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Gold/Mining/Energy : Big Dog's Boom Boom Room
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To: jim_p who wrote (24173)6/28/2003 8:55:00 AM
From: quehubo  Read Replies (2) of 206093
 
Jim:

I have no doubt that there will be a cycle and that they will be shorter. What I am trying to come to grips with is how much demand will return as prices slide once supply exceeds demand at certain prices. I think we tested $6.00 - $6.50 prices in June and found that in June the buyers were buying for storage.

At <$5.50 demand will return from #2 oil,

At <$4.25 demand will return from #6 oil,

As the price slides demand that is either out of service or at reduce operations will increase.

My guess is that June and July will prove that $6.50 is too high and that $5.30~ is too low because NG demand returning from #2 oil will be good for 1.5+bcfpd.

Since we did not get a significant supply response in the cycle ending in 2001, I doubt we will see anything before Q2 2004 coming from the present drilling increase preceded by a 1 year very high base drilling activity level that yielded a 5% decrease in supply.

Next Winter's weather will provide the answer whether prices can slide enough to permit NG demand to stay off of #2 oil or not. If we have another 1 in 100 year warm Winters we may find out how much demand returns as prices slide.

The unknown is at what point will E&P's decide prices do not support drilling at the drilling levels at the time?
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