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Gold/Mining/Energy : Oil & Gas Price Economics -- Ignore unavailable to you. Want to Upgrade?

To: diana g who wrote (175)	1/5/2000 6:00:00 PM
From: Ed Ajootian	Respond to of 350

Oil falls on disappointing data; Big Oil shares soar By Haitham Haddadin NEW YORK, Jan 5 (Reuters) - Oil fell sharply on Wednesday amid disappointment over weekly U.S. crude inventory data but Big Oil shares soared as investors, fearing interest rate hikes, flocked from technology to ``defensive' sectors. February crude closed below $25 a barrel, losing 64 cents lower on the day to end at $24.91 on the New York Mercantile Exchange. Late selling compounded early losses which followed separate reports from the American Petroleum Institute and Department of Energy that painted similar pictures, with U.S. crude oil inventory dropping some 1.5 million barrels in the December 31 week to around 290 million barrels. However, the decline was much less than expected as the last week of the year usually sees a very large tax-related decline -- for example, more than 16 million barrels in 1998. Market watchers were now divided over the next move by oil, which has more than doubled in price in 1999 as major producers stuck to a one-year output cutback deal that expires in March. Tim Evans of Thomson Global Markets saw prices being hit from the ``emotional disappointment' of the stock data but noted crude inventories are falling less than expected simply because refinery output is down due to dismal profit margins. ``This only spreads the shortfall around the complex...Once the market wakes up to that reality, we think prices will resume the long-term uptrend,' Evans added. Looking at technicals, Victor Yu of Refco Energy, said if oil can hold above $25 it was likely to go higher. But others see the market as potentially weak near-term. In fact, oil slipped 20 cents more in the aftermarket. In London, February Brent shed 66 cents to close at $23.73. Among the bearish factors cited is the fact that the year-on-year deficit in crude stocks in the United States went from above 40 million barrels to 26 million barrels last week. Other factors include warmer than usual weather in heating oil consuming regions and absence of supply disruptions from the Year 2000 bug, which traders fear will mean recent Y2K stockpiling will show up as increased refinery inventory soon. Adam Sieminski of Deutsche Banc. Alex Brown said besides Y2K coming and going without impact, pressure loomed from signs of slippage in December compliance to the crude output cuts by the Organization of Petroleum Exporting Countries. He also cited the expected return of Iraqi exports to the 2.7-2.8 million barrels per day level after a recent stoppage. But, long-term, Sieminski sided with the bulls, noting: ``(U.S.) crude oil is still trading near $25, the overall world oil supply/demand balances are tight and inventories are low'. Energy shares were net gainers. Oil majors rose sharply, prompting a hefty 4.29 percent gain in the S&P International Oil Index (^SPOILI - news) to 953.81 points. ``Generally large cap oil companies are good defensive stocks. I think what is happening is a very healthy rotation out of technology and into large cap oil stocks,' said Michael Young, an oil shares analyst with Deutsche Banc Alex. Brown. He said Exxon Mobil (NYSE:XOM - news) is the ``preeminent' firm for shifting into defensive stocks. It rose 3-15/16 to 80-3/4, while Chevron (NYSE:CHV - news) rose 2-3/16 to 85-1/4. Other oil indices closed as follows: S&P Refining (^SPENRM - news) up 1.96 at 94.16, S&P Oil and Gas (^SPOILP - news) up 1.69 at 53.49, and Philadelphia Oil Services (^OSX - news) down 0.83 to 79.09. *********************************************************** I've re-started trimming my TMR position now. It was fun while it lasted.