Off The Net For Awhile -- Coffee With Granddaughter Home From College -- March 8, 2022

Updates

Later, 1:00 p.m. CT:

Original Post

Thank you, thank you, thank you, Mr Biden. We are really separating the investor class from the non-investing class. I think BofA downgraded Big Oil earlier this morning. What were they thinking?

Side-By-Side -- Oil Futures -- Before -- After -- Biden Ban -- March 8, 2022

Look at the huge jump in April and May. Again, these are not the spot prices we will see in April and May, but rather what traders today are willing to pay for guaranteed delivery in April and May. I doubt they are looking to take a loss.

Due to my low-budget graphics department, the lines don't quite line up so by the bottom of the chart, "we're off" by one line. Deal with it.

If I had a subscription revenue stream, I might be able to afford a graphics artist. Futures.

I Would Put Them Side-By-Side If I Could -- Oil Futures -- March 8, 2022

Futures.

Before the Biden ban on Russian oil:

Immediately after the Biden ban on Russian oil:

Saudi Arabia Dropping Rigs -- March 8, 2022

Jen Psaki: US shale, you have 9,000 locations to drill. But that's it. That's all we're giving you. No more permits. No more pipelines. No more regulatory relief. You have 9,000 locations, be happy. With 650 rigs, that's 14 locations per rig to drill. If you drill one well with one rig every two weeks, that's 28 weeks, six months. And then you're done. Quit whining. You're done in August. Go on vacation. Have a marguerita. That's what I'm going to do.

Link here.

Twitter feed: everyone is now chiming in, including Saudi Aramco. Panic! Without Russian oil there is less than 2% spare capacity. I'm surprised there's any spare capacity without Russian oil. I doubted there was any spare capacity even before the Biden ban on oil.

But getting back to that graphic above. We've been through this before. Some years ago when oil was surging, Saudi Arabia again said it wasn't going to open the taps to give away there wealth. LOL. If they had the capacity, the reserves, the ability, they would sell all they could at these prices and then invest the profits in US blue chip companies with great dividends and guarantee a revenue stream for generations to come. 

But, some will say, they were able to flood the market a few year ago (2014 - 2016) when they tried to "break" US shale. If you go back and look at data for that period, you will find that flood of oil came out of storage; it was not new drilling. Their inventories right now are at relative historic lows. 

No, Saudi Arabia is not laying down rigs to preserve their oil wealth for future generations. They don't even think like that. Their thinking is tied up in one word: inshallah. 

Notes From All Over -- Early Morning Edition -- March 8, 2022

Buffett: back in world's top five. Link here. I wasn't going to post the article; it's unimportant. But then I read the last paragraph; another example of a writer not thinking:

On Friday, Berkshire Hathaway disclosed a purchase of almost 30 million additional shares in Occidental Petroleum Corp., a Houston-based oil and gas company. The deal, worth roughly $1.6 billion at midday Monday, helped draw down his company’s near-record $146.7 billion pile of cash.

So, $1.6 billion will help draw down his company's near-record $150 billion pile of cash. Oh, give me a break. If I have $150 and I give Sophia $2.00, for all intents and purposes I still have $150.  

On the other hand, this just goes to show me how much money BRK has -- makes a huge purchase -- 30 million shares of OXY -- and it doesn't even dent the pile of cash, much less the market cap of BRK. 

Buffett: here's the same story, again over at Yahoo!Finance, but it's not just a footnote. Now it's the headline: "Buffet chips away at cash pile with big Occidental bet." LOL. Chipping away is about as accurate as it gets. He spent $1.6 billion out of his $150 billion pile of cash. Whoo-hoo.

Biden: bans Russian oil, coal, natural gas. Pretty much bans everything. 

Russian oil: again for those who think Russia is still going to sell its oil, as long as its tankers can get out of the Black Sea. From S&P Global: surging oil, Russian crude woes pull down China independent refiners' runs. Link here. 

Race against time (they're reading the blog): Putin cannot "withstand" this war behond March. Link here. Russians are used to bare shelves, but this time it's gonna be a whole worse.

Bank of America (for what it's worth, I agree with all of this), link here:

• Bank of America's global oil team lifted oil price forecasts across the board, raising 2022 / 23 Brent forecasts to $110 / $95 from $85 / $75, respectively; the long-term price forecast was lifted from $60 to $70.
• The bank sees risk of a spike to $150 Brent, on the back of war in Ukraine.
• However, US analyst Doug Leggate is "disinclined to chase spot prices" writing that now is the time to rotate out of high-beta oil stocks, and into high-quality names and refiners.
• Leggate downgraded Ovintiv, OXY, NOG, COP, Diamondback, and EOG to hold from buy in Tuesday's note.
• Interestingly, the US analyst calls the environment a "golden age" for US refiners, as a pivot to bio-fuels has reduced capacity industry wide, and the crisis in Europe has raised operating costs for European competitors.
• Doug upgrades Holly, PBF, and Delek in Tuesday's note.
• In Europe, analyst Christopher Kuplent upgrades Equinor (NYSE:EQNR) to buy, citing structurally higher natural gas prices in Europe. 

Some thoughts:

• Brent forecasts are too low;
• I would not rotate out of (sell) high-beta stocks; I would hold; let profits run; use dividends, other revenue streams to start building / adding to positions in high-quality tech, streaming, and cloud names.