The Bottom Has Been Established In Oil, Just Ask Harold Hamm
Continental Resources, Inc. (a top 10 producer in the US) explores for, develops, and produces crude oil and natural gas properties primarily in the north, south, and east regions of the United States. The company sells its crude oil and natural gas production to energy marketing companies, crude oil refining companies, and natural gas gathering and processing companies.
Futures are derivative financial contracts in which the buyer must purchase or the seller must sell the underlying asset at the set price, regardless of the current market price at the expiration date. Though designed for farmers, as futures contracts have evolved, they became a vehicle to speculate on price. So as oil storage tanks were filling up quickly, there is limited storage space left. With no demand for May’s oil contract which was near expiration, prices turned negative…oil producers paid people/entities to take the oil of their hands.
Harold Hamm, Continental's billionaire founder and chairman, asked the U.S. commodity markets regulator and the trading exchange to investigate into whether market manipulation or fat fingers were the cause of the unprecedented price drop. I think Harold was just salty that his company had to reduce output by 30% in April and May due to the America's growing storage issues.
As the largest oil producer in North Dakota, Continental had to suspended drilling in its Bakken shale field and shut most wells and even declared force majeure on at least one customer contract to avoid delivery after the plunge in oil prices.
But times have changed, the global economy is reopening, the US economy is reopening and OPEC is extending oil production cut. So what did Hamm do as the largest shareholder of Continental…actually he owns 75% of the company, he bought more shares.
Billionaire wildcatter Harold Hamm bought more shares in the shale drilling company he controls as oil prices recover from their historic plunge.
Hamm added $57.1 million of shares in Continental Resources Inc., where he’s executive chairman, according to a filing with the U.S. Securities & Exchange Commission. The 3.44 million shares he purchased bring his total of direct and indirect shares to 288 million, or about 79% of the company.
He bought the shares at an average price of $16.62 starting June 22. Continental fell 10% Wednesday to $15.12, but is still up more than double from when it bottomed out March 9. U.S. oil futures fell to a historic low of minus $40.32 a barrel on April 20 and have since recovered to about $38.
Oil drillers continue to face very big issues. The world still has a glut of oil that are in oil tanks and oil tankers and there are a lot of companies who are drowning in debt. And although oil drillers are turning back on the wells, in the case of Continental, although the company announced plans to gradually increase production, 50% of its operated crude production is still offline. will still likely be under the cap.
If you believe the bottom has been established in oil, like Harold Hamm believes, the chart suggest to go long at the 4 hr demand at $14.50.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
Posted Using LeoFinance
