OPEC Monday – Sis, Boom, Blah

Clear as mud. That’s where we stand now that six of the eleven cartel members have made it clear that they plan to cut a million barrels of production (to 26.5 mm bopd), sometime soon, although, we’re not sure who is cutting how much. All because crude has fallen 20% in 2 months. Remember in August these same guys said they were very concerned over overly tight markets after BP’s mismanagement of Prudhoe Bay. Then OPEC was talking about all the excess supply they had brought on the market since 2002. Word of advice, keep your whole care to yourself.

For its part, oil drifted higher in the morning, peaked just after lunch up $1.54 at $61.30 (it’s best level in 4 whole trading days) and then ended the day up fourteen cents @ $59.90. Talk about much ado about nothing.

XOM for their part, never bought into the rally and ended the day down almost a buck. Part of this was attributable to Putin continuing to turn the screws on them but I think it was more part of the “selling the news” syndrome. How does it get more bullish from here? They cut 2 mm bopd? I really don’t think so. Saudi Arabia alone has over 5001 Arabian Knights to feed. Love puts on MUR, SU, HOC here on falling oil.

Natural gas rose, yet again, peaking around the same time as crude and ended flat on the day. Not good. While EOG traded more with oil, itis still the most leveraged larged cap E&P to natural gas prices. APC, whose management is undoubtedly growing tired of explaining how it is that they didn’t overpay when they paid 50% premiums for Western Gas and Kerr McGee back when oil $75. Also finding fault with current levels of SWN, BBG, ECA, and DVN. LNG is hilariously overvalued here. I’m looking for a big correction in gas this week so the only thing holding them up will be hopeful investment banks.

Look for the parade of analyst downgrades and estimate and price target reductions to begin again this week. So far, activity on the downgrades has been pretty light but I’ll post a spread sheet showing the increasing velocity with which estimates are coming down among the E&P, refinery, and drilling names. It’s been quiet but it’s been happening. More later.

OPEC Monday

Opec says they now have “pretty much got consensus on a 1 mm bopd cut”. Hmm, sounds familiar. Sounds pretty weak. Last week it was going to be “at least 1 mm bopd” and an “emergency meeting on Oct 18-19″. Now it looks like it can wait until the regularly scheduled meeting on Dec. 14.

– Shell added back 18,000 bopd from the Cawthorne Channel in eastern Nigeria. That leaves a total of 584,000 bopd offline due to rebel activity. Shell expects close to 500,000 bopd of this production to be back on line in 1H07 while the remaining Chevron production is on permahold.

– North Korea set off a small underground nuke Sunday that the US detected seismically. Kim Jong was feeling a little neglected, what with all the other crazies out there grabbing headlines, so he pops of a nuke. Good for you, we noticed, now sit down and shut up. By the way, we regularly send this guy heating oil tankers in the winter because his glorious DPRK is such a model of efficiency. Kim, we may just let it get really cold there this winter so better hug that uranium tight.

– November Oil is up $0.65 @ $60.41 (as high as $60.60 earlier this am). Yawn. I’m sure it will be a volatile day but this is not the big move in oil the OPECies want.  For that, I believe you have to knock down 2 mm bopd (75% of which must come from the Saudis) and that’s highly unlikely.