I’m feeling pumped. My little oil driller I mentioned yesterday is up another 12% in early trade.
That comes after releasing more data this morning on its recent oil strike. It’s now up 69% since the close last Friday.
You have two choices every day in the market. One is to listen to the endless drivel of the mainstream media.
The other is trying to find stocks with strong catalysts in front of them.
Which do you think will pay off more over time?
Shareholders in Strike Energy [ASX:STX] and Warrego Energy [ASX:WGO] don’t need any reminding on this front.
Strike, for one, is up over 300% since late July (but please note it is not a recommendation of mine).
Why? The Australian Financial Review reports that these two ASX stocks hit a ‘staggering’ gas discovery north of Perth. Boom!
It comes at an interesting time for the gas market. We know Australia is under pressure from high energy prices.
But we are atypical compared to the rest of the world.
The US shale boom is generating so much gas that they burn the stuff away in Texas just to get rid of it…
A bullish signal amongst the gloom
Now the US is exporting so much gas that it is deflating prices in Europe and Asia, too.
Check out how prices in these regions are dropping towards the level of America…
Source: The Wall Street Journal
This will bear watching for producers in America. But it’s hard to see it as anything but bullish elsewhere.
Lower costs are a boon for the economy. China, for one, is hungry for energy. The cheaper the better!
We may even see some of this US gas show up on the east coast of Australia if the import terminals get put in place.
This might be a nice reprieve for the state politicians in New South Wales and Victoria.
None of them seem keen to allow onshore exploration that could lead to shale wells.
But at the same time, high energy costs hurt consumers and deter manufacturing investment. Something needs to be done.
And it would be no surprise at all to hear that Donald Trump was on the phone to Canberra, pushing for US gas exports to come here.
We’ve talked before about how this abundant American gas gives Trump a free hand to try and wedge Russia over in the European gas market too.
The geopolitics are never far out of mind in any discussion around this.
Regardless, there is no doubt in my mind that energy is going to play an increased role in the markets over the next 12 months.
The countdown continues…
We are now only four months away from the new shipping regulations due to come in, called IMO 2020. I’ve talked about these before.
Ships will soon be required to burn a low-sulphur type of fuel. The big question remains whether or not the global refining system can provide enough to everybody at reasonable cost.
I was on the phone to an energy expert called Anas Alhajji recently. He tabled the distinct possibility that the oil price will split in a way that’s never been seen before in the history of the oil market.
That’s saying something, considering it goes back to 1859. The problem is not all oil is the same quality. It’s not uniform and interchangeable like gold.
That means heavy crude — from Venezuela, for example — could trade at a massive premium to the very light oil coming out of Texas.
This throws up various scenarios. But we can never be certain that any of them will play out because there are so many variables involved.
However, a big shift like IMO 2020 is unlikely to be completely benign or equitable in how the new dynamic establishes itself.
Somebody is going to benefit. It may be producers of sweet, light oil. It could be new shipowners at the expense of older fleets. It might be the US refining industry — the biggest in the world.
It’s a little too early to tell yet. But now’s the time to be preparing. As above, luck follows the prepared mind.