At The End of the Day
At the end of the day it is all about the end of the day. While oil prices trade below $40 a barrel in crisis market price levels, its taking its cue from the beleaguered stock market that can't hang onto a rally. The world was looking to the U.S. markets to lead the globe away from stock market gloom and when it failed other markets could not hold on to early gains. Oil traders are now being dominated by macroeconomic fears, but are still getting some support after a monster 7.3 million barrel drawdown in U.S crude supply!
China's interest rate cut was viewed as too little to offset the impact of currency devaluation. The Shanghai Composite swung wildly (sort of like my golf swing) falling nearly 4 percent, then jumped up and rallied to 4% higher only to close down 1.3% and down for the 5th straight day!
Yet, perhaps merger mania could signal that we may be near a bottom. The Wall Street Journal is reporting that Schlumberger Ltd. (NYSE:SLB) on Wednesday said it agreed to buy Cameron International Corp. (NYSE:CAM) for about $12.74 billion in cash and stock. This is the latest move by the world's biggest oil-field services company as the industry struggles with lower prices and rising supply. The price tag values Houston-based Cameron at $66.36 a share, a 56.3% premium to Tuesday's closing price. Amid the downturn in the energy sector, Cameron shares had fallen 42% over the past 12 months, but they surged 39% to $58.50 in premarket trading Wednesday. Cameron shareholders will receive $14.44 in cash and 0.716 Schlumberger shares for each share of Cameron. After completion, Cameron holders will own about 10% of the combined company according to the Wall Street Journal.
In the meantime, the energy complex is going to see if the American Petroleum Institute supply report is a fluke or not. The Energy Information Administration releases its version of our nations supply. Expectations were for crude supply to increase by 1.45 million barrels. Refinery utilization should fall -0.5 to 94.6%. Gas supply should fall by 950k and distillate supply is looking to increase. We still like looking at long dated calls. Usually when prices crash like this cap cuts and mergers bring prices back. Assuming that the global economy does not fall apart. I mean, it hasn't, has it?