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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: chowder who wrote (2342)	6/25/2001 12:25:50 AM
From: jim_p	Read Replies (1) \| Respond to of 206191

Good post brother bum! I couldn't have said it better. PS: For those few over leveraged oil and gas companies who were a little to greedy and were waiting for higher stock prices to de-leverage, the window closed Friday for new offerings not in the pipeline. KWK comes to mind. Greed is a terrible thing. Jim

To: chowder who wrote (2342)	6/25/2001 7:22:18 AM
From: Second_Titan	Respond to of 206191

<<Lehman Brothers says NG demand has shifted by as much as 6-7 BCFD, due to massive fuel switching.>> Dabum, Awhile back I crunched some #'s on #2 oil displacement that indicated about 2 bcfd for Jan-April. So take Lehmans estimate to include incremental switching to #6 oil. Well estimate 180 days * 6 = 1,000 bcf. Well this seems pretty damn bullish to me. How much storage would we have if we had not displaced NG consumption with #2 & #6 oil? Seems like the argument about depletion and the treadmill is supported by this argument. Lets the prices drop and see how much storage is built when #6 oil is not displacing NG.

To: chowder who wrote (2342)	6/25/2001 8:12:11 AM
From: Second_Titan	Respond to of 206191

Dabum I pulled the Lehman report and crunched the numbers they provided for each month assuming June would stay the same as April/May. The fuel switching has provided 985 bcf of gas available for storage according to this data. I estimated fuel switching to have provided about 525 bcf of storage based on the difference in #2 & #6 oil consumption over recent years. It seems that if fuel switching is this big of a factor there is little to be concerned with. This data would indicate that the slowdown in manufacturing is not a significant factor relative lack of production growth to meet demand. If Lehman's fuel switching data is correct with 1,000 rigs looking for gas, how many more will it take to gain on the treadmill? If anyone wants the Lehman brief you know where to find me.

To: chowder who wrote (2342)	6/25/2001 8:17:19 AM
From: kollmhn	Read Replies (2) \| Respond to of 206191

dabum- I want to address some of your thoughts but, not because I'm bullish. Only because another answer may lie a little deeper. Utility demand for gas fell 16%. I say so what? The real question is how much, if at all, did utility demand for all fuel sources decline? I'll venture that that answer is "it hasn't" and that the real question is what alternative source(s) are they using? Nat Gas has different supply/demand dynamics than oil has. Oil has one governing characteristic, IMO. There is, was, and will be, more of it than the world needs (at least for a few more years). Thus, its elevated price is determined purely by OPEC, not by demand or shortages. Nat gas has two pricing variables. One is a function of where OPEC prices oil and the other is an actual periodic supply constraint. In short, NG is priced versus oil in times of ample suppply and it is priced by demand during periods of shortages. In the end, the price of oil governs the price of NG if there is enough switching that can take place. Now, if we continue drilling for NG and if it were to result in increased production (which it has NOT, in a meaningful way) then NG prices would decline to a level where they are attractive versus oil. NG demand would increase and any extra NG supply would be utilized. It would come at the expense of oil (and OPEC)as some of oil's market share is diminished. OPEC has shown the resolve to maintain prices at the expense of market share. I have read arguments that this is not good in the long run but I don't believe it matters for the next few years. OPEC has learned (it already knew it) that selling 94% of its production results in twice as much revenue as does selling 100%. Frankly, selling only 90%, to maintain revenues, is no different than a 10% price cut and, therefore, easy (and cheap) to implement. If OPEC continues to manipulate production and give up a little market share, and if non-OPEC supply fails to grow, they will continue to control pricing. If they do this for a couple more years, NG drilling may no longer have low hanging fruit to go after. Then what? Declining production or, larger and deeper prospects that cost more per MCF. If OPEC holds together and maintains the oil price band, NG will bottom out well above $3, regardless of any increased production, and it will stay there until such time, (if ever) OPEC falls apart or lowers its price band. Like we used to say: "It's the price of oil, stupid.