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Musings From the Oil Patch July 15th 2020

Published: 09:57 16 Jul 2020 BST

Scotiabank - Musings From the Oil Patch July 15th 2020

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16 July 2020

 

Please note - Technical issues with the Chart Library

At approximately 1:30 PST we discovered an issue with the Chart Library which is not allowing charts to be displayed. I am currently working with our IT contractors to resolve the issue and I will update this post when I have additional details. 

 

Eoin Treacy's view

 

Video commentary for July 15th 2020

Eoin Treacy's view

A link to today's video commentary is posted in the Subscriber's Area.

Some of the topics discussed include: resilience means more government support for stock market themes, oil and gold steady, Dollar eases, Wall Street rotation into broader recovery

 

 

Musings From the Oil Patch July 15th 2020

Thanks to a subscriber for this report by Allen Brooks for PPHB. This issue includes a comprehensive discussion on the viability of a hydrogen economy. Here is a section:

The conclusion that comes from our examination of hydrogen is that without some major technological breakthrough that reduces the cost of producing it substantially, the economic hurdle will not be overcome.  That means the only way hydrogen could become an important energy source is with government intervention in the energy market and assigning a price to carbon, or subsidizing the hydrogen fuel.  At this point in time, as governments around the world struggle to reopen their economies and repair the financial damage done to their citizens and businesses by the response to the pandemic, it is difficult to see them embracing carbon prices, which raises energy costs for their people and companies.  This is why the strong push, especially in Europe, for tying net-zero carbon emission policies in government stimulus efforts to rebuild their economies following Covid-19.  We suggest energy executives, analysts and investors worry more about the debates over the economic rebuilding efforts than the short-term moves in oil prices, demand and supply.  The long-term future of the oil market will be impacted by the success of governments instituting carbon prices.

 

Eoin Treacy's view

Natural gas and coal prices are low in both nominal and relative terms. Economics 101 dictates that when the price of a vital commodity falls, consumers will naturally migrate towards it and find new uses for the resource.

 

As US Seeks Sourcing, Sole US Rare Earth Miner Goes Public

This article from the Associated Press may be of interest to subscribers. Here it is in full:

The sole miner of rare earths in the U.S. is becoming a public company amid elevated trade tensions with China, the dominant global supplier of the material used in everything from computers to cars.
MP Materials, which runs a mine and processing facility in Mountain Pass, Calif., near the border of Nevada, will be listed on the New York Stock Exchange in a deal with the blank-check company Fortress Value Acquisition Corp.

“This business combination and becoming a public company is a key milestone in MP Materials’ mission to restore the full rare earth supply chain to the United States of America," said James Litinsky, a co-chairman who will become chairman and CEO. MP Materials can produce refined neodymium-praseodymium, a rare earth material used in magnets that help power electric vehicles, wind turbines, robotics, drones and defense systems. China currently controls more than 80% of that market. MP Materials Corp. will be listed under the ticker symbol “MP."
 

 

Eoin Treacy's view

A decade ago, the price of rare earth metals surged to unimaginable heights because China restricted exports in a mercantilist effort to force investment in its high-end manufacturing sector. The effort created significant efforts to develop alternative sources of supply but most failed to reach production when China started exporting again.

 

Aphria-Aurora Combo Would Post Over C$1 Billion in Sales

This note by Michael Bellusci for Bloomberg may be of interest to subscribers.

A combined Aphria and Aurora Cannabis entity would suggest a company with over C$1 billion in sales in 2021, with over C$600 million in net cannabis sales, Stifel analyst W. Andrew Carter wrote in note.
 

* Stifel says “headset market share data suggests” a combination would produce a leader in Canada’s adult-use market, with 30% share
* Stifel questions whether a potential deal would garner regulatory scrutiny
* Separately, Scotiabank analyst Adam Buckham wrote in note a potential deal makes sense
** Positives for Aurora holders would be annual cost savings and improved credit position
** Could spark pot sector M&A
* Aurora shares in Toronto rose as much as 6.3% intraday; Aphria rose 7.7%
* NOTE: Earlier, Aurora-Aphria Merger Talks Are Not Just Smoke: React (BI)
* NOTE: July 14, Aphria and Aurora Explored Merger, Talks Failed: BNN Bloomberg

 

Eoin Treacy's view

The legalisation of cannabis in Canada was a buy the rumour, sell the news phenomenon. The prices of related shares surged ahead of the transition but did not improve on that performance subsequently and have since declined meaningfully.

 

Eoin's personal portfolio: stock market index long initiated July 6th 2020

Eoin Treacy's view

One of the most commonly asked questions by subscribers is how to find details of my open traders. In an effort to make it easier I will simply repost the latest summary daily until there is a change. I'll change the title to the date of publication of new details so you will know when the information was provided.

 

 

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