Member Info for romaron

Just to clarify. When there is a glut at the front end it is human nature to assume it will continue and like today it'll be 32 degrees for some time. It isn't always easy to get your head around severe energy shortages in the future. To be up to date one of the coldest days I can remember was at Wimbledon one year. In the shade on Centre Court I froze and to make it worse I'm not even a fan of tennis and it was corporate.

monkey - the truth is that he puts a lot of effort in but he hasn't done the miles. There are people on this message board who are experts in their fields and also like more control over their finances. People who really understand their 'specialised subject' are usually bored to tears about it and tend to keep quiet whether it's shipping, insurance and occasionaly even O&G. AB has less firm beliefs than some on here and take it from me, he knows more about EnQuest and the industry than anybody posting here.
I appreciate the skills behind many posters and we can each glean additional knowledge by considering the rationale behind their posts or their expertise in digging up obscure technicals or better reading of a balance sheet etc...
You're right about advice. Much cleverer people than us got it wrong recently (Jeff Currie, Eric Nuttall) but it seems the old-timer WB is getting it right and he is notoriously NOT a day trader.
When I was at Banque belge back in the 70's I bragged about how much I was making on my position being short on convertible Belgian Francs and was making large profits. Within days I had lost the lot and finished up making a decent loss. Lesson learned but it does explain my obsession with a belief that the market is shorter than we are being told and why I think if govt propaganda could be believed we'd be in contango. I don't accept that winter futures should be lower than spot. I am in a minority but I have a strong feeling in my water that something isn't right.
As for advice? I'm long and should be a supporter though maybe 'Strong Buy' is a bit, well strong but it does upset the trolls and doomsters who stalk this board.
Too hot to argue today.

Stay Lucky

Ran out of words. What I tried to say is that without the latest info and closeness to the market you are on a hiding to nothing with spreads and misinformation (a function of paper herds). When you have an bit more knowledge than the next investor you are a king. Naturally some will agree with me and many disagree. It is what makes a market but 'the market' has never let me down with the amount of stupidity and gambling addiction that is part of it. How else do you explain Bitcoin for example?

Be Lucky

I enjoy both your posts and the ticks indicate a fairly balanced opinion. I started work in a 'Dealing' room in 1972 and finished up on a 'Trading floor' in 1999. I didn't think there was a world of difference in either other than the name change and people would probably say I have more trading experience than most and I would agree but in a very narrow field. I finished up Forward Foreigh Exchange. It is massive (as is the oil market) but it doesn't mean I understand all the other stuff.
CFD.'s, letters of credit, head and shoulders (isn't it a shampoo?), and even options. E121 knows options better than me but I once spent a day with an options team back in the day to see if I could get a better outright price (one of the functions of swaps) by being the first in the broking market to approach from that direction. It didn't work for me because of spreads but it might work for (say) Goldman Sachs (GM) because they might have a large interest in one of the legs of the trade. An instance is in Forward Italian Lira if you had a big order to sell and buy lira it would usually interest GM. They were only interested in size and anything below $100mio didn't interest. The reason it interested them (and Morgan Stanley) was that they had access to cheap dollars as did the larger US bank in London. It meant they could fund their Italian BTP's more cheaply on their high income desk (or whatever they called it). [buy/sell Lira to fund BTPs: sell/buy dollars funded by client funds looking for higher rates]
For me options are insurance for EnQuest but most are paper trades.
I did 8 years in Dealing rooms and because I was young picked it up quickly. You learn technicalities and how to fit a boiler but you cannot be an expert on everything and why bother? M - I even did promissory notes for the famous "Belgian Dentists" in the early 70's. You never know what is behind a trade and the annotations of Buy/Sell can be deceptive. Something few mention here is that there will be an element of professional money agreeing with the majority here that oil is a BUY but still money to be made by shorting one company and holding another. If it works it works and some of these things are self-fulfilling.
I spent a drunken afternoon c.2017 with an ex trader of Dresdner Kleinwort (group who famously sued for lost bonuses) and a quant guy from HSBC (I think). I asked them questions that they couldn't answer. Without their array of boxes and electronic flows they're like stranded whales. When they have the right conditions and tools PI's don't stand a chance.
I prefer Warren Buffets approach. The weakness in the 'professionals' way of trading is that they have to report to a boss or institution. They might have the right position but be forced to cut once limits are breached. There is obviously a danger in holding the wrong stock but to be on the wrong end of some of the recent swings would crucify many here.

.... without checking I think JPM and BOA are corporate advisers to EnQuest.

I'd also consider these. Jefferies look after the AB & family shares. James Hosie has tended to have a downer on EnQuest for some time and may be a permabear.
I know a well known analyst in the retail sphere quite well and he is a fountain of predictability and non-committal. He makes Stanley look interesting. I had a trading question for him [the analyst] that he couldn't answer. A qualified Accountant who went to Cambridge but remarkably narrowly focused. James Hosie is his own man and put out his target price without speaking to EnQuest (confirmed at AGM). The company disagree with his forecast but they would, wouldn't they!
The EPL was announced on 26 May and it will be 46 days when it starts its journey through parliament. That is a long time for us with the wild swings we see almost every day but nothing in the life cycle of government and O&G operations. The analysts, including JH may well have changed their mind but until something official or an event that throws everything in the air there is little reason for them to change their TP. I'm pretty sure their clients will get a fresher outlook but they aren't like the tip sheets that have a different opinion on the same stock almost weekly. The likes of Barclays, JPM and Jefferies don't tout or make outrageous predictions because they are actually quite good at their jobs. the future will always remain unknown.

https://twitter.com/eri****tall/status/1545021199687847937/photo/1

This feeds into my theory that Brent futures are too low. "Unless the recession is deep and protracted, we believe that the dated calendar strips are largely undervalued." If what we're being fed by the (near to panic) authorities along with their actions then why isn't the front end much lower? If it's tight now, what will it be like come winter time? The truth is being hidden from people that you can't produce O&G at the flip of a switch. A decade of starvation in in starting new fields and keeping capex to a minimum is now showing the results. The cult of renewables promising the undeliverable is largely to blame.
Of course a deep recession is a threat but the other side of the coin suggests "the strongest fundamental oil market set up in decades, or maybe even ever".

Or as another RBC analyst wrote "the physical [oil] market is pricing in scarcity while the financial [oil] market is pricing in recession."

Thanks robizm - I have him on filter so missed the gist. He has a fund? I think Boris Johnson is more truthful.

Sorry M - I misread that as AB's fund. I didn't realise it was about Coco. Has his mum cut his pocket money or banned him from the computer?

Ben Wallace is 13/2 favourite to be the UK's new PM. Some years ago I was invested in Xcite Energy (Bentley field). The Corporate Affairs Director of Xcite Energy Resources plc was a certain Andrew Fairclough. Later Whalsay Energy. He managed to get an MP to ask a question in Parliament regarding the North Sea (and possibly Xcite). That MP was Ben Wallace.
AF and BW both served in the Scots Guards.
If BW does become PM it will be a positive for the O&G industry of the UK. He understands the importance of fossil fuels and commodities. Wars start over such things.

Explain?

Time to get into HBR I think. Recent performance explained by today's RNS. Bit like giving your kids money. "Now I expect you to put it into a decent income fund and put some aside for Uni, don't spend it straight away."

This will drag us up as well.

Unless you've got deep pockets. The physical market trade because they have actual buyers and sellers of the oil. Fewer traders stir it up and the algos finish it off. They feed off themselves.

"Throughout 2019 and 2020, the average daily range for Brent crude, from its highest to lowest, was about $1.80 a barrel. That reflected mostly normal markets, even during the period when COVID first took hold and the Saudis and Russians flooded markets with barrels. This year, the market on average is in a $5 range.

Why? Well, trading is sparse; average daily open interest in Brent contracts is about 280,000 contracts daily, according to Refinitiv Eikon data, versus 358,000 for 2021.

Margin requirements have been higher, and that leaves fewer speculators, a situation that feeds on itself, as people are wary of trading because they don’t want to find themselves in deep trouble from a trade that goes badly in a matter of minutes. That means more volatile trading when people do exchange contracts - leaving situations like Tuesday, when oil traded in a stomach-churning $13.65 range from top to bottom.

Source: Reuters

Auson some thoughts here - - the HBR position doesn't surprise me. I stay away from them [HBR} for a couple of reasons and one which I won't post on a public board concerns PMO. Never underestimate the nefarious dark arts of those engaged in share placings or off-shoring positions and evading reporting restrictions. The stock on loan is a short unless somebody can explain another reason to me. Possibly a small float for MMs, spread betting firms but after that? And of course it can easily go to double digits.
If I wanted to keep within agreements of holding stock in a lock up situation then I would look enviously at the rising price as it could be one year away from officially being able to exercise the right to sell. However, I can probably lend them. This is where it gets murky. What if I lend them to a company I have an interest in that is to an extent off the books. I can still be the holder of the stock and votes but the entity I've lent them to is now in the position of being able to sell. Companies are more restricted than employees and a further complication is share options. Not everybody is a Director and has to report purchases and sales.
If for example I'd been awarded 1mio shares or put into a company at the price of £1 and saw the price rise to £3.50 but could not exit until 2023 and thought £1.25 was fair value then maybe I could make an arrangement to lend an accomplice stock until 2023. He sells today at £3.50 and gets a fee or percentage. He can now lend you £3.5m at a peppercorn rate. In 2023 the loan of stock is repaid except the accomplice doesn’t have the stock now. So you sell the stock to him and he pays you in sterling. The price is now only 50p. The accomplice facilitated and gets paid for doing very little. In your books you were even paid by the accomplice a fee for lending the stock. The accomplice is the villain and it is all sweetness and light with you. As you are both holder and accomplice there needs to be some accountancy adjustments as selling at £3.50 when the price is 50p might look a little suspicious. Effectively you played the system and didn’t sell during the lock-up term. You correctly reported the loan of stock. The accomplice might split them up into amounts just under reporting limits or might just not bother (ARCM - "what, me guv"). There are so many ways to trade that it is not surprising that compliance is almost impossible and unless the agreement is watertight clever traders and lawyers will continually probe. It is worse in AIM where they have perfected this and you get “death spiral financing”. The loser is usually the PI.
I suspect that the larger than normal stock on loan with HBR is something to do with the 'lock-up' period and will drop when it ends.

Political, paper, physical.

EU parliament backs labelling gas and nuclear investments as green. Likely to become law unless super-majority of states veto (unlikely).

Saudi crude oil price hike set to collide with recession fears
In the two days since the hike in the official selling price (OSP) of the world's biggest oil exporter, benchmark Brent futures have slumped 11.3%, ostensibly on weak demand and recession fears.
It may seem a bit of a mission impossible to reconcile these two developments, but in some ways they reflect the difference between the reality of physical oil trading and the perception of the much bigger paper market.

Source: both Reuters today

If you're a trader follow the paper. If you follow politics - good luck! Or like Coco keep buying the scratch cards. Saudi Arabia seems to prefer physical and so do I. The actions of the EU parliament, UK government and Biden suggest that the politics are hiding the true picture.

As usual I'm confused and this'll wind E121 up but I think we have a form of contango. There is a building up of inventory at the front end. Russia and Iran are shipping as much oil presently as they can before sanctions really bite. The reason is a shortage this winter and the fundamental lack of investment in the last decade in O&G infrastructure. This would usuall result in contango as the price of crude drops as Russia/Iran sell while the goings good; but it hasn't. Then add the SPR release by the US. The reason is the anticipated shortage hasn't arrived and the sky is clear and sunny so countries are furiously stockpiling otherwise oil would be $20. Obviously I'm wrong as figures don't lie (or do they?). Backwardisation is the norm because the world won't run out of oil. However, the shale tap is unlikely to be turned on as liberally as in the past (forget Govt, think shareholders) and OPEC had their own problems with Govt finances the past years and exacerbated the existing paucity of infrastructure investment and new fields. Shorters of oil are praying for a recession. I don't know if it will be severe? The demand side is imo rock solid and growing. Politicians are now positioning themselves to show an ambivalence towards fossil fuels. In summation - we should be in contango but we're not.
We live in unusual times.

Build it and they will come.

Agree M - "A butterfly flaps its wings in China and causes a hurricane in the Caribbean". You turn on Bloomberg and the voices are always excited and they have fast music playing, even on flat days. Try taking a heavy bowl of water down some stairs and small movements make the water oscillate and start going over the sides. People get carried away with the noise. Bit concerned about the Boris Johnson situation but he has become a liability to the Tories and we don't tolerate "the big lie" here like they do in the US. Mind you the renewable fraternity blame everything on climate change but never mention benefits of fossil fuels. All good fun.

Bonne chance

*bit of light relief from COP26 time: https://www.youtube.com/watch?v=RYSLyvbR_1w (HMHn supplied before the drivel on here drove him away).

It does look like he will go in a matter of hours/days. What will be the market reaction? Up, down or neutral. I'm hoping up as it will remove the uncertainty plus it will show the world that the UK does care about integrity at the top.

Today's sell off is hard to explain. The supply problems remain and it only balances if demand contracts. Oil is fungible so we need Asia to play too. Not many days when Shell and BP do worse than us but I was most surprised at Centrica.
I can't think of many better defensive stocks and yet it got dragged down too. This isn't about the physical market but financial driven with no doubt algos playing their part. Just have to wear it. Like FCF the physical wins in the end.

KO - You've got governments having convenient scapegoats in Putin and Covid and as always will suggest that any recession will be brief and mild. So on the one hand attack oil because it will be mild and of a brief duration. On the other hand why impose a windfall tax for 3 years and why is visiting Saudi Arabia so important?
https://www.reuters.com/world/us/back-europe-biden-turns-diplomatically-delicate-saudi-arabia-trip-2022-07-05/
It will become clearer next month one hopes. All I know is that our debt will have all but disappeared by end of 2023 and from then on all the FCF belongs to shareholders.

O/T KO I like this graph - Art berman - 20h https://twitter.com/aeberman12 UK GDP on Energy since 1300
I'm considering increasing my fleet of oxen and branching out. I've had a few problems with the wagons which are a bit wide for modern roads and I keep losing wing mirrors. I'm also having a problem sourcing yokes - interested?

https://mcdan.com/price-forecasts/
The latest figures are out. H1 2022 105.55 and they're forecasting 104.50 for H2
2023 92.31
2024 84.27
2025 77.47

These are best guesses and are a reminder that these are closer to what the industry uses in their modelling. I think they're far too conservative but it depends on how deep the recession is and macro events obviously. AB did point out that the $100 + prices may only be temporary. Industry veterans tend not to get caught up in the hype surrounding oil. I think you can take it as read that AB has lower expectations than many on here (me included). I don't see Saudi Arabia accomodating the West with vastly increased production. They too think long term and could easily argue that they aren't the insurance for when the West gets energy wrong.