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Join Date: Apr 2003
Charlie Maxwell Yesterday's Bob Brinker Guest
I was stuck in traffic on northbound I5 yesterday- hint to possible migrants to Puget Sound-don't come.
Anyway, Bob Brinker who is not usually my cup of tea had Charlie Maxell, the oil analyst for Weeden &Co. as his guest. Brinker did an excellent interview, asked helpful questions and shut up for the answers. I think it was over an hour long. Maxwell said a lot of things, but relevant to the recent downward pressure in crude and especially US NG prices, he felt that the most likely scenario would be a crude trading range between $55 and $75/bbl, basis WTI, lasting for perhaps a couple of years. After that he sees a resumption of shortages and prices rising.
He admitted that once commodity markets get moving, it is hard to put safe limits on how far they might move up or down.
On the same topic but from a different source, I read a Nabors Ind. presentation to the Sept 6 Lehman Energy Conference. They discussed ""rig intensity", which is the #rigs running to get a certain production outcome. In the Middle East, rig intensity doubled between 1995 and 2005. In 1995 128 rigs were running; at year end 2005, 262 were. Although production has increased somewhat, excess capacity has diminished over this period.
The same thing is even more true in US natural gas drilling. Over the past decade, US gas drilling intensity has increased 3x over, yet production is flat to down. The wells completed have had smaller reserves, and faster decline rates. Gas wells drilled in the past couple years have had 30% decline rates contrasted to 16% in the early 90s. 27,000 wells needed to be drilled last year, just to stay even with prior years.
People make a big deal about the current gas oversupply. Unless variability of weather has been repealed, it is meaningless. There is not enough storage capacity to form a true buffer for the demand variability. Hence, shortages and oversupply of a temporary nature present speculative opportunities to traders and hedge funs, but the resulting prices distort the longer term commodity picture.
Para todo mal, mezcal. Y para todo bien, tambien!
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For national security reasons we need to move to energy independence - in my opinion we need a war-time focus on this issue.* We cannot do that quickly, nor can we replace capacity lost to political instability quickly.* [I remember fuel rationing stamps.] I think it is great that new crude reserves are located, there will still be plenty of world-wide demand.* Let's not loose our focus on the work to be done.
Re the I5 drag: if the Seattle metro area would construct light rail SOME folks would have alternatives.* That is not to say that the freeway problems would go away because more business and employees would arrive - but at least a % of the population would get where they are going on time.* The only really efficient mass trainsit around Seattle are the ferries (for those who don't know a couple can transport 2,000 passengers each trip).
[edit to correct move "cannot" to it's proper place in a sentence]
We will drill and build until we create another glut and then prices will crash.* It will take several years; and no, it's not different this time.
So, what stock index or ETF should we short?
The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Thanks 2B. I am sure that you are certainly right.* Well, at least you are certainly certain.*
The oil business has been highly cyclical since John Wilkes Booth was wiped out in the 1860's. It was going to replace whale oil back then but didn't really do that until the 1870's. We've had Spindletop and other great finds and new technology has continued to come along to find more. We have emerging technologies to find deeper oil and much of the world that had been closed to development is now opening up. More will. We are also developing technologies to utilize coal more effectively.
Originally Posted by Nords
So, what stock index or ETF should we short?
Beats the hell out of me. I'm an optimist not a fortune teller.
I do think oil will do ok for the next cycle but the "big up" has happened. Eventually the oil ETF will be a good short but not now.
__________________ The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
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