Our live Investing Matters Podcast Special which took place at the Master Investor Show discussing 'How undervalued is the UK stock market?', has just been released. Listen here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
If I filter out all the others and leave GKP and G since March 2nd (both G and GKP happened to open at about 148p that day) then GKP's potential for catch-up is even more stark: https://invst.ly/r0l0d
A quick review of where all the usual Oil Co's (plus PMO) are in relation to Oil peaking in October 2018:
https://invst.ly/r0jx4
By that measure, the GKP 'bullet train' could well keep going for a while yet as there's some ground to make up.
Here's the picture since beginning of March, just before Brent plunged below $50 https://invst.ly/r0k28
As seemed possible in the chart earlier, G seems to be heading back towards the 118-120 trading zone, https://invst.ly/q-7de which at $38 Brent would put the sp (p) at just over 3.1x OP($) - so ‘normalising’ to some extent as the old 3x chart demonstrates, https://invst.ly/q-7c- , although G went a lot weaker v OP under less adverse circumstances a year ago.
It is sobering to see how much the Oil Co’s have lost v the FTSE 100 overall, with RDS so far failing to recover from its dismal Q1 Results on 30/4/20.
typo correction: The long term trends for Brent (red in the chart below) have been downward for more than five years, since well before the plunge from $110+.....
Longer term:
The long term trends for Brent (red in the chart below) have been downward for more than five years, since well before the plunge from 110p+. These trends have been countered by shorter term rising trends (blue) with sharp moves through trend lines invariably triggered by mismatches of supply (mainly driven by US Shale) and demand (market factors including the recent global virus related issues). Judging from this history, the likely price range for Brent by year end would appear to be in the shaded ellipse here: https://invst.ly/qz69h , a range of $35 to $53, centred near $45. This range includes the $40 estimate recently given by Morgan Stanley for end of year and is in line with their longer-term view of $45: https://www.reuters.com/article/us-research-morganstanley-oil/morgan-stanley-sees-tighter-oil-market-raises-brent-forecast-idUSKBN23300S?rpc=401&
There is room for error, of course, but it does define the likely extremes as we progress out of the current slump in price and as the gap down in OP, from about $45, gets filled. For G it suggests an sp of between 112 (35x3.2) and 145 (45x3.2) during the period if the current ratio holds without dilution as OP improves.
Despite my earlier post, you have to admire G’s resilience this week - going ex-div on a yield of about 6% (at 125p) but not coming out bottom of the pack on a week by week basis:
https://invst.ly/qz3-f
That dubious honour was going to RDS, which has been lamentable of late, until GKP stumbled at the close, with Chevron doing little better and very marginally behind G at the close. It was a four day week in the US and UK, of course, the full five days for Oil and DNO.
And a cliff-hanger at the close - is G about to crack the downward trend of the last couple of days? https://invst.ly/qz436 or will Monday see it continue towards 111?
Much will depend, most likely, on OP and market sentiment.
It looks like G is now in one of its typical short term downtrends (red on this 15min chart): https://invst.ly/qy-z7 which was partly triggered by ex-div but seems to be continuing.
The weakness against Brent (green) is also apparent and the ratio of G(p):OP($) has now dropped back to under 3.3. Unless it rallies soon then 109-111 looks like a natural destination.
Hydrogen may be the best option but that doesnt mean it will prevail. Look at VHS v Beta in 80's - beta was way better but VHS marketed their way to dominence. If hydrogen is going to stake a claim it needs a champion with real resources - Musk is pushing unchallenged at present and with the recent battery achievements indicated has substantially lowered the ev cost profile to that of the petrol engine. In short he is hoovering up the right to map out the non petrol/diesel future
batteries of the future may well be using substrates other than lithium.
I'm all for hydrogen as it has loads of advantages but it also has disadvantages such as storage and transportation difficulties, plus expensive to produce (at least at the moment).
Yes - Hydrogen is probably the future path and a natural lead-in for some oil+gas producers (the energy source - not our homonymous and excellent poster ). Musk can afford to make mistakes and, in any case, he probably doesn't care that there isn't enough Lithium for everyone on the planet - just as long as he can sell a lot of cars.
Agree with you Hydrogen.
I'm back down to 40% of my maximum G holding and keeping an eye on the price today and as it goes ex-div.
96p looks possible to me ex-div at $30 OP - although it does seem a very long shot today!
I'm generally trading swings here and on other stuff rather than buying and holding - market is very fragile.
Yes Hydrogen - OP.com certainly cover Energy in general, not just Oil. James Stafford is the founder and CEO
On the subject of Oil as a 'screaming buy' right now I have to say it hasn't recovered from recent lows as well as some - CWR ( a favourite of Hasiba's I recall) has done pretty well as an example. RDS has been a big disappointment for me so far - I'm hoping it'll prove to be a slow burner but the dividend cut seems to have knocked it right off course for the moment. G, meanwhile, did well up until mid April but has levelled out since. It has recovered so well compared to the usual group that I suspect there's going to be little upside from here until OP improves, Payments re-establish properly and anticipated production projects start earning: https://invst.ly/qxsl6 . I do think that when G goes ex-div it could induce a medium term slump in sp.
Looking at recent price action (15 minute ticks) we can see that , lacking any other stimulus, G is tracking OP fairly closely at a ratio of around 3.4x: https://invst.ly/qxhyx
All other factors remaining the same, the ratio looks set to drop back to just under 3.2x upon ex-div.
Oil Price recently published a bullish view: https://oilprice.com/Energy/Crude-Oil/Is-The-Oil-Collapse-Over-Already.html
And checks out as ‘clean’ at https://mediabiasfactcheck.com/oil-price/
Some articles can be ‘opinion pieces’ rather than straight reporting, of course. The fact that I didn’t post the bullish link probably reflects my own sentiment rather than that of OilPrice, Hydrogen, that article didn’t convince me.
My impression at the moment is that the balance of pundits seems to be pointing at a long haul for OP.
If you have a source that is cautionary about OilPrice I think we’d all like to know about it as it’s a common point of reference.
It's early days but Brent is so far following the pattern I suggested on Thursday: https://invst.ly/qx28a , which implies that $40 could still be three or four months away. WTI seems to be too high - less than $2 discount to Brent as I write.
Meanwhile, Oil Is Unlikely To Go Much Higher according to this article and to other pundits at the moment:
https://oilprice.com/Energy/Oil-Prices/Oil-Is-Unlikely-To-Go-Much-Higher.html
With OP weakening, G managed to stay above 116 for much of the day, falling off towards the end, however:
https://invst.ly/qwg1x
So not especially strong going into ex-div week:
https://invst.ly/qwgf1
And surprisingly coming in last -but-one over the week:
https://invst.ly/qwg5-
If you thought Oil has been a bad investment since Brent ‘peaked’ in October 2018 then you’d be right, here they all are plus the FTSE 100 and PMO (RDSb hiding behind G here): https://invst.ly/qwgcc
Can things be this simple? Probably not...
Does anyone remember when OP gapped down on the 6th March? Here’s a four year view of Brent with the dominant price range for the commodity shown as a shaded pitchfork: https://invst.ly/qv-wb
The suggestion here is that, following the March 6th drop, a ‘new normal’ track for Brent will perhaps follow the lower parallel path offset by about $30 from the previous one until, for fundamental reasons, it shifts back up towards the original.
Given the rule of thumb SP ratio of 3x, that would translate to roughly 90p off G’s previous trading range - which hit a max of about 220 in November, suggesting 130p as an approximate max in the present environment. The model certainly fits with G’s current range which appears to be nominally 100-130:
https://invst.ly/qv-v1
The fact that neither Brent or G’ s price ranges appear to have narrowed in proportion to their lower pricing would indicate, of course, that volatility has increased.
At least G has closed above the 118 resistance tonight - perhaps a chance to revisit some early April highs in the 120's before dropping back ex-div if - as seems likely because there is still plenty of supply available - OP stalls: https://invst.ly/qv4ul .
The usual group since last week's close: https://invst.ly/qv4x1
GKP has either had a spectacular couple of days or a much needed recovery depending on your point of view, here's the same group for the month of May so far: https://invst.ly/qv4-z
This is an interesting technical analysis re OP - he starts with WTI then moves to Brent.
He talks about 'FOMO' driving markets at the moment but does not mention tomorrow's WTI contract expiry, which could be a catalyst for the action IMV :
https://www.fxempire.com/forecasts/article/crude-oil-price-forecast-crude-oil-markets-pressed-towards-gap-649947
Considering that G has been dancing up to 117 and higher for the best part of four weeks and that Brent has risen by $13 over the same period, today's performance seems a tad disappointing. The G:OP ratio continues to gradually drop back towards 'normal' levels - currently it is 3.34x. It does start to point to G being potentially limited to around 130 if Brent continues towards $40 (and around 8p less when it goes ex-div.):https://invst.ly/qukol
It’s perhaps worth a recap on how the story has unfolded since Mar 1st - just before things took a serious turn for the worse.
https://invst.ly/quf9k
Only Chevron (-3%, NYE of course) has done better than the FTSE100 (- 9%) over the period and the market has yet to open there today. RDS has taken more of a battering at (-25%), whilst G is a creditable -21%. Because of the balance of my portfolio I’d like to see RDS overtake G from here but frankly happy if both are making progress back towards parity with Chevron - which would put G at around 140p today and RDS at around 1600.
They'd be silly not to as it must be a factor weighing on the sp.
However, once KRG has done three months consistently I could imagine them putting out an RNS to the effect that they don't intend reporting routine payments that fall in line with guidance.
Will they rns a payment receipt for the 15th since not been notified yet?
Also worth noting that the discount of WTI to Brent has fallen from near $10 a month ago to about $3 today.
Not afraid to admit I was wrong. Traders taking on the risk and investing amongst the economic turmoil doing very well indeed. Just expected some down days but hardly any at all