Not a Good Time for Aluminum
November 12, 2008
There’s no doubt commodities stocks have suffered, but few industries have struggled like the aluminum metals and mining segment. The most glaring indicator of the difficulties in this industry was most recently displayed by Alcoa Inc.’s [AA: 10.17, -0.77 (-7.04%)] horrid earnings. There couldn’t have been a “better” way to start the S&P 500 earnings season than to report a 52% drop in net income. With that said, a lot of the death and destruction has been priced into this industry and many companies are trading at trough multiples. Don’t be fooled by these metrics, aluminum will not be turning around soon. Read more
Fundamentals of Crude Oil Pricing: Part V
November 4, 2008
If you have not read parts one the earlier parts of this article, please visit Part One, Part Two, Part Three, and Part Four.
Fear and Uncertainty
Fear and uncertainty and the worst enemy of a financial market, and, if you turn on the television, it is easy to see why this is the case and how it can affect the world financial markets. Within the crude oil markets, fear and panic can cause a severe move in either direction. During this current credit crunch and liquidity crisis, we have seen crude oil drop Read more
Fundamentals of Crude Oil Pricing: Part IV
November 2, 2008
If you have not read parts one through three of this article, please visit the following pages for Part One, Part Two, and Part Three respectively.
Refiners and the Crack Spread
The general misconception that the demand of crude oil is that it comes directly from “whoever pulls it out of the ground to their cars.” Unfortunately this is flawed thinking as they neglect many steps in between the first and last steps. The refiners are the ones who actually control the demand of crude oil, not the consumers. Their demand for the most part is Read more
Fundamentals of Crude Oil Pricing: Part III
October 31, 2008
If you have not read parts earlier parts of this article please visit Part One and Part Two.
Shortages, Stockpiles, and Decline Rates
Often one of the most important short-term pricing factors in regards to crude oil are shortages and stockpiles. These dynamics work in ways that are mysterious to most investors and misunderstood by many others. It is easy Read more
Fundamentals of Crude Oil Pricing: Part II
October 29, 2008
If you have not read the first part of this article, please go visit it here.
OPEC
The Organization of Petroleum Exporting Countries (commonly referred to as OPEC) is the world’s largest cartel. It consists of Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela. OPEC has control of roughly two-thirds of the world’s oil reserves and 35% of the world’s crude production (these numbers do not include tar sands and other unconventional forms of hydrocarbons). OPEC collectively places production quotas on its nations Read more
Fundamentals of Crude Oil Pricing: Part I
October 27, 2008
Without a doubt, crude oil has been the commodity with the most buzz surrounding it over the last three years. Every investor and analyst (especially those geniuses on CNBC) has an explanation for every single move, but more often than not they are either misinformed or lying. The importance of crude oil to our world financial markets is very important; it affects everything from companies’ transportation costs to consumer behavior and spending habits. Being able to predict the future price or price movements would be an invaluable skill, but the question is how would an investor even go about this? I believe the basis of this unattainable skill is influenced by a wide number of factors. Read more
Is Coal out of Steam?
October 8, 2008
As bad as it as been for many of the energy companies, its been even worse for the coal stocks on the way back down. Most of the major coal stocks are down over 50% from their highs since around the beginning of June. Much of this fall can be attributed to the violent swings in the price of the commodity itself, the rest of it deals with the premium at which the stocks trade due to their predicted earnings growth over the next 5-10 years. Read more
Why Was Crude Up Huge On Monday?
September 23, 2008
The trading at the New York Merchantile Exchange (NYMEX) on Monday turned from ordinary to absurd extremely quickly as oil had by far it’s largest one day nominal and percentage gain. I have now been covering the energy sector for more than two years but this was easily the most unbelievable trading day I have ever experienced. Crude oil opened the day at $104.55 and closed at $120.92 while hitting an intraday high of around $130.00. The trading became very volatile around 2:15pm that the NYMEX actually halted trading for about a minute because crude oil hit the one day stop out of a $10 Read more
Future of Soybeans Rests in Brazil’s Hands
September 18, 2008
It’s the most important crop in the world. Its price per bushel has skyrocketed over the past five years due to the evolving appetites of emerging nations, and limited acreage has only exacerbated the situation. Many investors have declared its recent action the formation of a bubble unfounded by fundamentals and merely the result of market speculation and low inventories depleted by government-sponsored energy mandates. I am not talking about corn- soybeans are the protagonist of this tumultuous agricultural commodities drama. Read more
Mid-Cap, Large Potential
September 15, 2008
I am not the first, nor the last, person to mention the sell off in commodities recently. Crude oil has now dropped below $100 a barrel and natural gas is down more than 40% off its twelve month high. No one can say when this slaughtering will stop and it is making more and more people wary of investing in stocks that are correlated with commodities. However, I have come across a company that has benefited from this rough time: Equitable Resources Inc [EQT: 28.55, -1.83 (-6.02%)]. A stock that has mirrored the movements of the sector as a whole over the last few months; Equitable is now cheap enough to be Read more
 
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