Market Review and Trends
My Investing Journey: Hurricane Katrina
By DanielXX  •  September 3, 2008
By: DanielXX If late-2004 and early-2005 are remembered for the corporate debacles of CAO, Citiraya and ACCS, the later part of 2005 will be remembered for the attention that centered on oil and refining. The catalyst was Hurricane Katrina, which was the worst-ever storm to hit the Gulf of Mexico and caused extensive damage to the refining facilities in the region, exposing the deep global capacity crunch in refining capacity. Katrina formed over the Bahamas in late August 2005 and due to the unpreparedness of the authorities, caused severe destruction along the Gulf of Mexico coast from central Florida to Texas in the form of a Category 5 storm, with the most severe loss of life and property damage occurring in New Orleans. Of more interest to oil traders was the damage to the oil production/refining infrastructure in the most important offshore oil production area of the US, where numerous oil platforms were destroyed and refineries were forced to close; approximately half of the Gulf's oil production was shut over the subsequent 6-month period. Oil prices making new highs had been the talk of town throughout 2005, but Hurricane Katrina brought into focus the glaring global tightness of refining capacity. Simple and complex refining margins spiked up several dollars per barrel after Katrina which bloated the profits of refineries across the world for 2H05. Allied to this tale is the story of SPC. The story is told in my writeup on "Bull stock: SPC". Struggling with razor-thin margins and stagnating revenues in its refining business in the late 1990s when oil prices were in the pits, it was a massive beneficiary of the burgeoning demand for petroleum products after 2003 that translated in steadily rising refining margins from 2004 onwards. Read more...
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By DanielXX
DanielXX operates a series of popular stock blogs through which he channels his passion for stock investing. He has been sharing his experiences and views on the Singapore stock market for the past year on these blogs, and is best known for his HotStocksNot site where he makes regular calls against certain hot stocks on the Singapore market. DanielXX considers himself a medium-term investor and focuses on fundamental analysis in his stock-picking approach
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