Displaying items by tag: Commodities

(Houston)

Oil is an enticing commodity right now. Global cooperation on constraining output has led to strongly rising prices, which coupled with margin improvements during the downturn, means the sector looks ripe for great profits. But where is the best place to put money? Barron’s has tapped a top fund manager for his picks, and they are interesting. Both picks are exploration and production companies, and are Kosmos Energy and Apache. The former is a South American E&P that focuses on offshore drilling, while Apache is Houston-based and focuses more on gas.

FINSUM: These are pretty contrarian bets on small E&P companies. These seem quite high risk/high reward.

(New York)

It might be a great time to buy gold, or at least that is what one of the top gold funds on the street is saying. VanEck International Investors Gold fund, which has routinely outperformed peers, says Gold is finally likely to break out its narrow trading range. Gold suffered a terrible bear market from 2011 to 2015, and prices are low and there is little selling pressure. This, coupled with heightened geopolitical risk and inflation, mean that gold seems likely to find a catalyst for strong performance.

FINSUM: We do agree that prices are low and there is little selling pressure, but there have been plenty of other times there were geopolitical catalysts, so it is hard for us to get behind that notion.

(Houston)

Oil prices have risen spectacularly over the last year, with Brent crude now trading above $80 per barrel. However, the question for investors is what to do about the rise. Have they already missed the gains? Additionally, oil has the complication of being difficult to invest in directly because of the cost of rolling over futures positions. Therefore, the best way to take a position in oil markets is through several ETFs. The tickers to look at span from those covering major oil companies to those more weighted towards E&P companies. Here are some of the funds: VDE, XLE, IXC, IYE, XOP, OIH, and USO.

FINSUM: We suspect that exploration and production companies will gain the most from recent price rises as their businesses will be most directly impacted by gains (just like they were most hurt in the downturn).

(Houston)

Investors need to take note of the oil market, which has been spiking recently. Prices for Brent crude are now above $80 per barrel, a price that would have seemed unimaginable even a year ago, and a world away from the $20s we had in early 2016. The market is partly being driven higher by geopolitics, such as the new sanctions against Iran, but it is also a product of supply shortfalls. Higher prices are now coinciding with all the cost decreases firms made during the market rout, which is allowing them fat margins and the cash to pay dividends and pay down debt.

FINSUM: If the market can stay elevated, which seems likely for a while, then it will be transformative for the many oil and oil-related companies that have been struggling for years.

(Houston)

We tend not to write too much about oil, the reason being our readers don’t seem too interested in it. However, the market has quietly seen a really resurgence over the last year or so, and has risen dramatically from lows in the $20s in 2016 to $75 now. The core reason why is that a booming global economy has pushed up demand for oil (to the tune of 5 million barrels per day), which has largely cleared the glut of oil inventories that had been plaguing the market.

FINSUM: The big question now is whether OPEC maintains the supply cuts. It is worried about higher prices inducing increased production from rivals, but the reality is that Saudi Arabia needs oil prices to stay high right now for several reasons (e.g. IPOing Saudi Aramco, domestic social and economic reforms etc).