₪ David Pescod's Late Edition March 17, 2006
OIL INVENTORY VS PRICE OF OIL
INTL. FRONTIER (V-IFR) $1.84 +0.24
This weekend CNN is presenting a special — We were
warned — tomorrow’s oil crisis. It examines the frightening,
but possible, scenario of the world running out of oil.
This theory is getting a little long in the “tooth” at least in the
short run, as there seems to be book after book being published,
suddenly, talking about “peak oil production” and all
that kind of stuff and of course all of these are theories…..
One thing that is fact, though, is inventory levels and right
now the inventory of oil held in the United States is at its highest
level since 1999. Needless to say, back in 1999 the price of
oil was much lower at around the $20.00 level.
So what gives? Why the sudden change in the relationship
between the amount of barrels in holding tanks verses the
huge disparity in the price of oil? I mean, back in December
when we stared to point out the huge build in inventory in gas,
with the warm winter, gas prices were halved. How come oil
isn’t much cheaper now? And heaven forbid, if the Iranians
and Bush ever kissed and made up...(now there’s a picture
that would warm your heart — Ayatollah and Bush in a liplock..),
but yes if they ever did make up, I would suspect oil
could drop $10 or $20 over-night.
We ask Clive Stockdale, the former oil and gas analyst at
Loewen Ondaatje, Pemberton and Dominion, to please explain.
Clive, who is now Vice President Corporate Finance at
Canaccord Capital, tells us that things are dramatically different
today.
“A few years ago the MBA’s and that type, who were just
out of school, suggested that “just-in-time” inventory was the
“thinking of the day” and every dollar spent on maintaining
anything in inventory was simply wasted capital”, he says.
Today he says, “In the new world, where security is important,
all of a sudden having the actual physical asset held in a
safe place has suddenly given you a sense of security. And
access to that, down the road, is hard to put a price on! And
he suggests, we’re learning it may just be one of the more important
commodities out there.
Still bullish on oil? He worries not about the current inventory
levels.
As far as stocks to watch, he suggests you take a look at
Intl. Frontier.
WESTERN KELTIC (V-WKM) $0.38 +0.02
It’s an exciting time on the commodity markets today, as zinc is up
+0.04 at a new high of $1.12. Meanwhile, copper is also surging ahead
as the world economies continue to do well.
While the price of zinc has had a sharp and hurtful correction, inventory
levels for zinc just continue to head straight down….so the
question now is, just how high can zinc go? The economists recently
looked at sources of zinc around the world and it looks like Northern
Korea and Northern Canada seem to be a favorite place to find the
stuff. I don’t think too many speculators are going to go anywhere
near North Korea…...Meanwhile, there are lots of interesting plays in
Northern Canada, though.
Yukon Zinc has an interesting silver rich zinc play, the Wolverine
deposit, in the Finlayson District with widely respected management,
but unfortunately it has a ton of stock outstanding.
Canadian Zinc has the Prairie Creek mine almost ready to go, but
there’s lots of questions as to whether that mine will ever by permitted.
Today we figure why not take a look at that “Old-Dog” Western Keltic,
which we featured back when John Greig, the super successful mining
executive out of Vancouver, featured it as one of his top stock
picks!
He asked, “Why can’t Western Keltic be worth a $1.00 to $1.25 in
this base metal market?” Today, we pile on board and we hope that
Greig is right! To receive a copy of our March 3 Interview with John
Greig email Debbie Lewis at debbie_lewis@canaccord.com.
If you would like to receive the Late Edition, just e-mail
Debbie at debbie_lewis@canaccord.com |
