Long Oil is crowded

I’m advising clients to tune in where the noise is and where the herd is gathering.

Albeit, this is subjective and certainly more art than science, it’s important to identify the “crowded trade” and asking yourself if you are about to be the marginal buyer.

For example,

“everyone” is going Long Crude Oil, Natural/LNG Gas and Coal.

and “nobody” wants to buy Chinese equities nor Gold.

There is merit considering a contrarian result.

With Brent Crude Oil currently $83, I ask myself if it rises $20 or falls $20 from here?

In the coming months, I say it sees $63 rather $103.

October 13, 2021

by Rob Zdravevski

rob@karriasset.com.au

Still looking for lower oil prices

Brent Crude has fallen 12% since my note (3 weeks ago) called a peak.

Last night’s 6% decline (to $68.75) suggests and adds a little more strength to the downward trend.

The two links below discuss my bias for lower prices.

For now the $62 mark is a spot to watch and certain technicals over the coming weeks will help me decide if a new Long position is established there or around the $57 level.

July 20, 2021

by Rob Zdravevski

rob@karriasset.com.au

Looking for interim peak in Crude Oil

Here’s a market call for you….Brent Crude is about to top out at the $78.50 level.

I’ve been bullish about the Oil price for the past year and remain so over the longer term, but parabolic advances also need a break and some consolidation.

My technical work suggests the crude oil price peaks soon and comes back to test the $64-$62 mark in the coming months.

See my 20+ year chart below. Amongst many extreme coincidences, we are also nearing a 50% move (between the 1999 low and the 2008 high) along with testing the underside of an ominous downward sloping trendline.

Anecdotally, many now are calling Oil to a $100…..and so I ask, where were they when Brent was $30 or $40….another moment of popular pundits making calls at the nutty end of a run which has seen Brent Crude Oil nearly quintuple from its $16 low in March 2020.

Ultimately, I think Oil goes to $120 – $140, in a massive ‘last’ hurrah…I’ll write more about that in a few months time.

For now, it’s time for the Oil price to shake a few people out and I love a good shakeout.

This also means having a think about your Oil & Gas equity positions.

In fact, many of them are already exhibiting weakness.

June 28, 2021

by Rob Zdravevski

rob@karriasset.com.au

The Woodside anomaly

The ‘de-correlation’ and anomaly of the Woodside Energy (WPL.AX) share price.

May 31, 2021
by Rob Zdravevski
rob@karriasset.com.au

Oil continues marching higher

My current read of the Brent Crude Oil price is….

if it closes above $70, then there is clear air to the $74-$76 region, while probability of a spurt to $80-$82 remains, such a move would swing the pendulum into extreme territory.

and then we’ll see OPEC start to increase output.

Basically, traders are waiting for a break above $70 and if they see it, then watch them pile in.

for context though, going Long Oil today (currently trading at $69.50) is a marginal bet. I see the risk/reward equation as being either $6 up or down.

After all, Brent Crude already seems stretched on various measures after having tripled from its $16 low in April 2020. Establishing a new ‘long’ position at this moment is akin to squeezing the last 10% out of a trade.

Keep in mind, that markets tend to move in the direction where they can inflict the most damage……..and a $80 oil price would hurt more (politically and commercially) than if fell to $50.

March 12, 2021

by Rob Zdravevski

rob@karriasset.com.au

Oil at $70 in short order indeed.

Brent moved $10 higher (from $60) to my mentioned target (see linked story below) of $70 within a month.

There is reasonable probability of $75 being next and $84 would make a few squirm.

https://robzdravevski.com/2021/02/09/oils-stealthy-rise-and-still-going/

March 8, 2021

by Rob Zdravevski

rob@karriasset.com.au

An Oil Shock in stealth

OPEC are meeting today, it could be a doozy….murmurs of supply cuts.

My question to answer what OPEC may decide is…..

what do the Saudi’s and Russia want or need ??
and what will hurt America the most ??
especially following the recent accusations made by the U.S about MBS and Biden approved missile strikes against Iranian backed militia…….

the answer is higher oil prices.

Logic suggests a nice reversion of Brent back to $53 would be sensible, equitable etc.
but without being a purposeful antagonist and we are a year on from last years March 8th stoush,

although Brent at $75 would remind many who’s in charge….

and I reiterate that inflation (meaning higher interest rates and higher government and corporate debt servicing costs) will likely come from higher prices in the energy complex and definitely not from services and consumer products.

March 4, 2021
by Rob Zdravevski
rob@karriasset.com.au

Overbought Brent

Today, at $51.10, Brent Crude Oil has registered its most ‘daily’ overbought reading since January 3rd, 2020 (when it was trading at $70).

I’m still bullish on the price of Oil but its telling me to harvest a little as prices should take a pause.

December 17, 2020
by Rob Zdravevski
rob@karriasset.com.au

Market Quips & Synopsis – Sept 18, 2020

Market Quips & Synopsis Some brief points about selected markets or assets and look for the links within for added musings.

About current markets, I’ll open up by saying..

I notice there is dangerous trading going on, market capitalisations in some companies are extraordinary.
For example, how does $1 billion market cap on revenues of $20,000 sound?

ASX scuttlebutt says, “shorts” are trying to pressure companies into raising capital, some are seeing increased stock “promotion” activity and there are many people in the market “that don’t know what they’re doing or shouldn’t be there”.

I see the AUD and XAU (Gold) in a holding pattern, (see the AUD chart below);
they need to hold 0.7240 and $1,902 respectively,
breaks above 0.7355 & $1,978 should see a new lurch higher

Also watching AUDJPY closely, need to hold 76.00 to confirm “more risk-off”,
A move above 0.7730 suggests “risk-on” and higher equity indices

Another indictor to assess the steam in a S&P 500 decline is whether Japanese 10 Year Bonds (JGB”s) trade below 0.00%.

The S&P 500 is down 6% from recent highs,
Indicators are not clear in calling a new downward trend, however I think 3,272 is the target (a further 2.5% lower).

The Nasdaq 100 has now fallen 11% since its September 2nd high.
Looking for it to ease a further 2.4% to 10,814 before determining the strength of the decline.
The decline wasn’t a surprise, as written by me on August 29 and September 3rd  

Global portfolios have a 3% short position in either (or both) the Nasdaq 100 or the SOX index

My ASX 200 target is 5,803, which is 1.2% below the price as I write.

I’m pleased with calling Oil down from $44 to $39.30. Brent held $39.30 for the past week, 
has since rallied 10% in past 4 days….quick rallies are not always a preferred scenario

VIX remains relatively high at a reading of 26, the call option phenomenon has influenced this increase

The De-Equitisation story combined with rising money supply & low interest rates leads to my thesis that higher equities is the dominant and over-arching long term theme.

While we accept near-term rates will stay Lower for a while,
I think the long end of interest rate curve will rise.

AAII Survey exhibiting narrowest bull/bear spread since June 11, which is when S&P 500 had a 8.2% decline.
Since March 5th, more retail investors have remained bearish (than bullish). This survey remains a reasonable contrarian indicator as markets bottommed on March 26th and never looked back.

Oil Rig count showing no meaningful change of increase, see attached, number of rigs in operation has halved

I remain long term bullish on the Oil price and continue to accumulate positions (proxies) to benefit from this opinion.
Incidentally, I have a view there is a coming crisis in energy prices which will stoke inflation (albeit it may be 18 months away) 

In another edition, I’ll expand on various investing themes and I hope to soon publish my bullish thinking about Platinum on my Linkedin page.

That’s all for now…

warm regards,
Rob

My Oil Juxtaposition

I am (long term) bullish on the price of Brent crude oil, which will be another note for another day…..

but I am bearish on the equity prices of large oil companies, especially those listed in the U.S. due to their declining oil reserves, poor exploration and production cost management, awful capital allocation towards acquisitions, debt laden balance sheets while insisting on maintaining historical dividend distributions at any cost.

Furthermore, a recent brainstorm with a client (and friend) confirms the industry is operating with technology and a mentality that hasn’t changed for 50 years which has resulted in a dearth of innovation and lack of efficiencies being sought.

Shareholders of Exxon Mobil, Chevron, ConocoPhillips, Occidental, Apache and the like, should allocate ample time to assess their holdings, hedging and strategy,

while shareholders of oil field service companies…….

August 20, 2020
by Rob Zdravevski
rob@karriasset.com.au

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