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It took me a while to work out what you meant Y11
But who has oil hanging around that they need storage for? Perhaps they could rent out the space for CO2 storage or something (they could make legislation that forces companies to pay to put their CO2 there) LOL
I have condensed my position to:
Will there be a 'supply shortfall' spike in oil prices before the big recession hits?
I have posted too much today :)
I was just looking at the US oil stocks again and although the SPR should hold steady now after the historic releases, the non-SPR stocks have 50 million barrels they could draw down before they hit the post-2015 minimum*.
We could see a few further weekly draws in July before they start levelling off and people start wondering where the oil supply is going to come from.
If anyone is bearish oil please could they put their reasoning forward, there seems to be reducing supply going forward and demand will have to fall pretty fast for the price to stay stable. Are we close to a global recession?
*For example we are at 453mmb but they were 414mmb in December
We also have the Saudi's 1mmbpd cuts start in July. Plus, the increase in interest rates has increased the holding costs for oil driving some one-off supply on to the market.
Oil demand is now higher than 2019 but it looks to me like supply is lower. If oil doesn't start moving higher within the next month I will have to relook at my understanding of where we are.
Good comments from yesterday, I agree with everything MarkGo and Spights said but would like to add
For a bit of context, although the draw down this week was very large, reserves (commercial + SPR) are still 9 million barrels higher than the bottom which was hit December 30th. There were some big increases in Jan/Feb that have not worked their way out yet.
But MarkGo's thoughts regarding where we are and what will happen in the future match mine. I am pretty excited to see what happens to prices now the SPR sales are done and we are at driving season. I would also add that hedge funds and other investors have been shorting futures contracts as they think there will be a recession, this has helped supress the oil price (this is the paper part MarkGo referred to). I wouldn't be surprised if the US gov pushed this to help with the war effort.
The US shale rigs seem to have been increasing efficiency over the last few year so the output per rig has been rising so the drop in rigs has not affected output as much as it might sound. But I do think there will be a levelling off or slow down towards the end of the year because the price of gas especially has reduced confidence and investment.
Agreed.
I don't think Looney has done anything too wrong yet. I try to read between the lines as he has to be very careful with his PR to not upset the green lobby ("cash machine" LOL).
I am certain that the energy landscape will be very different to now in a few years time, it is Looney's job to put BP in the best possible position to make the most of the new conditions. His current actions should be targeting 3 years out, so we can't say 'this is a crazy decision because electricity costs X today'.
I like BP because they trade at a discount to their peers, it's like you get the O&G business at a discount with all the transition investment FOC. In the future, when technology such as hydrogen is more integrated, BP should be in a stronger position than other companies who were not investing for so long. There will probably be a period of consolidation where all the transition malinvestment gets exposed during a downturn.
Try AJ Bell, they were very good for me transferring from ii
HappyInvestor
Re inflation adjusted oil price.
On trading view I have run the chart TVC:USOIL/ECONOMICS:USCPI to get an inflation adjusted graph.
Interestingly, the chart can be split up into sections:
('oil prices' refers to inflation adjusted below)
The current oil price is almost exactly the average from 2015 to now [$71 equiv]
Before that you had the 'pre US shale' Sep07-Aug 14 level that was 78% higher! [$126 equiv]
Between 2003-2007 there was the ramp up period .
1986-2003 was a long era of 'flat', probably ended by China's fast industrial growth - 39% lower [$43 equiv].
(obviously there was volatility within each era but the chart can be split into those 'flat' sections)
I am betting on us entering a new 'ESG,Transition and post US shale' price period that will be marked by high oil prices.
In this period, OPEC+ have the pricing power but on top of that no one can respond to increased demand as the banks won't lend and the governments have made a very hostile investment environment. Then you have the collective green hysteria where the laws of physics don't apply.
I am half excited about the profits that will flow and half worried about the mob with pitchforks that will plunder the company (resulting in even less oil to go around).
Whilst buybacks can be done on the scale they are currently, and with the share price so undervalued, they are my clear preference.
There are 9% less shares in issue than a year ago. We could look at this a few ways. Assuming you hold the same number of shares you could own 9% more of the company than you did with no action, or you could sell up to 9% of your shares to make up for the low dividend.
Obviously ignoring peoples personal tax situations.
Lots of interesting points made.
I would say oil is priced assuming we are going to have a recession, short positions by institutions have hugely increased this year but supply is predicted to be short vs demand and storage is getting lower. BP priced likewise, it sure isn't priced on the trailing earnings giving a PE of 4.x.
There is scope for a short squeeze and fast rise in oil prices which helps push the world into recession.
It's one of the best for me, I suppose it's the luck of the draw with the timing.
BP was stitched up with the spill and we have been through a decade of unfriendliness for commodities.
I intend to hold through the decade so buybacks at a lower price can only help the long term. At the moment it's
'buy 100m shares and get 25m free' for the company.
If you want a popular share NVDA is where to go but I am happier going with the unloved one that 'prints money like a cash machine'.
No, they will start liquidating positions if no other action is taken by Friday.
But don't take advice from someone here, your friend needs to phone their broker.
Yes, this is good news. I wrote a complaint yesterday arguing I was working to their dates which they changed unfairly. Perhaps others were unhappy too.
I got confirmation from AJ Bell they were initiating the transfer I filled out yesterday morning and it shows the request on my ii account. Hopefully the transfer of my ISA POLY shares goes through and thanks for the person who mentioned AJ Bell so I can keep the tax wrapper.
My non-ISA trading account shares I am trying to transfer to Wood & Co but no news back on that, the international transfer seems much more complicated. If I don't hear back by Friday I will have to request share certificates from ii.
Owning POLY is not boring that's for sure. Let's hope for a positive outcome in the next few months.
How does it help you?
The poster said no ONLINE trading.
I have been buying also but you need to phone them up.
I can't believe they changed their stance on allowing transfers out. The message from Friday in not very clear and only has one sentence to this effect.
When I phoned them up this lunchtime two separate staff members told me this instruction had come from POLY which must be untrue as I can't find any RNS.
This has screwed my plans up somewhat, they will only allow certificate requests now up to Friday.
The changes won't make a difference. Partly the damage is already done (as companies now will put a huge risk premium on the UK for having an unpredictable tax environment), and partly the change was insignificant.
The change might only kick in if there is a bad recession where OPEC lose control of oil prices and then no guarantees it won't be slapped back on a whim.
When pricing projects, future cashflow is everything. The current tax is ridiculous as no profits can be extracted without the huge tax. So the potential profit is very low, the investment really high and the oil company takes 100% of the risk. It's insane, unless your intention is to kill all future North Sea fossil fuel extraction.
This just adds to all the other UK policy incentives that result in less production and more people trying to grab. We have gone past tipping point.
I don't think it will be very easy to refill. The governments are flush with anti-O&G sentiment and they believe we won't need oil in a few years time. Why waste tax money to make oil companies rich, there will be a lot of resistance.
What the releases have done is reduce oil prices over the last year. The fact they are not higher is a reflection of the slowing global economy. If the economy does better in H2 than traders are predicting, we will have a bounce.
The market rules so we have to assume it's correct, we have a big slowdown coming (which seems priced into BP but not NVDA).