ConocoPhillips

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02.10.2024

Middle East escalation drives oil and armaments, airlines weak + Boeing considers billion-euro capital increase

Oil stocks benefited from the news of a possible conflagration in the oil-rich Middle East, as this is associated with the risk of a shortage of the raw material. Chevron $CVX (-0.58%) , Exxonmobil $XOM (-0.73%) and ConocoPhillips $COP (-3.4%) gained up to 2.4 percent in New York. In Europe Totalenergies $TTE (-1.26%) and Eni $ENI (-0.63%) rose by up to 1.4 percent. In times of war, it is also not unusual for arms manufacturers to see share price gains. In the USA, for example Lockheed Martin $LMT (+2.16%) and RTX $RTX (-1.21%) recorded gains of around 2.7 percent in some cases, while in Europe Rheinmetall $RHM (-1.89%) was particularly popular in Europe, with a rise of more than 5 percent. BAE Systems $BA. (-0.14%) were 3 percent higher.

The situation was different for shares in tourism groups and airlines. For the latter, the risks of higher kerosene prices are increasing. Some travel destinations may also be canceled for the time being and the risk of terrorist attacks is increasing. Investors in Tui $TUI1 (-1.21%) saw their share price fall by 2.5 percent. For the share price of Lufthansa $LHA (-0.44%) fell by more than 2 percent. IAG $IAG (-1.73%) lost 3.9 percent. Shares in US airlines such as American, Delta and United Airlines fell by up to 2.4 percent.

The US aircraft manufacturer Boeing $BA (-1.57%) is considering a capital increase in the double-digit billion range in its ongoing crisis, according to insiders. The company is considering issuing new shares worth at least 10 billion US dollars (just under 9 billion euros), the Bloomberg news agency reported on Tuesday, citing people familiar with the matter. The fresh money from shareholders is intended to fill the manufacturer's coffers, which are becoming ever emptier as a result of years of ongoing crisis with flight bans and production restrictions as well as the recent strike by tens of thousands of employees. A Boeing spokesperson declined to comment. According to insiders, it is likely to be at least a month before Boeing gets serious about such a capital increase

Economic data, quarterly figures

Stock market holiday in China

ex-dividend of individual stocks

Cisco Systems USD 0.40

Quarterly figures / company dates Europe

07:00 Grenke new business 3Q

09:00 Gea Group Capital Markets Day

No time specified: Totalenergies Investor Day - 2024 Strategy & Outlook

Economic data

• 11:00 EU: Labor market data August Eurozone Unemployment rate Forecast: 6.4% Previous: 6.4%
• 14:15 US: ADP Labor Market Report September Private Sector Employment PROGNOSE: +128,000 jobs previous: +99,000 jobs

📣 All these stocks hit new 52 WEEK LOWS at some point today

📣 All these stocks hit new 52 WEEK LOWS at some point today

Boeing $BA (-1.57%)

Chevron $CVX (-0.58%)

Occidental $OXY (-2.74%)

$ETSY (-0.39%)

Mobileye $MBLY

$APA (-2.76%)

Bath & Body Works $BBWI (-4.2%)

Franklin Resources $BEN (-0.56%)

Cleveland Cliffs $CLF (-5%)

Conoco $COP (-3.4%)

Coterra $CTRA (-1.79%)

Devon Energy $DVN (-2.23%)

Estee Lauder $EL (+1.18%)

Equinor $EQNR (-0.16%)

GlobalFoundries $GFS (-4.1%)

Halliburton $HAL (-2.02%)

Hess $HES

Nucor $NUE (-2.98%)

Mosaic $MOS

Schlumberger $SLB (-1.54%)

Stellantis $STLAM (-0.34%)

Top Golf $MODG (-2.6%)

Dave & Bysters $PLAY

Upcoming events this week:

Monday

• Earnings reports from McDonald's ($MCD (+0.5%) ), Caterpillar Inc. ($CAT (-2.26%) ), Palantir Technologies Inc. ($PLTR (-3.33%) ), ON Semiconductor Corp. ($ON (-2.61%) ) and Tyson Foods Inc. ($TSN (+3.39%) )
• Speech by Atlanta Fed President Raphael Bostic
• S&P final U.S. Services PMI (January)
• ISM Services PMI (January)
• Senior Loan Officer Survey

Tuesday

• Earnings Reports from Eli Lilly
  $LLY (+0.32%) ), Amgen ($AMGN (+3.04%) ), BP ($BP. (-1.13%) ), Gilead Sciences Inc. ($GILD (+0.34%) ), Ford ($F (-0.67%) ), GE HealthCare Technologies Inc. ($GEHC (-0.32%) ) and Snap Inc. ($SNAP (-2.76%) )
• Speeches by Minneapolis Fed President Neel Kashkari, Cleveland Fed President Loretta Mester and Philadelphia Fed President Patrick Harker

Wednesday

• Earnings Reports from Alibaba Group Holding Ltd. ($BABA (+5.86%) ), Disney ($DIS (-1.33%) ), Uber Technologies Inc. ($UBER (-2.45%) ), CVS Health Corp. ($CVS (-2.18%) ), Arm Holdings PLC ($ARM (-3.76%) ) and PayPal Holdings Inc. ($PYPL (-2.73%) )
• Speeches by Fed Gov. Adriana Kugler, Fed Gov. Michelle Bowman and Richmond Fed President Tom Barkin
• US trade deficit (December)
• Consumer credit (January)
• 
  Congressional Budget Office (CBO)

Thursday

• Earnings Reports from S&P Global Inc. ($SPGI (-0.29%) ), Philip Morris International Inc. ($PM (+1.84%) ), ConocoPhillips ($COP (-3.4%) ), Unilever ($UL (+1.42%) ), Honda ($HMC (+0%) ) and AstraZeneca ($AZN (+1.03%) )
• Initial claims for unemployment benefits (week ending February 3)
• Wholesale inventories (December)
• Speech by Richmond Fed President Tom Barkin
• Financial stability statement by Treasury Secretary Janet Yellen before Congress

Friday

• Earnings Report from PepsiCo ($PEP (+3.26%) )
• Annual seasonal adjustments (CPI)

The bear is dancing! 🐻 - 5 Bearish Scenarios for Western Oil Stocks.

The oil industry has been battling massive media headwinds in the public eye since as early as the 1980s. Nevertheless, the saying proves true: "Those who are believed dead live longer!" proves true again and again.

In the following, I have listed some points that could indeed trigger bearish scenarios in the Western oil and gas sector. The probabilities for it are quite given, although these are now realistic, I am not able to judge with the contribution.

1. decoupling of the world markets

Many of you must have heard about it in the news. China is currently mediating in the dispute between the oil powers Saudi Arabia and Iran. It is said to amount to reconciliation and a new alliance is to be forged.

Oil trade, explicitly between Saudi Arabia and China, is then to be traded via the yuan (the Chinese currency).

What does this mean? Currencies have no material value. They are printed numbers with a sometimes fancy design intended to facilitate trade in a country or currency union. Behind this piece of paper, however, is always the respective person's imagination of the economic power of the respective nation. Almost all international trade is in U.S. dollars.

Saudi Arabia owns about 13% of the world's oil reserves (according to OPEC statistics). Not for nothing is Saudi Aramco $2222 has at times been the most valuable company in the world. China, on the other hand, is one of the largest buyers of oil. If one now transacts this trade in yuan, one suffers a relatively high loss of value in the dollar. The prices of WTI or Brent, which are tradable for us, would inevitably lose value as well, as demand collapses accordingly. (Long-term view)

In addition, we should continue to monitor China's activities with regard to Iran. After all, Iran also has huge oil reserves that cannot participate in the market at the moment due to the nuclear dispute and the resulting embargo.

2. persistently high prices

Persistently high prices could also spell doom for our oil industry. At present, it is true that money is being made strongly and shareholders can enjoy dizzying records. Nevertheless, the search for alternatives is becoming more attractive. The high demand from the industry may topple as soon as the high prices cannot be passed on to the end consumer, as this would again lead to demand deficits and increased supply. This leads to production cuts and ultimately to demand problems for oil.

The search for alternatives becomes more attractive, as high oil prices make one attractive to the overall market. This does not necessarily spur renewable energy sources. Relatively low coal and gas prices also lead to a reorientation on the energy markets. This can be read particularly clearly from the prices of the respective commodities from 2022. With the difference that the scenario was true for gas.

3. political environment

The following scenario is itself very unlikely, since the lobby in the EU can enjoy quite a lot of influence. Nevertheless, one is quite capable of surprises.

Suppose political environment in a large economic area changes rapidly. This can mean various legalities.

As an example, I take the decoupling of alternatives from oil and gas products. Biofuels could be fully more competitive, or a tax break, as in the 2000s could be a consequence. As a result, demand for oil fell just as sharply, and the federal government consequently rescinded the tax break and passed the Fuel Quota Act to compensate.

4. speculative bubbles in emissions trading

Many may not be familiar with it. In the EU, emitters are obliged to compensate for their emissions. In this case, the responsible companies have to buy certificates for this purpose. However, every emitter participates in this market. Accordingly, it can lead to speculation bubbles forming here as well. The corporations pass these costs on to the consumer. Accordingly, the respective economic good naturally becomes more expensive.

However, this emissions trading system is not limited to the EU. China and other countries also have such trading systems, although the prices there are rather symbolic in comparison.

In addition, there are of course national emissions trading systems, such as the one we have in Germany with the so-called CO2 pricing.

5. overthrow in own rebuilding

The petroleum companies on the European continent in particular are almost outdoing each other with their sustainability goals.

While Total $TTE (-1.26%) has nevertheless been able to solidly claim the gas market in the LNG sector for itself, Shell hardly plays a significant role in it. $SHEL (-1.69%) hardly plays a significant role in it. Overall, in the liquefied natural gas market, US brands such as. $LNG (-2.15%) , $CVX (-0.58%) and $COP (-3.4%) have established themselves.

Please note that this is the fossil market. In the renewables sector, Shell, in turn, already plays a quite considerable role.

BP $BP. (-1.13%) on the other hand, is rather cautious and timid in this respect. Rightly so?

Of course, this cannot be said across the board, since no one can reliably predict the future, especially the general conditions for the future. Nevertheless, the restructuring of the petroleum companies costs an enormous amount of capital and destroys their original business model. It is therefore necessary to venture into new and uncertain sectors, into markets that are already dominated by other well-known companies. The risk of losing market share both in the oil industry and in the so-called "future industries" is therefore very high.

Re-entry 1st tranche sold in full on 30.01.2023 for EUR 112.66

Stop Loss - Take profits

Holding period 1.5 months

Sometimes you just want to have something very quickly but then think that it makes sense to wait...