Local Oil Names Drop Sharply After WTI Spikes Lower

Posted on | by Todd

Shares of ASX oil names are under pressure in early trade as West Texas Intermediate Crude Oil (WTI) prices dropped over  4% overnight.

WTI prices fell by close to $4.00 per barrel to $70.40 as a confluence of bearish news hit the market.

Increased trade friction between the US and China pushed WTI lower in Asian tarde, while news that Liyba and Saudi Arabia have increased production by a combined 800,000 barrels per day pushed the market through key support levels.

As illustrated in the chart below, WTI has rallied more than $10.00 over the last 5 weeks, which now places initial support $3.00 lower near $67.00.

Similarly, local oil names, OSH, STO, WPL and ORG have rallied over the last month and appear to have more downside price potential over the near-term.

OSH will announce their quarterly production report next Tuesday and STO and WPL will release their reports next Thursday.

We have traded both sides of these names over the last 12 months and will update with specific entry levels near lower technical support areas over the medium-term.

WTI Crude Oil

Origin Energy

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Santos

 

Woodside Petroleum

ALGO Update: Keep Santos On Your Radar

Posted on | by Todd

Since rejecting Harbor Energy’s takeover bid on may 20th,  shares of STO have dropped over 10%, which is inline with the drop in global crude oil prices.

Despite the fall in the share price, CEO Kevin Gallagher has been firm that the company (and shareholders) will be better off and will see the benefits of their $2 billion cost cutting plan over the next few quarters.

Our ALGO engine triggered a buy signal in STO at $5.50 on May 30th.

We see good support in the $5.30 to $5.40 area and would suggest adding to long positions there.

We don’t rule out another offer from Harbor Energy in the $7.00 per share area sometime in the future

Santos

 

ALGO Buy Signal For Santos

Posted on | by Todd | Leave a Comment on ALGO Buy Signal For Santos

Our ALGO engine triggered a buy signal on STO into yesterday’s ASX close at $5.50.

The “higher low” pattern is referenced to the $4.80 low posted on March 15th.

The share price has dropped over 15% since the company rejected a $6.86 per share takeover offer from Harbour Energy last week.

Since then, there have been internal discussions about a higher takeover price, as well as whether the current management can use their strong balance sheet to increase earnings restore a fully-franked dividend.

Technically, we see solid support near the $5.30 area and initial upside resistance at $6.10

Santos

 

 

 

 

 

 

 

WTI Crude Oil Retreats From 4-Year High

Posted on | by Todd | Leave a Comment on WTI Crude Oil Retreats From 4-Year High

Over the past three weeks, the price of WTI Crude Oil has rallied over 12% and posted a four-year high at $69.35 in early NY trade last night.

However, WTI closed the session down 1.4% at $67.70 after the US and France announced they were close to reaching a deal to renew the Iran nuclear agreement, and a surprise increase of a million barrels in weekly API inventory data.

It’s worth noting that speculators have amassed a very large net long position in the WTI futures market. As of the April 17th report, the non-commercial net long position stood at 728,000 contracts.

This long exposure is just below the record high of 739,000 contracts set in early February when WTI peaked at $66.30.

Technically, the daily internal momentum indicators for WTI are stretched but not yet overbought.

The deadline for renewing the Iran agreement is May 12th. It’s likely that the  ongoing negotiations of that agreement will have a strong influence on the near-term price action of WTI.

From a “cause and effect” perspective, any political hurdles in extending the Iran agreement will see WTI trade higher, while the perception of a successful agreement will likely push WTI lower.

Local shares OSH, STO and WPL have all rallied sharply over the last three weeks and have a strong correlation to crude oil prices.

As such, we urge investors to be cautious of increased volatility in the crude oil market and how it could impact these local oil names.

WTI Crude Oil

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Woodside Petroleum

Santos

 

 

 

 

 

Harbour Energy Offers $13.5 Billion For Santos

Posted on | by Todd | Leave a Comment on Harbour Energy Offers $13.5 Billion For Santos

US-based, private equity firm Harbour Energy has raised it’s takeover offer to $13.5 billion for oil and gas producer SANTOS. 

This is the third offer since last August and pencils out to $6.50 per share.

The bid represents a 30% premium over last Friday’s closing price of $5.07 per share.

STO was added to our ASX Top 100 Model Portfolio at $4.82 on February 12th.

Santos

 

 

 

 

Local Oil Names Firm As WTI Extends Recent Gains

Posted on | by Todd | Leave a Comment on Local Oil Names Firm As WTI Extends Recent Gains

West Texas Intermediate (WTI) Crude Oil rose over 3% in NY trade to reach a 7-week high of $65.70.

The boost was a result of EIA data showing US crude stocks unexpectedly fell by 2.6 million barrels, or 0.6%.

For the week, WTI has risen over 5%.

In Monday’s blog, we mentioned our preference to buy local names STO, WPL and OSH.

These three stocks are up over 2% for the week and we still see scope for further upside range extension. Also, all three of these stocks are in our ASX Top 50 Model portfolio.

On the daily charts, the next area of resistance for STO is near the $5.65 level, with support at $4.90.

The chart of OSH shows resistance at $7.70 and support at $7.05

The valuation metrics for WPL are more complex. The share price has under performed the Spot WTI price by 24% since September and is 21% below it’s EPS momentum trend.

At 6.50 X EBITDA, WPL may be the best pick for a move back into the price gap above $29.65.

Santos

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Woodside

WTI Rally Lifts Local Oil Names

Posted on | by Todd | Leave a Comment on WTI Rally Lifts Local Oil Names

The price of West Texas Intermediate (WTI) Crude Oil rose 3.5% last week and settled just over $62.00.

This places WTI pretty much in the middle of the $66.80 to $58.00 range we have seen so far this year.

What makes this noteworthy is that last week’s rally coincided with a rally in the USD.  In short, the USD vs Crude inverse correlation looks to be diminished for now.

The technical picture in WTI is improving and the next upside target is near the February highs of $63.40.

As a result, shares of STO, WPL and OSH are all up over 1.5% in early trade today.

All three of these stocks are in our ASX Top 50 Model Portfolio and we prefer the long side from current levels.

We’ll update each of these stocks in subsequent postings.

Woodside Petroleum

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Santos

 

 

 

The Crude Oil Rally Is Looking Stretched

Posted on | by Todd | Leave a Comment on The Crude Oil Rally Is Looking Stretched

Since December 1st, the price of WTI Crude Oil has rallied over 14%.

Just in the last 5 days the WTI price has risen 5% from $60.25 to a 3.5 year high today of $63.50.

Recent reductions in crude inventories combined with Geo-political tensions in the Middle-East have support prices.

However, there have been many analyst sceptical that this will be a protracted rally in Crude prices.

This scepticism can be seen in the price action of some of the local oil-based names.

Despite the 5% rise in WTI over the last week, shares of OSH have dropped by 2.5% to $7.90, and the share price of WPL and STO have been consolidating off their recent highs and look to be pointing lower.

We urge caution on the sustainability of the recent run up in Crude prices and would suggest exiting long exposure to WPL, STO and OSH

Woodside

Santos

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