tag:blogger.com,1999:blog-16133993814110307742024-03-05T03:55:41.457-08:00* Petroleum Oil Gas info Blog *Oil Trader`s Blog The Smartest Trading Community On The Webmuneerhttp://www.blogger.com/profile/06546405330556671064noreply@blogger.comBlogger305125tag:blogger.com,1999:blog-1613399381411030774.post-372517093999933002009-10-14T14:25:00.002-07:002009-10-14T14:27:18.486-07:00Is Alan Greenspan Shorting The Stock Market?Former Federal Reserve Chairman Alan Greenspan said he sees the U.S. economy slowing next year as the surge in stocks comes to an end. “The odds are that we flatten out, even though earnings are doing very well,” Greenspan said in an interview with Bloomberg Television, referring to the equity market. That flattening out will probably “put some sort of dull face” on the economy in 2010, he added.<br /><br />The former Fed chief said he sees little threat of higher inflation now, even as the economy recovers. In the longer run, inflation will pick up unless the Fed withdraws the stimulus it has pumped into the economy, he said, voicing concern it may come under political pressure to refrain from doing so.<br /><br />“We are still by any measure in a disinflationary environment,” said Greenspan, 83. “Unless we sterilize or unwind the big monetary base we’ve built up, two, three years out inflation really begins to take hold.”<br /><br /><em>Petroleum Oil Gas info Blog is a website for active online futures and stock traders. I will provide my real time trading decisions and my market thoughts on this webpage.</em>muneerhttp://www.blogger.com/profile/06546405330556671064noreply@blogger.com2tag:blogger.com,1999:blog-1613399381411030774.post-69302141257665821002009-10-14T14:25:00.001-07:002009-10-14T14:25:23.893-07:00What Are The Best Stocks To Short Now?As the market rallied to such an extreme level there are probably lots of good shoting candidates on the US markets. I think it would be interesting to open a debate here on the best stocks to short right now.<br /><br />Is the dollar going to recover somewhat and are the mining and basic resources stocks that will give us the best bang for the buck? If this is the case, maybe United States Steel Corporation (X), Freeport-McMoRan Copper & Gold Inc. (FCX), Hecla Mining (HL) and Goldcorp Inc. (GG) are good candidates or even Market Vectors Gold Miners (ETF). Oil stocks could also be an interesting shorting pick, especially the smaller names that have run too far, too fast.<br /><br />But the market correction can be focused in the financials and in that case I think the best play will be on the ETF, Financial Select Sector SPDR (ETF) or in some selected names like American Express Company (AXP), Bank OF America (BAC) or some smaller regional banks. Many market analysts have been expressing concerns about the commercial real estate and there are plenty of names to sell short on that space, Boston Properties, Inc. (NYSE:BXP), Simon Property Group, Inc (NYSE:SPG) or the sector ETF, iShares Dow Jones US Real Estate (ETF).<br /><br />For instance, the short seller specialist, Jim Chanos is focusing on shorting healthcare stocks. I don`t think its the most interestign sector to short at the present time.<br /><br />But the idea of this post is to open the debate on shorting opportunities on the US stock market with the members of this big trading community sharing their shorting picks and the reasons for the their selections. This way we can take advantage of the intellectual capital that we built on this webpage.muneerhttp://www.blogger.com/profile/06546405330556671064noreply@blogger.com0tag:blogger.com,1999:blog-1613399381411030774.post-58953343814013041492009-10-14T14:23:00.001-07:002009-10-14T14:23:17.324-07:00Will The US - China Trade War Send The Markets Tumbling?"China said Sunday it would review complaints about U.S. exporters' pricing of chicken and auto products after Washington's move to slap punitive sanctions on Chinese tire imports, raising tensions in a trade dispute ahead of two planned meetings between the countries' leaders." in the Wall Street Journal<br /><br />Is this the match that will ignite a market correction? I think it is. I am watching the early price action in Asia and markets are looking soft. I am already short Dax Futures and I am considering doubling my position when the market opens later today. Globex S&P Futures are already down 10 points, which is a major move for a Sunday night Globex session.<br /><br />I think people will be running for cover on Wall Street tomorrow and for the next few trading sessions. The party may very well be over. And those who came late to the party will get a decent hangover.muneerhttp://www.blogger.com/profile/06546405330556671064noreply@blogger.com0tag:blogger.com,1999:blog-1613399381411030774.post-7711650376640421832009-10-14T14:22:00.001-07:002009-10-14T14:22:48.869-07:00Art Cashin Says That The Market Resembles The Summer Of 1987“There’s just some eerie things about this—it’s reminiscent of spring and summer of ‘87 when nobody believed the rally and it kept going up despite skepticism, people shorting into it. It ate them alive until it suddenly turned.” says Art Cashin.<br /><br />Is this a reminiscences of the 1987 stock market crash? Very interesting words from the veteran trader Art Cashin. He has been wrong all along, being bearish since late March or May but is he regaining his form?muneerhttp://www.blogger.com/profile/06546405330556671064noreply@blogger.com0tag:blogger.com,1999:blog-1613399381411030774.post-86613003636763865912009-10-14T14:21:00.000-07:002009-10-14T14:22:05.736-07:00Time To Short Oil?Crude oil futures prices ended the session lower on Friday, posting the biggest single-day loss in 2 weeks.<br /><br />NYMEX October Oil Futures dropped 3.7%, or 2.65 dollars a barrel, to 69.29 a barrel. That was the biggest decline since Aug. 31 and followed four days of gains that pushed prices up by nearly 4 a barrel on the "dollar weakness trade".<br /><br />"It's the continuing battle between (weak oil supply/demand) fundamentals and economic optimism and there's a lot of uncertainty over which is going to be the strongest performer" in the conflict, said Gene McGillian, an analyst at Tradition Energy in Stamford, Conn.<br /><br />Officials of the Organization of Petroleum Exporting Countries this week kept oil output restraints in place and said prices around current levels were fair for both producers and consumers. While OPEC leader Saudi Arabia expressed confidence over the coming economic recovery that will lift demand for oil, some analysts voiced concern about oversupply weighing on the market. I think there is an increasing possibilities that the OPEC members will cheat on their quotas oversupplying the market. But the major risk shorting oil is still the "dollar weakness trade" that has been going on.muneerhttp://www.blogger.com/profile/06546405330556671064noreply@blogger.com0tag:blogger.com,1999:blog-1613399381411030774.post-34213221180084869322009-10-14T14:20:00.002-07:002009-10-14T14:21:09.027-07:00US Markets Have Done Nothing In 8 Years"Eight years have now passed since 9/11, and the Dow is essentially unchanged since that horrible, sad day. On 9/11/01, the Dow was at 9,605. The index is currently trading just 15 points below that level at 9,590." in Bespoke Investment Group Website<br /><br />After all the bull and bear markets of all these years the Dow Jones moved less in 8 years then it normally moves in a hour. Remarkable, not?muneerhttp://www.blogger.com/profile/06546405330556671064noreply@blogger.com0tag:blogger.com,1999:blog-1613399381411030774.post-73713467517188566862009-10-14T14:20:00.001-07:002009-10-14T14:20:36.862-07:00Longest Streak Since November. Can It Continue?U.S. stocks gained for a fifth day, the longest streak for the Standard & Poor’s 500 Index since November. The S&P made a fresh 11 month high and keeps defying gravity. I do not have any trading position on the S&P Futures but I am short Dax Futures and feeling the pain. I am off over 130 points in just 2 trading sessions.<br /><br />But even more frustrating then that is the behaviour in the Euribor Futures complex. I am losing in that position every single day. Quite amazing. Even though, I have the December and March futures so time is on my side on that trade.<br /><br />But not everything is going against me, my stock picks are doing very well. Dynegy and Hecla Mining are going through the roof. <br /><br />After losing a few thousand euros shorting Dax Futures I think its time for the bears to charge the market lower. I am as bearish as I can be and I expect a major correction in the global stock markets in the next few weeks. <br /><br />I will regroup watching Rafael Nadal at the US Open. He will play against the talented Fernando Gonzalez. It will be a close call.muneerhttp://www.blogger.com/profile/06546405330556671064noreply@blogger.com0tag:blogger.com,1999:blog-1613399381411030774.post-88910636264732361162009-10-14T14:15:00.001-07:002009-10-14T14:17:06.347-07:00Natural Gas Futures Seasonality. Time To Buy.This is the Natural Gas Futures seasonal graph that was sent by one the members of this trading community. As you can see this is the best time of the year to be long Natural Gas Futures. The seasonal graph shows us that September and October are the best months for Natural Gas prices increases.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgqXW6NhHjr3Ga46X_k4eTi5WXspD3llyyxtPboBm6kGKQsTO-bAYS7lbTzc_vi3t8rdeXe_UFA9P4xO5vTQaXDUdDHxbfidZdVF_jowSjRhdzZOw_Mlc0-Mm7kFOCivDIhTMZ0kvqo-Pgg/s1600-h/natural+gas+futures+seasonal+patterns.png"><img style="WIDTH: 400px; HEIGHT: 317px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5392567435295119746" border="0" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgqXW6NhHjr3Ga46X_k4eTi5WXspD3llyyxtPboBm6kGKQsTO-bAYS7lbTzc_vi3t8rdeXe_UFA9P4xO5vTQaXDUdDHxbfidZdVF_jowSjRhdzZOw_Mlc0-Mm7kFOCivDIhTMZ0kvqo-Pgg/s400/natural+gas+futures+seasonal+patterns.png" /></a><br />As you know I bought October Natural Gas Futures last week at 2.500, very near the bottom. On friday the natural gas futures spiked higher more then 8% and I had no trouble at all in riding it higher. I am still holding it for higher prices with a stop a little above my entry price to secure a part of my profits no matter what. Anyway I think a major long term bottom in gas prices is already in.<br /><br />Today I will take the day to watch the <a href="http://www.usopen.org/en_US/index.html">US Open</a>. Nadal, Tsonga will be in action today and I am looking forward for the night session where the ressurgent and always spectacular Taylor Dent will meet forces with the brit Andy Murray. I love comebacks and I still remember when Jimmy Connors made a comeback at 42 years old and sent the US Open crowds wild with his fantastic play.muneerhttp://www.blogger.com/profile/06546405330556671064noreply@blogger.com0tag:blogger.com,1999:blog-1613399381411030774.post-78303801871432724042009-10-14T14:13:00.000-07:002009-10-14T14:14:05.963-07:00Shorting S&P Futures. Buying US Dollars.On the reaction to the Employment Report I sold some more S&P Futures and I closed the Nikkei`s that I had paired with some S&P`s overnight. All this indecision makes me think that we are at an important crossroad in this market.<br /><br />I will get back to the Nikkei Futures soon, hopefully after a meaningful correction. <br /><br />I am turning dollar bullish again and I am testing the market with a small long US Dollar, short Euro currency position.<br /><br />Natural gas futures are showing some signs of life but is this the real reaction rally?<br /><br />Petroleum Oil Gas info Blog is a website for active online futures and stock traders. I will provide my real time trading decisions and my market thoughts on this webpage.muneerhttp://www.blogger.com/profile/06546405330556671064noreply@blogger.com0tag:blogger.com,1999:blog-1613399381411030774.post-66271873365274346732009-10-14T14:12:00.002-07:002009-10-14T14:13:12.418-07:00Waiting For The Employment Report. Consensus Is -200K On Non Farm Payrolls.It will be important to read the market`s reaction to the data because I think we will have a major move one way or another. So I have my orders lined up on my trading platform so that i can hit them as soon as I need to.<br /><br />My commitments are rather heavy so I have to read it right and act fast.muneerhttp://www.blogger.com/profile/06546405330556671064noreply@blogger.com0tag:blogger.com,1999:blog-1613399381411030774.post-19847669803700737002009-10-14T14:12:00.001-07:002009-10-14T14:12:29.873-07:00Risk Taking Appetite. Major Commitments In The Market.My risk appetite is making multi months highs. I couldn`t stand aside the collapse in the Natural Gas Futures and I bought some futures at 2.500. I was looking at a price chart and I am pretty sure that a major rebound is imminent. I had no fear and I bought a few contracts that I plan to carry for a few trading sessions.<br /><br />I was also looking into some beaten down stocks and I bought a few Hecla Mining (HL) shares. Silver and precious metals in general are trading up big time and I think Hecla Mining (HL) stocks can double in a few months. I also bought some out of fashion Dynegy Inc. (DYN) stocks which I am afraid that I will have to wait a few months to see some real price appreciation. But I read the Fitch downgrade report and I concluded that there is some upside potential to this stock. Besides Dynegy (DYN) was trading at a major support level so I gave it a shot. And while I was looking around the utilities sector I came across Duke Energy (DUK) with a 7% dividend yield so I bought it for income. <br /><br />Jean Claude Trichet comments were pretty dovish and I suffered on my Euribor Futures. I expected an hawkish statement from the ECB and I got a confused and unclear statement. Anyway the pain will only be temporary as the Euribor rates are trading 20 basis points below the 1% ECB rates. So, I added a few contracts to my short trading positions and I probably got top prices for this move.<br /><br />Finally the Employment Report will be released tomorrow before the trading bell. I closed my remaning short S&P Futures and I can play the market both sides tomorrow depending on the market reaction to the data.muneerhttp://www.blogger.com/profile/06546405330556671064noreply@blogger.com0tag:blogger.com,1999:blog-1613399381411030774.post-57179745151515198102009-10-14T14:11:00.001-07:002009-10-14T14:11:48.609-07:00Buying Natural Gas At 2.5000I am buying Natural Gas Futures at 2.500. This is the most oversold market I have ever seen and I always get a big bang when I am able to buck such trend. <br /><br />I am probably betting a bit more then I should but I am expecting a big rebound at any time now. I have to admit that my heart is racing but that is probably a sign that the market is about to reverse.<br /><br />This futures expires in September 28th and between now and then I should be able to close it with a decent profit.muneerhttp://www.blogger.com/profile/06546405330556671064noreply@blogger.com0tag:blogger.com,1999:blog-1613399381411030774.post-44944935114534285162009-10-14T14:10:00.000-07:002009-10-14T14:11:05.105-07:00Correction Is Under Way. We Are On FED Alert.I have seen this before. Markets are beginning to sell off worried that the easy monetary policy is coming to an end sooner then expected.<br /><br />I am carrying a bigger short line having added some shorts at 1022 and 1019. I have a first target at 1000 but I think we are going a lot lower then that. <br /><br />Financials like Citigroup Inc.(Public, NYSE:C) and Wells Fargo & Company (Public, NYSE:WFC) are leading on the way down today.muneerhttp://www.blogger.com/profile/06546405330556671064noreply@blogger.com0tag:blogger.com,1999:blog-1613399381411030774.post-58028264075969788802009-10-14T14:07:00.000-07:002009-10-14T14:10:09.488-07:00Very Active On The S&P Futures.Very important economic data points are coming out later today:<br /><br />- ISM Manufacturing, 50.5 is expected;<br />- Construction Spending, 0.0% is expected;<br />- Pending Home Sales, no estimate available<br /><br />I am closing my short line at 1015 and waiting for the data to decide what to do next. Economic data has been stronger then consensus in general but the market reaction has been rather soft. I am leaning to the short side but I will watch these data points from the balcony.<br /><br />I was awake all night watching the Nikkei`s and trading forex. I am needing a rest. It already looks thursday or friday to me. This forex system is doing so well that I am trading it day and night. I am going to pay for this sooner or later...<br /><br />You can check all economic data at <a href="http://econoday.com/">econoday.com</a>. This is the site is normally use. Have a nice trading day.<br /><br /><em>Petroleum Oil Gas info Blog is a website for active online futures and stock traders. I will provide my real time trading decisions and my market thoughts on this webpage.</em>muneerhttp://www.blogger.com/profile/06546405330556671064noreply@blogger.com0tag:blogger.com,1999:blog-1613399381411030774.post-82065289608329037772009-10-14T14:04:00.000-07:002009-10-14T14:05:23.509-07:00Over a Barrel - The Truth About OilLast night, ABC's Charlie Gibson presented "Over the Barrel - The Truth About Oil." The program was a well-crafted presentation about the supply side issues of oil. However, there were some notable problems.<br /><br />First, the program began with news clips about America's addiction to oil but provided minimal demand-side analysis of our appetite/need for oil. If we are truly addicted to oil, we need to address ways to use oil and energy more efficiently. With nearly two-thirds of oil used in transportation our emphasis should be in improving utilization. Petroleum is a depletable resource and we need to use it sensibly.<br /><br />Second, the program didn't spend enough time on using other energy forms to displace oil. We should have initiatives that reduce and eliminate oil use in heating and power generation applications. Increased use of electric power generated from "clean" coal technology and renewables should play an increased role.<br /><br />Third, in examining the cost components of gasoline, the ABC report failed to include the contribution of gasoline taxes. Taxes account for around 25% of pump prices compared to 10% added by private company margins. So State and Federal governments are making 2 1/2 times more net revenue than oil companies and gasoline stations.<br /><br />Fourth, where would a news story on oil be without a conspiracy theory about the big bad oil companies. Gibson's interview with a consumer advocate did little to address the issue and only perpetuated the myth that "big oil" controls oil markets.<br /><br />On the plus side, Gibson did a good job in covering the hidden costs in guaranteeing oil supply from the Middle East. We should increase Federal gasoline taxes to cover the expenses associated with "securing" this supply. This would reduce gasoline demand and help balance the budget.<br /><br />It was good to see that sense of reason Boone Pickens on the program. Mr. Pickens emphasized that we are not going to drill our way out of this problem. This is a position that we have long supported. In a analogy to the illegal drug trade, the solution to addiction is not to produce more drugs. While we may produce more than the two million barrels a day from new finds that Pickens suggests, this problem is not going to be solved by supplying more oil. <br /><br />The analysis of the role of speculators on oil prices was good except that Gibson gave the idea that millions of barrels of oil are being bought, sold and moved around the country. Most of the speculation is in paper barrels (options) rather than physical barrels.<br /><br />The program had some good points, but fell far short of delivering on "The Truth About Oil."muneerhttp://www.blogger.com/profile/06546405330556671064noreply@blogger.com0tag:blogger.com,1999:blog-1613399381411030774.post-21152122719062304102009-10-14T14:03:00.000-07:002009-10-14T14:04:34.764-07:00Obama's Tax on Oil and GasI recently received a letter from Jim Hackett, Chairman, President and Chief Executive Officer of Anadarko Petroleum Corporation, asking for my help in a grassroots campaign to inform elected officials about the the $400 billion in new taxes that the Obama Administration proposes on the American oil and gas industry.<br /><br />Now I found this kind of surp[rising because Mr. Hackett has never contacted me before. No cards on my birthday, no fruit cake at Christmas, and no offers to increase my retirement benefits. Not that I am really complaing. After all Mr. Hackett does have a lot on his plate. I am pleased that he contacted me on this issue and hope that other oil and gas CEOs are taking similar measures.<br /><br />He suggests the following measures:<br />- Join the API's Partnership for America's Energy Security<br />at <a href="http://www.partnershipforenergy.com/">http://www.partnershipforenergy.com/</a><br />- Send a message to your elected officials through social networking sites<br />- Sign the Louisiana Oil and Gas Association nationwide petition on President Obama's<br />at <a href="http://www.loga.la./esa/stop-obamas-tax-inrease.html">http://www.loga.la./esa/stop-obamas-tax-inrease.html</a><br />- Write or call your eleted officials<br /><br />During the election, I tried to contact the candidates regarding energy security. I sent them an e-mail from their web sites. The Obama Campaign asked for money, Clinton sent a automated response and I'm still waiting to hear from McCain. I was never able to present my ideas to them.<br /><br />I hope that this campaign will work because even in those darkest dumb moments that we all have, I cannot see how taxing the oil and gas industry is going to help the economy or lessen US dependency on foreign oil.<br /><br />Tell your legislators "Don't Bite the Hand that Fuels Them!"muneerhttp://www.blogger.com/profile/06546405330556671064noreply@blogger.com0tag:blogger.com,1999:blog-1613399381411030774.post-5165369029900385042009-10-14T14:02:00.002-07:002009-10-14T14:03:13.956-07:00Industry Needs Stable FundingIn reporting on the May Offshore Technology Conference in Houston, the Oil & Gas Journal said that "Oil and gas companies are becoming more adept at maintaining long-term business strategy in the face of short-term uncertainty stemming from oil price cycles." In a session on "Coping with price volatility: how will it affect major capital projects," executives discussed cost-cutting measures that include lowering capital budgets and renegotiating contracts.<br /><br />The responses were hardly revolutionary or even evolutionary. Adjusting budgets is the time honored response to fluctuating oil prices. Unfortunately, the knee-jerk, cash-flow driven reaction is dead wrong. What it amounts to is buying high and selling low.<br />As profits rise, driven by high oil prices, companies increase spending and operating costs rise driven by restrictions on goods and services. When prices drop, budgets are slashed and oil field activities drop. The recent decline in drilling activity has occurred much faster than in previous down cycles. The herd mentality prevails and oil and gas companies line up to announce reductions. <br /><br />Where are the contrarians? We believe that the best approach in dealing with the highly volatile oil market is to maintain constant real dollar budgets. This level spending will enable companies to focus on the long-term and take advantage of opportunities during business cycles.<br /><br />From a strategic position, upstream companies should focus on development during up cycles and exploration in down times. When profits are high, build a cash reserve that can be used to fund projects when revenues drop. For downstream companies, low prices and low demand periods are opportunities to invest in capital projects to add capacity and improve efficiency.muneerhttp://www.blogger.com/profile/06546405330556671064noreply@blogger.com0tag:blogger.com,1999:blog-1613399381411030774.post-52454906892803857652009-10-14T14:02:00.001-07:002009-10-14T14:02:42.112-07:00Short-term Savings May Lead to Long-term ProblemsParade magazine had an interesting article titled "Who Profited From Oil Prices?" in the January 25, 2009 edition.<br /><br />A more appropriate title might have been "Who Profited from Lower Oil Prices?" as the story indicated that the winners were consumers who benefited from a $2/gallon drop in gasoline prices for annual savings around $282 billion and hedge fund managers who shorted oil.<br /><br />The losers were OPEC and other major producers who saw their revenues decline which could cause "political and economic turbulence" in Venezuela, Russia and Iran. <br /><br />While oil companies lost revenue as prices declined they also saw their costs for oil field equipment and supplies drop as well. Oil producing states that earn revenue from production taxes saw their income slashed. Alaska projects a 7% drop in oil revenues and Louisiana forecasts a $2 billion budget shortfall by 2010.<br /><br />Green technology suffered as well as lower oil prices made solar and wind power less attractive. T. Boone Pickens' green-tech fund lost more than $1 billion.<br /><br />Another factor is the fluctuation in oil prices which drives planners nuts. National, state, and company budgets and programs suffer with price volatility resulting in delays and cancellation of programs.<br /><br />A short-term mentality affects the marketplace and causes delays in development of alternative energy supplies. Consumers may benefit from short-term savings but project delays will produce long-lasting impacts and higher energy prices.muneerhttp://www.blogger.com/profile/06546405330556671064noreply@blogger.com0tag:blogger.com,1999:blog-1613399381411030774.post-81069906620206813002009-10-14T14:00:00.000-07:002009-10-14T14:01:35.692-07:00New International Gas CartelAdd another log to the fire. <br /><br />Consumers may be soon be using this option if world natural gas producers have their way.<br /><br />Russia, Iran and Qatar recently met in Tehran to discuss an OPEC-style cartel to control world natural gas markets. <br /><br />This poses yet another threat to the world economy and political stability. Funneling more money into Iran and Russia is hardly a formula for world peace.<br /><br />These three countries control more than 55% of the world's natural gas reserves and 26% of production. Natural gas trade has grown through construction of pipelines and shipments of liquefied natural gas. Russia, Iran and Qatar account for 28% of world natural gas movements and Qatar supplies 17% of the world's LNG.<br /><br />The proposed cartel is dangerous because:<br /><br />1.) Russia provides 50% of natural gas used in Europe. <br />2.) Europe imported 57% of its natural gas in 2006 and forecasts call for that to increase to 93% by 2030.<br />3.) Climate change initiatives look to natural gas use as a way to reduce global warming when compared to coal or oil.<br />4.) U.S. LNG imports are forecast to grow 7.3% annually from 2006-2030.<br />5.) OPEC and Russia own 74% of the world's natural gas resources.<br /><br />About twenty years ago, I asked Dr. Subruto, then Secretary General of OPEC, why the organization did not extend its charter to include all hydrocarbons. My logic for this was that exports from his home country, Indonesia, were declining and they might be forced to leave the cartel if they were no longer a significant exporter. However, I reasoned, they could continue to be a member by virtue of their natural gas exports if the organization's mission changed. <br /><br />In 1988, the notion was specification. In 2008, the spectre of such a global energy monopoly seems very real.muneerhttp://www.blogger.com/profile/06546405330556671064noreply@blogger.com0tag:blogger.com,1999:blog-1613399381411030774.post-3583274442549953452009-10-14T13:59:00.000-07:002009-10-14T14:00:13.309-07:00OPEC Struggles with Eroding PricesOur friends in OPEC are meeting November 18th to discuss the impact of the global financial crisis on oil prices. <br /><br />The decline in oil prices prompted the emergency conference. Light, sweet crude oil for November delivery fell to $86.59/B on October 9th. <br /><br />In the department of "liar, liar pants on fire," OPEC announced:<br /><br />It would work "to ensure market fundamentals are kept in balance and market stability is maintained." <br /><br />Shukri Ghanem, head of Libya's national oil company, said that "OPEC's aim is to create a balanced market, which neither harms the producers nor the importers."<br /><br />If you believe either of these statements, I know where you can buy some sub-prime mortgage loans. <br /><br />Where was OPEC's interest in not harming consumers when prices hit $147.27/B on July 11th?<br /><br />OPEC is interested in protecting their own well being. OPEC members abdicated market control when they abandoned the market basket mechanism to maintain prices within a price band. As the world has discovered relative to regulation of financial markets, free market conditions can produce diverse economic outcomes.<br /><br />Like making money from investments when the stock market is rising, OPEC has enjoyed the free ride with higher prices. Now that these prices have fueled decreased demand and economic recession, they want to cut output to firm up oil revenues.<br /><br />If the past is any indication, OPEC will not be able to influence this market. If Americans are addicted to petroleum, OPEC is hooked on petrodollars. In the face of falling revenues, what OPEC countries will be willing to cut production? Historically, reductions in quotas have resulted in cheating and competition among OPEC members for market share. <br /><br />For consumers, this is good news. For oil and gas companies, this brings back memories of 1986.muneerhttp://www.blogger.com/profile/06546405330556671064noreply@blogger.com0tag:blogger.com,1999:blog-1613399381411030774.post-34030340657474154712009-10-14T13:58:00.000-07:002009-10-14T13:59:07.985-07:00OCS Moratorium ExpiresThe ban on offshore drilling quietly expired on September 30th. However, the battle is far from over as OCS leasing opponents are expected to continue their efforts. <br /><br />According to Sen. Robert Menendez (D-NJ), "Expanded OCS drilling is bad energy policy, bad environmental policy, and it will do nothing to lower the prices at the pump, now or ever. This country deserves a serious debate about energy and not just election year posturing." <br /><br />Senate Energy and Natural Resources Committee Chairman Jeff Bingaman (D-NM) said: "We'll revisit this issue next spring." <br /><br />The issue will no doubt be the subject of an energy discussion that will include initiatives for renewable fuels, tax increases for oil and gas producers, and assistance for low income families. <br /><br />The bill will also include plenty of "pork." The measure, like all Washington initiatives, will require spending more money and result in little if any actual energy production.<br /><br />[Source: "There's little celebration as OCS leasing moratoriums expire," Nick Snow in Capital Commentary, Oil & Gas Journal]muneerhttp://www.blogger.com/profile/06546405330556671064noreply@blogger.com0tag:blogger.com,1999:blog-1613399381411030774.post-73857412908152720982009-10-14T13:57:00.001-07:002009-10-14T13:57:45.283-07:00Industry Image is Battered by IkeThe oil and gas industry's already bad public persona is taking another hit. This time courtesy of Hurricane Ike. <br /><br />The widespread gasoline price jumps that occurred ahead of the storm surge have further diminished the industry's image. Gasoline prices rose to $5.49/gallon in Tallahassee, FL and $4.99/gallon in Knoxville, TN. The Knoxville price of regular gasoline was $3.66/gallon on Friday. <br /><br />One might expect price increases as a consequence of the storm, not in anticipation of the storm. This is clearly price gouging and industry executives should work to restrain independent station owners from taking advantage of the public. <br /><br /><br />Refinery closures and crude oil shortages will force national prices to exceed $4.00/gallon nationwide. The Energy Information Administration reported that gasoline prices on September 8th averaged $3.65/gallon. Prices in the Dallas area jumped 30 cents/gallon before the storm hit. So we've probably blown past the $4.00/gallon mark nationally as I post this. <br />My best advice is to postpone trips, buy only what you need immediately and report stations engaging in price gouging.muneerhttp://www.blogger.com/profile/06546405330556671064noreply@blogger.com0tag:blogger.com,1999:blog-1613399381411030774.post-3494368752557111002009-10-14T13:56:00.001-07:002009-10-14T13:56:52.505-07:00What is Energy Independence?Over the next two months we will see the topic of energy independence discussed and dissected by candidates and commentators. In order to achieve a goal of energy independence, Americans and candidates first need to understand what the goal really means.<br /><br />The place to begin is where we are today. According to the Energy Information Administration the United States used 101.563 quadrillion Btus of energy in 2007. Of that total, net imports of energy were 29.231 quadrillion Btus or 28.8% of consumption. Energy imports were 34.679 quadrillion Btus and exports were 5.448 quadrillion Btus. The imports were primarily crude oil and refined products (28.780 quadrillion Btus or 83.0% of total imports) and natural gas (4.717 quadrillion Btus or 13.6%). Our principal energy exports were crude oil and refined products (3.007 quadrillion Btus or 55.2% of total exports) and coal (1.507 quadrillion Btus or 27.7%).<br /><br />Therefore the issue of energy independence is really an issue of oil and gas independence. In 2007 our imports of natural gas were 4,602 billion cubic feet (Bcf) of which 3,770 Bcf (81.9%) were from Canada and 451 Bcf (9.8%) were from Trinidad and Tobago. Natural gas imports from the Middle East were 18 Bcf from Qatar. These values indicate that natural gas imports should not be an area of concern.<br /><br />This brings us to the real issue. Energy independence means we should focus on oil imports. In 2007, oil imports were 13,468 thousand barrels per day (MB/D). OPEC countries provided 5,980 MB/D (44.4%). The major sources of non-OPEC imports were Canada 2,455 MB/D (18.2%) and Mexico 1,532 MB/D (11.4%). I doubt that we need to worry too much of the security of supplies from our NAFTA partners Canada and Mexico. <br /><br />So our real goal is not energy independence or oil independence, it is independence from unreliable oil imports. I would classify unreliable oil imports as those from areas/countries that may be subject to supply disruptions due to political turmoil and those countries where oil revenue may be diverted to support terrorist activities. This list would essentially include all of the OPEC countries and Russia. Now there are some who would challenge this broad brush approach, however in terms of goal setting this may be a convenient way to frame the target.<br /><br />Saudi Arabia wants us to consider them a friend, but their actions during this past year have done little to indicate that they will do anything to help us. Oil supplies from Iraq and Kuwait are subject to political turmoil and should be viewed as strategically vulnerable. Many of the other OPEC members have large Moslem populations (Indonesian, Libya, Algeria, and Nigeria) which may cause some oil revenue, however small, to be funneled to terrorist activities. Russia’s attack on Georgia has provided a wake-up call that the former “evil empire” may be dormant but is far from dead. The amount of oil from these sources was 6,394 MB/D in 2007.<br /><br />The strategies to eliminate these sources from our oil supply have been well-defined. In the short-term they must be focused on reducing oil consumption which means improving fuel economy in cars and light trucks and increasing the supply of oil through more drilling. Intermediate efforts should be directed toward removing oil use in areas where it can be replaced by renewable energy, natural gas and “clean” coal. This means the elimination of distillate fuel oil in the residential and commercial and industrial sectors (1,118 MB/D). The major area to improve is to reduce the use diesel fuel (3,038 MB/D) and motor gasoline (9,072 MB/D) in the transportation sector.<br /><br />Doing the math reveals that we would have to eliminate distillate fuel use in the residential and commercial and industrial sectors and reduce diesel fuel and gasoline use by 43.6% to eliminate unreliable oil supplies. This would require an increase in fuel economy from 17.2 miles/gallon in 2006 to around 25 miles/gallon which seems like a reasonable goal. <br /><br />Unfortunately, supply and demand will not stand still while we improve car efficiencies and drill for more oil. This means that we should seek solutions that increase our supply of oil from reliable sources both domestically and internationally and adopt tougher conservation measures immediately. We need to have targets set for four, six and eight years from now to measure the effectiveness of our elected officials in moving toward oil independence.muneerhttp://www.blogger.com/profile/06546405330556671064noreply@blogger.com0tag:blogger.com,1999:blog-1613399381411030774.post-156817304703723302009-10-14T13:55:00.000-07:002009-10-14T13:56:08.444-07:00Where’s the Oil and Gas?With all of the discussion on offshore drilling, I thought it might be useful to examine where we might expect future domestic supplies to come from.<br /><br />According to assumptions for the Energy Information Administration’s Annual Energy Outlook 2008, the U.S. has 165.67 billion barrels of technically recoverable oil and 1,364.61 trillion feet of technically recoverable natural gas. These estimates do not include areas where drilling is officially prohibited. The offshore component of these resources is 24.6% of oil and 15.7% of natural gas.<br /><br />The Moratorium on Offshore Drilling signed by President Bush in June 1990, resulted in making a significant portion of estimated future natural gas and oil supplies unavailable for development. Estimated undiscovered conventionally recoverable resources in the Federal Offshore area total 75 billion barrels of oil and 362 trillion cubic feet of gas, of which an estimated 21% of the oil and 17% of the gas are in the moratorium area. As of 2000, undiscovered conventionally recoverable resources in the Gulf of Mexico were estimated at 193 trillion cubic feet of gas and 37 billion barrels of oil, with the moratorium area in the Gulf containing about 4% of the gas and 7% of the oil. Along both the East and West coasts, all estimated undiscovered conventionally recoverable resources (47 trillion cubic feet of gas and 13 billion barrels of oil) are in the moratorium area. In the North Aleutian Basin in Alaska, about 6% of the estimated 123 trillion cubic feet of gas resources are in the moratorium area and about 1% of the estimated 25 billion barrels of oil.<br /><br />Oil (Billion Barrels)<br />Onshore = 124.9<br />Offshore<br />Annual Energy Outlook 2008 = 40.8<br />Restricted Federal Offshore = 15.8<br />Restricted Gulf of Mexico = 2.6<br />Restricted East and West Coasts = 13.0<br />Restricted North Aleutian Basin = 0.3<br />Total Offshore excluding restricted areas = 40.8 <br />Total Offshore including restricted areas = 72.4<br />Total excluding restricted areas = 165.7 <br />Total including restricted areas = 197.3<br />Percent from Offshore excluding restricted areas = 24.6% <br />Percent from Offshore including restricted areas = 36.7%<br /><br />Natural Gas (Trillion Cubic Feet)<br />Onshore = 1151.1 <br />Offshore<br />Annual Energy Outlook 2008 = 213.6<br />Restricted Federal Offshore = 61.5<br />Restricted Gulf of Mexico = 7.7<br />Restricted East and West Coasts = 47.0<br />Restricted North Aleutian Basin = 7.4<br />Total Offshore excluding restricted areas = 213.6<br />Total Offshore including restricted areas = 337.2<br />Total excluding restricted areas = 1,364.6 <br />Total including restricted areas = 1,488.3<br />Percent from Offshore excluding restricted areas = 15.7%<br />Percent from Offshore including restricted areas = 22.7%<br /><br />The statistics present two questions: 1.) “Is the restricted resource large enough to offset the risks to the environment and tourism?” and “Is the restricted resource large enough to attract bids from oil and gas companies?”muneerhttp://www.blogger.com/profile/06546405330556671064noreply@blogger.com0tag:blogger.com,1999:blog-1613399381411030774.post-52480322292298882432009-10-14T13:54:00.000-07:002009-10-14T13:55:16.501-07:00Taking the Point on Renewable EnergyWho will lead the transformation of the world’s energy supply from fossil fuels to renewable energy? <br /><br />One might suggest that the current group of fossil fuel providers change their focus from depletable fuels to a different form of energy. However, this makeover seems highly unlikely.<br /><br />Oil and gas companies define themselves as providers of crude oil, natural gas, refined products and petrochemicals. An examination of the mission statements indicates that none of the majors sees themselves in the broader perspective of an energy producer. The national oil companies are even more emphatic in limiting their scope.<br /><br />The core technologies are different. The basic technologies of the oil and gas industry are not readily transferable to renewable energy. At the core of oil and gas supply is the extraction or removal of mineral deposits and the conversion of them into useful products. The conversion process may be regarded as a necessary product quality enhancement rather than a significant processing step. This is especially true in the natural gas value chain. Renewable energy requires manufacturing (wind turbines and solar panels) which use mechanical and electrical engineering skills. These skills are not the emphasis of oil companies recruiting efforts.<br /><br />Wall Street expectations minimize strategic thinking. The short-term focus forced upon public companies by investors, limits long-term research and development. A dollar spent on solar energy research is one less dollar that the company can use in its core business of finding and producing oil and gas. Wall Street is not going to reward this effort. Oil and gas companies are valued on the basis expanding their reserve base at the lowest possible cost.<br /><br />The executive orientation is limited to better utilization of core competencies within the scope of their mission. The industry is focused on process improvement and not on new product development. [See blog "Bad Information on Good Morning America" that addressed the R&D issue in more detail]. Senior executives concentrate on those areas where the company has succeeded in past (distinctive competencies) and stay within their comfort zone. There are few rewards for strategic and innovative thinking outside the realm of the mission. What executive is going to wager his current position on an outcome twenty or thirty years in the future? <br /><br />The question is now who will step up and become the champion of renewable energy? If the computer industry is any indication, the solution is more likely to originate in the garage than in the boardroom.muneerhttp://www.blogger.com/profile/06546405330556671064noreply@blogger.com0