BrotherMaynard

Plenty of Natural Gas: Exploration and Production Companies Keep Increasing Oversupply

excellent point about shut-in storage -- it should be considered inventory. the future supply problem b/c of lower rig counts is overblown. that's why curve flattening should be the next stage of this cycle.

just to expand on the EOG comment, stephen schork today:

"several Northeast pipelines started issuing operational flow orders (OFOs) in an apparent attempt to limit shippers exceeding their contractual limits...In addition to the Labor Day holiday, last week’s report also comprised the ratchet clause rollover. Injection ratchet clauses in the East require shippers to inject working gas through scheduled stages in order to preserve operational integrity. By September 01st no more than 80% of storage can be filled....According to the latest estimate from the EIA, maximum storage capacity in the East is 2.178 Tcf. As of two reports ago, week ended August 28th, estimated storage was 1.78 Tcf. That calculation was already 81½% of capacity or 1½ points above the ratchet. In other words, storage in the East over the last two reports was at operational capacity. Thus, the OFOs were a likely means to hold storage below the 80% threshold...What’s so bullish about that? Absolutely nothing."


here's the rest of schorks note: www.cnbc.com/id/327973...

Best Investments for Rising Oil

btw, i never understood why oil (or other commodities for that matter) were such a great idea when it came to the falling dollar? Why not just bet against the falling dollar in...the forex market? At least in the forex market you don't have to deal with non-currency related issues like OPEC or EIA demand statistics, or driving habits of americans, or how many cars chinese consumers bought? just a sloppy way to hedge in my opinion.

seriously, though, how many 10-k's has anyone read where currency risk was hedged away by buying commodities?

Best Investments for Rising Oil

RE: Nelsanity

"Oil being priced in dollars is not comparable to your house (assuming you live in the US). When Saudi Arabia sells a barrel of oil in dollars what are their costs in?"

Look...the currency markets are seperate from the commodities markets, fundamentally speaking.

There is no fundamental reason for the commodity/currency trade other than speculators think it is a better store of value than the dollar (or whatever currency happens to tickle everyone's fancy).

The dollar movement has nothing to do with fundamental supply and/or demand for the commodity, any more than it does any other asset on the planet.

The dollar can go all over the place, but commodity prices are ultimately a function of supply/demand, not currencies, despite their obvious correlations. Somebody must buy or sell the actual commodity to set the prices...the prices just aren't "adjusted" by a market maker.

Again, the dollar/commodity trade Its merely a speculative store of value. It is not an axiomatic price-setting mechanism like supply and demand, and therefore buying/selling commodities becuase of currency movements is more noise than signal. And if it goes on long enough, you start to get large dislocations.

Best Investments for Rising Oil

Not a very good -- these sort of platitudinous assumptions offered up by the author are similar to the idea that trees grow to the sky and its amazingly easy to see how this sort of careless temperatment got us into the housing mess.

"Almost every investor is aware that oil supply is getting harder to find, while oil demand from growing economies is rising."

Well, if you are a contrarian, this is a red alarm. "Almost every investor..." is like saying "everybody knows land is finite and population is growing, so housing prices are going up forever." In addition, the author didn't really offer any evidence/data to support his statements, much less for anybody to refute, but I guess just assuming he is right is good enough? That's how you lose money, in my opinion.

"Furthermore, underinvestment in oil industry infrastructure leaves open the door for an energy shock if a global economic recovery"

Again, this guy is bringing nothing to the table...no statistics, just a headline that you can read on most any newspaper or blog...in other words, every capital market on the planet has priced this in. Nobody should risk capital (short or long) based on these platitudes alone.

"Barrels are priced in dollars, so as the value of dollars fall, the price per barrel will rise."

I understand this correlation is undeniable. But the causation is flat out erroneous. Look for this correlation at any time during the 90's...it didn't exist, and for good reason. Pricing oil higher because the dollar fell is double counting. The currency markets, prima fascia, are responsible for repricing all things on a relative basis. For instance...my house is priced in dollars, so ceterus paribus, my house is worth more because of the dollar fell? You never hear Shiller or CR talk about the dollar being a tailwind for houses. It's fundamentally no different for oil and investors are asking to get burned by assuming this is a sound fundamental reason for risking capital.

"Remember that the next time some part-timer tries to sound wise by pointing out that the leveraged ETFs are calculated on a daily basis -- as if you didn't know that by now, and as if it means they can't work for periods beyond a single day."

This author could've offered some valuable insight, but instead decided to drop ad hominems. So i will attempt to add some insight to leveraged ETFs...Going long a leveraged fund is being effectively short volatility. As volatility falls, you should do OK. But as volatility rises, your returns will indeed erode. So for example, when the VIX hit 90, people lost money hand over fist, no matter which side of the leveraged bet they were are on. In the world where VIX is 20-30, they should probably do OK. But again, doing the leveraged thing is taking on unecessary risk because it adds the fate of the VIX into your total return.

Oil Rises Again: What Does it Mean?

higher prices are not the result of anything fundamental. we still have massive oversupply, evidenced by the 80m bbl floating offshore; Cushing filled to the brim; ballooning OPEC spare capacity and awful demand numbers.

the bounce is dumb money flowing into etf products in the hopes of getting in on the "dollar weakness" trade. This trade is, in and of itself, ludicrous, as oil's appreciation is due to nothing more than paper chasing paper.

In fact, I would argue that these higher oil prices are going to impel the speculative oil that is in storage to be dumped on to the spot market, putting abnormal pressure on spot prices. The evidence of this could be found in the weekly EIA reports, which would likely show a downtick in cushing supply, but abnormally large overall builds in commercial stocks.

Until there is a genuine uptick in demand, oil is going to have a tough time sustaining itself above $50 for any multi-week period of time.

Chesapeake: When Gas Prices Will Recover

"Barclays: US gas needs to go below $4 to balance oversupplied market"

www.platts.com/Natural...

Chesapeake: When Gas Prices Will Recover

Great rationale, weiwentg. this site needs more of this sober analysis. commodities are a completely random variable. all a conservative investor can do is buy a business that can thrive no matter what the price -- Be it $2nat gas or $12 nat gas. CHK used to be able to do that until their capital structure recently became prohibitave. This is, again, where mcclendon's ideologue-mentatlity ("nat gas will never go to $2") has seriously jeoprodized its long-term prospects. Yes they have lots of valuable real-estate...but this is precisely the worst time in history to attempt large-scale, premium-inclusive, monetization of large assets. I'd throw Rio Tinto in this bin, too.


On Dec 11 09:17 AM weiwentg wrote:

> It does sound to me like Aubrey has a handle on his company's financial
> situation and his hedge book. However, what worries me is that he
> seems to assume he can sell assets in every environment. He managed
> recent large sales to BP and Norsk Hydro in a very difficult environment,
> but that's not a reason to assume he can keep doing that. Remember
> what Charles Prince said about how Citi was still dancing?
>
> The comment about Aubrey being a buccaneer really did it for me.
> The guy is hyper-aggressive. I happen to think he has a high chance
> of making it big. That said, there's downside risk in that if natural
> gas gets under, say, $4 for an extended period, I can see a situation
> in which he drives the company into the ground (meaning it needs
> a highly dilutive capital injection or files bankruptcy). Sub $4
> natural gas is a bit of a doomsday scenario, but you can never tell
> what commodity prices will do.

Chesapeake: When Gas Prices Will Recover

Other famous ideologues - Bernie Ebbers, John Mackey, Jeff Skilling...all lived in a perpetual state of denial. The reason why everybody likes them so much is simultaneously why they shouldn't be liked and their stocks should be avoided.

Oil Sector Flush with Cash, Expect M&A - Canaccord Analyst

Rather than rely on a completely random variable such as oil prices, why not model for the worst? All I ever read on this site is how oil is going to triple digits right quick. But what if that doesn't happen? What If a company can't operate at $30bbl? If thats the case you shouldnt own it any more than you should go to the casino. That thought process is about as rational as it gets.

The EIA is required to make guesses. They're obviously no better than the next guy as they were about 50% off the mark this time around. It's irrational to believe that the EIA or anyone else for that matter can divine what the price of oil will be in the future.

For instance:

"As a result of the sputtering economy and lower petroleum demand, the price for the U.S. benchmark West Texas Intermediate oil will average $63.50 a barrel next year, the EIA said."

www.reuters.com/articl...







On Nov 27 10:26 AM jayjayjay1212 wrote:

> HAHAHA 30$ oil... What an irrational investor, I'm guessing he was
> the first one to call oil at 250$ when it was trading at 140$ + ...
>
>
> By the way, the integrated companies know the long term equilibrium
> price should be more towards 100-120$ in real dollars, just as the
> International Energy Agency mentioned in their study. BrotherMaynard,
> if you know more than the IEA, please tell us how you got this good
> and why you are not CEO or on the board of any of the big energy
> companies!
>
> As Warren Buffett says, better to buy a great company at a good price
> than an average company at a great price. The great names in Oil
> Sands (Suncor, Canadian Natural Resources and Encana) would fit in
> the former category, so the big guys in Energy are likely shopping
> around as we speak in order to boost their growth prospects.
>
> As for your ''Time to move on'' statement, most of us are actually
> WORKING in this sector, so this is our job, we are not ''moving on''
> to the next ''hot sector'' as I'm sure you already have done. We
> actually study the fundamentals, not what Roubini or Cramer are saying.
>
>
> Disclaimer: I own Suncor shares
>

Oil Sector Flush with Cash, Expect M&A - Canaccord Analyst

omg, this site is relentless about hoping for commodity names. integrateds have been around for almost centuries now...and that for good reason. They don't make crazy assumptions, esp. given the crazy nature of crude. $49 of oil is historically extremely expensive. Integrateds know this. So why would they pay for an incompetent company that can't manage when oil falls below $60 now, rather than wait until oil hits $30 and it goes out of business...just buy it from the Ch 11 judges.

It was a bubble folks...time to move on.

Time to Fill Up on the Strategic Petroleum Reserve

why don't we wait until oil hits $30 until we fill up.

Gold Miners: Biggest Drag on My Portfolio, Yet the Biggest Opportunity

take ag/commodity prices today and whack those in half...then ask your self if you would want to own the equity names. i promise those names you mentioned above would all of the sudden look extremely expensive (NOV might be the exception).

Gold Miners: Biggest Drag on My Portfolio, Yet the Biggest Opportunity

Wow a bunch of commodity/ag plays. lots of imagination there.