Barron's Asia on IOC and Oil price linked commodities

[ebster123]

News for 'IOC' - (DJ How China's SUV Craze Will Drive Oil to $80 -- Barron's Asia)

By BERNSTEIN    China oil demand for the first four months in 2015 has been stronger than expected and decoupled from weak industrial production growth. Lower oil prices have helped stimulate SUV sales which are in turn pushing up demand for gasoline. As demand proves more elastic to price than many expect, we anticipate further positive revisions to demand, which will be positive for oil price and oil linked equities in the near term.    • China has surpassed US as the largest oil importer of crude oil as lower prices have led to stronger apparent demand growth and increased stockpiling.    - Chinese oil imports reached an all-time high of 7.4MMbls/d (+9% y-o-y, +0.6MMbls/d) in April, exceeding US crude oil imports for the same month (7.2MMbls/d).    - Stripping out crude purchases for the strategic petroleum reserve and commercial inventories, underlying apparent demand increased by 6% y-o-y.    - While industrial output growth has been a good proxy for oil demand in the past, there are clear signs of decoupling, as oil demand becomes increasingly a function of demand for transports than industrial activity.    • China oil demand is being driven by exceptionally strong gasoline sales, which reflects stronger underlying demand for transportation fuels.    - Apparent gasoline demand increased by 20% y-o-y in April to 10MMT per month (2.8MMbls/d), which was an all-time high and double the level from 2008.    - While jet fuel (kerosene) demand was also strong, diesel demand remains relatively sluggish on weak industrial growth in China. Further loosening of monetary conditions could help boost demand near term.    • Stronger gasoline demand has in turn been driven by stronger SUV sales which we partially attribute to the 30% decline in gasoline prices in 1Q15.    - SUV sales have been growing at 50% y-o-y in China and now represent over 25% of passenger vehicle sales in mainland China    - While increasing SUV sales has been a long term trend, the acceleration in SUV sales coincides with gasoline prices were almost 30% lower y-o-y in 1Q15. Despite lower fuel efficiency, the fall in gasoline prices has meant that SUV's today have comparable fuel costs to Sedan's a year ago.    • We expect further positive revisions to global oil demand estimates as demand proves to be far more elastic to oil demand.    - With China oil imports growing at 9% (year to date) and apparent demand growing at 6% (year to date), IEA demand estimates of 300mbd growth (3%) for China are too low.    - More broadly, we expect that that oil demand will prove to be far more elastic to oil prices than currently assumed (as was seen during the 1980's). While demand estimates have been raised from 0.7MMbls/d to 1.1MMbs/d, this does not go far enough in our view. We expect further positive revisions from the IEA throughout 2015.    • We continue to believe that markets will tighten in the near term pushing up oil prices, which will be positive for oil linked equities.    - Oil markets are rebalancing and we expect demand growth to significantly outpace non-OPEC supply growth as we go into the second half of the year, with a supply deficit of 1.5MMbls/d in 4Q15.    - While inventories are high, spare capacity is extremely low at 2.5MMbls. Any unplanned supply disruption or surprise on the upside for demand will support prices.    - In the short term, we continue to believe that Brent will rebound more quickly than many expect to US$80/bbl (WTI US$70-75/bbl) which will be supportive of oil linked equities. Our top picks in the region are CNOOC (883.HK), Oil Search (OSH.AU), Inpex (1605.JP) and InterOil (IOC).    Investment Conclusion    A controversy for oil markets is how elastic demand will be to lower prices. While the perception is that demand is inelastic to price, we expect that demand will prove more elastic to price than many expect.    Recent data from China support this view. Oil imports in China continue to grow at close to double digit rates. Not only is China now the largest importer of crude but apparent oil demand (stripping out commercial and strategic stockpiling) has increased year to date by 6% year-on-year, primarily on stronger gasoline demand. In turn, the growth in gasoline demand appears to be a result of SUV sales which are growing at 50% year-on-year, (partly) in response to the fall in gasoline price. We expect positive revisions to current global demand estimates of 1.1MMbls/d which will further help to rebalance the market as non-OPEC supply growth slows. This will be positive for oil and oil linked equities in the near term. Our top picks in the region are CNOOC, Oil Search, Inpex and InterOil.    -- Neil Beveridge, Max Warburton, Robin Zhu, Kevin Lian, Yang Liu (Analysts)    The companies mentioned in Hot Research are subjects of research reports issued recently by investment firms. Their opinions in no way represent those of Barrons.comor Dow Jones & Company, Inc. Some of the reports' issuers have provided, or hope to provide, investment-banking or other services to the companies being analyzed. Share prices at the time the report was issued and the date of the report are in parentheses.    ---    To be considered for this feature, please submit material to:    Comments? E-mail us at asiaeditors@barrons.com  Subscribe to WSJ: http://online.wsj.com?mod=djnwires    (END) Dow Jones Newswires   May 27, 2015 00:30 ET (04:30 GMT)   Copyright © 2015 Dow Jones & Company, Inc.- - 12 30 AM EDT 05-27-15

[Li'loilady]

Nice find.  Post it to Goldman's Facebook page?

[Putncalls]

I have read that GS 420 report half a dozen times. In 97 pages they never made any mention of changing demand.

[jft310]

Economics 101 demand and supply curve is basic stuff first day Econ class stuff. . Proof Goldman has an agenda to distort .They Establish position bash and collect proceeds. Over and over again.

[Putncalls]

If this detailed and influential "420' report becomes another example of GS hutzpah..... I just don't know what to say? That's just plain bad.

[jft310]

Amazing Amazing sums it up.

[sageo]

Economics 101 demand and supply curve is basic stuff first day Econ class stuff. . Proof Goldman has an agenda to distort .They Establish position bash and collect proceeds. Over and over again.

Jft - Good afternoon to you ! In your next post, you used the word "amazing". That pretty -well sums it up. It always "blows my mind" as to how low some companies or individuals will go in their greed to achieve their goals. How anyone "worth their salt" can look at what PRL 15 contains and downgrade IOC is mind-boggling .From the information we had when Ant #4 was planned,I believed that with the expected thining to the south, if we encountered 600 to 800 feet of our target zone I would be happy. Now it appears that we could have as much as 1400 to 1500 feet above the gas/water contact....(with good dolomite,good porosity and fracturing [loss of drilling mud] ) . Based on what we now know, Ant #6 has a very strong possibility of also being another fine Antelope addition.....also an " eventual" Elk #3 won't hurt us either ! [ ....to say nothing of Mule Deer or Antelope South ]. Instead of a downgrade, an outperform would have been better,imho. Not trying to "pump", just trying to observe what I believe to be reality.Have a good evening.

[jft310]

In Goldman's defense we are 6 months or so away from The Promised Transformational Event that Total payment with size arguements then over . Part of this is timing . Or at the AGM what stock price moving comments will he make ??
Plant location is a non mover . Plant size and type could be a price mover because that decision requires a joint agreement on size . Example 2 trains at 5 tons tells the market what those that know the most think. It's big..? Is that AGM news??
What about naming the new reservoir engineering firms ?? Not so much of a mover . But a start date with a certain time horizon definitely would help the stock price . Spudding Ant 6 not so much .
Start up at Wahoo not so much . Triceratops not so much . The above my opinion.

[Putncalls]

Economics 101 demand and supply curve is basic stuff first day Econ class stuff. . Proof Goldman has an agenda to distort .They Establish position bash and collect proceeds. Over and over again.

Jft - Good afternoon to you ! In your next post, you used the word "amazing". That pretty -well sums it up. It always "blows my mind" as to how low some companies or individuals will go in their greed to achieve their goals. How anyone "worth their salt" can look at what PRL 15 contains and downgrade IOC is mind-boggling .From the information we had when Ant #4 was planned,I believed that with the expected thining to the south, if we encountered 600 to 800 feet of our target zone I would be happy. Now it appears that we could have as much as 1400 to 1500 feet above the gas/water contact....(with good dolomite,good porosity and fracturing [loss of drilling mud] ) . Based on what we now know, Ant #6 has a very strong possibility of also being another fine Antelope addition.....also an " eventual" Elk #3 won't hurt us either ! [ ....to say nothing of Mule Deer or Antelope South ]. Instead of a downgrade, an outperform would have been better,imho. Not trying to "pump", just trying to observe what I believe to be reality.Have a good evening.

The whole point of the GS 420 piece was that size doesn't matter. That is why IOC's PPS is what it is.

[jft310]

Puts to Interoil shareholders size is everything . Most shareholders think the difference in a payment
of $500 million is well below $2-3 Billion (3 billion from UBS at 12 T's) and is quite meaningful especially when it's 6-9 months away .
UBS clearly states why the stock price is weak and they say it's size . Because of Phil's misspeaks the market is not pricing in the GLJ estimate or higher.The fall in the price of oil has hurt with fools thinking oils price for WTI will be below $60 when we sign LNG contracts . That's a hoot .