Author: Adam Feik

In Search of the Most Efficient Energy & Commodity ETFs

Posted on by Adam Feik

Adam Feik - INO.com Contributor - Energies


I wrote last week about the best oil ETFs. In the process, I discovered an interesting feature of the PowerShares DB Oil ETF (DBO), of which I had not previously been aware.

Specifically, as I described, other oil ETFs have a practice of automatically rolling into the next month’s oil futures contract when the current month contract expires – even if doing so will cause some price decay, as in “contango,” when the next month’s contract is higher priced than the current months (which commonly happens due to storage costs incurred by the party holding the physical commodity, etc). DBO, on the other hand, designed their ETF to NOT automatically roll into the next month’s futures contract, specifically to address that problem of decay, or “negative roll yield.” Instead, PowerShares uses what it calls an “Optimum Yield” formula to automatically roll into the most attractive near-month futures contract (of the next 13 months). In so doing, DBO thereby claims to optimize the fund’s “roll yield” (whether markets are in a state of contango or the opposite condition, known as backwardation). Continue reading "In Search of the Most Efficient Energy & Commodity ETFs" →

What’s the Best ETF for Playing an Oil Price Rebound?

Posted on by Adam Feik

Adam Feik - INO.com Contributor - Energies


A lot of investors seem very interested in bottom-fishing in the oil and energy realm these days. Perhaps that fact by itself ought to give everyone a little pause. It certainly does me!

The attraction, of course, is that oil's big crash from its June 2014 peak has made for a lot of "lower prices." Obviously, we all like to "buy low," when possible. Plus, almost everyone agrees oil isn't going away anytime soon. I don't dispute any of that.

On the contrary, as I've cited before (see my January 22nd blog, for example), the oil industry must find a bunch of new oil each year – about 5% of its current productive reserves – just to keep up with demand. About 4% of the 5% increase is required merely to replace depletion. The other 1% is to meet demand growth. Another way of stating the same thing is that by 2020, the industry will need to find about 30 million bbl/day of new oil supplies (compared to today's production of about 93 million barrels per day).

Furthermore, to reiterate a few more key points from that Jan. 21st blog, emerging countries are poised to continue increasing their demand for oil and energy as they expand the world's "2nd great industrial revolution." This is not a small deal or a short-term flash in the pan, as emerging countries are home to about 6 billion of the world's 7 billion people. In addition, the world's population is set to increase by 2 billion by 2040, and much of the increase will occur in emerging countries. Continue reading "What’s the Best ETF for Playing an Oil Price Rebound?" →

Middle Eastern politics begin to affect oil prices again

Posted on by Adam Feik

Adam Feik - INO.com Contributor - Energies


For months, the big story behind plummeting oil & gas prices has been the U.S. and Canadian on-shore shale boom. The resulting supply glut has caused WTI crude to fall from about $107 on June 20th, to a low of about $45 recently. Meanwhile, Saudi Arabia and OPEC have held firm to their Thanksgiving weekend decision to continue pumping at a steady rate. Finally, lackluster demand from emerging countries like China hasn't had enough kick to cause prices to rebound significantly.

So… OPEC countries have been the "steady" ones in all this.

In recent days, however, focus has turned to the Middle East (of all places). Can you imagine? Middle Eastern geopolitics affecting oil prices? It's been awhile since the Mid-East has been the center of attention. Continue reading "Middle Eastern politics begin to affect oil prices again" →

An Interesting Shale Play

Posted on by Adam Feik

Adam Feik - INO.com Contributor - Energies


One stock that has caught my attention the last couple months has been Pioneer Natural Resources (PXD).

Simply put, every analyst or article I've read agrees PXD has a solid balance sheet, exceptional management, favorable hedging positions through 2016, low production costs, and some of the most productive oil field acreage in the business. Plus, the stock seems to be trending higher within a trading channel that bears the appearance of a good strong bottoming formation – even while trading more than 30% below its 52-week high.

U.S. Shale Oil

Shale is still a dangerous place to play, no doubt about it. Oil and gas prices continue to flirt with a continuation of their precipitous declines since last June 20th. Further oil-price deterioration would surely affect shale companies like PXD.

On the other hand, if you're game for a little bottom-fishing and want to stay with high quality, take a look at Pioneer. Continue reading "An Interesting Shale Play" →

Swim Midstream with Pipeline MLPs

Posted on by Adam Feik

Adam Feik - INO.com Contributor - Energies


Continuing my little mini-series on energy investments that are actually performing (see also my recent refiners and solar articles), today I’ll turn my attention to pipelines.

Many pipeline companies, of course, remain very profitable despite the crash in oil prices, since the vast majority of pipeline companies’ revenue typically comes from fees paid by its oil-producer customers based on the quantity, or volume, of oil and petroleum products transported. Thus, energy pipeline companies (commonly structured as Master Limited Partnerships, or MLPs) are normally not terribly sensitive to oil price changes. Further, MLP stocks historically exhibit little correlation to oil prices, over the long term.

A company with rising dividends, solid management, AND a great technical setup

Take a look at Magellan Midstream Partners (NYSE: MMP; chart courtesy of MarketClub). Continue reading "Swim Midstream with Pipeline MLPs" →