Has Oil got us over a barrel?
XJO
Continued Uncertainty
Up 103 for JULY
The Australian market was up over 100 points for the month of July, and actually hitting a decade high in the first week. However, once again due to conflicting concerns around potential trade wars, and domestic issues such as ASIC launching Federal court action against AMP, and pending doom, surrounding the housing market the early rally was unable to be sustained, resulting in the market losing steam, and oscillating between 6200 and 6300 from July the 6th for the remainder of the month.
KEY ECONOMIC DATA
- RBA holds the rate steady at 1.5%
- Unemployment rate steady at 5.4%
- China GDP 6.7%
| DOW JONES IND AVG 24,161 – 24,415 : UP 254 |
DJI 12 MONTH CHART
The month of July saw the Dow claw back the correction from the last two weeks in June, with a rise of 254 points.
Once again the sheer weight of phenomenal economic and corporate data compelled the market to override continued fears around a potential trade war.
The corporate season so far with around 84% of S&P 500 companies beating market expectations is on track to be the best earnings season since 1994.
This stellar corporate earnings season coupled with simply amazing economic data, such as Initial Jobless Claims dropping to the lowest level since Dec 1969 (48.5 yrs), and GDP hitting 4.1%, empowered the market to reach high’s not seen since February, and the NASDAQ to reach all-time high’s.
Key Developments in the Month of July
- GDP HIT 4.1%
- Trade War escalation with China.
- Continued positive domestic Economic Data
- Tech stocks hit an all-time high
- Federal Reserve Senate testimony confirmed the likelihood of 2 further Interest Rate increases.
- EU trade dispute resolved.
- Intitial Jobless claims lowest since DEC 1969.
| OIL STOCK UPDATES: Massive upside potential |
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Venezuela
In addition to the Iranian issue, we also have the compounding problem of Venezuela. The continued trajectory of production decline is symbolic of the near complete and now likely inevitable collapse of the entire state of Venezuela. To what extent and how long this will impact upon Venezuelan Oil production is impossible to guess, but as we can see from the chart below, Oil production has been dropping off dramatically.
Conclusion
What is important to understand, is that with U.S, Russia, Saudi Arabia and other OPEC nations such as Nigeria, already effectively at full production, what will happen if there is a further supply shock, whether emanating from Iran’s actions, or Venezuela’s collapse. In addition to these potential major supply shocks, there are also an array of mundane disruptions such as Libyan port access and Norway Industrial action also impacting upon Oil supply.
If a major supply disruption occurs, there is only one direction for the price of Oil to go, which will ultimately benefit Oil & Gas producers.
| BEACH ENERGY – BPT |
BPT – Beach Energy: $ 1.91
With the above Macro Oil view in mind, combined with BPT’s recently improved Quarterly Report and a substantial increase in both reserves and production, it’s a case of right time and place for Beach Energy.
Further to our previous report, BPT has now broken through the resistance level between $1.80 – $1.85.
Quarterly Report 30th June 2018: Highlights
- FY Sales Revenue $1.25 B
- 4Q Revenue $471 m Up 20%
- 4Q Sales 7.6 m Barrels Up 12%
- 4Q Production 7.23 m Barrels Up 10%
| ETF LOOK |
ZYAU – Etf Securities S&P /ASX 300 High Yield Plus ETF : $11.35
An ETF with the following key benefits.
- Exposure to S&P/ASX 300 Australian stocks
- Exposure to the highest yield paying 40 stocks from the S&P/ASX 300.
- Dividend paid Quarterly.
- Great way to spread portfolio exposure beyond simply the ASX 200.
- 9.65 % Dividend AVG
YMAX – BetaShares ASX 20 ETF : $9.01
An ETF with the following key benefits.
- High Yield exposure to the 20 largest Australian Stocks.
- Focused exposure to Australian Blue Chips.
- Quarterly Dividend
- Amazing Gross Div: 10.3%
- Important: The options strategy used by this ETF, is a defensive investment, and can be expected to underperform a strongly rising market, from a capital gain perspective.
If you would like to take advantage of this & future opportunities, please call us on (08) 9202 3900
