Monday morning oil market update: Its a heck of a good price pullback to buy into!greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
On Thursday and Friday, our NYMEX market was closed due to T-Day holiday. The Brits sold off the Brent by 30 cents a barrel due to favorable developments anticipated on the restart of Iraqi oil flows.
Sure enough, the Iraqi oil minister 'confirmed' that if offered a straightforward 6 month 'oil for food' rollover, the Iraqi gov would accept it and Iraqi oil exports would resume. So this morning we have our NYMEX crude oil opening about 60 cents lower, flirting with $26- a full dollar below last week's high.
For those of you that are interested in the purest y2k play out there, albeit very high risk, this morning's crude oil and refined products price pullback is providing a great spot to get in.
~If these refineries reduce rates and/or shut down for rollover, the gasoline and the heating oil is very cheap both in absolute terms and relative the crude. We'll have a supportive API stat report on Wed (I think it'll be a day late cause of T-Day) because secondary storage (commerical, ag and jobber tankage) hoarding seems to be in high gear.
~Even if Iraq agrees to resart things due to a 6 month UN rollover, we're still gonna lose about 30 million barrels of their exports in a very tight market. BUT, I dont think Iraq will just restart without their infamous gamesmanship. Today's oil market is acting like the restart is a given-ITS NOT. Plus, UN posturing might delay things further. Russia's UN delegate is meeting with Iraq's Aziz in Moscow. He'll be out all week and there's still a huge split in the UN Sec Council on how we're gonna monitor Iraqi weapons and this oil sale.
~$26 crude is just plain too cheap based on what I've read in this forum over the past few months. Neither stock market shorts or gold length has proven to be a good y2k market play. The play is in the oil sector and the window of opportunity is still wide open!
-- Downstreamer (firstname.lastname@example.org), November 29, 1999
Thanks for the info Downstreamer.
Re. your investment advice: just remember, the Internet has a long memory. You might want to add copious disclaimers to your posts, or make very sure that you can't be identified from that email address. I know it's common sense to not invest your future based on unsolicited commercial advice, but there ARE people that dumb, and lawyers willing to work for them. :|
-- Colin MacDonald (email@example.com), November 29, 1999.
For what it is worth:
Venezuela: Oil May Reach $30
MADRID (Reuters) - Venezuelan Energy and Oil Minister Ali Rodriguez said in an interview published on Monday that the oil price could rise in the short term to as much as $30 per barrel, but that it should stop at that level.
In a interview with Spanish newspaper La Razon, when asked whether $30 a barrel was a possibility, Rodriguez said: ``In the context of the current conditions it is possible, but I think it won't go above that level.'' Rodriguez said producers would work to defend price stability.
International oil prices hit last week a post-Gulf War high of $25.90, rising to more than double the level early this year.
``It is possible that under a specific situation, such as a cold winter in Europe, the oil price picks up speed but afterwards it will find its level again,'' Rodriguez said, without specifying further.
He said at its September meeting in Vienna OPEC had agreed to work for price stabilization, adding that current levels of between $25 and $26 per barrel have been said to be satisfactory by major producer countries.
However he declined to comment on plans for further action.
``All the countries I talked to recently, Arabia, Kuwait, Iran, Iraq, Qatar, Algeria decided to maintain production cuts until March next year. We do not see any reason to change this policy. We don't dare to make any forecasts for beyond March,'' Rodriguez told La Razon. Reut04:28 11-29-99
-- Bill P (firstname.lastname@example.org), November 29, 1999.
Question for Downstreamer: Was this guy shorting oil?
What was he thinking?
From Wall Street Journal web site--top story at 1:11 pm EST on 11/29/99
Unauthorized Trading to Cost Millions at Plains All American Dow Jones Newswires
HOUSTON -- Plains All American Pipeline L.P. and Plains Resources Inc., its parent company, have discovered unauthorized trading activity by an employee in Plains All American's crude oil trading operations.
Plains All America said Monday it expects the transactions to result in trading losses of about $160 million.
The Board of Directors of Plains Resources has authorized a full investigation into the matter by outside counsel and PricewaterhouseCoopers LLP. Operating results for 1999 will be adversely affected by these losses. Arthur Andersen LLP is conducting a preliminary independent review of the facts on behalf of Plains All American's lenders.
After a preliminary investigation, Plains All American said the employee's unauthorized trading activity occurred primarily from April to November 1999, although it may have begun in January 1999. Depending on the results of the investigation, previously announced financial results may be restated.
A First Call/Thomson Finanacial survey of seven analysts produced a mean earnings estimate for the company's fiscal 1999 of $1.63 a share.
Plains All American, as it purchases crude oil, typically establishes a margin by selling crude oil for physical delivery to third party users, or by entering into a future delivery obligation with respect to futures contracts on the New York Mercantile Exchange. The company said it believed the trader, who has been fired, violated Plains All American's policy of maintaining a position that is substantially balanced between crude oil purchases and sales or future delivery obligations.
"We are extremely disappointed by the unauthorized actions of one of our traders and are taking appropriate, swift and decisive action to see to it that our policies cannot be circumvented like this again," said Greg L. Armstrong, Plains All American's chairman and CEO. "While these losses are clearly significant, we believe that several recent, pending and anticipated positive financial developments will help Plains All American navigate through these difficult times."
Mr. Armstrong said the company had received $51 million in cash from an October 1999 sale of equity. The company also received $15 million from selling excess crude oil and will sell $100 million worth of crude oil line fill in the first quarter of 2000.
Plains All American also is in discussions with potential buyers of the portion of the All American Pipeline extending from California to Texas, although there can be no assurance the will be completed.
This segment of the pipeline generated $4 million of earnings before interest, taxes, depreciation and amortization for the twelve month period ending September 30, 1999. The segment of the line contains the 5.2 million barrels of crude oil line fill that is being pumped out and sold for $100 million.
As a result of the unauthorized trading, Plains All American and certain of its affiliates, not including Plains Resources, are in default of covenants under their existing credit facilities.
In addition, Plains All American has significant cash requirements for which it will need to draw on credit facilities. The company is discussing how to finance these defaults with various members of its bank group.
Plains Resources said it is willing to infuse up to an additional $64 million into Plains All American, subject to various conditions, including satisfactory resolution of the discussions with Plains All American's lenders.
-- nothere nothere (email@example.com), November 29, 1999.
I appreciate your expressed concern. Anyone that deals in oil futures trading is comfortable with risks. If some dumbass is litigious enough to try and sue someone based on a public forum post, bring em on. I post under a legit e-mail and I'm easy to track. The purpose of this forum is to offer and tap our collective expertise. I'm not gonna back off cause of some stupid lawsuit concern.
Who knows how they got trapped. Notice most of the problem took place from April to Nov. Assuming they were caught short could be legit or could be too simplistic. If its the Plains I know, they are a big Midco crude gatherer and have a big new terminal in Cushing Okla- where the NYMEX dictates delivery on their crude contract. As I've contended - most of the oil industry traders are pollies. Even The Economist came out with a cover story saying the crude market was oversupplied and was headed to single digits last Spring. Or maybe this Plains trader was a doomer and thought refiners would have y2k probs. He went long 'cracks' (long products and short crude spreads) which would have been a loser during this time frame. Like Nic Leason of Barings, he might have stuck the losing trades in a drawer and scrambled for margin money from higher ups that didn't understand complex hedgem stategies. Only Plains really knows at this point...
-- Downstreamer (firstname.lastname@example.org), November 29, 1999.