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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (34870)	12/7/1999 5:45:00 PM
From: Les H	Respond to of 99985

Oil refiners struggle with Y2K inventories By Timna Tanners LOS ANGELES, Dec 7 (Reuters) - Worries about a potential run on gasoline stations just before the New Year have created an odd inventory headache for refiners, which usually draw down stocks at year-end for tax and accounting reasons. Oil refineries are grappling more than usual with the flip of the calendar over the right level for year-end inventories, torn between keeping normal minimum supplies or boosting reserves to avoid possible Y2K glitches or consumer runs on gasoline. Typically, refiners reduce oil and gasoline stocks at year-end for tax and accounting-related issues. Holding large amounts of inventory means companies have cash tied up and might not be operating efficiently. Moreover, this year, inventory costs are especially high as oil prices have doubled from year-ago levels. But Y2K computer concerns have some refiners defying their accountants and preparing for any last-minute adjustments for failed computers and stockpiling supplies for any consumer panic. Two recent polls showed 28 percent to 40 percent of Americans will fill their gasoline tanks before the New Year. ``It's a Catch 22. All told, they want low end-of-the-year inventories, but they don't want to be the service station on the news with the 'Out of Gas' sign,' one West Coast products trader said. Market analysts said refiners appear likely to keep extra oil product stocks close at hand but away from the refinery. They also may be keeping extra stocks in alternative locations like pipeline facilities, and some major oil companies already have made deals to have smaller firms hold stocks temporarily, analysts said. ``Given the choice, they would obviously dump all of their inventories, but forced with the reality of the circumstances, they are tending to carry a little more inventory at the end of the year than they would have planned a year ago,' analyst Rob Harvan at Honeywell/Bonner & Moore said. The stockpiling of fuels has been reflected in strong demand and higher prices for oil products on the New York Mercantile Exchange (NYMEX), analysts said. Gasoline futures prices have strengthened more than 7 cents a gallon in the past month to 70.25 cents. For oil stocks, refiners want to achieve a delicate balance between buying oil before prices rise, as some companies fear they will, and not dipping into a tax accounting convention that keeps year-ago supplies of cheaper crude on the books. An accounting method used by most firms for tax reporting, called ``Last in, first out' or LIFO, means companies accumulate ``layers' of crude oil remaining from past years. That is complicated this year by the fact that oil prices have more than doubled over last year's levels. If inventory reserves fall below 1999 levels, the company dips into the 1998 layer of oil stocks, which are priced at the average $11-a-barrel market prices at the end of 1998. Since New York oil prices stand at about $26 a barrel now, the company would incur a tax gain on its books. ``People want to keep stocks at a minimum, but don't want to dip into those LIFO layers because with the cheaper oil, they would incur huge taxes,' Purvin & Gertz senior principal Ken Miller said. Inventory policy is likely to vary, depending on the refiner and its proximity to sources of oil, analysts said. Indeed, some refiners said they were sticking with ``business as usual,' without concerns over potential operation failures due to the Y2K computer bug problem. ``We're not going to be doing anything unusual. Stockpiling oil or gasoline for Y2K does not make economic sense,' one oil trader said. >>>Also read where business are now requiring employees to >>>schedule travel around Y2K and in January with hardcopy >>>ticketing as opposed to purely electronic ticketing. >>>Royal Bank of Canada is also lowering limits on cash >>>withdrawals.

To: Les H who wrote (34870)	12/7/1999 6:06:00 PM
From: SBerglowe	Read Replies (1) \| Respond to of 99985

Les.. What to do? what to do? While my blue-chip investment portfolio lagged, while the financial stocks look lousy, my trading portfolio jumped and wagged it's tail like a Hokie :) . I'm up 60% (about) on my trading portfolio this month because I've been fortunate enough to be "in a few good stocks". Like an imbecile, I even used margin this month for the first time in 10 years, reduced to 8% today by selling WPNE which went up another 4 points after I grabbed a 7 1/2 point profit. So many others must be using margin... What is going on in the market? The A/D line is making new lows..... HOWEVER.. The Bradley model points to a near term selloff, but January points to MANICALLY up.... It's truly amazing how squiggles on a chart motivate herd mentality. From a technician's point of view it appears that the oscillators can only go in one direction, and that is up especially If Y2K is a nonevent,( and maybe the snafus's will be monstrous,).... the a/d line is so oversold and so many stocks could reverse here. Short term...I could see a significant pullback. PROFIT TAKING. There's mania in the market....However, Don Wolanchuck who has a BIGG following is calling for 16600 on the Dow on the way to 60,000 led by the TECHS. Could the mania be that insane...I ponder. Excuse me, time to open a good red and have dinner.