Brent and West Texas Intermediate (WTI) oil prices have fallen around 9% from their late April highs to their early May lows amid a spate of concerns including: Trends in US oil production, OPEC’s commitment to recent supply reductions, rising US oil inventories, the health of the global economy and the pote ntial for a destabilizing US-China trade war.
All told, some of these factors appear eerily reminiscent of last October, the start of a serious sell-off in oil that saw WTI prices plummet from $76.90/bbl to the low $40s and Brent to fall from $86.74 to under $50/bbl.
Late last year, we took a look at supply and demand conditions in global oil markets and (correctly) predicted that the selling pressure was near an exhaustion point and that prices would see a sharp recovery into 2019.
With our targets for crude now achieved, and market volatility on the rise, it’s time for an updated deep dive into the oil markets.
Our conclusion: This is not the beginning of another late 2018 style market swoon nor are we seeing any evidence of excess global oil supplies. Rather we see the recent sell-off as a correction driven largely by hedge fund profit-taking following a record-setting start to 2019 for crude.
In this issue, we update our outlook for crude and explain some of the surprising factors behind last week’s larger-than-expected build in US oil inventories.
Fair value is always in the eye of the beholder. But it’s clear big money is now seeking value in energy, despite fluctuating oil prices.
The conventional wisdom is the MLP sector is dead money. That’s a mistake for several reasons.
We still smell investor panic in the air. But the trading action of the past couple days is nonetheless encouraging, as the stock market has reversed big intra-day selloffs to finish higher.
Antero Midstream Partners' (NYSE: AM) merger with its general partner is the latest "simplification deal in the MLP sector.
Dominion Energy's (NYSE: D) offer could do a lot to resolve uncertainty surrounding Dominion Midstream Partners LP's (NYSE: DM) future.
In the December 19, 2018 issue of Energy & Income Advisor “Oil: It’s Not 2014,” we took a deep-dive look at the global oil market and came to the following conclusion:
“While it’s tough to catch the proverbial falling knife or call an exact bottom in crude, we believe oil is approaching a crucial bottom and will recover into the first half of 2019. Specifically, we could see Brent rallying back over $70/bbl and WTI reaching the mid $60’s by the second quarter of 2019.
Blueknight Energy Partners (NSDQ: BKEP) is cutting its quarterly distribution for the second time in a year, from 8 to 4 cents per unit. Unfortunately, even after that large of a reduction, the payout still isn’t safe. In fact, the consensus of analysts tracked by Bloomberg is the July distribution will be cut to just a penny a unit.
Amerigas Partners’ (NYSE: APU) merger terms with general partner UGI Corp (NYSE: UGI) imply a roughly 83 percent cut in the dividend when the deal closes. That eventuality has been known by investors for two weeks and is therefore baked into the price. Therefore, while we do advise moving on from Amerigas, the MLP is now off the Endangered Dividends List.
In most sectors of the stock market, mergers and acquisitions are almost always viewed as investor friendly: An opportunity to realize a windfall gain, or at least to hook onto a stronger company that will generate better long-term returns.
In the master limited partnership world, however, M&A has recently taken on a darker connotation.
Two years ago, Keystone XL was the only major pipeline project blocked by federal regulators. Today, even projects supported by both the US government and the affected states face the prospect of delays and even derailment in the courts.
Elliott and Roger on Apr. 24, 2019
Balanced portfolios of energy stocks for aggressive and conservative investors.
Our take on more than 50 energy-related equities, from upstream to downstream and everything in between.
Our assessment of every energy-related master limited partnership.
Roger Conrad’s coverage of more than 70 dividend-paying energy names.