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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: Steve Childs who wrote (3981)	11/30/1997 10:05:00 AM
From: DNaber	Respond to of 95453

Steve, I too love this current downdraft in the drillers- a great buying opportunity. I don't think that we'll see much 17$ oil except possibly for a very few days due to the typical overreaction in the commodity markets. OPEC was overproducing their quota's and can't increase their production by 2.5 mil bpd (Venezuela for example, the US's largest foreign supplier, simply ignores their quota and produces at 100% capacity). We'll see about 600,000 bpd from the new agreement- mostly Saudi. Assuming fixed demand (of course it's not- it's expected to grow 1.5-2% per annum) that 600,000 increase out of worldwide consumption of 58 milbpd could drop the price by .20. Add in a possible (but unlikely-given the US's influence) increase in Saddam's UN allottment to $3 billion every six months. This would increase supply by another roughly 350,000 bpd. That would translate into another .10-12 drop per barrel. So at current prices we knock off say .35 bringing us down to 18.75 pb. This analysis leaves out two important variables that IMO support oil prices; 1) Demand increases and 2) The markets recent drop from 20-22$ range to the current 19ish. Maybe the drop is already built in? On Monday the commodity market may overreact and drop more, and some funds and analysts may sell some more producers and drillers (More buying opps!) But IMO that any oil price drop will be short-lived and oil should stabilize at least at current levels. Maybe we'll still see your 75%! Good Luck!