Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19
Gold Price Gann Angle Update - 10th July 19
Crude Oil Prices and the 2019 Hurricane Season - 10th July 19
Can Gold Recover from Friday’s Strong Payrolls Hit? - 10th July 19
Netflix’s Worst Nightmare Has Come True - 10th July 19
LIMITLESS - Improving Cognitive Function and Fighting Brain Ageing Right Now! - 10th July 19
US Dollar Strength Will Drive Markets Higher - 10th July 19
Government-Pumped Student Loan Bubble Sets Up Next Financial Crisis - 10th July 19
Stock Market SPX 3000 Dream is Pushed Away: Pullback of 5-10% is Coming - 10th July 19
July 2019 GBPUSD Market Update and Outlook - 10th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Crude Oil Price Drop Offers Investors a Discount Opportunity

Commodities / Crude Oil Nov 12, 2012 - 07:27 AM GMT

By: Money_Morning

Commodities

Best Financial Markets Analysis ArticleDr. Kent Moors writes: Markets declined significantly in the wake of last Tuesday's Presidential election. In the two days that followed the S&P shed almost 3.6%.

But now the energy sector in general - and oil in particular - is poised for a major move up.


As I am writing this, six of the nine elements I regularly monitor to determine oil prices are pointing north.

The relationship between refinery margins (the difference between what it costs to produce oil products and the price that can be charged at the wholesale level - where the refiners make their profit) and inventory in gasoline are also indicating an oversold market, even without factoring in the East Coast double whammy of Hurricane Sandy and a Nor'easter.

The underlying dynamics, therefore, haven't changed. If left to its own devices, oil prices should be moving up (and our profits right along with it).

So why the dip?

Where Oil Prices Go From Here
The first issue is short-term.

The aftermath of an election usually produces a downward pressure, regardless of who wins. The market bought into the election moving up smartly. It came out of the election moving in the other direction.

Nothing unusual there. The markets opened Wednesday morning with the election as history. That always occasions misgivings about what is coming next.

Yet cross currents over demand projections will be giving way to a more robust energy sector. This is not going to be a straight upward movement in prices. But those levels are currently depressed because of outside questions about overall economic prospects.

The oil market itself (and the energy sector as a whole will move essentially in the direction that its dominant component moves) has underlying dynamics that would dictate a crude price higher by about 15% at current levels.

But the outside "distractions" need to be weeded out first. Especially this time around.

There are two major elements preventing the energy sector from moving up.

I discussed both of these with my Energy Advantage and Energy Inner Circle subscribers yesterday, along with the way in which we have positioned both portfolios to profit from the current situation.

Here is the summary of what I told them. Two matters remain foremost in the mix, assuring that the next two months will be marked by considerable gyrations.

First, the clock is ticking in Washington on the "Fiscal Cliff." Second, Mario Draghi, the head of the European Central Bank (ECB), has prompted new concerns over the Eurozone.

Editor's Note: To find out what stocks Kent is recommending right now click here

The massive spending cuts and tax hikes obliged by the "fiscal cliff" would certainly push the U.S. economy over the brink into a deep and prolonged recession. However, despite the low regard given to politicians in Washington, there are already indications they will reach an agreement before the end of this year.

This will not be an ultimate solution. Yes, Congress and the White House will compromise to kick the can down the street one more time. But that will be sufficient for our purposes. Expect a rally in energy when the central powers begin to telegraph the compromise.

The second problem - Europe - was actually the major reason why the markets tanked on Wednesday. Draghi said publically what a number of folks had been saying privately. European economies are slowing, with that slowing now beginning to hit the continental engine - Germany.

Draghi subsequently made additional comments on Thursday that tempered the impact somewhat. Yet, new riots in the streets of Athens following the controversial passage by parliament of an austerity package have once again put a visual on the situation. A truly incredible admission by the Greek government of an almost 25% official unemployment rate simply intensified the concern.

Well, here is what will happen with the ECB. The mechanisms are in place allowing the central bank to buy distressed paper, although there are still some domestic decisions that have to be made by EU governments. It also remains unclear when Spain will formally request a bailout.

These details will finalize.

The European capitals have no other option, despite the political unpleasantness of the requirements. Even then, the most important decision (setting up the structure to buy cross-border commercial bank paper) has already been made.

Europe will not regain its financial footing without a lender of last resort. The ECB has now assumed that position. Despite the disagreements resulting, the path is laid out to ease the situation.

Once again, as with the financial cliff in the states, we will experience a stop-gap measure, not an ultimate solution.

The market has been trading on emotional reading of headlines for some time. We have undergone two downward slides in oil prices that went well beyond anything the actual market justified, followed by recoveries just as quickly.

All in the last few months.

This will remain a volatile situation in both directions. The objective in developing and balancing an energy investment portfolio in such an environment is two-fold.

First, the stock selections need to reflect the tradeoffs in the sector itself. That is, not all reactions to market activity will move in the same direction. Second, there are ways to establish ceilings and floors on risk short of simply using puts and calls.

As we move through the current cycle of market instability, I'll be providing some general suggestions in Oil & Energy Investoron how to design such a portfolio.

Source :http://moneymorning.com/2012/11/12/oil-prices-have-dipped-just-dont-expect-these-discounts-to-last/

Money Morning/The Money Map Report

©2012 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules