GeorgeC' re: the Bloomberg article... that was the "spin doctoring"...
The keyword was " amid SPECULATION" that OPEC compliance was cracking...
OPEC compliance is fine; even at 75% of proposed levels - we will sustain $22-24 crude; and it will be firmly supported on a supply & demand fundamental basis.
OPEC is focused on a 12 month average price. They are caught in the ironic "catch 22" position of having no choice other than to maintain cuts and have $24 ish+ crude, or weaken to any substantial degree and re-visit $16 once again immediately; and most importantly - they would lose all future credibility for "talking" the markets up in any future cut proposals. ... and they know it.
Their major problem is how to support prices on the way down, when they do open up production a bit. The only way they can get the markets to support prices on the way down; as they increase production; is to bring the World to its knees... literally.
Imho; they'll maintain 85% + compliance and we sill see US supply levels drop below 285 M boe in storage and a speculative bubble will at least be temporarially reached near, or at $30 crude imho. At that price; the markets and the media will support OPEC raising production and only then and under those circumstances; can OPEC "ease" prices down without a short selling - manipulative down draft.
Also; given the strong possibilities of Nat Gas also reaching a peak demand season "temporary" bubble level - they will feed on each other imho.
Go back and look at the last time we had $3.00 Nat Gas prior to peak drawdown season... it is not here at this level, prior to the demand/drawdown season by accident.There is far to great a wall of worry and doubts of sustainability here; for speculation alone to be responsible for these prices.
George; I think the articles like the one from Bloomberg are once again; some traders planting their "spin doctoring" stories in the Dorfmanesque media ears; and this creates a "win - win" situation for Wall Street.
The Mutual Funds are hanging out there naked... they trim at fiscal year end - October. The last thing in the world they want, or will permit; is a breakout while they are "out"... Traders know if there are any buy orders in size, they know who's shopping, who's selling and when; especially when entire sectors are being trimmed, or bought en masse~.
Short sellers, hedge funds et al; have continually stepped in in these "vacumns" and layed on the OSX stocks, shaking them out, taking out some stops; getting a quick & easy 7-10% before seeing any buying support. That, imho; was what we just saw... no volume led capitulation. Why would the E&P's selloff here ? Who cares about the Dooomberg article !?!?! These stocks are at price levels from last April when $14-16 crude and $2.00 Gas were the analyst valuation model numbers !
How the hell can BR have 50% upside to its recent high, with $3.00 Gas ? OEI @ $8 here, after a tremendous debt reduction & balance sheet restructuring - and with these commodity prices compared to April, May ? XTO - look at their numbers... Does anyone really think that the early cycle service companies like BJS, or SII are deserving of price levels equal to last March & April ? Does anyone really think that Cap Ex spending levels for 2000-20001 are NOT going to be much, much better than 1998-1999 ?!?!? Does anyone not expect Q4 & Q1 to be substantial moves forward in activity ?
This is a "Game" where Institutions merely do not try to hide the fact that they are sector sellers, trimming at fiscal year end etc... and then feign ignorance & suprise as the short sellers come in and reposition the sector cheaper; so they can re-enter at attractive valuations... they also allow the shorts an exit and everyone wins...
The volume speaks volumes here... literally (VBG). This is not "real" selling; this is a short selling, shakeout manipulation where all participants are not necessarially sitting in the same smoke filled room planning this out; but rather, where all involved recognize the game and the "win - win" relationship of their cooperating roles...
Without factual information such as 2-3 weeks of API builds in crude, substantial OPEC breaks in compliance - documented & not just speculated about... and most importantly; with merely crude over $18 and Nat Gas over $2.40 - we are GUARANTEED of OSX 120+ by July 4th and the entire Street knows it...
I still think; we turn & run to OSX 85-90 in a blink of the eye soon, very soon... It could start as soon as the first week of Novemeber. Those Oct 8th sellers will want to be back in by November 9th . |
