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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: CommanderCricket who wrote (49957)	8/27/1999 10:59:00 AM
From: SliderOnTheBlack	Read Replies (2) \| Respond to of 95453

Big Oil's view on Cap Ex Spending... good & bad news... BP's Browne is the ''posterchild'' Big Oil CEO for the Street... this commentary is what the Street wants & what they will reward. Their is still TREMENDOUS pressure on the Oil Majors & large Independants to NOT increase Cap Ex spending from present levels for just the reasons that Browne mentions below... That damn ''Sustainability'' issue will just not go away. Both the Street analysts & many of the Big Oil CEO's simply do not trust OPEC - per Browne's comments here - they not only have no confidence in OPEC - but are actually budgeting for and planning to see much, much lower commodity prices going forward. While some of this may be the very savy ''talking down of expectations'' - it has to be a potential portent of some of the driller & service stocks perhaps not seeing the type of increases in activity in the first 1/2 of 2000 that many expect. For just that very reason - why ''bet'' on what Big Oil does Cap Ex spendingwise ? - play the ''only'' upside to a postive upside surprise in commodity prices - the E&P companies themselves. Especially the undervalued ones and even taking the entire issue a step further; play the domestic US Nat Gas pure plays - entirelly eliminating the OPEC factor... BP's Browne calling present prices - ''speculation'' and he is setting his Cap Ex spending based upon $11-$17 Brent... not good news for driller & service stocks looking forward. This is the reason I say - look for that 150 GOM rig count AND storage below 320 M boe - which we are below presently... 1/2 of the puzzle is now in place - the piece that supports present commodity prices - but the piece that supports upside earnings for the OSX is not as yet even close... Untill this changes - this clearly remains an E&P game (instead of driller/service stocks) imho... From Bloomberg today: <<BP Amoco, Europe's second-biggest oil company, is planning for Brent prices between $11 and $17 a barrel for the next few years, saying this year's surge resulted from speculation OPEC will stick to its word. ''The market is pricing expectations,'' BP Amoco Chief Executive John Browne said earlier this month. Oil ''stocks are coming down, but have not yet reached normal levels. It will take discipline into the fourth quarter for them to come down to normal levels.'' >>

To: CommanderCricket who wrote (49957)	8/27/1999 11:41:00 AM
From: Evolution	Read Replies (2) \| Respond to of 95453

The spread between Brent and WTI is very interesting. I don't recall it ever being this close It may just reflect increased consumption in Europe. Besides the difference due to grade quality, I guess a major factor for the difference is transport. To analyze the trends, let's take simple limit cases: 1-If all Brent were sold in the US, full transport costs would need to be added to Brent to be competitive with WTI. --> Case of maximum differential. 2-The opposite case, i.e. all WTI were sold in Europe, full transport costs would need to be added to WTI to be competitive with Brent. --> Case of minimum differential (even possibly reversal of differential) In conclusion, the fact that the differential is decreasing may just mean that more Brent is used locally instead of being transported out. Which means increased Europe consumption. The simple reasoning above takes the simple case of 2 geo-markets US and Europe. The other geo-markets complicate the picture, but do not invalidate the effects of Transport costs between US and Europe. For a market equally distant, cost-wise, to US and North Sea, the differential should be zero, at same grade quality. Inefficiencies in the markets may have greater short-term effects, but in average the reasoning above should stand. Does that make sense? e-

To: CommanderCricket who wrote (49957)	9/12/1999 10:45:00 PM
From: Tomas	Respond to of 95453

Last year Brent was trading at a higher price than the Nymex contract, though only for a few days. Oil Traders Bet on Widening Price Spread Between Nymex, IPE Crude Futures Price Spread Between Nymex, IPE Crude Oil Likely to Widen New York, Sept. 12 (Bloomberg) -- An unusually narrow price difference between crude oil futures traded on exchanges in New York and London provides an opportunity for profit when the spread widens to normal levels, traders said. Crude oil for October delivery on the New York Mercantile Exchange fetches just 11 cents more a barrel than the comparable Brent crude oil contract on London's International Petroleum Exchange. New York futures, on average, were $1.43 a barrel more expensive than London contracts over the past year. ``It's a buy somewhere right in this range,' said Tom Bentz, a broker at Paribas Futures Inc. in New York. ``I don't think this can last for long.' To benefit from a widening spread, investors would buy a Nymex contract, normally more expensive, and sell a Brent contract. If the spread widens -- whether by rising New York prices, falling London prices or a combination of the two -- the trades can be reversed, delivering a profit. To be sure, the positions would be losing ones if the difference in prices narrowed further or if Brent became more expensive than Nymex. Crude oil prices have rallied on both sides of the Atlantic -- with Nymex crude up 95 percent this year to $23.55 a barrel from a 12-year low of $10.35 in December -- as production cutbacks from the Organization of Petroleum Exporting Countries tightened world supplies. Brent is up even more, jumping 122 percent to $23.44 a barrel. Narrowing Spread The spread between the two types of crude oil has been narrowing for several days -- last Friday it was 97 cents a barrel. ``But if it stabilizes people will see it as a buying opportunity,' said Craig Gile, an energy derivatives trader at Citibank NA in New York. ``Historically it's between $1 and $1.50. If I were an investor, I would start looking at it.' Tim Evans, an analyst at Pegasus Econometric Group in New York, said he's advising his clients to bet on a widening spread, because Brent is almost always much cheaper than the Nymex contract. Some traders said it would be more prudent to make spread trades on the November or December contracts since the October Brent contract expires on Sept. 15 leaving less than a week for a futures position to become profitable. The November and December Nymex-Brent spreads are currently 74 cents and 84 cents a barrel, which although wider than October, are still not as wide as normal. ``I would prefer to go a month or two out to give yourself a bit of time on it,' Bentz said. Been Here Before The Nymex-Brent spread has fallen this low before, and in June of last year it went negative, with Brent trading at a higher price than the Nymex contract, though only for a few days. Nymex crude is often referred to simply as West Texas Intermediate, or WTI, the benchmark U.S. crude oil grade on which the contract is based. The IPE contract is based on North Sea Brent Blend, a denser, more sulfurous grade than WTI. The quality differences between the two would naturally make WTI a more expensive grade because, when refined, it yields more higher-value products such as gasoline. Local changes in supply and demand affect prices too. The price spread determines whether it is profitable to ship crude oil between the two regions, a type of trading known as arbitrage. Russia last month halted gasoline exports and reduced exports of other fuels including diesel in order to guarantee supplies to its domestic market. Traders said that's helped boost European demand for Brent, which is valued for its suitability for making heating oil. Even so, if the usual arbitrage opportunity for European crude oil sales to the U.S. stays closed, eventually supplies will ``become tighter here (in the U.S.), and the spread will widen again,' said Bentz. bloomberg.com