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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: Jane4IceCream who wrote (72298)9/5/2000 10:36:45 AM
From: jim_p  Read Replies (5) of 95453
 
Comments from Raymond James this morning.

"It looks like $30 oil is here to stay"

Conclusion
While everyone’s attention has been focused on OPEC production changes as the key driver of world oil prices,
we believe global oil shipping capacity has quietly emerged as the real oil price driver over the next year. A
nearly three-fold increase in tanker rates over the past year clearly indicates that tanker capacity is running at full
utilization. Without more tankers, there can be no increase to OPEC exports to consuming regions, which could
prove to be especially problematic this winter, as increasing winter demand and flat global oil production combine
to pressure record low global oil inventories to even lower levels. In other words, transportation bottlenecks are
likely to force oil inventories down and oil prices up even more over the next six months.
Unfortunately, it is unlikely that this problem will be solved any time soon. Long new build lead times combined
with tanker fleet attrition suggest no net tanker additions before 2002. Additionally, a potential emergence of the
“hoarding” phenomenon could actually drive tanker efficiencies and net transportation capacity down over the
next year. The net effect of this emerging bottleneck is not only a widening spread between Arab prices and
consuming region prices, but also an overall increase in oil prices in consuming regions over the next year. It
looks like $30 oil is here to stay.

Jim
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