Some spectacular moves today, particularly in the coals, the refiners, and oil service.
I highlighted the positive comments of the CFO of Halliburton a little while ago, and now a couple of coal CEOs have issued a similar set of bullish forecasts.
Reuters: New long-term contracts to boost coal miner profits.
Quotes:
Soaring electricity demand and sky-high oil prices are driving up the price of coal and producers are set to benefit as they negotiate new long-term supply contracts, two major U.S. coal miners said on Wednesday.
"A lot of legacy contracts are expiring soon and that has great implications for our bottom line," said Steven Leer, chairman and chief executive officer of Arch Coal Inc.
....
Considering the prospects of long-term global energy shortages with oil at $70 per barrel, "this is the best environment I have ever seen in more than 20 years.
"I have never seen the coal industry in such an enviable position as a producer. Coal will be the backbone of electricity generation for the next 25-30 years," said Leer.
Thursday, June 29, 2006
Sunday, June 25, 2006
Canadian Oil Sands - the Next El Dorado in North America?
Dr. Michael Economides, a petroleum engineer and Professor at the University of Houston, has recently suggested that the Canadian oil sands could be the next El Dorado in North America.
This comment comes, interestingly, from a gentleman who believes peak oil won't hit until roughly 2050 and that both Saudi Arabia and Russia will eventually increase production substantially. His other views: He's bullish on natural gas, believes that Venezuela's Hugo Chavez is the biggest threat to the United States and it's oil needs, and is convinced that Chinese demand, geopolitics and OPEC's inability to raise production in the short term are the main cause of high oil prices, not an imminent Hubbert's Peak of global production.
While his views thus differ substantially from peak oil proponents including Boone Pickens, Kenneth Deffeyes and Matthew Simmons, in seeing huge potential in Canadian oil sands, Dr. Economides joins a chorus of oil industry types, analysts, and investors.
On the potential of Canadian oil sands I highlight, in no particular order, the comments of:
Boone Pickens, Jim Rogers & Charles Maxwell
Donald Coxe
Peter Thiel
Raymond James
CIBC
Leigh Goehring
Stephen Leeb
Martin Whitman
Henry Groppe
Jim Cramer
BMO Nesbit Burns
CERA (yes, them)
China
For a list of stocks and a little bit of back story, here's my take.
In terms of technical analysis, the main oil sands stocks [Suncor, Canadian Natural Resources, Canadian Oil Sands Trust, Nexen, Imperial Oil, as well as to a lesser extent Encana, PetroCanada, Opti Canada, Husky Energy] held up well recently and continue to have some of the stronger charts in the energy sector.
For Dr. Economides' recent viewpoints, please see:
Resource Investor: Peak Oil Debate Digresses Into Global Warming Argument.
Resource Investor: Energy GeoPolitics: The Impact on Prices and Supply of Oil and Gas.
PS. After posting this, I went over to The Oil Drum and the top article turned out to be the con argument on oil sands, the problem of the natural gas input requirements. This is a legitimate concern. If you are worried about that, then I would focus on Encana, Canadian Natural Resources, Nexen and Opti Canada. The first two have substantial natural gas production themselves [not necessarily in the same region, but it helps offset the cost pressures if they produce the same product], and the last two are working on a project where they should be able to produce gas they can use from the oil sands itself, thus reducing their need for natural gas input and lowering their costs substantially.
PPS. There's also a water issue, but that never stopped anybody. For reference, see Chinatown.
Quotes:
Noah Cross: Either you bring the water to L.A. or you bring L.A. to the water.
....
Walsh: Forget it, Jake. It'sAlberta Chinatown.
This comment comes, interestingly, from a gentleman who believes peak oil won't hit until roughly 2050 and that both Saudi Arabia and Russia will eventually increase production substantially. His other views: He's bullish on natural gas, believes that Venezuela's Hugo Chavez is the biggest threat to the United States and it's oil needs, and is convinced that Chinese demand, geopolitics and OPEC's inability to raise production in the short term are the main cause of high oil prices, not an imminent Hubbert's Peak of global production.
While his views thus differ substantially from peak oil proponents including Boone Pickens, Kenneth Deffeyes and Matthew Simmons, in seeing huge potential in Canadian oil sands, Dr. Economides joins a chorus of oil industry types, analysts, and investors.
On the potential of Canadian oil sands I highlight, in no particular order, the comments of:
Boone Pickens, Jim Rogers & Charles Maxwell
Donald Coxe
Peter Thiel
Raymond James
CIBC
Leigh Goehring
Stephen Leeb
Martin Whitman
Henry Groppe
Jim Cramer
BMO Nesbit Burns
CERA (yes, them)
China
For a list of stocks and a little bit of back story, here's my take.
In terms of technical analysis, the main oil sands stocks [Suncor, Canadian Natural Resources, Canadian Oil Sands Trust, Nexen, Imperial Oil, as well as to a lesser extent Encana, PetroCanada, Opti Canada, Husky Energy] held up well recently and continue to have some of the stronger charts in the energy sector.
For Dr. Economides' recent viewpoints, please see:
Resource Investor: Peak Oil Debate Digresses Into Global Warming Argument.
Resource Investor: Energy GeoPolitics: The Impact on Prices and Supply of Oil and Gas.
PS. After posting this, I went over to The Oil Drum and the top article turned out to be the con argument on oil sands, the problem of the natural gas input requirements. This is a legitimate concern. If you are worried about that, then I would focus on Encana, Canadian Natural Resources, Nexen and Opti Canada. The first two have substantial natural gas production themselves [not necessarily in the same region, but it helps offset the cost pressures if they produce the same product], and the last two are working on a project where they should be able to produce gas they can use from the oil sands itself, thus reducing their need for natural gas input and lowering their costs substantially.
PPS. There's also a water issue, but that never stopped anybody. For reference, see Chinatown.
Quotes:
Noah Cross: Either you bring the water to L.A. or you bring L.A. to the water.
....
Walsh: Forget it, Jake. It's
Thursday, June 22, 2006
Kunstler now 'not calling for the end of the world as we know it'.
James Kunstler is the author of "The Long Emergency, Surviving the End of Oil, Climate Change, and Other Converging Catastrophies of the 21st Century", which I consider to be one of the more Apocalyptic peak oil books.
For whatever reason he backpedaled in this interview, saying he is neither calling for an energy Armagedeon, nor calling for the end of the world as we know it.
Perhaps I'm an idiot, but his book and his blog writings appear to call for exactly that. But hey, sit down to be interviewed by a beautiful young lady, and the whole peak oil scenerio doesn't look quite so bad. And heck, the Asian pirates are gonna have a heck of a time making it to Syracuse anyway.
Anyway, on with the show..
James Kunstler, as interviewed by CNBC's Erin Burnett:
CNBC: "With oil prices hovering around $70 a barrel, it's clear the words 'cheap oil' may be a thing of the past. But what would we do in an age where we can't get our hands on expensive oil either? Our next guest says 'Brace yourself. That may be what's in store for Americans within a matter of years.' James Kunstler is the author of "The Long Emergency, Surviving the End of Oil, Climate Change, and Other Converging Catastrophies of the 21st Century" and he joins us now. We appreciate your joining us, James."
Kunstler: "Nice to be here."
CNBC: "Alright, I was reading your book, and I wasn't sure what to expect, and I have to say, I've had difficulty putting it down. One thing that you say though, here, on page 20, 'Two hundred years of modernity can be brought to it's knees by a worldwide power shortage.' Is it fair to say you're calling for an energy induced Armagedon?"
Kunstler: "Oh gosh no! What I'm saying is that we're facing a discontinuity in regular life, but I'm not calling for the end of the world as we know it. That's not true at all."
CNBC: "Alright. So what are you calling for though; you are saying that we're gonna run out of oil?"
Kunstler: "Well, I'm saying that we're gonna run into big problems with the complex systems that we depend on, not when we run out of oil, but as we go over the world production peak. That's when the trouble starts."
CNBC: "So, here's what I want to follow up with you on. Because this whole issue of a peak is highly controversial. I mean, last week, here on Street Signs we were listening to Ben Bernanke talk in Chicago, and he said at the end of 2005, in terms of proved reserves of oil on this planet, we had 15% more than we did a decade earlier, at about 1.2 trillion barrels, and he says that doesn't even count the Oil Sands up in Canada."
Kunstler: "Well, that's just not reliable information that he's getting. The US Department of Energy is considered to be the most unreliable source of this information. In fact, global production has been flat since 2004. We've found no significant amounts of oil. The Saudi Arabians have had tremendous trouble producing more oil, in fact, they've failed, even though we've requested them to do it innumerable times. Their own giant oil fields, the Ghawar oil fields, which represent more than half of their production has been in deep trouble for several years now, they're producing more sea water than oil, because they have to pump so much sea water into the ground."
CNBC: "Right."
Kunster: "And you know, it's generally evident that the giant oil fields of the world, the Burgan field in Kuwait, the Cantarell field in Mexico, the Daqing field in China are all past peak and are now entering depletion, and we've got a serious problem."
CNBC: "So obviously, as we've said, it's controversial. But let's just assume that your numbers are right, and that you're right. Is it fair to say, that we have enough time to come up with what obviously the new energy bill here in the United States directly encourages, which is alternative sources of energy, whether it be hydrogen, or nuclear, or solar."
Kunstler: "There's tremendous wishful thinking around this subject, just tremendous. No combination of alternative fuels, or systems for running them, is going to allow us to continue running Walt Disney World, Wal-Mart and the Interstate Highway System. We're going to try everything we possibly can, but it's not even going to make up for a substantial fraction of what we're going to lose from oil. So this is for real."
CNBC: "Alright. Well, anyone who wants to find out more has got to read the book. We appreciate your joining us, thanks so much."
Kunstler: "You're welcome."
For whatever reason he backpedaled in this interview, saying he is neither calling for an energy Armagedeon, nor calling for the end of the world as we know it.
Perhaps I'm an idiot, but his book and his blog writings appear to call for exactly that. But hey, sit down to be interviewed by a beautiful young lady, and the whole peak oil scenerio doesn't look quite so bad. And heck, the Asian pirates are gonna have a heck of a time making it to Syracuse anyway.
Anyway, on with the show..
James Kunstler, as interviewed by CNBC's Erin Burnett:
CNBC: "With oil prices hovering around $70 a barrel, it's clear the words 'cheap oil' may be a thing of the past. But what would we do in an age where we can't get our hands on expensive oil either? Our next guest says 'Brace yourself. That may be what's in store for Americans within a matter of years.' James Kunstler is the author of "The Long Emergency, Surviving the End of Oil, Climate Change, and Other Converging Catastrophies of the 21st Century" and he joins us now. We appreciate your joining us, James."
Kunstler: "Nice to be here."
CNBC: "Alright, I was reading your book, and I wasn't sure what to expect, and I have to say, I've had difficulty putting it down. One thing that you say though, here, on page 20, 'Two hundred years of modernity can be brought to it's knees by a worldwide power shortage.' Is it fair to say you're calling for an energy induced Armagedon?"
Kunstler: "Oh gosh no! What I'm saying is that we're facing a discontinuity in regular life, but I'm not calling for the end of the world as we know it. That's not true at all."
CNBC: "Alright. So what are you calling for though; you are saying that we're gonna run out of oil?"
Kunstler: "Well, I'm saying that we're gonna run into big problems with the complex systems that we depend on, not when we run out of oil, but as we go over the world production peak. That's when the trouble starts."
CNBC: "So, here's what I want to follow up with you on. Because this whole issue of a peak is highly controversial. I mean, last week, here on Street Signs we were listening to Ben Bernanke talk in Chicago, and he said at the end of 2005, in terms of proved reserves of oil on this planet, we had 15% more than we did a decade earlier, at about 1.2 trillion barrels, and he says that doesn't even count the Oil Sands up in Canada."
Kunstler: "Well, that's just not reliable information that he's getting. The US Department of Energy is considered to be the most unreliable source of this information. In fact, global production has been flat since 2004. We've found no significant amounts of oil. The Saudi Arabians have had tremendous trouble producing more oil, in fact, they've failed, even though we've requested them to do it innumerable times. Their own giant oil fields, the Ghawar oil fields, which represent more than half of their production has been in deep trouble for several years now, they're producing more sea water than oil, because they have to pump so much sea water into the ground."
CNBC: "Right."
Kunster: "And you know, it's generally evident that the giant oil fields of the world, the Burgan field in Kuwait, the Cantarell field in Mexico, the Daqing field in China are all past peak and are now entering depletion, and we've got a serious problem."
CNBC: "So obviously, as we've said, it's controversial. But let's just assume that your numbers are right, and that you're right. Is it fair to say, that we have enough time to come up with what obviously the new energy bill here in the United States directly encourages, which is alternative sources of energy, whether it be hydrogen, or nuclear, or solar."
Kunstler: "There's tremendous wishful thinking around this subject, just tremendous. No combination of alternative fuels, or systems for running them, is going to allow us to continue running Walt Disney World, Wal-Mart and the Interstate Highway System. We're going to try everything we possibly can, but it's not even going to make up for a substantial fraction of what we're going to lose from oil. So this is for real."
CNBC: "Alright. Well, anyone who wants to find out more has got to read the book. We appreciate your joining us, thanks so much."
Kunstler: "You're welcome."
Thursday, June 15, 2006
Boone Pickens putting his money where his mouth is.
I guess he didn't hear the one about "never give 'em both a time and a price; just one or the other." And maybe he doesn't need to worry, he's been pretty much nailing it so far.
The Dallas Morning News: Pickens predicting $80 oil.
Quotes:
Boone Pickens, the legendary Dallas oil and gas investor who seems to peer at markets through a crystal ball, issued a new prediction Monday: The price of a barrel of oil will rise to $80 by the first of next year.
Reuters: Legendary investor Boone Pickens likes oil not gas.
Quotes:
Pickens, a long-time backer of companies operating in Canada's oil sands, said he's been buying shares of oil-sands miner Suncor Energy Inc. (SU.TO: Quote, Profile, Research) (SU.N: Quote, Profile, Research) as that company's stock price slipped in recent weeks along with those other energy companies.
"I've been a buyer of Suncor recently on the pullback from $85" a share, he said.
The Dallas Morning News: Pickens predicting $80 oil.
Quotes:
Boone Pickens, the legendary Dallas oil and gas investor who seems to peer at markets through a crystal ball, issued a new prediction Monday: The price of a barrel of oil will rise to $80 by the first of next year.
Reuters: Legendary investor Boone Pickens likes oil not gas.
Quotes:
Pickens, a long-time backer of companies operating in Canada's oil sands, said he's been buying shares of oil-sands miner Suncor Energy Inc. (SU.TO: Quote, Profile, Research) (SU.N: Quote, Profile, Research) as that company's stock price slipped in recent weeks along with those other energy companies.
"I've been a buyer of Suncor recently on the pullback from $85" a share, he said.
Tuesday, June 13, 2006
200 Days Later.
If you bring up the XLE [energy ETF] or OIH [oil service ETF] on your favorite charting site (BigCharts is one) and draw 100 and 200 day simple moving averages on them, you will see that for the first time in a long time (about 3 years, but who's counting..) the XLE in particular has violated the 200 day moving average, while the OIH is basically right on it.
In addition, both of these ETFs would, given further moves down, violate the 'higher highs, higher lows' precept that is the foundation of most people's definition of an uptrend.
The next couple of days and weeks are therefore crucial in terms of these longer term signals.
In addition, both of these ETFs would, given further moves down, violate the 'higher highs, higher lows' precept that is the foundation of most people's definition of an uptrend.
The next couple of days and weeks are therefore crucial in terms of these longer term signals.
Monday, June 12, 2006
Jim Rogers: "Be very careful."
From this weekend's Cavuto on Business on FoxNews:
Ben Stein: "The world economy is slowing, the growth of demand for oil is slowing dramatically. I think the long term trend of demand for oil is very, very strong, but in the short run, inventories are piling up, even the Saudis can't find anyplace to store the oil, they're putting it in old oil tankers. There is a disconnect here, the price has got to fall with this huge overhang of supply. When it does, it knocks the props out of inflation, the interest rate rising cycle will stop, and stocks will rally."
Jim Rogers: "Well, Ben may be right, the market should rally after this collapse it's had recently, but Ben, we may already be in recession and the markets are gonna be down this year, and probably down into next year, so be very careful."
The ingredients are certainly there: rising interest rates, high energy costs, and what is increasingly smelling like a housing bust. And the whole stock market is stinking up the joint.
Jim Rogers, as far as I am concerned, has good gut instincts. He also ran one of the early hedge funds with George Soros.
Ben Stein: "The world economy is slowing, the growth of demand for oil is slowing dramatically. I think the long term trend of demand for oil is very, very strong, but in the short run, inventories are piling up, even the Saudis can't find anyplace to store the oil, they're putting it in old oil tankers. There is a disconnect here, the price has got to fall with this huge overhang of supply. When it does, it knocks the props out of inflation, the interest rate rising cycle will stop, and stocks will rally."
Jim Rogers: "Well, Ben may be right, the market should rally after this collapse it's had recently, but Ben, we may already be in recession and the markets are gonna be down this year, and probably down into next year, so be very careful."
The ingredients are certainly there: rising interest rates, high energy costs, and what is increasingly smelling like a housing bust. And the whole stock market is stinking up the joint.
Jim Rogers, as far as I am concerned, has good gut instincts. He also ran one of the early hedge funds with George Soros.
Thursday, June 08, 2006
It's Hammer Time!
I'm seeing a fair number of hammer candlesticks in energy land, and, coming after a strong sell off like the one we're having, hammer candlesticks tend to be a good sign that a bottom has been 'hammered' out. You can read more about this particular candlestick formation here ('Bullish Hammer'). Note that we still need confirmation tomorrow, which I'm thinking we'll get.
Update: I was wrong, the hammers went unconfirmed. It looks rather sickly out there.
In the longer run, well, it's nice to read something like this:
Reuters: Halliburton sees earnings doubling in coming years.
Update: I was wrong, the hammers went unconfirmed. It looks rather sickly out there.
In the longer run, well, it's nice to read something like this:
Reuters: Halliburton sees earnings doubling in coming years.
Tuesday, June 06, 2006
An argument for uranium.
From Sprott Asset Management, a peak oil aware asset firm based in Canada, comes a new paper entitled "Investment Implications of an Abrupt Climate Change" which argues that an increase in the use of uranium for nuclear power will be one way humans will try to mitigate the introduction of more CO2 into the atmosphere. CO2, or carbon dioxide, is a byproduct of burning carbon based energy (oil, coal, natural gas, etc), and is a greenhouse gas, which is to say that when increasing amounts are introduced into the earth's atmosphere, CO2 leads to increased heat retention.
Cameco (CCJ) is a Canadian producer of uranium with large reserves, and a good entry point these days looks like $36-39.
Boone Pickens plays up the aw shucks bit on TV, but when you get to the part in this paper about water shortages, and you remember that Mr. Pickens other big investment these days is in water rights..
Cameco (CCJ) is a Canadian producer of uranium with large reserves, and a good entry point these days looks like $36-39.
Boone Pickens plays up the aw shucks bit on TV, but when you get to the part in this paper about water shortages, and you remember that Mr. Pickens other big investment these days is in water rights..
Thursday, June 01, 2006
Boone Pickens: One word - Up.
Boone Pickens was interviewed on CNBC last week on his favorite topic, oil.
CNBC: Pickens' Predictions.
Q: Where are oil prices headed from here?
A: "Up. We could still back off a little bit, but it's trend is up, and we'll be back up in the mid 70's pretty quick."
Q: Where will be around the end of the year, still $70s?
A: "You know last year, I believe we backed off right at the end of the year and then picked up again. The trend is always up, because we're dealing with a limited supply of oil, which I think is 85 million barrels a day, and that's it, I don't think we can get any more out of the system, I'm talking about globally. And when I see the fourth quarter projected for 86.5 million barrels a day, it's gonna get tight."
Q: Will high prices solve high prices? Will we ever hit that point and get back down?
A: "You don't want it back down."
Q: Will demand eventually slow down due to high prices?
A: "Absolutely you will. That's the way you win the game, is that the price gets up high enough that it chokes you, and you start conserving, and you'll cut back on usage, and then you've solved the problem; you start to live with a changing energy picture forever after."
Q: You think that gasoline prices are too low in the US, that they should be higher?
A: "Gasoline prices around the world are a good $5 to $6, and so why are we here at $3? We're here because we haven't taxed our gasoline so much. But oil is the same, pretty well the same, Brent/North Sea, WTI, are basically the same product. Gasoline is different, there should be a global price for gasoline."
Q: What do you say to people who say you are talking your own positions up?
A: "I even had a Congressman come to see me, and said I was doing just that. I said I'm not. I said the fundamentals are the fundamentals, it doesn't have anything to do with my book. I don't think anybody can talk the market up for more than 2 minutes, that's it."
CNBC: Pickens' Predictions.
Q: Where are oil prices headed from here?
A: "Up. We could still back off a little bit, but it's trend is up, and we'll be back up in the mid 70's pretty quick."
Q: Where will be around the end of the year, still $70s?
A: "You know last year, I believe we backed off right at the end of the year and then picked up again. The trend is always up, because we're dealing with a limited supply of oil, which I think is 85 million barrels a day, and that's it, I don't think we can get any more out of the system, I'm talking about globally. And when I see the fourth quarter projected for 86.5 million barrels a day, it's gonna get tight."
Q: Will high prices solve high prices? Will we ever hit that point and get back down?
A: "You don't want it back down."
Q: Will demand eventually slow down due to high prices?
A: "Absolutely you will. That's the way you win the game, is that the price gets up high enough that it chokes you, and you start conserving, and you'll cut back on usage, and then you've solved the problem; you start to live with a changing energy picture forever after."
Q: You think that gasoline prices are too low in the US, that they should be higher?
A: "Gasoline prices around the world are a good $5 to $6, and so why are we here at $3? We're here because we haven't taxed our gasoline so much. But oil is the same, pretty well the same, Brent/North Sea, WTI, are basically the same product. Gasoline is different, there should be a global price for gasoline."
Q: What do you say to people who say you are talking your own positions up?
A: "I even had a Congressman come to see me, and said I was doing just that. I said I'm not. I said the fundamentals are the fundamentals, it doesn't have anything to do with my book. I don't think anybody can talk the market up for more than 2 minutes, that's it."
Monday, May 29, 2006
On Second Thought: The Super Duper Spike Theory.
Arjun Murthi of Goldman Sachs was responsible for the original $105 super spike call ('Buy early. Buy often. Repeat.') that caused so much controversy in early 2005. He's apparently now thinking that $105 may be too conservative if something happens in a major oil exporter.
AME Info: Oil could go above $105 a barrel.
He didn't apparently mention hurricanes, but it sure is hot.
Update: More information is in this article 'Oil could top $105 in major supply outage: expert'.
AME Info: Oil could go above $105 a barrel.
He didn't apparently mention hurricanes, but it sure is hot.
Update: More information is in this article 'Oil could top $105 in major supply outage: expert'.
Monday, May 22, 2006
Bottom?
With the caveat that I still have some things to learn about technical analysis, it looks to me like today or tomorrow might see a bottom for crude oil prices. If that finds it's footing, I'm thinking the equities also stabilize.
I was thinking of trying to trade it via the USO oil ETF, but right now I'm on vacation and it's tough to make good trades when your mind is on other things.
If they were to find a floor here or close, that would support the idea that we had a medium term top in energy ('Q: The difference between a correction and a crash.'), but if the declines continue in size.. then obviously something more serious is developing. In specific, I'm wondering if perhaps high prices are having effects we don't recognize clearly yet.
I had suggested $3 a gallon was going to be trouble [('Three is the magic number.') and "I think $3+ gasoline on a sustained basis (4+ months) is going to alter the universe." ('Buy early, buy often, repeat.')], but it seemed this year that $3 a gallon was not so bad after all. Maybe my first instinct was right?
I was thinking of trying to trade it via the USO oil ETF, but right now I'm on vacation and it's tough to make good trades when your mind is on other things.
If they were to find a floor here or close, that would support the idea that we had a medium term top in energy ('Q: The difference between a correction and a crash.'), but if the declines continue in size.. then obviously something more serious is developing. In specific, I'm wondering if perhaps high prices are having effects we don't recognize clearly yet.
I had suggested $3 a gallon was going to be trouble [('Three is the magic number.') and "I think $3+ gasoline on a sustained basis (4+ months) is going to alter the universe." ('Buy early, buy often, repeat.')], but it seemed this year that $3 a gallon was not so bad after all. Maybe my first instinct was right?
Tuesday, May 16, 2006
Enter the Dragon Grand Poobah.
"ConocoPhillips" sung to the tune of "Green Acres".
Starring Warren Buffett and Bill Miller.
Eddie, er, Warren:
ConocoPhillips is the oil stock for me.
Oil production is the life for me.
Oil reserves spread out so far and wide
Keep Manhattan, just give me that oil upside.
Eva, er, Bill:
New York is where I'd rather be.
I don't want no stinkin' commodity.
I just adore a penthouse view.
Dah-ling I love you but give me Citigroup on Park Avenue.
Warren Buffett appeared to suggest that oil was a bubble a month ago at the recent Berkshire Hathaway shareholders meeting, but maybe he'd had one too many cheeseburgers andCherry Cokes Budweisers, or maybe he was just trying to headfake Bill Miller, another well known value manager (though with a different philosophy).
Motley Fool: Berkshire on Bubbles.
Quotes:
Q. Do you think that we are in a commodity bubble?
A. Not in agricultural products, but yes in metals, oils -- the most extreme being in copper.
....
Buffett's concerns were recently echoed by Legg Mason's Bill Miller, who said, "Today people want commodities, emerging market, non-U.S. assets, and small- and mid-cap stocks. Those were all cheap five years ago, and had you bought them then, you would be sitting on enormous gains ... [But] [g]iven the choice of buying Commodities with a capital C, or buying capital C -- Citigroup (NYSE: C) -- at current prices, I'll take the latter."
And now, Mr. Buffett's Berkshire Hathaway reveals:
AP: Berkshire reveals stake in ConocoPhillips.
Bershire already held an investment in Petrochina, which to some degree can be looked at 4 ways: an oil play, a China play, an anti-dollar play, and a 'maybe they find something in the South China sea' play ('Investment Advice from Kenneth Deffeyes.'). In addition, he bought a utility that wants to build a large wind farm ('What would Warren do?'), and talked about the idea that he might invest in nuclear power ('LOBG Sing Along w/ Warren Buffett.').
Now he's bought a stake in ConocoPhillips [COP] and GE.
COP is thus officially certified as the oil stock for the value crowd. It also happens to be well diversified oil major, having investments in tar sands projects in Canada and Venezuela, in oil production in Russia via a stake in Lukoil, large US oil operations including refining, and, having just bought Burlington Resources, extensive North American land based natural gas production.
But let's not forget GE also has a large energy business which has been targeted for expansion by CEO Jeff Immelt, producing items for natural gas, clean coal, wind and nuclear power generation.
So apparently Warren Buffett knows a little something about energy.
And in something I missed, so does Charlie Munger, his partner:
thestreet.com: Buffett Bets on Oil.
Quotes:
The ConocoPhillips stake also fits Buffett's game plan. He has experience in the energy sector, having made high returns by investing in PetroChina (PTR:NYSE - commentary - research - Cramer's Take), and he has long said publicly that he views energy as an attractive area.
Still, the move seems bound to raise some eyebrows, particularly after Buffett's longtime sidekick, Charles Munger, made some controversial comments at the recent Wesco Financial (WSC:NYSE - commentary - research - Cramer's Take) conference. He suggested that future generations will curse present-day Americans for consuming fossil fuels at such a high rate, since the supply of oil will be greatly diminished.
"Those were pretty strong words," says Tongue's partner at T2 Capital, Whitney Tilson. "You rarely see Buffett and Munger investing in something that's just had its biggest run in history in the last five years, [like the oil and gas market] . One reason may be that they believe oil prices are going to be high, if not higher, for a long time."
Starring Warren Buffett and Bill Miller.
Eddie, er, Warren:
ConocoPhillips is the oil stock for me.
Oil production is the life for me.
Oil reserves spread out so far and wide
Keep Manhattan, just give me that oil upside.
Eva, er, Bill:
New York is where I'd rather be.
I don't want no stinkin' commodity.
I just adore a penthouse view.
Dah-ling I love you but give me Citigroup on Park Avenue.
Warren Buffett appeared to suggest that oil was a bubble a month ago at the recent Berkshire Hathaway shareholders meeting, but maybe he'd had one too many cheeseburgers and
Motley Fool: Berkshire on Bubbles.
Quotes:
Q. Do you think that we are in a commodity bubble?
A. Not in agricultural products, but yes in metals, oils -- the most extreme being in copper.
....
Buffett's concerns were recently echoed by Legg Mason's Bill Miller, who said, "Today people want commodities, emerging market, non-U.S. assets, and small- and mid-cap stocks. Those were all cheap five years ago, and had you bought them then, you would be sitting on enormous gains ... [But] [g]iven the choice of buying Commodities with a capital C, or buying capital C -- Citigroup (NYSE: C) -- at current prices, I'll take the latter."
And now, Mr. Buffett's Berkshire Hathaway reveals:
AP: Berkshire reveals stake in ConocoPhillips.
Bershire already held an investment in Petrochina, which to some degree can be looked at 4 ways: an oil play, a China play, an anti-dollar play, and a 'maybe they find something in the South China sea' play ('Investment Advice from Kenneth Deffeyes.'). In addition, he bought a utility that wants to build a large wind farm ('What would Warren do?'), and talked about the idea that he might invest in nuclear power ('LOBG Sing Along w/ Warren Buffett.').
Now he's bought a stake in ConocoPhillips [COP] and GE.
COP is thus officially certified as the oil stock for the value crowd. It also happens to be well diversified oil major, having investments in tar sands projects in Canada and Venezuela, in oil production in Russia via a stake in Lukoil, large US oil operations including refining, and, having just bought Burlington Resources, extensive North American land based natural gas production.
But let's not forget GE also has a large energy business which has been targeted for expansion by CEO Jeff Immelt, producing items for natural gas, clean coal, wind and nuclear power generation.
So apparently Warren Buffett knows a little something about energy.
And in something I missed, so does Charlie Munger, his partner:
thestreet.com: Buffett Bets on Oil.
Quotes:
The ConocoPhillips stake also fits Buffett's game plan. He has experience in the energy sector, having made high returns by investing in PetroChina (PTR:NYSE - commentary - research - Cramer's Take), and he has long said publicly that he views energy as an attractive area.
Still, the move seems bound to raise some eyebrows, particularly after Buffett's longtime sidekick, Charles Munger, made some controversial comments at the recent Wesco Financial (WSC:NYSE - commentary - research - Cramer's Take) conference. He suggested that future generations will curse present-day Americans for consuming fossil fuels at such a high rate, since the supply of oil will be greatly diminished.
"Those were pretty strong words," says Tongue's partner at T2 Capital, Whitney Tilson. "You rarely see Buffett and Munger investing in something that's just had its biggest run in history in the last five years, [like the oil and gas market] . One reason may be that they believe oil prices are going to be high, if not higher, for a long time."
Monday, May 15, 2006
Q: The difference between a correction and a crash.
A: A correction is when it happens mostly to the other guy's portfolio, a crash is when it happens mostly to yours.
About a month ago I mentioned that the introduction of the various commodity related ETFs could be a signal of a top ('Lessons from the Internet bubble.'), and that's looking like a reasonable call these days.
Again, I tend to think in energy stocks that we may see a medium term top, with more upside ahead, but there are no guarantees.
In terms of watching my stocks, I am looking for them to find support levels at the 20 or 50 day moving average, and I am keeping an eye on volume.
I also have a shopping list which I'm watching to see how they behave and if I find an entry point I like. Candlesticks are a helpful way to identify possible reversal points.
About a month ago I mentioned that the introduction of the various commodity related ETFs could be a signal of a top ('Lessons from the Internet bubble.'), and that's looking like a reasonable call these days.
Again, I tend to think in energy stocks that we may see a medium term top, with more upside ahead, but there are no guarantees.
In terms of watching my stocks, I am looking for them to find support levels at the 20 or 50 day moving average, and I am keeping an eye on volume.
I also have a shopping list which I'm watching to see how they behave and if I find an entry point I like. Candlesticks are a helpful way to identify possible reversal points.
Tuesday, May 09, 2006
Leggo my Diamond Offshore.
Q: What's trading roughly 38% under fair value?
A: Um, lemme think... Dell [DELL]?
Q: No.
A: Um.. Microsoft [MSFT]?
Q: Nope.
A: Wait, wait, I got it. United Healthcare [UNH]?
Q: Ugh. Give up?
CNBC via MSN Money: Manager targets Diamond Offshore, Grant Prideco.
Quotes:
Investors seeking bargains within the energy sector should bore down to companies that drill for oil and gas or provide equipment and services to drillers, said J.C. Waller of Icon Advisers.
Shares of companies in the drilling sector are “still trading, in our estimate, about 38% below fair value,” Waller said Tuesday on CNBC’s “Squawk on the Street.”
Waller arrives at his conclusions via a quantitative analysis that’s focused on company earnings and ignores energy-price fluctuations. “Oil companies are making money (whether) oil’s trading at 50 or 60 bucks a barrel,” he said.
[P.S. Actually, Dell might have washed out today.]
A: Um, lemme think... Dell [DELL]?
Q: No.
A: Um.. Microsoft [MSFT]?
Q: Nope.
A: Wait, wait, I got it. United Healthcare [UNH]?
Q: Ugh. Give up?
CNBC via MSN Money: Manager targets Diamond Offshore, Grant Prideco.
Quotes:
Investors seeking bargains within the energy sector should bore down to companies that drill for oil and gas or provide equipment and services to drillers, said J.C. Waller of Icon Advisers.
Shares of companies in the drilling sector are “still trading, in our estimate, about 38% below fair value,” Waller said Tuesday on CNBC’s “Squawk on the Street.”
Waller arrives at his conclusions via a quantitative analysis that’s focused on company earnings and ignores energy-price fluctuations. “Oil companies are making money (whether) oil’s trading at 50 or 60 bucks a barrel,” he said.
[P.S. Actually, Dell might have washed out today.]
Thursday, May 04, 2006
Jim Cramer starring in "Raging Energy Bull".
Two thumbs way up on Suncor.
Ethanol stocks.
More ethanol.
The late stage drillers.
5/3/06 - "Tonight's show is all about oil."
Though they don't mention it in the transcript, I am pretty sure I heard Jim Cramer say recently on his show that he thought oil would not trade below $70. I don't agree with that. We're having a sort of quasi-Murphy's Law moment, where everything that could go wrong looks like it will go wrong, and that's levitating oil, but I wouldn't want to bet anybody that we might not dip back down in the 60's this year. I can't tell you whether these problems get better or worse, if we get a sense of that you know which way you want to play it.
Also, I am skeptical of the ethanol stocks Cramer recommends. I can't argue with success - they have mostly skyrocketed - but the underlying fundamentals of ethanol aren't very good.
Ethanol from corn, which how it's produced in the US, is not efficient, currently requires subsidies (and likely will for a while), and generates a product that contains less energy than the equivalent gallon of gasoline. Unless something changes there, the story leaves me skeptical, and has a bit of a PT Barnum feel.
Ethanol stocks.
More ethanol.
The late stage drillers.
5/3/06 - "Tonight's show is all about oil."
Though they don't mention it in the transcript, I am pretty sure I heard Jim Cramer say recently on his show that he thought oil would not trade below $70. I don't agree with that. We're having a sort of quasi-Murphy's Law moment, where everything that could go wrong looks like it will go wrong, and that's levitating oil, but I wouldn't want to bet anybody that we might not dip back down in the 60's this year. I can't tell you whether these problems get better or worse, if we get a sense of that you know which way you want to play it.
Also, I am skeptical of the ethanol stocks Cramer recommends. I can't argue with success - they have mostly skyrocketed - but the underlying fundamentals of ethanol aren't very good.
Ethanol from corn, which how it's produced in the US, is not efficient, currently requires subsidies (and likely will for a while), and generates a product that contains less energy than the equivalent gallon of gasoline. Unless something changes there, the story leaves me skeptical, and has a bit of a PT Barnum feel.
Wednesday, May 03, 2006
Mr. Stewart Goes to Houston.
James B. Stewart is a columnist for the Wall Street Journal and SmartMoney, as well as the author of a number of books on business and investment topics, and has a lot of financial experience under his belt. I have no idea what his track record is on investments, but his columns reflect a lot of saavy and intelligence.
So I feel rather less pseudo Internet bubblehead-ish when I read his new column, which suggests investing in oil service, among other things.
Note: For some reason this column has a different title in the WSJ than SmartMoney, but it appears to be the same article. The SmartMoney version is free.
WSJ: Prospecting in the Energy Sectors Is Likely to Pay Off in Long Term. [$]
SmartMoney: Playing Energy.
Quotes:
Eventually demand should ease and production increase, which is the only long-term solution to high oil prices. Needless to say, this would knock energy stocks from the lofty perches they've recently been occupying.
....
One of the savviest investors in the oil and gas arena I know is a Houston-based executive who recently told me he's been aggressively buying stocks in the oil-services sector. In the past, his suggestions have been impeccable. Among the stocks he mentioned are BJ Services, which specializes in pressure pumping, and Noble Corp., which focuses on deep-ocean drilling. I recently sold Noble in some premature profit-taking but still own Smith International, which makes a wide array of oil-field equipment, including drill bits. There are also oil-services exchange-traded funds, such as the Oil Services HOLDRs.
[By the way, it's possible his source is John Olson.]
So I feel rather less pseudo Internet bubblehead-ish when I read his new column, which suggests investing in oil service, among other things.
Note: For some reason this column has a different title in the WSJ than SmartMoney, but it appears to be the same article. The SmartMoney version is free.
WSJ: Prospecting in the Energy Sectors Is Likely to Pay Off in Long Term. [$]
SmartMoney: Playing Energy.
Quotes:
Eventually demand should ease and production increase, which is the only long-term solution to high oil prices. Needless to say, this would knock energy stocks from the lofty perches they've recently been occupying.
....
One of the savviest investors in the oil and gas arena I know is a Houston-based executive who recently told me he's been aggressively buying stocks in the oil-services sector. In the past, his suggestions have been impeccable. Among the stocks he mentioned are BJ Services, which specializes in pressure pumping, and Noble Corp., which focuses on deep-ocean drilling. I recently sold Noble in some premature profit-taking but still own Smith International, which makes a wide array of oil-field equipment, including drill bits. There are also oil-services exchange-traded funds, such as the Oil Services HOLDRs.
[By the way, it's possible his source is John Olson.]
Tuesday, May 02, 2006
Dan Rice's Words of Wisdom.
WSJ (via Post Gazette): The No. 1 energy fund's wild (but energizing) ride.
Dan Rice runs the excellent Blackrock Global Resources fund, which I'd recommend, but it has a load.
My suggestion: Print the article out, read it, put it up on your wall, read it again in a week.
The main points:
- The best scenario is that oil trades in a range of $60 - $70; not too high, not too low. And if you've been reading along, that's clearly where OPEC wants it too.
- He believes there's still substantial upside, particularly in coal, but also in oil production and oil service.
- He highlights the fact that since 2000, there have been 20% corrections roughly twice each year in the energy sector. Be aware of this, use it to your advantage; let cash build during the surges and try to jump in on the corrections.
- He suggests a small portion of the average investor's portfolio be allocated to the energy sector, but admits to having 90% of his own money in it.
Dan Rice runs the excellent Blackrock Global Resources fund, which I'd recommend, but it has a load.
My suggestion: Print the article out, read it, put it up on your wall, read it again in a week.
The main points:
- The best scenario is that oil trades in a range of $60 - $70; not too high, not too low. And if you've been reading along, that's clearly where OPEC wants it too.
- He believes there's still substantial upside, particularly in coal, but also in oil production and oil service.
- He highlights the fact that since 2000, there have been 20% corrections roughly twice each year in the energy sector. Be aware of this, use it to your advantage; let cash build during the surges and try to jump in on the corrections.
- He suggests a small portion of the average investor's portfolio be allocated to the energy sector, but admits to having 90% of his own money in it.
Monday, May 01, 2006
Oh Lord, Please Don't Let Ben Be Misunderstood.
Some days I wonder if I know anything about investing at all.
It seems there's a bit of a conundrum going on about what Ben Bernacke might have said the other day, what exactly he meant, and did he know what he meant, etc, etc. And you know what, I thought he was pretty clear.
This is the important bit of his testimony:
The FOMC will continue to monitor the incoming data closely to assess the prospects for both growth and inflation. In particular, even if in the Committee's judgment the risks to its objectives are not entirely balanced, at some point in the future the Committee may decide to take no action at one or more meetings in the interest of allowing more time to receive information relevant to the outlook. Of course, a decision to take no action at a particular meeting does not preclude actions at subsequent meetings, and the Committee will not hesitate to act when it determines that doing so is needed to foster the achievement of the Federal Reserve's mandated objectives.
Does it mention a timeframe? No. Just the possibility of pausing. Some people apparently took it as hinting at an imminent pause. Um... I dunno, I guess I'm too unsophisticated to see that. It rather seems like that would be reading something into it that isn't there. The rest of the testimony goes into the usual suspects; inflation, housing, energy, etc.
Perhaps people are so used to the circular talk of Greenspan, they were thrown off by the plain speak of Bernacke. In fact, unlike Greenspan, you don't even have to try to parse it or paraphrase it, it's pretty clear on it's own. Which is why I'm a little perplexed by the whole issue. And I think we've got more interesting things to worry about.
Bernacke has a rather nasty job ahead of him, and I don't mean in guiding the markets to exactly what he's doing every step of the way.
No, he gets to try to do the economic equivalent of driving a semi out of control fire truck from the back end, which is to say he has to use short term rates to try to move long term rates enough to thread the needle, just enough to put the brakes on inflation, which nobody really has a great read on, while not inadvertantly triggering a crackup of some sort, perhaps in housing, which nobody really has a great read on either.
Keep an eye on that, that's the real issue, not whether the market or various participants think he is or isn't handling communicating with them well.
Anyway, on a more important topic, Leggo my Diamond Offshore..
It seems there's a bit of a conundrum going on about what Ben Bernacke might have said the other day, what exactly he meant, and did he know what he meant, etc, etc. And you know what, I thought he was pretty clear.
This is the important bit of his testimony:
The FOMC will continue to monitor the incoming data closely to assess the prospects for both growth and inflation. In particular, even if in the Committee's judgment the risks to its objectives are not entirely balanced, at some point in the future the Committee may decide to take no action at one or more meetings in the interest of allowing more time to receive information relevant to the outlook. Of course, a decision to take no action at a particular meeting does not preclude actions at subsequent meetings, and the Committee will not hesitate to act when it determines that doing so is needed to foster the achievement of the Federal Reserve's mandated objectives.
Does it mention a timeframe? No. Just the possibility of pausing. Some people apparently took it as hinting at an imminent pause. Um... I dunno, I guess I'm too unsophisticated to see that. It rather seems like that would be reading something into it that isn't there. The rest of the testimony goes into the usual suspects; inflation, housing, energy, etc.
Perhaps people are so used to the circular talk of Greenspan, they were thrown off by the plain speak of Bernacke. In fact, unlike Greenspan, you don't even have to try to parse it or paraphrase it, it's pretty clear on it's own. Which is why I'm a little perplexed by the whole issue. And I think we've got more interesting things to worry about.
Bernacke has a rather nasty job ahead of him, and I don't mean in guiding the markets to exactly what he's doing every step of the way.
No, he gets to try to do the economic equivalent of driving a semi out of control fire truck from the back end, which is to say he has to use short term rates to try to move long term rates enough to thread the needle, just enough to put the brakes on inflation, which nobody really has a great read on, while not inadvertantly triggering a crackup of some sort, perhaps in housing, which nobody really has a great read on either.
Keep an eye on that, that's the real issue, not whether the market or various participants think he is or isn't handling communicating with them well.
Anyway, on a more important topic, Leggo my Diamond Offshore..
Sunday, April 30, 2006
The devil made them do it.
I caught a couple of interviews on TV with people complaining over $3 gasoline prices. One woman complained as she filled her car at a gas station. No mention was made of the fact she was filling a mid-range Mercedes. Another gentleman was rather angry about the costs to fill his brand new Range Rover, which is a $55,000+ SUV. Amusingly, it's likely the depreciation on that vehicle is costing him more than the gasoline, particularly now that large SUVs are likely to retain less value.
It would be nice if they found some people I could actually feel for, but I guess maybe those people don't get on TV.
Here's another amusing one, a comment left on the the BusinessWeek article on Boone Pickens. I like the logic here, not only is the oil industry responsible for high prices, it also screwed us by giving us low prices in the first place.
It's gonna be an interesting year.
Quotes:
Nickname: MT
Review: I am not willing to pay $3, $4, or $5 per gallon as T. Boone states. I have to. The industry conditioned me to build a lifestyle around $1 per gallon gas. Now that they have us locked into using so many gallons of gas per month, they begin the extortion. I can't react fast enough. They know this. By the time I can get a more efficient car, or move closer to work, or whatever, they have extorted thousands of extra profit from each one of us. I am all for a free world economy. US distribution infrastructure is far more efficient and ubiquitous than in other countries. Because we have more volume and efficiency our gas prices have been much lower than other countries, not because they were somehow being kept down artificially. Now the oil industry is simply gouging consumers because they can. They know our current government will not protect its citizens from the unethical or unlawful behavior of the rich and powerful.
Date reviewed: Apr 27, 2006 8:47 PM
It would be nice if they found some people I could actually feel for, but I guess maybe those people don't get on TV.
Here's another amusing one, a comment left on the the BusinessWeek article on Boone Pickens. I like the logic here, not only is the oil industry responsible for high prices, it also screwed us by giving us low prices in the first place.
It's gonna be an interesting year.
Quotes:
Nickname: MT
Review: I am not willing to pay $3, $4, or $5 per gallon as T. Boone states. I have to. The industry conditioned me to build a lifestyle around $1 per gallon gas. Now that they have us locked into using so many gallons of gas per month, they begin the extortion. I can't react fast enough. They know this. By the time I can get a more efficient car, or move closer to work, or whatever, they have extorted thousands of extra profit from each one of us. I am all for a free world economy. US distribution infrastructure is far more efficient and ubiquitous than in other countries. Because we have more volume and efficiency our gas prices have been much lower than other countries, not because they were somehow being kept down artificially. Now the oil industry is simply gouging consumers because they can. They know our current government will not protect its citizens from the unethical or unlawful behavior of the rich and powerful.
Date reviewed: Apr 27, 2006 8:47 PM
Thursday, April 27, 2006
$800 before $60.
Calm down, just having a little fun. We've been steadily climbing the price ladder on predictions, I figured I'd cut to the chase and save myself a few posts.. [Just to be explicit: Nobody, including me, is predicting $800 oil. At least not this week..]
Boone Pickens actual quote was "$80 before $60". And he's still firm in his belief in Canadian oil sands and coal as investments. As production of conventional oil plateaus, the thought is that natural gas can be switched to a transportation fuel, leading to more demand for coal for electricity production. Nuclear eventually will kick in too, but that will take a while.
BusinessWeek: T. Boone Pickens: Still Courting Controversy.
Columnist Jim Jubak has a slightly different angle, but ends up in the same neighborhood as Boone Pickens.
MSN: Oil substitutes? Try these 5 stocks.
A couple of side thoughts of my own:
ICO, or International Coal Group, which is a turnaround play of Wilbur Ross, may finally have found it's footing. Note that Boone Pickens has never recommended this stock. He has recommended coal stocks BTU, CNX, and MEE.
JOYG is a sort of coal and oil sands equipment play that has done well for a while now.
Boone Pickens actual quote was "$80 before $60". And he's still firm in his belief in Canadian oil sands and coal as investments. As production of conventional oil plateaus, the thought is that natural gas can be switched to a transportation fuel, leading to more demand for coal for electricity production. Nuclear eventually will kick in too, but that will take a while.
BusinessWeek: T. Boone Pickens: Still Courting Controversy.
Columnist Jim Jubak has a slightly different angle, but ends up in the same neighborhood as Boone Pickens.
MSN: Oil substitutes? Try these 5 stocks.
A couple of side thoughts of my own:
ICO, or International Coal Group, which is a turnaround play of Wilbur Ross, may finally have found it's footing. Note that Boone Pickens has never recommended this stock. He has recommended coal stocks BTU, CNX, and MEE.
JOYG is a sort of coal and oil sands equipment play that has done well for a while now.
Wednesday, April 26, 2006
There's a new addict in town.
Maybe a few.
China's oil demand - growing. India's oil demand - growing. And even for oil exporters, demand is growing.
WSJ: Oil Minister Asserts Iran Won't Cut Exports Despite Nuclear Standoff. [$]
Quotes:
That plan doesn't account for another problem: soaring domestic consumption, which is eating into the amount of Iranian oil available for export. Mr. Vaziri said his country's gasoline use is growing at an eye-popping rate of 10% a year. Already, Iran is importing 25 million liters a day of gasoline, equivalent to nearly 160,000 barrels a day. Plans to add new refining capacity could gobble up another 500,000 barrels a day of Iranian crude production -- leaving no new crude to export to the rest of the world.
"We have a problem in the use of gasoline," Mr. Vaziri said.
MSN: How China is winning the oil race.
China's oil demand - growing. India's oil demand - growing. And even for oil exporters, demand is growing.
WSJ: Oil Minister Asserts Iran Won't Cut Exports Despite Nuclear Standoff. [$]
Quotes:
That plan doesn't account for another problem: soaring domestic consumption, which is eating into the amount of Iranian oil available for export. Mr. Vaziri said his country's gasoline use is growing at an eye-popping rate of 10% a year. Already, Iran is importing 25 million liters a day of gasoline, equivalent to nearly 160,000 barrels a day. Plans to add new refining capacity could gobble up another 500,000 barrels a day of Iranian crude production -- leaving no new crude to export to the rest of the world.
"We have a problem in the use of gasoline," Mr. Vaziri said.
MSN: How China is winning the oil race.
Sunday, April 23, 2006
Man cannot live by energy stocks alone.
Energy is making most of the headlines, but I think it's time to keep a closer eye on this housing boom/bubble bursting question.
The homebuilders look like they're up for another leg down, and the news reports and anecdotes out of real estate seem to suggest a rapid slowdown developing in sales.
Spiking gas prices, rising interest rates, and a sickly real estate market, it's certainly looking like an interesting year, or, as Boone Pickens put it 'not one of our best years'. Though of course the stock market as a whole doesn't appear to care right now.
Peter Thiel of hedge fund firm Clarium Capital has suggested the real estate bubble is going to burst and along with rising interest rates and consumer debt levels, it would blow the US consumer to smithereens and lead to a serious slowdown in the economy. His suggested play: long term US bonds which will benefit as interest rates are lowered by the Fed once this develops.
Interestingly enough, Jim Rogers, the former hedge fund manager and long term commodities bull, also believes we had a real estate bubble that will burst, admits to shorting Fannie Mae and certain homebuilders, yet has also shorted the US long bond, which is the diametric opposite of Peter Thiel's suggestion. Jim believes that inflation is much higher than US government figures are suggesting, thus interest rates will have to go higher to reign in inflation, not lower.
Two great investors with serious money making credentials and with generally the same starting hypothesis, yet reaching opposite conclusions.. Now that's a real conundrum!
The rise in virtually all the other commodities with oil suggests that inflation is the issue, but the bond market generally does not appear convinced of that. But there are two obvious signs of inflation, the rise in housing prices and gas prices, which are the exact items the US government has decided in their wisdom to try to filter out. Too volatile, they decided. There are a couple of other pieces to throw into the mix: the labor market appears to be strong, wages are rising, and companies appear to be starting to pass along rising energy prices.
I can't ignore the evidence, so I must lean with Jim Rogers, but I can't bring myself to short long bonds; oil and commodities contain quite enough inflation bets for me.
But something tells me to keep a sharp eye out for signs of Peter Thiel's thesis developing, and that is what I am doing.
[Both Peter Thiel and Jim Rogers both made good calls on oil and continue to be bullish. Peter Thiel here, and Jim Rogers here. Those stories are old but their thinking is still along those lines.]
Update: In hindsight, I realized I oversimplified Peter Thiel's argument somewhat above. Part of his scenario is that the Fed will likely overshoot in raising interest rates, as has happened in the past.
The homebuilders look like they're up for another leg down, and the news reports and anecdotes out of real estate seem to suggest a rapid slowdown developing in sales.
Spiking gas prices, rising interest rates, and a sickly real estate market, it's certainly looking like an interesting year, or, as Boone Pickens put it 'not one of our best years'. Though of course the stock market as a whole doesn't appear to care right now.
Peter Thiel of hedge fund firm Clarium Capital has suggested the real estate bubble is going to burst and along with rising interest rates and consumer debt levels, it would blow the US consumer to smithereens and lead to a serious slowdown in the economy. His suggested play: long term US bonds which will benefit as interest rates are lowered by the Fed once this develops.
Interestingly enough, Jim Rogers, the former hedge fund manager and long term commodities bull, also believes we had a real estate bubble that will burst, admits to shorting Fannie Mae and certain homebuilders, yet has also shorted the US long bond, which is the diametric opposite of Peter Thiel's suggestion. Jim believes that inflation is much higher than US government figures are suggesting, thus interest rates will have to go higher to reign in inflation, not lower.
Two great investors with serious money making credentials and with generally the same starting hypothesis, yet reaching opposite conclusions.. Now that's a real conundrum!
The rise in virtually all the other commodities with oil suggests that inflation is the issue, but the bond market generally does not appear convinced of that. But there are two obvious signs of inflation, the rise in housing prices and gas prices, which are the exact items the US government has decided in their wisdom to try to filter out. Too volatile, they decided. There are a couple of other pieces to throw into the mix: the labor market appears to be strong, wages are rising, and companies appear to be starting to pass along rising energy prices.
I can't ignore the evidence, so I must lean with Jim Rogers, but I can't bring myself to short long bonds; oil and commodities contain quite enough inflation bets for me.
But something tells me to keep a sharp eye out for signs of Peter Thiel's thesis developing, and that is what I am doing.
[Both Peter Thiel and Jim Rogers both made good calls on oil and continue to be bullish. Peter Thiel here, and Jim Rogers here. Those stories are old but their thinking is still along those lines.]
Update: In hindsight, I realized I oversimplified Peter Thiel's argument somewhat above. Part of his scenario is that the Fed will likely overshoot in raising interest rates, as has happened in the past.
Friday, April 21, 2006
An energy investor more nuts bullish than me.
A hedge fund manager with 80% of his portfolio in energy service? Sounds nuts, right?
But here's the kicker: He is a former energy analyst who, when he couldn't understand Enron, refused to put a buy rating on it, and stood his ground until Merrill apparently forced him out as a result.
Who looks nuttier on that one?
Energy Tribune: Energy Tribune Speaks with John Olson.
Quotes:
John Olson never made any friends at Enron. But he’s made a name for himself as one of the savviest energy analysts in the United States. As an equities analyst at Merrill Lynch, Olson refused to put a buy rating on Enron, a refusal that led Merrill to offer him early retirement – he wasn’t given another option. Olson left Merrill but it hasn’t hurt his career one bit. During his 30 plus years as an energy analyst, he has worked at Drexel Burnham, First Boston, and Goldman Sachs. He got his first job in Houston with Rotan Mosle in 1979. He spoke to ET’s managing editor, Robert Bryce.
ET: Your hedge fund did very well in 2005. But it appears the energy markets have cooled off during the first quarter of 2006. What do you see happening for the rest of the year?
JO: The expectation is that oil prices will hover around $60 to $65 until next January. However, gas prices are down to about $6.75 and are expected to go to $4.70 or $4.80 and recover to $7.40 by next January. So the stock market for natural-gas related companies and service companies has come under a lot of pressure…. [But] the earnings trends of this industry remain very, very strong. Earnings trends for big oil companies were up about 59% in 2005. For oil service companies, they were up about 142%. Most of the growth money is going to end up in oil service companies because of their earnings growth prospects. Our portfolio is 80% in oil service companies.
Life is going to be very good. What can go wrong is that gas goes down to $4.80 and stays there or crude goes down to $50 and stays there.
ET: What’s the most important trend you see developing in the energy sector?
JO: The increasing difficulties with oil and gas consumption and supplying that consumption are going to force a rearrangement of priorities. But no place needs more reform than America. We are using 22 million barrels per day of the world’s 85 million barrels per day, and over 15 years, we may go to 25 to 27 million barrels per day versus the world’s 105 to 110 million barrels per day. We can ill afford it already. The trade deficit on oil imports was $100 billion last year and there’s no end in sight.
But here's the kicker: He is a former energy analyst who, when he couldn't understand Enron, refused to put a buy rating on it, and stood his ground until Merrill apparently forced him out as a result.
Who looks nuttier on that one?
Energy Tribune: Energy Tribune Speaks with John Olson.
Quotes:
John Olson never made any friends at Enron. But he’s made a name for himself as one of the savviest energy analysts in the United States. As an equities analyst at Merrill Lynch, Olson refused to put a buy rating on Enron, a refusal that led Merrill to offer him early retirement – he wasn’t given another option. Olson left Merrill but it hasn’t hurt his career one bit. During his 30 plus years as an energy analyst, he has worked at Drexel Burnham, First Boston, and Goldman Sachs. He got his first job in Houston with Rotan Mosle in 1979. He spoke to ET’s managing editor, Robert Bryce.
ET: Your hedge fund did very well in 2005. But it appears the energy markets have cooled off during the first quarter of 2006. What do you see happening for the rest of the year?
JO: The expectation is that oil prices will hover around $60 to $65 until next January. However, gas prices are down to about $6.75 and are expected to go to $4.70 or $4.80 and recover to $7.40 by next January. So the stock market for natural-gas related companies and service companies has come under a lot of pressure…. [But] the earnings trends of this industry remain very, very strong. Earnings trends for big oil companies were up about 59% in 2005. For oil service companies, they were up about 142%. Most of the growth money is going to end up in oil service companies because of their earnings growth prospects. Our portfolio is 80% in oil service companies.
Life is going to be very good. What can go wrong is that gas goes down to $4.80 and stays there or crude goes down to $50 and stays there.
ET: What’s the most important trend you see developing in the energy sector?
JO: The increasing difficulties with oil and gas consumption and supplying that consumption are going to force a rearrangement of priorities. But no place needs more reform than America. We are using 22 million barrels per day of the world’s 85 million barrels per day, and over 15 years, we may go to 25 to 27 million barrels per day versus the world’s 105 to 110 million barrels per day. We can ill afford it already. The trade deficit on oil imports was $100 billion last year and there’s no end in sight.
Tuesday, April 18, 2006
Rich Son's Brave New World.
Robert Kiyosaki is the author of the "Rich Dad, Poor Dad" series of books. I expect a new book, say maybe "Rich Dad's Guide to Canadian Oil Sands" at any moment. But, generally, my observation is that the peak oil/oil crisis meme is spreading to more mainstream types.
Yahoo Finance: The Coming Oil Crisis.
Quotes:
Oil Prices Will Keep Heading Up
My reason for taking you on this trip down memory lane is because I believe we're approaching a repeat of that 1973-1974 crisis. Once again, oil prices are going through the roof. During the mid-70s, oil went from under $3 a barrel to over $35 a barrel. And in 1974, we were stuck in an unpopular war in Vietnam, a war we would not win.
In 1998, oil was just $10 a barrel, and today it is over $60. We're also stuck in a war we may not be able to win.
The difference this time is that things are actually worse than they were in 1974, at least in my opinion. One difference is that the oil crises back in 1973 to 1974 and again in 1978 were political problems. Today, the oil crisis is a problem of diminishing supply and increasing demand. In other words, this time, there really is an oil crisis.
Many people today believe that oil will once again return to the $35-a-barrel level and aren't concerned. Or they believe that with better technology, energy companies will find more oil, and happy days will be here again.
I believe differently. Not that I'm an oil expert, but in 1966 through 1968 I was hired as an apprentice by Standard Oil of California, where I learned a lot about oil and the oil industry. Although I did see oil prices slide back down in the 1970s, this time, I believe they will go higher, not lower. I wouldn't be surprised if we soon see oil at over $100 a barrel and gasoline at $5 to $12 a gallon at the pump.
....
An Alarming Gap
While many environmentalists, concerned with global warming, are thrilled that oil supply is on a decline (and we truly do need to replace oil with more renewable forms of energy, such as wind and solar power), there's another concern that must be considered. If energy costs continue to rise and our economy stops growing and starts shrinking, many stocks will crash, older Americans will not be able to retire, inflation may skyrocket, businesses will close or cut back, and jobs will be lost. Not only will we be facing global warming, we'll be facing civilized chaos.
The problem today is that oil companies are too short-sighted, the environmentalists too far-sighted, and politicians only concerned with being elected. As a result, there will be a gap between the end of oil and a conversion to less destructive forms of energy. In this gap, all hell may break loose.
In my next article, I'll go into what I'm doing to prepare for the gap, as well as why I believe the gap can't be avoided. In other words, it will not be 1973-1974, or stagflation, all over again. I believe it will be the end of civilization as we know it -- and possibly the birth of a brave new world."
Yahoo Finance: The Coming Oil Crisis.
Quotes:
Oil Prices Will Keep Heading Up
My reason for taking you on this trip down memory lane is because I believe we're approaching a repeat of that 1973-1974 crisis. Once again, oil prices are going through the roof. During the mid-70s, oil went from under $3 a barrel to over $35 a barrel. And in 1974, we were stuck in an unpopular war in Vietnam, a war we would not win.
In 1998, oil was just $10 a barrel, and today it is over $60. We're also stuck in a war we may not be able to win.
The difference this time is that things are actually worse than they were in 1974, at least in my opinion. One difference is that the oil crises back in 1973 to 1974 and again in 1978 were political problems. Today, the oil crisis is a problem of diminishing supply and increasing demand. In other words, this time, there really is an oil crisis.
Many people today believe that oil will once again return to the $35-a-barrel level and aren't concerned. Or they believe that with better technology, energy companies will find more oil, and happy days will be here again.
I believe differently. Not that I'm an oil expert, but in 1966 through 1968 I was hired as an apprentice by Standard Oil of California, where I learned a lot about oil and the oil industry. Although I did see oil prices slide back down in the 1970s, this time, I believe they will go higher, not lower. I wouldn't be surprised if we soon see oil at over $100 a barrel and gasoline at $5 to $12 a gallon at the pump.
....
An Alarming Gap
While many environmentalists, concerned with global warming, are thrilled that oil supply is on a decline (and we truly do need to replace oil with more renewable forms of energy, such as wind and solar power), there's another concern that must be considered. If energy costs continue to rise and our economy stops growing and starts shrinking, many stocks will crash, older Americans will not be able to retire, inflation may skyrocket, businesses will close or cut back, and jobs will be lost. Not only will we be facing global warming, we'll be facing civilized chaos.
The problem today is that oil companies are too short-sighted, the environmentalists too far-sighted, and politicians only concerned with being elected. As a result, there will be a gap between the end of oil and a conversion to less destructive forms of energy. In this gap, all hell may break loose.
In my next article, I'll go into what I'm doing to prepare for the gap, as well as why I believe the gap can't be avoided. In other words, it will not be 1973-1974, or stagflation, all over again. I believe it will be the end of civilization as we know it -- and possibly the birth of a brave new world."
Thursday, April 13, 2006
Mammas don't let your babies grow up to be oil service workers..
Cause they ain't gonna be gettin' a lot of sleep, at least not for the next few years.
MSN Money: Oil drillers drowning in cash.
You can see Jubak's picks here.
Jubak is clearly on top of the story, so I'm not going to argue with him in terms of picks. I am playing the sector more broadly with a sector fund because I am not sure which service companies are going to get hit with higher material and labor costs and which will more fully reap the rewards of this cycle.
MSN Money: Oil drillers drowning in cash.
You can see Jubak's picks here.
Jubak is clearly on top of the story, so I'm not going to argue with him in terms of picks. I am playing the sector more broadly with a sector fund because I am not sure which service companies are going to get hit with higher material and labor costs and which will more fully reap the rewards of this cycle.
Boo-yah peak oil, skee-daddy.
I dunno but I think my version was funnier.
I would be lax if I didn't point out that Jim Cramer and Pat Dorsey have now both waxed poetic on THX and EPL [see link and below].
What is the world coming to?
LOBG: Obligatory Jim Cramer Homage.
Quotes:
"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."
....
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.
versus:
thestreet.com: Cramer's 'Mad Money' Recap: Crude Awakenings.
Quotes:
Hitting Pay Dirt
Jim Cramer had a hunk of burning love for all things oil on his "Mad Money" TV show Thursday, pressing the issue that the price of crude is sky-high but that all the stocks aren't rising with it.
The crude price being used is way too low and Cramer wants to help you "get revenge for how much you're paying at the pump."
Right now we are drilling twice as much as we were a few years back, but we're finding the same amount of oil that we used to, Cramer said. We are running out of the easy oil to find, and oil will be going higher.
....
Swing Your Partner
In other oil plays, Cramer said that Energy Partners (EPL:NYSE - news - research - Cramer's Take) is one of the greatest buy opportunities since he started "Mad Money."
Energy Partners is a company that is most levered to finding new oil, and there's nothing more important than getting to new oil.
I would be lax if I didn't point out that Jim Cramer and Pat Dorsey have now both waxed poetic on THX and EPL [see link and below].
What is the world coming to?
LOBG: Obligatory Jim Cramer Homage.
Quotes:
"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."
....
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.
versus:
thestreet.com: Cramer's 'Mad Money' Recap: Crude Awakenings.
Quotes:
Hitting Pay Dirt
Jim Cramer had a hunk of burning love for all things oil on his "Mad Money" TV show Thursday, pressing the issue that the price of crude is sky-high but that all the stocks aren't rising with it.
The crude price being used is way too low and Cramer wants to help you "get revenge for how much you're paying at the pump."
Right now we are drilling twice as much as we were a few years back, but we're finding the same amount of oil that we used to, Cramer said. We are running out of the easy oil to find, and oil will be going higher.
....
Swing Your Partner
In other oil plays, Cramer said that Energy Partners (EPL:NYSE - news - research - Cramer's Take) is one of the greatest buy opportunities since he started "Mad Money."
Energy Partners is a company that is most levered to finding new oil, and there's nothing more important than getting to new oil.
Tuesday, April 11, 2006
Power to the people!
Interesting article on uranium, worth reading.
thestreet.com: Precious Metal.
I am surprised that there is no mention of BHP, the Australian conglomerate, because it's an interesting stock that pretty much covers all your bases: precious metals, uranium, coal, oil and natural gas. Plus, as the story mentions, Australia is selling a lot of resources to China, which is on a longer term growth path.
thestreet.com: Precious Metal.
I am surprised that there is no mention of BHP, the Australian conglomerate, because it's an interesting stock that pretty much covers all your bases: precious metals, uranium, coal, oil and natural gas. Plus, as the story mentions, Australia is selling a lot of resources to China, which is on a longer term growth path.
Sunday, April 09, 2006
Chris Skrebowski's Rorschach Test.
Instructions:
1.) Open the below link.
2.) Print the contents (4 pages).
3.) Stare deeply at the pages.
4.) Write down the first thoughts that come to mind.
Petroleum Review: 2006 Megaprojects.
You can see some other people's reactions at the Oil Drum.
My initial thoughts are that I have to look a little harder at Petrobras (PBR), which I've been eyeing for a while but don't own at the moment. A relatively cheap company, a number of projects scheduled to come on-stream in the next couple of years, in a fairly stable part of the world, and though their projects are offshore and fairly challenging, they are reputed to have the expertise to manage them, with an added bonus that extreme weather events are less of a factor for them than in the Gulf of Mexico. On top of that is the fact that Brazil is increasingly able to export oil as it produces plenty of ethanol from sugar for internal markets.
In terms of the rest of the report, it seems to have ruffled some feathers that it's more optimistic than last year's. That strikes me as a tad of a strange reaction. I say the more info, the better.
1.) Open the below link.
2.) Print the contents (4 pages).
3.) Stare deeply at the pages.
4.) Write down the first thoughts that come to mind.
Petroleum Review: 2006 Megaprojects.
You can see some other people's reactions at the Oil Drum.
My initial thoughts are that I have to look a little harder at Petrobras (PBR), which I've been eyeing for a while but don't own at the moment. A relatively cheap company, a number of projects scheduled to come on-stream in the next couple of years, in a fairly stable part of the world, and though their projects are offshore and fairly challenging, they are reputed to have the expertise to manage them, with an added bonus that extreme weather events are less of a factor for them than in the Gulf of Mexico. On top of that is the fact that Brazil is increasingly able to export oil as it produces plenty of ethanol from sugar for internal markets.
In terms of the rest of the report, it seems to have ruffled some feathers that it's more optimistic than last year's. That strikes me as a tad of a strange reaction. I say the more info, the better.
Friday, April 07, 2006
Lessons from the Internet bubble.
Wall Street has discovered the oil and commodities story and is busy introducing new instruments (especially ETFs) that invest in these areas, including an oil ETF (ticker USO), a broad commodities ETF (DBC), and an upcoming silver ETF (SLV). Considering the attention ethanol is attracting, I expect a corn ETF at any moment. (I'm kidding.. I think. Though let's check if 'COB' is available.)
Traditionally, when Wall Street introduces an abundance of investment options for 'the little guy' that aim to allow concentrated investments in a certain segment of the market, it is a very clear warning sign that this particular investment trend is nearing a top.
As an example, when the Internet bubble of the late 1990's really got going, there were a large number of mutual funds introduced that focused on technology and internet stocks. Within a few years, as that particular fad ran it's course, people who put their money in these concentrated funds saw their investments essentially decimated.
I happen to think we are not at a significant top (ala the Internet bubble), as energy stocks and commodity stocks still represent a fairly small portion of the overall market, don't have the kind of valuation extension you saw in the Internet bubble, and we don't have quite the same trading frenzy seen then. Also, the Munder Netnet fund, one of the poster children mutual funds of the Internet bubble, was actually introduced very early (1996), and made some people a nice amount of money if they exited before it all blew up.
I happen to think we're not at a significant top, but I wouldn't rule out a short term, or maybe even an intermediate term one.
As a result, I'll be keeping an eye on what I own, why I own it, and my sell discipline a little more intensely than usual.
MSN: Leave the new oil ETF to the pros.
Traditionally, when Wall Street introduces an abundance of investment options for 'the little guy' that aim to allow concentrated investments in a certain segment of the market, it is a very clear warning sign that this particular investment trend is nearing a top.
As an example, when the Internet bubble of the late 1990's really got going, there were a large number of mutual funds introduced that focused on technology and internet stocks. Within a few years, as that particular fad ran it's course, people who put their money in these concentrated funds saw their investments essentially decimated.
I happen to think we are not at a significant top (ala the Internet bubble), as energy stocks and commodity stocks still represent a fairly small portion of the overall market, don't have the kind of valuation extension you saw in the Internet bubble, and we don't have quite the same trading frenzy seen then. Also, the Munder Netnet fund, one of the poster children mutual funds of the Internet bubble, was actually introduced very early (1996), and made some people a nice amount of money if they exited before it all blew up.
I happen to think we're not at a significant top, but I wouldn't rule out a short term, or maybe even an intermediate term one.
As a result, I'll be keeping an eye on what I own, why I own it, and my sell discipline a little more intensely than usual.
MSN: Leave the new oil ETF to the pros.
Monday, April 03, 2006
The latest from Arjun "Spike" Murti.
I dunno, maybe he's a big Buffy fan or something.
MarketWatch: Oil stocks up on crude, Goldman note.
Quotes:
"With refining capacity gains expected to just about meet trend demand growth over the next several years, we believe that our view of an extended strong cycle is intact," Goldman Sachs analyst Arjun Murti wrote in a note. "We continue to believe that we are in the early part of the middle phase of a 'super-spike' period for commodity prices."
For a pure refining play, Murti said he continues to like Valero, citing its "diversified asset base, complex refinery system, and track record of acquisition integration." He said Valero stock has the potential to spike 39% higher to $84 a share.
MarketWatch: Oil stocks up on crude, Goldman note.
Quotes:
"With refining capacity gains expected to just about meet trend demand growth over the next several years, we believe that our view of an extended strong cycle is intact," Goldman Sachs analyst Arjun Murti wrote in a note. "We continue to believe that we are in the early part of the middle phase of a 'super-spike' period for commodity prices."
For a pure refining play, Murti said he continues to like Valero, citing its "diversified asset base, complex refinery system, and track record of acquisition integration." He said Valero stock has the potential to spike 39% higher to $84 a share.
Friday, March 31, 2006
Why corn ethanol is a bit of a Catch-22.
Hmm.. 'Rising fertilizer' costs, eh? Where does fertilizer come from again?
Gotchas like this are part of the reason that Brazil uses sugar, which is a more efficient way to generate ethanol.
Bloomberg: Corn Prices Soar as Survey Shows U.S. Farmers to Cut Acres on Higher Costs.
Quotes:
March 31 (Bloomberg) -- Corn prices in Chicago rose the most in seven months after the U.S. said farmers will sow the fewest acres since 2001 because of rising fertilizer costs. Soybeans fell as growers said they will plant the most ever.
Corn will be planted on 78.019 million acres, down 4.6 percent from last year, a government survey of 87,000 farmers showed. Analysts expected a 1.5 percent decline, based on the average of 25 estimates in a Bloomberg survey. Farmers may shift to soybeans because of higher costs to fertilize corn in the U.S., the world's largest producer and exporter of both crops.
``Prices have to rise to buy more acres,'' said Dale Durchholz, an analyst for AgriVisor Services Inc. in Bloomington, Illinois. ``This was a huge surprise.''
....
``Corn is the most fertilizer-intensive of major crops, accounting for approximately 40 percent to 45 percent of each of the three main fertilizer nutrients,'' nitrogen, phosphate and potassium, Silver said in his report. The reduction in corn plantings ``reflects factors including lower farm income, higher fuel and fertilizer costs, and excessive dryness in soil conditions in the southern Plains states,'' Silver said.
Gotchas like this are part of the reason that Brazil uses sugar, which is a more efficient way to generate ethanol.
Bloomberg: Corn Prices Soar as Survey Shows U.S. Farmers to Cut Acres on Higher Costs.
Quotes:
March 31 (Bloomberg) -- Corn prices in Chicago rose the most in seven months after the U.S. said farmers will sow the fewest acres since 2001 because of rising fertilizer costs. Soybeans fell as growers said they will plant the most ever.
Corn will be planted on 78.019 million acres, down 4.6 percent from last year, a government survey of 87,000 farmers showed. Analysts expected a 1.5 percent decline, based on the average of 25 estimates in a Bloomberg survey. Farmers may shift to soybeans because of higher costs to fertilize corn in the U.S., the world's largest producer and exporter of both crops.
``Prices have to rise to buy more acres,'' said Dale Durchholz, an analyst for AgriVisor Services Inc. in Bloomington, Illinois. ``This was a huge surprise.''
....
``Corn is the most fertilizer-intensive of major crops, accounting for approximately 40 percent to 45 percent of each of the three main fertilizer nutrients,'' nitrogen, phosphate and potassium, Silver said in his report. The reduction in corn plantings ``reflects factors including lower farm income, higher fuel and fertilizer costs, and excessive dryness in soil conditions in the southern Plains states,'' Silver said.
Thursday, March 30, 2006
Boone Pickens on CNBC 03-30-2006.
CNBC via MSN Video: Boone Pickens.
Mr. Pickens comments we'll likely see $75 before $60, which again suggests to me that he believes that OPEC will successfully defend $60 if necessary, as well as the idea that it's likely something is going to go wrong somewhere: hurricanes, Nigeria, Iran, Iraq, pick your poison.
He makes an interesting suggestion that we go to a global price for gasoline, like we have for crude oil, perhaps via taxes. He's in Washington, maybe he's talking some sense into them down there.
But man, the US sees $6 gasoline as in Europe, and GM and Ford are in a heap of trouble. Okay, an even bigger heap of trouble than they are in now.
Mr. Pickens comments we'll likely see $75 before $60, which again suggests to me that he believes that OPEC will successfully defend $60 if necessary, as well as the idea that it's likely something is going to go wrong somewhere: hurricanes, Nigeria, Iran, Iraq, pick your poison.
He makes an interesting suggestion that we go to a global price for gasoline, like we have for crude oil, perhaps via taxes. He's in Washington, maybe he's talking some sense into them down there.
But man, the US sees $6 gasoline as in Europe, and GM and Ford are in a heap of trouble. Okay, an even bigger heap of trouble than they are in now.
Wednesday, March 29, 2006
Matthew Simmons on Bloomberg TV 03-28-2006.
A lengthy interview with Matthew Simmons covering a wide range of energy topics.
To view it, click on the below article, then click on the link that says "Simmon's & Co.'s Simmons: Oil and Natural Gas Markets" which is in the box labeled "Related Media on Demand" then "Video", on the right hand side of the page.
Bloomberg: Oil Rises to 7-Week High on Forecast of Gasoline Supply Decline.
To view it, click on the below article, then click on the link that says "Simmon's & Co.'s Simmons: Oil and Natural Gas Markets" which is in the box labeled "Related Media on Demand" then "Video", on the right hand side of the page.
Bloomberg: Oil Rises to 7-Week High on Forecast of Gasoline Supply Decline.
Oil service stocks look set to spike.
thestreet.com: Oil Service Stocks Look Set to Spike.
I still have a few things to learn about technical analysis, but I believe the charts of many energy stocks in general are looking better, and not just in oil service.
Update, more charts:
321energy: Special update on the energy sector.
I still have a few things to learn about technical analysis, but I believe the charts of many energy stocks in general are looking better, and not just in oil service.
Update, more charts:
321energy: Special update on the energy sector.
Monday, March 27, 2006
Things that make you go "Yippie!"
If you don't already have a subscription to Barron's, invest $4 and buy this week's Barrons to read the full interview with Art Smith, the CEO and Chairman of John S. Herold Inc., a research firm that follows the oil industry.
Barrons: Energy, An Aging Bull.
A quick summary:
Energy stocks have run up over the past 3 years, but on various valuation measures continue to look like solid investments, particularly the oil majors. $60 a barrel oil and $7 natural gas is sort of an equilibrium level that should balance supply and demand for the next few years, but Mr. Smith suspects that it is likely there will be a further large upswing in prices, and that it could be due to peak oil. He makes note of the difference in oil futures and the price implied in energy stocks, and he believes the futures prices are likely more correct, suggesting the stocks still have value in them. On the question of what to avoid, he notes that oil service is red hot and that caution should be used in terms of potentially overpaying for what's already in the stocks.
Barrons: Energy, An Aging Bull.
A quick summary:
Energy stocks have run up over the past 3 years, but on various valuation measures continue to look like solid investments, particularly the oil majors. $60 a barrel oil and $7 natural gas is sort of an equilibrium level that should balance supply and demand for the next few years, but Mr. Smith suspects that it is likely there will be a further large upswing in prices, and that it could be due to peak oil. He makes note of the difference in oil futures and the price implied in energy stocks, and he believes the futures prices are likely more correct, suggesting the stocks still have value in them. On the question of what to avoid, he notes that oil service is red hot and that caution should be used in terms of potentially overpaying for what's already in the stocks.
Sunday, March 26, 2006
The new, new thing circa 2006: Moonshine, er, ethanol.
Sun Microsystems and Microsoft are competitors in the tech world, but two of their founders (and apparently at least one of the founders of Google) appear to be agreeing on at least one thing: It's time to invest in the production of ethanol, a plant derived form of alcohol fuel than can serve as a substitute for gasoline.
There are still questions about whether ethanol is actually worth it in terms of energy returned versus energy invested, and if and when it could be scaled up to be more than a small part of America's fuel supply, but nonetheless, a number of famous tech investors have energy on their radar and are making investments in various alternatives including ethanol, as well as solar and new battery technologies.
Economist.com: A healthier addiction.
NY Times: On the Ethanol Bandwagon, Big Names and Big Risks.
Businessweek: Kleiner Perkins Energy Startups Soon to Shine?
Update, UCB study on ethanol:
UCBerkeley: Ethanol can replace gasoline with significant energy savings, comparable impact on greenhouse gases.
There are still questions about whether ethanol is actually worth it in terms of energy returned versus energy invested, and if and when it could be scaled up to be more than a small part of America's fuel supply, but nonetheless, a number of famous tech investors have energy on their radar and are making investments in various alternatives including ethanol, as well as solar and new battery technologies.
Economist.com: A healthier addiction.
NY Times: On the Ethanol Bandwagon, Big Names and Big Risks.
Businessweek: Kleiner Perkins Energy Startups Soon to Shine?
Update, UCB study on ethanol:
UCBerkeley: Ethanol can replace gasoline with significant energy savings, comparable impact on greenhouse gases.
Saturday, March 25, 2006
It's a Mad, Mad, Mad, Mad World!
What kind of a strange world are we in when Pat Dorsey, the value biased director of stock research from Morningstar.com recommends not one but two energy stocks on FoxNews' Bull & Bears, one of which is also a recommendation of Jim Cramer (aka Reverend Jim of the Church of What's Working Now).
Both recommended Houston Exploration (THX) in the past week.
FoxNews: Bulls & Bears Recap of March 18.
Pat: I'm betting on Energy Partners (EPL), which is an oil and gas exploration firm in the Gulf of Mexico. It's building a bunch of high impact wells right now that have the potential to double or triple the company's reserves. The stock's at $22 right now and could be at $40 if these wells succeed. This has some risk, but if it succeeds, it will do extremely well. (Energy Partners closed on Friday at $22.27.)
....
Pat's prediction: Houston Exploration (THX) up 40 percent by next St. Patrick's Day.
thestreet.com: Mad Money Recap 03/24/2006.
Quotes:
Lightning Round
Cramer was bullish on
....
Houston Exploration (THX:NYSE - news - research - Cramer's Take)
Note: Not all that long ago, Pat Dorsey would make statements like "Oil is going straight down" whenever the subject of energy or energy stocks came up on the show. Normally, this kind of about face by a stubborn bear is an important warning signal. [As in: who's going to buy our stocks from us if everybody's on our side?!] But in this case, we'll make a note of it and keep on the alert.
Both recommended Houston Exploration (THX) in the past week.
FoxNews: Bulls & Bears Recap of March 18.
Pat: I'm betting on Energy Partners (EPL), which is an oil and gas exploration firm in the Gulf of Mexico. It's building a bunch of high impact wells right now that have the potential to double or triple the company's reserves. The stock's at $22 right now and could be at $40 if these wells succeed. This has some risk, but if it succeeds, it will do extremely well. (Energy Partners closed on Friday at $22.27.)
....
Pat's prediction: Houston Exploration (THX) up 40 percent by next St. Patrick's Day.
thestreet.com: Mad Money Recap 03/24/2006.
Quotes:
Lightning Round
Cramer was bullish on
....
Houston Exploration (THX:NYSE - news - research - Cramer's Take)
Note: Not all that long ago, Pat Dorsey would make statements like "Oil is going straight down" whenever the subject of energy or energy stocks came up on the show. Normally, this kind of about face by a stubborn bear is an important warning signal. [As in: who's going to buy our stocks from us if everybody's on our side?!] But in this case, we'll make a note of it and keep on the alert.
Monday, March 20, 2006
FPA: We believe in Hubbert's Peak.
First Pacific Advisors (FPA) is a fund advisory firm that has always marched to the beat of a different drummer, but has a solid track record. They were big in energy stocks (mainly service) for a while, but are now heavily in cash-like instruments because they believe the risk/reward ratio is not favorable at the moment. Over a 5 year time frame they are believers in energy.
CNBC via MSN video: First Pacific Advisors Portfolio Manager Steve Romick.
CNBC via MSN video: First Pacific Advisors Portfolio Manager Steve Romick.
Friday, March 17, 2006
Things that make you go "Hmm".
Palm Beach Post: Warmer oceans blamed for producing more intense hurricanes.
St Petersburg Times: Get ready to 'hunker down'.
Quotes:
It looks more and more like another nerve-racking hurricane season.
Sea surface temperatures are above average, La Nina has returned and the Atlantic Basin remains in an "up" cycle for storms.
"There is no reason not to expect a real active season," said Hugh Willoughby, a renowned hurricane researcher at Miami's Florida International University.
Longtime hurricane forecaster William Gray predicted an above-average season, with 17 named storms, nine of them hurricanes and five of those Category 3 or higher. He predicted at least one major hurricane would hit the United States.
....
For the 25 years before 1995, an average of fewer than nine named storms formed in the Atlantic region. The numbers increased by about 40 percent over the next 10 years.
The results were particularly pronounced the last two seasons, when a total of 42 named storms formed in the Atlantic Basin. Eight hurricanes struck Florida in those two years.
....
Even more bad news: Up cycles tend to last a bit longer than the down cycles, Willoughby said. The current cycle is expected to last another 20 or so years.
"Maybe even 30 years," Willoughby said.
....
Tropical storms need fuel to thrive. Warm waters provide that fuel.
Last year the waters around many parts of the Atlantic Basin were 4 degrees warmer than normal.
It doesn't sound like much. But combined with warm waters, favorable steering winds and weak shear, it creates an ideal scenario for lots of storms.
Part of the reason for the warmer waters was that the Bermuda High, a system of high pressure, was exceptionally weak in the winter of 2004-2005 and did not provide the usual cooling of Atlantic Basin waters.
Essentially, the waters started off above average and nothing happened to prevent them from getting even warmer.
If there is a silver lining this year, it might be that the Bermuda High has been stronger the past few months. The trade winds have stirred up the Atlantic and cooled the sea surface.
The temperatures remain slightly above normal, but not as high as the previous year, Landsea said.
"That's the good news," he said.
St Petersburg Times: Get ready to 'hunker down'.
Quotes:
It looks more and more like another nerve-racking hurricane season.
Sea surface temperatures are above average, La Nina has returned and the Atlantic Basin remains in an "up" cycle for storms.
"There is no reason not to expect a real active season," said Hugh Willoughby, a renowned hurricane researcher at Miami's Florida International University.
Longtime hurricane forecaster William Gray predicted an above-average season, with 17 named storms, nine of them hurricanes and five of those Category 3 or higher. He predicted at least one major hurricane would hit the United States.
....
For the 25 years before 1995, an average of fewer than nine named storms formed in the Atlantic region. The numbers increased by about 40 percent over the next 10 years.
The results were particularly pronounced the last two seasons, when a total of 42 named storms formed in the Atlantic Basin. Eight hurricanes struck Florida in those two years.
....
Even more bad news: Up cycles tend to last a bit longer than the down cycles, Willoughby said. The current cycle is expected to last another 20 or so years.
"Maybe even 30 years," Willoughby said.
....
Tropical storms need fuel to thrive. Warm waters provide that fuel.
Last year the waters around many parts of the Atlantic Basin were 4 degrees warmer than normal.
It doesn't sound like much. But combined with warm waters, favorable steering winds and weak shear, it creates an ideal scenario for lots of storms.
Part of the reason for the warmer waters was that the Bermuda High, a system of high pressure, was exceptionally weak in the winter of 2004-2005 and did not provide the usual cooling of Atlantic Basin waters.
Essentially, the waters started off above average and nothing happened to prevent them from getting even warmer.
If there is a silver lining this year, it might be that the Bermuda High has been stronger the past few months. The trade winds have stirred up the Atlantic and cooled the sea surface.
The temperatures remain slightly above normal, but not as high as the previous year, Landsea said.
"That's the good news," he said.
Tuesday, March 14, 2006
Most skeptical headline of the week.
Bloomberg: Pemex CEO Says Mexico May Have Found Deep Water Oil.
Actually, the article isn't any more convincing. It might be 10 billion barrels, it will likely take 10 years to develop, and Pemex doesn't have the expertise to do it alone, and they can't bring in international partners to help, according to current Mexican law.
Actually, the article isn't any more convincing. It might be 10 billion barrels, it will likely take 10 years to develop, and Pemex doesn't have the expertise to do it alone, and they can't bring in international partners to help, according to current Mexican law.
Encana upgraded.
I was wondering what moved this stock today, I have to assume this was it.
The Energy Stock Blog: EnCana Upgraded By Prescient FBR Analyst.
The Energy Stock Blog: EnCana Upgraded By Prescient FBR Analyst.
Monday, March 13, 2006
Insights from oil service firm Weatherford.
Some interesting insights from an article on Weatherford, one of my favorite oil service companies.
Forbes: Oil Gleaners.
Quotes:
The petro-giants own the oil, but they rely on service companies like Weatherford to drill for it, study it and build wells and pumps to extract it. As the average untapped oil reservoir is to be found in ever smaller, deeper and tighter rock, service companies have come up with ever more innovations. And they’re charging for it. According to research firm John S. Herold, since 2000 the inflation-adjusted cost of finding and producing oil and natural gas worldwide (not counting taxes or royalty payments) has climbed 80% to $9 per barrel.
“It reflects all the symptoms of an aging of the reservoir base,” says Bernard J. Duroc-Danner, 52, chief executive of Weatherford, the fourth-largest oil service company (after Halliburton (nyse: HAL - news - people ), Baker Hughes (nyse: BHI - news - people ) and Schlumberger), with 25,000 workers worldwide. The older these fields get, the more help they need, and that’s good for Weatherford. In 2005 net income was up 42% to $470 million on $4.3 billion sales.
Worldwide, capital expenditures on energy exploration and production have risen 15% in each of the past two years to $170 billion, according to Herold. The number of drilling rigs poking holes in the world is at a high not seen in 20 years--up from 1,200 in 1999 to 3,000 now. Yet the oil supply, at 84 million barrels a day, has expanded just 1% since 2004.
....
Like biblical gleaners extracting more wheat from long-tilled acreage, Duroc-Danner is revitalizing oil flows from aging fields once thought to be largely tapped out. That means he is turning his back on the kinds of large-scale seismic testing used to prospect for elephant fields--a high-margin business dominated by Schlumberger. “Frankly,” he says, “we don’t think there’s a lot of big reservoirs left to be found.”
Forbes: Oil Gleaners.
Quotes:
The petro-giants own the oil, but they rely on service companies like Weatherford to drill for it, study it and build wells and pumps to extract it. As the average untapped oil reservoir is to be found in ever smaller, deeper and tighter rock, service companies have come up with ever more innovations. And they’re charging for it. According to research firm John S. Herold, since 2000 the inflation-adjusted cost of finding and producing oil and natural gas worldwide (not counting taxes or royalty payments) has climbed 80% to $9 per barrel.
“It reflects all the symptoms of an aging of the reservoir base,” says Bernard J. Duroc-Danner, 52, chief executive of Weatherford, the fourth-largest oil service company (after Halliburton (nyse: HAL - news - people ), Baker Hughes (nyse: BHI - news - people ) and Schlumberger), with 25,000 workers worldwide. The older these fields get, the more help they need, and that’s good for Weatherford. In 2005 net income was up 42% to $470 million on $4.3 billion sales.
Worldwide, capital expenditures on energy exploration and production have risen 15% in each of the past two years to $170 billion, according to Herold. The number of drilling rigs poking holes in the world is at a high not seen in 20 years--up from 1,200 in 1999 to 3,000 now. Yet the oil supply, at 84 million barrels a day, has expanded just 1% since 2004.
....
Like biblical gleaners extracting more wheat from long-tilled acreage, Duroc-Danner is revitalizing oil flows from aging fields once thought to be largely tapped out. That means he is turning his back on the kinds of large-scale seismic testing used to prospect for elephant fields--a high-margin business dominated by Schlumberger. “Frankly,” he says, “we don’t think there’s a lot of big reservoirs left to be found.”
Friday, March 03, 2006
ExxonMobil: Peak oil? We don't believe in no stinkin' peak oil!
ExxonMobil: Peak oil? [pdf]
Quotes:
Oil is a finite resource, but because it is so incredibly large, a peak will not occur this year, next year, or for decades to come. According to the U.S. Geological Survey, the Earth was endowed with over 3.3 trillion barrels of conventional recoverable oil. Conservative estimates of heavy oil and shale oil push the total resource well over four trillion barrels. To put these amounts in perspective, consider this: Since the dawn of human history, we have used a total of about one trillion barrels of oil.
....
With abundant oil resources still available -- and industry, governments and consumers doing their share -- peak production is nowhere in sight.
Quotes:
Oil is a finite resource, but because it is so incredibly large, a peak will not occur this year, next year, or for decades to come. According to the U.S. Geological Survey, the Earth was endowed with over 3.3 trillion barrels of conventional recoverable oil. Conservative estimates of heavy oil and shale oil push the total resource well over four trillion barrels. To put these amounts in perspective, consider this: Since the dawn of human history, we have used a total of about one trillion barrels of oil.
....
With abundant oil resources still available -- and industry, governments and consumers doing their share -- peak production is nowhere in sight.
Wednesday, March 01, 2006
Do I hear 60?
Why yes, I do. Looks like OPEC is signaling it wants the new floor at $60.
AP: OPEC President: $60 'Fair Price' for Oil.
Quotes:
While tight markets and global tensions have pushed up prices, the president of OPEC said Wednesday there's plenty of oil with the global surplus expected to grow at current production levels.
The assessment by Nigerian Oil Minister Edmund Daukoru in an interview with The Associated Press provided an indication that the OPEC producers are likely to pull back on production levels when they meet March 8.
....
Daukoru, who is OPEC president this year, declined to speculate what the cartel will do, but said its discussions "should be against the background of that anticipated overhang" which he suggested could lead to a collapse in oil prices.
He called $60 a barrel for oil a "fair price" and said oil prices should be kept at "an equilibrium with global economic growth." He cautioned if prices are allowed to edge toward $70-a-barrel "everybody gets nervous" about the impact on the global economy.
AP: OPEC President: $60 'Fair Price' for Oil.
Quotes:
While tight markets and global tensions have pushed up prices, the president of OPEC said Wednesday there's plenty of oil with the global surplus expected to grow at current production levels.
The assessment by Nigerian Oil Minister Edmund Daukoru in an interview with The Associated Press provided an indication that the OPEC producers are likely to pull back on production levels when they meet March 8.
....
Daukoru, who is OPEC president this year, declined to speculate what the cartel will do, but said its discussions "should be against the background of that anticipated overhang" which he suggested could lead to a collapse in oil prices.
He called $60 a barrel for oil a "fair price" and said oil prices should be kept at "an equilibrium with global economic growth." He cautioned if prices are allowed to edge toward $70-a-barrel "everybody gets nervous" about the impact on the global economy.
Sunday, February 26, 2006
The bombing begins in 5 minutes.
File under humor: Canadian readers react to Jon Markman's post, "O Canada, Can We Have Alberta?".
Good thing he didn't let on about Operation Alberta Freedom or they'd really be ticked.
It would be interesting to see whether in terms of actual dollars, there is more American or Canadian money invested in Suncor. There aren't a huge number of large cap Canadian stocks, so I assume Canadians themselves have a lot of money in Suncor, but it could be close.
P.S. Hopefully everybody can tell the title is a joke..
Good thing he didn't let on about Operation Alberta Freedom or they'd really be ticked.
It would be interesting to see whether in terms of actual dollars, there is more American or Canadian money invested in Suncor. There aren't a huge number of large cap Canadian stocks, so I assume Canadians themselves have a lot of money in Suncor, but it could be close.
P.S. Hopefully everybody can tell the title is a joke..
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