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

To: Richard Saunders who wrote (7688)	10/9/2000 7:46:56 AM
From: Bobby Yellin	Respond to of 24934

wow-that was an interesting read thanks bobby

To: Richard Saunders who wrote (7688)	10/9/2000 8:31:51 AM
From: kingfisher	Read Replies (1) \| Respond to of 24934

From a previous article by James Smith. In this week's issue of Barron's there's an interesting article on oil by Cheryl Strauss Einhorn: , "Coming: $40-a-Barrel Oil?" (See pg MW18) Quoting from this article, "In the early 1990s, the world could store 20 days of oil supplies. Now, global capacity is only 10 days, and with the current supply shortage, the world has much less than that put away." And because there are few places to store this oil, , "Refiners will now either have to stop taking foreign crude or store Uncle Sam's" says Einhorn. Quite a ridiculous situation, but we all know why this is being done before Nov 6th. The govt is making a huge mistake in targeting the price of oil. By tapping into the SPR based on price rather than a "Supply Shock", it presumes that the govt knows at what price oil is cheap and at what price oil is expensive. But do they? A govt study not long ago projected that the cost of oil would stay around $24/bbl going out 20 years!!! What if they're wrong? Actually, they are already wrong. We believe that oil will be trading at $60-80 range in the next few years. Looking back at the Fall 2000, a couple of years from now, most people will realize that the govt should NOT have been reducing the SPR.....in fact...the govt should have been adding to it all along. If the govt knew what they were doing, they should have tripled the size of the SPR back when oil was $10/bbl two years ago. 600 Million bbls is only 30 days supply. If things really get dicey in the MidEast wouldn't it be better to have 90 days supply in reserve? Is the govt saying that an interruption in oil supplies due to a MidEast conflict cannot last more than 30 days???? Last week I brought up the point that it costs money to store oil. The real danger is that as the govt sets a precedent that they will intervene every time the price of oil moves towards $40---by dipping further into the SPR---it sends a signal to oil companies that they don't need to store oil. The govt can do it for them and it costs the oil companies nothing. As I pointed out before, it costs money to store oil. Why should oil companies store oil at high cost to themselves if they can fall back on the govt every time oil goes up in price? Einhorn raises a similar point in pointing out the backwardation in oil (supplies for current delivery are more expensive than those for future delivery). Under these conditions, storing oil now and selling it later is a losing proposition. In fact the farther out the contract the cheaper the price of oil. What does this mean? Why the backwardation? It means that the market still does not believe that oil is in a bull market. Once the major participants in the oil market truly believe in higher oil, you will see that backwardation disappear. (In a normal market the far out months should be priced more expensive to the nearterm months). Ironically, once everyone is convinced that oil is going nowhere but higher ---thus pricing futures delivery months at a sharp premium to near months--- that is precisely when you are likely to see an intermediate-term high for oil. Til such time as the backwardation disappears I'm convinced that oil is headed ever higher. Our work suggests that 2002 will be especially crazy for the oil markets. Something to look forward to....if you are a member of OPEC. Clinton will go down in history for a lot of things he'd rather forget, but this one is likely to have a more lasting impact. Jeopardising US National Security for short-term political gain, is not going to sit well with historians. Historians will note that although Clinton did not cause the coming war in the MidEast, he certainly left America ill-prepared to respond to it. Many people falsely accuse the Clinton/Gore administration of not having an oil policy. That in fact is not true. Their policy with regards to oil is to do everything within their powers to reduce our national security, leaving the next President with very few options in an emergency. Again the US should have a 90 day supply of oil on hand, not 30 days, and certainly not less than 30 days as the Clinton/Gore administration is now implementing. What makes this situation worse is that many other nations are now actively discussing the idea of copying the US, by dipping into their own reserves. This will only put more nations at risk. Saddam can afford to sit back and pick his moment to stop production. Some analysts have suggested a move to $50 if Saddam were to withhold production going into Winter. I rather doubt that a move that high can be solely caused by Saddam unless he simultaneously starts another conflict with Kuwait. Not something that can ever be ruled out. But if he stops production, could we see a quick move to $40....that would be quite reasonable. Even if you are a big believer in the MidEast Peace Talks, does that mean you should not prepare for the worst. Clinton got elected in 1992 using a catchy phrase, "Its the economy, stupid." Historians will retort: "No, it's your foreign policy, stupid!" A vital element in foreign policy includes preparing for a war that no one wishes will come. That includes maintaining an adequate amount of oil in strategic reserve. How Oil Relates to Stocks and Bonds Some have wondered whether stocks have seen their Lows. Afterall the Nasdaq did sell off 10% going into Mid-September. Is it possible that we have seen the lows for stocks and that we can all be "happy campers" again? I truly doubt it. Nothing can ever be ruled out with the markets, but those of you who have studied our models in detail will know that we don't rely solely on Timing Models. We filter our Timing Models thru our Pricing Models. The main pricing model we using is the Reversal System. To confirm that the market can move to New Highs, the market needs to achieve certain threshold levels on a closing basis. See our daily reports to confirm these key levels. Is it possible that bonds responded better to the Economic Confidence Model Turning Point than stocks. Yes, it appears so, but this does not mean stocks are not still due for some rough weather ahead. My attention is drawn to the fact that the Utility index peaked precisely on September 13th. Bonds peaked on September 1st, but did not accelerate in their move downwards until September 14th. Many of you are familiar with our concept of a "Directional Change." This is not the same thing as a Turning Point. In many ways a DC is more valuable than a TP. Markets normally move higher til they form a top, then they move sideways before accelerating downwards. It is that point in time at which a market accelerates in the opposite direction (some time after for a high or low) that we call Directional Change. Sept 14th on bonds is what we would classify as a Directional Change. It wasn't the High, but it did give us a momentum change in trend, or what we call "Directional Change." What I'm saying is that we must consider the idea that bonds may have just planted an important intermediate-term high here in September. Again our reports are never one-sided. We will always tell you in our daily reports where you should consider the potential for New Highs. If bonds were to close above a key bullish reversal, it would suggest a move to New Highs (See our daily report on bonds to confirm the key levels). Til then, we believe bonds are likely headed lower. Its interesting to see how markets relate each other. Central Bank intervention last week to help the EURO came as a surprise. Many analysts felt the US would not participate, but did. Still, many now wonder how much longer the US will stay on the "intervention team" especially since a stronger Euro could very well undermine US stocks and bonds. Huge amounts of European capital has found a home in US assets in just the last 6-12 months. Much of this European capital is not going to go back to Europe because Europeans have been on a buying binge, buying US companies. You don't sell a company you just bought because of exchange rate changes. Still, some capital that went into US stocks and bonds could come back out if the EURO were to rally too strongly. Those of you interested in the direction of US stocks, should pay special attention to the EURO. If it moves too high, some foreign capital will flee the US market. (see our report on the Euro to confirm key levels to monitor). If it sinks again, it will renew worries that US companies will have more earnings disappointments due to currency exchange rates. Either extreme could have negative consequences for US stocks and bonds. Our longerterm view is that the EURO will continue to sink, and we believe the nearterm risk is also to the downside. But again, see our reversal levels in our reports to confirm a large move in either direction. Many of you will have noticed the correlation between the rising price in oil and the plunging price of the Euro. Could it be that OIL will spike higher again soon? It is not only possible, it is quite probable. It may even happen before November 6th. That would be very interesting. You can imagine what another spike in oil would do for both stocks and bonds. If you would like to have your name removed from this distribution list, follow these steps. Go to our website: pei-intl.com

To: Richard Saunders who wrote (7688)	10/10/2000 11:57:05 AM
From: Richard Saunders	Respond to of 24934

Offtopic cdn. oils, on topic re: oil pricing & SPR. "The story" is starting to be reported. thestreet.com =-=-=-=- Will Strategic Petroleum Reserve Oil Make You Warm? Maybe Not By Christopher Edmonds Special to TheStreet.com Originally posted at 8:00 AM ET 10/9/00 on RealMoney.com When the U.S. Department of Energy revealed the "winners" of the Strategic Petroleum Reserve lottery last week, you might have expected the list to read like a Who's Who of petroleum refiners. After all, the whole reason for releasing the 30 million barrels of crude is to make sure all Americans stay warm this winter, especially those using heating oil, manufactured from refined crude. "The temporary infusion of 30 million barrels of oil into the market will likely add an additional 3 million to 5 million barrels of heating oil this winter, if refineries could match higher runs and yields seen in the past," said Secretary of Energy Bill Richardson in announcing the plan to release oil from the Strategic Petroleum Reserve, or SPR. This column has noted the challenges refiners face in transforming the crude into distillate products. Now, however, there appears no guarantee that the SPR oil will ever make it to domestic refiners. Most of the companies receiving SPR crude aren't refiners or even directly related to them. Take a look at the winning bidders: A Slick Proposition Traders Benefit from Strategic Petroleum Release Company Grant Marathon Ashland Petroleum, LLC 2.4 Million Barrels (MMB), West Hackberry Sweet 1.5 MMB, Bayou Choctaw Sour Euell Energy 3.0 MMB, West Hackberry Sweet BP Oil Supply Company 6.0 MMB, West Hackberry Sweet Elf Trading, Inc. 1.0 MMB, West Hackberry Sweet Equiva Trading, Inc. 0.5 MMB, Bayou Choctaw Sour 2.0 MMB, West Hackberry Sweet Morgan Stanley Dean Witter 1.5 MMB, West Hackberry Sweet 0.55 MMB, Bryan Mound Sour Vitol, S.A. 1.05 MMB, West Hackberry Sweet 0.55 MMB, Bryan Mound Sour Valero Marketing and Supply 1.0 MMB, Bryan Mound Sour Burhany Energy Enterprises 4.0 MMB, West Hackberry Sweet Lance Stroud Enterprises 4.0 MMB, West Hackberry Sweet Hess Energy Trading 1.0 MMB, West Hackberry Sweet Source: U.S. Dept. of Energy While a couple of refiners are getting a piece of the action, a significant amount of oil is going to energy trading firms to be put to work in their general trading efforts. As it turns out, almost half is going to neophyte, possibly wannabe oil tycoons with little, if any, experience in the energy business. Take Lance Stroud Enterprises. According to Platt's Oilgram, an oil trade publication, the company has one employee, Lance Stroud, and is located in a residential section of New York's Harlem district. When Platt called to inquire about the company's bid, the mother of the former army intelligence officer answered the phone. Stroud, who has worked as a grain wholesaler and has never been involved in the energy business until now, was out shopping for a Letter of Credit (LC). Each winning bidder has until Monday to present an LC to the Department of Energy. Platts reported that Stroud has an LC offer from Banque Paribas. Interestingly, Paribas is the same bank that energy marketers say refused to stand behind an LC it provided to the Power Company of America, or PCA, a now-defunct power trading and marketing company that contributed to a near meltdown of the wholesale power markets in 1998. "This sounds way too familiar and ominous," says an energy trading executive familiar with PCA's blackout. Two other winners of SPR oil are also unconventional: Burhany Energy Enterprises is located in Tallhasee, Fla. Burhany also appears to be a sole proprietorship, with Ronald Peek listed as the company's only employee. And, Euell Energy Resources is a Colorado company with "operations that include natural gas and power marketing, diverse pipeline installations and construction management," according to its Web site. Neither Burhany or Euell could be reached for comment. However, a check of filings at the Federal Energy Regulatory Commission, or FERC, show no filings by Stroud, Burhany or Euell. And while there would be no requirement to register with the FERC to receive oil from the SPR, most "legitimate" energy trading operations "have regular dealings with FERC and would appear in occasional filings" says the trading executive. Together the three companies are scheduled to receive 10 million barrels of crude from the release, over 40% of the total. At the same time, bids from refiners like Conoco (COC:NYSE - news), Texaco (TX:NYSE - news) and Royal Dutch Shell were turned down. "A prudent operator would not sell to these [lesser known] types of organizations," says one oil analyst. "There is just too much risk. It's almost like the government is selling the oil to itself," suggesting the winning bidders will ultimately not qualify. If winning bidders cannot provide an LC by Monday, the Department of Energy is likely to "go down the list" to other bidders, according to the analyst. However, that will delay the process even longer. Only four of the 11 recipients -- Marathon (MRO:NYSE - news), British Petroleum (BP:NYSE ADR - news), Valero (VLO:NYSE - news) and Vitol -- appear to have direct links to refiners. Even Morgan Stanley Dean Witter (MSD:NYSE - news) received 2 million barrels from the SPR. Dipping into the SPR puts more oil into the market but there's no guarantee it will be turned into heating oil and no assurance it will even be put to use in the U.S. As this column noted last week, it's quite possible that an unintended consequence of the policy will actually be to reduce domestic inventories as refiners feel pressure to increase exports to boost profit margins. In fact, while a waiver from the Department of Commerce would be required, the SPR does not require that the petroleum released be sold, either in its original or refined state, in the U.S. And, since following the barrels from marketer to trader to refiner would be nearly impossible, there's no guarantee the oil will even be refined in domestic markets, let alone see its way as heating oil to the Northeast. And a final rub: Each of the recipients of SPR oil had to agree to replace the oil between August and November of next year -- a period that is prime time for building heating oil reserves for next winter. So, at the very moment supply will be needed most, more than 30 million barrels of oil will be removed from the system, a move that could simply postpone the supply quagmire until next year, well after the presidential election. "The policy is troubling," says a former Department of Energy staffer who worked with the SPR. "You have to question the purpose of the SPR." In a statement last week, Secretary Richardson disagreed. "Through this exchange, we can help alleviate tight oil and heating oil supplies, help make certain that Americans can heat their homes this winter, and add to the nation's national oil insurance policy, all at the same time. That's a good 'rate of exchange' for taxpayers, consumers, and the nation." For everyone, probably not. But for Lance Stroud and Morgan Stanley, it's a heck of a deal. -------------------------------------------------------------------------------- Christopher S. Edmonds is president of Resource Dynamics, a private financial consulting firm based in Atlanta. At time of publication, neither Edmonds nor his firm held positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While Edmonds cannot provide investment advice or recommendations, he welcomes your feedback and invites you to send it to Chris Edmonds. -------------------------------------------------------------------------------- Send letters to the editor to letters@thestreet.com. Read our conflicts and disclosure policy. Order reprints of TSC articles. Top RELATED STORIES Christopher Edmonds Strategic Oil Reserve Release: Strategic Only in a Political Sense 10/6/00 8:20 AM ET The move won't do anything at all to help your wallet this winter. In fact, it could hurt it. Christopher Edmonds Oil-Slick Politics 9/22/00 5:45 PM ET One analyst says the president's release of oil from the petroleum reserve is nothing more than grandstanding. Christopher Edmonds At Energy Confab, High Earnings, High Stocks, High Spirits. Can It Last? 9/21/00 6:45 AM ET Some highlights: Is Apache still on the acquisition warpath? And EOG's Papa sets a brand-new deal.