Much obliged, but I don't pretend to have a handle on it. As a matter of fact, if there is any one particular thing that I am certain of, it is the fact that there are no handles to grasp in the oil sector. J.Paul Getty was notorious for his work ethic: He went to bed with the chickens, rose very early and was usually the first to the office, complete with his sack lunch. An interviewer once asked him as to what he attributed his success. He replied:"Rise early, work hard, and strike oil." I have a feeling that most of us here are doing well at the first two of Getty's attributes, we're just trying to "strike oil". "Striking oil" seems to have that elusive handle. T34 B
The following excerpts are from an article by Cheryl Einhorn which appears in next week's Barron's (available on-line by subscription):
>A pause that refreshes. That's what the sell-off should amount to in natural gas -- a bull market that just needed a breather. Prices hit a 21-month high just two weeks ago, but the rally was speculative, fueled by traders who took their most aggressive net-long positions in six years.
>.. speculators bet hurricane [Bret] jitters would disrupt natural-gas...Mother Nature spared production sites. Prices collapsed at week's end. Thursday alone, they slid 6%, the biggest drop in six months.
>..Allison Fleischmann [Goldman Sachs] warns, prices "should be lower and go down to $2.25." But she adds: "This is hurricane season," meaning prices could rally back fast.
>The bull case doesn't even require a cold winter, but rather simply a normal one -- something we haven't seen during the past few relatively warm years. Too, the bull case may not be readily apparent, in part because the gas rig count has rebounded lately.
>That count bottomed back in April at 362 working rigs. Since then, it has climbed every week and today stands at 550. "That is substantial and beyond what we had anticipated," says Bob Christensen...<
>The rig count has grown because oil prices have doubled since major OPEC crude producers decided to cut production. Since most energy companies produce both oil and natural gas, their cash flows have improved.
>And while many companies were initially suspicious of the run-up in energy prices, they've begun to believe it is for real and have been willing to invest some of their cash in boosting gas production. The reason: Industrial demand, which accounts for 44% of gas consumption, has been strengthening amid a strong U.S. economy.
>The housing market has been booming as well. The country has added a million single-family homes a year since 1996, and 70% of them are designed to use gas appliances. The good times have also added 10% - 15% more commercial space throughout the U.S., 13% of which use gas for one purpose or another.
>Because so few rigs were in use last spring, gas supplies have been tightening. Production volumes were off 1% in the first quarter and 3% in the second. "It will probably drop even more in the third quarter," says Bill Featherston, a gas analyst at Schroder & Co.
>Christensen doesn't think the recent rig-count increase will be able to boost gas supplies until well into next year. There is a lag time of at least six months between increased drilling and any new production buildup.
>This is significant because storage levels for gas remain at 6% below year-ago levels.
>In the time left between now and the start of the heating season in November, Christensen doesn't think the industry will be able to store enough gas for winter to make up for the 7% production shortfall -- four billion cubic feet a day -- stemming from the lack of new supplies.
>"It looks like the industry will go into the winter radically underfilled," he says...All told, he says, "it is like getting filled to 2.3 trillion cubic feet," Christensen avers. "That is low by any stretch of imagination. It means we could have fireworks this winter."
>How high does Christensen think gas prices will go? "Expect between $4 and $5 gas in the first half of 2000."