Commodities Sector.. New Bull Phase is beginning

[vand]

Crude oil is roaring back after the last selloff:

$100 looks very doable within the next 12 months.

 

Belangp's last video addresses the restoration of "normal" oil prices and restoration of the gold/oil ratio.

 

[Bumble]

The oil price surge today was caused by a large syncrude plant in Alberta being forced to shut down, losing over 300,000 bbl/day of production. It will lead to a drawdown in Canadian reserves, but not much more. Oil prices have been rising because of production cutbacks by Russia and the Saudis, together with a collapse in production in Venezuela and sanctions against Iran. Yes, there is room for prices to rise further, but it is best to temper bullish sentiment with the following considerations:

1. Russia and Saudi Arabia between them have enough swing production to make the price of oil go where they want. They appear to be targeting between $70 and $80.

2. There are a lot of marginally profitable shale producers who can open the taps if the price rises above $70.

3. Trump is likely to approve oil production in Alaska.

4. Iran doesn't need to sell oil to the west. China is happy to buy it and Iran is happy to accept yuan in payment. China is also buying Venezuelan oil.

5. Oil is not the only energy. Japan is starting to reboot its nuclear reactors. Renewables are constantly coming on stream. Electric cars will reduce demand for oil.

 

[vand]

On 26/06/2018 at 19:59, Bumble said:

The oil price surge today was caused by a large syncrude plant in Alberta being forced to shut down, losing over 300,000 bbl/day of production. It will lead to a drawdown in Canadian reserves, but not much more. Oil prices have been rising because of production cutbacks by Russia and the Saudis, together with a collapse in production in Venezuela and sanctions against Iran. Yes, there is room for prices to rise further, but it is best to temper bullish sentiment with the following considerations:

1. Russia and Saudi Arabia between them have enough swing production to make the price of oil go where they want. They appear to be targeting between $70 and $80.

2. There are a lot of marginally profitable shale producers who can open the taps if the price rises above $70.

3. Trump is likely to approve oil production in Alaska.

4. Iran doesn't need to sell oil to the west. China is happy to buy it and Iran is happy to accept yuan in payment. China is also buying Venezuelan oil.

5. Oil is not the only energy. Japan is starting to reboot its nuclear reactors. Renewables are constantly coming on stream. Electric cars will reduce demand for oil.

 

 

I wouldn't be so sure of any of that. The US shale boom helped supply side for a few years, but the reality is that the world is still using more oil each and every year and trend will continue, regardless of newer technologies. Peak oil (when was the last time you heard that?) is still going to happen. There are always fundamental forces at work far beyond what the simple headline of the day is suggesting is driving the price.  

 

Oil has broken to a new high just a few session after it completed its intermediate low. If you are a bear that should frighten the life out of you. It is a very bullish technical setup, and it suggest that it wants to run higher.

[KDave]

Is the oil price rising really a bullish indicator given not too recent history? I understand this is not cause and effect, but equally demand and supply of oil had nothing to do with what happened in 2008 either. Perhaps rising oil is more indicative of systematic stress than it is market conditions. 

[Pipers]

Imo, there was an over supply the market corrected there was pain now OPEC Russia want the price as high as possible without the USA boys making producing to much again.  Iran has been selling oil to China for years. 

[vand]

So today I had my annual pension review and made a significant allocation change to my portfolios, moving a big chunk of my cash position into the natural resources fund and putting 100% of my monthly contributions into this fund also. Going forward I will have  >75% of my pension in this fund in the next 5-10 years.

 

You should have seen the look on the pension advisor's face. Couldn't understand my strategy at all. Was recommending Japanese equities because of QE and Abeonomics. LOL. I think he's missed the boat on that.

Brought warmth to my heart knowing I'm buying into such a hated sector.

[HelpingHands]

To those buying uranium.  Is it ok to just stack it in a monster box with the silver?

 

 

[KDave]

I do like Uranium, it is cheap in a world of expensive. I believe that nuclear energy will need to take some of the share from oil thanks to the push toward EV, especially in the west. The only alternative is fossil fuels, there is nothing wrong with coal, but plant food (CO2) is very unpopular thanks to years of indoctrination in the west. We will choose the longer lasting damage of having to deal with the nuclear waste instead.

The uranium price chart looks like the template for precious metals. Another few years of bear to go? 

[Bumble]

20 hours ago, HelpingHands said:

To those buying uranium.  Is it ok to just stack it in a monster box with the silver? 

It depends on how much enrichment it has received. If it is highly enriched (over 5% U-235) then it is best to divide it up between several different locations in case it fissions spontaneously which would be bad because your house insurance probably doesn't cover that risk. If it's just some depleted uranium you bought second-hand on Craig's List then you don't need to worry about how much you have, unless you are worried about silly things like radiation.

[HelpingHands]

2 hours ago, Bumble said:

It depends on how much enrichment it has received. If it is highly enriched (over 5% U-235) then it is best to divide it up between several different locations in case it fissions spontaneously which would be bad because your house insurance probably doesn't cover that risk. If it's just some depleted uranium you bought second-hand on Craig's List then you don't need to worry about how much you have, unless you are worried about silly things like radiation.

As long as it doesn't tarnish my pandas.

[vand]

Nymex Crude oil now broken out above $72. 

 

Despite this his the entire commodities sector remains at just about record low when measured against stocks! Commodities have much, much, much further to run...

[vand]

$73 now. $100 oil could be back before anyone realises.

Gold/Oil ratio is now a very modest 16.5, almost straight-lining it down from 48 when oil hit its bottom a couple of years ago.  

 

[vand]

"Generational Lows" - get on board for the ride up.

 

[vand]

We haven't managed to break out of the base yet, but the Dow/CRB ratio is now threatening to break through its downtrend, something that iGold advisor is now picking up on also.

This is not a get-rich quick play, but being overweight in a sector over its coming bull market is a sure-fire way to build long term wealth. Buy some. Keep buying some, and let the market do the work over the next decade.

 

[vand]

I was too early on the call when I started this thread, but my thesis has not changed. Gary Savage now also suggests that commodities are preparing for a new bull market:

https://blog.smartmoneytrackerpremium.com/2020/01/beginning-the-next-inflationary-period.html

 

[vand]

https://moneyweek.com/508874/commodities-are-dirt-cheap-but-is-it-time-to-buy