Hi Ray, I don't think that refiners margins are the tail
that wags the dog in the energy complex, but I was really
just considering an oversold bounce, and we may not get that.
You are right
that the rig count is way up there as is
the build, so maybe not even a bounce.
Our initial estimation for next weekks AGA report looks for a build in the
mid-90 bcf range. This compares against a build last year of just 70 bcf, a
3-year average build of 80 bcf and a 5-year average build of 84 bcf. This
continues to be a bearish situation. We remain long the September $3.00 put
and short the September $4.50 call.
As reported by Bloomberg, Global Marine Inc., an offshore oil exploration-
services company, evacuated a natural-gas rig in the Gulf of Mexico this
morning because of an explosion, and one crew member is missing, the U.S.
Coast Guard said. Thirty-seven of the 38 crew members left the rig in two
life boats and were picked up by ships in the area, Petty Officer Patrick
Montgomery said. A Coast Guard helicopter and rescue boat were sent to the
rig, 26 miles south of Freeport, Texas, Montgomery said. Workers from a
Global Marine subsidiary were using a Marine Drilling Cos. rig to drill new
wells, said Mike Dawson, Global Marine's director of investor relations.
The cause of the explosion wasn't immediately known, Montgomery said. Dawson
had said earlier the crew was evacuated because of a fire. The extent of
damage to the rig was unknown. It was also unknown if there was any
environmental damage.
The Baker-Hughes rig count showed a sizable jump this week to 93 total
rigs operating. Rigs dedicated to natural gas rose to 1,068. mentioned previously, it will be very hard to develop a bullish outlook with the rig count still this high
The Canadian Gas Association reported a build of almost 19 bcf for the week
ending July 6. While not a record, it is above the 3 and 5-year average of
injections. One interesting note is the break down of storage. Western
storage is still below year-ago levels while the East is above. This is a
similar situation to the U.S. where Western storage is also below year-ago
levels. California does not look to alleviate their energy concerns any time soon
-------------------------------
someone sent me the below article in a
PM, just passing it along. It really does not mean much
for prices over coming year.
On China's Oil Consumption Growth
forbes.com
==========
Insatiable
Andrew Tanzer and Chandrani Ghosh, Forbes Global, 07.23.01
China and the rest of developing Asia are driving the world oil market.
Gas-guzzling Americans consume 19 million barrels of oil a day, four times what the Chinese do. Per capita the U.S. burns 20 times as much oil as China. Yet a strong case can be made that
China already has more influence on the world's oil price fluctuations than the U.S. does. That influence is destined to grow. It offers clues to future oil price trends--and geopolitics.
"Oil is priced at the margin," explains Lawrence Goldstein, president of the Petroleum Industry Research Foundation. Prices are driven by that last barrel of demand, not by the installed base of
consumption. Demand is huge in the U.S., but it grows by only 1% a year; consumption in Western Europe is flat.
Meanwhile, demand in China and India races ahead. Last year Asia accounted for 92% of global net growth in oil consumption, up from 68% in 1999, according to the East-West Center, a
Honolulu-based research institution.
In 1998, amid the Asian financial crisis, oil demand in the region declined for the first time since the early 1980s. World oil prices crashed to $10 a barrel. Then Asian economies rebounded
with unexpected vigor, helping to push oil prices to more than $30 a barrel in 1999.
Fereidun Fesharaki, a senior research fellow at the East-West Center, says oil demand in Asia is currently weak, implying a break in prices later this year. Developing Asian economies are
inefficient users of U.S.-dollar-priced oil--industrialized countries like the U.S. and Japan squeeze out 50% to 100% more economic growth per barrel--and have been whipsawed of late by
higher crude prices and weak currencies.
But look longer term and the picture changes. By 2010, Fesharaki projects, Asia will be importing 20 million barrels of oil a day, twice as much as the U.S. does today, 80% of it from the
Middle East. China, for instance, which was a net oil exporter as recently as 1993, is now importing 1.4 million barrels a day, a level which will more than double by 2010.
Many of Asia's largest oilfields are petering out, and exploration prospects are poor. Daqing and Shengli, China's two largest fields, are mature and in decline. So is Bombay High, which
accounts for more than half of India's oil production. Duri and Minas, the big Caltex (a Chevron-Texaco joint venture) fields on Sumatra, are in steep decline after 60 years of pumping.
Indonesia can't meet its OPEC quota.
With more than 50% of the world's population, East Asia is endowed with only 4% of the world's proven oil reserves. It's not for lack of looking. "It's just not there," asserts Fesharaki.
Offshore Vietnam and western China, two of the region's great hopes, have turned out to be flops.
How do the Chinese regard their escalating dependence on imports? "They're paranoid about it," reports Fesharaki. China and India will grow more aligned to the Middle East. It's a good bet
that China will barter weapons for some of the oil. Indeed, Fesharaki notes that a mysterious trading company under the Chinese Defense Ministry--outside of the normal state oil-importing
apparatus--imports 150,000-plus barrels a day from Iran.
China's oil insecurity helps to explain its interest in building a navy. Indonesian waters are infested with pirates and the archipelago is in danger of a social meltdown. Millions of barrels of oil a
day already flow through the choke point of the Strait of Malacca to Northeast Asia. |
