Oil macro analysis, page-2

Hi guys,
I did an oil macro analysis (linked in original comment of this thread) on Aug 27 and as can be seen, I linked it on the LNG forum in case anyone was interested.

1) 3 day sharp rise

Price of LNG was AUD 2.58 then. I spoke in August of importance of 40 level and how oil should race away from the 40s to give confidence. Indeed as soon as I passed my comment, oil raced off to one of the biggest 3 day rises in 25 years, and bumped its head against the 50 level. Looking at LNG’s chart, LNG too raced away to AUD 2.89 in line with oil’s spectacular short term rise

2) Importance of 50 level resistance

I had also warned of many further bearish issues in my comment however and oil continued to fall since (after hitting its head against the 50 level) and stocks continued to get hammered.
I also spoke of how I’ve been meaning to write that analysis ever since oil fell below 50 in July and indeed 50 has again proven to be a resistance. Anyone following oil closely will know that oil made a couple more attempts to cross 50 and fell short before the last attempt where it once more bumped its head on touching the 50s.

3) LNG very sensitive to oil movements

Hard to believe that LNG has fallen so much in such a short time, but obviously it was also following the oil sector and early investors might have booked their huge profits made earlier in the previous year. Unfortunately, this has been negative for the later investors.

I haven’t been following each of the energy stocks in detail but am looking at the energy sector more from a macro basis. I’m not too sure but based on what I remember, of all the ASX energy stocks, LNG seems to be one of the most sensitive to oil prices over the past few months with good rises on oil rises but really huge falls on oil falls.

4) Importance of 40 level

I did a further oil macro analysis update on October 27th and another on November 16 on the forum of another energy stock (Disclosure - I hold neither LNG nor that stock)
http://hotcopper.com.au/threads/far-stable-oil-macro-analysis-update.2625323/?post_id=16267916
I also mentioned there on Oct 27 (WTI close – USD 43.39) that
“Oil is looking ready to test the 40 level once again. How it reacts at this level is key. If it makes a hard fall at this level, then even the 30 level cannot entirely be ruled out.”
I’ve not been following the oil scene much oil seemed to have jumped to 47.68 by November 3 but then came crashing back to test the 40 level that I rightly thought it would test. So here we are at the 40 handle with a WTI close of 40.73 and a low of 40.22 on Nov 13^th and it has been tested the 40 handle many times ever since, over the last 10 days.

Today’s Motley fool article gave a simple but very valid reason for LNG’s fall – fall in oil prices - “Unfortunately, against a backdrop of plunging oil prices, which may indirectly threaten the viability of LNG Ltd’s two prospective tolling facilities in North America, investors have clearly grown bearish of the company’s outlook.”

5) Going forward –

As I mentioned in my Aug and Oct oil macro analyses, the 40 level is an extremely critical level for WTI for me. (Please read my Aug macro analysis on the Oil forum and October one on the other forum if you want to go deeper). Needless to say, LNG looks likely to continue to track oil.

6) Aug 27 to Oct 27 price movements

I have been tracking the movement of many energy stocks since my Aug 27 and Oct 27 oil analyses and here are some figures in case anyone wants a quick look. (Please cross check in case any mistake)
Aug 27 – Oct 27 (copying and pasting from my earlier oil macro analysis) –
FAR has risen 37% since then, SXY has risen 51%, STO risen 24%, LNG fallen 35% and WPL more or less same.
ORG fell by 29%, SEA by 2%, AWE by 22% while HZN rose by 57%, KAR by 4% .
As can be seen, LNG was one of the worst hit

7) Movements from Oct 27 to Nov 16 –

Taken these movements from my brief Nov 16 update on the other energy stock forum
LNG (down 11% despite that day’s sharp 15% rise); FAR down 8%; STO down 35% (I had warned of capital raising and debt issues for energy stocks in my Aug macro analysis); WPL down 7%,; SXY down 24%; OSH up 5%; BPT down 15%; DLS down 14%; ORG down 16%; SEA down 16%; AWE down 20%; HZN down 15% and KAR down 13%.
LNG since then seems to have had a sharp fall again to erase off Nov 16's gains, and is once again pretty badly hit.

8) Conclusion -

To conclude, LNG is simply tracking the oil sector. The big issue IMO was the huge profits in the earlier year and surely many investors would have booked their profits amid oil's spectacular collapse.

I’ve listed down all the pros and cons of the oil sector in my oil macro analysis, in case anyone wants to go in much deeper. I originally shared it on only 5 ASX energy forums and LNG was one of them. Just thought of sharing this brief update and my other ones (Oct 27 and Nov 16) in case anyone was interested and especially since many things I thought have come to fruition.

Oil is at a very critical level (WTI 40) and how it reacts here is key.
Rest assured I’m not downramping or anything of the sort. I do feel bad for you guys and it has obviously been a terrible year. All the best with LNG going forward.
Cheers