News with Tags "Commodities"

In trading on Tuesday, shares of Occidental Petroleum Corp (NYSE: OXY) crossed above their 200 day moving average of $92.85, changing hands as high as $93.09 per share. Occidental Petroleum Corp shares are currently trading up about 1.9% on the day. The chart below shows the one year performance of OXY shares, versus its 200 day moving average:

Click here to find out which 9 other stocks recently crossed above their 200 day moving average »

Looking at the chart above, OXY’s low point in its 52 week range is $66.36 per share, with $117.89 as the 52 week high point — that compares with a last trade of $92.95.

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According to the ETF Finder at ETF Channel, OXY makes up 15.91% of the iShares Dow Jones U.S. Oil & Gas Exploration & Production Index Fund ETF (AMEX: IEO) which is trading higher by about 1.6% on the day Tuesday.

See what other ETFs contain OXY »
See what other stocks are held by IEO »

As the center of gravity in the global refining industry shifts away from American consumers to rapidly growing emerging markets, oil and gas companies face major implications. Sales in the US, once a key driver for global crude oil prices, have weakened in the sluggish economy and may not recover to previous levels, given the rising number of hybrids and electric vehicles. In developing markets, unpredictable demand has resulted in price volatility. Meanwhile, high oil prices and environmental costs put pressure on margins, sometimes leading to asset restructurings, sales or even bankruptcies. And despite excess supply and low margins, national oil companies (NOCs) continue to build out their refining capacity. In this turbulent environment, companies will survive only if they take matters into their own hands, rethinking their strategy in response to the industry’s new dynamics.

The key to staying ahead rests on answering three critical questions.

How to benefit from the growing activity in emerging economies? The developing world—Asia in particular—will increasingly determine global fuels demand. OPEC estimates that between 2015 and 2020, demand for liquid fuels in the Asia-Pacific region will grow at 2% annually, while in North America and Europe, demand may decline slightly.

Supply is shifting, too. NOCs continue to add refining capacity because it raises their margins over exporting crude. Many have formed partnerships with international oil companies (IOCs) to benefit from their operational expertise, and their access to global markets. For IOCs, these joint ventures give them access to the NOCs’ domestic markets, with favorable tax terms and beneficial financing. NOCs also have advantages in building storage and pipeline infrastructure, especially in their own countries.

But three key principles help these alliances succeed. First, there needs to be clear agreement on strategy. Partners may have different goals. For example, NOCs may want to protect national markets while IOCs aim to create shareholder value. Second, success will require effective decision-making. Management of the new entity must agree on critical decisions up front and clearly define roles and decision rights. If there’s ambiguity, the success of the partnership may be threatened. Finally, joint ventures work best when they are supported by well-defined processes and metrics. The best joint ventures embed these in the organization’s design to enable efficient operations.

What is the right asset portfolio? Given the slowing growth in demand, we expect many refineries to cut back on the production of traditional liquid fuels, even while they may be ramping up production of alternative products and trimming their portfolios. Winning companies will consider a host of options.

For example, cleaner diesel has long been popular in Europe. It’s now becoming the preferred fuel in China and the rest of Asia. To meet the demand, IOCs around the world are upgrading refineries to produce low-sulfur diesel. Lubricants and petrochemicals also are becoming more attractive. That’s why Total started building a lubricant-blending plant in Tianjin, China, last November, and ExxonMobil will expand a petrochemical plant in Singapore this year. And biofuels aren’t going away, so smart IOCs are making strategic investments. Compared with alternative technologies, biofuels are an attractive investment, since they perpetuate the internal-combustion engine and in several cases share the same logistics and distribution infrastructure as gasoline and diesel.

Industry leaders also are pruning their portfolios. Shell is selling assets in the UK, Africa, Scandinavia, Greece and New Zealand, and ConocoPhillips said it would sell about $10 billion of downstream assets over two years. The sales have generated a wave of consolidation across the refining industry as incumbents and newcomers try to gain an edge through more efficient operations.

How to achieve world-class operational excellence? Margins are critical in a commodities business like refining. Companies that lower costs can benefit with significantly higher returns on capital employed—sometimes by as much as three times.

Even companies with better-than-average cost positions have opportunities to improve. In our experience, they boost the output of finished products, usually through higher utilization and throughput. They increase yield, which reduces crude and overall feedstock costs. And they lower fixed costs by improving labor productivity and reducing maintenance costs.

The shifting of demand growth to emerging economies and the rise of the NOCs pose challenges for refiners—but also new opportunities. By forming partnerships with well-positioned NOCs, by deciding how to benefit from emerging markets, by rebalancing their asset portfolio to address changing dynamics, and by raising their game in operational efficiency, companies can find new life—ahead of the competition—in a rapidly evolving industry.

Andy Steinhubl is a Bain & Company partner in Houston and a member of the North American Oil and Gas practice. José de Sá is a partner in the firm’s Rio de Janeiro office and a member of the Oil and Gas practice.

As the center of gravity in the global refining industry shifts away from American consumers to rapidly growing emerging markets, oil and gas companies face major implications. Sales in the US, once a key driver for global crude oil prices, have weakened in the sluggish economy and may not recover to previous levels, given the rising number of hybrids and electric vehicles. In developing markets, unpredictable demand has resulted in price volatility. Meanwhile, high oil prices and environmental costs put pressure on margins, sometimes leading to asset restructurings, sales or even bankruptcies. And despite excess supply and low margins, national oil companies (NOCs) continue to build out their refining capacity. In this turbulent environment, companies will survive only if they take matters into their own hands, rethinking their strategy in response to the industry’s new dynamics.

The key to staying ahead rests on answering three critical questions.

How to benefit from the growing activity in emerging economies? The developing world—Asia in particular—will increasingly determine global fuels demand. OPEC estimates that between 2015 and 2020, demand for liquid fuels in the Asia-Pacific region will grow at 2% annually, while in North America and Europe, demand may decline slightly.

Supply is shifting, too. NOCs continue to add refining capacity because it raises their margins over exporting crude. Many have formed partnerships with international oil companies (IOCs) to benefit from their operational expertise, and their access to global markets. For IOCs, these joint ventures give them access to the NOCs’ domestic markets, with favorable tax terms and beneficial financing. NOCs also have advantages in building storage and pipeline infrastructure, especially in their own countries.

But three key principles help these alliances succeed. First, there needs to be clear agreement on strategy. Partners may have different goals. For example, NOCs may want to protect national markets while IOCs aim to create shareholder value. Second, success will require effective decision-making. Management of the new entity must agree on critical decisions up front and clearly define roles and decision rights. If there’s ambiguity, the success of the partnership may be threatened. Finally, joint ventures work best when they are supported by well-defined processes and metrics. The best joint ventures embed these in the organization’s design to enable efficient operations.

What is the right asset portfolio? Given the slowing growth in demand, we expect many refineries to cut back on the production of traditional liquid fuels, even while they may be ramping up production of alternative products and trimming their portfolios. Winning companies will consider a host of options.

For example, cleaner diesel has long been popular in Europe. It’s now becoming the preferred fuel in China and the rest of Asia. To meet the demand, IOCs around the world are upgrading refineries to produce low-sulfur diesel. Lubricants and petrochemicals also are becoming more attractive. That’s why Total started building a lubricant-blending plant in Tianjin, China, last November, and ExxonMobil will expand a petrochemical plant in Singapore this year. And biofuels aren’t going away, so smart IOCs are making strategic investments. Compared with alternative technologies, biofuels are an attractive investment, since they perpetuate the internal-combustion engine and in several cases share the same logistics and distribution infrastructure as gasoline and diesel.

Industry leaders also are pruning their portfolios. Shell is selling assets in the UK, Africa, Scandinavia, Greece and New Zealand, and ConocoPhillips said it would sell about $10 billion of downstream assets over two years. The sales have generated a wave of consolidation across the refining industry as incumbents and newcomers try to gain an edge through more efficient operations.

How to achieve world-class operational excellence? Margins are critical in a commodities business like refining. Companies that lower costs can benefit with significantly higher returns on capital employed—sometimes by as much as three times.

Even companies with better-than-average cost positions have opportunities to improve. In our experience, they boost the output of finished products, usually through higher utilization and throughput. They increase yield, which reduces crude and overall feedstock costs. And they lower fixed costs by improving labor productivity and reducing maintenance costs.

The shifting of demand growth to emerging economies and the rise of the NOCs pose challenges for refiners—but also new opportunities. By forming partnerships with well-positioned NOCs, by deciding how to benefit from emerging markets, by rebalancing their asset portfolio to address changing dynamics, and by raising their game in operational efficiency, companies can find new life—ahead of the competition—in a rapidly evolving industry.

Andy Steinhubl is a Bain & Company partner in Houston and a member of the North American Oil and Gas practice. José de Sá is a partner in the firm’s Rio de Janeiro office and a member of the Oil and Gas practice.

In trading on Monday, shares of Stillwater Mining Co. (NYSE: SWC) entered into oversold territory, changing hands as low as $10.42 per share. We define oversold territory using the Relative Strength Index, or RSI, which is a technical analysis indicator used to measure momentum on a scale of zero to 100. A stock is considered to be oversold if the RSI reading falls below 30.

In the case of Stillwater Mining Co., the RSI reading has hit 29.3 — by comparison, the universe of metals and mining stocks covered by Metals Channel currently has an average RSI of 46.3, the RSI of Spot Gold is at 55.6, and the RSI of Spot Silver is presently 44.8.

Click here to find out what 9 other oversold metals stocks you need to know about, at MetalsChannel.com »

A bullish investor could look at SWC’s 29.3 reading as a sign that the recent heavy selling is in the process of exhausting itself, and begin to look for entry point opportunities on the buy side.

Looking at a chart of one year performance (below), SWC’s low point in its 52 week range is $7.31 per share, with $24.04 as the 52 week high point — that compares with a last trade of $10.50. Stillwater Mining Co. shares are currently trading down about 1.1% on the day.

According to the ETF Finder at ETF Channel, SWC makes up 3.87% of the First Trust ISE Global Platinum Index Fund ETF (NASD: PLTM) which is trading lower by about 0.7% on the day Monday.

See what other ETFs contain SWC »
See what other stocks are held by PLTM »

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