Tuesday February 14, 2017
Earnings for energy producers are forthcoming at this time. That would be for the time period of the last quarter of 2016. Let's take a look.
The blue bars frame the last quarter. For energy producers it was a tough quarter. I am guessing that for most US producers, the break even price is about $43. The fact that OPEC
and Russia began broadcasting well publicized production cuts as prices fell to that level adds some credence to my speculation. And they are now claiming that in fact production has been cut which raised prices.
We contend that prices are more subject to rise and fall by speculation in futures markets than by production at the wellhead. And sure enough, by late December, traders were the most optimistic on higher prices since 2014.
Believe me, when the net position of traders swings to more longs in calls and futures, than shorts, prices rise, no matter what OPEC does or does not do.
Adding to the evidence that prices are continuing to rise is the announcement by HAL and SLB that their fire sale on energy services has ended.
XES Energy Service
It appears Energy Service XES is completing its third correction right now. This argues for higher oil prices in the near future as well.
The Baker Hughes Rig count confirms this analysis.
Note the count is up 29.7% year over year. And it rose more at year end with the price of oil.
So, no matter what the earnings report is for 4th quarter 2016, it appears earnings will improve for 1st quarter 2017.
Oh, one more thing, natural gas prices should be completing their correction.
Price nearly doubled from the $2.00 low rising to $3.90. A 50% correction has occurred right down to the uptrend line. Let's watch the price action going forward.
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