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Old Trader is a 63 year old private investor, managing a retirement portfolio constructed to a) generate a high current yield, b) preserve capital, and c) increase capital. His methodology involves taking a "top down" macro view to identify favorable trends, and then engage in... More
  • Bernanke vs. the IEA 0 comments
    Mar 1, 2011 7:07 PM | about stocks: RDS.A, TOT, STO
    Yesterday, in the first day of his two day visit to Congress, Ben opined that rising oil prices wouldn't hurt the economy unless higher prices were "sustained". Of course, that begs the question of what "sustained" is.

    There's no shortage of past examples where say, geopolitical tensions flared up, causing oil to spike, but in a week, or two, diplomatic efforts bear some fruit....the tensions ease, and oil drops back down in price. In another example, during hurricane season, how many times have we seen oil start climbing, as a storm appears to be taking dead aim at GOM oil fields, only to have it change course, and meander off somewhere else, and prices come back down.

    Under each of these examples, oil may indeed, spike, along with gasoline, diesel, and any other petroleum based products, but only for a few days, or a couple of weeks, and the drama's over.

    However, looking at oil prices, Brent, WTI, and Dubai crude were all trading around $73-$76, back in September, 2010, but have been marching steadily upwards since then, a period of 6 months, and counting. I don't know about you, but to me, it seems that we're getting pretty close to a "sustained" period of rising oil prices (if, in fact, we've not already reached that point).

    Based on the first day's testimony, Ben doesn't seem likely to be in a hurry in taking his foot off of the stimulus "pedal", so it doesn't appear reasonable to expect much relief from a strengthening dollar. Continued high unemployment seems to be causing Ben to "stay the course".

    And then, we have the IEA's latest report (released Feb. 10, 2011).

    Some of the highlights of the report include:

    Global oil product demand for 2010-2011 is revised upwards by 120k/bpd to 89.3 mb/d.

    World oil supply was nudged upwards by 0.5 mb/d to 88.5 mb/d, with non-OPEC production flat.

    The link to the report is here:

    omrpublic.iea.org/?cigx=d.kac,stid.3560,...

    Given the mismatch between demand and production (speaking from a global perspective), along with the still unsettled conditions in the MENA region, any sort of weakness, or retracement in oil prices seems like an opportune time to add to positions of oil/gas producing firms. RDS.A and TOT are two that are on my radar, which would be additions to my position in STO, which has been working out well for me.







    Disclosure: I am long STO.
    Themes: Oil, energy Stocks: RDS.A, TOT, STO
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