Podcast & Videos Of The Week

A Look At The Coal Sector, The Paper Vs. Physical Oil Market & An Interesting Article From ZeroHedge

It’s been a busy week, but I wanted to highlight a couple of the most interesting things I have seen over the last week. I know I’m probably starting to sound like a broken record talking about oil and coal, but I figure that’s why most of you are here, and I’m going to keep pointing out the opportunities that I find most attractive. This week I have a video talking about the coal sector, along with a podcast covering the oil market with a focus on paper vs. physical markets. I also wanted to include a post from ZeroHedge on oil production in the Permian. It talks about energy M&A, rig count, and what’s going on with Russian refineries

And just like that, the fate of Biden's re-election is now in the hands of the two things he hates the most: US shale companies and Vladimir Putin... as is the price of oil and gas, and expect both to keep rising for the foreseeable future crushing any last hope Biden may have had of being re-elected.

Investors looking for an oil bull market have been looking at production from the Permian basin and waiting for production growth to slow and eventually decline. I know better than to try to predict exactly when Permian production will start to decrease, but it’s a major checkpoint to look for over the next couple years for oil markets. If Permian production is about to roll over, I hope you all have some exposure to the energy sector. Tick tock.

Yet Another Value Podcast w/ Matt Warder

I was waiting to make this post for this week until this video was out. If you happen to be interested in coal stocks, you will enjoy this one. Matt Warder is a guy I like to follow on all things coal, and his appearance will be worth watching if you own Warrior Met Coal HCC 0.00%↑ and/or other coal stocks like I do. They talk briefly about the different types of coal and their uses, along with the recent launch of the new Range Resources Coal ETF. Matt talks about why he favors metallurgical coal names over thermal for the next couple years.

He thinks we’re probably in the 3rd inning of this cycle, and they discuss the future for metallurgical coal and some of the differences between blast furnaces vs electric arc furnaces (which requires scrap steel to produce steel). The most interesting part (for me at least) was where they discuss Alpha Metallurgical Resources AMR 0.00%↑ and Warrior Met Coal, along with several other coal stocks. He covers AMR’s buyback program, Warrior’s Blue Creek Mine, and how he sees the next couple years playing out for those two companies.

“The way I view HCC is like future AMR”

-Matt Warder

HC Insider Podcast w/ Ilia Bouchouev

I listened to this podcast twice if that’s any indication of how curious I am about oil markets (or maybe I have too much time on my hands). I think the equities are the best way for an investor like me to get exposure to oil, gas, and other commodities, but this was an interesting podcast that takes a look at the plumbing of the oil market. It was full of interesting tidbits on oil markets, but was primarily focused on the difference between the paper and the physical market for oil. They also discuss how algorithms are not good at modeling geopolitical risks (like the ones we see today in Russia along with the Middle East), and the Strategic Petroleum Reserve and how oil can be released from the SPR. I’ll include some quotes that stood out to me from the podcast.

“If you think that we consume roughly 100 million barrels per day of physical oil, what I think people don’t understand is that we trade 5 to 6 billion barrels per day…. By that I mean all the futures, options, and over the counter market, but that’s like 50 to 60 times more.”

“In October last year alone, in just one month, the algorithms sold roughly 200 million barrels of futures. If you take this 200M and divide it by 30 days, that’s roughly 7 million financial barrels per day. So here is your battle. So OPEC is reducing physical supplies by one or two million barrels per day, but CTAs (commodity trading advisor) or algos are essentially selling 7M barrels per day, which is like four times larger, so not surprisingly, prices went down. And now, what’s happening now, those CTAs are still short. They are more short than the historical norms by roughly 200M barrels. And I think their behavior is going to determine where the price is going to go in the next couple months. Their patterns are actually changing and the mere passage time will cause their bearish technical signals are going to become less bearish or flip to bullish, which means that OPEC will probably win this battle because time is on their side. The simple passage of time is going to force algorithms to cover their short position, which is probably going to happen in the next couple months. And now the physical market, in my opinion, is going to win this battle and that could potentially lead to substantially higher oil prices.”

- Ilia Bouchouev