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

To: Second_Titan who wrote (3897)	8/30/2001 6:47:49 AM
From: stan_hughes	Read Replies (2) \| Respond to of 206085

Que - You make some valid arguments and I have no quarrel with your points 1, 4, 5 and 6, but I offer the following comments about 2 and 3. Concerning point 2 - what makes you believe that the NG overhang will be absorbed by a normal winter? If you're basing your forecast on empirical data, I don't believe you can totally rely on past consumption patterns. Not only is the economy still more or less in recession, I think people will be attuned to using less NG than normal this winter, thanks to last year's experience being fresh in their minds. I also expect more people to be looking for ways to save money in this gloomy time, and turning the heat down a bit isn't such a huge sacrifice in the grand scheme of human hardship. All this suggests to me it will take a colder than normal season just to consume a normal BTU inventory, and we are way above normal inventory levels already, BWTFDIK. Lastly, the various long term weather forecasts seem to be in conflict with each other at the moment (I've seen two so far, both diametrically opposed). All I can say at this point is Lord help the NG longs if the so-called global warming effect revisits NA this winter, and on top of a backdrop of reduced industrial demand. Intermediate to longer term however, I like NG for the same reasons you've cited, at least until extensive fuel cell usage starts to kick into gear. After that, who knows? But you still have to be careful about overpaying for the stocks. Concerning point 3 - I don't think we can assume anything about oil prices, because OPEC is playing at the margins on global demand. Basically, they're eating the impact of the current decreasing demand on behalf of all producers for the sake of holding prices up. However, the Saudis have reportedly never enjoyed playing swing producer for their brethren, even in their own interest. The longer they are forced to play this role, the less satisfying it will be for them, especially if they start to see cheating. Overproduction of e.g. just 1MM a day for even a short period of time can oversupply the feedstocks in a hurry. That would be bad enough, but if the Saudis open the spigots to re-assert their control..... Maybe this happens, maybe it doesn't, I truly do not know. But I'd be watching the inventory numbers really, really carefully this fall to see if crude supplies seem to somehow be materializing from points unknown. Getting back to the NG situation - I'm personally not in any hurry but it's possible the E&P stocks could be in a mood to start discounting these things sooner rather than later. Maybe it's time to make a laundry list of potential purchases. I confess to not having done a lot of work in this area recently except look at charts. Based on what I see, and my assessment of the degree of disconnect between NG pricing forecasts and reality, I expect to see fresh haircuts in the E&Ps of another 15-30% from current levels depending on their NG exposure. And if the whole market tanks at the same time (an increasing possibility these days), the declines could be greater. FWIW I'm aware that my energy predictions are largely based upon my bearish view of the overall global economy, and how it represents a drag on the energy sector. An earlier than anticipated US economic revival would serve to negate all the potential bearish influences I've described, with the exception of a mild winter which isn't under anyone's control. Maybe in the end we'll get the worst of all energy worlds (global recession, mild winter), or the best (economic recovery, frigid weather), or maybe a mixture of the two that cancels each other out (probably - ain't that always the way). Tune in next April and I'll tell you what happened LOL