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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: Raymond Duray who wrote (329)	10/29/2000 11:57:54 AM
From: excardog	Read Replies (1) \| Respond to of 74559

Raymond, You may already have these sites but thought I might pass them along for others. eia.doe.gov This slide show is informative, I'd love to have a TA persons opinion on some of the graphs. eia.doe.gov The debate continues. I remain in the camp that says the ME is fibbing about production abilities. On a side note how bout those Ducks yesterday.I'm a life long Oregonian. Eugene in 1973 interesting times. Regards, Scott

To: Raymond Duray who wrote (329)	10/29/2000 1:20:35 PM
From: edward miller	Read Replies (1) \| Respond to of 74559

I don't normally have much time to post or respond, but there are a few things worth saying. First, your first link refers to Colin Campbell's view of the oil situation, which I believe is closer to reality. Your post seems to imply that because these oil fields were found that the problem is solved. End of story. We can agree to disagree on that. With technological advances these new fields are being depleted more rapidly than ever before. Old fields are producing less, even in the ME. Second, if we are swimming in oil, where is it? Every weekly collection of data indicates no significant build of crude storage or heating oil or any other energy source of significance. Crude and natural gas prices have been sufficiently high for over a year to stimulate production. Where is it? There seems to be a misconception that just because there is oil in the ground that it is available, or could be in the next few months (or whenever we really need it, so we don't need to be too concerned). Part of the answer is that there aren't any spare tankers to transport crude from the ME countries to the US. Tanker rates have tripled this year. Every available tanker is in use, so there is no "Wall of Oil" coming, as some claim. From what I have read we are at least 18 months away from having any new tankers available, and some of the fleet are so old they should not be in service. Do we need another Exxon Valdez? I don't think so. Significant changes have happened. E&P companies have been burned so badly by low prices that they are not clamoring to drill. Instead they are using profits to repair badly damaged balance sheets, pushed that way by their bankers, by the investment community and by shareholders. The proof is that business for the service companies is very slow to improve, even with over $30 crude prices. In the last downturn over 100,000 people lost their jobs, and they are gone from the industry. People have left due to the severely adverse conditions of the cyclical nature of this commodity business. They can not ramp production without trained, experienced people to do the work. There is a lot of talk about alternatives, but it is all talk until prices are perceived to be permanently high. The futures markets are still projecting much lower prices next year, so there is no incentive to invest. Also you should realize that this backwardation is a disincentive for the oil companies to invest. It shows that the general investing world does not believe that high prices will stay. Therefore no new drilling. No increase in supply. Think about this. No investor will bet on alternatives if the price of petroleum is coming down in 1-2 years, or even in 3 years. Energy costs must remain high for alternative energy sources to evolve because investors are guaranteed to lose unless this is true. This commodity is cyclical, and we have left the end game of low oil prices and are entering the period of the cycle in which prices go the other way --> A classic commodity cycle. Cycles are not one way. The oil problem is not solved forever. Prices dropped so low that many companies lost money, esp. the smaller E&P companies, so drilling almost stopped. No new supplies means less supply because existing oil and gas fields are always being depleted, so production has dropped even as prices are rising. This time production is not roaring back because the catastrophy of 1998 is too near, so companies are very hesitant to spend. Instead they are cashing in by paying down their debt, and they have a lot of debt from the 1997-1998 crash in energy prices. This is as it should be for any company that wants to stay in business. This energy cycle will not be straight up, then down. It has a long way to go, and it will impact economies around the world, as it already is. The price squeeze is on, as can be seen in Korea and other countries which are not as efficient as the US in energy usage. Energy prices will be a drag on economic growth through most of this decade, of course IMHO based on my readings. This will be a major factor in terms of a developing worldwide recession, IMHO. Don't forget that we have no excess refining capacity. So we are in a position of reduced production from existing fields, no incentive for increasing production based on the futures indicating that prices will crash next year, no workers to ramp up production rapidly, world demand ramping up (masked in 1998 by the Asia crisis), no tankers to deliver more crude from overseas, our pipelines are inadequate and decaying (witness the New Mexico blast). All in all, it's no problem. Yeah, right.

To: Raymond Duray who wrote (329)	10/29/2000 7:30:55 PM
From: kormac	Read Replies (1) \| Respond to of 74559

26-Oct-00, API announced that in the most recent reporting period, the week prior, that there appeared to be about 1MM excess of supply over demand. Barring market manipulation for political purposes, etc., or an exceptional cold snap in the northern latitudes, we shall see the spot price of oil declining fairly quickly to the high $20's. Ray, we are in the shoulder season. We ought to have a build for now. Refineries are doing yearly maintenance. best Seppo