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US Dollar
+0.210 +0.27%

Is It Time to Take Profits on Oil Refining Stocks? (re-visited)

Adam Feik - INO.com Contributor - Energies

I wrote on February 24th about whether the time had come to take profits on oil refining stocks like Tesoro, Valero, and others. (My conclusion was to hold the stocks for the time being, but to keep a close eye on them).

Since then, oil refiners have continued rising (generally), as oil prices have showed continuing weakness – especially in the last 30 days. Crude oil, of course, is the key input for refiners, so refiners benefit when its raw materials prices are low. Nymex crude fell below $50/bbl Wednesday, having fallen from $61 on June 23, 2015, and from $107 on June 20, 2014 (data from eia.gov).

Here's an updated table showing performance of selected refiners through July 22:

On Thursday, July 23rd, oil and refining stocks both fell. But more often recently, it's been… [Read more...]

Surprise, Greece Has No Money

It just seems to this observer that the Greek kabuki dance is never ending. How can banks keep lending money to a country that is insolvent? That seems a little backward and just stupid to me. What do you think of the situation in Greece?

Here's the reality of the situation, Greece is going to default, the bankers may as well get ready to write off those loans as the money is not coming back. The next question is, whose next, Portugal, Spain or Italy? The next buzzword that is going to come out of all this is contagion. I think when Greece exits the eurozone it will be good for the euro longer-term. Think of it like when a company announces bad earnings and fires the CEO. The stock price has anticipated and discounted all the bad news and for the most part things get better over time for that company. The euro is the same way as pretty much all the bad news is out, except the actual exit of Greece from the euro.

Sooner or later it's going to come to crunch time and time is getting short. Angela Merkel and Germany are going to have to swallow their pride and make some important decisions very soon.

So onto the only economy that seems to be working and that is the US. Today I'm are going to be looking at the major indices to see if they are beginning to tire or getting ready for another upward push.

I'm also going to be looking at three stocks today. [Read more...]

What's Next for the Norwegian Krone?

Lior Alkalay - INO.com Contributor - Forex

In my last article, I laid out how upbeat sentiment was growing in Oil amid upbeat projections from the industry leaders, and especially from Tony Hayward, the incumbent Glencore Chairman and ex-CEO of BP. Add to that the latest soft patch in the US economy and this could mean some upside for Oil-oriented currencies. Canadian Oil is expensive to make and is oriented towards the US market where stockpiles are currently at historical highs; the Ruble is well positioned and will probably perform well but the latest news of weapons buildup by pro-Russian rebels heightens the risk of a surprise escalation and detonation that is hard to price. So what's left? The Norwegian Krone.

Norwegian Krone and Oil

Norway is Europe's biggest energy exporter, with Oil and Gas exports accounting for 52% of the country's total exports and 23% of the country's GDP. Therefore, any fluctuation in Oil prices has a substantial impact on the Norwegian economy, the outlook for rates and, of course, the Norwegian Krone. How much is the NOK correlated with Oil? As seen in the chart below by the Norges Bank (Norwegian Central Bank) the correlation is very high. In other words, the direction of Oil sets the course for the NOK. To put it simply, for the NOK to recover, Oil has to recover.

Chart courtesy of Norges Bank

What Could Favor Oil

Although there is still excess supply in the Oil market there is a marked reduction in Oil rigs across the world. In fact, the reduction in drilling was rather quick and moved pretty much in tandem with Oil prices; the Oil meltdown resulted in a reduction of -28.9% in the rotary rig count across the globe Now, once Oil prices move higher it's theoretically possible that it could ignite an opposite result and cause the rigs count to rise. Yet, until we get there, the combination of Oil prices falling sharply and quickly, a better economic outlook for Europe and general dollar softness (which tends to propel commodities higher) all support a rebound, even if only a temporary one.

Chart courtesy of WTRG Economics

Monetary Policy in Norway

Of course, another aspect to consider would be monetary policy in Norway; if rates are heading lower, then compared to the dollar the NOK would be at a disadvantage, even if rate hikes in the US are postponed. In its last meeting, though the Norges Bank tilted slightly to the dovish side, the message they offered to investors was rather mixed. They stated that inflation remained steady at around 2.5%, that there was a chance of interest rates moving lower in the future amid weakness in the economy, and finally that Norway's housing market was overheated. This mixed massage means the Norges Bank, while preparing for cutting rates amid an expected downside to the economy, might in fact save a rate cut for a later time, given that inflation is still fair and the housing market overheated. In other words, a rebound in Oil prices could signal that the Norges Bank will move to the sidelines rather than cut rates which, of course, fundamentally, would favor the NOK. In fact, the recent bottom in Norwegian 2-year sovereign bond yields may suggest that the market is beginning to warm up to that scenario. Moreover, consider that benchmark rates in Norway are 1.25% while US rates are at 0.25%; if the Fed does feel compelled to postpone its rate hike (which seems to be the case) while the Norges Bank holds steady, the rate differential, coming on the back of risk appetite and an Oil rebound, would favor the NOK.

Timing with Technicals

Of course, while fundamentals point on the direction it's the technicals that can help us with the timing. As the chart indicates, the USD/NOK was quick to react to the recovery in Brent futures and the pair slid to as low as 7.47 from 8.32 back in March. Yet, within the past few days, the pair is encountering support around 7.4-7.5 which raises the risk for a rebound to 7.83; from there, the pair could regain momentum and slide, possibly to as low as 7.25.

One Thing to Remember

Despite the chances of a broad commodity rebound and more gains for Oil on the back of a weaker dollar and fewer Oil drills globally, one must remember that the current fundamentals suggests that this process, in the grand scheme of things, is a correction after an Oil meltdown and a rapid dollar appreciation. But in the mid-term, US rate hikes are still coming and eventually dollar appreciation will return and Oil, while possibly maintaining price levels higher than $50, would find it difficult to surge beyond $85, limiting gains for the NOK in the longer term.

Chart courtesy of FXCM platform Marketscope 2.0

Look for my post next week.

Lior Alkalay
INO.com Contributor - Forex

Disclosure: This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.

How To Invest In Oil Like A Pro

Adam Feik - INO.com Contributor - Energies

In the last 2 weeks, I've written about oil ETFs and broader energy and commodity ETFs. Interestingly enough, some of those ETFs have switched over to "green triangles" on their MarketClub charts, just within the past few days. Check out USO and DBE for example. DBO (the oil ETF I prefer over USO) has not yet flipped over to a long-term ("monthly") green triangle.

Another way to play oil prices

Today, I'm going to describe a slightly more sophisticated way to bet on rising oil prices. The advantages of this approach, compared to buying ETFs, are these:

• You can place fewer dollars at risk. Yet at the same time…
• You can retain reasonable upside potential, and…
• In combination, you can almost entirely protect your principal, in order to make sure you'll live to invest another day (even if you're wrong about this particular oil bet).

Here's how it works: [Read more...]

Commodities Recovery: An FX Game Changer?

Lior Alkalay - INO.com Contributor - Forex

It's been less than a week since the big chiefs of the commodities world met at the FT Commodities Global Summit in Lausanne, Switzerland, situated along the beautiful banks of Lake Geneva, yet already the markets have begun to adjust its collective expectations. So what's all the fuss about?

Quite simply, all of the commodity moguls, from Gunvor to Glencore to Vitol, all among the largest private companies in the business, have proffered one clear message and it is this: That they, nearly to a one, expect a healthy recovery in commodity prices. With all of the big shots expressing an upbeat view it becomes clear that they are acting on far more information than the rest of us, as one might surely expect, as being in the commodity business allows them ready access to more tangible and viable data. That nearly unanimous upbeat tone should be taken as a rather clear sign that we are about to see a bounce back in commodity prices. Surely, with currencies such as the Aussie, Kiwi, Loonie and the Norwegian Krone, and many more currencies beyond those, being highly sensitive to commodities prices, we are likely to see perhaps a significant impact in the FX arena.

Two Big Predictions

Although the talk at the Commodities Summit was on commodity prices, in general, it was evident that two sectors had drawn more attention than the others. Oil, naturally, because of its importance to the global economy but also Iron Ore, a key ingredient in the making of steel and one of the major commodities exported to China. [Read more...]

Is Gold Foretelling An Impending Greek Disaster?

Today is the first day of spring and maybe this is the cause for the spring in the markets. March 20th also happens to be "International Happiness Day" and I'm sure that many investors have a smile on their face today with the way the markets are acting in Europe, Asia and the U.S.

Today, I'll be looking at gold prices because they are acting and doing something that they haven't done in a long time and I want to share that with you in today's video. It is impossible to pinpoint what is causing gold to rally, whether it is short covering or the potential that Greece is going to implode any day now. Either way, it's not important what is causing the rally. The important thing to remember when trading is to get the direction right and not worry about what is causing the trend. I remember when I was in the trading pits in Chicago, I asked someone why the market was going up and he said to me, "It doesn't matter, it's going up". There is a lot of truth in that comment. That's one of the big takeaways in trading, don't over think markets.

As I write this commentary before the market opens, we could be seeing the equity markets close well towards the end of the day and possibly closing in new high ground on short equities before the weekend. The NASDAQ is very close to breaching the 5000 level, a close over that area today can be viewed as being very positive for the weekend.

Crude oil also appears to be finding some support at lower levels but has not yet reversed trend and turned around. I will be looking at that market to see where the key points are for a trend reversal to the upside. Remember markets can get very crowded on one side of the ledger when everybody believes that the trend will continue and go on forever. When that happens, a market tends to reverse and go the other way. The reason that happens is because markets are forward-looking trading instruments.

I will be getting into the recent Trade Triangle scan today to find new trades that may be just emerging. You won't want to miss that part of today's video.

This being Friday, I will of course, be looking for weekend trades using our "52-week highs on a Friday" strategy.

Every success with MarketClub,
Adam Hewison
President, INO.com
Co-Creator, MarketClub

How to Make Money in the Chaos of Oil and Gas

The Energy Report: Stephane, do you think the oil price has hit bottom and is now recovering?

Stephane Foucaud: When the Brent oil price was close to $50/barrel ($50/bbl), I think it was the bottom. It has recovered quite a bit. There is a risk that it might dip again, but I don't think we will reach the low $50s for quite some time. The reason I think there is a risk that the oil price could dip is that there has been an overreaction to the North American rig fleet reports, and particularly to what appears to be a large number of rigs being taken out of the market. Those rigs are, however, associated with lower-producing areas. Therefore, I think it's more sentiment than reality in terms of impact on the supply. The recovery has been too steep.

TER: What prices are you forecasting for 2015 and 2016?

[Read more...]

Article source: http://feedproxy.google.com/~r/theenergyreport/caoK/~3/yMw_yYAi6co/16542

Gold And The King: The True Story Of Opposites

Aibek Burabayev - INO.com Contributor - Metals

Dear INO.com Readers,

Recently, I have heard a lot of arguments about the correlation between major financial instruments and I decided to make special report for you to give some idea about their actual relationships.

For today’s analysis, I chose Gold, WTI Crude Oil ("black gold") and the Prime Currency’s DXY Index (King). I would guess all of you track these instruments from time to time to check the precision of your financial "compass." Most important here is to find out how sensitive Gold price is to fluctuations in Oil and Dollar value. To check that, let’s get down to our comparative historical dynamics charts depicted in different time periods.

Quarter Century Comparative Dynamics

Quarter century comparative dynamics chart

The 90’s look flat compared to the wild present day, only Oil managed to make a huge 80% spike in 1990, rising from the $20 level up to the $40 area. During those years, Gold and the Dollar index showed good and quite constant negative correlation, making opposite curves and charting ellipses. It worked nicely up until the crisis 2008 year, both instruments, by turns, had been changing sides and keeping an accurate inverse relationship. Oil is less predictable, first it was between Gold and the Dollar index correlation, but still positive with Gold and negative with the Dollar index, then in 1996 and in 1999-2001, it was in direct relationship with the Dollar index, but the rest of the time Oil reverted back to its normal inverse relationship. Bipolar might be the right definition for Oil.

The overall picture only looks stable for the Dollar index, which can be portrayed with the following expression, "Never shall those born to crawl, learn to fly." If we mention the instrument’s dynamics, which stayed in the range between -24/+33%, showing mirror reflections. 25-year dynamics indicate that the Dollar is quite stable with only above 1% gain, meaning that major currencies in total kept about their parity to the Dollar.

It’s quite an interesting discovery because as we see on the chart both hard "tangible" assets (I stress the word "tangible") gained weight significantly from 2 fold for Oil to 3 fold for Gold against the USD, with even more impressive peaks on the way. Another interesting note is that Gold and Oil have higher upside margins: 519% for Oil and 340% for Gold and comparatively small downside negative extremes: -54% for Oil and -42% for Gold, which means that asset inflation or actual revaluation tendency dominates. Fiat money lost its value to hard assets in triple digit percent numbers. That’s it with the sad but true part.

Post Crisis Comparative Dynamics

Post crisis comparative dynamics chart

As seen on the weekly chart above, Oil is a very tricky instrument. In 2008, just in one year it hit both margins: upside at +60% and then downside at -60% when the crisis emerged, moving an unthinkable 120% in between. From 2009 up to the middle of 2011, the Fed’s Quantitative Easing started a robust uptrend and positive correlation between Gold and Oil. In the meantime, the Dollar index had been behaving in its normal inverse relation, but only in 2009. In 2010, due to European debt crisis, half a year it had been moving in an uptrend with abnormal positive correlation with Gold and Oil. After that, the Dollar index returned to its usual role, being opposite to commodities.

I want to you to focus on the period between spring and autumn of 2011, when Gold’s bubble hit a historic record above $1900/oz, but Oil on the contrary, plummeted from a $114 high to a $77 low on weak economic data and deepening European crisis. It’s interesting to watch how the same fundamental reasons caused two different reactions. Feared investors put their money into Gold and at the same time they ran off the Oil. For me, it means that Gold’s safe haven function is mostly in a "sleeping mode" when both Gold and Oil just track the opposite direction from the Dollar index, although with different velocity. But when the world needs a hedge, Gold starts to be in high demand, seeking price’s ceiling and then all other tangible assets just dim.

Present Day Comparative Dynamics

Present day comparative dynamics chart

The above daily chart is last and represents the current situation in relationships between the three instruments. Briefly saying, Oil and the Dollar index have an almost ideal inverse relationship between each other compared to the sudden abruptions appearing with Gold. Abnormal correlations between Gold and Oil are highlighted in dark grey rhombuses, for one year one can count five distinct periods where these soil treasures move opposite directions.

As for the Gold and Dollar index correlation, we can see a good inverse relationship with several disconnections. Only in last November (highlighted in red ascending lines), Gold started to be in direct relationship with the Dollar index, with some deviations in Gold behavior when both instruments have been gaining value. Recent days' moves in Gold and the Dollar index are even more similar, highlighted in blue ellipses.

Bottom Line

Most of the time, Gold moves together with Crude oil, but opposite to the Dollar index. Still, history shows that we can’t rule out sudden abruptions in relationships where most often Gold and less often the Dollar index are the world’s safe haven assets, nowadays, due to currency wars.

Oil is the most Dollar index sensitive asset here and is utmost vulnerable amid fear, weak fundamentals and growing supply.

After all, you should be flexible with your approach as nowadays the world is changing so fast.

Lucky and Intelligent Trades!

Aibek Burabayev
INO.com Contributor, Metals

Disclosure: This contributor has no positions in any stocks mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.

Is It Time To Take Profits On Oil Refining Stocks?

Adam Feik - INO.com Contributor - Energies

Does it sound strange to even think about "taking profits" on anything related to energy?

Well, oil refining companies' stocks have enjoyed quite a run this year. Check out this table summarizing recent returns for 5 selected stocks (total returns through 2/20/15, from Morningstar; returns longer than 1 year are annualized; "since Jan. 15" data from Yahoo! Finance):

If you haven't paid attention to this group, how surprised are you to see a group of oil-related stocks with positive returns over the past 12 months – let alone Tesoro's +82% performance?!!

I've also included the 3-, 5-, 10, and 15-year returns, just because they're so remarkable.

Oil down, refiners up!

Of course, the driving reason for this group's stellar 1-year returns is that oil refiners actually benefit from being able to pay lower prices for crude oil, which is the primary raw material used to make their refined products, such as gasoline. [Read more...]

Greece, Nazis And 3 Strong Sectors

It's hard for me to believe that the newly installed Greek government is now calling for Germany to make reparations of some $250 billion because of what the Nazis did 75 years ago to Greece. Such is the world we live in.

Make no mistake about it, Greece is the Achilles' heel of the euro and just this morning Alan Greenspan, former head of the U.S. Fed, came out and indicated that it was just a matter of time before Greece exits the euro. I couldn't agree more with him, Greece is just an accident waiting to happen.

Unlike the United States, which is one nation with one currency and laws, the euro has been cobbled together with a number of countries that have nothing in common with each other. They don't speak the language, they don't have the same customs and traditions, and they certainly don't share the same discipline for work. [Read more...]

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