“U.S. President Donald Trump is set to review whether to waive or re-impose sanctions on Iran this week, a decision that has implications on Iran’s oil exports.”
—Wall Street Journal, January 11, 2018
As I write Friday morning oil is off a smidge of $0.35. Everything energy rallied yesterday. And reason number one is the weak U.S. Dollar.
Thursday the U.S. Dollar Index dropped .46 to close at 91.61. The prior low set in September was 91.00. So a test of that level is coming up. When the U.S. Dollar drops in value, commodities priced in dollars rise in value to compensate for the currency loss. So industrial metals, gold, and energy have been on a tear lately. Keep an eye on the 91 level, a break below there would likely spur even more energy bullish speculation.
Wall Street Journal, January 11, 2018
U.S. President Donald Trump is set to review whether to waive or re-impose sanctions on Iran this week, a decision that has implications on Iran’s oil exports.
Apache APA is attempting to break out of its trading range, bounded by $39-46. Volume rose significantly on Thursday. Apache rose $2 or about 4.5 percent on Thursday. It is now set to probably challenge the $51 previous high set last July.
The Energy Service Sector is always of interest in the Permian Basin. The ETF for that sector is XES. XES is finally rallying. It rose 3 percent yesterday to $19.11. It is posed to challenge the last high several months back at $24.
FRAK is the ETF for Shale Producers. It too is rallying at $16.69. The last high was $19. But the high recorded during triple digit prices was $32. An indicator termed on balance volume is just now turning up on the weekly chart for FRAK. This is quite bullish.
What about the actual prices of the commodity itself? The previous high for West Texas Intermediate was about $60 recorded in mid-2015. A close today at this $65-66 level breaks oil out of this multi-year range. That would set my sights on $80. You heard it here first. This is further confirmed by unleaded gasoline breaking out of its range to $1.84. The cold weather in the Northeast has heating oil up from $1.75 three months ago to $2.07 today. So all three sectors are confirming breakouts.
The laggard group has been the Drillers. These stocks are still mostly trading literally below book value. And yes I purchased more of them Thursday. Ensco ESV broke out of its trading range going back to last March of 2017. ESV has $5.90 cash per share. But it is trading for $7.36! That means one is only paying $1.46 for all the fixed assets the company owns! Warning, do your homework, the drilling business is a dicey play. But if oil prices continue upward it seems reasonable to expect these stocks would at least return to book value.
BP Prudhoe Bay BPT has broken out of its year long range. This is based on its all Alaska exposure and the fact that the U.S. Government is expanding drilling opportunities there. Whether Big Oil will take the challenge with a November election looming, well we shall see.
Natural gas futures rose a whopping 10.34 percent Thursday. That is very close to reversing the downtrend that has kept price below $3.
So for now things are quite bullish for energy.
If you have an extra $2.8 million lying around, here’s another idea. Lyndon Johnson’s ‘ranch’ is for sale. Okay by West Texas standards, 142 acres is a back yard, but this is scenic Central Texas. An Italian painter owns it now. Included is the 2,848 square foot home, as well as various other buildings. Yes that is almost $20,000 an acre but this is not just land, it’s history. For the J. R. Ewing yearning to make a statement, this is surely the way to do it.
