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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: Czechsinthemail who wrote (6705)1/7/1998 12:01:00 AM
From: Lee Fredrickson  Read Replies (1) of 95453
 
Baird;

Found your earlier post,
www3.techstocks.com
some of the days best reading. (And on a day of some dyn-o-mite
contributions!)
<So long as the distant futures prices remain relatively high, companies can undertake drilling projects with high confidence in their ability to make money.>

The long range view, which producers HAVE to take, says demand
won't go away. But the short-term side (recent slide of spot prices)
has been torturing us for awhile now, whether it SHOULD affect
drillers or not, it's been eating my lunch like a barracuda.

So what about the supply side?
Iran and Norway, #s 3 & 2, are likely to go all out, as they have
been for years.
The only real surplus production available is from Saudi Arabia.
They are having more financial difficulty as a state than is
generally recognized. (Hence their pushing for higher quota at
last OPEC mtg.) If the prices begin to hold at these lower levels,
they'll have shot themselves in the foot--depleting their finite resource at a faster rate for the same (possibly lower) bottom
line. Do you have any ideas on how low a spot price or prolonged
a price depression would cause the Saudis to begin to cut back
on production to protect the price?

Thanks, always happy to find your thoughts in an evening's read.

Lee
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