Energy game continues. After the
OPEC+ meeting, the US oil futures price once rose to $88 per barrel on Thursday, and the Brent Oil futures price also rose to $94 per barrel, with the cumulative increase this week being about 10%.
At this meeting, OPEC+ will cut production by 2 million barrels per day from November 2022 based on the production plan in August 2022, which is the largest production cut since the epidemic in early 2020, equivalent to about 2% of global oil demand, and the validity period may be extended to December 31, 2023.
According to the data provided by OPEC+, OPEC member countries may reduce production by 1.273 million barrels per day, from the production plan in August of 26.689 million barrels per day to 25.416 million barrels per day; non-OPEC member countries may reduce production by 727,000 barrels per day, from the production plan in August of 17.167 million barrels per day to 16.44 million barrels per day, see the figure below.
In fact, due to the slow progress of the project after the epidemic, the actual output of many member countries may not reach the level of the output plan. Therefore, although the output reduction seems amazing and the actual effect may not be the case, the impact may be mainly on the level of consciousness - the signal released by the OPEC+ meeting disturbs the capital market and investment sentiment.
How much impact is
The background of this meeting includes: 1) Oil prices have fallen by nearly 30% from the middle-year high; 2) Europe is in the energy crisis of "winter is coming"; 3) The US midterm elections are not far away, and political and economic pressure may increase under inflation; 4) The US and Europe may set limits on oil export prices to Russia.
"Everything has a price" "Energy security has a price as well", the OPEC Secretary-General said at his monthly regular meeting held in Vienna on October 5, 2022.
You have pressure, and I have pressure too.
Inflation pressure in Europe and the United States has been arising from supply shortages, while OPEC+’s earning pressure has been aggravated by expectations of a global economic slowdown.
Who is the winner of the energy game? Probably Buffett .
A few hours after OPEC+ announced plans to cut production, the U.S. announced that it would release another 10 million barrels of strategic oil reserves (SPR) in November to withstand the pressure of rising oil prices.
As early as March, the United States began to release 10 million barrels of strategic reserves per day to curb high oil prices.
As of the week ending September 30, 2022, the U.S. crude oil inventories excluding strategic oil reserves were 429 million barrels, a decrease of 1.356 million barrels from last week; crude oil inventories including strategic oil reserves were 846 million barrels, a decrease of 7.55 million barrels from last week, see the figure below.
As can be seen from the figure, the U.S. crude oil inventories that exclude strategic reserves rose slightly when crude oil futures prices fell sharply in 2020, mainly because many countries took advantage of the low oil prices. Judging from the fact that crude oil inventories, including strategic reserves, has dropped sharply in recent weeks, with a decline far higher than that in the excluding strategic reserves, the consumption of strategic reserves has surged after the release of strategic reserves.
See the figure below, and the US strategic oil reserves derived from the two data have declined significantly in recent weeks.
In addition to vigorously promoting strategic reserves, calling on US oil companies to increase production is also a feasible measure. High oil prices have also stimulated U.S. oil exploration and exploiters and refiners to increase production to ensure the prosperity of oil prices.
The sharp drop in oil prices in early 2020 eliminated a group of overwhelmed U.S. oil companies, so crude oil production has not yet returned to pre-epidemic levels. See the figure below. Although the current crude oil production fluctuates and fluctuates, the trend is slightly upward, it has not returned to the level before the price collapse.
Buffett, who has continued to increase his holdings in oil stocks this year, is at the right time.
Berkshire (BRK.US) announced on September 28, 2022 that from September 26 to 28, the company continued to increase its holdings of common shares of oil and gas exploration developer Occupy Petroleum (OXY.US) , a total of 5.9852 million shares, with a purchase price ranging from US$57.9116 to US$61.3765. Based on this, the average price may be US$58.90 per share.
In addition, Berkshire also increased its holdings of Occupy Oil's Series A preferred stock by $100,000.
According to Occupy Oil's equity announcement at the end of August, combined with the number of shares increased in September, Berkshire's current holdings of Occupy Oil may reach 194 million shares, accounting for 20.86% of the latter's total issued shares. On the day of the production cut meeting (October 5, 2022), Occupy Petroleum rose 2.37% in a single day to close at $67.74, a 15% premium to Berkshire's latest average increase in holdings.
In addition, Berkshire, in addition to 33 Apple (AAPL.US), , Bank of America (BAC.US) and Coca-Cola (KO.US), the fourth largest holdings shares Chevron (CVX.US) - a comprehensive energy company, also rose slightly by 0.57% to $158.53 on the same day.
Since this year, Berkshire has built a position in Oct.com and continued to increase its holdings in Chevron. As of June 30, 2022, Chevron and Oct.com were Berkshire's fourth and sixth largest positions respectively (only in terms of US stock ).
Thanks to the rise in oil prices, Occupy Petroleum and Chevron have risen by 135.14% and 38.88% year-on-year, respectively. It is clear who is a smart investor.
Mao Ting
