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

To: Robert Floyd who wrote (23266)	6/2/1998 1:07:00 PM
From: Gator II	Read Replies (1) \| Respond to of 95453

Robert... You asked, "Is price the issue for our service sector?" Response: I assume you are referring to the price of crude. Well, no but if "the market" thinks it is, it is. Meaning it's kinda like the fundamental crowd saying they don't believe in technical analysis, but if everyone else does and markets actually move based upon technical happenings, you have to believe in it to one degree or another. Then you posed the following: "Isn't the real issue here the fact that demand has decreased (due to issues such as the Asia downturn), causing a oversupply on the market?" Response: Well, yes, and OPEC raising quotas 10% didn't help either i.e., more supply in face of lesser demand resulting in more (albeit less costly per unit) product having no where to go. (Tanks and tankers, already full, etc.) In conclusion, you asked: "Even if the OPEC ministers succeed in raising oil prices by cutting production, doesn't the lower production lead to less work?" Don't know for sure what you mean by "less work." If you mean the oil services sector is driven by _oil volume consumed_, and therefore less drilling would be required to bring on additional supply, I would agree but you are being entirely too logical and IMHO the Street doesn't "get it" until it hits them over the head. It's perception is higher oil prices means less demand for product which further results in lesser need to drill and therefore lower day-rates and eventually, lower earnings for drillers. Regardless of any of the above, I believe the Street would react negatively if OPEC doesn't attempt to reduce production. Further, until the price of crude is north of eighteen dollars a barrel, the whole sector may become/stay range bound. Of course, we can turn on a dime as the result of the Saudi Royal family being overthrown (King dying?) or instability either in Saudi Arabia or in the Mid-East (Islamic fundamentalists rebelling) or some cataclysmic (War in the Mid-East or Indian Sub-continent?) event occurring. To count on (or even want) these events to happen in a timely manner to enhance one's portfolio is, however, foolhearty, to say the VERY least. Guess it's nail biting time until the Oil Ministers meet, but we already knew that. Gator II