RE:RE:Buying Opportunity?I always love some good discussion to keep things active on the community boards so I'll add on.
1. Interest rates in general cause downward pressures on valuation multiples and the price people are willing pay for an equity. So, naturally a rate hike cycle will cause downward pressure on the stock market as a whole.
2. To address the discrepancy between physical and financial market, physical market is driven by commodities being exchanged for cash today (spot market) whereas as the financial market (futures market) tries to price in the macros of future.
3. Unsure
4. The Freeport LNG represents a short-term arbitrage between domestic (think NA as a whole) and foreign (think EU) markets. The moment it was announced it would nonoperational for a few months, NYMEX NG took a dip and Dutch TTF shot upwards. This price action was the result of an increase of supply domestically and decrease of supply overseas. It will eventually be reversed to an equilibrium when the problem is resolved.
5. I have a concrete opinion of what to make of the windfall taxes, but I am leaning towards poltiical noise. SDE's tax pools for example are just under $2 billion and have the potential to "offset" $100 million+ in potential taxes at the current tax rate. If there was an increase in tax rates due to windfall tax, the deferred income tax asset would increase in value accordingly. In layman's terms, accounting income =/= taxable income, adjustments are made to accounting income to arrive at taxable income and taxes are paid on the taxable income. So, if you have the ability to reduce taxable income by $2 billion, and there's a windfall tax of say 25% added, 50% tax rate on $0 taxable still equals zero dollars.
6. This plays into the financial versus physical market. The financial market prices in a recession, but the physical market prices in actual present supply/demand which is extremely tight at the moment. Furthermore, the financial oil market is pricing in a great deal of risk to demand due to a recession. If the recession doesn't cause that level of demand destruction, there's nothing but reward/safety in estimates.
7. This is the biggest unknown catalyst in the O&G market. If this war persists into 2023, Europe could be in a horrible situation over the winter as their already low inventories become empty.