No y2k probs in the oil sector...greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
North Sea Brent is now down to $20. NYMEX WTI is flirting with $21/ barrel. Heat cracks (the margin refiner's make in producing heating oil and diesel) are down on 15 year lows. Refiner's are definately cranking up runs in anticipation of year end hoarding. The industry stats are also reflecting a lighter than normal fall refinery turnaround (maintenance) season. I would have expected the opposite due to y2k testing and remediation.
If so many oil industry remediation projects are so far behind, where is the economic reflection of this? I guess I'm just old fashioned. I thought markets were efficient and transparent.
No different than the stock market, I guess -its biz as usual. If the markets are wrong, its got to be a huge opportunity. Where's the opportunity? Certainly not playing anticipated y2k probs in the oil sector over the last 2 weeks. OUUUUCCCCHHHHH!
-- Downstreamer (email@example.com), October 08, 1999
How about producing oil or nat gas wells in continental USA.
See the following for recent testimony to US Senate on Oil Tanker Y2K status:
"It has been estimated that a typical tank vessel may contain between 50 and 200 micro-processors. This is a relatively low number compared to aircraft or even some other vessel types. As you might expect, systems controlled by Y2K-vulnerable micro-processors include the following:
! navigational systems
! telecommunication systems
! real time process controls such as engine room and cargo monitoring systems
! strength and stability monitors
! alarm systems
Within our industry, there have been reports of documented Y2K failures of ship main control, radar mapping, ballast monitoring, cargo loading, engine room vibration, and ship performance monitoring systems. None of these failures to date has resulted in major losses and some were intentionally induced as part of Y2K assessment procedures."
-- Bill P (firstname.lastname@example.org), October 08, 1999.
Downstreamer said: "North Sea Brent is now down to $20. NYMEX WTI is flirting with $21/ barrel."
As a former commodities trader and a specialist in the precious metals I've had many years of experience in tracking the Crude market as it often times correlates to the metals and the ags. Allow me to share with you some old veteran trader wisdom. [I've retired from the biz and am not trading this market and I'm not attempting to give any kind of trading advice just the whys and wherefores of the current mkt pricing.]
I don't have the North Sea Brent quotes handy BUT I do have NYMEX WTI... spot crude is trading right now at 1:15 pm EDT at about $24.50 (source: http://www.futuresource.com/) basis Spot crude October '99 contract. Now the November '99 contract has down a profit- taking retracement at $21.55. This is normal after a huge sustained (and a technically healthy) runup in price.
Technical oscillators that are what most professionals look at because most of the pro's utilize these technical tools to analyze the market trends, are indicating a continuing bullish trend on the longer term side but are moving to short term sell signals. It's these pro's who essentially call the shots and program the computer trading programs parameters for action. Ex: the Nov 99 WTI contract price chart when analyzed under the Wilder DMI/ADX program (one of the more reliable programs when used properly) is indicating we've got a short term correction underway in the Nov delivery month price chart.
The DMI signal though is showing a crossing signal coming into the "neutral" territory. This tells me there is a near-term price correction in progress and this market will now become a temporarily, choppy market. The long term trends are still VERY bullish. This would confirm the price bar-chart pattern in which the upward trendlines have been temporarily broken showing a healthy round of what we call "profit-taking." Long-terms signals remain VERY BULLISH 3 to 6 months out. The market is making technically healthy corrections in order to sustain the move. I don't care technically speaking if the patterns are for oil or widgets the patterns function just the same. And this is the way most of the pro's and computers trade. Its all a numbers and mathematics game for technical traders.
A lot of traders who picked up on the last buy-signal at $20-$21 have realized profits in the continued price run up to $25. The market made attempts to penetrate that price point. They failed. They've now been selling those contracts to take profits on the way back down. This has created a selling wave and provided some "shorting" impetus to factor in. Support is strong at the $20 level with sell stops apparently sitting between $20 to $21.50. This means that short- traders are going to take profits on the drop down to those levels and get out probably looking to turn and go long again.
So we've had a combination of long's taking profits and the shorts using this to their advantage to further take the market down in the absence of fresh buying. This action is giving the longs a chance to buy back at the lower end of what may be a month of two of trading in a narrow price range.
Longer term charting analysis suggests that an explosive move pattern is being set up with the real potential for the pattern to suggest a move to perhaps $40 a barrel in the next 3 to 6 months! That may not happen but the formation bases are there for such a possibility. But for now expect the market to move down and test $20 before determining whether or when to advance up beyond $25. The market itself, to remain healthy needs a retracement to $20 which would be a 1/3 retracement. 50% would also still be healthy for the longterm bull market move. (That would put it down to about $17.50 or so).
Conclusion: Oil is trading on technicals as all markets due when there is the absence of critical urgent fundamental factors like a "shooting war" breaking out or the death of a major world leader or some other sudden crisis. Y2K is not a sudden crisis. It will only weigh in the background under certain conditions. Don't try to draw conclusions about Y2K from ANY market, gold included. It's just not gonna be there till the shooting starts. Markets (especially ones dominated by computers making trading decisions) normally run on technical factors. Y2K is a fundamental factor. Y2K will become a technical factor IF and WHEN it affects the computers at that moment. And then it will still retain its factor as a fundamental also. Until then, the computers won't care. What the markets are telling us about Y2K in a round about way is that no one is panicking because the gov't and corp. spinmasters are considered credible. Remember also American's generally tend to be procrastinators even when it comes to investing. Worrying about Y2K appears to be no different to both the general population as well as in the markets.
You also said: "The industry stats are also reflecting a lighter than normal fall refinery turnaround (maintenance) season. I would have expected the opposite due to y2k testing and remediation."
Downstreamer...what testing and remediation? We are hearing happy face talk from the spin meisters but the comments from others on this forum and elsewhere tell us that they adopted FOF a long time ago so there was little Y2K testing and remediation to slow them down.
Also you said: "If so many oil industry remediation projects are so far behind, where is the economic reflection of this?" "Certainly not playing anticipated y2k probs in the oil sector over the last 2 weeks. OUUUUCCCCHHHHH!"
That might well be a reflection that they have done little or no remediation and that is what we're seeing reflected. In other words, you're being lied to. They've just been playing a shell game with the public and you've just spotted a loose thread in their alibi. The markets won't even factor for Y2K until maybe late in December, if even then. Markets are never wrong! But sometimes they wake up kinda late!
-- Dick Moody (email@example.com), October 08, 1999.
Very interesting commentary. I'll be darned if I can figure this stuff out on my own. ASL got smashed with the gold squeeze. They must be fairly smart people but somehow didn't see it coming.
In my uneducated way of looking at this, OPEC may hold up production which raises prices to the point that it becomes profitable for U.S. and others to pull more expensive oil out of the ground. I am interested why you think that oil might be headed upwards towards $40. Stictly technical or somewhat fundamental?
-- the Virginian (where the heck is Trampus) (NoY2KOilProblems@HeadinGround.com), October 08, 1999.
Dick, Spot NYMEX crude settled today at $20.90 (down $1.55). Your contention that spot crude is up over $24 is due to the fact that you're reading an expired FuturesSource quote on Oct crude that went off the board at the end of Sept. I hope all that verbage wasn't in vein.
You're a technician. I'm not. Here's my market advice without all the above gibberish: Wait for this current oil market washout to end. Don't try and pick the bottom until it does. Wait for 2 higher NYMEX closes and then BUY IT or STOCK UP.
-- Downstreamer (firstname.lastname@example.org), October 08, 1999.
Why do I say $40 oil? Actually I'm not saying that it will, just that on a technical basis that would be a return to 1991 Gulf War levels. All I'm saying is that oil has that wide open potential IF Y2K does indeed restrict oil supplies in whatever manner. This is pretty much a technical call for the outer limits of the run. Technicals doesn't say that this is where it has to run just that the charts don't show all that much resistance once $25.00 to $27.00 is penetrated.
Yes, I looked at the wrong month when I gave that initial quote and was not thinking. The technicals however are based upon Nov/Dec 99 contract pricing and analysis not October.
Therefore, no the verbiage was NOT in v-a-i-n.
Your advice ". Wait for 2 higher NYMEX closes and then BUY IT or STOCK UP. " seems simple enough, and also perhaps dangerous enough ...in knowing when the bottom is or is not, especially when crude is the type of commodity that really bounces around. Yes, I am a technician/fundamentalist and you're apparently just a fundamentalist. Try learning the technicals, it will take some of the guess-work out of things.
-- Dick Moody (email@example.com), October 08, 1999.
This is why I hang out on this forum. Facts, experience, and analysis -- generously given.
Thanks to each of you.
I don't understand half of it, but this is my kind of reading.
-- semper paratus (firstname.lastname@example.org), October 08, 1999.
A more simple answer from somebody not in the trading end of things, but still in the oil industry. The Mid-East recently discovered that Y2K will affect them, and it's not just a three-day sandstorm.
Pump now, because it may be awhile before you can pump later.
-- Dog Gone (email@example.com), October 08, 1999.
If oil gets scarce, there's always dogsleds!
Come here, boy.
-- Downstreamer (firstname.lastname@example.org), October 09, 1999.