Sean Brodrick – A Focus On The Energy Sector And Related Commodities
Sean Brodrick, Natural Resource Analyst at Weiss Ratings and publisher of Wealth Wave, joins us to focus on the energy sector and related commodities like oil, natural gas, copper, and lithium. We start off by reviewing the macroeconomic and geopolitical factors driving the oil and nat gas prices higher, and delve into which types of companies in the energy space have Sean’s attention. Next we switch over to the general selloff in the energy metals like copper and lithium, and what these may signal about the future expectations on the health of the economy and the demand side of the equation.
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Are Oil Prices Heading Back To $120?
By Josh Owens – Oilprice.com – Jun 28, 2022
“As we predicted last week, the temporary weakness in oil prices coming from a widespread futures sell-off by speculators was nothing more than just a respite before another upwards climb. The unchanged physical tightness in oil markets, which can be seen from backwardation, combined with French President Macron highlighting the lack of spare production capacity of Middle Eastern oil producers stoked bullish sentiment. With Libya potentially losing another 300,000 b/d of its production/exports in the coming days, a jump above $120 per barrel later this week is very much on the cards.”
“Western Powers Mull Russian Oil Price Cap. G7 countries have agreed to explore imposing a ban on transporting crude that has been sold above a capped price, despite analysts warning that such measures dramatically increase the likelihood of sudden supply cuts from Russia.”
Oil Markets Could Face A Doomsday Scenario This Week
By Cyril Widdershoven – Oilprices.com – Jun 28, 2022
“Expect lots of oil price volatility in the coming months as markets finally discover just how much spare capacity OPEC members really have.”
“Oil production outages in Libya and the continued impact of Russia’s invasion of Ukraine are going to push oil prices higher if new supply isn’t found.”
“While some analysts are predicting oil demand destruction in the near future, there is little evidence to back up those claims.”
It is a bit concerning that so many investors are all on the same side of the fence regarding Oil and that most are looking for more supply issues and even higher prices; however, the fundamentals in that regard do seem to indicate there could be one more leg higher to energy prices.
Still with so many waiving the bullish banner, it does give one room for pause as to what the alternative scenario may look like with a sudden collapse in oil and nat gas from already lofty price points.
If we do see Oil in the $130’s or $140’s as many are expecting, then that sure isn’t going to ease the pricing increases we see in so many sectors, including the mining sector. So many businesses freight and shipping costs will be problematic at those levels, not to mention the effect on disposable incomes for the consumers in many areas of daily life.
I’ve scaled out of the handful of oil and gas names I was in earlier in the year (Petrus, CGX, Riley, Hemisphere, Inplay Oil) and now just hold NG Energy at this point. GASX still seems undervalued to me, and technically so does OYL, but they’ve had some lackluster news and then a lack of news so didn’t gain as much momentum as other stocks have.
I’ve considered buying back into a few of them now that they’ve pulled back from their highs, especially if oil and nat gas are going to have one more leg higher for a blow-off top. It’s tempting to “buy the dip” here, but if we saw Oil pull back down under $100 or $90 (much less the $60s-$70s pundits like Josef Schacter are expecting), then many of the stocks would have plenty of room to fall further. It seems likes like a tough spot here on whether to add or hold off with regards to energy stocks.
Supply and Demand. Since Wall Street got computers is that still an economic theory. ?
That is a good point Lakedweller2. Economic theory may well be all the supply/demand picture is not just for oil or nat gas, but same thing for copper or lithium that were also discussed in the interview with Sean.
We’ve seen some really wild swings in many of the commodities over the last 2 years, and many of the price ranges we saw were overdone to the upside and downside, somewhat divorced from the supply/demand backdrop, and many simply got trading momentum going in such a fashion that the moves became exaggerated (like what we saw in nickel, palladium, zinc, iron ore, wheat, corn, etc…).
There were periods of a few weeks to a few months where the range in prices was extremely volatile with large swings, so it’s been a bit precarious for commodities traders, and unfortunately the underlying associated resource stocks, didn’t always process the moves in tandem.
This is why using technical analysis can be quite instructive for sizing up a sector or for individual stocks, as it incorporates all the data, fundamentals, and sentiment into the pricing. As a result, it may be best to just consult the charts on many of the these commodities or extractive companies, looking for where the support and resistance levels are for the short-term and intermediate-term.
UAE, Saudi Arabia Pumping Oil Near Limits
By Irina Slav – Oilprice.com – Jun 28, 2022
“Saudi Arabia and UAE are nearing the limits of their production capacity. Saudi Arabia’s production quota was raised 114,000 bpd in June and will be raised another 170,000 bpd in July.”
“News about shrinking spare capacity in leading OPEC+ producers could become next catalyst for oil.”