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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Haim R. Branisteanu who wrote (10145)	8/3/2004 2:29:04 PM
From: mishedlo	Respond to of 116555

Gasoline prices follow crude prices, with a lag Tuesday, August 3, 2004 6:09:27 PM afxpress.com WASHINGTON (AFX) - Crude oil futures prices hit highs Tuesday, but consumers have yet to feel the pinch Despite the surge to $44 a barrel on the New York Mercantile Exchange, retail regular-gasoline prices actually fell a penny a gallon to $1.89 overnight, according to the American Automobile Association Nationwide, gasoline averaged $1.93 a gallon last week, the lowest price in three months, the government reported Monday. Gas prices are down 17 cents a gallon, or 8.2 percent, since peaking in late May at $2.10 "Sometimes it's hard to see the impact immediately" of higher crude oil prices, said Dave Costello, an economist for the government's Energy Information Agency. "There is a lag." If a spike in crude prices is short-lived, it may never show up at the pump. A persistent increase in crude-oil prices may take two to six weeks to be fully reflected in pump prices, Costello said Eventually, higher crude-oil prices are passed through to spot wholesale gasoline prices and retail gasoline prices, Costello said While crude oil is a global commodity, gasoline is subject to local variations in supply and demand. While oil producers have no pricing power in the global petroleum market, oil refiners have been able to push their margins to record levels in local gasoline markets In the second quarter, refiners' margins increased 84 percent to $9.79 a barrel In the first half of the year, about half the increase in gasoline prices stemmed from higher costs and about half from higher margins, Costello said. Gasoline prices follow a marked seasonal pattern because of shifting supply and demand. In the early summer months, prices tend to soar as demand surges while supplies take longer to adjust Refiners' spare capacity must be converted from winter heating oil to summer gasoline and back. Gasoline inventories were extremely tight this summer until they recently improved somewhat, Costello said In July, the government projected that crude prices would average $37 a barrel with retail gasoline averaging $1.89 for regular gas. The EIA will update its short-term energy outlook next Tuesday

To: Haim R. Branisteanu who wrote (10145)	8/3/2004 3:11:17 PM
From: mishedlo	Respond to of 116555

Major oils grappling with how to achieve output growth - [hell why do they need to graple with output growth. The less output growth they have the more profit they will make - this article seems silly - mish] Tuesday, August 3, 2004 6:56:44 PM afxpress.com DALLAS (AFX) -- By most measures, the major integrated oil companies turned in banner quarterly results, with strength coming from multiple sources Strong oil and natural gas prices propelled exploration and production results, while refining margins soared and robust demand for petrochemicals and polymers outweighed high crude prices to boost profit from chemicals But with a few exceptions, oil companies reported either flat to declining production during the second quarter "The issue here is the oil companies are flush with cash, they reported record earnings, and commodity prices are high, but they're not able to redeploy excess cash into growth opportunities because they're not there," said Louis Gagliardi, an oil company analyst at John S. Herold. "So they're using the money to pay dividends or buy back their stock, which is good in the short term for the investor because it supports the stock price." That said, Gagliardi sees the ability to grow production becoming even more difficult for the major oils in the years ahead "I don't know how these companies are going to grow," he said. "They say the risk is too high in places like Russia, but maybe there's even greater risk in not acting." ExxonMobil , which last week reported record results for the second quarter excluding one-time items, said oil-equivalent production grew 1 percent. The world's largest oil and gas company maintains it will average 3 percent production growth a year from 2003 to 2008, while spending $100 billion on capital projects between through 2008 Agnostic on prices "We remain on target to do that," said Exxon spokesman Tom Cirigliano. "We don't go by oil prices in determining our capital spending, and we advance projects when it's commercially viable to do so. Projects here are years in the making, and they are projects that will be producing for ExxonMobil for 20 to 30 years "Management is careful to take advantage of prime projects when the timing is right despite the current price oil." All the companies in the industry are battling natural declines in resources from existing fields, said Fadel Gheit, an oil company analyst at Oppenheimer & Co. And many are "high-grading" their assets, in which producing properties they deem to be marginal are sold so the companies can focus on the best performers. That also reduces output ChevronTexaco , which reported a second-quarter profit more than double that earned in the year-ago period, said normal field declines in the U.S. were primarily to blame for an 8 percent drop in net oil-equivalent production on a year-over-year basis. Excluding property sales, the No. 2 oil company's net oil-equivalent production declined about 6 percent from the second quarter of 2003. Worldwide oil-equivalent production declined about 4 percent from the second quarter of 2003, with about half of the decrease attributable to properties sold since last year's second quarter, the San Ramon, Calif.-based company said "Chevron had a very huge production decline, but that was predictable because they don't want to wait until an oil price decline to sell their assets," Gheit said ConocoPhillips , which reported a 75 percent increase in second-quarter net income, used part of the proceeds from asset sales to pay down $1.5 billion in debt. The asset sales had the effect of bringing about a slight decline in year-over-year production, the Houston-based company said "Companies are only going to grow production when it's profitable to grow it," Gheit said. "They're not going to grow production to sacrifice return on capital employed. They don't consider growth as necessary, all they hope is to maintain production." Gagliardi sees output growth from now until 2005 coming from BP , which posted an 18 percent increase in year-over-year production in the second-quarter due mostly to a contribution from its TNK-BP joint venture in Russia, and Conoco, with a contribution coming from its heavy-oil projects in Venezuela. Shares of the major oils were on the rise Tuesday afternoon, following on record high prices for crude oil. ExxonMobil's shares added 57 cents to $46.82, while ChevronTexaco rose $2.12 to $98.60, ConocoPhillips advanced 55 cents to $79.46 and BP moved up 79 cents to $57.07. All for of the stocks hit 52-week highs earlier in the session fxstreet.com