Oil Mini-Glut Is Coming: Short Oil Stocks

J

jamis359

2007 will be the year of the oil mini-glut. World oil demand is forecasted to increase by 1.3 mil bbls/day from '06 to '07, while production from the former Soviet states will increase by 2.9 mil bbs/day -- not to mention increased production in North America from the recent drilling and exploration frenzy. The Saudis will be able to throttle back production, giving the world cushion to absorb temporary disruptions in Nigeria (terror), Gulf of Mex (hurricanes), Prudhoe (pipeline).

A sampling of short candidates for the watchlist:

http://stockcharts.com/candleglance/?NFX,PXD,PLLL,FST|D|G

I'm not suggesting shorting these today -- energy stocks are short-term oversold. I'm suggesting watchlisting them and wait for next overbought thrust. Looking for a medium-term correction in oil, probably $50-ish, early 2007.
 
T- Boone Pickens says that the world cannot produce and process more than 85m b/d and current demand is 84.8 m b/d. He did make 1.5 billion off his opinion last year.
 
Quote from just21:

T- Boone Pickens says that the world cannot produce and process more than 85m b/d and current demand is 84.8 m b/d. He did make 1.5 billion off his opinion last year.
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T-Boone needs to recalibrate his model. EIA forecasts world oil production in '07 to be 87.6 mb/d, with a net surplus of about 0.4 mbd exceeding world demand. I believe EIA's demand estimate is too high; a slowing US economy will trigger softness in other national economies, taking the edge off of world demand.
 
Yeah, I agree. With high prices, you always get ways to find more oil. I see a global recession actually, (2007). Oil could get hammered. The fact that almost everyone is long, makes this even more probable. Demand does not need to drop for this to happen, only to flatten.


BTW, although T Boone has made billions, he has also been wrong for serious stretches in the past. Sorta like Rodgers once he gets is mind around something. These guys have the funds to outlast such periods. Joe Trader does not.

Jay
 
Quote from Jayford:

Yeah, I agree. With high prices, you always get ways to find more oil. I see a global recession actually, (2007). Oil could get hammered.
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Jayford,

Am I missing something? Wouldn't a drop in oil put more spending money in pockets to improve consumer spending? Or maybe you're saying a recession would hit oil prices...either way, a major decline in pump prices would improve a lot of sectors.

I think an oil decline would be bullish for the economy as a whole.
 
oil has moved down quite a bit these last 2 weeks and everyone is saying its going down further, I think it may touch 65-68 range however I think its back to 75 quickly after that. Glut what glut.
 
I 've been reading stuff like storage capacity is near full due to futures prices fueling demand for crude while the current physical market is well supplied- ie:oil costs 70.00 bbl+3.00 dollars storage and futures price is 75.00bbl at forward price so that's 2.00 profit if its stored till expiry. That sort of thing makes for a false demand until storage is completely full and the economy slows and hurricane season diminishes(which should lessen actual demand)- causing a decrease in price- . There are also tales of tankers waiting in port for days because no storage is available- meaning lots of oil ..n'est'ce pas ?(nasty pass)- so as the macro outlook decreases storage should be full.
I don't think that hizbollah, Lebanon or Israel will disrupt oil flow.
 
The problem with predicting oil prices is the only bad prediction is a reasonable one. Right now bears predict $50 a barrel. Highly unlikely. Either there is a supply disruption and oil goes to $100 dollars or the most likely scenario that LNG infrastructure creates cheap substitutes while oil nations increase production to maintain revenues leading to a collapse in prices and we end up at $20.
 
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