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Energized Randoms


Remember, we are still in the shoulder months...demand will pick up as winter arrives...

  • Since May, the natural gas surplus over 2005 has shrunk from a surplus of about 500 bcf to a surplus of 174 bcf. I expect a normal winter to have us at a 300-500 bcf deficit by spring, which would be bullish for natural gas.

  • Last year was a +2 standard deviation type winter (on the warm side) and January 2006 was the warmest January in the past 100 years. I consider those "easy comps."

  • If we get a cold winter (which we haven't had in a long time), we could have a serious problem/price spike.

  • Why the expected sudden shift from surplus to deficit? A 32% decline curve is a large part of the reason.

  • Rig count up 20% year over year…natural gas production flat. We need more rigs.

  • The drillers are priced at levels that suggest natural gas supply will not be a problem. I humbly disagree…

  • I heard rumors of a Nabors (NBR) LBO last week…perhaps someone else sees the value here that the market does not?

  • Mexico's Canterall oil field (the 2nd largest producing oil field after Saudi Arabia's Ghawar) is rumored to be declining at 14% a year. Compounding a 14% decline rate for five years would take production from 2 million barrels/day to under 1/million barrels/day.

  • The Mexicans are said to be considering allowing foreign investment in the energy sector to make up for their declining production.

  • How would/will the market react if/when Ghawar goes into decline? All oil fields eventually do…

  • Is that why Saudi Aramco has nearly tripled its rig count since June 2004? More rigs working to get flat production…sounds like a common theme to me.

  • Commitment Of Traders (COT) Reports are out today at 3:30pm EST (due to holiday last week). Last week, open interest in crude spiked to the highest level ever as commercials reduced their net long position to a flat position in crude futures.

  • I am hoping for warmer weather and a pullback in some of the natural gas stocks over the next couple of weeks as I would like to add to my long exposure.

  • Oil is still range bound from $58-$62…Boone Pickens out this morning with an average price target for crude of $70 for 2007. Sounds about right to me.

  • Remember, we are still in the shoulder months…demand will pick up as winter arrives (for both oil and natural gas).
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