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Strategies & Market Trends : Strictly: Drilling II -- Ignore unavailable to you. Want to Upgrade?

To: Art Bechhoefer who wrote (28386)	2/19/2003 9:43:05 PM
From: patron_anejo_por_favor	Read Replies (1) \| Respond to of 36161

<<Since war is now virtually inevitable, the price of oil should remain at near record levels, or go even higher. Who benefits here--which producers, which integrated companies?>> The Trillion dollar question, Art, is how LONG will the oil prices remain up? There are a lot of potential scenarios at play.... 1) We win quickly, Saddam destroys oil production facilities 2) We win quickly, oil production facilities intact 3) We win quickly, oil production facilities destroyed, prolonged guerillar fighting during occupation 4) We seize oil production facilities intact, but prolonged fighting for Bagdad and guerilla action in oil fields (blown pipelines etc ala Columbia) 5) Oil fields destroyed, prolonged battle for Baghdad, prolonged guerilla fighting. 6) We win quickly, Persian gulf tanker routes are blocked by sunken ships in gulf inlet and elsewhere. etc. As far as most of the drillers and oil E&P's go, the market has priced in a swift and favorable conclusion to the war, with rapid reduction in crude prices afterwards, IMO.... So it's pretty hard to come up with a "most likely" scenario for oil prices (particularly "how high and how long"), at least IMO. If prices are up and for a long time, it seems obvious that the major beneficiaries are companies with non-Persian Gulf production and reserves. I suppose UCL, OXY, perhaps CVX would benefit more than XOM, BP and RD among the integrateds. Gassers might benefit slightly because of fuel switching. Energy production trusts that have a large crude component would benefit mightily. Pure play refiners (VLO, SUN) might be hurt, due to rising input costs. Huge amount of risk playing all of these, IMO. Other posters here and on Big Dog's thread are much more knowledgeable than me about this stuff.