Greenlaw, 1996 was a great year to be in the patch. We were going gonzo upgrading rigs, and laying plans to construct a bunch of newbuilds. The buzzword back then was 'North American Gas'. That was really a fun time.
First part of 1997 was great too, then the bottom dropped out. Asia tanked, LTCM, Russia, etc. - stocks went into a multi-year toilet.
I'm not suggesting that will happen this time, but it bears watching. The stocks of liquids were 180 degrees where we are today 340mm crude vs. 270-ish. I'd suggest watching that number as any climb back north of 300 would not be good.
Gas can be seen in the Highland chart you mentioned, just typical boom & bust stuff. Same story every time as we lurch from crisis to surplus & back again. There isn't any shortage now of gas prospects to drill - just a shortage of will to do it. Play this cycle, but keep an eye out for signs of the next glut.
I'm still very bearish on the general markets, slightly bullish on energy, ditto for mining stocks. Right here and right now if the general market didn't suck I would be wildly bullish on energy. Perhaps a good approach would be short the general market, hedge that short with some energy long, keep a little mining to spice things up, and keep a healthy dose of cash to limit risks.
Sharp |
