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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: jbe who wrote (20922)4/30/1998 6:29:00 PM
From: j g cordes  Read Replies (2) of 95453
 
A question to the oil thread..

If one can explain why this scenario isn't bearish for exploration.

There's enough oil currently flowing and on tap to depress prices
and overload supplies on hand. Because of this depression of price the petroleum industry has agreed to cut back production at the well heads around the world with some agreement on who can produce how much or else the Saudi pumps will drop prices reallllly low and hurt the higher cost producers (most everyone else). This dropping of production will allow supplies to shrink and demand/costs to come up to a more fair dollar per barrel delivered.

If supplies are being artifically contained then this must cut back in some measure the need to open and explore new wells... while only making marginally better the services to increase flow from old wells. Looking at the charts of SLB and HAL for example they're near their all time highs with the current prospect of demand cutbacks. If their services are being used to open the Caspian fields then doesn't this again add to the number of potential spigots thus again dropping the price of crude?

Seems to me the oils are like the memory chip producers, too much capacity, with great R&D continuing to lower costs while increasing yield from old wells. Last, isn't the world demand for oil stabilized to down with Asian stretching its weakness, the US topping out for the summer season and Europe flat?

Jim

P.S. yea, I know I stepped in a mine field.
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