Friday, July 29, 2005

Raymond James endorsing Operation Alberta Freedom.

Raymond James Research Report Gushes Over Canada's Oil Sands.

Quotes:

CALGARY, July 28 /CNW/ - Investment Dealer Raymond James Ltd. today released an in-depth research report that emphatically declares that after almost a century of development, the time for Canada's Oil Sands has finally come.

"We continue to believe that those companies with leverage to the Oil Sands of Canada offer excellent long-term investment opportunities," says John Mawdsley, Senior Vice President and Energy Research Analyst at Raymond James. "Even with the significant share price appreciation of these energy-related stocks over the past year, the stars are aligning for companies involved in the Oil Sands."

Companies highlighted in the Raymond James report include:

Black Rock Ventures Inc.
Canadian Natural Resources Limited
Canadian Oils Sands Trust
Deer Creek Energy Limited
EnCana Corporation
Husky Energy Inc.
Imperial Oil Limited
Nexen Inc.
OPTI Canada Inc.
Petro-Canada
Shell Canada Limited
Suncor Energy Inc.
UTS Energy Corporation
Western Oil Sands Inc.

According to the report, some of the circumstances that positively impact the Oil Sands of Canada include the following:

- With the Oil Sands of Canada holding 175 billion barrels of proven
recoverable reserves (second in size only to Saudi Arabia's 262
billion barrels), Canada is one of the few non-OPEC countries that
can increase oil production.

- Production from the Oil Sands is expected to exceed all OPEC
producers, except for Saudi Arabia, by mid-next decade. This will
make the Oil Sands the third largest oil producer in the world,
after only Saudi Arabia and Russia.

- The "low-hanging fruit" of global oil reserves have been picked.
To find new, substantial reserves, producers often have to deal
with extreme conditions, like drilling in ultra-deep water, the
severe High Arctic, or in politically unstable areas.

- The number of giant oil field discoveries has been very limited
over the last 10 years, and the likelihood of finding more of
these fields drops with each passing day.

- At 83 million barrels a day, the world consumes one billion
barrels of oil every 12 days; there certainly is not a discovery
of a one billion barrel pool every 12 days.

- Canada's political stability creates a more positive climate for
investors and oil producers when compared to other countries where
other significant oil reserves are found including Russia,
Venezuela, the west coast of Africa and the Middle East.

The report also underscores the importance of the massive Oil Sands reserves to the North American economy. "At current rates of consumption of approximately 20 million barrels a day in the United States, the 175 billion barrels of proven reserves in the oil sands could supply all of the U.S. oil requirements for the next 25 years," says Mawdsley. "If we include the additional 130 billion barrels of potential reserves, Canada could supply all U.S. oil requirements for the next 40 years."

The economic implications are immensely positive for companies involved in the dramatic growth of the Oil Sands at a time when global oil production is close to reaching a peak, says Mawdsley.

"We believe that world oil production will peak in the next five to ten years," he says. "Many of the world's oil producing nations have already reached their production peaks and many more nations will be added to this list. We believe that this bodes extremely well for investment in the Oil Sands where production can grow dramatically over the next decade and longer."

Thursday, July 28, 2005

Buck up boys.

I see some of you folks weakening. You want to sell, don't you? You're afraid it might not last, that it's a bubble. You want to sell it all and get that G500 you've had your eye on for when the oil goes back to $20.

Well buck up boys.

A little Deffeyes to help you through your weak moments. [video]

A little Don Coxe to buck you up. [audio, Windows Media Player format]

The striking difference between this 'bubble' and the Internet bubble is that most of the major 'pushers' of this bubble are older, experienced, 'seen it all' guys, guys who've been in oil forever or who have made some solid investment calls in their careers.

Experienced oil guys: Simmons, Deffeyes, Maxwell, Pickens, Campbell, Groppe.

Investment guys: Coxe, Rogers, Wanger, Heebner, Leeb.

That said, you must make your own judgements. Sell when it's right for you.

Wednesday, July 27, 2005

Top 10 Signs We've Passed Hubbert's Peak.

Note: For background, read this first.

What to look for to let you know we've passed Hubbert's Peak:

10. Tim Evans of IFR, throwing in the towel, declares "oil stocks have reached a permanently higher plateau". In reaction, oil prices spike a further 50% overnight.

9. James Howard Kunstler is arrested at the former Neverland Ranch by Santa Barbara sheriff's deputies and charged with gross abuse of farm animals. [No, no, not what you think. It just turns out that some of these &*^%$# things are rather stubborn.] Neighbors observe that he had grown increasingly bitter in spite of all the fame, and that the millions he secretly made on oil futures and shorting the stocks of airlines and US car manufacturers never really brought him happiness.

8. General Motors introduces their miniHummer hybrid. It gets 19 MPG and is available in 5 cool colors. Honda, meanwhile, introduces the 11th generation of their hybrid Civic which gets 178 MPG, while parked returns power to the grid and downloads the latest Paris Hilton videos, and for those customers who occasionally forget, flosses.

7. United States President Hillary Clinton, surrounded on each side by resolute and purposeful looking Democratic colleagues, declares "This will not stand!" when a Saudi school child drops his ice cream in a Saudi branch of the American chain Baskin Robbins and doesn't clean it up. In retaliation, President Clinton announces Operation Black Gold Rush 2010 and orders US forces to launch operations against all major oil producing nations in the Middle East from Forward Operating Base Mesopotamia.

6. French President Jacques Chirac, upon being informed of Operation Black Gold Rush 2010, announces his countries' immediate support, gives authorization for "any and all US overflight rights", sends French forces to occupy Libya (post US seizure, of course..), and personally vows to round up a few dark-ish looking folks on his way back to Paris.

5. After protesting briefly the launch of Operation Black Gold Rush 2010, the Chinese, seeing American attentions diverted, seize the boundary waters of every Asian nation and overrun them with Chinese built clones of BP's ThunderHorse deepwater oil drilling platform. Surprisingly, the Chinese do not invade the actual island of Taiwan. Intelligence intercepts later reveal the Chinese premier exclaiming: "What the %#^& are we gonna do with more &*&^%$ laptop makers!?!"

4. Survivor: LA

3. Trump Oil files for bankruptcy.

2. Russian President Vladimir Putin announces the first of several stages of purges of Russian elites and elects himself "President for Life". Gazprom, Rosneft and Lukoil are merged into the Soviet secret police.

1. A video appears on the Internet of Paris Hilton having sex with a gas station attendant. Surprisingly, she appears to actually be into it this time.

Tuesday, July 26, 2005

Ottawa Citizen endorsing Operation Alberta Freedom.

Ottawa Citizen: Great black north is an oil power.

Quotes:

As Ms. Cooper observes, there has been massive investment in Alberta's oilsands that hold an estimated 1.7 to 2.5 trillion barrels of oil, and are the world's biggest known reserve. This has not been lost on the energy-hungry Chinese. "Canada's oil production from the oilsands is on track to explode," she says.

ExxonMobil, which owns about 70 per cent of Imperial Oil, and is one of the most active oilsands players with a 25 per cent stake in the Syncrude mining project and the wholly owned Cold Lake heavy-oil project, is investing $3.5 billion U.S. to $5.5 billion U.S. in the Kearl oilsands project.

Other enormous players in the region are Suncor Energy, Canadian Natural Resources, Husky Energy, Shell, Chevron, Western oilsands, Petro-Canada, UTS Energy Corp. ConocoPhillips Ltd., Total SA and Devon Energy Corp.

"This massive investment in the oilsands has not been lost on the Chinese, and investment will soar further over the next 10 years and more," says Mr. Cooper.

The Canadian Energy Research Institute (CERI) conservatively estimates that by 2015, the output from the oilsands will total some three million barrels per day, likely making Canada the world's second-largest oil exporter, behind Saudi Arabia.

"Investors would do well to consider the implications of Canada's natural bounty in a world where technological innovation is rapid and globalization accelerates the free flow of capital, labour and investment," says Ms. Cooper.

"The United States has clearly begun to see this picture. The global geopolitical implications are very important. Canada's role in the global economy and in the political sphere is about to increase dramatically in importance. It's nice to have a world-class bounty that the two largest economic powers desperately need."

Nat King Coal.

I happened to catch Kudlow & Company on CNBC today, which I generally don't watch. Perhaps it was serendipity, because two of the guests were hot on coal. Yes, coal. (They were also into energy in general, but they specifically picked out coal to highlight.)

The guests were Frank Husic of Husic Capital Management (I think - the web guest list doesn't mention him) and Susan Byrne of Westwood Holdings Group. Mr. Husic referred to it as a "secular move" (ie. long term).

Now I don't know where you are, but where I'm at it's hot and much of the US is hot. And hot means air conditioning, and air conditioning means electrical power, and much of our electrical power means coal. Additionally, some coal is used in producing metals, so in theory it is a China and India play. (I know next to nothing about this.)

Among names mentioned: Peabody, Massey, Arch, Consol, Foundation, Alpha Natural Resources, and Walter Industries, which the guest claimed had a hidden coal play.

FYI: I have some coal holdings myself, Peabody (BTU), Consol (CNX), Fording (FDG), and Natural Resources (NRP).

Article: Green Coal

Finally, coal need not be the backward polluting step many environmentalists might believe. Coal gasification facilities reduce dramatically particulate and sulfur dioxide and nitrogen oxide emissions. They can produce hydrogen, which would fit with zero-carbon hydrogen fuel cell technology.

And, as the Energy Department notes, "if oxygen is used in a coal gasifier instead of air, carbon dioxide is emitted as a concentrated gas stream. In this form it can be captured more easily and at lower cost for sequestration."

Finally, coal gasification technology is ready and available. Cleco Corp., which has generated 70% of its electricity with natural gas, on July 12 announced its plans to build a $1 billion, 600-megawatt "clean coal" power-generating plant in northern Louisiana. The company noted that natural gas prices had risen from $2 per million British thermal units of energy production to $7 per million Btu. It figures that the clean coal plant will save its customers $4 billion over 30 years over high priced natural gas.

Monday, July 25, 2005

It's Deja Vu All Over Again?

An analyst calling for Amazon at $400, oil at $105.

Some guy puttin' 90% of his money in energy stocks?!

It's a long cycle?

You can (gulp) buy and hold (for 9 -13 years)?

The funds are overloaded in the stuff?

Here come the Internet nutcases.

The charts are looking bullish.

Guys running around in robes celebrating.

[Wait, wait.. That last one was Tyco, not Internet bubble, nevermind.]

Now the job hopping.

Remember, here's the key:

When your neighbor corners you at a party and starts talking about the money he's making on oil stocks, RUSH RIGHT HOME AND SELL ALL YOUR ENERGY STOCKS. In between then and now, relax, do your thing; dollar cost average, trade a little, whatever. It's all good.

Friday, July 22, 2005

LOBG: Use Care When Reading Columnist's Investment Advice.

I generally find sector funds to be very profitable ways to invest, so I disagree with this article. Nevertheless, there are a couple of good quotes buried in it.

USA Today: Investing - Use care if rotating into sector funds.

Ralph Wanger is a great money manager. Well, was. He retired.

Quotes:

Ralph Wanger, founder of the Acorn funds, thinks energy is the best long-term sector now. "You can make a pretty good case that petroleum production will peak in about 10 years," he says. "That doesn't mean there will be no fuel, but it does mean that there won't be increasing amounts of liquid petroleum."

David Dreman, chairman of Dreman Value Management, likes energy, too. "It's not that oil prices have to go sky-high," he says. "But energy companies are making enormous profits, they're buying in their own stock, and they're selling at low multiples." By "low multiples," Dreman means that their prices are relatively low compared with their earnings.

Wanted: One American Bride?

Cnooc May Drop Unocal, Seek Marathon, Investors Say.

Thursday, July 21, 2005

Greenspan endorses Operation Alberta Freedom.

Testimony of Chairman Alan Greenspan.

Energy prices represent a second major uncertainty in the economic outlook. A further rise could cut materially into private spending and thus damp the rate of economic expansion. In recent weeks, spot prices for crude oil and natural gas have been both high and volatile. Prices for far-future delivery of oil and gas have risen even more markedly than spot prices over the past year. Apparently, market participants now see little prospect of appreciable relief from elevated energy prices for years to come. Global demand for energy apparently is expected to remain strong, and market participants are evidencing increased concerns about the potential for supply disruptions in various oil-producing regions.

To be sure, the capacity to tap and utilize the world's supply of oil continues to expand. Major advances in recovery rates from existing reservoirs have enhanced proved reserves despite ever fewer discoveries of major oil fields. But, going forward, because of the geographic location of proved reserves, the great majority of the investment required to convert reserves into new crude oil productive capacity will need to be made in countries where foreign investment is currently prohibited or restricted or faces considerable political risk. Moreover, the preponderance of oil and gas revenues of the dominant national oil companies is perceived as necessary to meet the domestic needs of growing populations. These factors have the potential to constrain the ability of producers to expand capacity to keep up with the projected growth of world demand, which has been propelled to an unexpected extent by burgeoning demand in emerging Asia.

More favorably, the current and prospective expansion of U.S. capability to import liquefied natural gas will help ease longer-term natural gas stringencies and perhaps bring natural gas prices in the United States down to world levels.


See here for more info on supporting Operation Alberta Freedom. Send your dollars in now!

He also puzzles about the bond thing again, but he still doesn't have an answer. Poor Augustus.

Weekend at King Fahd's.

Anybody seen Andrew McCarthy lately? The Saudi's may have a lucrative acting role for him.

Let's hope everybody else knows their lines and nobody wants to do any ad-libs.

Longest-Serving Saudi Ambassador Resigns.

Sunday, July 17, 2005

Deffeyes: "We're speeding up the decline."

Orlando Sentinel: NO GUSHERS HERE.

With oil prices so much in the news, I checked in with Kenneth Deffeyes, my favorite black-gold naysayer from Princeton University and the author of Beyond Oil.

Deffeyes is among those experts who think we're near the peak of oil production. T. Boone Pickens, who's expecting $3-a-gallon gasoline, is among them, too.

But unlike most others, Deffeyes has a date in mind -- around this Thanksgiving -- after which production will decline.

By his calculation, we'll be out of oil and running on empty in 100 years.

My goal for ringing him up was to see if anything had changed from a year ago. With increasing demand in China and India, record prices, the war, was there any way -- possibly -- that the situation wasn't as bleak as it seems?

Nope. If anything, it's worse.

"We're burning the candle at both ends. We're speeding up the decline," he tells me.

Happy Turkey Day, folks.


It's interesting that the author draws no connection, not even a potential one, between the story above and the one before it, quoted below.

Sounds like this year's back-to-school shopping season will get a failing grade.

That's what I'm hearing from Orlando consultant Britt Beemer, who conducts national surveys every six weeks or so. "It's the worst in 10 years," Beemer said.

He quizzed parents across the country last week and found they're planning to spend just shy of $300 this summer -- $100 less than last year -- on new sneakers, backpacks and T-shirts.

Thursday, July 14, 2005

Matthew Simmons on Bloomberg 07-12-05.

Matthew Simmons of Simmons & Company International was on Bloomberg radio on July, 12 2005.

His comments, as close as my notes get them:

- There is a lot of oil on the market, but very little data about oil and reserves. Consequently he's not sure if anybody really knows if oil prices are high or actually remarkably low.
- Based on DOE estimates, it looks like oil refineries will have to be running sustained 24x7 operations from 7/1 through Labor Day.
- We've got a very tight system, and a very, very scary picture, he thinks $60 oil might turn out to be a great bargain.
- The risk is that we develop a shortage (demand greater than supply). His estimate is that odds are 50/50 we could develop a summer shortage.
- Ever since $30, there has been talk of speculation driving prices, but there is no substantial evidence of this.
- In terms of prices, he drew a comparison with other liquids we buy, and observed that although oil is non-renewable, it is still substantially cheaper per pint than renewables like beer (he actually said "cheap beer") and wine ("jug wine").
- He believes the price of oil will eventually reflect it's true value, somewhere in the mid to high triple digits.
- In terms of demand, at even $5, $6 or $7 dollars a gallon, we may not see a substantial reduction in demand. As an example, he was in Nairobi, Kenya recently, where gasoline is in that range, and he said the roads were jammed with traffic.
- This summer is not simple, and the winter could be a big problem; heating oil may cost quite a lot.
- "I worry a lot about winter, we may exceed by 4 to 6 million barrels per day of demand over supply."

Monday, July 11, 2005

Obligatory Jim Cramer Homage.

"You smell that? Do you smell that?...

Napalm, son. Nothing else in the world smells like that. I love the smell of napalm in the morning.

You know, one time we had a hill bombed, for twelve hours. When it was all over I walked up. We didn't find one of 'em, not one stinkin' [ short's ] body.

The smell, you know that gasoline smell, the whole hill.

Smelled like... victory."


Quote: Apocalypse Now

[To get the full effect, please roll up your sleeves, stand up and pace feverishly while occasionally gesticulating wildly as your alternate between yelling at the camera and pounding whatever might be around for emphasis.

Thank you,

The LOBG Management.]


Let me tell you about oil and being short, folks.

Oil is a precious resource. Not only that, but oil runs the world. Everybody needs oil. Now there are hints we are nearing a peak in oil production. Oil may in fact be getting a little harder to find.

Being short is a stock market term. You have an open position, and you are obliged to purchase something in the future to close your position.

Now let's connect the two.

The average person on this planet is short oil. They need to get up every morning and buy in oil. They are going to be buying in oil for the rest of their days. They will be waking up tomorrow and having to buy in oil. They will be waking up the next day and doing the same thing. The week after, the same thing. A year from now, the same thing.

So the rest of the world, with the exception of a small minority, is mostly SHORT OIL.

You, my friends, are LONG oil. In fact, if you've been playing the Home Game, you own a lot of oil: you are gloriously LONG OIL. You are gushing in it. You are the Saudi Arabia of your neighborhood.

And each and every day, the rest of the world has to come to you and me and buy oil in.

Sunday, July 10, 2005

Patterns.

PATTERNS ALL AROUND YOU
PATTERNS EVERYWHERE
PATTERNS OF BEHAVIOR
SOMETIMES SEEM UNFAIR
CAN YOU RECOGNIZE THE PATTERNS THAT YOU FIND?
PATTERNS UNFAMILIAR
PATTERNS LEAD YOU THROUGH (TO)
PATTERNS OF DISCOVERY
TRACING OUT THE CLUES
CAN YOU RECOGNIZE THE PATTERNS THAT YOU FIND?

Lyrics: Devo

Natural resources:

ExxonMobil (USA) wanted to buy part of Yukos (Russia), but after some craziness, it went to Rosneft/Gazprom (Russia).

Xstrata (Swiss) wanted to buy WMC Resources (Australia), but it eventually went to BHP (Australia).

Minmetals (China) wanted to buy Noranda (Canada), but Noranda eventually instead decided to merge with Falconbridge (Canada).

CNOOC (China) wanted to buy Unocal (USA), but it's going to ?
[..ChevronTexaco (USA)].

Not natural resources:

General Motors (USA) did a deal with Fiat (Italy). Then GM realized their mistake and had to pay money to get out of it.

Daimler (Germany) bought/mergered with Chrysler (USA).

IBM (USA) sold it's PC division to Lenovo (China).

Anyone squawking about Maytag?

What's left of MG Rover for sale to anyone who wants it.

Friday, July 08, 2005

Super Spike II: Murti's Revenge.

The China Post: Oil analysts, wrong all year, raise price predictions, say risk on upside.

Quotes:

Three months ago analysts predicted crude oil would average US$49.50 a barrel in New York this year. Today it reached a record US$62.10.
Now the analysts in a Bloomberg survey are back with another prediction, their highest ever: US$53 a barrel in New York this quarter and an average of US$52 for the entire year.

"We've been increasing our price forecasts just about every month," said Dave Costello, an economist with the U.S. Energy Department in Washington who supervises the monthly Short-Term Energy Outlook. "It's an unfamiliar market. The market has been immune to the kind of adjustments that have occurred in the past."


"There will be nothing to set a price ceiling until we start to see demand restraint," said Adam Sieminski, chief energy economist at Deutsche Bank AG in New York. "The risk is primarily to the upside."

Yowza!

While some hedge fund managers have been bullish on oil prices, including Boone Pickens, whose Dallas-based energy commodity hedge fund returned 200 percent after fees in the first half of this year, analysts have stuck to lower forecasts.

Thursday, July 07, 2005

The MadMan rings the register.

Jim Cramer of thestreet.com and CNBC MadMoney is calling for ringing the register on energy stocks. He's taking money off on stocks like Encana and Haliburton.

He's not selling entirely, but he's making a call to take some off to avoid the "pigs get slaughtered" syndrome.

MSN Money on Oil.

StockScouter is an automated stock ranking system available via MSN Money. You can read about it here, and see it's top 50 picks for July here. Surprise, it's got a lot of energy names.

Another MSN columnist, Jim Jubak, focusing on oil stocks with a couple of articles worth reading:

Higher oil prices? It's worse than you think.

When will oil run out of gas?

Fund Managers Gone Wild!

There was an article on the front page of USA Today [I don't actually buy the thing - I borrowed it.. sniff..] about general mutual funds loading up on energy stocks, but I can't find it to link to it.

I would say this is bad news, but the funds they highlighted included CGM Focus Fund, FPA Capital, Fidelity Contrafund, and Fidelity Leveraged Company Stock. All of these funds have good track records and smart managers.

CGM Focus is nearly 49% in energy!
FPA Capital is something like 25% in energy.

Read the March report from FPA Capital here. He likes the drillers, and absolutely hates the financials.

Read the December report from CGM Focus here. It's old, but he still likes MUR I believe. He dumped all his homebuilders and steels recently though.

Additionally, David Dreman is pushing the oils in his latest Forbes column "Black Gold".

[Amusingly, David Dreman and Robert Rodriguez from FPA Capital are well known contrarians!]

Then there is this article from USA Today: "Natural Resources Funds Strike Oil".

Quotes:

The question for investors: Will the oil run continue? John Segner, manager of AIM Energy fund, thinks so. He estimates that worldwide oil demand is 84.2 million barrels a day. And producing capacity is 85.5 million barrels. "There's very little excess capacity," Segner says. "If the global economy were to grow 2% a year, that's another 1 million barrels of new demand."

Demand may be growing faster than expected: June car sales were almost 1.7 million units, up nearly 16% from a year ago, according to Autodata. Most of that increase came from a General Motors promotion. Nevertheless, it may also signal a stronger-than-expected economy, which, in turn, means higher demand for oil.

Normally, when demand increases for a commodity, supply does, too. Eventually, more supply means lower prices. So when will we see $30 oil again?

"Never," says Timothy Guinness, manager of Guinness Atkinson Global Energy. The appearance of new supply may not be as large as optimists believe, he says. "There aren't many new Alaskas out there. The Caspians have been a big disappointment, and deep-water drilling is proving tougher than anticipated."

In the next few years, oil prices could average $55 to $85 a barrel, depending on how much supply comes on line and how oil companies behave. "Why find extra oil if it brings the price down?" Guinness says.

In the long term, he says, a "hugely persuasive" case can be made that producing will peak in 25 years.

AIM's Segner believes most oil stocks reflect oil prices at $35 a barrel, which means there is still time for the stocks to run, assuming oil stays high. Stocks of oil services companies - firms that keep oilfields running - typically sell for higher price-earnings ratios than the Standard & Poor's 500-stock index. (A stock's P-E ratio is its price divided by its past 12 months' earnings; lower is cheaper.) They currently have lower P-Es than the S&P 500, Segner says.

Guinness, whose fund's 31.5% gain ranked it first among all stock funds the first half of this year, is avoiding speculative exploration stocks. There's no reason to stretch for stocks with potentially high earnings at this point in the game. His fund has concentrated on midsize integrated oil companies, such as Occidental Petroleum and Amerada Hess.

Another area of interest: Canadian companies that are developing oil from oil sands, such as EnCana.

All commodities are volatile, and oil particularly so. Big new oil fields or slow economic growth could send oil prices and oil stocks tumbling. Right now, that doesn't look likely. "The economy is doing much better than I would have thought, given the price of oil," AIM's Segner says. "To me, it's quite surprising."

Nothing's a sure thing, and soaring oil prices have their skeptics, too.

Bill Wilby, director of equities at OppenheimerFunds, is one. The commodities markets have big swings between shortages and surpluses - and price is what determines the difference between the two. "The higher the price, the higher the supply response will be," he says.

July 07, 2005.

My sympathies to those affected by the bombings in London, and generally to innocent people anywhere who have been subject to despicable acts.

Unfortunately, there is never any shortage.

Wednesday, July 06, 2005

Defending Arjun Murti's Life.

The Christian Science Monitor: As oil prices rise, shrugs at the gas pump.

Demand refuses to back down. I don't know about you, but I see exactly the same behavior going on in my neck of the woods.

Super spike, here we come.

The Saudis show a little ankle.

Financial Times: OPEC can’t meet west’s oil demand, say Saudis.

Quotes:

The Organisation of the Petroleum Exporting Countries will be unable to meet projected western demand in 10 to 15 years, Saudi officials have warned.

At today's prices, the world will need the cartel to boost its production from 30m to 50m barrels a day to 50m by 2020 to meet rapidly rising demand, according to the International Energy Agency, the energy watchdog for consuming countries.

But senior Saudi energy officials have privately warned US and European counterparts that Opec would have an “extremely difficult time” meeting that demand. Saudi Arabia calculates there is a 4.5m b/d gap between what the world needs and what the kingdom can provide.

Saudi Arabia pumps 9.5m b/d and has assured consumer countries that it could reach 12.5m b/d in 2009 and probably 15m b/d eventually. But a senior western energy official said: “They said it would be extremely difficult to move above that figure”.

Stephen Leeb Interviewed in BusinessWeek.

BusinessWeek: Oil Stocks: Plenty of Fuel Left.

Quotes:

Q: Steve, what's your forecast now for oil prices and their effect on the stock market -- which is, of course, a big area of expertise for you?
A: I believe oil prices' uptrend will remain. It won't be straight up, but by and large the factors that have caused oil to go from $10 a barrel in '98 to more than $50 now are very much in place. Demand for oil is very much in place, given the expanding economies in India and China, whereas the supply is ever more limited.

So the only question for me is, short-term dips notwithstanding, how quickly oil prices rise in the forthcoming period -- not whether they'll increase, but how quickly they'll increase.

Q: What are your favorite energy plays? Is it too late to get into the sector?
A: No, it's not too late. Hard to believe, but virtually no Wall Street analyst believes that oil prices are going to stay in an uptrend. What this means is that energy stocks are currently valued as if oil prices are going to come down -- and come down a lot (30% or more), over the next three to five years. Plus, if I'm right, the entire energy sector is exceptionally cheap. Beyond the usual suspects such as Nabors Industries, Suncor Energy, and the oil producers are some interesting alternative energy plays. These include Air Products & Chemicals, FPL Group, and Exelon.

Q: I would welcome your opinion on EnCana (ECA ) and Transocean (RIG ).
A: Both those stocks are in our portfolio, and we like them both very much. EnCana, as with Suncor, has a stake in the Canadian oil sands and has an excellent production future -- i.e., it's going to be increasing in the foreseeable future. Combine that with rising oil prices, and you have a genuine growth stock, which is trading at a very modest multiple of less than 13 times earnings.

As for Transocean, it is by a wide margin the most significant and largest deepwater driller for oil, and if there are any additional significant hydrocarbons to be found in the world, they're going to be found in the deepest waters. This highly leveraged driller should see torrid growth for many years.

Q: Won't alternate energy sources eventually bring down oil prices?
A: I hope so. That's a very complicated question. The short answer is, eventually, yes. But the caveats include extremely long lag times between bringing on alternative energies, between the planning and fruition stages in these alternative sources. For example, were we to start building a new nuclear plant today from scratch, it could easily take as long as a decade to finish.

For me, and I realize I'm on a soapbox right now, by far the most interesting alternative energy is wind. In the June 24 issue of Science magazine, there's a peer-reviewed article by a Stanford professor who argues that electricity generated from wind could economically generate, via downstream production of hydrogen gas, enough to fuel the entire vehicle fleet in the U.S.

Clearly, this is an aggressive statement, but it does come from a very reputable source in one of the most reputable science magazines in the world. The biggest players in wind, in case you want an investment angle, would be FPL, General Electric, and Scottish Power (SPI ).

Q: Do you see any near-term opportunities in the oil-equipment segment?
A: If you mean stocks like Halliburton (HAL ) and Schlumberger (SLB ), I think they represent wonderful opportunities. We'd advise accumulating shares in both.

Q: Is it economical to go after the tar sands in Canada?
A: It's economical, and indeed, Suncor, EnCana, PetroCanada (PCZ ), and Canadian Oil Sands Trust (COSWF ) are four companies with very strong production growth rates by virtue of their stake in the tar sands. However, there's a limit to what we can expect the tar sands to produce, as mining these sands happens to be energy-intensive and unfriendly to the environment. Still, this should be a very fruitful area for many years, and each of these four companies should be very strong performers.

Q: Are there any interesting investments to be had in the biofuels industry?
A: Not really. Perhaps Archer Daniels Midland (ADM ) in the ethanol area. But I don't believe ethanol is a meaningful source for alternative energy. I think we should be funding biofuels, and there's some interesting technology concerning ways of converting carbohydrates into fuel, but at this point, the technology is very interesting but quite expensive. Funding this technology is something the government should be doing whole hog.


PS. Leeb likes gold too. Read the interview for that, I chose not to highlight it. It's not the focus of this blog, and it's not a pony I am personally riding at this point. Additionally, please use caution about how you get in if you are just joining the oil story, no matter what you might read here.

Tuesday, July 05, 2005

BusinessWeek on Oil.

A couple of good articles from BusinessWeek:

Energetic Disagreements on Oil.

Is There Plenty Of Oil?

Monday, July 04, 2005

We're not alone.

Bloomberg: Oil Traders Increase Bets for $80 Crude on Supply Concerns.

Quotes:

New York Mercantile Exchange data show 6,900 options contracts outstanding that allow the buyer to purchase crude oil for December delivery at $80 a barrel, compared with an average of 77 in January. The probability that oil will top $75 a barrel when the December crude contract expires is 21 percent, according to Adam Sieminski and Michael Lewis, strategists at Deutsche Bank AG, up from 5 percent at the start of the year.

I actually much prefer it when I'm not on board with the herd. Thankfully, this isn't a herd.

Yet.

Louis Navellier on oil.

A MarketWatch column on Louis Navellier's Emerging Growth newsletter: 'Emerging Growth' evolving?

Quotes:

In a hotline last week, Navellier added: "Well, the stock market is in a profit-taking mood now and the latest excuse for this profit taking is the fact that oil prices briefly hit $60 per barrel on Thursday.

"These high oil prices are obviously very exciting for our energy stocks and I expect to profit immensely from this, especially when those energy stocks release their second quarter earnings results from mid-July through early August. So don't worry about the price of oil even though the market is worried about it. In truth, that was just an excuse to take profits.

"The oil situation is very simple. Oil inventories are always depleted in the summer after building in the spring. They'll build again in the fall and then be depleted in the winter. The fact that the futures traders overreact to the weekly inventory numbers is amazing to me. Oil inventories are much higher than they normally are. Prices shouldn't be this high, but many commodity traders are manic and like to jerk the market around."

Among energy stocks Navellier has mentioned recently: Anadarko Petroleum (APC), Southwestern Energy Co. (SWN).

Resource Funds Seen Taking a Breather.

MarketWatch: Resource funds seen taking a breather.

The Guinness Atkinson Global Energy Fund has a lot of Canadian oil stocks, much more than the average fund, which explains it's significant outperformance at this point. (Friday was a particularly memorable day.)

On the downside, if oil prices fall it will get clobbered a great deal more than the average energy fund.

Friday, July 01, 2005

The OPEC Put.

Remember the Greenspan put?

OPEC just did the same thing, at $53 a barrel.

OPEC Draws a Line in the Sand.

Houston, we have a problem.

What the &^%* are we gonna do with all this &*^%$# money?

Financial Times: Opec suspends talks on boosting output quotas.

Quotes:

Sheikh Ahmad Fahad Al-Sabah, Opec president and Kuwait's oil minister, said $53 for West Texas Intermediate, the US benchmark, was an "ideal" price. This is a higher level than Opec had previously stated.