Yes, it wasn't hard to see that OPEC wouldn't touch production targets. The Russian meeting with Al-Naimi was the easy tell. But no, no -- I did not see that leading to another $4 dollar, 8% drop in oil prices. No.
The Wall Street Journal is talking about new paradigms in oil following this latest oil disaster, about the OPEC cartel being unable to control prices in the way they have previously. I heartily disagree. I believe the rest of the cartel will actually thank the Saudis for holding a hard line on production, allowing lower prices to weed out the weakies for the next painful six months until the next OPEC meeting (with those weakies particularly focused in non-core U.S. shale oil).
From a trading standpoint, this move today finally strikes me as the capitulation move and, if I weren't already licking several wounds from this disaster, I'd be looking to actually buy oil. But I can't.
What I do know is that this market, for the last three months in do-mode, is now in overdo mode, as markets often get to. Once the plug is released from the bathtub, the water no longer leaves in an orderly fashion. It violently flushes out, spewing everywhere and making quite a mess.
That's what markets do.
And in this case, the mess will be felt in very specific places, very quickly. Non-core shale players in small- and mid-cap exploration and production companies were plotting ways to survive an $80 oil winter until prices and production would stabilize, perhaps over the next year.
Now, many of those companies will not survive -- if oil stays near or under $70.
The names of these companies aren't secret, you need only look at the tape today and find any E+P down 12% or more and you've got that bankrupt risk now: Halcon (HK), Goodrich (GDP), Triangle (TPLM), Magnum Hunter (MHR), Oasis (OAS) -- and the list goes on and on.
Of course, I will tell you that the opportunity lies in finding others down in the struggle today more than 6%, but will survive, like Cimarex (XEC), Continental (CLR), Anadarko (APC) or even the majors like Conoco (COP).
You've got some solid companies pricing as if they're going to power your lights and car on good wishes and sunshine for now on.
Markets go into overdo mode. They do that. But unless everything has changed, there is still money to be made by finding the right investments in energy, and money NOT to be lost by avoiding the wrong ones.