Commodities Today: Takeover Speculation And Geopolitical News Moving Stocks

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Includes: BP, CCJ, CLR, CVX, RDS.A, RDS.B, URG, XOM
by: Matthew Smith

Summary

Discuss the impact of lower oil prices and the geopolitical cracks now appearing.

Highlight the recent news out of Australia that the country is open to the idea of allowing nuclear energy.

Look at fresh takeover rumors surrounding BP, as well as the bounce we saw yesterday in some of the larger energy names.

With OPEC's move, or lack of action rather, to keep oil production at current levels, we were sure that there would be countries moving to shore up their finances sooner rather than later. With many oil producing countries operating with budgets well above their means, the fall in oil prices has been quite painful. Russia has been battling in the FOREX market to defend its currency and now is canceling plans to build a pipeline to deliver energy supplies to Europe from the Black Sea. This highlights just how large of an impact that Russia is feeling from lower oil prices and economic sanctions.

In what could be good news for commodities in general, rumors arose overnight that China's central bank might reduce reserve requirements in an effort to provide further liquidity for the economy.

Chart of the Day:

We saw a rebound in some of the larger energy names yesterday, as investors looked to names such as Chevron (NYSE:CVX) and Exxon Mobil (NYSE:XOM) as good long-term options to play a rebound in oil prices. The risk-on trade is not back yet, but if one continues to see interest in the largest names, then it might be safe to start nibbling at the more speculative E&P companies.

Source: BigCharts

Commodity prices are as follows (at time of submission):

  • Gold: $1,199.70/ounce, down by $18.40/ounce
  • Silver: $16.43/ounce, down by $0.262/ounce
  • Oil: $67.86/barrel, down by $1.14/barrel
  • RBOB Gas: $1.831/gallon, down by $0.05/gallon
  • Natural Gas: $3.904/MMbtu, down by $0.098/MMbtu
  • Copper: $2.8845/pound, down by $0.0135/pound
  • Platinum: $1,219.40/ounce, down by $22.20/ounce

Australia Open To Nuclear

We were surprised not to see more headlines in the financial market data feeds than we did concerning the news out of Australia that the government may reverse course and open the country to nuclear power. Talk of the country allowing nuclear power generation comes up every few years, but with climate and carbon treaties gaining traction among the leading industrialized countries, Australia is focusing on how they can continue to meet their goals, both those required by internal mandate as well as those from external agreements.

If Australia is set to allow nuclear energy, it would be a boost to uranium miners such as Cameco (NYSE:CCJ) and Ur-Energy (NYSEMKT:URG) and a blow to coal. While coal is a big employer in Australia, so too is uranium although with no domestic demand it employs far fewer individuals in total.

Oil M&A Rumors Emerge Again

Shares in BP (NYSE:BP) are rising today after rumors began circulating during European trading that Royal Dutch Shell (NYSE:RDS.A) (NYSE:RDS.B) might be preparing a takeover offer for the company. The rumors around BP have been constant over the past few months, but nothing has materialized yet. While we do believe that BP is the most likely takeover target of the large integrated oil companies, it is hard for us to imagine a buyer emerging before the company has put its legal troubles (and potential liabilities) behind it.

Hamm's $10 Billion Loss

Continental Resources (NYSE:CLR) CEO and founder Harold Hamm has now lost half of his fortune in the last few months, and it is not because of his divorce (as was feared before the judge made his ruling). The $10 billion loss has been caused because of the decline in oil prices and Mr. Hamm's decision to remove Continental's hedges just before the latest move lower in oil.

Paper fortunes are gained and lost every day, but the magnitude of this loss is impressive.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: BP has previously been recommended.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.