There’s no hiding from the market when your latest earnings report is released.
But sometimes you don’t have to hide. Sometimes business is on the up and the outlook is good.
That’s how we can sum up the third quarter result from giant oilfield services company Schlumberger [NYSE: SLB].
Revenue was up 2% from quarter to quarter and the stock held steady in Friday’s trade. The market gave it a pass.
Why should you and I care?
Because Schlumberger also sounded a warning about the rosy predictions for US oil supply growth.
This means the oil bull market is much more likely to continue over the next 12 months.
We can deduce another clue on this too…
The Trump administration is so worried about higher prices, it’s trying to knock down some key international environmental legislation.
It’s no exaggeration to say billions in potential profit are riding on this outcome.
Today’s Profit Watch explains it all…
Schlumberger is a strategic way to get the pulse of the oil market. It’s a service company.
When energy companies are exploring and drilling for oil, they call Schlumberger to help them get the job done. And they do so from all over the world.
When the oil industry is weak, Schlumberger’s phone doesn’t ring as much.
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Right now, the receptionist at the office is looking busier — revenue in the international division outpaced North America for the first time since 2014.
Last week the company put global spare capacity at 2% and oil demand as strong.
Takeaway: The industry is tightening. And this tells me the oil bear market is well and truly over.
But I’m most interested in the comments the CEO of Schlumberger, Paal Kibsgaard, made around the US Permian Basin.
No one gets closer to the market than a guy like this
The Permian is the key area that’s helped ramp up American oil production. And Kibsgaard is suggesting that it may be peaking earlier than the industry assumes.
Put simply, to me it looks like Kibsgaard is calling BS on the current market consensus.
This would be very big news, if so. The oil industry and governments are operating with the idea that the USA can keep the market well supplied and counter the loss of Iran and Venezuela.
This is not to say the Permian is out of the picture completely.
Only that the latest assessment from Schlumberger adds another worry to the market’s long list of concerns.
And that includes the list in the mind of Donald Trump.
He is a politician who’s completely transparent about his rank self-interest. Trump wants lower oil prices to win further appeal with his voter base.
High oil prices take up the price of ‘gas’ Americans pay at the pump.
The Trump administration is pushing to have key environmental legislation rolled back.
This might be the most important story to follow in 2019…
Why? It’s all to do with shipping…
A critical 2020 deadline is getting closer every passing day
Ocean vessels use a dirty fuel called ‘bunker oil’. It’s harmful to the environment and to human health.
It’s due to be banned in January 2020 as far as the international maritime sector is concerned.
Think of it this way…
When you fill up your car, you can choose regular unleaded or the premium stuff.
Global shippers will be forced to buy premium.
Sound simple? It isn’t. Millions of barrels of bunker oil will need to find a new market. Premium marine diesel will be in short supply.
Some refiners will make windfall profits…and others could potentially go broke.
It could send the price of crude over US$100 and sap further spending power from the consumption economy.
This rule is due to come in on 1 January 2020.
Trump’s also up for another election the same year.
And he wants this legislation eased back…
US President: Selfish, cunning…and right!
The Wall Street Journal quotes energy advisor Bob McNally as saying:
‘Few things terrify an American president more than a spike in fuel prices.’
And in this case, Trump has a point.
A lot of signals suggest this IMO 2020 rule could be very disruptive and send crude prices uncomfortably high.
Trashing the global economy is in the interest of no one.
But here’s one problem with Mr. President’s style. He’s practically put every US trade partner offside.
They might just be happy to stick it to him and assume he’s throwing another bone to the fossil fuel industry. After all, this is the guy that says reviving the US coal industry is a good idea.
Here’s what I mean: Easing the timeline on IMO 2020 is, as I understand it, a good idea under the circumstances.
But the US can’t force anything here.
It doesn’t control the organisation putting the new rules down — and they deny there’s anything to worry about.
If IMO 2020 goes ahead as planned, it could squeeze the oil market just as US production slows down.
That’s a powerful and dangerous combination.
We’re in for a volatile time here…but the bias for oil is to the upside.
It’s no exaggeration to say that this time next year oil could be double what it is now.
Keep scooping up the best oil stocks while you can.
I have a few ideas on which ones to follow in the Aussie small cap space. I’ve been positioning readers since March.
Check them out here.
Soon I’ll be able to shares details of an event taking place next week between my publisher James Woodburn and colleagues Shae Russell and Jim Rickards.
Right now, I’m pre-empting a big move in the oil price. But last week I pointed out one of the few assets that’s starting to move right now.
Well, this is what this free event is all about.