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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: skinowski who wrote (41296)	9/11/2005 9:29:22 AM
From: russwinter	Respond to of 110194

intermediate term top in the energy complex> I'm not sure about the stocks (am neutral), as ultimately they need to replace reserves, but one of two things must occur for this Land of Oz scenario in the energy commodity: 1. a severe economic downturn where people greatly reduce driving, or are willing to sit in the cold (or there is no winter), or 2. the Ministry of Truth comes up with a perpetual motion machine. If there are no disruptions elsewhere, CL can stay capped as long as SPR is used as aggressively as it is now, Message 21689112 so not sure that's the market to watch, at least for now. It looks like 900,000 bpd of oil production will be off line for some time, so 12% of the SPR will be needed to cover that for the next three months. But 900,000 bpd in refining is also likely to be down for months. Message 21690071 There is no way the end product market can stay in equilibrium, the Train Wreck will intensify. There was 324 MMBbls of combined gasoline and distillate inventory as of 9/2. A fourth of that will be gone by the start of winter if demand doesn't adjust significantly. The same with NG, so far 84 bcf/d has been lost, and this shortfall looks to be about 25 per week, given production shutdowns and NG processing damage. mms.gov Message 21678688 That means we will be going into the heart of winter in mid-Dec, with a hole of 400 bcf/d in inventory. So one of several things must happen: a large economic contraction, or huge price spikes, and more likely a combination of both. Or there must be a miraculous recovery in a substantial portion of the downed refining/NG processing capacity, and downed oil and NG production, with no room for error anywhere else in the supply chain. The odds of that must be close to nil. (*) Raymond James site gives current inventory levels for energy products: raymondjamesecm.com