That’s the end of H1. Performance best summarised as ‘mixed’. Commodities have without a doubt been the main story in first half of 2018 with Oil prices jumping almost 30% in the period from lows of $62pb (wti). You wouldn’t know it looking at some Mid cap Oil producing bellwethers like Tullow although PMO has certainly put on some weight with TheShareHub 2018 pick rising over 65% in the period. The stock is still a country mile away from where it should be with Brent prices at $80pb but what’s the rush? The casino wants to see more evidence of the oil supply issues that have surfaced since Trump’s size elevens kicked the Iranian nuclear deal out the park. What Trump did not see coming was the virtual capitulation of Venezuela, Libya, Nigeria and many other suppliers. What’s worse for Trump and the US is that recent data released by the EIA shows that the US rig count has began to fall at a time when it should be rising. Not only that, but US gross production which was growing at around 100k barrels per week is now treading water at best. Numbers remain unchanged for the 3rd week running. As many know US figures can be fudged or played around with and some more cynical observers out there believe that these figures are often tweaked to suit certain market needs… tut tut. Speculative nonsense aside, the recent numbers look like US shale is stalling or may have peaked or the numbers were inflated in the first place. Take your pick. The problem for the globe now does not rest with OPEC alone. Trump’s inability to understand how the oil market works and his actions on Iran could well see the likes of Vitol and Glencore on his back as these Oil traders will not be able to keep Oil prices low when ‘real supplies’ are becoming scarce. And that’s the reality. The Saudi’s and Russian’s may open the taps but it’s not going to be enough to stop a massive oil spike based on Iranian sanctions fully in place come Nov 2018. Furthermore, the Saudi’s are keen to get the Aramco IPO off in 2019 which means they are in no rush to burn reserves simply to keep prices down. That said, the question lingering now in the market is how fast the likes of Russia and Saudi Arabia can raise supplies? After years of lack of investment, there are no big production projects (non OPEC and OPEC) ready to come back into the supply line. Most are years away from first oil. Many old producing assets are beginning to run dry with decommissioning common place across the north sea and others areas of the globe. If the Saudi’s struggle, then Trump and co will need to work very hard on the likes of Vitol and Glencore if they are to contain or stop Oil hitting $100pb. Do not be surprised if you see Glencore suddenly being sanctioned or pressured by the US. The US are in a desperate position as come Nov 2018, Iranian sanctions kick in and the market might not be in a position to allow it to happen. Vitol and Glencore can’t simply invent the black stuff to massage numbers… well not on the scale that could be required to prevent PoO breaking through $100pb. Should the $100pb barrier be broken, Trump will be the reason why it happened. And that’s going to wear very heavily on his popularity as business and consumer begin to get squeezed at a time when Trade Wars are already hurting.
Moving on to the real ‘global show’ at the moment… the World Cup. For a change the headlines are all about dreamy school boy/girl football. Roy (or now also Jane) of the rovers stuff. Talk about hooligans, fighting, bottle throwing, stabbings etc and you’d be describing a typical average day in London (the new ghetto) rather than a footy tournament in Russia. Hats off to Putin. He’s pulled off the biggest PR stunt that the globe will see for many a year. Russia looks fab and the footy is delivering a change of the old guard on and off the pitch. The names that did not make the cup like Italy and Netherlands raised eyebrows when they failed to qualify for the main group stages. Any trend followers will have looked at those failures and asked the simple question why? If you look at the sides, many of the greats like Pirlo and co have retired. Look at the Spain. A shadow of the great side they once were. Same for Argentina and Germany. Of course these sides will be back but for now the transition from the old guard to the new guard is taking longer than expected. Bit like Brexit. The benefit of younger sides is that they play with no fear. They chase every ball. And they can do it for 120mins. It would not surprise me one bit if the World Cup is lifted by a side not seen before. Could it be Croatia? Could it be Belgium? Or could it be one of the past greats? Last time Uruguay won the World cup was in 1950 (post war). Last time England won the World cup was 1966 of course. All points to ‘change’ when the main event completes on Sunday the 15th.
Week 26 Review:
I mentioned last week that the ‘capital raising’ season was upon us. More and more AIM listed companies are tapping the markets for much needed cash. Some unexpected and some expected. It’s the unexpected ones that feel like a kick in the teeth for long standing pi’s. Some explanations by management are not cutting it either. One hunch is that these companies are being ‘approached’ by IG/City Index and others all keen to manage their book but in need of stock at cheaper prices. The casino can be a pretty ugly place but if true, management teams really need to toughen up and shareholders would be wise to pay attention to salary increases, bonus shares and options that often find seem to get approved before or after a large placing tut tut.
Across the ShareHub picks, HUM.L looks in good shape and cheap at 33p. Exploration has kicked off now and if the results are good, the stock should have a double whammy of great production news and great exploration news. just what the market likes. Add to this the recent 5 month lows hit in PoG and when the latter recovers (and it will) the stock should see additional demand. CERP and AMER should be on the verge of issuing production updates so keep an eye out on those stocks. Both are trading near year lows which suggests there is plenty of upside to come once the good news begins flowing again. AMER have exploration kicking off soon and CERP may well have an acquisition or two lined up that could be transformational.
All top picks from newspapers to theShareHub consolidated in week 26. Not too much to report in terms of performance. H2 does look a better period for commodities although the summer malaise will see lower volumes and reduced interest. One stock that should buck the trend is MATD. After the recent cash raise, it’s not unusual to see some loose stock being sold into market. But with 6 exploration wells lined up of which most are back to back or could be tandem, the news flow and interest in the stock should be massive. The first well is set to kick off next week and the company is set to do a presentation to sellside analysts on July 10th. At 9p, it would not surprise one bit to see the stock in the 20’s or 30’s should the term ‘oil shows’ appear in any interim RNS updates. MATD is part of the ShareHub ‘heads up’ picks for 2018. As with all stocks risks remain so please read the risk warnings in the left sidebar.