Very quietly, the natural gas bust is moving into oil.
The official price for West Texas Intermediate is down just $3.50/barrel over the last few weeks, but that doesn't tell the story. Due to a lack of pipeline capacity in major oil fields like the Permian Basin and the Bakken, many producers aren't getting that price. Analysts are expecting "flat" capital spending due to a lack of infrastructure, but when was the last time in this industry that something just "flattened"? It always busts after a boom.
Trilby Lundberg describes what is happening at the gas pump as a "price crash." It's possible that a refinery might suddenly blow up, giving prices a brief lift, but when you're hoping for a disaster, you're not bullish, you're bearish.
Transporting product by rail or truck costs much more than piping it out, but the short-range moves on some of the impacted companies like Occidental Petroleum (OXY) and Concho Resources (CXO) have been up. Concho re-affirmed its production guidance in November, and leading short-seller Jim Chanos reportedly went long on Occidental last month as well.
Oil traders clearly aren't taking delivery of this glut, perhaps expecting that OPEC will simply reduce their production to keep prices high. But the International Energy Agency (IEA) sees demand through 2013 as sluggish, and there's no indication that production increases in the U.S. oilpatch are going to let up.
To that, you have to add renewable energy. Not just solar energy, whose supply keeps increasing steadily, and is now at 5.9 Gwatts, but the cheaper renewable energy of efficiency. Insulation, new engine technologies, and higher efficiency products of all kinds should start biting energy prices as early as next year. With U.S. production up 760,000 barrels/day for 2012, it does seem as though a thumb is about to be placed on energy prices -- one that won't lift easily.
Small wonder, then, that big energy users like Southwest Air (LUV) are now trading near their yearly highs, while big U.S. oil producers like Anadarko Petroleum (APC) have seen little lift from increased production. Expect those investment trends to accelerate in the new year.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.