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Shorting Oil, Hedging Tesla

Discussion in 'TSLA Investor Discussions' started by jhm, Mar 15, 2016.

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  1. RobStark

    RobStark Well-Known Member

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  2. jhm

    jhm Well-Known Member

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    Hmm, Russia is a big enough swing oil producer that it must participate with OPEC production cuts to make them remotely effective. Now it wants to find investors willing to bet that Russia will not overproduce and drive down the oil price. It will be interesting to see how much downward pressure this exerts on oil futures curves.

    Speaking of which, the chart below shows that the Brent futures curve has been rising from the April and June curves.


    upload_2020-7-29_12-46-0.png
     
  3. adiggs

    adiggs Active Member

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    And here I think that oil for much later delivery should be coming down. But I think of this market working in an analogous fashion as stock options (sell an option today, for a given buy or sell price in the future, with premium being paid to the option seller by the buyer; I've finally figured out that not all markets work this way).

    Anyway, using my stock option mental model, I wouldn't be paying for a net position that requires a $50 or $60 share price in the future to pay off. I see too many headwinds.

    Then again, I don't work in O&G or O&G financing, so what do I know?

    (Where are those Chevron puts again!?! :D)
     
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  4. TheTalkingMule

    TheTalkingMule Distributed Energy Enthusiast

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    2019 was the peak annual for crude oil demand. Either that or it's maaaaaaybe gonna be 2024/25, but that's seeming less likely every day.

    As a long time consultant in the business and corporate travel world, I can tell you with absolute certainty the level of savings these procurement officers are seeing right now is not going to snap back. Realizing the savings of a 90% shutdown of travel and entertainment is not an exercise that CFOs and CEOs will just walk away from. They're sitting back and thinking about the bonus checks they're going to get if they can just bring back the profits with this expense level.

    Business travel will never be the same, and therefore crude demand has peaked.

    IATA Now Predicts Travel Won't Recover Until 2024 | One Mile at a Time
     
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  5. TheTalkingMule

    TheTalkingMule Distributed Energy Enthusiast

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    This just popped up in my feed, no idea if it's reputable or reliable.

    Oil Tankers’ Strange Trips Reveal a Stubborn Glut of Diesel
    Perhaps this is an explanation for our 1M+barrel per day week-to-week variance in Saudi exports to the US.

    chart.png

    As I've been ranting, the numbers just don't seem to add up every week in the US. Production is barely off its peak, Saudi imports have risen, stockpiles are at a record and rising 10Mb per week.

    Maybe the mega-crash in oil(and the wider global economy) is just around the corner. I see no avenue to this glut not overflowing and oil relationships dissolving. Aren't we 10 years overdue for end of days inflation?
     
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  6. jhm

    jhm Well-Known Member

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    This is all the more significant because air travel is one of the most difficult portions of oil demand to switch to renewables. It was supposed to be a growth opportunity for the oil industry.
     
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  7. TheTalkingMule

    TheTalkingMule Distributed Energy Enthusiast

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    And jet fuel is the end of the line for refinery profits. When gasoline/diesel/other isn't in high enough demand, you can always squeeze the airlines for higher margins on jet fuel. Or at least you used to....

    Next thing you know we, as a society, will resolve to use far less plastics.
     
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  8. jhm

    jhm Well-Known Member

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    I hear tar is the last growth opportunity for oil, that is, until we pave roads and roofs with solar.
     
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  9. TheTalkingMule

    TheTalkingMule Distributed Energy Enthusiast

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    Looks like someone got an early peek at earnings. Chevron and XOM both plummeting this morning ~5%. Sell puts now or get greedy?
     
  10. jhm

    jhm Well-Known Member

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    Exxon’s Mad Dash To Save Its Dividend | OilPrice.com

    ExxonMobil is defending dividends at all cost.
    You gotta admire the XOM cult. There willing to ride out losing half their share value so long as the company keeps paying its dividend.
     
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  11. Dr. J

    Dr. J Active Member

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    I guess if you can borrow money for free, you can keep the merry-go-round moving. Until you can't borrow money at all.
     
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  12. TheTalkingMule

    TheTalkingMule Distributed Energy Enthusiast

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    2Q ex-dividend date for XOM is Aug 12th, we should get a good picture of valuation after that date. I'm sure there's a lot of investors hanging in for this on last quarter of stable dividends before jumping ship.

    CVX is Aug 19th, puts expire Aug 20th.....
     
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  13. jhm

    jhm Well-Known Member

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    They are monetizing their credit rating. The funny thing is that they have a hard time maintaining a stock price above book value (current P/B = 0.98). So if they borrow say $15B to pay their dividend, it reduces book value ($182B) by $15, which could drive the market cap ($178B) down $15B as well.

    Borrowing cash to fund capex is a different story because capex builds the asset and liability sides of the ledger. Net income available to shareholders is only $7.1B (ttm), not enough to cover capex plus dividends. So at least some portion of the dividend paid will come right out of equity (book value) and likely cut into market cap.
     
  14. TheTalkingMule

    TheTalkingMule Distributed Energy Enthusiast

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