Four months later, Buffett once again stepped in to increase his holdings in Western oil. According to documents disclosed on the website of the US Securities and Exchange Commission, from June 6th to 7th, Berkshire Hathaway, a subsidiary of Buffett, increased its holdings of Western Petroleum common stocks for two consecutive days, totaling 2.5655 million shares, at a cost of approximately $153 million.
As of now, Berkshire holds 250.58 million shares of this energy producer, with a stock market value of approximately $14.9 billion based on Western Oil's latest stock price of $59.48 per share.
Buffett's last increase in holdings was in early February of this year. At that time, according to documents disclosed on the website of the US Securities and Exchange Commission, Berkshire purchased a total of 4.3 million shares of Western Oil stocks from February 1st to 5th at a cost of approximately $245.9 million, with an average purchase price of $57.18 per share.
Buffett's investment in Western oil began in 2019. Starting from the first quarter of 2022, Berkshire has made significant purchases of Western Oil stocks for three consecutive quarters, increasing its stake in Western Oil to 20.9% and becoming the single largest shareholder of Western Oil. In August 2022, Berkshire obtained permission from the Federal Energy Regulatory Commission to purchase up to 50% of Western Oil's shares. Subsequently, Buffett continued to increase his holdings along the way. Buffett revealed in May last year that he is not seeking a comprehensive acquisition of the company, but Berkshire may indeed purchase more shares of Western Oil, which the company typically tends to buy at a price below $60 per share.
Buffett has stated that the company is optimistic about the large amount of oil and gas assets owned by Western oil companies in the United States, as well as their leading position in carbon capture. Buffett believes that oil and gas production can help alleviate energy dependence in the United States, which is in the interest of shareholders and the country.
At Berkshire's 2024 shareholder meeting held on the evening of May 4th, Buffett and Vice Chairman Abel expressed high recognition of the CEO of Western Oil, believing that investing in Western Oil is a good decision and may be held for the long term.
Last week, due to the gradual relaxation of production reduction expectations by OPEC+, international oil prices plummeted significantly. The main contracts for WTI crude oil and Brent crude oil hit a minimum of $72.48 per barrel and $76.76 per barrel, respectively, reaching a four month low.
According to data released by the US Commodity Futures Trading Commission (CFTC), as of the week ending June 4th, speculators' net long positions in NYMEX WTI crude oil decreased by 49087 lots to 152342 lots, reaching a new low in nearly three weeks.
The US Department of Energy stated in a statement last Friday that it is seeking to purchase 6 million barrels of oil to supplement its Strategic Petroleum Reserve (SPR). US Energy Secretary Jennifer Graham said last Tuesday that there may be an accelerated replenishment of strategic oil reserves this year, with approximately 3 million barrels per month.
Regarding the fundamentals of crude oil, Zheng Mengqi, an analyst at Haizheng Futures, introduced that on the supply side, the OPEC+meeting held on June 2 agreed to extend voluntary production reduction measures until the end of 2024 and collective production reduction measures until the end of 2025. The OPEC+statement shows that OPEC+will achieve a production of 39.725 million barrels per day in 2025, and agrees to increase the UAE's production quota for 2025 from the current 2.9 million barrels per day to 3.519 million barrels per day. The OPEC+production reduction of 2 million barrels per day announced in October 2022 has been extended until the end of 2025. The additional voluntary production reduction measures of 1.66 million barrels announced in April 2023 have been extended until the end of 2025. The voluntary production reduction measures of 2.2 million barrels announced in November 2023 will be extended until the end of September 2024, and gradually cancelled from October 2024 to the end of September 2025 depending on the situation. On the demand side, the peak summer gasoline demand season in the United States is approaching, and the utilization rate of refinery capacity has rebounded to historical highs. The price differences of gasoline, heating oil, diesel, and comprehensive cracking have all stabilized. As of the week ending May 31, the capacity utilization rate of US refineries was 95.4%, an increase of 1.1 percentage points compared to the previous week.
Zheng Mengqi believes that OPEC+'s extension of the current production reduction scale until the third quarter of this year is in line with market expectations, but it will gradually relax production reduction starting from the fourth quarter of this year. Global crude oil will continue to experience supply shortages in the third quarter, while gradually moving towards a tight supply-demand balance in the fourth quarter. In addition, Saudi Arabia has lowered its July OSP, and EIA crude oil inventories have slightly rebounded. The previous bearish sentiment has already fallen, and the tightening of supply in the third quarter still exists. There is fundamental support below oil prices, so it is recommended to approach it with a rebound mindset.