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Yes H - huge challenges all around.
Due to some hasty reactions to the RNS, including some from me, G got a lot of stick yesterday. Our excuse, to be fair, would be sensitivity to current pressures on all investments, lack of confidence concerning dealings with the KRG and suspicions about the necessity and ambiguity of the RNS. Meanwhile G also appears to have reached something of a plateau as the current OP and C-19 saga shifts between phases.
Against that backdrop, I dug out my old ‘reality check’ chart that looks at G relative to the usual group + PMO since oil peaked at $86 in 2018:
https://invst.ly/qnjlh
G appears in the top half of the group for much of the time but, unless you factor in dividends, none of them have done well as ‘buy and hold’ investments; with those below the green line currently falling below overall equivalence with Brent. RDS, of course, has just capitulated on maintenance of its dividend level. The chart shows retrospectively where there have been opportune moments to trade or to swap between members of the group. It seems fair to say that trading has been essential to preserving capital value in most members of this group, although gauging when to do so is not always easy. G has recovered extraordinarily well from the recent 55p, outpacing all the others from that bottom point. It has certainly served those who stuck with it very well indeed from that point onward: https://invst.ly/qnk35 . The question now is whether that high performance will be maintained as OP recovers or whether G’s relationship with Brent will naturally ease back to pre-crisis levels.
Well, another week that was - RDSb turned out to be the runt of the litter by a good margin:
https://invst.ly/qnc7i
Watching the physical market v WTI in the US has less activity, on the part of spot, than watching paint dry.
https://invst.ly/qncd1
G, meanwhile, remains relatively stable although the RNS today certainly caused jitters with a few here declaring intentions to sell up. The words 'includes a new draft Production Sharing Contract ('PSC') that seeks to separate the Jurassic oil development from the deeper Triassic natural gas development' at first sight seemed to suggest (on reflection probably inadvertently) that the KRG had issued a new document containing proposals that were unfamiliar to G. Pity.
There'll presumably be a similar RNS regarding Miran in a month's time.
It may seem like today did not go brilliantly after the sp fell back but if you look at G's performance since it hit 55p compared to all the others... https://invst.ly/qmx41
A positive day in the market - pretty much everything up, including G, with something of a boost from the EIA too despite the crude build. Chevron certainly seemed to feel the benefit:
https://invst.ly/qmcdz
To the downside though, WTI Spot doesn’t appear to be moving up from $8, yet the June Futures is trying to make headway at around $16. Something there is going to have to give in the next three weeks: https://invst.ly/qmcd2
That earlier G ‘trading’ chart (under Price Action') was a 15minute one, Jack - so you can probably ignore the gap you spotted.
Ha! Crossed wires Jack - you said DOW futures were up so I thought you meant the Futures index.
I don't follow the DOW - in fact the various indices are only of background interest to me, partly because they capture the way the herd moves rather than the leaders. They kinda tell you what you already sense. And that is probably why, of course, they can lag behind reality. The US has seen much more of a bull market over the last ten years and the recent crisis seems to have knocked them back less than 3 years, the FTSE is back roughly 4.
https://invst.ly/qm5bs
I don’t think G will be re-testing the bottom - ie 55p. G seems to be valued on recovery rather than current status and, following some strong buying, 100p may well be as low as it will go from here - the support at 98p held didn’t it?
I suspect that WTI Spot may have hit the bottom and, although Futures have a lot of sorting out to do, I think Brent may well have seen the worst of it - although a dip to $17/$18 isn’t inconceivable. My current obsession is with WTI Spot v June as they approach the next expiry: https://invst.ly/qm5gs
Cheers
Furthermore, if you look at ALL major indicies, they all "follow" the shape of the S&P / DJI.
Watch CNN "Closing Bell" They have slots to show all indicies. Once you've seen the S&P, you might as well switch off..
Quite why each country bothers with an indicies these days is beyound me.
Hi Boyo,
I wasn't talking about DOW futures 30, I was taking about the DJI.
The heirachy of indicies is:
1. S&P 500 - "The Daddy"
2. DJI - "The Mummy"
Where they lead, all other indicies slavishly follow incl the Ftse 100
Pehaps you might produce a chart of the above 2 + FTSE and see the strength of correlation.
My abiding question is, when are the world indicies & OP going to reflect realiity?
I'm reluctant to engage atm, as I feel sure that we will have a retest of the bottom on all indicies, and they will obviously impact individual shares.
ATB
Jack
Everything on my watchlist is up except for WTI Spot - and that really needs to lift at some point for the Futures to climb properly.
Ok thanks withoutt
Leem1
Rig count, and cuts start Friday
Yea bunks no idea why Oiler’s popped today. Didn’t expect that
Nice view from up here, made short work of the hill this morning.
Sorry Jack - didn't realise you were talking about DOW Futures 30 as I never look at it.
I guess there's some correlation but much more so with the FTSE Oil& Gas - which I would expect as G is part of that family:
https://invst.ly/qlza-
In terms of chicken and egg then Indices do track the market and , as you point out, G was certainly floating with all the other boats today.
But as to what was driving that general positivity about Oil Co's I remain slightly mystified - the news around oil didn't seem to warrant it. ATB
With respect, Dow futures were up by 400 pre open and this is where the uptick in G came from I think.
It certainly fell after dow opened at 2.30pm
G reached it's first high before the DOW was awake, Jack, but your point remains valid - markets (FTSE & DOW) were generally 'up' and the indices are a measure of that. However, any positivity regarding oil and related industries at the moment seems to be misplaced as far as I'm concerned - hence my question about where the enthusiasm was coming from. Much as I welcome the way G has held it together by comparison with the majors (RDS and Chevron) I'm not sure it is justified in the current climate. It doesn't have the benefit of size and diversity of interests and revenue streams. The big guys should, for example, be able to turn OP volatility to good use - especially with their access to trade, storage and shipping - but G has none of these advantages and also has its well rehearsed geopolitical risks. I'm also unconvinced by WTI today - near term futures seem way overpriced given the extreme contango curve. I also suspect that oil may never recover to pre-COVID-19 levels of demand and that the path to even an 80% level of recovery will be slow and tough. In my view, G's resilience will certainly be tested, so any upticks in sp much above 100 - and certainly above 120 - strike me as froth, and I'll happily grab a profit from them if they seem to be unsupported by some underlying rationale. ATB
Boyo,
The 'enthusiasm' came from the dow being 400 pips up = G@117 and when it dropped 400 pips, G = 112 - Simples
Oil also rises & falls with the Dow.
A rising tide floats all boats!
Top on the Dow for me is 24588
Let's see what happens after the "Big 5" report during the week.
G looks to me to have put in a "Double Top" at 117
Lets see
Jack
Here are the usual runners and riders since last Friday’s close, using Brent Spot instead of LCO for better consistency (as investing.com switched the front month prematurely). https://invst.ly/qltz0
G took a walk to the top of the hill today but ended up almost back at the start. Quite where the enthusiasm came from is anybody’s guess as Oil is clearly stuffed for a good while yet: https://invst.ly/qltzn
Meanwhile, my obsession with WTI June v WTI spot continues, with the latter stubbornly fixed around $8 and the former, which did recover from near $10 earlier, clearly struggling with the path it may consequently have to take in order to converge with its sibling over the next three weeks:
https://invst.ly/qltuu
Unless there’s a lift in Spot it’s hard to see a happy outcome.
Correction:
Where is WTI really headed? Well it looks like $10 OR LESS to me at the moment.
So WTI (June) was supposed to recover towards $20 after last week’s debacle? Yeah right!
Since last Friday’s close, this is how the usual runners and riders have fared:
https://invst.ly/qlar9 (LCO replaced with ‘Spot’ due to the monthly issue with Investing.com switching to the next month ahead of schedule). G remains fairly flat, like the majors RDS and Chevron. GKP and DNO, meanwhile, appear to be more influenced by OP still.
But if you add WTI (June Futures and spot) to the picture then you get a vision of the hell that is ongoing:
https://invst.ly/qlauv
Where is WTI really headed? Well it looks like $10 to me at the moment, which would put Brent at around $17 - but WTFDIK as Hawkey would say.
https://invst.ly/qlb38
disappointing finish from G today, was looking strong during afternoon trading and then that measly 20k UT was 3.3p lower than the previous trade. On the bright side, ftse futures up and WTI somehow lands up over 4%. We all know it can and normally does all change over the w/e. G board been peaceful last couple of days, calm before the storm? probably. GLA - wishing you all a pleasant weekend.
G has been a trader’s delight over the last two days, just be aware that the closing price of 110 (UT - as Bunks pointed out) is the last tiny mark on the chart (arrowed). https://invst.ly/qkcxd
So is G now trading between 109 -117 or will it soon see100 again ? That probably depends on the fate of WTI.
Although Brent is the one that relates directly to G, it is WTI that attracts our attention these days. The landlocked supply of Shale oil to places like the vast storage in Oklahoma is currently the epicentre of global saturation - for what the US doesn’t import inevitably spills into global supply - not dissimilar to a blocked drain. So, with no demand to soak up supply, whatever happens to WTI must surely knock on to Brent.
This 15 minute chart from last Friday’s close purports to show, amongst all the others, WTI ‘spot’ - supposedly around $8 today?
https://invst.ly/qkco0
- I’m reliant on investing.com for that being the case - it’s difficult data to get hold of as most sources refer to the futures price or some derivative, so treat with caution.
So for Jack (Salad) I’ve dusted down the old G v 3xBrent chart:
https://invst.ly/qjwd2
Today the ratio is more like 5.2x and has been for three solid days. It almost seems like G was today responding to WTI Futures (June) rather than Brent, which is bizarre on a number of levels.
As stated earlier, I sold a few (28% in fact) around 117 and - from the chart - you might be able to hazard a guess as to where my next sell point is and where - if opportunity presents itself and I'm in the mood - I might buy back.
Well I sold a few earlier - it would seem rude not to given the craziness of the market.
There are four flavours of OP on this 15 minute chart of WTI lunacy from Friday’s close. At least Brent Futures and Spot are reasonably tight in relationship but WTI is another story altogether if this data is anything to go by:
https://invst.ly/qjsah
Some market headlines today talk of a surge in OP. I happen to think all the upbeat stuff is premature and bonkers given the real situation. To that extent I’m in the same camp as recent G poster Marfthew. There appears to be a disconnect with reality. Rather like the viral infection, I think OP and stocks could experience a couple of waves.
Hi Jack
You are utterly right to point out that the 3x relationship with OP which served as a good rule of thumb for G has graduated to 4x and even 5x yesterday. This should tell us something, should it not?
Either G has been re-rated because of terrific profit potential or the price of oil has fallen to such a level that the company’s sp is no longer based on what it currently produces but upon its assets and their perceived future value when normal market conditions return (together with a suitably sustainable OP).
G’s sp today is based either on faith in, or rational assessment of, its future prospects irrespective of today's ‘temporary’ position regarding OP. Acting in faith is not my style and I don’t recommend it.
From last Friday, G’s sp (and others) have effectively been disconnected from the current OP. As I said, today’s drop was hardly going to assist the sp - implying that it would add pressure. However, because of the disconnect, that pressure has not had any effect on the sp - yet.
I don’t think I’ll be quoting the G:OP ratio for a while except, perhaps as indication of normality returning or of lunacy setting in. I was quite sympathetic with those who talked about shorting G yesterday. The only reason I chose not to sell was because I have already de-risked and felt that 98p would withstand a bit more pressure and, also, that I would top up if the price dropped to a much lower level.
Jack - I'll respond to your post shortly
First - just to add to the previous discussion about Futures/SpotPrices and, by inference, CFDs (bear in mind that OANDA is a CFD, not the spot price) I'd draw people's attention to Malcy's excellent piece yesterday: 'Oil price- Super Contango at work…' https://www.malcysblog.com/2020/04/oil-price-petrotal-dgo/ in which he expresses his frustration with much of the confusion caused by events of the last few days as the WTI contract rolled over.