OPEC and Production Cuts: Why Now's the Time to Buy

OPEC decided to defer any further cuts in output. In response, oil prices slid. In the short term, this is the natural reaction of the market; however, OPEC has delivered a powerful message. The message is simple. OPEC is motivated to cut production in order to prevent prices falling below the marginal cost of production. Once prices fall below marginal cost, "new production" cannot be brought on to the market, because the marginal cost of production exceeds the marginal revenue; thus production cuts make little sense. It is my view that the action of OPEC is one which will put a floor under oil prices.

Today, OPEC controls 40% of global production; over the years, I expect OPEC will lose Nigeria and Angola, while it may gain new members from amongst the former Soviet Union. The reason is simple; OPEC will find within it a big conflict of interest if it controls supply from both high marginal cost producers and low marginal cost producers. OPEC will remain very strong and it is likely that over time they will get growing support from non OPEC high and low marginal cost of production producers.

Now let me clarify; the marginal cost of production of OPEC is low, very low; the OPEC oil industry can remain profitable even at $15/barrel. The marginal cost of production from oil sands (Canada) and deep/ultra-deep water (United States, Brazil, Angola, Nigeria) is far higher and it is these which will bring new production on market.

At present, price levels marginal producers will be forced out of the market. Presently, a production cut is automatically executed without OPEC making any sacrifice on volume because the high marginal cost producers shall withdraw from the market. There are certain OPEC members (Angola and Nigeria) which might suffer from the OPEC decision because they remain high marginal cost producers. For a low marginal cost producer, volume becomes increasingly important in a market where prices fall; this is not the case for a high marginal cost producer.

Now, the marginal cost of production for deep/ultra-deep water (main new production expected from Brazil, United States and Angola) is near enough $60 per barrel; the marginal cost of production for oil sands (Canada) is much higher. Realistically, even with a significant economic slowdown, demand growth will surpass production growth. If production growth is to come to market, oil prices must sustain over $60. Saudi Arabia has opined that the fair price of oil is about $75 per barrel; I do not see them as being far off the mark, because at this level, marginal producers of oil will receive a reasonable but not excessive return on investment assuming a long term marginal cost of production of $60 per barrel.

In my view, the marginal cost of production will fall. Oilfield service and driller resources have been stretched while demand remained elevated. In this environment, the oilfield services and drillers have enjoyed considerable pricing power. For this reason, the marginal cost of production has remained high with capex inflation running at 12% and more for oil producers; at the same time opex inflation has remained elevated at over 6%.

Now considerable new capacity has been added by oilfield services and the drillers; some has already entered the market and much more shall come into the market between now and 2012. As new capacity enters the market and as demand eases off in light of falling oil prices, industry inflation levels will retreat. Thus, in my view, the long term marginal cost of production should fall within a range of $48 to $53 per barrel. If new production is required as a consequence of rising demand, long term oil prices can be expected to range from $55 to $61 per barrel. At this level, oil producers are provided a reasonable return on investment.

Oil demand today is in the region of 85.893 million barrels per day. Oil production is 85.619 million barrels per day. There is little surplus production capacity outside of OPEC and OPEC surplus production capacity runs are approximately 1.7 million barrels per day. The market is well supplied today. What about tomorrow?

In terms of future visible production, amongst OPEC, Saudi Arabia has the ability to bring new capacity onto the market. The Manifa field in Saudi is capable of adding 900k barrels per day, while re-starting Damman would add a further 75,000 barrels per day. Saudi Arabia is unlikely to increase its production capacity at oil prices under $75 per barrel. Outside of the OPEC, there is visible production able to come to market of 1 million barrels per day from United States (447k barrels), Brazil (291k barrels) and Azerbaijan (268k barrels). Brazil and United States bring new production from deep/ultra-deep water with high marginal costs of production. Azerbaijan has a lower marginal cost of production; nonetheless its source in the Caspian Sea. The Caspian is an expensive operating environment because it is land locked which makes transportation an expensive proposition; in addition because the Caspian Sea is land-locked, the cost of bringing offshore drilling equipment is high; so while cost of production is lower than deep/ultra-deep water, it is not cheap. Offsetting these visible production gains are visible production declines in the North Sea (282k barrels) and Mexico (287k barrels); on a global level, net non OPEC visible production capacity will increase by 105k barrels per day.

So in terms of visible production capacity we have 85.619 million barrels per day capacity today; add to this OPEC surplus capacity of 1.7 million barrels per day and visible Saudi Arabia additional potential capacity of 975k barrels per day and we come to 88.336 million barrels per day. Add on the non OPEC visible capacity net addition of 105k barrels per day and we have total expected and visible future production capacity of 88.441 million barrels per day. Production capacity not presently visible can expected to continue to come to market as and when prices and demand justify investment. Amongst the high cost of production producers, there is plenty of "not presently visible" opportunity in the deep/ultra-deep water & harsh environment theatre; I see great promise in Angola, the Gulf of Guinea (in fact most of the African West Coast), Brazil and United States; Canadian oil sands will one day provide a valuable source of oil.

There are other sources of incremental high marginal cost production such as Russia, Venezuela, Nigeria and Equatorial Guinea; however due to instability inherent in these States, it cannot be reasonably relied upon. Iraq, Russia, Kazakhstan, Turkmenistan and Azerbaijan remain opportunities for lower marginal cost producers; but once again stability within the jurisdiction is an issue. India and China also have high marginal cost of production potential, albeit with not as much promise as the preceding countries.

From a supply perspective, compare the expected and visible future production capacity of 88.441 million barrels per day with demand of 85.893 barrels per day and you will understand why there was no fundamental reason for oil to trade at $147 per barrel. Now keep in mind that at least 7 million barrels per day of this production comes from high marginal cost producers; to keep this production on market, oil prices must remain over $60 per day. Just as there was no reason for oil to trade at $147 per barrel, there is absolutely no fundamental reason why oil should trade at levels below $60 on a long term basis.

From a demand perspective, we have the same story; cheap oil is history. During 2000, oil demand was at 76.715 million barrels per day; this level of demand could be significantly satisfied by the low marginal cost producers. Thus, in the past as expectation of future demand growth were optimistic, we saw a significant rally in oil prices, because it was required to bring new production online. As future demand growth expectations reduced, prices collapsed because present demand could be satisfied by low marginal cost producers. The low marginal cost producers cannot satisfy today's demand of 85.893 million barrels per day during 2008; the best they can do is 81 million barrels per day; the last 4.893 million barrels must be paid for to compensate the higher marginal cost producers and it is at this higher level that the price of oil will settle.

In looking at demand for oil during 2008; United States demand has shrunk from a peak of 20.687 million barrels per day during 2006 to 19.562 million barrels per day during 2008. This level of demand is beneath demand during 2000, 2001, 2002 and 2003. In my view significant further contraction in demand is highly unlikely, even when confronted with a deep and prolonged recession. China on the other hand has seen demand increase from 4.797 million barrels per day during 2000 to 8.004 million barrels per day in 2008. This economy continues to grow and energy demand will remain elevated even in a slow down.

As for the rest of the world; I look at it in distinct segments. The OECD Ex United States includes several mature slow growth economies in demographic decay, these economies are at greatest risk of contraction. Non OECD Asia (Ex China) includes moderate growth economies; some contraction in energy demand can be expected amongst these economies. Former Soviet Union & Eastern Europe are high growth economies; slowing growth in energy demand can be expected, however demand for energy will not contract for several years. All other (including Emerging Markets India, Brazil) includes economies with high growth but with significant slow-down risks; energy demand growth will slow but with little risk of an outright contraction.

The below table illustrates my view on an absolutely worst case scenario for energy demand (click to enlarge image):

Until something fundamental changes (new oil alternative or new significant low marginal cost fields), from here on energy will be in an irrepressible bull formation; the upswings will be higher with the downswings being less severe. Oil can trade at below $60 per barrel if demand contracts to 81 million barrels per day because at this level of demand the supply from high marginal cost producers is not required. Even with demand at 81 million per day, prices would need to be substantially higher than the marginal cost of production of the low cost producers as long as there is an expectation of demand growth from these levels.

As illustrated in the chart above, demand destruction of this magnitude is not something I can contemplate even in a deep and prolonged recession; the only other reason demand destruction of this magnitude can occur is through new technologies providing a new source of energy capable of replacing oil; neither are remotely visible today. Long term oil prices can also fall with a sustainable decrease in the marginal cost of production; this again will require new technology – none in sight today. Oil prices can also fall if a new low marginal cost of production source is found; this needs to be a significant find – nothing below 4 million barrels per day will reduce dependency on high marginal cost sources; once again nothing of this magnitude is remotely visible.

My conclusion: Go buy. Oil is finally trading at and below fair value; it might fall on sentiment, valuations might get better, but no one can time the market to perfection.

Disclosure: Long BP with conviction; Oilfield Services risks are slightly higher so while I am long SLB, it is a small position.

Comments

[mangolfer:]

I'm holding out for the $15 per barrell you mentioned. The way things are going, it seems to be coming....

2008 Dec 02 07:20 AM

[yank:]

""Valuations might get better"-
You have to be kidding right? RIG, NOV, and others are trading at P/Es of 3 or 4, with a PEG ratio of 0.3 It doesn't get any cheaper than that. Basically, these cos are being valued at $15 oil. As you say that will never happen. Yes sentiment is poor. But much of that is tied to the strong US dollar (USD). I cannot see the current rally in the USD as being sustainable. When it cracks oil prices will adjust upward.

2008 Dec 02 08:34 AM

[NOWHEREMAN:]

Opec crude is priced about $5 below WTI because it is a basket of oil grades. Meanwhile the garbage crude produced by Iran and Venez. is about $10 below.

When the target of $75 is bandied around, are the Marginal suppliers getting $65 or does the $75 refer to Iran/Venez. and is WTI really $85?

Can you clarify?

2008 Dec 02 08:39 AM

[SW Richmond:]

I am slowly building a position in DXO. At 3-4 bucks a share, I'd be an idiot not to.

2008 Dec 02 08:45 AM

[Shiv Kapoor:]

WTI = $75. Rest get penalty or premium on WTI depending of it is heavy or light sweet crude.


On Dec 02 08:39 AM paultaut wrote:

> Opec crude is priced about $5 below WTI because it is a basket of
> oil grades. Meanwhile the garbage crude produced by Iran and Venez.
> is about $10 below.
>
> When the target of $75 is bandied around, are the Marginal suppliers
> getting $65 or does the $75 refer to Iran/Venez. and WTI is really
> $85?
>
> Can you clarify?

2008 Dec 02 08:45 AM

[bertil:]

Excellent clear thinking backed up with (hopefully reliable?) facts.
My question: Why do you prefer BP to other integrated oil companies?

2008 Dec 02 09:01 AM

[Ferdinand E...:]

Interesting paper, even though I am tempted to reach for my 'leading academic energy economist in the world' hat. I know of nothing in the production behavior of any OPEC producer to believe that if the price of oil fell below 60 or 50 or 40 dollars, production would have to be reduced because - according to you - price would be below marginal cost.

What about speculation rather than fundamentals taking the price of oil to $147/b? There is undoubtedly a speculative component in that price, and I'm prepared to accept about 10%, but if you study rates rather than levels, then it's quite obvious that consumption was outrunning production. That is the bottom line regardless of what speculators do or don't do! As for Saudi Arabia's future plans, it's the living truth that they don't intend to produce more than 12.5mb/d, regardless of how much oil they have or don't have in the ground. Why should they? The forecasts of the IEA indicate something else, but they don't really understand very much, do they.

As for Nigeria and Angola leaving OPEC, that's certainly not impossible, although I won't say why. Oil is funny though, because to my way of thinking the Norwegians should have cut production at one time in order to keep the oil price from tanking. Why didn't they? The same reason that Norway bought new military aircraft in the US rather than Sweden, which is that they wanted to be wined and dined and shown some respect by movers and shakers in the US. Put another way, stupidity was behind that decision. As for Russia, they understand the advantages of a high oil price, and I wouldn't be surprised if they didn't move to help support the price.

Anyway, this is a paper that deserves to be carefully examined.

2008 Dec 02 09:08 AM

[User 283977:]

I agree, OPEC will reduce production and this has to increase prices.

As to why BP, its yield at $46 is over 7%. So you get paid 7% while you wait. Even if BP were to go lower, 7% is a pretty good. So BP is a potential growth stock and a value investor stock.

For example, Exxon (XOM) is priced at 76 and change, but its yield is 2.1%. So BP's yield is over 3 times higher.

This is why I am long on BP.

2008 Dec 02 10:35 AM

[topshelf:]

First let me paste a clip from one of the many articles on the OPEC Meeting. Take note of the wording, the hint, of something more than a Cut in Supply being possible. I'll asterisk the words:

TEHRAN (AFP) — OPEC will decide on a "major" output cut next month if the oil market is deemed to be deteriorating, the cartel's secretary general Abdalla Salem El-Badri said on Monday.

"If we see the market is deteriorating we will make ***a major action*** in Algeria *and anywhere if necessary*," he told reporters in Iran.

El-Badri, who is attending an oil and gas seminar in Tehran, said earlier that the Organization of Petroleum Exporting Countries will cut production by a "good amount" when it meets in December to tackle tumbling prices.

"If there is ***an action** that OPEC can take, ***it will not hesitate*** to stabilize the market," he said in English.

"We can't say how much the output cut will be in December but for sure there will be an action because we're seeing that stocks are high," he said. "I cannot tell you (the size of the cut) but it will be a good amount."

"The price of 75 USD is reasonable but our outlook is for between 70 to 90 USD per barrel," El-Badri said.

The cartel's secretary general said non-OPEC oil producers "Mexico and Norway have already declined the production naturally by themselves," adding that OPEC would seek to convince Russia to join the efforts as well.

"After Algeria meeting myself or the head of the conference will go to Moscow to try make them participate."
======================...
my 2 cents:

Consider that Saudi is the friendliest to the US/West. IMHO Saudi sent a Hint of the price needed to make the Cut on the Low side.
Saudi gave the West a Marker, a Target Price, of $75.
The closer to $75 that Crude gets to in a mere 2 weeks, Dec 17th, the less the Cut of Supply. Should Crude stay at the $50 Range, or worse be below $50 by Dec 17th, then the Hawks of OPEC get their way, and OPEC makes a stunning Cut and/or an "action".

If you read the wording carefully, you can see OPEC gave a delicately worded Caution. A Cut is definite. We don't know how much. What is "an action"? Is that something more than a Cut, something like a Halt?

There are a few more important items in play at this same time. OPEC has an opportunity here to get an increase in their Power. Russia may consider increased cooperation with OPEC, paving the way an eventual joining....but only if they see the way this dilemma is handled turn out to work. Norway and Mexico are also watching.

In another way of looking at this, the coming decision is being placed in the West's Court. OPEC passed the "Ball" to the West, and said, [my wording in a brass tacks manner], "if you don't increase the price of Crude, we will make a huge Cut. We in Saudi will try to make $75 acceptable to the others, and we in Saudi need $75 also. Even with $75 we will have some countries saying they need a higher price. So its up to you. If we don't see an increase at or heading towards $75, we're going to shock you... your call'

2008 Dec 02 10:46 AM

[Here's a th...:]

I think it should be obvious now the increase in oil cam from speculation not demand. Improvements in production however are real and so is the recession.

2008 Dec 02 10:47 AM

[Shiv Kapoor:]

mainly div yield & turn-around potential; in prior upcycle they were plagued with misfortune & qhse problems - I think the right steps have been taken to effect a powerful turn-around.


On Dec 02 09:01 AM bertil wrote:

> Excellent clear thinking backed up with (hopefully reliable?) facts.
>
> My question: Why do you prefer BP to other integrated oil companies?

2008 Dec 02 10:53 AM

[Shiv Kapoor:]

you can get the numbers from EIA's website. This www.eia.doe.gov/steo links to an EIA article; numbers are largely from files available on the bottom right hand corner of thw webpage.


On Dec 02 09:01 AM bertil wrote:

> Excellent clear thinking backed up with (hopefully reliable?) facts.
>
> My question: Why do you prefer BP to other integrated oil companies?

2008 Dec 02 11:00 AM

[mannheim:]

Why are the Oilfield Services companies like SLB higher risk?

2008 Dec 02 02:37 PM

[melfsh:]

Did I miss it, or did Mr. Kapoor not take into consideration that the fields that are currently produceing the 86 million barrels a day are declining at a 4-5% rate per year?

2008 Dec 02 03:12 PM

[Urbane Gori...:]

So far, OPEC doesn't seem to have the gumption to really cut production. Although they talk about it a lot and even publicize cuts, they don't really follow through in any sustainable fashion. I'm guessing that this is due to three reasons:

1) Each member of OPEC has it's own agenda. Many of them just **need** the cash flow to support their social programs.

2) The Saudis do have ties to us, seem to understand that the world is in a financial situation and realize that if they cut production, they might cause a further deterioration. To my way of thinking, the Saudis are the most forward thinking of the Cartel.

3) It's quite possible that they feel they cannot stop the downward spiral of oil pricing and can only talk tough.

All of my opinions are short term. When the economy gets going, or when the the market realizes we are underproducing oil, then price will skyrocket and we'll all feel good about $5.00 a gallon gas again!

jegan ;-)

2008 Dec 02 03:44 PM

[uberneocon:]

Nigeria says they won't cut as they already have a lot shut in because of MEND's activities. As for Manifa, total junk oil, and I think they are still a few $$ billions away from building the drilling islands, causeways etc in the Gulf. While I could (probably!) be wrong, don't recollect the Saudis in the past mentioning an "appropriate" price, viz $75 now. Given the trickey and intertwined US-KSA relatonship, the Saudis are both eager to keep the US fairly happy, but while also looking after their own pocketbook. I'm just guessing this comment on price could be a prelude to a Saudi cut in production. Guess we will see pretty soon.

2008 Dec 02 03:44 PM

[Shiv Kapoor:]

Taken into consideration. New production coming on line replaces reduction from existing production and then some. This cannot continue for ever, but as of now, there are enough new production fields to replace falling production from older fields.


On Dec 02 03:12 PM melfsh wrote:

> Did I miss it, or did Mr. Kapoor not take into consideration that
> the fields that are currently produceing the 86 million barrels a
> day are declining at a 4-5% rate per year?

2008 Dec 02 10:44 PM

[Shiv Kapoor:]

SLB is a top notch company. Risks are marginally higher because the impact on earnings cannot be assessed until producer capex budgets are adjusted for lower oil prices; i.e. less visibility. Also while the dividend yield on this stock is good and very secure, BP's is as secure and higher. The BP yield gives you the long term market returns and this mitigates risks greatly. Finally, market is not fully pricing in BP's recovery from its Alaska/GoM problems of the past. SLB is excellent value here and I will likely accumalate on dips.


On Dec 02 02:37 PM mannheim wrote:

> Why are the Oilfield Services companies like SLB higher risk?

2008 Dec 02 10:48 PM

[M3:]

Good aricle. But the whole basis for your arguement is that USD60/bbl-USD75/bbl is the price needed to cover the marginal cost of production for the additional 7mbd needed now to keep the world running. Why would you think its USD60-75/bbl and not lower like USD30-45/bbl? Oil fields keep pretty tight-lipped about production costs so the actual marginal costs are anyone's guess. However, its a fact that a lot of the increases in production that is coming online now were based on oil prices forecasts of USD30-45/bbl made 10 years ago. Not alot of people had the vision back then that oil would go this far up (especially when oil was trading at around USD15-20/bbl). USD60-75/bbl might be needed for future projects but those that will be coming online in the next 2 years definately have lower costs. Hence, although prices probably won't go too far down, it might be 2-3 years before they rebound to the USD70's/bbl level.

2008 Dec 04 01:41 AM

[was:]

You might be right for giving a range of USD 30-45/bbl. But this is more likely the break even value not the profitable number. Big investments of billions of dollars (canadian oil sands, deep sea production, etc.) are made to get profits of comparable volumes.
Any comments??


On Dec 04 01:41 AM M3 wrote:

> Good aricle. But the whole basis for your arguement is that USD60/bbl-USD75/bbl
> is the price needed to cover the marginal cost of production for
> the additional 7mbd needed now to keep the world running. Why would
> you think its USD60-75/bbl and not lower like USD30-45/bbl? Oil fields
> keep pretty tight-lipped about production costs so the actual marginal
> costs are anyone's guess. However, its a fact that a lot of the increases
> in production that is coming online now were based on oil prices
> forecasts of USD30-45/bbl made 10 years ago. Not alot of people had
> the vision back then that oil would go this far up (especially when
> oil was trading at around USD15-20/bbl). USD60-75/bbl might be needed
> for future projects but those that will be coming online in the next
> 2 years definately have lower costs. Hence, although prices probably
> won't go too far down, it might be 2-3 years before they rebound
> to the USD70's/bbl level.

2008 Dec 04 05:34 AM

[M3:]

Oil project analysis 10yrs ago were done the same as they are today, i.e. they're meant to make profits not just break even (with even stricter criterias perhaps because oil didn't seem to be going anywhere back then). If a project got a go, then you can bet they where going to make profits even at USD30. That's how companys like XOM got so rich in the past 2 years. It takes 10-15yrs to get a serious offshore production going and you're right it take billions. So the more stringent you're assumption for future oil prices the safer you are. New projects online within +2/-2 years from now were definately using oil forecasts of USD30-45/bbl, even oil sands. But to be fair 10 years ago oil sands were just a pet project and no one thought them seriously until oil topped USD60, which was only about 3 years ago. Also, for those who have forgotten, oil price (real adjusted for Oct 2008), averaged USD44/bbl from 1980 to present, and guess what? We've come full circle again with oil at ~USD45/bbl. So there's more reason why oil should be below USD60 than at USD200/bbl i.e. because we've been there! Check it out!(www.eia.doe.gov/emeu/s...)

On Dec 04 05:34 AM was wrote:

> You might be right for giving a range of USD 30-45/bbl. But this
> is more likely the break even value not the profitable number. Big
> investments of billions of dollars (canadian oil sands, deep sea
> production, etc.) are made to get profits of comparable volumes.
>
> Any comments??

2008 Dec 04 07:02 AM

[Shiv Kapoor:]

I would say projects now coming to fruition were based on oil projections at $40-$45. With opex inflation running at 6% and capex inflation running at 12%, average project inflation is 9%; which is some 6% over CPI based inflation of 3%. $40 compounded at a 4% inflation premium for the industry calls for $60 oil.


On Dec 04 01:41 AM M3 wrote:

> Good aricle. But the whole basis for your arguement is that USD60/bbl-USD75/bbl
> is the price needed to cover the marginal cost of production for
> the additional 7mbd needed now to keep the world running. Why would
> you think its USD60-75/bbl and not lower like USD30-45/bbl? Oil fields
> keep pretty tight-lipped about production costs so the actual marginal
> costs are anyone's guess. However, its a fact that a lot of the increases
> in production that is coming online now were based on oil prices
> forecasts of USD30-45/bbl made 10 years ago. Not alot of people had
> the vision back then that oil would go this far up (especially when
> oil was trading at around USD15-20/bbl). USD60-75/bbl might be needed
> for future projects but those that will be coming online in the next
> 2 years definately have lower costs. Hence, although prices probably
> won't go too far down, it might be 2-3 years before they rebound
> to the USD70's/bbl level.

2008 Dec 04 08:02 AM

[johnboyltd:]

Excellent article however the maths need amending for the production decline rates which may be in excess of 4% ( 3.5 million bpd). Also many of the higher cost projects that are coming on stream were proposed at $45 -$55 / barrel.Notwithstanding that a correction is clearly going to happen, hopefully soon!!!

2008 Dec 04 11:37 AM

[User 283977:]

Lots of great discussion points...

However, the final arbitrator is the market, and the market appears to have spoken. Kapoor's call was correct with respect to the direction the market would be going based on anticipated hefty supply cuts by OPEC. Good call Kapoor.

- - - - - - - - - - - - -
Crude oil for January delivery surged 8.1% to $50.05 a barrel in early electronic trading, topping the $50 mark for the first time since Dec. 1. It was last up $2.92, or 6.3%, at $49.20 a barrel on the New York Mercantile Exchange.

Monday's gain followed oil's 13.4% gain last week, the biggest weekly rally in four years.

Oil prices surged "on hopes of hefty supply cuts by OPEC," said Nimit Khamar, an analyst at Sucden Financial, in a note.

2008 Dec 15 11:29 AM

[Shiv Kapoor:]

I think RIG, NOV & SLB are now attractively valued. Expect bottom on SLB of $32-$33; RIG of $38-$39 and NOV of $17-$18. Earnings flows for SLB should be fairly negative for the next 2/3 qtrs so it will likely give a buy on declines opportunity. The same holds true for RIG/NOV but these two are somewhat insulated because of excellent backlog.


On Dec 02 08:34 AM yank wrote:

> ""Valuations might get better"-
> You have to be kidding right? RIG, NOV, and others are trading at
> P/Es of 3 or 4, with a PEG ratio of 0.3 It doesn't get any cheaper
> than that. Basically, these cos are being valued at $15 oil. As you
> say that will never happen. Yes sentiment is poor. But much of that
> is tied to the strong US dollar (USD). I cannot see the current rally
> in the USD as being sustainable. When it cracks oil prices will adjust
> upward.

2008 Dec 24 01:10 AM