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|Posted on June 22, 2017 at 11:22 AM||comments (100)|
Short and long. The market indexes are near their highs, and with that come the predictions for more of the same, along with other predictions of a big decline, and everything in between. We see the market as having long- and short-term trends and it is important to realize what the overall trend is and how the near-term possibilities fit into the big picture. The S&P has rallied to more than triple the value of the 2009 low, and we think that it is clear that the longer-term trend of the market is bullish. Within that long-term trend, we believe the potential for pullbacks of up to 15% exists, but would still leave the market in a bullish trend. The problem with much of the commentary is that it does not make the distinction between the long- and short-term trends, as people seem to want a one-word solution to the market’s direction of either “up” or “down,” and it’s really more complicated than that. We think that if investors can get a handle on the long-term trend, then they can make some better judgements on a short-term basis, and how that fits into their overall plan.
|Posted on May 12, 2017 at 11:09 PM||comments (43)|
|Posted on February 27, 2017 at 8:37 AM||comments (47)|
Parties to an agreement to limit crude oil production starting in January were 86 percent in line with commitments, a joint OPEC, non-OPEC group said.Members of the Organization of Petroleum Exporting Countries agreed in November to sideline about what was expected in global demand so that total member state production would be at 32.5 million barrels per day in January "in order to accelerate the ongoing drawdown of the stock overhang and bring the oil market rebalancing forward." Non-member states, led by Russia, agreed to limit their production in solidarity.OPEC said a joint committee monitoring the terms of the agreement held its inaugural meeting in Vienna to verify compliance."According to the joint technical committee report for January 2017, the OPEC and non-OPEC producers achieved a conformity level of 86 percent," OPEC said in a statement. "The [monitoring committee] noted that there is still room for improvement to reach 100 percent conformity, and, in this regard, urged all parties to press on towards full and timely conformity."Speaking at an energy summit in London earlier this week, OPEC Secretary-General Mohammad Barkindo said there was strong coordination around the agreement, comments that followed reports suggesting stronger action in the second half of the year.The agreement holds for six months and OPEC said it would consider an extension as appropriate.Libya and Nigeria are exempt from the agreement as they depend on revenue from their energy sectors to help ensure national stability. Iran, meanwhile, is the only member state allowed to increase its production as it looks to regain a market share lost to nuclear-related sanctions.Petromatrix, a sector consultant group based in Switzerland, reported the OPEC cuts are not enough to eat into the surplus of crude oil already on the market. Data this week from the United States, where shale oil is recovering along with crude oil prices, show total U.S. oil stockpiles rose last week for the seventh week in a row.The latest survey from S&P Global Platts found compliance from the 10 OPEC members obligated to cut production at 91 percent. Platts noted coordination from non-OPEC members, but did not include their contribution in its compliance figures.Crude oil prices were slightly lower in early Friday trading. Credit Dan Gruber UPI. 24th Feb 2017.
|Posted on February 12, 2017 at 3:58 PM||comments (39)|
|Posted on January 3, 2017 at 5:53 PM||comments (47)|
|Posted on January 3, 2017 at 5:50 PM||comments (31)|
|Posted on December 20, 2016 at 11:39 AM||comments (62)|
Quiet Consolidation. After the market makes a large move to the upside, it often becomes “overbought,” which mostly means some stocks have moved up too much and too fast, and now need to go through some kind of a consolidation period before the uptrend can resume. This appears to be where the market is positioned now after the 10% gain by the DJIA and S&P over the past six weeks. We believe the market can relieve this condition by moving sideways for a few weeks, or by pulling back and correcting a portion of the previous advance, or something in between, where some stocks pull back, but others do not. For the Dow and S&P, we see the potential for a pullback of about 5%, but more for some stocks, like Financials, and less for others, like Technology. We could see the consolidation period continue on into next year, but suspect some typical January volatility could also set the market up for another good rally in the first quarter of 2017. RBC Dec 21 2016.
|Posted on December 19, 2016 at 10:44 AM||comments (26)|
To Be Continued. The stock market has been hitting new highs recently, but the number of stocks supporting the move has been decreasing over the past few weeks, which is an indication a pullback could be coming. We think the long-term trend continues to be positive, but the market is extended for the near term, and a dip of about 5% on the indexes would not be unusual to see over the next few weeks. The short-term sentiment has also become a bit high on the bullish side as the Dow approaches 20,000, which also suggests to us a correction is due. However, many of the market-letter writers we see continue to doubt the longer-term bullish trend, and we view this position as one that has plenty of room for improvement. And so we continue to view the stock market as bullish into next year, with a potentially rocky period around year-end to set us up for the next rally. RBC charts.
|Posted on December 16, 2016 at 10:44 AM||comments (44)|
Oil Peak Again. The rally on oil appears to have stalled again, despite the world developments that would indicate a strong likelihood of higher prices. The price has peaked in line with previous tops of the past year, and even though the recent peak was a slight new high, it has so far not carried through with an extended gain. This makes it likely that the commodity could pull back to the low end of the recent range of around $45 again. The recent weakening trends of a number of the energy-related stocks adds to the likelihood of a pullback in the price of oil as well, in our view, and suggests that investors should hold off for now on increasing exposure to the group. It is possible that this range that has held oil for most of this year could continue for several more months, with little indication of a larger trend coming in either direction. It’s the definition of a neutral hold. RBC Dickey.
|Posted on December 13, 2016 at 3:30 PM||comments (53)|
2016 has been a tougher year for most service companies than 2015, and revenues have continued to fall as much as 27% when compared to 2015 on average. Companies exposed to onshore North American activity have seen their revenues diminish even more. While 2015 was the year that service companies built alliances, 2016 was the year that saw service companies starting to consolidate fully. We have seen many mergers and acquisitions happening, with TechnipFMC and GE-BHI as the frontrunners. Other service companies have started to unlock their own potential by completing the organizational and operational changes that were initiated last year. The overall workforce reductions in the service industry are looking likely to cease in the first half of 2017. 2016 has also seen several companies becoming insolvent or have been dissolved. In North America alone, more than 100 service companies have filed for bankruptcy. Service prices continued to fall, which forced service companies to think about new contractual set ups. Risk and profit sharing have been instruments used to improve these company’s margins. Two weeks ago, news that the oilfield service industry was hoping for was announced. The OPEC-members, supported by Russia and other non-OPEC members, agreed to a target production rate of 32.5 mb/d in order speed up the drawdown of stock overhang in the hopes of balancing the market. With revenues down 30-50%, these OPEC-cuts will deliver a lifeline for many. Since oil prices are expected to average at 60-65 USD/bbl for 2017, following the productioncuts, E&P spending will react accordingly. Within OPEC, the service market will only be marginally affected. Production cuts will be initiated at producing fields and the cost for brownfield services is expected to stay flat. The drawdown of purchases is related to the completion of the offshore development of Upper Zakum in the UAE. The largest reaction will be visible for non-OPEC shale exposed service suppliers. It is estimated that as much as 15 USD billion of additional spending will flow into the market for drilling contractors and well services, assuming 10,000 wells are drilled and completed. Though offshore suppliers should not expect to see their revenues increase next year, the volume of projects rolling over along with deflation in the industry, is still larger than the uptick of new FIDs and contract awards. The EPCI and subsea segments will therefore get reduced and in total, the offshore market will be reduced by 19 billion USD in 2017 compared to 2016. Next year will follow a lot of the trends seen in 2016, with more market consolidation and tighter collaboration between service companies and operators. OPEC production cuts will turn the needle on the FID for many projects in shale and offshore, which will generate more transparency on future activity and revenue.