Hi John,
Here goes on a second bite at the energia apple....
CNBC just put up some charts on the performance of E&P and oil services stocks on a one week, one month and CY basis. Nothing but red. And particular so within the last week.
ENL reported today that the Gulf Coast Crack, the price per barrel that the refiners are able to profit, has slipped from an all-time high of about $14/bbl on 4/15/01 to about $2/bbl today. $2 is considered the breakeven point, with any price below that not covering costs of operation. So, Mr. Market is a cruel taskmaster and now that he's decided that energy is going into surplus, prices are crumbling faster than foundation of salt-water concrete. No prices, no profits. No profits, no reason for equity prices to move north, except for the foolishness of uninformed
speculators. I fully expect we'll start to see the rig count heading down by the end of summer. Present committments will be honored, but new work will be curtailed as the invisible hand decides to avoid making up the losses (on low commodity price) on volume.
Re: CH4 - my thought process was that NG would hold above 3.25 and maybe work it's way back towards 4.00 in the fall
I cannot agree with you here. <g> I was of that opinion as of a month ago, but I've been watching the AGA underground storage builds fairly closely:
highlandenergy.com
Most commentators believe we will be at 3Tcf in storage by 11/01/01. At this level, we can handle anything, including a November/December like the one we endured last year. The coldest on record, or at least the coldest since the 1880's depending on who you read. The odds of this winter being as cold or colder than last are quite small, by my way of thinking, though a statistician among us may be able to provide more specificity to my argument.
One way to look at the highland energy table is to compare the builds of Natural Gas in Storage for weeks 18 through 30 over the course of time:
Year: Gas Added to Storage:
1995 1,036 Bcf
1996 1,057 "
1997 1,006 "
1998 1,124 "
1999 906 "
2000 830 "
2001 1,184 "
[[Methodology: Subtract gas in storage at Week 17 from Gas in Storage at Week 30. ]]
As can be easily seen from the table, the poor market for the energy complex through 1997 and 1998 marked the bottom of the cycle had an impact on rig counts. Today, the industry is running flat out, with well over 1,200 rigs running [[as of May: eia.doe.gov
Kinda make me wonder what the Bush/Cheney Energy Plan was proposing, since the world has the manufacturing capacity to add only about 25 rigs per annum. ]]
So, the way I see it, the industry is running flat out, the supply is going through the roof and there's ample evidence now that NatGas prices could easily reach the $2/mcf level by autumn. I sure can't see any scenario whereby prices go back up to $4/mcf anytime soon.
[[Aside, the NGL (Natural Gas Liquids, or Propane/Butane) market has been especially soft this past week..... because traders are attending the Calgary Stampede. How about that for a distracted market? <bg> ]] |
