And even if you agree that oil prices have peaked, the ESG movement limits both the money and the places where it can drill, notes famed investment author John Mauldin. “Economics 101 says that if you reduce the supply of something that has increasing demand, the price will rise,” says Mauldin, who, it should be noted, is affiliated with a company independent oil and gas operator.
And that’s exactly what happened, especially with offshore oil deposits. The VanEck Oil Services ETF OIH is up 51% over the past 52 weeks, while the S&P 500 is up 15% over that period. The stock of an oil services company, Weatherford International WFRD, is up 202% in the period, while shares of Nvidia NVDA are up 228%. Transocean RIG and Tidewater TDW are on the verge of tripling in value over the past 52 weeks.
Not that anyone seems to care. Check out this photo from a Barclays offshore oil conference with empty chairs.
Rupert Mitchell, author of the Blind Squirrel Macro blog, focuses on owners and operators of oil rigs or drillships, their support vessels and specialized service providers with a combined market capitalization of $30 billion. Valaris VAL, Noble NE and Weatherford each emerged from bankruptcy with limited or no debt, while Transocean is heavily indebted but has the largest number of high-end assets, positioning it to be a pioneer Take advantage of rising day rates. Tidewater is a leader in the platform supply vessel market.
His argument is simple: There are high utilization rates of over 90% and increasing daily rates, which, as it sounds, are just the daily cost of drilling. At the same time, offshore companies trade at a discount of up to 80% on the value of their replacement costs, preventing the construction of new facilities. Shipyards that have historically been sidelined by this sector are instead focusing on hot sectors such as liquefied natural gas tankers.
“Bottom line: no new drillships, floaters, jack-ups, PSVs, etc. will be built until daily rates remain well above current levels for a reasonable period of time (so that the economics of new construction appear reasonable). We are a long way from this point. Oilfield equipment and service providers with low average age fleets are increasingly becoming price makers,” he writes.
The market
US stock futures ES00 NQ00 were weak after the S&P 500 SPX slipped 0.2% last week. Oil futures CL00 were above $91 and Bitcoin futures BTC.1 were above $27,000.
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The buzz
The big event is on Wednesday when the Fed’s decision is announced, but Monday’s economic calendar also includes sentiment among homebuilders.
Stellantis STLA made an offer of a 21% wage increase over the weekend as part of a new contract that was quickly rejected by the United Auto Workers, which are striking at one plant each owned by Stellantis, Ford Motor F and General Motors GM.
Biden’s national security adviser held talks with the Chinese foreign minister in Malta – possibly ahead of a meeting of heads of state and government.
Turkish President Recep Tayyip Erdogan has asked Elon Musk to build a Tesla
TSLA factory in Turkey at a meeting in New York.
The best of the internet
How to read the offers from car manufacturers.
Adam Smith’s misinterpretation led to deaths of despair.
A real succession drama at LVMH
MC, where 74-year-old Bernard Arnault has five children, all in the business.
Top ticker
Here were the most active stock ticker symbols on MarketWatch as of 6 a.m. Eastern Time.
The graphic
According to calculations by quantitative strategists at UBS, 24 stocks are needed to reduce portfolio volatility to less than 10% of the market volatility of the last five years. They ran similar tests in 2009 and found that 28 was the median value that brought portfolio volatility to less than 10% of market volatility. Admittedly, the stocks tested by UBS were selected randomly and without any diversification objective in mind.
Random readings
On TikTok, people watch pirated content – one 90-second clip at a time.
The host of a popular podcast about Rome is asked about the viral trend of why men are obsessed with the Roman Empire.
No Fun League was back in style after a New England Patriots sideline pass to an offensive lineman was somehow tipped just short of the uprights on a desperate four-down play.
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