FREE WHELAN: Something is cooking in oil

In this Stockhead series, investment manager James Whelan from VFS Group offers his insights on the key investment themes and trends in domestic and global markets. From macro musings to the metaverse and everything in between, Whelan offers his distilled thoughts on the hot topic of the day, week, month or year, from the point of view of a professional money manager.

And so, we commence the final week at VFS Group. A wonderful seven years in which I managed to get quite a bit done. I thank the team here for all they’ve done, and we part as friends.

Any questions or comments please let me know.

Now to business…

I say farewell to my wife and eldest daughter for a week today as they journey to Melbourne on ballet-related business. I will be making sure to get as much anecdotal evidence on flight and restaurant capacity. As we were rushing around getting everything ready for their departure and my move to 100% duties around the house for a week, I somehow managed to pay $2.33 a litre for fuel.

$2.33 a litre. Something is cooking in oil markets and it’s very exciting. Let’s review:

The war in Ukraine has gained a little more size with a drone attack on Russian oil infrastructure. The port of Novorossiysk (which somehow I need to pronounce for TV later today) accounts for about one fifth of the oil that Russia sells. It’s also 15% of grain sales.

Trouble here is boosting commodities.

Thing is that the US, who seem more than usually keen to continue to pour money into Ukraine to buy weapons to defend against Russia, does not want to see further instability in the oil market. Jonny Sixpack swing voter in a swing state is going to be asked to re-elect Biden next year and if I’m paying $2.33 for my MG Jonny is through the nose to fill up his F250.

The US wants this war set within strict boundaries.

Along with that the US are, presumably for similar reasons, running their reserves down. Way down. Stockpiles are way down.

Largest weekly drop to stockpiles.

The sharpest decline in forever.

Plan Beta FUEL

Aside from simply going long a commodities ETF (which I preferred last week) I’m happy to stay long the FUEL ETF from Betashares.

BP (which is the 7th largest company contained) managed to increase its dividend and share buybacks last week despite earnings falling significantly from last year. Things are still strong in oil markets.

But trade the range on physical oil, according to one of the smartest names in the business…

Anas Alhajji…

Shortened letter since there’s a list of things I need to get done immediately.

On that note, I’ll take the opportunity to thank everyone once again for their support and look forward to talking soon from the other side.

All the best,

James

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