zman’s Energy Brain

oil, gas, stocks, etc…

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More Opec Warnings – But We All Care Just A Little Less

Posted by zmann on October 2, 2006

Opecie warnings are growing tiresome but also growing less effective (as seen in today’s oil price action), at least from the guys with little to no street cred. Tone will probably change if we move back below $60 so my thinking is that that won’t happen until next week but there’s always hope.

Oil may get a bounce Wednesday when the numbers will almost certainly be less bearish. Big inventory numbers, one way or the other, usually are followed by a partial reversal – so the large gasoline build last week may be followed by a draw this week. I doubt it will be draw, given the time of year, but it will certainly be a smaller build than last week. Also, look for distillate to build again but not as much,probably around 2-2.5 mmbls. If the group gets a good bounce I’ll be buying more puts because while the fundamentals are very bearish this will lessen OPEC’s near term worries, allowing oil to drift lower after an initial pop.

XOM is very silly up here given that they produce more and oil and gas than they can possible hedge yet the stock is off 5% from recent highs while oil and gas are down over 20% each and the out months have been severely damaged. It’s being propped up because it’s viewed as a safe harbor for investors wanting energy exposure in increasingly uncertain times. That won’t last but we may have to get into earnings season for the group with begins after October 20 before this pattern reverses.

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