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To: JHR who wrote (7891)	3/22/1999 12:22:00 PM
From: Thean	Respond to of 14427

JHR, Regarding the drillers - I think 90% of the OPEC thing is priced in. The 10% surprise factor can swing oil towards $16 1/2 intraday today or tomorrow but we should consolidate from here. While this week can be an short term peak, I do think the drillers have a 50:50 chance of going further. Last year in a similar OPEC environment the drillers went on marching to higher high for the next 6 weeks. What eventually killed it was the reality of non-adherance of OPEC producers and the prospect of massive slowdown in Asian economy. The key factors different this year are: 1. Most believe Asian bottoms have been reached and I think this is accurate. But a resumed pickup in demand like we saw in 1997 will not happen this year or next as they have to work off their very excessive capacity. Net, I think oil consumption will not grow enough to stimulate a hike in the oil companies e&p budget. Based on the data I read a few months back, the projected net GNP growth for the whole of Asia (including China and Japan) is between 1-2% in 1999. I don't have last year net GNP growth but they aren't too different from 1-2% I think. 2. On the supply side oil production is >4 million barrel a day less now today than a year ago so this is a positive. I sold all my drillers last Friday and will look to reenter upon some weakness on a trading basis. Give it a few more weeks and if things get excessively speculative, I would trade them on the short sides. I also think that an averaging out strategy may be good here. For example, remove 1/3 out today, and look to move another 1/3 out (or sell calls) if they rally another 5-10%. Keep the other 1/3 for LT capital gain.