ISSUES....
Inside, confidential, off the record

 

Oil bullish

OPEC has chosen to increase production, as of
November 1st, by 500,000 bpd to 27.2 million bpd. It
appears, with the benefit of hindsight, that our comments
regarding the unwillingness of Saudi Arabia's Oil Minister,
Mr. al-Naimi, to talk with the press and to remain
uncommonly uncommunicative, and that that seemed to
us to be a sign of his intention to push for an increase in
the quota, was either prescient or lucky. We'll go with the
latter for now.

In reality, the increase is far less than one half million
barrels of crude per day, for it appears that the 10
countries of OPEC’s 12 that have been given production
quotas (Angola and Iraq are presently excluded from the
quota system) produced, on average, 26.7 million bpd in
August, well above the previous quota. The market took
the news of the decision to increase production well in
stride, trading lower initially and then ending the day on its
high. We remain bullish of crude via long positions in
Suncor Energy, but the market has become inordinately
extended to the upside and a correction... and perhaps a
material one... is overdue.

Turning then to today's weekly inventory figure to be
released by the IEA/DOE, we look for crude inventories to
be down rather sharply. Something on the order of -3.5
million barrels would not surprise us. On the other hand,
distillate inventories are likely to be up 1-2 million barrels,
and gasoline inventories are likely to be up 0.5-1.5 million
barrels. Finally, we look for refinery operating rates to be
up another one half percent to something approaching
92-93%. It is worth noting that that is below the average
of the past five years, albeit not materially so:

Oct WTI up 39 78.06-11

Nov WTI up 39 76.83-88

Dec WTI up 34 75.60-65

Jan WTI up 35 74.78-83

OPEC's Crude Basket (09/11) $73.13

Henry Hub Nat Gas $5.99/MMBtu.

- Dennis Garthman / 09 12 07

For more on interesting comments, you can subscribe to The Gartman Letter by contacting Dennis Garthman: Phone 757 238 9346, Fax 757 238 9346 or dennis@thegartmanletter.com


Petroleumworld 09 13 07

 

ISSUES.... Is an independent journalist effort from Petroleumworld, on Inside, Confidential
and Off The Record Information, its views are not necessarily those of Petroleumworld

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