Energy Insights

By: Meridian | Sun, Nov 19, 2006
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Last week the International Energy Agency issued harsh words for those of us who chose to listen. They said.." ...the world's energy supply is heading for crisis and we can expect "skyrocketing prices or more frequent blackouts" unless urgent action is taken..."

This week buried deep in the business section of my daily paper was a little article talking about PEMEX - the Mexican state-owned energy producer. You see, back in 1976 PEMEX discovered a huge oilfield in the Gulf dubbed the Cantarell Field. This giant field is responsible for 60% of Mexico's oil output. Production data shows that Cantarell peaked in 2004 at 2.1 million barrels a day. Si senor. So far so good. So far so normal. But here is where the story takes a perverted little twist. Seems the political types in Mexico have had their fingers in the guacamole and PEMEX has been recording huge losses each year to the tune of $1 billion. What the politicos have squandered the money on remains a mystery. This has left PEMEX with little working capital to explore for more oil in the Gulf and little working capital to employ technology like CO2 flooding to extend the life of Cantarell.

Now let's take a pause for refection here. The IEA is shouting harsh words at us. Authors like Matt Simmons are railing at us about PEAK OIL. PEMEX is unable to grow itself. A gigantic oil field finds itself in decline.

Hellooooooooo!!!! Wake up and smell the coffee. This is PEAK OIL dear reader. This is what it is going to look like, feel like, smell like and taste like for years to come. Get used to it. PEAK OIL is evolving in front of us, behind us and all around us - each and every day. As you sit in the comfort of your easy chair and ponder these words there are many more fields as big or bigger than Cantarell that are approaching their peaks. Don't expect to see stories like PEMEX make glaring headlines to remind us all that we are peaking. You see, as I said last week journalists are a cautious, risk averse bunch. They only like to headline a story once they are absolutely 110% sure of its accuracy. And even then they are reluctant. Get on the bandwagon dear reader. Start to educate yourself because the media will not do it for you. Go to your local bookstore and order a copy of Matt Simmons book (Twilight in the Desert). Read it. Think about it. Now add to the equation the story of Cantarell. Then factor in the 20-30% decline rates of Natural Gas wells in North America. We are being forced to run harder just to stay still. It's like trying to go up an escalator that is coming down. Now imagine yourself on that downward moving escalator trying to walk fast enough to make upward progress. There is someone at the controls and slowly he is speeding things up. You have to walk faster and faster to make progress. You begin to sweat and pant for breath. Eventually the fight within you wanes. You give up. You have peaked. You gasp to catch your breath as the downward moving escalator whisks you to the ground floor. The next 10 years will be quite interesting to say the least. For those in the know and for those informed, the next 10 years will be the most profitable of their lives. For those in the know, wake up each and every day and quietly remind themselves....- " there is money to be made in the energy markets....", " there is money to be made in the energy markets..",..... " there is money to be made in the energy markets..."

Keep yourself in the know. Take the energy markets by the horns. Assert yourself. Point your browser to Your subscription to Energy Central is a few mouse clicks away.

Chinese spoken here !! This week officials from Canadian energy firm Enbridge made the journey to China to schmooze with officials from Sinopec. Turns out Enbridge is seeking to feed the hungry dragon in China by building a 1100 km long pipeline in Canada to get oil to the Pacific Coast so Chinese supertankers can swoop in and load up. Several weeks ago I reviewed Enbridge for my readers. Since this review, readers who took my advice have made a 9% return on their money. Not too bad at all !!

And....hang on to your hats folks. Here we go again. This week British PM Tony Blair was in Washington for a courtesy call. What he said made me roll my eyes back in my head. For the record, he said..." the solution to the situation in Iraq lies not in Iraq, but outside Iraq in places like Iran...". In other words, Iraq is an abject failure. So now let's pin the blame for that on Mr. Ahmedinijad in Iran and go into Iran and give him a good whoopin'. And how did Iran respond? Very calmly actually. They simply said that by Q1 2007 they will have a full nuclear cycle in operation. Yes sir !! Uranium acquisition, processing, enrichment...and the Bomb. And you were worried about Oil prices being too quiet? A fresh serving of volatility is coming right up ! And we at Energy Central will be watching with laser-like intensity for investing and trading opportunities in the energy sector.

"Come and listen to my story 'bout a man named Jed,
a poor mountaineer, barely kept his fam'ly fed.
And Then one day he was shootin' at some food,
and up from the ground come a bubblin' crude,
oil that is, black gold, Texas tea."

Remember the 1960's sitcom the Beverly Hillbillies featuring Jed, Elly Mae, Granny and Jethro? As the story goes, these folks hailed from the Ozark Mountains in Arkansas. Well it turns out there is more to Arkansas than previously thought. This week for my readers I took a look at Arkansas and as I went shootin' at some food...guess what happened?

Up from the ground come a bubblin'....... tight shale gas!! All joking aside, you gotta' read about what is happening in Arkansas. You will be suitably impressed with the companies that I profile this week.

And lastly, this week for my readers I take a close look at 6 oil refiners. I take a look at some fundamental financial data and try to correlate this data to what the charts tell me. An interesting exercise. Of the 6 companies examined, 4 are buys right now.

Crude Oil - Intermediate Term

Again, the media made me laugh this week. Crude Oil on Friday took a little dipsy-doodle detour. The media were quick to trot out all their highly educated analysts in front of the cameras. Reasons for the dip ranged from OPEC cheating to forecasts of a warm winter. But they missed the obvious. Unbelievable! Do these people forget that oil prices are driven by action on the Futures markets? Today was the last trading day for December Crude Futures. All those not wishing to take physical delivery had to exit their long positions. It appears to me that there were some big time players who may have left their exit to the last minute and when they did decide to square off the books they wreaked havoc. Monday the active contract will be the January Futures. It is trading $3 over where the market closed on Friday. Simple explanation. Too bad the media missed it. Now, if you are listening to the "bubbleheads" on CNN or some other channel you are being seriously mis-informed. Break free of the media ball and chain. Oil is not falling apart. We are very much in a long term uptrend. The recent pause in the action is quite a healthy development really. No market rises indefinitely from lower left to upper right on the charts. While the investing masses out there cower in fear of the future because they take their data from the television set, we at Energy Central are taking the opposite stance. We are stepping up to the plate and showing our readers a goodly selection of attractive energy stocks each week. Stocks that move. Stocks that can help people "ring the register" - ka-ching, ka-ching. You can choose to follow the masses like some timid sheep. Or you can stand up and admit to yourself that energy is in a long term uptrend. The choice is yours to make. Choose the former and you will be on your own in your sad little mis-informed world. Choose the latter and Energy Central will welcome you aboard with open arms.

Natural Gas - Intermediate Term

Again, the Futures markets are at work here too. Next Tuesday is the Last Trading Day for December Nat Gas. On a day when Crude was down, Nat Gas was up and smartly so, I might add. Why? Well, it appears that some players who were short decided to get out of the way to cover off their positions. Funny how you never hear the media talk about Nat Gas. I thought there job was to present balanced reporting. Take a step back and look at this chart. Technically, we see higher bottoms over the past 6 weeks. We are above the 18 day moving average. The RSI is positive. The long term uptrend on Natural Gas remains intact just as it does on Oil. Gas wells across North America all suffer from one commonality - decline rates. Drill a gas well, put it on production and it declines up to 25% a year (more in some cases). We have to keep drilling each year just to keep up with the natural declines. Two weeks of unseasonable cold weather on the eastern coast of North America this winter will chew up the surplus of Gas in storage. Then watch the fireworks fly. My comments above also hold here. You can quiver in fear in the corner along with the investing masses or you can stand up and assert yourself. Choose the former and we cannot help you. Choose the latter and Energy Central will be your guide to profitable trades in the Gas sector.




Author: Meridian

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