http://jubakpicks.com/2009/11/13/the-short-and-the-long-of-oil/ Sat, 11 Feb 2012 09:31:11 +0000 hourly 1 http://wordpress.org/?v=3.3.1 http://jubakpicks.com/2009/11/13/the-short-and-the-long-of-oil/comment-page-1/#comment-1929 Qurjfax Mon, 23 Nov 2009 17:47:22 +0000 http://jubakpicks.com/?p=2164#comment-1929 In your article on the long and short of oil, you were planning to take a look at some ways to tell what oil stocks look most promising. Are you still planning to do so? In your article on the long and short of oil, you were planning to take a look at some ways to tell what oil stocks look most promising. Are you still planning to do so?

]]> http://jubakpicks.com/2009/11/13/the-short-and-the-long-of-oil/comment-page-1/#comment-1792 FrozenFoot Sat, 14 Nov 2009 15:56:16 +0000 http://jubakpicks.com/?p=2164#comment-1792 Refiners are basically middlemen. They buy crude and make refined products that they sell for a few pennies per gallon (on a good day). They really only make money (say $0.10 per gallon) when there are shortages of refined products or close to it. In other words, they need very high utilization of refining capacity in their market. VLO mothballed their Aruba refinery recently - obviously not good sign for them. Don't forget that ethanol has taken a bite too. It replaces gasoline and our government has been subsidizing it. Not easy to compete with that. If you really have to own a refiner find one who is opening / expanding capacity in Asia. Really IMO, you want to be in the business of getting crude out of the ground (called production) for a few $ per barrel and selling it for $50 or $70 or what ever the markets gives. That's why the Middle East is so wealthy. So stick with the major integrated oils with play in Iraq, etc - everyone should have a few shares of a major in the vault. That's why it's called black gold. And buy best of breed. Refiners are basically middlemen. They buy crude and make refined products that they sell for a few pennies per gallon (on a good day). They really only make money (say $0.10 per gallon) when there are shortages of refined products or close to it. In other words, they need very high utilization of refining capacity in their market. VLO mothballed their Aruba refinery recently – obviously not good sign for them. Don’t forget that ethanol has taken a bite too. It replaces gasoline and our government has been subsidizing it. Not easy to compete with that. If you really have to own a refiner find one who is opening / expanding capacity in Asia. Really IMO, you want to be in the business of getting crude out of the ground (called production) for a few $ per barrel and selling it for $50 or $70 or what ever the markets gives. That’s why the Middle East is so wealthy. So stick with the major integrated oils with play in Iraq, etc – everyone should have a few shares of a major in the vault. That’s why it’s called black gold. And buy best of breed.

]]> http://jubakpicks.com/2009/11/13/the-short-and-the-long-of-oil/comment-page-1/#comment-1780 kelvinator Fri, 13 Nov 2009 22:55:30 +0000 http://jubakpicks.com/?p=2164#comment-1780 The other aspect aside from timeframe that's interesting about the difference between the US EIA and the International Energy Agency (IEA) comments is the report this week in the Guardian (UK) that a couple of former senior staff from the International Energy Agency claim the US EIA has consistently pressured the IEA to provide more optimistic medium/long term forecasts for oil supply than is warranted by the data. The claim is that they fear "triggering panic buying." If true, this would give more weight to the possibility you mention that demand and price pressure could hit the recovery in the next year, or by 2011 as the IEA's head economist warned in August. The other aspect aside from timeframe that’s interesting about the difference between the US EIA and the International Energy Agency (IEA) comments is the report this week in the Guardian (UK) that a couple of former senior staff from the International Energy Agency claim the US EIA has consistently pressured the IEA to provide more optimistic medium/long term forecasts for oil supply than is warranted by the data. The claim is that they fear “triggering panic buying.” If true, this would give more weight to the possibility you mention that demand and price pressure could hit the recovery in the next year, or by 2011 as the IEA’s head economist warned in August.

]]> http://jubakpicks.com/2009/11/13/the-short-and-the-long-of-oil/comment-page-1/#comment-1778 Jim Jubak Fri, 13 Nov 2009 21:56:31 +0000 http://jubakpicks.com/?p=2164#comment-1778 mp3106, absolutely. HIgher prices would put a damper on economic growth which would reduce demand which would lower prices. At least in an ideal world. The wild card in that rational market scenario is that fuel prices are heavily subsidized in some of the markets showing fastest growth in demand: China, Iran, India, Indonesia, etc. all have subsidies that keep fuel at below market prices. Not at all clear to me how to figure that into the mix. mp3106, absolutely. HIgher prices would put a damper on economic growth which would reduce demand which would lower prices.
At least in an ideal world. The wild card in that rational market scenario is that fuel prices are heavily subsidized in some of the markets showing fastest growth in demand: China, Iran, India, Indonesia, etc. all have subsidies that keep fuel at below market prices. Not at all clear to me how to figure that into the mix.

]]> http://jubakpicks.com/2009/11/13/the-short-and-the-long-of-oil/comment-page-1/#comment-1777 Jim Jubak Fri, 13 Nov 2009 21:53:33 +0000 http://jubakpicks.com/?p=2164#comment-1777 francolargo, I think what scary investors away is the low capacity utilitization rate--about 80% now. It's hard to make money in the refining biz at that level. Look at the recennt earnings reports from th likes of Valero. Not only were earnings down (a loss of 39 cents this quarter versus a profit of $1.24 a share in 3Q08) but they were unpredictably bad. Wall Street had expected a loss of 26 cents and Valero delivered a loss of 39 cents. Nobody much believes the projections for 2010 right now. francolargo, I think what scary investors away is the low capacity utilitization rate–about 80% now. It’s hard to make money in the refining biz at that level. Look at the recennt earnings reports from th likes of Valero. Not only were earnings down (a loss of 39 cents this quarter versus a profit of $1.24 a share in 3Q08) but they were unpredictably bad. Wall Street had expected a loss of 26 cents and Valero delivered a loss of 39 cents. Nobody much believes the projections for 2010 right now.

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