Oil Trader - Reaction to Record Draw ?It is amazing that on the same day the IEA reports a 14.6 million boe record draw, and Saudi is thinking about producing more 3 months from now and oil goes down almost $2.50 for the day.
EIA Report Weekly Inventories -Link My take is that because of the manuplation in the future contract (electronic market) regarding oil, traders that own oil contracts and want to fiscally manipulate the market are being left holding the bag with bigh losses. Saudi is messing with the traders of this world, its very abstracted from the physical market real supply and demand concerns.
I believe that Saudi is shaking up the oil traders, so that they loose confidence it going long on the oil contracts and strengthen OPEC hold on the oil market, and disrupt the futures pricing of crude oil.
This just creates buying opportunities for companies like CVE who has both upstream and downstream operations.
This shake out of oil traders, and with low gas prices its a double wammy in North America. I think this is a buying opportunity and there is likely no other time when the oil companies have had more solid balance sheets.
However with this volitility you have to ask yourself how long people would hold energy stocks with the premise that their value will increase with buybacks, some day 10 years from now they will be able to cash in on that.
My belief is that potentially energy stocks will have to compete with dividends, so people get paid properly while holding the stock.
I just bought into CVE as it is highly leveraged to oil and has many catalysts for shareholders at this level.
MHP
IMHO