The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
This week’s drop in OP has knocked it off a promising trend but, like busses, there’ll be another one along eventually:
https://invst.ly/13a2vy
Another thing about OP is that you can always find a headline that matches your pov:
FT: ‘The days of $100 oil prices are over'….Demand will continue but potential world supply is likely to peg back the cost.
https://www.ft.com/content/57f1ad77-119f-42df-a1ff-3d57df70ba80
OilPrice.com: ' Chevron Returns Record Cash to Investors as Oil and Gas Output Hits New High
https://oilprice.com/Latest-Energy-News/World-News/Chevron-Returns-Record-Cash-to-Investors-as-Oil-and-Gas-Output-Hits-All-Time-Hig.html
I didn't read the FT article (I assumed a paywall ) but I assumed it overlooked the ongoing fall in identified global reserves?
Ultimately the world will need Oil to be expensive in order to drive transition to alternatives. Cheap oil is bad for everyone.
Absolutely GfG - regarding BP:
Looking at BP against Shel since 2019, it’s apparent that BP has slipped by more than 15% in sp terms:
https://invst.ly/13a1y2 .
All of which has come during the recovery from the mutual low point of all the majors in October 2020.
But whilst BP’ volatility usually dances around Shel - and has made them a useful pairing for investors who trade between the two, BP has crashed out of its ‘covid recovery’ trend since the dreadful drop and gap down in October, shown more closely here:
https://invst.ly/13a21d
So, depending on your viewpoint, it’s either a basket case or a recovery prospect with better upside potential than Shel.
OP dropping by $4 since Thursday’s statement did not help the promising recovery in Shel’s sp did it?
Here’s the week’s OP v Oil Co’s chart:
https://invst.ly/139zr1
Yet despite the wobbles, the sp remains just about on the upward green trend for the moment:
https://invst.ly/13a1mp
I got the answer to my 'will the winner be red or green?' question rather sooner than I expected with the apparently unfavourable reaction to today's Board change RNS :
https://invst.ly/139z6-
I appreciate it's a dismal time for LTH's. For those of us who are interested but just watching, there's just relief at avoiding losses rather than any particular satisfaction . With the November + December rally wiped out and the sp re-set to 500, it is now much weaker than it was 12 months ago and we all know how low it then went after the last set of FY Results. If 500 fails to hold then 380 will come back on the radar.
The daily chart today (Wednesday) makes things look rather worse than they are: https://invst.ly/138i6u
A 15' view shows that the sp has held pretty level over three days despite a drop in OP: https://invst.ly/138i53
Thursday will be the test.
Looking at today's 15' chart, I'd have to agree with Gioviano, even though 550 has held up pretty well for over a week: https://invst.ly/138htp
Breaking below the green on the next daily chart (around 525 currently) would be a more significant negative sign for me, with 500 the last major support (ok - 450 at a stretch ) before the analyst levels and gap around 380 come on the radar :
https://invst.ly/138hww
I often say that the sp follows OP except when it doesn’t and the fact is that although the two are related the sp does have other significant influences (like nasty impairment news) which ordinarily play a more dominant role. Then there's the tendency for the sp to filter out much of OP’s volatility. This comparison of the two since mid October demonstrates this quite well:
https://invst.ly/137op3
The sp may well be less volatile than Brent but , as I mentioned previously, it is currently running about £1 down compared the trend in OP which has been steadily rising since the year began. There's also that gap up to 2566 beckoning to be filled at some point. It’s a shame about the much smaller one down to 2440 created on Friday with the sharp bounce back towards 2500 . It's possibly small enough to ignore whilst the price is rising. The scene is therefore set for the results to overshadow the recent setback, which was fortuitously announced well in advance.
Trendwise, the three year red ceiling here is closing in on OCDO:
https://invst.ly/137ddw
750 is the current limit if red holds, dropping to around 700 in a month's time. Here’s a closer look:
https://invst.ly/137dhq
Green is the only challenger. So, which will win: red or green? February’s results probably hold the key.
Here’s how Shel, BP, CVX and XOM moved with respect to Brent last week (approximate scale shows Shel and Brent price )
https://invst.ly/136gt0
To put that into some context, here’s a plot of Shel & Brent over the last 15 months , with some dates highlighted when OP was at the current price of $83:
https://invst.ly/136h59
Brent has risen by over $1 since Friday’s LSE close, which suggests that the sp could strengthen further on Monday if OP remains firm.
More recently, Shel has been lagging OP and the comparison over recent weeks suggests that Shel is at least £1 down currently and should be heading to fill the gap created by the update on Jan 8th to 2566 once confidence is restored sufficiently.
https://invst.ly/136hzp
Brent has been on the up since December
Brent: https://invst.ly/133lvt
but Shel has been going the other way, pushed flat down on the the bottom blue tren here:
Shel: https://invst.ly/135h12
BP similarly, although with slightly more sign of an uptick this last couple of days:
BP: https://invst.ly/135h0l
Well this morning has provided the more positive indication that I said was lacking in my post last night.
https://invst.ly/133xp2 , which suggests that 550 may mark a bottom for the current phase.
There's never any guarantees with OCDO, though. As far as I can see, much of the price is based on optimistic expectations for the technology rather than the retail side of the business, which is far less exciting currently.
Monday has left OCDO difficult to read: it hasn’t convincingly broken out of the red down trend but has simply stepped sideways, which leaves the realistic possibility that the price might bottom out at 550 - rather higher than I anticipated:
https://invst.ly/133m29
I’m not convinced even though it has paused at an established support level.
My simple rule is ‘when in doubt stay out’ - I don’t let FOMO drive me into a reckless move any more.
Absolutely GfG - the ‘increase in spare capacity’ observation was in the article you posted and I hadn’t switched onto that until your post - so thanks!
Good to see you back Armani: hope this works out well for you - and us, of course (self interest is never far away in these matters).
I’m not too disappointed in today’s minor drop although it did run counter to OP and also went against the expectations I had expressed in a previous post. No chart today as my interest is currently in the ratio of sp to OP which is at a recent low of about 29.6x. In terms of the 30 day moving average, it places Shel about £2 down relative to OP when compared to how it has performed on average over the last month (by my amateur calculations). To me, this represents an eventual upside when conditions improve - hopefully by FY results or Q2 when US ‘driving season’ approaches.
Time will tell as char333 would say - it seems he’s over on the BP chat now.
A good article, GfG. I liked this observation in it:
‘[OPEC] are effectively increasing their spare capacity by reducing actual production. And they will not change course until prices rise, which they would only do if a supply disruption occurs.’
OP has always been a guessing game.
The current reduced output from North Dakota (part of the Bakken field which crosses North Dakota, eastern Montana, and southern Saskatchewan) is temporary due to weather conditions and it’ll be back in full swing as the next months of futures contracts come into focus.
But one thing is for sure: OPEC and US Shale tussle for volume and price, which either drives it to a sweet spot that suits both or it goes off the rails.
This shows Shel v Brent over the last few months.
https://invst.ly/1331ep
I'm currently thinking that Shel 's sp will absorb a further modest fall in OP and hold above the blue unless something unexpected happens (which, of course, it probably will !! ).
I don’t entirely agree with your dismissal of fundamental factors, Gioviano, they are not all random and unrelated to the price. Ocdo operates in a tough sector and it has to navigate a lot of challenges even when things are going well.
What stands out for me is the fact that the charts - which reflect the herd instinct and crowd behaviour of the market rather than fundamentals - are again converging towards the analyst levels around £4. Ordinarily, my instinct, based on the following chart, would be a fall to around £5 - £5.20, which would probably mark a partial re-entry zone for me. However, the gap at 386 has bothered me since it formed in June and it is very close to Exane’s autumn value. So I probably wouldn’t simply pile in immediately- but progressively build a holding whilst watching , waiting and trading depending on how things turn. 450 would also come onto the radar if it falls below 500. Anyway, GLA on this tricky path.
https://invst.ly/13174z
Taverham:
There are some very obvious and major differences between OCDO and JD, not least that OCDO retail operates in a 'low margin' groceries whilst JD's market presumably has higher margins. Debt is presumably also an issue for OCDO (both are mentioned in the article I quoted from last June but I now find it's behind a 'register to view wall'). JD are not into the robotic tech - so not investing to the same degree. Whilst OCDO retail can be compared to similar retailers, the Group cannot - which is why the end of Feb FY results should throw much more light than yesterday's trading statement.
I certainly agree with Chilting's observation: 'any company that hasn't reached its full potential is difficult to value, not just Ocado.'
Sorry things aren't going well for you Gioviano and Retire.
It's not great to see the price drop back into the downward trend https://invst.ly/130-i7
Which is why I posted about the difficulty of arriving at a realistic valuation of OCDO.
There are a range of views expressed on this board - some obvious rampers and de-rampers along with more genuine investors, some overoptimistic and some more cautious . I moved into the latter category when I first exited at around 960p in August and am glad I jumped out again more recently.
I 'm still interested but my target entry point would upset people if I stated it. I do find that Valueplay's posts, which are invariably supported by facts/evidence provide a useful balance to some of the enthusiasm. I think OCDO could yet prove to be a good LT investment but in the short term I see it as a pure trading stock.
Yes indeed, dananzi. I added. Let's hope the blue line holds:
https://invst.ly/130-6f
Regarding 'Speculation on $110 a barrel but no conviction on this from the majority of analysts' , GfG, It's interesting that higher OP - and even the maintenance of its present level - currently seems dependant on global conflicts of one form or another. Absent these circumstances, if the supply and demand equation was operating naturally in a stable global trading environment, it does appear that US Shale production would again be driving OP down and that KSA, as head of the unruly OPEC cartel, would yet again be engaging in a battle to maintain market share. Over the last decade this has inevitably driven OP down to unsustainably low levels causing the boom & bust cycles in the US. The difference this time, however, might be the fact that the debt-laden shale producers, that had to pump ever more to survive as OP fell, have largely been eliminated - so OP might simply fall to a lower compromise between OPEC and US Shale, which I guess might be around $60.
The market doesn’t seem to know how to value OCDO - after 20 odd years developing the business and associated technology and 13 and a half years on the stock market. it has never yet, to my knowledge (DYOR), paid a dividend - is there any sign of it doing so? So capital gain is the only reason for buying the shares yet it’s still about 50% above the Exane and Barclays analyst targets of Sept/Oct . It’ll be interesting to see if those assessments get revised this year after the FY results for the whole group -not just retail - are published on 29th Feb.
Meanwhile it‘s worth reflecting on whether OCDO has moved on significantly since this article appeared in The Grocer last June, when Exane had uprated it from ‘underperform’ to ‘neutral’ at 365p: https://www.thegrocer.co.uk/finance/ocado-gets-vote-of-confidence-with-much-better-outlook/680318.article
These points, amongst others, were raised in it: Ocado “still has a lot of proving to do”, noting questions around its ability to move into non-grocery automation, whether partners will order sufficient capacity to reach break-even and how to refinance its debt due in 2025 and 2026.