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A New Oil War?

Investors and still working to piece together the wreckage following the drone attack on Saudi Arabia’s oil facilities that knocked out half of the country’s output.

West Texas Intermediate prices continued to climb Monday afternoon to settle near $63 as crude vaulted to its biggest single-day gain in more than ten years, according to FactSet.

Saudi Arabia claims yesterday morning it would restore a third of its crude output by the end of the day, The Wall Street Journal reported. But that hasn’t stopped some industry experts from floating wild predictions regarding just how high crude could jump before the situation resolves.

Are we heading toward the next oil shock that will tip crude back toward $100 for the first time in more than five years?

Not so fast…

“This is the biggest interruption of global oil production since the Iraq war”, InfraCap MLP’s Jay Hatfield tells MarketWatch. Still, “since the damage was to an oil processing facility versus oil wells or refineries, and the fires are now out, it is reasonable to assume the Saudis can restore a good portion of production over the next month.”

It’s also important to note that while yesterday’s jump in crude was severe, the price of oil has yet to even post new year-to-date highs. In fact, WTI remained solidly above $65 for most of 2018 before it was dragged into the gutter during the fourth-quarter meltdown.

WTIC

Best case scenario moving forward is the White House doesn’t beat the war drums and releases some of the pressure on Iran. Trump commented yesterday that he doesn’t want war with anyone is in “no rush to respond to the attacks”. If he changes his mind, the consequences could be far greater than a surprise oil rally…

Enough about oil. Let’s check in on some other market headlines this morning.

Seinfeld is coming to Netflix (NASDAQ: NFLX).

The show’s Hulu contract is coming to an end, just in time for Netflix to throw down piles of money for the streaming rights. As of now, it’s not known exactly how much cash Netlflix paid — but I’m sure it’s a lot. For comparison, the Verge reports that Hulu bought the rights for $160 million.

The timing bodes well for Netlfix, as Seinfeld is a popular show and new streaming services like Apple TV+ are popping up everywhere. You probably also remember that Netflix stock tanked 10% back in July after the company reported a major decline in subscriber growth.

Netflix reeled in just 2.7 million new paying customers last quarter, less than half of what the company forecast. International subscribers were also weak point. The most optimistic analysts said critically acclaimed original shows like Stranger Things may be able to reverse the company’s fortunes. But losing The Office and Friends is going to be a major blow to Netflix’s binge-worthy arsenal.

Perhaps the addition of everyone’s favorite show about nothing will bump Netflix’s subscriber count— and even help keep the ones it currently has. Of course, this is just speculation. As of this morning, investors aren’t exactly stoked about the news. Netflix shares finished flat Monday. The stock remains more than 20% off its July highs.

NFLX

Finally, a major autoworkers strike could lead to some serious trouble for General Motors Co (NYSE: GM).

GM faces not only a loss in productivity but the loss of millions of dollars in the current UAW strike.

Workers at GM walked off their shifts in a demand for higher wages and better benefits, reports Bloomberg. This is the first strike in 12 years for the American auto giant. GM could reportedly lose up to $50 million a day during the walk out.

In a vain attempt to appease the strikers, management offered upwards of $7 billion for beleaguered plants and to hire new workers. That apparently wasn’t enough.

It gets even messier. The strike also comes in the middle of a huge corruption scandal that involves UAW officials allegedly embezzling money.

Bottom line: You won’t catch me trying to scoop up shares of GM on the cheap just yet…

Sincerely,

Greg Guenthner

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Greg Guenthner

Greg Guenthner, CMT, is the editor of Rude Awakening PRO and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing for 13 years. In 2018, Greg’s Rude Awakening PRO portfolio beat the S&P 500 by 14%.

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