Oil Prices and the Iran Deal

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Last Thursday afternoon's modest reversal into positive territory means that crude oil prices have a ways to go yet before an equilibrium takes over.

As of Thursday's close,West Texas Intermediate had eked out a fractional gain, amounting to a two-session rise of 3.3%, and 6.4% for the month.

Meanwhile, Brent had posted a 3.2% two-day rise and a 7.5% gain for the month.

Given its wider use as the bellwether yardstick for oil trade worldwide, Brent often exhibits a greater sensitivity to geopolitics and global market pressures than WTI.

However, the even greater relief is this: since the lows of early 2016, WTI is up 72.3%; Brent is up 77.7%. 

Is this the result of Trump's decision to axe the Iranian nuclear deal (JCPOA)?

To a certain extent, yes.

Filed Under: Oil

Why Renewing Sanctions on Iran Will Cause Oil Price Chaos

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An agreement is an agreement, or so it's said.

Tensions are skyrocketing after Israeli Prime Minister Netanyahu's claim that Iran has violated the Joint Comprehensive Plan of Action (JCPOA) agreement.

This is the deal that was meant to shut down Iran's nuclear weapons program.

Whether Netanyahu is correct or not, it puts the ball in President Trump's court. Remember, he has questioned the JCPOA since before his election.

The talking heads on TV will tell you that canceling the JCPOA and renewing sanctions on Iran will drive oil prices up.

Filed Under: Oil

This Company Could Save Puerto Rico from the Second-Largest Blackout in History

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3.4 billion hours.

That's the amount of energy that has leaked out Puerto Rico's mangled power grid ever since Hurricane Maria devastated the island last September.

The Category 4 storm, with 150-mph winds and 36 inches of rainfall that toppled 80% of the island's power lines and flooded its generators, has left the island in the longest and largest blackout in U.S. history.

It is also the second-longest blackout in world history.

The only event to have a bigger impact is Typhoon Haiyan, which pummeled the Philippines in 2013, where more than 6.1 billion hours of power was lost.

As of March 20, six months after the hurricane shredded the island, 7% of utility customers still couldn't turn on the lights, refrigerate food, or run water pumps.

The U.S. Army Corps of Engineers estimates that Puerto Rico would need 50,000 utility poles and 6,500 miles of cable to restore its power system.

It's starting to look like the island's power problems are far from over.

Filed Under: Oil

Oil Prices Spike as Mayhem Takes Hold

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As I write this (Tuesday, April 10), oil prices are billowing higher.

Both West Texas Intermediate (WTI) and Brent are rising sharply, each up 1.9% for the day before the market even opened.

That means WTI has jumped 4.1% in less than two trading sessions, while Brent has improved by 4.3% over the same brief period.

Now, I do expect that there will be some leveling off as the rise catches some resistance.

However, we cannot underplay what's been happening in oil recently.

With WTI approaching $65 a barrel and Brent already surpassing $70, both have surpassed my estimate of where the prices would be at the end of June.

Filed Under: Oil

These Two Firms Just Created the Ultimate Renewable Energy Hybrid

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Renewable energy's place as part of the global "energy balance" is a delicate scale.

As its prospects and contribution rise, limitations also appear.

There are several main elements involved.

First, the intermittent nature of solar and wind power (the sun doesn't shine 24/7, and the wind isn't always blowing) means alternative, more traditional generation sources must remain online to cover the slack periods or those in which demand peaks.

Second, the absence of new rounds of government credits results in the flattening out of pricing advantages.

And third, the higher unit production costs that are absorbed by end users through existing state requirements include mandated portions of renewable energy. 

The world's overall reliance on renewables like solar and wind has and will continue to rise. But that growth has also raised questions about how much higher that reliance can move.

This is particularly troubling for large regions of the world in desperate need of additional electricity like the Caribbean and Puerto Rico.

There, only one, potentially dangerous solution remains – low-quality coal.

Filed Under: Oil

The Saudi Aramco Handbook: Everything You Need to Know About the World's Largest IPO

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We've been talking about Saudi Arabia's plan to roll out the single-largest IPO in history for some time now.

Right off the bat, I can tell you that the Saudi IPO is going to create an onslaught of profit plays for years to come after the actual listing.

Think about it.

$2 trillion could soon be hitting the global energy markets. This could be the biggest wave of capital to hit at one time in history.

Earth-shaking events like these are the reason why more millionaires and billionaires are created overnight in the energy markets than in any other sector.

That's also why I want to take a few minutes today to tell you everything you need to know about Saudi Aramco, including how much it's really worth, where it will be listed, and how you can profit from it.

Filed Under: Oil

The Truth Behind the Recent Oil Price Spike

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For the past week, I've been discussing some of the broader – and more technical – factors in the oil trade.

But my overall conclusion in each of those issues was this…

A rise in crude oil prices was coming, at least in the near term – a conclusion that has certainly come true.

As I'm writing this (Thursday, March 22), the West Texas Intermediate (WTI) price has surged almost 3% for the day and over 5% since the close on Monday, and is up 6.5% in a week – its highest level since the beginning of February.

Meanwhile, Brent has registered equivalent gains of 2.9%, 4.6%, and 6.5%, respectively.

Filed Under: Oil

Revisiting the "Oil Vega"

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A few years ago, in one of my books ("The Vega Factor"), I coined a phrase to explain the new way in which oil pricing was unfolding, along with the uncertainty resulting from it.

Then, the market was facing rising crude topping $100 a barrel.

Now, the situation finds oil rising into the mid-$60s after a bout of abnormally low prices.

The phenomenon described, however, applies to oil moving in either direction.

I called it "Oil Vega."

Simply put, it refers to the increasing inability to determine the true value of crude oil based on its market price. 

Now, there is a reason why I'm revisiting this phrase now.

You see, I am close to putting the finishing touch on a new investment tool that identifies stocks based on this phenomenon.

Filed Under: Oil

Derivatives Are Becoming a Problem... Again

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Recently, I gave a briefing to some finance folks associated with the trading of global oil.

The topic was the escalating problem with derivatives in that trade, and the difficulty that usage was creating in determining a market value for the underlying commodity.

We have discussed this matter a few times here.

However, a recent uptick in the intermediary paper used to arbitrage oil trade – that is, bringing the values of a "paper barrel" (a futures contract) with a "wet barrel" (the actual consignment of oil in the market) together when the former is expiring – has created a concern.

Filed Under: Oil

The Easiest Way to Find the Richest Oil & Gas Plays

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Multiples are one of the most popular "yardsticks" when it comes to finding undervalued oil and gas stocks to buy.

More often than not, that involves a hard look at the multiple of a company's earnings to determine whether or not a stock is fairly valued.

In the case of energy stocks, however, there is a more important multiple you need to understand. Much more important, in fact, and more reliable, too.

I generally use it to target oil and natural gas stocks, although the "yardstick" can be tweaked to apply to power producers, and even coal and uranium miners.

It's a way to cut through some of the fast and loose "games" management can play with its reserves, too, and to get a more accurate feel for a company's booked reserves and its trading price.

Ultimately, my yardstick takes into consideration the extractable reserves a company has in the ground and opens up a window into how that stock should trade.

I've used this measure time and again to bring home market-beating double- and triple-digit wins.

Once you understand how to use this yardstick, you can too.

Filed Under: Oil