The oil price decline and an OPEC divide
Graham-Wood began by noting that the oil price had already fallen from $120 to $70 before the December OPEC meeting last year, and now the oil price has fallen down to sub $40. In terms of OPEC, Graham-Wood highlighted the Saudis tactic to see-off high cost producers and gain market share with lower oil prices. He believed that a possible break up of OPEC is on the cards, with Saudi using the organisation for their own means, whilst oil producers with high costs like Venezuela are being forced to the side. Graham-Wood continued to the oversupply of oil in the market, expressing the lifting of sanctions in Iran in early 2016 being a further contributor of around half a million barrels a day to the already flooded market. He concluded that demand isn’t aiding the supply situation, with the China slowdown, and Graham-Wood urged shorting the market at these levels is still the best bet.
Oil Stocks: The Recap
When concerning Pantheon resources (PANR), Malcolm Graham-Wood commented that they have cracked the code, and they believe that on the basis they have there is no reason to drill a dry well again. He urged that the value of the stock at the moment is 200p, but with a lot of wells to drill and more excitement to come, there is no reason this stock can go considerably higher.
Graham-Wood continued to Tullow Oil (TLW), which he expressed had been a huge success many years ago, but the last two years have been a bit of a shocker or the stock. However, they have cut costs and renegotiated their debt, and therefore he concluded that TLW will be an interesting play over the next two years.
For further analysis on oil stocks including Sound Oil (SOU), RockHopper (RKK), President Energy PLC (PPC), AEN, AMER and Hurricane Energy (HUR).