Friday, April 08, 2005

T. Boone Pickens on CNBC 4/5/05.

Being a little lazy right now, I googled to see if I could cheat a little on this post. I found a couple of comments on the appearance here and here, but they don't capture the full picture of his comments (ie. I actually have to do some typing).

Anyway, T. Boone Pickens is definitely the guy everybody's watching on oil, so his short term comments may have added to the sell off this week.


"We're headed for $60, how quick, I don't know. This is the weakest period in the year, coming into the second quarter because the use of oil is down and you're building inventories and you come out of the second quarter into the third and you're picking up on demand. When you look at the fourth quarter, projections up to 87 million barrels a day are required worldwide, and I don't think you can produce over 84 million."

When asked whether supply and demand or speculation/manipulation is driving the price, he responded:

"I think it's legitimate supply and demand, if you'll give me 6, 8, 9 months, the rest of the year, it will be supply and demand. For the short term, there's no question we've got plenty of oil around right now, and I think you may see some weakness. But it's gonna move right on up. We'll make $60 by the third quarter for sure."

When asked about the deferred (long dated) contracts:

"Backwardation has changed dramatically in the market, and the out months have come up substantially. If you look at the fundamentals, I don't think there's any way anybody can come out with the conclusion, let's compare 2005 to 2007, if all you can produce now is 84 million barrels of oil a day, and I don't believe the supply you add will take care of the decline you'll have to deal with on older production. So if you can't do any more than 84 million barrels a day, all projections - unless you get into a collapse of the world economy - that you're gonna see demand greater in '07 than you see in '05."

[Translation: He thinks that the rise in deferred prices makes sense because he doesn't think production/supply can rise much and unless the world economy collapses, demand should continue to rise into 2007.]

When asked about Suncor (SU):

"Suncor is being evaluated about $30 - $35 a barrel. If you have $50+ a barrel, then eventually Suncor gets evaluated on the basis of $50. I still think Suncor is a very good investment."

For a little more on Suncor and oil sands, read the article "Alberta's Earth Shaking Ambitions" from the Globe and Mail.