Oil

Noting the Biden administration SPR release announcement. It’s a reasonable amount, 1m a day, with a potential 180m barrels in total, to help address supply shortages exacerbated by the Russian invasion of Ukraine.

Mind you, they’ve already released quite a bit, to little to no avail. And they don’t have *that much* left to draw further.

If the Iranian nuclear deal had gone through, had Venezuela, had OPEC+, then it would all have likely been effective in combination, but perhaps not so much on its own.

Still, the effect on oil and gas stocks today, and oil pricing more broadly, is visible (oil down 3% at time of writing).

We’ve largely unwound our energy exposures. We’ve still got Worley (WOR) but that is a downstream play on oil and gas capex for one, but for two (and really larger to our mind) is the role Worley will play in the energy transition, with a significant and growing pipeline of engineering work in the renewables space. The beta that WOR has to oil and gas prices is and will steadily decline.

The other exposure is Aurizon (AZJ) however that is a Quality Value play, a short duration infrastructure play. It’s also a corporate activity story, as they sell-down/exit the One Rail coal assets. The beta to oil and gas prices is likewise somewhat modest. What beta it does have is probably viewed as a negative, if anything, due to ESG aversion to hauling coal.

So we don’t have much left, after exiting WPL and ORG. The volatility in the space is very high, but the China/Omicron scare tipped our hand (fearing what a lockdown to the region would do to the oil price) as did the then-seemingly-likely sounds of peace (which turned out to be more headlines, and less substance) from Russia with regard to hostilities in Ukraine.

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