The markets had a bit of a shock early this morning during an unannounced missile test, which we now know, was conducted by the U.S. and Israel. We have attached an article here, but we would hope not to see too many more instances of military exercises that could provoke Syria and/or its allies into any offensive military moves. We expect the oil market to calm down this week but rise into any attack signed off on by the U.S. Congress, which was our view last week as well.
Chart of the Day:
Readers continue to ask U.S. why we remain bullish of names like EOG Resources (EOG) and Kodiak Oil & Gas (KOG) after their big run-ups. Well if one simply looks at the run-up we have had in North Dakota oil production (and natural gas production as well) it is quite obvious why we are so bullish. This is easy oil to tap with technology only improving and we are seeing an increase in the footprint of profitable areas to drill. Anyone not bullish of these two names, which are growing organically at healthy clips, should re-evaluate their position because this will be looked back upon as one of the great bull market opportunities of our generation years from now.
Source: Carpe Diem Blog
Commodity prices this morning are as follows:
- Gold: $1393.00/ounce, down by $3.10/ounce
- Silver: $24.22/ounce, up by $0.707/ounce
- Oil: $107.33/barrel, down by $0.32/barrel
- RBOB Gas: $2.8892/gallon, down by $0.0009/gallon
- Natural Gas: $3.655/MMbtu, up by $0.074/MMbtu
- Copper: $3.2855/pound, up by $0.0525/pound
- Platinum: $1527.40/ounce, up by $0.30/ounce
There are very serious issues in play with the collapse of the BPC cartel as it now appears that Belarus is attempting a Yukos style takeover of Russian assets. The move is brilliant on one level in that Russia has somewhat set precedent for it, but idiotic on another level. We have read that the plan to seize the assets is focused around $100 million in damages and it could be argued that some assets would be worth far more than this... again though we must refer to the Yukos situation. This could be good news for names like Potash Corporation of Saskatchewan (POT) and Mosaic (MOS), which are members of the North American cartel, Canpotex.
It has been ugly recently for the Potash names, however we could see a move higher if Russia and Belarus allow tensions to escalate any further over the breakup of their cartel, BPC.
Source: Yahoo Finance
We say this because if Belarus were to force Russia to flex its muscles we could see a geopolitical event that could cut off shipments of potash to certain parts of the world. The fear would no longer be of potash flooding the markets from the Urals but supply from the Urals potentially cut off. This is a fluid situation and new developments occur daily, but we wanted to highlight to readers that there could be some bumps in the road to the plan to break up the rival cartel.
Oil & Natural Gas
Russia is seeing oil and condensate growth continue as the country's producers continue to expand production under the guidance of Vladimir Putin's government. Mr. Putin has made it a point of emphasis to build up Russia's production of high demand commodities and the oil and natural gas industry has been one of the focal points. The country saw post-Soviet production hit another high this past month and according to BP (BP) the past month's production is roughly 1 million barrels per day short of the Soviet record. With BP working on frontier opportunities in Russia, namely the Arctic Circle and deep water wells, we think that the country could easily exceed the old number in a few years with success from BP and Rosneft (GM:RNFTF). Bloomberg has a great article on why this growth is continuing via this link.