Tuk, et al,
1. I have tidied away all sorts of "should this board or that board be used, etc" commentary/asides.
Please just drop that subject everyone. There are some [***] where I have done a bit of nip and tuck, and some vanished posts that did not help the discussion.
2. Regarding whether to buy in to RDSB / BP / etc as oil majors at this point in the cycle ....... here are my 2c/worth,
a) Ordinarily it might be a good time. Shale is pretty much crushed. KSA sov wealth has given a strong buy signal in their own investments into the oil majors. Yet oil majors are significantly beaten down.
b) But it would not be without risk.
c) Personally I bought last time they were this low, and figured that the cycle would go on longer. That means I have not made as much as I would have done if I had sold more earlier. In point of fact I top-sliced from 28% of portfolio down to 21% a few years ago, but have been caught out by this revaluation which has beaten me down to 16% *.
d) The main risks are:
- i) Renewables wedge drives faster and deeper into oil/gas;
- ii) Low interest rates and short memories lead to another go at shale;
- iii) Macro economic cycle could be L-shaped depression rather than V-shaped recovery;
- iv) A sector perennially exposed to political risk.
e) Personally my own call is to continue to hold my overweight oil majors (16%) but not to increase them. I figure that renewables are now taking about half the annual increment in energy production (c.1-2%), which has therefore reduced but not yet eliminated longer-term demand factors. Within a few years that will have gone, but there is still c.7% annual reservoir declines to factor in and it will be about another decade until that renewables wedge is taking all that 7% weight. The KSA (and Russia, indeed all of ROPEC) need $40-$50 to balance their country budgets, and that is a very cash-generative price for the oil majors. So there is more likely to be a price spike or two up above that, than down towards the $20. So on balance I decided to hold for the time being.
3. But I am often wrong in these things. So if anything my ostensibly sensible rational commentary should be used as a warning !
Regards, dspp
(* So my oil major holding had 1/3 wiped off its value, as will become clear when I get my end-year portfolio numbers up. That's the good news - you should see my HUR holding for the bad news
)