Monday, July 23, 2007


Okay, no guys named Otis [trying to stay with the Animal House theme of the month] that I could find had much to say about energy or oil. I did find a guy named Phil, which is kind of the white guy equivalent of Otis.

Also, a coupla Jeffs, a John, a Matthew, an Adam, and an Otter, er Peter, with the funniest headline of quite some time.

Investor's Business Daily: Oil Could Soar Past $100 On Demand, Some Argue.


"My line right now is that we're headed to triple-digit oil prices within three or four years and the first digit is not going to be a 1," said Philip Verleger, an economist who heads energy consultancy PK Verleger LLC.

He cited "huge" pent-up demand in China and the rest of Asia, lack of growth in production capacity and reduced investment in refineries amid local resistance to new sites, and worries about measures to fight global warming.

"We've created a situation where prices are going to go up a lot," said Verleger, a respected forecaster.

Bloomberg: $100 Oil May Be Months Away, Not Years, Say CIBC, Goldman.


Jeffrey Currie, a London-based commodity analyst at the world's biggest securities firm, says $95 crude is likely this year unless OPEC unexpectedly increases production, and declining inventories are raising the chances for $100 oil. Jeff Rubin at CIBC World Markets predicts $100 a barrel as soon as next year.

``We're only a headline of significance away from $100 oil,'' said John Kilduff, an analyst in the New York office of futures broker Man Financial Inc. ``The unrelenting pressure of increased demand has left the market a coiled spring.'' New disruptions of Nigerian or Iraqi supplies, or any military strike against Iran, might trigger the rise, Kilduff said in a July 20 interview.


``Ultimately, the key to the outlook going forward is when will Saudi Arabia ramp up production,'' he said in an interview. ``If you have a situation in which inventories globally get drawn to critically low levels, the volatility in this market is likely to explode, which significantly increases the probability of $100 oil.'' Oil might slip to $73.50 if OPEC were to start producing more now, he said.


The failure of near-record fuel prices to restrain global oil demand growth is what concerns Rubin, chief strategist at the brokerage unit of Canadian Imperial Bank of Commerce in Toronto.

``Prices have doubled, and demand is alive and well and accelerating,'' he said in a July 18 interview. ``The argument that rising prices would choke demand and bring increased output is falling to the wayside.''


The cost of finding and pumping oil is rising steadily, convincing analysts such as Rubin and Deutsche Bank AG chief energy economist Adam Sieminski that higher prices will last. Shortages of deepwater drilling ships and rigs has pushed daily rents to records, and the skilled workers needed to run rigs, weld pipes, pilot vessels, fix refineries and build oil-sands projects command ever-higher wages.

``Three years ago we were calling for $30 oil, then $35 and then $40 oil,'' said New York-based Sieminski, who last week raised his forecast for the average price of oil in 2010 to $60 a barrel from $45.

``I've gotten tired of increasing these forecasts in $5 increments,'' Sieminski said in an interview. ``Something has happened. Costs have continued to escalate, and the geopolitical situation has gotten worse.''

The $60-a-barrel forecast for 2010 is 15 percent higher than the average analyst forecast, Sieminski said. The projection probably will turn out to be too low, he said.


The most inadvertently hilarious headline I've seen in a while:

Bloomberg Video: Beutel of Cameron Hanover Doubts Oil Will Reach $80 This Week.


PS. Note that when the "Oil is going to $100" noise reaches a crescendo, we tend to peak and go down. So be vigilant.

Monday, July 16, 2007

Toga! Toga!

[Okay, so you don't get the title. Party on.. Dorfman.. Animal House. Yes, the jokes are obscure and a little dopey, but I've been blogging on energy stocks for 2 and a half years now and I've got to do something to amuse myself.]

NY SUN: Energy Party Is Far From Over.


Mr. Gaines, a former crack institutional energy analyst, a one-time adviser to Carl Icahn in his hostile energy takeover attempts, and no stranger to this column because of his consistent stock-picking prowess, reckons that if you equate energy shares to the human life cycle, the stock group is probably only in its 20s.

Energy fundamentals remain very positive, he notes. "It's Economics 101; you've got growing demand and diminishing supply," Mr. Gaines says. "American production is not being replaced. We, as well as China and India, have an insatiable oil appetite. America still doesn't have a viable energy policy, and given current conditions, the terror and supply disruption premium of about $15 a barrel is not about to disappear any time soon."

In recent years, we've seen forecasts of $100-a-barrel oil from the likes of Goldman Sachs, Merrill Lynch, and Boone Pickens. Mr. Gaines, currently CEO of Dune Energy, a Houston-based oil and gas producer, figures that the elusive triple-digit target is likely to become a reality over the next 12 months. Oil closed Friday at around $73.93 a barrel.

Given the surge in energy stocks, Mr. Gaines, who is said to have a personal equities portfolio in excess of $100 million, about 90% of which is in the energy sector, has easily been one of the best stockpickers in this column. Three of his current favorites, each of which he owns, are Allis-Chalmers Energy, Chesapeake Energy, and Comstock Resources. He views all three as potential 25% to 50% gainers over the next 12 months.

Party on, Boone.

[Note to the WSJ: Page A2?]

WSJ: Potential Energy Crunch May Bring Other Fuels to Fore.


World oil and gas supplies from conventional sources are unlikely to keep up with rising global demand over the next 25 years, the U.S. petroleum industry says in a draft report of a study commissioned by the government.

In the draft report, oil-industry leaders acknowledge the world will need to develop all the supplemental sources of energy it can -- ranging from biofuels to nuclear power to oil extracted by unconventional means from the oil sands of Canada -- to meet soaring demand. The surge in demand is expected to arise from rapid economic growth in such fast-developing countries as China and India, as well as mounting consumption in the U.S., the world's biggest energy market.

The findings suggest that, far from being temporary, high energy prices are likely for decades to come.

Saturday, July 14, 2007

Oh my God.

Joe Kernen utters the above priceless quote when Boone Pickens first appears on the screen and it's apparent the interview is being conducted with Mr. Pickens in gym attire and with his foot up on his desk.

I'm not sure what exactly that suggests; a man of 78 and still on top of his game having a bit of fun, or a ton of hubris from a guy who's been right so long he's getting cocky. I think the former. [At least he didn't end with "Party on, dude".]

Predictions: $80 by next May, but first possibly a dip to the high sixties due to an excess of oil around right now. He suggests people not be short oil.

CNBC TV: Oil May Dip Slightly, But Will Hit $80 by Next May: Pickens.


"What I see from the producers’ side is that the Saudis, the Russians -- all the producers -- want a higher price for oil and what they’re searching for is how much can the market stand, how much can the world economy stand on price. They’ll keep pushing it on up as far as it will go.”

Pickens shorted natural gas last year because there was “too much gas” -- and said the action “made our day.”

“We got a late start to the summer this year, so gas is still suffering,” Pickens said. “I think gas will suffer on into 2008. All those things will clear up with time. A few months in a commodity market going down or up just scares hell out of everybody… You need to look at it on a longer-term basis than that. At the same time, if you’ve got your neck stuck out in a commodity market, you can lose a lot of money real quick.”