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Gold/Mining/Energy : Big Dog's Boom Boom Room

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From: Big Dog	12/2/2004 9:25:20 AM
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RBC Capital Oil Service Strategist--December 2, 2004 Investment Opinion Daily Rap The OSX plunged 3.85% to 120.68 following a 7.4% drop in crude prices that drove the Dow and other broad market indices to some of their best performances of 2004. The decline in the OSX represents the worst single-day percentage loss for the index since January 27, 2003. However, it is worth noting that the index has declined more than 3% in a single day seven times YTD while the OSX has advanced 28.5% overall YTD. Crude futures dropped $3.64 to $45.49 as the contract blew through several key technical support levels, triggering a flurry of stop orders. Yesterday marked the first time crude has closed below $46 in over 2 months. The drop in crude futures was the largest 1 day drop in dollar terms since right after the 9/11 terrorist attacks in 2001. The decline in crude followed a surprisingly bearish inventory report, that showed the largest build in distillate stocks in over three months. Distillates, which include the all-important as of late heating oil stocks, rose 2.3mm barrels. Heating oil was up 1.1mm barrels. The API inventory report showed distillates increased even more than the DOE report, with the API reporting an increase of 4.4mm barrels. The surprise increase in distillate stocks coupled with the forecasts for mild winter weather did miracles to ease the recent concerns over lower than normal heating oil inventories this winter. It will be interesting to see how the building US inventories affect OPEC's thinking heading into its December 10 meeting in Cairo as several members, notably Venezuela and Iran, have already begun to call for production cuts.

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