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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: Lucretius who wrote (14883)3/16/1998 10:39:00 AM
From: Thean  Read Replies (2) of 95453
 
LT,
We know this weak oil price will take a while to rebound. I don't know if two months is going to be enough. Sure we will start the summer driving season by then and we may expect a hot summer, but still the key is to see how the oil market does in that time. I suggest we don't put a time tag on when the drillers will recover but rather take advantage of the continuing saga by trading the drillers. There will always be up and down and in the bigger picture we are upside capped unless oil goes to $17-$18 and stabalizes there. Similarly, we should be bottom supported about 10% down from here because the fundamentals at present is still intact.

This support will need to be reevaluated once in a while should we have future e&p budget cut by the big oil companies. This is not very likely but no one can predict what they will do unless you know the thinking of the key executives at those oil companies. They have a dual agenda to run their business - long term growth and short term profit. There is no argument about the long term growth equation but weak oil prices will hurt profit short term and in this environment it makes increasing e&p budget difficult. Don't know about anyone else but I was attracted to this sector because of the tight rig supply and expanding e&p spending in the next 2 years.
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