farwest

Don't Believe This Rally in Oil

Articles like this (and Micheal Lynch's NYT piece) are exactly why so oil will stay high and go higher. They show a fundamental misunderstanding of the oil market.

Peak Oil is a "theory" like gravity is a theory. They are immutable. Just because a trader or a consumer doesn't like that gravity exists, doesn't change the fact that it does - and no amount of ill-informed comments will change it either.

>Bespoke Investment Research reported yesterday that Oil has >now gone up 108% in price per barrel in 118 calendar days.

Wow, "sounds" impressive! Too bad it is a totally meaningless statistic. Just how high has worthless Citi gone up? Or AIG? Or Copper? Or Lead? Or Nickel? They are all up as much or
more in percentage terms. And why not say "in the last 365 days, oil is down 50%" (or whatever the actual number is)? But of course, that wouldn't produce the desired "shock" statistic.


>Today’s oil bulls think oil is the best place to be because the >building of infrastructure, in their minds, will dominate the >economic recovery. This compares to U.S. consumers who have >permanently reset their spending at lower levels.

>We think they are wrong. Even though China or India have one >billion people their consumers still control a pittance or Mini-Me >level of buying power in comparison to the average American. An >old and true business adage says, “If nothing is sold, nothing is >produced.” Most production is held hostage by retail sales. Just >ask any automobile company today and they will reinforce us. If >the U.S. economy doesn’t come back, don’t hold your breath >waiting for everyone else to get back their "Mojo" back.

Hmmm. With all your "research", did you really fail to somehow
notice that almost all the growth in demand in oil in the last ~5 years came from the developing world? And that the developing world hasn't gone into recession despite all the claims by the xenophobes that if the US sneezes, the rest of the world catches a cold? If China, India and Brazil have a cold (while still growing 6-10%) then I think every American/European would dearly love to be so sick.

As for China not having the same per capital buying power, so what? Does that makes the 90% yoy increase in sales in cars in China in August any less astounding? Nor the fact that China overtook the US as the worlds biggest car market, selling 1MM vehicles in August? Just what do you think will power those 33,000 new cars added daily in China? Oxen?

While the arrival of peak is debatable (only a matter of when, not if), it is a meaningless argument for consumers. WHAT MATTERS IS THAT THE ERA OF CHEAP OIL IS GONE - the incremental bbl costs more than $60 to produce (oil sands, heavy oil, offshore, arctic, secondary and tertiary recovery medium and light fields etc).

Add in the stunningly steep and massive declines in what was the second largest field (Cantarell) in the world until last year (now ~8th and declining faster than all predictions at 35% yoy), it's clear that the era of cheap oil is over.

When the world's biggest field (Ghawar) starts its decline, the world oil market will panic. That day is coming - soon - maybe 5 years, maybe 10. But it is coming like day follows night. In the meantime, it is sufficient to know that $60 is the likely floor in oil - drops below will only be temporary and will be huge buying opportunities.

Natural Gas ETF Premium Reaches 20%: Time to Unload?

For those suggesting to not buy the ETF and instead buy the producers, beware that the street has long ago bid up almost all the producers and value them as if NG was $6 again. There is no point in buying now.

From my ciphering, I can't find value anywhere for NG producers, certainly not in the CHKs of the world. Bank lines will be pulled soon as credit redeterminations kick in. Year end SEC reserve updates will decimate reserves with <$4 mcf, causing even more credit lines to be pulled. Pity the play who is unhedged or has significant hedges rolling off (likely at $8-$9 being replaced with $5-$6).

It appears way too many people think this is just another usual nat gas market - it isn't - the massive discoveries in shale coupled with technical advances with fraccing has turned the industry on its head and low prices (~$5mcf) are going to be around for years. All I can say for NG bulls, you better be praying for an unusually cold winter - else you'll enter next year with a huge over hang again.

Beyond Petrobras: Value and Growth in the 'Other' South American Oil Companies

How's that vastly over hyped and over valued BZP investment turning out for ya?

For somebody who appears to have some sense, recommending BPZ at $20 was utterly contemptible even with somebody with rose colored glasses.

BPZ, at current $6, is 50-100% over valued to the peer group and is still a sell. The only thing that could justify current price is if they have much better than expected success at Albacora. But that's betting on the come and only nitwits do that.

World's Top Producing Oil Nations and Oil Fields

"Not sure why comments like these are so important. The green technologies do have "hype" but they are also delivering. In 2008 56% of all new MW additions in the US came from "green technologies".

The old saying, liars, damn liars and statisticians comes to mind when I read nonsense like that.

The facts are the only reason so much was "green" was due to massive subsidies and investor hype - just how many shmucks, err, "investors" would put a penny into solar or wind or ethanol or biofuels today? Maybe the collapse in solar, wind, ethanol etc this year have awakened some people (for those who aren't green zealots, I suspect they already have).

Forget the hype and let science and economics drive our energy policy. The US should abandon subsidies to the usual suspects - subsidies never worked in the past, and won't work now. Solar and wind will have their day - eventually.

In the meantime, while people worry about eventual decline in oil supplies, right under our noses in the US we have discovered massive new reserves in Nat Gas (the "clean" fuel) in just the last few years (reserves have increased a mind boggling 35% and still growing). If we switched from coal fired base load electrical production to Nat Gas, we'd prevent huge amounts of pollution and drastically lower our CO2 emissions (coal produces twice the CO2 per btu as Nat Gas).

Lets focus on the here and now, not pie in the sky wishful thinking by green nimrods who've been wrong for decades.

Metalline Mining's Silver Lining

Yikes. What a joke commentary. MMG abandons their FS 99.9999% finished and never publishes it - must have been so bad that no amount of lipstick could make this pig deposit profitable.

Six Reasons Natural Gas Is Better than Oil

Unbelievable codswallop!

You've got it entirely backwards and show a shocking ignorance of the energy market and NG in particular.

Jeff Macke Implodes on CNBC

Is Jeff institutionalized yet?

Four Canadian Energy Stocks on the Rise

Oh gawd, overweight gassy plays? Are you nutz? With $3.60 Henry Hub??????????????????

I thought I had heard it all, but that investment philosophy takes the cake...

Petrobank Energy Can Deliver, Even with Low Oil Prices

I had to comment a bit more. Frankly, your analysis infuriates me - the type of "analysis" that is heavy on "story" and little on valuation - all to common to suck people in and get their arse handed to them.

Granted, THAI might work. It's come a long way, but there are plenty of technical issues that are too involved to bother discussion here that ensures that THAI will never replace SAGD etc etc. And the time to bet on THAI was 2 years ago when PBG stock offered 10-20 bagger upside (were you one of the few saying buy back then?). Now, at BEST, it's a 1-2 bagger and incremental moves will be slower and slower as the law of large numbers kicks in.

I had to cringe at your statement that PMG can expect wells to add 10-20% at a time - again, that's possible, but is otherwise an unrealistic expectation. 1,000 bpd wells are good wells even in Columbia. 3-6K bpd per well is uncommon and not something ANY rational investor should expect.

Finally, suggesting that the market gives little value to THAI is ABSURD. If you compare oil sands plays with similar land package and look at conventional oil plays with similar production, you'd find that a combined valuation significantly lower than what PBG now enjoys. Right now PBG enjoys a premium valuation - perhaps it is deserved, but I sure wouldn't "invest" on a hope and a prayer with the stock at current valuations - At $2, it was a good risk reward. At current $26, you have to be smoking something - but in this market, it's clear that many who should know much better, light up all day long...

Petrobank Energy Can Deliver, Even with Low Oil Prices

6.1 cf multiple??? In this market? Get real. Many juniors are trading at 1-3x cf. A premium multiple is 4x.

Can Biofuels Bottom?

Ethanol isn't at a bottom - it is a bottomless pit. Drop the subsidies and mandates and the entire industry will implode. If demand rises, all those virtually brand new mothballed distilleries will be brought back online - at best, pricing pressure will remain for many years and the industry will struggle mightily even when the economy turns around.

Ethanol is like most of the rest of the "Green" technologies - uneconomic except at times of high prices - and thus a horrific investment unless you are gifted at playing the hype.