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Oil News:

Friday, August 23rd, 2024

Oil prices have been rangebound this week, recovering after the frenzy seen in the first two weeks of August, with ICE Brent settling in a narrow band between $76 and $78 per barrel. Overall sentiment has been improving after the US Federal Reserve’s July meeting notes indicated September would be the most probable date for the much-anticipated interest rate cut. If Jackson Hole doesn’t disappoint, macroeconomics might lift oil even higher.

Houthis Attack Greek Oil Tanker. A Greek-owned Suezmax tanker carrying Iraqi Basrah crude is adrift in the Red Sea after being attacked by Houthi militias as they claimed the operator company had ties with Israel, with the EU’s naval mission calling it a navigational and environmental hazard.

US Coal Megamerger Creates New Champion. Leading US coal producers Arch Resources (NYSE:ARCH) and Consol Energy (NYSE:CEIX) will merge in an all-stock deal to create a mining giant valued at more than $5 billion, boosting an export capacity of 25 mtpa across two separate shipping terminals.

Canadian Rail Strike Ends in Federal Arbitration. A Canadian rail strike that started this Thursday has been forcibly cut short by the federal government after it compelled labour unions and the CPKC and CN railroad companies into binding arbitration, under section 107 of the Canada Labour Code.

Oil Majors Quit War-Torn South Sudan. With Malaysia’s state oil firm Petronas withdrawing from South Sudan on the back of the ongoing civil war, the country’s state-run Nile Petroleum is to assume ownership of its assets in the country, once producing more than 150,000 b/d across six license blocks.

Chevron Eyes Australian Carbon Capture. US oil major Chevron (NYSE:CVX) has been awarded a permit to evaluate an area of around 8,500 km2 in Western Australia’s offshore territory for potential CO2 storage projects, to be captured from its Wheatstone and Gorgon LNG liquefaction plants.

Czech Refinery Shuts Down Due to WWII Bomb. The Czech Republic’s Litvinov refinery operated by PKN Orlen has shut down production after an unexploded World War II was found in a remote part of the plant, with preliminary estimates suggesting the forced halt could take up to 2-3 weeks.

EU Gas Storage Reaches Strategic Threshold. EU underground natural gas storage sites reached 90% of capacity this week, holding 1,025 TWh more than two months ahead of schedule, with central and eastern Europe seeing the highest fill rates whilst Latvia and Denmark have been the region’s laggards.

Environmentalists Sue UK Government. The Oceana UK environmental group is challenging the United Kingdom government in court for issuing 31 exploration licences in May as part of its latest offshore licensing round, saying authorities failed to assess the projects’ environmental impact on marine life.

Mexico Rules Out Revamp of Oil Policy. Mexico’s soon-to-be president Claudia Sheinbaum ruled out a reversal of oil policy to the Nieto-era associations between private producers and state oil firm Pemex, despite a dramatic 12% decline in oil production in AMLO’s six-year tenure to a low of 1.48 million b/d.

Egypt Promises to Get Its Mojo Back. Egypt’s government has promised to return oil and gas production in the country to normal levels from 2025 onwards after a spectacular plunge in gas output from the offshore Zohr field that prompted the North African country to import LNG and fuel oil to meet power needs.

Russia Delays Key LNG Plant. Russia’s LNG specialist Novatek has postponed the start of Arctic LNG 2’s third train from 2026 to 2028 as sanctions have complicated the procurement of Chinese-built liquefaction platforms and gas carriers, potentially seeking to relocate future plants to ice-free ports.

Venezuela Fires Dozens over Political Dissent. Over a hundred employees at Venezuela’s state oil company PDVSA and its Oil Ministry have been fired after they failed to support incumbent President Maduro at rallies and disputed the official voting results of the presidential ballot held July 28.

California Solar Subsidies Cost Billions. According to California’s Public Utilities Commission, the cost of the Golden State’s residential solar subsidy would amount to $8.5 billion annually, mostly carried by customers who do not have rooftop panels as they pay utilities’ fixed costs, such as maintenance.

Hedge Funds and Mag.7: https://www.ft.com/content/7d48e551-73d3-4b89-ba24-4d9119df87d0

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Ackman: https://www.institutionalinvestor.com/article/2dnrqrlgvcnhswi1idxc0/corner-office/the-summer-of-bill-ackmans-discontent

Sovereign: https://www.institutionalinvestor.com/article/2btfpiwkwid6fq6f5zmyo/home/secrets-of-sovereign

NZ Sovereign Wealth: https://www.ft.com/content/b6bc18f8-e595-4c82-bc08-6e177d12817f

Key Takeaway: Both the ride and the returns improve when we set aside fear and take time to be out of the market.

The “Time in the Market vs Timing the Market” charts are making the rounds again. Depending on the parameters that are used (starting date, # of days excluded) the actual numbers can vary, but they usually look something like this:

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They are often put together by the Marketing departments of Wall Street firms to induce a little fear of missing out and thereby keeping investors sitting on their hands through the ups and downs of a market cycle.

The arithmetic used to produce these charts is sound. If you miss too many of the best days in the market (but stick around for the worst days) your cumulative gains evaporate rather quickly. On the other hand, if you sidestep just the worst days but fully participate in the best days, your cumulative gains soar. Remove the 50 best days from the market since 1990 and the annualized return is negative. Remove the 50 worst days and the annualized return more than doubles.

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The market logic of just missing the best days (or just missing the worst days) is faulty. No one is so perfectly bad or so perfectly good at reading the environment that they will be missing out on just the best days or avoiding just the worst days. We do, however, know that the best days and the worst days often cluster together in periods of elevated volatility. So, if we are missing some of the best days, we are probably also missing some of the worst days.

The marketing departments for the big firms won’t tell you this, but I will: missing equal numbers of the best days and worst days will tend to increase returns and reduce overall volatility. The more volatility you miss, the better the investing experience. That means both a smoother ride and a better destination.

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Share

While that is a market fact, it is not an implementable strategy. But we know that these best day/worst day clusters are not random. They occur during periods of elevated volatility and those tend to occur during downtrends in the market. Increasing equity exposure during periods of trend strength (e.g. when the 200-day average is rising) and reducing equity exposure during periods of trend weakness (e.g. when the 200-day average is falling) is an implementable strategy and achieves the goal of largely sidestepping both the best and worst days in the market.

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When we let go of the fear of missing out and embrace the longer-term trends, we can avoid volatility and sleep better at night, whether we are spending our time in the market or out of the market.

Mr fff

A Fed Loosening Cycle is About to Occur

Dr. Fly Fri Aug 23, 2024 9:49am EST Leave a comment

All of the important people have convened at Jackson Hole to discuss policy concerns, the things that shape your lives in ways you don’t truly understand.

Want a new home? They’ll decide what you will pay at Jackson Hole.

How about that new car? Jackson Hole.

You and your fiancé want to get married this fall? All Jackson Hole will decide on the costs.

The velocity of money is about to go up. The presumption of the bears is that ‘it doesn’t matter’ because ‘we have too much debt.’ I used to believe in all of that but bur living in the real world and not some ******* fantasy has taught me not to touch the Fed’s kettle when it’s hot. I’ve got the burns to show for my mistakes.

In a sense, the Fed has eliminated the economic cycle. Gone are the days of boom bust boom. Now we just plod along higher with a stable unemployment rate, GDP buoyed by an ever increasing population. The correlation between population increase and GDP is almost 1.00.

But what about how shitty stocks have been recently?

In the short term there are plenty of things that can go wrong. As a trade we remain vigilant and will short this ******* tape into the ground if we must. But in the intermediate term into the Fed cuts, there isn’t a good bear case to be made, lest we are now discussing the specter of WW3, which on the surface might seem scary and foreboding; but ultimately that too is super bullish, lending to all sort of new money creation and industry.

I don’t make the rules; I just follow them.

NVDA earnings next week:

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jog on

duc