Strictly: Drilling and oil-field services Message Board

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Gold/Mining/Energy : Strictly: Drilling and oil-field services

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To: Dwight E. Karlsen who wrote (39324)	3/9/1999 9:45:00 AM
From: JungleInvestor	Read Replies (2) of 95453

Call me greedy also because I'm holding long. To say that OPEC does not have a very good track record is the understatement of the year. My view is that the main reason for the rise in price is that analysts are beginning to realize that supply and demand are getting back into balance. Of course there is some impact on prices for expectations that OPEC may do something based on all of the meetings going on. The oil inventory numbers the last two weeks were drastically different than analyst expectations. Crude oil inventories are about the same level as a year ago. The biggest remaining "glut" is in distillates. My guess is that with the late La Nina storm hitting the midwest and northeast (coupled with refiners switching from distillate to gasoline production and a number of refineries taken off line recently due to low profit margins), this week's (tonight) and next week's inventory reports may show a nice drawdown in distillates. If this occurs, more analysts will jump on board Sarge's "OSS train". This morning on Bloomberg, Tucker Anthony's chief economist (Kathleen Camilli) said that the problems in Asia caused the glut but that supply and demand are getting back into balance. She expects oil prices to rise to its historic price range of $16 to $17 per bbl. IMO if OPEC does agree (along with major non-OPEC oil producing countries) to significant cuts, the price of oil (and our OSS stocks) will take off and rise way above the $16/$17 historical price because even without the cuts supply/demand are coming back into balance (and the full impact of the huge capex cuts has not hit yet). Today looks like a down day (oil down about 24 cents about an hour ago). Tomorrow could very well be another good day however due to a big meeting in Saudi Arabia and hopefully a good API report. One other unknown factor being stirred around in this pot is China. Gold is up over $2 on fears that China will devalue the Yuan. I've read that this would be deflationary for commodities (I don't understand why this is so). Of course gold is also a commodity - perhaps it's up because of demand from the Chinese people as a hedge against a devaluation. IMO my OSS stock holdings are currently very undervalued (especially my largest holding - VTS). If there is a further significant run up in price before the 23rd OPEC meeting, then I'll probably sell a portion of these holdings because of the risk that OPEC may again disappoint (buy on the rumor, sell on the news). I'd continue to stay at least 50% invested, however, since an agreement could really propel these stocks upward.

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