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Started By
Message
Oil Down Big!
Posted on 5/8/12 at 10:00 am
Posted on 5/8/12 at 10:00 am
Oil is seemingly in a free fall. Don't know what combination of factors is causing this, but the oil services and providers are getting hammered as is my portfolio.
Demand destruction? Removal of the geopolitical risk premium? Increased suppl? Whatever it is I'm now a bit more worried than I was last week about the the US and world economy (not just due to oil)
Demand destruction? Removal of the geopolitical risk premium? Increased suppl? Whatever it is I'm now a bit more worried than I was last week about the the US and world economy (not just due to oil)
4
Posted on 5/8/12 at 10:53 am to greenhead11
quote:
Whatever it is I'm now a bit more worried than I was last week about the the US and world economy (not just due to oil)
The price of oil is a strange animal.
On one hand it is a predictor of future economic growth. On the other hand, it is a headwind to future economic growth.
Posted on 5/8/12 at 11:59 am to TheHiddenFlask
Lots of reasons and this may be one.
Bloomberg
quote:
CME Group Inc. (CME), the world’s largest futures exchange, is raising futures margins for non-hedged positions to comply with new regulations. Members will be treated as speculators for outright positions, paying a higher margin, said the exchange, which trades everything from energy, agriculture and metals to interest rates and equity indexes. Members are now treated as hedgers rather than speculators even if they have a speculative position. The change is effective May 7, it said in a statement.
Bloomberg
Posted on 5/8/12 at 12:12 pm to TheHiddenFlask
quote:
The price of oil is a strange animal. On one hand it is a predictor of future economic growth. On the other hand, it is a headwind to future economic growth.
Exactly! Its like a catch 22.
I'm in a quandry trying reconcile both sides and anticipate the future. Where oil goes without geopolitical esclation- I honestly have no idea. I still give some geopolitical turmoil a speculative 50% chance of reoccuring- especially post election time
Posted on 5/8/12 at 12:15 pm to greenhead11
All commodities are getting hammered. Gold, silver, copper, molybdenum, fertilizers, natural gas...
You are not alone in being more concerned about the world economy.
You are not alone in being more concerned about the world economy.
Posted on 5/8/12 at 1:04 pm to Tigris
We also have an election coming up
Posted on 5/8/12 at 1:13 pm to DuckSlayer22
You serious clark?
Posted on 5/8/12 at 2:14 pm to DuckSlayer22
quote:
We also have an election coming up
People put WAY too much stock into this, imo
Posted on 5/8/12 at 2:21 pm to LSUtoOmaha
Dad was telling me about a bill being signed for a pipeline in canada running through ND to the refineries in Texas. He said he thought oil would shoot down.
Posted on 5/8/12 at 3:17 pm to bubbz
TransCanada filed their new permit for Keystone, I don't think anyone has any idea when that might actually be approved much less be built, and its not like that's news to anyone given the political wrangling over the issue for the last year or so. Kinder is building one in Canada but its not coming south, ONEOK announced they were building an NGL pipe to connect from the Bakken to an existing pipe they already have. I can't think of any news announcing any international pipes which would require a bill, those tend to draw a lot of non-industry observers given the political posturing that follows anything...political.
Posted on 5/8/12 at 8:52 pm to kfizzle85
You seem to be pretty knowledgeable about O&G domestically, What do you think about MLPs going forward? I'm specifically looking at EPD and already have some of my parents' $ in KMP and it has paid off well.
Interest rate risk?
Interest rate risk?
Posted on 5/8/12 at 9:27 pm to greenhead11
Oil is not down that big.
Posted on 5/9/12 at 5:34 am to djmicrobe
Keystone is already connected to the Cushing hub. Obama was here to announce the approval of the Cushing to the Gulf portion to the processing plants, Champion is drilling the piss out of the Dakotas and Rockies there's a bottleneck to the refineries.
Posted on 5/9/12 at 8:11 am to djmicrobe
10% in one week is pretty significant to me!
Posted on 5/9/12 at 9:09 am to CtotheVrzrbck
quote:
Keystone is already connected to the Cushing hub.
What?
Posted on 5/9/12 at 9:20 am to greenhead11
quote:
You seem to be pretty knowledgeable about O&G domestically, What do you think about MLPs going forward? I'm specifically looking at EPD and already have some of my parents' $ in KMP and it has paid off well.
Interest rate risk?
Ignoring valuation and personal preferences for dividend vs price appreciation, I think companies that are gas-focused (but NGL focused) might be oversold based on misperception. Although processing operations open them up to more commodity price exposure, the frac spread is looking nice these days. So I'd check into gas heavy, NGL focused pipes with large processing operations. EPD is probably the poster boy for such a description.
Posted on 5/9/12 at 11:28 am to kfizzle85
quote:
Ignoring valuation
Something I need to learn more about, but what are the better metrics to value MLP's?
I would think on P/FCF, TEV/EBITDA, and distribution growth rate would be most instructive for comps?
quote:
personal preferences for dividend vs price appreciation
I would tend to argue that MLPs are a nice balance of these two objectives. I would be going into MLPs for income and indirect commodity exposure for the old folks portfolio (which is heavily income oriented). As for me personally gotta have a healthy mix of both- along with some good old non dividend paying growth
Posted on 5/9/12 at 11:44 am to greenhead11
quote:
Something I need to learn more about, but what are the better metrics to value MLP's?
I would think on P/FCF, TEV/EBITDA, and distribution growth rate would be most instructive for comps?
Price to distributable cash flow, distribution coverage ratios, distribution growth rate, really inspect the waterfall structure. The asset side of things IMO is tough just because of their inherent financial structure.
quote:
I would tend to argue that MLPs are a nice balance of these two objectives. I would be going into MLPs for income and indirect commodity exposure for the old folks portfolio (which is heavily income oriented). As for me personally gotta have a healthy mix of both- along with some good old non dividend paying growth
I agree, I was just caveating that as one MLP might be better for pure distribution growth while another might be less mature and have a lot more of a price appreciation expectation to it, and that that's (as I'm sure you know, just saying) a portfolio-based decision rather than a company-specific one.
Posted on 5/9/12 at 11:49 am to greenhead11
I trade oil everyday, in fact, I'm trading it now as I type. I can tell you that Crude prices should never have been over 102 to begin with. Everytime the price rises above $100/bbl we have an economic slowdown in our country. Our economy cannot support $100/bbl Oil. This entire run-up in prices to $110 was the result of aggresive talk coming out of Iran by their gov't threatening to close the Strait of Hormuz. On the day that prices peaked above $110 it was on news by an Iranian news station that there was an attack on a Saudi pipeline. The news was poven false 20 mins later. I can tell you that there were abnormally large amounts of futures contracts being sold above $110. Since that day there has not been a single aggressive word come out of Iran and prices have fallen. It's my opinion that the Iranian gov't ran-up prices on rhetoric and hedged out at the highs since they need oil above $100 to support there fiscal situation.
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