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John Gilluly  

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  • EIA: U.S. Crude Oil Storage Capacity Will Not Top Out In 2015 - Presaging A Short Squeeze? [View article]
    Sorry. I knew that would come up. CL is the futures ticker for crude. On Wednesday after the Fed announcement, April crude was $44.50, May crude was $46.50. Wow, sit on a barrel for a month, and receive an extra $2 for doing so? I have read that it only costs 45 cents a month to store oil at Cushing; and if you are a regular user of the services, it may even be cheaper. That was a locked-in guaranteed $1.50 profit.

    I don't trade futures, but I think we witnessed the first of the dollar's many dead cat bounces yesterday.

    By the way, gas rigs (not mentioned here) slipped to 242 on Friday. That's the lowest print recorded by Baker Hughes in 28 years. 2015 is also the year when EPA has mandated/planned the largest coal to natgas transformations at power plants in decades. Not a bad time to start doing that, in my mind. Probably the best opportunity to buy Natgas stocks since 2012 (FGC, FRAK), and GASL (for the risky, but it's got great names in its index). Natgas rigs are down 40% in a year.
    Mar 21, 2015. 07:30 PM | 1 Like Like |Link to Comment
  • EIA: U.S. Crude Oil Storage Capacity Will Not Top Out In 2015 - Presaging A Short Squeeze? [View article]
    Doug, I thought that too, but when I ran some charts on the dollar and its behavior vis a vis oil prices, it appears to me there is some kind of lock-step in tandem.

    Steadily-lower oil prices heat an economy up and the dollar (which is really a "representative" of the strength of the US economy) steadily rises. And in this case - the ever present Wall Street worry over the Fed and interest rates also boosted the dollar, so there was a double-whammy on oil - both crude overproduction/ strengthening of the economy combined with interest rate gyrations.

    But when oil hit $42/bbl on Wednesday AND the Fed did not tighten on the same day, I think the sudden drop in the dollar says that the bottom in Crude was in. Have you seen the sudden tightening in the near to forward CL contract over the last 2 days? Breathtaking.

    In some respects, I think the economic effect of dramatically lower crude prices in a short amount of time are a little like an inoculation or Vitamin B shot. It's in the system. Now it has to work its way through.

    I did some comparisons between 2008-09 and 2015 in an recent SA article comparing the two oil bear markets (http://bit.ly/1C8q7c0), especially regarding the role of the dollar.
    Mar 21, 2015. 03:46 AM | Likes Like |Link to Comment
  • EIA: U.S. Crude Oil Storage Capacity Will Not Top Out In 2015 - Presaging A Short Squeeze? [View article]
    Doug, if all the headlines care about is what at's Cushing's Storage facility, then it doesn't really matter what's available some other place and at whatever price it costs to store there. It won't figure in the price of WTIC.

    As the real estate guys say, "Location Location Location".. You might think it irrational (people in a room on fire can be irrational) but the news Cycle is going to be Cushing Cushing Cushing until the supply in storage at Cushing goes down.

    That's the reality. Not the hope (which bullish articles are full of, and of which precious little has come, besides more information that the market has ignored in its relentless trek downward).
    Mar 20, 2015. 07:36 PM | 2 Likes Like |Link to Comment
  • Interesting Parallels Between The 2009 And 2015 Oil Bear Markets [View article]
    Nat Gas rig count today fell to 242, the lowest since Baker Hughes began keeping records in 1987.
    Mar 20, 2015. 05:28 PM | Likes Like |Link to Comment
  • Interesting Parallels Between The 2009 And 2015 Oil Bear Markets [View article]
    I was hoping that it was the first of the one-day wonders for the dollar at the beginning of its downswing - or at least a consolidation for it.

    A friend sent me these two links (below) from zero-hedge today. They go into the strong negative relationship that the dollar has had to commodities, and especially to Emerging market economies, which may be worth an investment-look if the dollar begins to weaken now. EM has been decimated by the strong dollar and commodities drop.

    1 (http://bit.ly/1EwANhE) and 2 (http://bit.ly/1EwANhF)
    Mar 19, 2015. 07:12 PM | Likes Like |Link to Comment
  • Interesting Parallels Between The 2009 And 2015 Oil Bear Markets [View article]
    JCH57, thanks for the nice background on GASL. One last item- if oil doubled (factor of 2x1) from $44 in a couple of years, the highest GASL would ever get to again is likely (6x1) or $15-$16. That's the problem with these 3x funds - they go down by a factor of 5x1 or even 6x1 on a sustained, trending drop, and that's what's happened to GASL in the last 9 months. With something like UWTI it's much much worse. It will likely never rise above $12 ever again, unless there is a reverse stock split.

    The three things to look for over the next month will be: dollar (up or down); inventory build (up or down); and rig count (how much down). Virtually all the real growth in the world oil market has come from the American frackers. They are the ones who have filled the oil tea-cup up to its brim. If/when they back off appreciably and measurably on their production, the "spill-over" that's been resulting will stop, and with it, the "drops" in crude over the edge of the cup. The big question will be how much and how actively they respond to market forces.
    Mar 19, 2015. 06:54 PM | Likes Like |Link to Comment
  • Interesting Parallels Between The 2009 And 2015 Oil Bear Markets [View article]
    Saw this article today about oil production slowing. Also mentions March time frame: http://seekingalpha.co...
    Mar 19, 2015. 02:11 AM | Likes Like |Link to Comment
  • Interesting Parallels Between The 2009 And 2015 Oil Bear Markets [View article]
    Well, it's after the Fed announcement - they're not raising rates as I expected - and the dollar is dropping like a rock (good).

    That's one obstacle out of the way.

    I also noticed the terrific tango in the May CL contract - it's two bucks higher than April's (!) +5% in a single month? You could buy April's contract - store it for a month - and deliver it in May for a guaranteed $1.50 profit (3.5%); annualized that's 36-40% for switching between storage tanks. Doesn't look like Mr. Market plans on keeping oil down near $40 for long.

    Next batter up is the rig count on Friday afternoon. (See: http://bit.ly/1xfg6de) We need rigs to drop another 66, with 50 of them being the highly productive horizontal ones. That will put us at the -50% attrition mark. If another 50/per week drop between now and mid-May, the number of operating oil rigs in the US would be about 400, or half of now, and 25% of the peak.

    Oil Volatility (OVX) is dropping big today too - now down 11% and counting. If it crosses below 46 by Friday, it will take out support

    Last, but not least, seasonal demand needs to pick up 5%, and I think we round the bases and bring this one home.

    Needless to say, the oil stocks are rocking today, and the fans are cheering. Let's hope this is not another one-day wonder.
    Mar 18, 2015. 02:39 PM | 1 Like Like |Link to Comment
  • Interesting Parallels Between The 2009 And 2015 Oil Bear Markets [View article]
    No, I know nothing about that; but past is not necessarily prelude, yet saying that - especially when I was looking through the rig data - March was always the lows for gas rigs (1991, 1992, 2012); and Q1 was the lows for almost all the oil bottoms I could find, going back 45 years.

    Come April 1, I have read that a lot of small oil companies may not get their credit lines renewed going forward by the banks. Sooner or later the rig cuts have to bite, although the way it seems now - if natgas is any indication, a few hundred oil-fracking rigs (400-500) could keep the largest economy on earth fully-stocked with oil indefinitely.

    Over-supply is a worldwide problem. The Saudis act like their supply of oil is inexhaustible, and it hasn't proved them wrong for almost 50 years.
    Mar 18, 2015. 01:45 PM | Likes Like |Link to Comment
  • Interesting Parallels Between The 2009 And 2015 Oil Bear Markets [View article]
    *
    To make the case that the Fed is not raising rates any time soon, the following data is helpful:

    Real Median Household Income in the United States is at a 20 year low (See: http://bit.ly/JqxJPC)

    The labor participation rate (the active portion of an economy's labor force, in this case, all those in the US 16 years or older who are either employed or are actively looking for work, as a percentage of the total population) is at a 10 year low. (See: http://1.usa.gov/pSpjQo).

    Inlfation expectations are hovering just above 12 year lows, and just under the Fed's target rate of 2% annual deflation. (See: http://bit.ly/1xeRQYJ)

    I don't see any main-street case to raise rates here, and the strong dollar is affecting our overseas multi-nationals, so I don't see them clamoring for a rate hike, either.

    The truth is - we are now the strongest economy in the world, growing stronger by the day, and the energy fiasco will only prove that strength going forward. Cheap energy - expanded across all sectors in the US is quietly underpinning the secular bull market we are in. The US could be energy-independent much sooner than anyone even dreamed-of 5 years ago. We are swimming in a glut of oil and natural gas, extracted by a technology that can do more, sooner, and with less equipment, than ever before.
    Mar 18, 2015. 12:18 PM | Likes Like |Link to Comment
  • Middle East OPEC Oil Rig Count Jumps 14% [View article]
    I read a very detailed article on CHK that its cost per BOE is $27/bbl. The CEO of EOG resources (the largest fracker) said his company could make more money today at $65/bbl than they could 3 years ago at $95/bbl. Let's assume that the technology has gotten so much better they are able to do this. Most of the reports I read is that American frackers would be overjoyed at a semi-permanent $55-$60 oil price.
    Mar 16, 2015. 12:43 PM | Likes Like |Link to Comment
  • Oil Demand Growth Risks Underestimation [View article]
    Nice article. First of its kind in MONTHS. One out of maybe a 1,000 articles on oil. That in itself is bullish. Long ARP and GASL.
    Feb 20, 2015. 01:43 AM | 1 Like Like |Link to Comment
  • These 5 Signs Indicate That Oil May Have Already Hit Rock Bottom [View article]
    GASL is a 3x leveraged ETF composed of the best of the best of blue chip E&P oil and gas companies. See Page 2 of (http://bit.ly/1z9VqAz) for a list of the companies. The two MLPs - ARP and LINE - are also picks, along with UPL. All 3 of these companies have their oil and gas production hedged at much higher prices.
    Jan 28, 2015. 03:52 AM | Likes Like |Link to Comment
  • These 5 Signs Indicate That Oil May Have Already Hit Rock Bottom [View article]
    Hawk,

    You write some of the clearest, easy-to-understand articles I have read on SA. Thank you.

    If readers are interested, you made a point about impending interest rates. I think interest rates will remain unchanged or low for the remainder of the decade. The recovery period we are going through now - with its large unemployment rate among the boomer generation - is likely to be a permanent secular drag (not a cyclical one) for the remainder of the decade.

    I don't see anything out there that even hints of strong secular growth. Our situation today is similar to the long recovery after the Great Depression years when interest rates stayed low for THIRTY YEARS (1932-62).

    For charts and a detailed discussion on interest rates, see these two articles below (from 2013):

    4% Mortgage Rates for the Remainder of the Decade? (http://bit.ly/1aAUA4R)

    Are Bonds on a Collision Course with Housing, History, and the Fed? (http://bit.ly/1kazLC7)

    ++++++++++++++++

    Lastly, from a technical perspective, a pattern of higher lows in oil-sector ETFs and stocks is developing - See GASL, ARP, UPL.

    Today - when the Dow was down 350 pts - oil-related stocks were flat or up on the day. Some were up as much as 6%. They have not followed crude down.

    It is my understanding that the oil-stocks lead the price of crude out of a bear market by as much as 6 weeks. Mid-March is what I have been hearing as the period when the savage rig-count cuts and Capex cutbacks will finally begin to affect supply. The oil stocks will likely rally on the day the largest oil inventory (supply) in history is recorded. When you reach the lowest place on earth, there is only up to go. With a 6 week lead time (stocks are anticipatory), January 30th is the new mid-March. It's likely that Spring in the Oil Patch has already arrived.

    I am long GASL. ARP, LINE, UPL are also picks.
    Jan 28, 2015. 03:26 AM | Likes Like |Link to Comment
  • Don't Rely On Your Emotions To Trade The Oil Patch [View article]
    Oil to gold ratio rose to 28.6 bbls per oz of gold at the close today. Anything could happen, but we are closing-in on the all-time record spikes of 1986, 88, and 89 when oil was $10/bbl.

    "Invest" on the basis of a few ephemeral spikes - that lasted brief moments in time during the last 10,000 days - or the other 9,900 days (99% of the previous 29 years) - when the ratio of crude to gold was lower than it is now?
    Jan 23, 2015. 05:40 PM | Likes Like |Link to Comment
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