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Strategies & Market Trends : A.I.M Users Group Bulletin Board -- Ignore unavailable to you. Want to Upgrade?

To: jas244 who wrote (6126)	11/5/1998 3:06:00 PM
From: JZGalt	Read Replies (3) \| Respond to of 18928

the oil industry will be on the come back with $50.00 a barrel crude oil. If you believe this you should not be AIM'ing your holdings. An increase from $16 to $50 even in 2-3 years should be done with a buy and hold methodology. Oil industry is a bargain. Sorry Jim, I disagree at least for the next 18 months and assuming you are talking about the integrated oil companies vs. those which are more oriented toward refining and selling gasoline and heating oil. If you look at the economics of the oil production and service industries, the laws of supply and demand are ruthlessly applied. The price of oil is less and less in the hands of OPEC and more and more in the hands of non-OPEC countries and those countries are more and more indebted to the G7 countries. You have a situation now where too many areas of the world want to ship oil to get hard currency to support their economies. In the days before the North Sea fields, OPEC could dictate price. Now there are a significant number of oil production fields which are under the control of countries which owe a ton of money to foreign banks and the IMF. Until they get out from under this level of debt and until the demand comes back in the economies of the world, it is unlikely that oil prices will rise more than a moderate amount barring some sort of showdown with Iraq or other turmoil in the middle east. The newest fields being exploited are in Baku, off the coast of west Africa, off the coast of Venezuela and Brazil biz.yahoo.com . Do you honestly believe these areas will restrict the flow of oil to satisfy the need of OPEC? Unlikely... It seems like the oil companies agree that the price is going to remain low. They are voting with their pocketbooks. Less wells drilled, less exploration done. loosbrock.com Latest futures charts once again show oil prices weakening after a rally on supply disruption of Georges. tfc-charts.w2d.com Weekly charts show a possible bottoming pattern, but nothing to suggest a full blown recovery any time soon. tfc-charts.w2d.com The oil industry is cheap, but I think we are stuck at sub-$18 oil until the world economies settle down and some of the recent excesses in Russia and Brazil are worked off. The November meeting of OPEC will need to announce productions cuts just to keep the status quo since the IMF has virtually assured a worldwide recession via it's actions in the past 9 months. The latest action in Brazil assures one of the US's largest markets will have a greatly decreased demand for US products over the next year to 18 months which will decrease production of goods in the US and decrease the energy demand slightly in the US. In 1997 we had started to see the beginnings of commodity gluts as more and more emerging markets went after hard currencies to support their inflated currencies. I don't see that trend changing direction anytime soon. I originally bought oil service stocks because the supply of offshore rigs was tight, and I didn't think the "Asian contagion" would spread. Russia and Brazil changed that tune. The oil industry might be a bargain if you have a time horizon of greater than 5 years, but I believe that you will have plenty of time to buy vs. sitting with a relatively stagnant investment while the world gets it act together. Hedge your bets. AIM some of these bandwidth companies I have been discussing. Much more likely that people will expand their use of communications vs. energy in the next few years. ---- Dave who drives a 1984 diesel Rabbit and gets 49 mpg...