Monday Wrap – It’s A Gas, Gas, Gas

Gas Pops 12% On Speculation. Gas started out flying high and never looked back, closing the Nymex session up $0.63 (12%) to $6.29. T Boone Pickens said he likes natural gas and that he was sizeably long although he declined to comment if he’s buying now or already has all his positions in hand. Gas giant EOG then added that the supply/demand situation would come back into balance after winter since production is falling (a comment I find offensively cavalier). That was enough for traders who steadily drove prices higher despite record storage and a rewarming underway. This morning I wrote that everyone with a vested interest was talking gas up, much like OPEC does with oil and wallah, up we go!

Oil Comes Along For The Ride, Despite Plenty Of Reasons Not To. Oil drifted slightly higher in the morning, waiting for Europe to close before putting on a super pump job in the afternoon that left November crude up $1.23 to $59.80. $60 remains critical resistance which if broken could open a move to $62, which I’m sure they’ll try in the morning. Hopefully, the IEA is preparing to downgrade their estimate of 2007 demand soon.

–For its part Opec may or may not meet this week. You know if it’s a location problem they can have it at my place if it will help. I just want them to get it over with so we can “sell the news”.
–Next year’s expected demand growth is headed by the Chinese with an expected 40,000 bopd increase. Note that in PetroChina’s 3Q report, they increased their production by over half that (23.8 mbopd) in the first nine months of 2006. That reduces the call on Opec to meet CHINESE DEMAND but no one seems to want to get that right now.

–Opec also revised non-opec supply up next year which effectively reduces the 2007 call on opec oil by 600,000 bopd (I guess Nigeria doesn’t need to get all those rebel shuttered platforms back on line after all, not that they were trying very hard). Opec projects the non-opecs will grow production by 1.8 mm bopd in 2007, representing the highest rate for the non opec group since 1984.

–As a point of historical reference, from the end of 1985 to March of 1986, west texas intermediate was more than cut in half, falling from $26 to $12 per barrel.

–BP said Prudhoe would probably back to between 400 and 450,000 bopd by Monday, pre leak levels. Again, oil traders chose not to notice.

Stocks Rise Again. Despite oil remaining 20% below its August high XOM closed at a 1 1/2 month high, only $1.30 off its all time high! Give me a break. Of course, XOM was far from alone with the XOI, XNG, and OIH all scoring gains of 2+%. That’s pretty impressive when you consider that the price component of future earnings for most of these companies has suffered some pretty harsh blows in the last 3 months (nat gas off 31%, oil off 25%).

— SU and ECA caught positive mentions in a Barron’s article rehashing Hubbert’s Peak theory, and both soared over 4%.

Oh well, tomorrow is another day when perhaps some sense of reality will take hold of both the broader and energy markets.