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Gold/Mining/Energy : Big Dog's Boom Boom Room
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To: whitepine who wrote (184422)6/15/2014 2:50:46 PM
From: Jim P.2 Recommendations

Recommended By
Sailing2
whitepine

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I could not resist selling covered calls on EMES. I lost it a few months back and am trying not to make the same mistake with the E&P's that are in a current run up. If it was one stock in the E&P sector I think it would be time to take profits or hedge a bit. Not sure where this run will end but with the price of oil up and the likelihood of an end to the ban on crude exports in the next 2 years or less I can see another leg up in valuations in addition to the short term product price increase.

Just an observation: The easiest crude to produce is the light crude. It makes sense since this is oil that will travel easiest through the rock pores and light crude most of it also having been cooked a little longer than heavy crude has more associated gas as an energy source to drive the oil to the well bore. This is the supply of conventional crude that rolled over a decade or so ago and gave credence to the impeding Peak Oil fears.
If history is a guide then fracking combined with "some additional tool" will allow the shale oil production to move a bit further down on the viscosity of the source rock oil. If I was betting I would say the tool will be bigger fracs with larger mesh sand.

Also, further developments in the supply demand balance in the value chain of oil production to consumption is the substitution of compressed or liquified natural gas in place of diesel for trucking and possibly for rail transport.
The most profitable part of the crude oil barrel for refiners is distillates which include diesel. There is an over production of gasoline which is why the U.S. exports so much. As natural gas replaces some of the demand for distillates this should make the market more balanced and increase the value available for the lighter oils.
Not sure how long any of this will take but the trends have started and are net positive for E&P's and the competitiveness of the U.S. in general.
jim
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