Venezuela has provided about 11% of U.S. oil imports, roughly 1.2 mb/d.   Two trends are putting that supply at risk.  The first is Venezuela’s increased commitment to sell its oil to Cuba, to China, and to other non-Japanese Asian countries.  This commitment may be partially one of political comradeship, but it also is based on Venezuelan debt to certain Asian countries. The second is the decline in Venezuelan production that has come from the increasing financial chaos and expropriation activities caused by its virtual dictator, Huge Chavez.  I think …

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Are stocks and oil bottoming?

Was last Tuesday’s 350-point rally the beginning of the end of the bear market or just a false “bear trap?”  And a related question: “Did oil bottom at $33 and will it get re-tested?”  Let’s see what we know.

Some things we know

Sometimes the objective observable facts can yield fairly clear conclusions.  Usually that’s not the case.  Usually you can use the available facts to make a decent argument in either direction.  But sometimes the facts seem fairly clear.

For example, there should have been clarity about being …

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Our current investment trauma marks the end of an era of excesses in credit and real estate markets, of course.  But it also denotes that the United States is undergoing a far more general and significant transition - not only to a new government with a radically different agenda, but more lastingly into a whole new climate for investments. 

Gone is the era of wind-to-the-back investing powered since 1982 by continually lower interest rates and the virtuous influence of the baby boomer demographic bulge working its way through the U.S. economy …

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Energy investing - for me, at least - is mostly on hold.  I do have some mid-stream gas pipeline companies that pay great dividends but little else besides cash.  When will it be time to get back into energy stocks in a core portfolio sense?   Lets work back from the new fundamental realities of oil prices to their implications for energy stock prices.    Before 2003 (except during the politically related oil crises of the 1970’s) there was only one condition in the oil market: plenty of oil.  So oil …

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As the global economy heads into terra incognita and the stock market tries to prove it has seen the worst my thoughts, for whatever they are worth, are: 1. Some economic observers such as John Thane, the CEO of Merrill Lynch, and JC Penney’s CEO Mike Ullman are saying the current economy is comparable with the Great Depression.   We need fiscal stimulus (since we’re nearly out of gas in terms of monitory stimulation potential).  How much?  If we’re going into a depression the quantity of fiscal stimulus needed …

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There’s been an official denial by Finance Minister Alexei Kudrin at the global economic conference in Brazil that Russia is playing a role in restricting global oil output.  But the fact is that Russian oil firms are only shipping 75% of normal exports in November.  It seems more than coincidental that Russia would cut oil exports just as OPEC is also cutting exports to support or raise the price of oil, particularly since the Russian government determines the export tax which in turn determines the amount of oil that …

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Among other recent reports, the Globe and Mail today published some details, posted below, of the OPEC effort to support oil prices.    Saudi makes significant oil cuts to some buyers JONATHAN LEFF AND BARBARA LEWIS Reuters November 4, 2008 at 7:29 AM EST SINGAPORE/LONGON — Top oil exporter Saudi Arabia has already cut significantly crude supplies to some of its customers, industry sources said on Tuesday, quelling doubts OPEC would stick to its latest output deal. One industry source estimated Saudi Arabia had reduced exports, as …

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The IEA raised its estimate of 2009 global oil demand by a slight 60 kb/d while cutting its 2008 estimate by 80 kb/d.  It also said OPEC spare capacity will rise later this year and next from the current 1.5 mb/d.  OPEC output in July at 32.8 mb/d was 1 mb/d higher than in April and 1.7 mb/d higher than in July, 2007.   Even non-OPEC output, generally thought to have peaked, rose and average 455 kb/d in 2008 and is expected to rise another 655 kb/d in 2009.  Apparently, higher …

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I understand that oil’s 20+% retracement from its high is not unprecedented; such a pullback often occurs in a bull market.  I also know that currently available values in oil and gas stocks seem excellent and that pullbacks in bull markets are the right time to accumulate bargains. Nonetheless, instead of buying I’ve been increasingly liquidating oil and oil service stocks.  I’ve sold my options on oil futures.  I’ve increased the EIS portfolio’s cash position for one reason.  This pullback may be over quickly but if it isn’t we could …

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A well-respected Dutch consultancy supported by substantial corporate interests including Shell has issued a report that warns of severe oil price shocks starting in 2010.  As my readers know, I have been suggesting a similar time frame for severe oil shortages based on my reading of predictions for supply constraints by many analysts and by the Wikipedia Megaprojects works. I have not analyzed the report in depth but my reading of the summary found aspects that were confusing.    For example, the report blames Mexico and Russia …

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According to this report from Bloomberg,  a European consultancy says that OPEC’s recent forecast of 2008 non-OPEC oil production is well in excess of reality.  It recommends that OPEC raise production (as if) and lower the prices it is demanding  for its excess heavy sour crude so as to be appealing to the market.  The implication is that OPEC is trying to keep oil prices high.  You think?  We are starting to get low enough prices that we may find out, particularly if they fall another $10 …

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The following report from the Financial Times (7/2/08) describes a dire forecast by the International Energy Agency that for the first time in history non-Opec countries will hardly be able to raise production at all during the next five years.   This forecast adds color to the recent megaprojects forecast of global production expected from all new fields going out to 2015.  The analysis is certainly consistent with recently noted high decline rates in the North Sea and Mexico, plus indications of declining production in the …

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Here is a comprehensive essay on the history of oil prices and a reasonable attempt to forecast them.   It come from The Oil Drum’s Australian Bureau.  Readers will find a number of similarities to my recent essay in Newsletter #16.  But it covers some additional ground using only a few well chosen charts.  I cannot recommend strongly enough that you read it. One of the interesting assertions in it is a Goldman Sachs estimate that current oil prices have reduced global oil demand by 5 …

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Churchill’s assessment applies to the current oil situation: this is the beginning of the end of OPEC.  That much is obvious; the more interesting question is “why?”

OPEC was founded in 1960 to protect the interest of its members, major oil exporting nations.  That interest is to stabilize world oil prices at levels that balance their competing objectives to maximize both long term oil demand and the short term oil price.   The idea was to keep enough oil off the market during glut periods to elevate the price and insert enough …

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  Crunch Time     Time for Natural Gas         Current Oil Outlook             It IS the dollar! First the April numbers. The EIS portfolio was up 11% for the month, about the same amount as the oil and services indexes, a bit better than the S&P. Year to date being up 8% is good relative performance. About 3% of it was due to the options on futures strategy. I added an option on some late 2011 natural gas futures contracts. I also disposed of most …

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