Hei @krugman25! Welcome to ManxxOil ! and thanks for the encouraging words!
Business visitors are always welcome here so let’s share some views over some coffee
By way of explanation, I have often posted here that traders should treat their trading as a business, with all the same serious considerations that a traditional form of company would incorporate. So I thought it would add some fun and colour to an otherwise serious matter to post my thoughts via a fictitious company called ManxxOil which is involved in buying, holding and selling crude oil! Hence I now term my trades in barrels and cents instead of lots and pips.
So forgive me if I sound a bit crazy - It just adds an additional interesting, and fun, dimension to an otherwise lonely, but very serious, activity! haha!
These both sound to me like very solid investments, covering upstream and downstream as well as midstream business.
The oil industry in the US is going through a huge and very positive upheaval right now and still has a long way to go. And its impact goes way beyond the US borders.
The US industry’s reaction to the sudden drop to extremely low oil prices back in 2014-15 was to drastically improve overall productivity and develop very efficient drilling technologies. The result has put the US oil industry into an exceedingly powerful position where it can still profit even with low oil prices, can produce large volumes, and can adjust output very quickly to match objectives.
The US is one of the world’s largest consumers of oil and was also one of the largest importers of crude. But that has now turned round completely and the US is on the brink of becoming a net exporter of oil and oil products!
This combination of huge volumes and efficient operations has changed the global oil price structure completely.
But yet another impact of these changes is the positive pressure for expansion on the domestic oil services industry and infrastructure such as refineries and pipelines.
Another interesting factor from an oil perspective is both positive and negative - and that is the US President! It is clear that he is keen to maintain a strong stock market but also low oil/gasoline prices! His most favourite weapon in international affairs is trade. And he is already creating huge international reactions in oil prices through his trade policies and sanctions with Iran and Venezuela.
But he is a great friend of fossil fuels and I doubt the US oil industry will suffer much under his reign! The only serious problem I have seen in the oil services area is the difficulty in raising sufficient investment capital to keep up in the race and still pay the dividends to keep the investors content…
All the “big oil” companies seem to be doing well even in a low price environment.
So it seems your investments are intelligently well-placed here!
Yes, I have noticed that too, And global economics is perhaps the most important factor under scrutiny during the current US-China trade issues and Brexit concerns. These two together cover a huge segment of global trade! But it would be wrong to put value on this correlation in too tight time frames. As you say, this is a longer term correlation based on a rather primitive and blinkered observation that increased economic activity means increased oil consumption.
But that relationship ignores oil supply factors and the general move to alternative energy sources and environmental pressures behind the focus on EV’s.
For example, here is my Daily S&P chart which shows a strong bounce of that weekly 200SMA recently up towards the daily 200SMA. But this move is not being reflected in oil prices at all (or at least only in muted terms), which are only slowly retracing some of last autumn’s collapse.
Another common correlation is the inverse relationship between USD value and oil price since oil is still mostly priced in USD. But we have since a reasonable move in USD recently, as shown here in the USDOLLAR index - but, again, it is not reflecting in oil prices in the short term:
Oil is currently caught between supportive OPEC-driven supply issues and global trade concerns - and still going nowhere outside of the “box”
I think a lot of funds and institutions are with you on that even though some have marked down their expectations for 2019. I am also trading from the long side whilst we are down towards $50 on WTI.
But I also have an underlying concern that the traditional methods of analysing oil prices are in danger of becoming obsolete in the new world of US dominance in oil markets and greater use of oil in global politics such as being seen with Iran and Venezuela at present. OPEC’s control over supply and pricing is eroding considerably. Even now they are having to cut their own production levels to maintain prices - only to risk the US filling the gaps and gaining market share at their expense.
We are already seeing talk of peaking oil demand in the foreseeable future - at the same time as major new discoveries of oil resources are being made such as in S. Africa. I do not believe we will see oil prices back up towards $100 except in the event of unexpected geopolitical events such as a major war, etc.
Interesting times we are living in right now - and, love him or hate him, (most people do one or the other - or both!) the most powerful person in the world right now, the US President, is right in the middle of it all with a very large spoon!