Oil and gas
We executed a small O&G trade in our direct equity sleeves. The price of oil spiked when war between Hamas/Israel broke out, roughly ~$15 worth of risk premia by our count.
That spike unwound quite quickly, as no other combatants entered the fray (a larger conflict in the middle east).
The OPEC+ meeting “kind of” came and went without much change, a larger cut then expected, but entirely voluntary, and not super clear how much of it was actually “new”, as opposed to already announced capacity reductions.
Stocks like Woodside and Santos have sold off quite heavily, so both the commodity itself and the listed producers have moved in tandem.
At the same time, the administrators of the US Strategic Petroleum Reserve stand ready to seemingly “buy as much as they can”.
Now, we are still quite sure that over the long-run hydrocarbons lose to renewables, but equally, there are some solid exposures with strong balance sheets, good free cashflows, operating in relatively safe geographies that we think can hedge some left-tailed risks, and help bridge the gap between the now and the medium run.
The number of wars seems to be going up, and the water in the Suez Canal coming down, so it is possible to imagine dislocations down the track, and a modest position that pays decent carry seems reasonable.
Our direct equity sleeves are still very defensively positioned, albeit now slightly less so (a hedge trade can be defensive, but in general, I would not want to put the words “oil and gas” alongside the words “defensive”).
Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.
This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.
Please note that past performance is not a reliable indicator of future performance.
General Advice Warning: This document has been prepared without taking into account your objectives, financial situation or needs, and therefore you should consider its appropriateness, having regard to your objectives, financial situation and needs. Before making any decision about whether to acquire a financial product, you should obtain and read the relevant Product Disclosure Statement (PDS) or Investor Directed Portfolio Service Guide (IDPS Guide) and consider talking to a financial adviser.
Taxation warning: Any taxation considerations are general and based on present taxation laws and may be subject to change. Aequitas is not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and investors should seek tax advice from a registered tax agent or a registered tax (financial) adviser if they intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.