OPEC oil price war

Good for consumers bad for Energy companies and energy funds.

Aramco trimmed about $400B! in market cap since December from $2T to now $1.6T

https://www.bloomberg.com/news/articles/2020-03-07/saudi-aramco-slashes-crude-prices-kicking-off-price-war

Oil futures might gap down huge tonight at open (11pm).

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This move by the Saudis has the potential to be massively damaging for oil, although the potential reward is high for them if it works.

On one hand, they are producing more supply. On the other hand, demand for oil had its biggest historic drop due to COVID-19 .

London (CNN Business)Oil producers are facing the biggest drop in demand for their product ever as the coronavirus spreads around the world, forcing OPEC and its allies to consider emergency measures.

Research firm IHS Markit said Wednesday that oil demand will suffer its steepest decline on record in the first quarter — worse even than during the 2008 global financial crisis — as schools and offices close, airlines cancel flights worldwide and a growing number of people hunker down at home.

Most of the reduction in demand can be traced to China, where the coronavirus has caused what IHS Markit describes as an “unprecedented stoppage” of economic activity.

But reduced consumption will be widespread, and IHS Markit expects global demand to drop by 3.8 million barrels per day in the first quarter compared to 2019. Demand in the first three months of 2019 was 99.8 million barrels per day.

“This is a sudden, instant demand shock — and the scale of the decline is unprecedented,” said Jim Burkhard, vice president and head of oil markets at IHS Markit.
(Source)

The price looked pretty bad on Thursday, before the OPEC meeting:


(Source)

They likely have enough money to keep this going for a while.

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CL futures down 30%

Carnage on the horizon.

Uh oh.

https://www.ft.com/content/804d6c82-61aa-11ea-a6cd-df28cc3c6a68

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It will benefit countries who import oil, such as China and India. Not a good thing for new energy industries now that oil is (even) more competitive on price.

My first reaction on seeing this over the weekend was that it would be bad for oil producing economies, and good for non oil producing ones.

So why has every market from Asia to the US acted so negatively? Or are they just neutral, and going down due to coronavirus outlook?

I can only see individual oil companies on Freetrade, shame there’s no ETF’s covered (such as $USO). Any good options on freetrade to make a speculative bet that oil will recover?

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DOW expected to fall 1,000+ points by open. Thanks to the Saudi decision.

TL;DR Oil plummets 31% in biggest drop since Gulf War as Saudi cuts spark all-out price war. Oil markets tumbled the most in decades overnight on Sunday. The sell-off was fueled by sinking demand due to coronavirus concerns.

Great break down of what’s going on with big Oil and it’s future.

Incase you don’t know this guy actually works in the Energy sector, doesn’t disclose what he does exactly but his take on the future of oil and renewables is very insightful.

Main main points being -

He’d avoid all Oil companies outwith Shell, BP and Exxon.

Only buy if you plan to hold for the next 10/20 years.

Even at that, limit your exposure for the time being.

Yes there is a massive transition to wind, solar and other renewables, but he reckons the 3 mentioned above are in a great position to capitalise on that trend.

If you only plan to invest for 5 years, he’d avoid the energy sector altogether.

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Some of this is the Saudi’s trying to kill off the competition too, e.g. US Shale. Once enough companies have gone, they’ll tighten the taps again I expect.

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This are some crazy days for oil companies. I have some positions in RDS.B and BP and things are very ugly there. Honestly didn’t really expect such a shock for oil and don’t really see things getting any better any time soon.

Confident in both my positions as those two are one of the best in the sector, but a lot of oil companies are most probably going under, especially the shale ones.

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Glad I sold and made a loss on Tullow Oil over a week ago instead of holding and making a major loss!

Did you get anywhere with this? I’m looking for a global oil ETF. I found iShares Global energy, but it’s not on Freetrade. Might just have to buy some Shell or BP instead, but I don’t really want to put it into one company.

No I didn’t - I had the exact same thought process as you. I’ve just left it for now, but I feel there’s no way oil is going to stay at $30 a barrel for long so would like to add something if possible. I don’t want to try Trading212 as I like freetrade, but if they have better coverage…

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I’m way too lazy to open up another broker and i wouldn’t want the hassle of checking an additional account, i already have up to ten different savings locations.

I could in theory make my own oil etf, what with no commission

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I don’t want to sound too salesy, but I’ve made a site to solve that exact problem of having to check multiple providers. On holfolio.com you add your holdings, then you can view everything in one place and have a better view of your entire portfolio.
It creates a public record of what (but not how much) you are buying - you can see my profile here

Its still early days, so feedback is always welcome - please share any suggestions to help make it better!

I checked it out when you posted it a few weeks ago! Looks good, I’m guessing I have to manually input every investment and trade that I make? I was looking for something like money dashboard which automatically tracks my investments with different companies via approved APIs.

I just don’t want the admin of setting it up and remembering to update it if I buy a share. I have ISAs, investment accounts, pensions, crowdfunding investments, crypto wallets…

FYI - gonna get £50 each of Shell and BP tomorrow :grin:

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Ah ok cool!
For now it’s manual updates, but the plan is to update automatically in the future.

Sounds good with the oil co’s, I might try something similar (if you put it in holfolio I’d already know :grinning:)

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