I believe this is one of the greatest buying opportunities in years!
If you delve into the numbers, it clearly shows this. Today's report from the EIA shows the following:
eia.doe.gov
Total Product Supplied for Domestic Use 19,875,000 barrels a day on average for 2008 and 20,738,000 barrels a day for 2007 - so our year over year usage has declined an average of 863,000 barrels per day. (total inventories inc SPR started the year at 1,671,000 and now stand 1,670,000 vs beginning '07 at 1,712,000 and holding 1,709,000 at this time last year so the year over year changes are nominal) Now we have to consider what price it took to achieve this decline from the following table:
tonto.eia.doe.gov
or chart if you prefer a visual (note the chart is a static contract and so is not as accurate as the spot price):
futuresource.quote.com
The average price of WTI from January to September for 2007 was $60.34. The average price of WTI from January to September for 2008 was $106.70. That is an increase of 77% in price to achieve a 4.16% decline in demand. And the easy demand destruction always comes first!
Our gasoline inventories were at 18 year lows before Ike hit (scroll down to the bottom):
tonto.eia.doe.gov
How are we going to rebuild these inventories with ¼ of our production down? So far this has been the impact:
Taken from:
gomr.mms.gov
Oil Gas MMCF/day
29-Aug 86,013 136
30-Aug 998,021 2,750
31-Aug 1,251,409 6,086
1-Sep 1,300,000 7,062
2-Sep 1,300,000 7,062
3-Sep 1,245,708 6,777
4-Sep 1,238,167 6,477
5-Sep 1,176,738 5,907
6-Sep 1,136,843 5,485
7-Sep 1,037,466 5,177
8-Sep 1,032,612 4,748
9-Sep 1,007,389 4,795
10-Sep 1,246,595 5,405
11-Sep 1,260,243 6,906
12-Sep 1,267,187 6,985
13-Sep 1,296,521 7,285
14-Sep 1,295,223 6,801
15-Sep 1,298,309 6,942
16-Sep 1,263,730 6,231
17-Sep 1,246,470 6,087
Total 22,984,644 Barrels of oil
115,104 MMCF of gas
We started losing production on August 29th yet look what the price of oil and gasoline have done since that time period:
futuresource.quote.com
futuresource.quote.com
This sell off makes no sense to me at all. There are gasoline shortages being reported all across the country and the price has gone down significantly since the hurricanes impact was felt. If the market isn’t allowed to send a price signal, no additional supplies will be forthcoming and these shortages will last for weeks.
NXY selling at less than 4 times 2009 earnings makes no sense to me at all:
finance.yahoo.com
SU selling at less than 8 times 2009 earnings makes no sense to me at all. Especially when they plan to double production by 2012 and have a reserve life of 50+ years:
finance.yahoo.com
I believe that the speculative money was flushed out of the gold market and today it started to revert back to the fundamentals. I believe the same thing is about to happen to the oil market. I hope everybody takes advantage of the current opportunity.
I am very long COSWF, SU, NXY, CNQ, ECA, TLM, PWE, and a speculative position in CLL.
FWIW, Don Coxe listed his top 10 holdings last week:
biz.yahoo.com
The Fund's top 10 holdings by market value, as at September 9, 2008 were:
Security Description Market Value as % of NAV
Canadian Cash 34.28%
SPDR Gold Trust 4.46%
Suncor Energy Inc. 3.42%
Canadian Oil Sands Trust 3.31%
Chevron Corporation 3.30%
Barrick Gold Corp 3.30%
CNH Global N.V. 3.03%
Monsanto Company 3.03%
Potash Corporation of Saskatchewan Inc. 2.67%
Penn West Energy Trust 2.33%
P.S. A special thanks to Wyatt for continuing to tell us to trade in moderation. I am bleeding badly and probably would've blown up if it weren't for his posts. I never thought things could get this low. |
