Sell Oil Search Near Resistance

Posted on | by Todd | Leave a Comment on Sell Oil Search Near Resistance

After posting a four-month low at $47.10 on March 27th, WTI Crude Oil has rallied to close at $51.10 today.

Shares of Oil Search have followed crude higher moving from $6.90 to a three-month high of $7.34 in early trade.

We see scope for a move back to the $7.70 level over the near-term. This would represent a “double top” technical pattern which usually serves as price resistance.

In this case, a move up to $7.70 would give investors a chance to take profits on long positions or write covered calls to enhance portfolio returns.

We recognize that the energy sector has some level of upside momentum, for now, and stocks like BHP and Origin on our buy side radar.

Chart Oil Search

Crude Dump Pushes Oil Search Lower

Posted on | by Todd | Leave a Comment on Crude Dump Pushes Oil Search Lower

The price of West Texas Crude Oil fell over 5% last night as the US Energy Information Administration (EIA) reported an 8.2 million barrel increase in domestic crude supplies. This lifted the total crude inventories to a new record of 528.4 million barrels in storage.

The front-month April contract broke the recent consolidation pattern to trade down to a 3-month low of $50.05, just above the important $50.00 support level.

A corrective bounce higher after such a large 1-day move is likely. However, with storage at all-time highs, more supply coming online and consumption numbers falling, a $48.00 price handle looks more probable than a $52.00 handle over the medium-term.

Shares of Oil Search have held above the recent low of $6.80, but look vulnerable to further downside.

The Investor Signals Algo Engine triggered a short signal at $7.72 on October 10th.

Technical studies suggest a break of the $6.75 level will see the stock revisit the November lows near $6.20.

Chart – OSH

 

 

Oil Search

Posted on | by Todd | Leave a Comment on Oil Search

Shares of Oil Search are under pressure in early trade as the company reported a 70% drop in annual core profits.

Net profits fell to $106.7 million for calendar year 2016, compared to $359.9 million during 2015. The company cut its full-year dividend to 3.5 cents from 10 cents, which was slightly ahead of analysts’ expectations of 3 cents.

Oil Search reported plans to roughly double capital spending this year to between $360 to $400 million, with exploration and development campaigns underway near a recent find in Papua New Guinea.

The company expects oil production of between 28 to 30 million barrels over the course of 2017, which would be slightly less than 2016 production.

Our Algo Engine triggered a “short” signal back in October at $7.72

Chart – OSH

 

Strong Demand For LNG

Posted on | by Todd | Leave a Comment on Strong Demand For LNG

With a 27% price increase since mid-November, LNG is one of the hottest commodities in the world.

New data on LNG rates show that the price of shipped natural gas for Asian delivery has jumped $1.95 per MMBtu to $9.20 per MMBtu.

A big part of the increased demand is coming from China, which saw its LNG imports rise to a record high of 47% in November as compared to the same time in 2015, to a total of 2.66 million tons.

South Korea was also reported as a big driver for LNG demand , with that nation buying cargoes to replace power generation lost during maintenance of four domestic nuclear power plants.

Our preferred energy names remain WPL, ORG & OSH.

Chart – OSH

 

OPEC Production Cut

Posted on | by Leon Hinde | Leave a Comment on OPEC Production Cut

We suggested going long oil names ahead of the OPEC meting, our preferred buy ideas were WPL, ORG, OSH and BHP. We see further upside ahead!

On November 30th, leaders of the Organization of Petroleum Exporting Nations (OPEC) agreed to their first production cut in eight years by collectively deciding to curtail crude oil production by 1.2 million barrels per day. Since then, West Texas Intermediate (WTI) Oil futures have gained over 6% from $45.20 to $51.50 at Friday’s NYMEX close.

The OPEC agreement got a shot in the arm on Saturday as 11 Non-OPEC oil producing countries agreed to cut their output by 558,000 barrels per day. This is the first time in over 15 years that a global agreement to cut production has been struck and adds fundamental support to the current rally in Crude Oil.

Technical indicators suggest the January WTI contract can move higher this week. The recent high in the $52.70 area is the next logical target, but there’s scope for a move back above $54.00 after this weekend’s Non-OPEC agreement. Near-term support is seen in the $49.60 area.

Although investors may be rightfully sceptical about the longevity of the OPEC and Non-OPEC productions cuts, our reading of the charts suggests being patient in trying to pick a near-term top in crude oil prices.

Chart - WPL
Chart – WPL
Chart - OSH
Chart – OSH
Chart - ORG
Chart – ORG

Oil Prices Surge 10%

Posted on | by Leon Hinde | Leave a Comment on Oil Prices Surge 10%

Crude Oil prices surged as much as 10%, almost reaching the $50.00 mark, as the Organization of Petroleum Exporting Countries (OPEC) agreed to curb oil production for the first time since 2008 in an effort to reduce oversupply and support prices.

The 14 nation cartel, led by Saudi Arabia, agreed to cut production to 32.5 million barrels per day, which pencils out to a 1.2 million barrel per day reduction from current levels. Saudi Arabia agreed to take the lion’s share of the cut; lowering their daily production by 486,000 barrels per day to get the deal done.

Russia, the world’s largest Non-OPEC producer, had long resisted cutting output but has tentatively agreed to join the effort by reducing production by 300,000 barrels per day. OPEC will meet with Non-OPEC producers on December 9th.

If history is an accurate gauge, the bullish market response to this deal may be short lived. OPEC members haven’t shown a strong track record of compliance to previous production agreements. As such, the recent price action in Crude Oil could reverse over the near term as more details are released.    

Chart - Woodside
Chart – Woodside
Chart - Oil Search
Chart – Oil Search
Chart - Santos
Chart – Santos
Chart - Origin
Chart – Origin

 

Oil Price Review – OPEC Meeting

Posted on | by Leon Hinde | Leave a Comment on Oil Price Review – OPEC Meeting

Crude Oil prices rallied over 4% to a three week high today, as the market perceived a growing conviction that major oil producing countries would agree to limit output at the OPEC meeting in Vienna on November 30th.

West Texas Intermediate crude oil traded as high as $48.50, up over 10% in five days, since Saudi Arabia, the de facto leader of OPEC, increased pressure on the group’s more reluctant members to join its proposed reduction of output plan. In recent days, OPEC members including Iran, along with non-OPEC member Russia, have suggested that they were leaning toward a deal to limit production.

Both Iran and Russia have been the main hurdles facing any output curtailment by OPEC, as both nations want exemptions to try to recapture market share lost by years of Western sanctions. Analysts have been clear participation by Iran, Nigeria and Libya are integral in any agreement to cut production and shore up crude oil prices.     

Chart - Oil Search
Chart – Oil Search
Chart - Woodside Petroleum
Chart – Woodside Petroleum

ETF Watch – OOO.AXW BetaShares Oil ETF

Posted on | by Leon Hinde | Leave a Comment on ETF Watch – OOO.AXW BetaShares Oil ETF

Oil prices surged overnight as investors speculate that OPEC members will push toward securing a deal to cut output. West Texas Intermediate Crude oil rose 5.8%.

As an introduction to our ETF Watch commentary, we’re looking at the BetaShares Oil ETF listed on the ASX under the code OOO.AXW. The ETF provides investors with a “pure play” to take a view on oil prices. It aims to track the performance of an index (before fees and expenses), that provides exposure directly to crude oil futures.

In addition, as oil is priced in USD the fund hedges its USD exposure back to AUD, which reduces currency risk for Australian investors.

At a company specific level, we continue to like OSH, ORG and note the recent positive momentum in STO following China’s Hony Capital increasing its share holding.

etf-ooo
Chart – ETF Oil BetaShare OOO.AXW

 

Chart - Oil Search
Chart – Oil Search
Chart - Origin Energy
Chart – Origin Energy
Chart - Woodside Petroleum
Chart – Woodside Petroleum

 

Oil Search – Price Bounces Following OPEC Agreement

Posted on | by Leon Hinde | Leave a Comment on Oil Search – Price Bounces Following OPEC Agreement

Oil Search (OSH.ASX) remains an attractive recovery story over the next few months with a potential price target back above $7.25. This target is seen as full value and profit should be taken at this point.

The $6.30 entry level was highlighted in the monthly strategy recording and again in yesterdays mid-week video update.

The current driver of oil prices is yesterdays announcement that OPEC reached an agreement to limit crude output. OPEC sources said the group reached a deal to cut its oil production for the first time since 2008.

Oil Search (OSH.ASX)

osh