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Tomas - whither winter weather. Personally don't buy the spiel re: HARD WINTER still in the wings. Extended winter maybe, but days are getting brighter quicker and darker later. Sure, it's possible to have some COLD temperatures appear but (imo) a decent chunk of the historical heating season is already in the rear-view mirror. Gas storage numbers would appear to be relatively full - they can change but it's that longer daylight thing again.
Totally agree with Kerm's comment re: weather being major price force with gas and global supply being driver behind oil pricing.
Historically it would also appear oil supply is more than adequate given current global demands.
So....... purely non-expert opinion but what's in place to fundamentally want to kick pricing of oil and gas upwards?
Same thing as in the past with most cyclicals - LOW PRICES. It's been said before that low prices cure low prices and also (imo) the flip-side is true - high prices cure high prices.
Take a look at some of the yr. over yr. numbers for rigs and utilization rates. Compare utilization capacity with historical levels. There's definite gloom. Why? As you mentioned - low prices are resulting in many projects being marginally, if at all, economic. A few of the expected recent announcements both N. and S. of the 49th parallel are detailing industry job loss. Activity levels in the oil arenas are definately lowering from where the recently were......
Back to the cure - low prices, especially on the oil side. The cashflow generation game is expensive and nowadays many producers are stacked full of debt and their share prices are in the toilet. How to raise dollars? Mr. Banker may I have an increase to my Line of Credit and "oh, by the way my reserve engineer guys say that I don't really have as much proven (at today's prices) reserves as we told you before" You know the bankers answer to that question - NO and LET'S TAKE A CLOSER LOOK AT WHAT YOU DO HAVE. '
How about selling some shares to the folks that are screaming to buy oil stocks. As someone joked, unless an oil co. is named YahooOil.COM it's a hard sell to interest folks in equity financing. No cash, reduced capital expenditures, production declines.......... all of a sudden (actually it'll probably be more gradual) the supply side of the equation begins to come back in line.
Global economics and overall oil demand - who knows? At today's pricing there would appear to be quite a negative light cast on things like Asian economies, Latin American growth, etc. If some of the economic/growth assumptions are proved wrong then the demand side of the equation swings back from today's views....... result? Same thing as always when dealing with cyclical stuff - the cycle continues.
Lots of words and mumbo jumbo. Bottomline, who knows?
Here's a link to some weather stuff from almost 2 weeks ago, hope your oil stocks are holding up better than mine......
geocities.com |
