Today is looking like it should be another decent day for commodities with markets green again. We see Asia especially strong with the Hang Seng up 0.52%, Australia up 0.85% and Seoul up 1.33%. Looking to Europe we see all green, with the CAC 40 up 0.67%, the DAX up 0.90% and Stockholm up 0.54%. Individual commodities are holding in strong as well, but we are seeing some resistance especially in the gold market.
Oil
Oil is rising in early trading, up over $107/barrel. Kodiak Oil & Gas (KOG) had an earnings disappointment, which is not necessarily a surprise given its status as a growing exploration and production play. They did dramatically increase revenue and their reported loss was due to an increase in rig count which created higher costs. This is a long-term play, but we will be watching today to see if momentum is broken. In aftermarket trading the shares were down 5%, so we shall be watching to see exactly where we settle down at.
EV Energy Partners, LP (EVEP) reports after the market close. The MLP recently did a secondary and has been setting the stage for a monetization of the Utica assets, which would take place probably sometime in the second half of the year. It will be quite interesting to see what they have to say, and we are hoping they shed some light on the exploration they are doing in the oil and wet gas windows of the Ohio Utica.
Natural Gas
Prices continue to be volatile for natural gas, with prices now falling due to higher temperatures in North America. Many of the producers of nat gas are up as of late, with Chesapeake Energy (CHK) showing a nearly 20% gain over the past month. The company has been shutting down lower margin operating areas proving short-term stability in underlying prices, but we think investors should focus on the company's plan to increase oil and natural gas liquids production. We think the company will ultimately meet their goals at a minimum and has a great chance of exceeding those production numbers. This is one of the few plays we like with natural gas exposure, so if you must play North American natural gas, stick to those diversifying the production base like Chesapeake.
Gold and Silver
Over the past 24 hours we have seen gold break through the $1790/ounce level only to fall shortly thereafter. It seems that the market has hit a bit of resistance, but New York trading may be able to get the market over the hump, so to speak. We were quite surprised with the rise in silver yesterday, rising above $37/ounce on strong price action. Since the close in New York silver prices have held strong in various markets and trade $0.17/ounce higher on our 24 hours chart from their close at 12 AM. We continue to like silver due to its dual status as a precious metal and industrial metal. This morning we are drawn to Paramount Gold and Silver, which is trading near a 3 month high and looking to break out. If it were to break out, it has room to run to the $3/share level at which time it will have its work cut out for it.
Rare Earths
Risk is returning to the market, but not so much to the rare earth plays. It is troubling due to the positions we have, yet we are playing news in the industry and not just hoping and wishing. Stans Energy rewarded us yesterday, but we believe the news will take a bit longer to release based off of the most recent press release. Molycorp (MCP) has had many distractions recently with shareholder lawsuits and such which has us shaking our heads. People have forgotten that although Molycorp has the less desirable light rare earth elements, they also have the technology to make these into quite valuable products for the market thus shielding them from falling prices.
Potash
Although not our favorite way to play potash, we are drawn to Agrium (AGU) this morning as it is a diversified farming play and looks to break through the $85/share level. The company is part of CANPOTEX, the powerful potash cartel, and has some great assets in North America and Australia. Agrium is riding high right now, and we want to hitch a ride. The chart shows that it has been steadily rising from the lower left to the upper right as some commodity traders like say.
Disclosure: I am long EVEP.
