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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: The Perfect Hedge who wrote (9180)1/22/1998 1:33:00 PM
From: Erwin  Read Replies (4) of 95453
 
A fundamental point of view

Hello to All,

I am not a TA guy. I am a fundamental type of guy. I am sure TA has a place in investing and that probably is self-evident by comparing my portfolio of oil related woes to a TA based portfolio of lesser woes. However, I want to share an observation on the future prices of crude.

The commodity futures scene has changed in the last day or two. If you run out to the NYME and check the prices on March and April contracts you will notice that they are less a bbl than February contracts. This, to me, is a fundamental indication that there are some bad times for any oil related equity in the near future and this inverse price relationship didn't exist just a few days ago. These commodity guys are a strange breed that I have never understood but the one thing that they do right is predict the future prices of commodities because they set them. Whether it is true or not, it is the conception that OPEC sets world production and is the main force behind supply/demand oriented prices. I take the future price situation to mean that the oil Guru's don't see OPEC doing anything about production quotas for at least the next two months. Taking that into consideration and accepting that equity prices are the product of investor perceptions, it puts us in a bad short-term position when the earnings euphoria wears off. SLB helped to put a cap on that euphoria and their comment about earnings projections didn't help matters. Fundamentally speaking, watch those future prices and it should point to a break point in the oil service slump.

Humbly submitted,
Erwin
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