Crisis in Russian Oil is Over

Investment Analysis Clubs Macro Economic Trends and Risks
1

I marked the crisis in Russian energy for global prices last week. But the US cutting off Russian oil on Tuesday was the top.

The reasons it was the top?

  • Russian energy supplies are going on elsewhere on the globe for now and until there is much more supply gradually introduced from other countries US included.

  • The fears over losing Russian energy are abating.

  • The central bankers around the world are tightening their respective money supplies. This always drives down commodity prices.

What does this mean? The premiums around all energy companies are leaving the marketplace.

How long till such premiums reappear? Who knows. But not next Tuesday, not for the foreseeable future, it can take many months or many years for a deep energy shock to reenter the markets.

Am I wrong? Tell me…

Do not rely on the longer term supply and demand charts. Those are a moot point.

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2

The premiums around all energy companies are leaving the marketplace.
Am I wrong? Tell me…

Some of the premiums are leaving. Remember, WTI was over $90 in early February.

DB2

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3

Oil is overpriced.

I can believe that. What would be your base/not-overpriced level for oil – $90, $80, $60?

DB2

4

Iran? For 20 years, we’ve embargoed equipment for Iranian oil fields. Now, suddenly we’re going to make nice, let them produce their nuke bombs? Just to get some more oil so Biden doesn’t lose the Congress in Nov?

I will not make political posts on MeTAR.

I will not make political posts on MeTAR.

I will not make political posts on MeTAR.

I will not make political posts on MeTAR.

But

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I will not make political posts on MeTAR.

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dag nabbit

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do you have to

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I will not make political posts on MeTAR.

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make things so difficult?

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I will not make political posts on MeTAR.

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5

Oil is overpriced.

I can believe that. What would be your base/not-overpriced level for oil – $90, $80, $60?

DB2


DB2,

Setting up a target in a free market makes little sense. I get having a concrete point of reference would seem to allow people to sleep better, but it is not a reality of a free market.

I just know when there is a premium that wont last.

The top level of froth is off the market. The equities around that will predict another level of froth will drop out of the market. Meaning the premiums will be dropping out.

I will add a disclaimer, I think it is low level risk oddly enough, but if another news event comes along the analysis will be wrong. The problem is betting on nothing as of now is not a good bet.
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I just know when there is a premium that wont last. The top level of froth is off the market. The equities around that will predict another level of froth will drop out of the market. Meaning the premiums will be dropping out.

Looking at oil company stocks, a lower price for oil means their prices will drop. However, then the basing price for oil becomes important. If oil stays around $80, where it was in January, or $90 (February) then the oil companies will be looking at lots of cash flow and free cash flow. Large companies such as Chevron will be considering special dividends and stock buybacks. Small companies will be able to pay down debt and become more deleveraged.

The coming year should be positive for these companies. Wendy might repurchase her XOM shares. :slight_smile:

I’m thinking about higher beta stocks such as MRO and OXY.

DB2

7

Looking at oil company stocks, a lower price for oil means their prices will drop. However,

DB2,

The relationship between the barrel price and the equity prices is unhinged. Meaning even if prices of the barrel go up the crisis wont be the same. The premium is dropping out.

The markets are manic depressive.

I do not have to guess at barrel prices.