Get Them George

[osucowboysr1]

http://news.yahoo.com/news?tmpl=story&u=/ap/20050425/ap_on_bi_ge/oil_prices_21

[FWPoke]

The U.S. government weekly report showed gasoline inventories declining by 1.5 million barrels to 211.6 million barrels, or 5 percent above year-ago levels.

But Shum was confident that gasoline supplies will be enough to meet demand.

"Gasoline inventories in the U.S. are higher than last year's levels, so traders shouldn't worry too much about it," he said. Well, so much for the whole "supply and demand" theory. By all rights, prices should actually be lower this year. They should be in the $1.65 range right now. The market investors are actually allowing the terrorists to win. They are driving up oil prices, and lowering consumer as well as investor confidence. Instead of worrying so much about what COULD happen later on, they need to focus on what is actually happening now. Oil production is meeting or exceeding the current demand. Prices should reflect that fact. If we have problems with the supply in the future, let prices rise then, not now.

I know, I know, my simplistic view does not come close to doing justice to the true nature of the oil business, but I really think everyone has made it too complex. A simple supply and demand approach would do wonders IMO.

[SLVRBK]

Gasoline inventories are up but so is demand and don't forget all the other products made from oil, if it's plastic it's made from oil.

[ctaggie]

Saudis plan on expanding production from 11m barrels a day capacity to about 15 million in 2009 ... 4 million a day. World is supposed to consume about 3% more a year during that period ... 2005-2009. That's about 13% more over the entire period. Consumption is supposed to be 87m barrels in Q4 of this year. Add 13% to that and it's about another 11.3m barrels a day that will be needed in late 2009. Saudis are saying they can get 4.5 of that. Where's the rest going to come from? That's the picture I'd rather focus on. Just where does that additional almost 7m barrels come from? I don't know, but it likely won't be any place that would be considered "cheap" oil.

Wall Street has been mostly wrong on this since the start of 2004. Heck, you can sell into the futures market 6 years out at $50 a barrel. What does that tell you? It ought to tell you this is different than the past, where futures prices were way lower than spot prices. Not this time. Also, where do you think Pickens has his bets right now? Long energy, that's where.

[Pokefan]

Slvrbk Demand is up 1.3% while supply is up 3% according to what I read. Soooooooooooo......................

[SLVRBK]

Stockpiles are made before the start of the "summer driving season" when demand increases. You buy your supply, refine and stockpile ahead of demand otherwise gas prices are even higher.

[SLVRBK]

A few quotes from an article on the gasoline supply for the summer driving season. msnbc.msn.com/id/7407519/ (http://msnbc.msn.com/id/7407519/)

American drivers will burn through an average 9.3 million barrels per day of gasoline this summer -- up 1.8 percent from last year, according to the U.S. Energy Information Administration. That would be higher than the five-year average, the agency said.

"Refiner output increases are not expected to keep up with demand growth due to limited growth in refinery capacity," the report said.

Imports will have to make up the difference, rising 4.7 percent from last year. About 10 percent of U.S. gasoline demand is currently met by imports.

That means we will be importing refined gasoline because we lack the refining capacity to provide enough product to meet demand.


“Around this time last year we were at about $35 a barrel, so you’re looking at a $20 difference in oil prices year over year,” said Jacques Rousseau, an analyst who follows the oil refining industry at Friedman, Billings, Ramsey in Houston. “So about 50 cents of today’s gas price represent the increase in crude prices since last year.”

Oil consumption typically dips this time of year between the peak demands of winter heating and summer driving in the northern hemisphere. But with global demand closer than ever to production capacity, U.S. oil prices have surged by more than 30 percent this year.


To help meet the peak demand for gasoline during the summer driving season, refiners typically begin building up inventories this time of year to head off summer shortages. Those stockpiles are currently higher than last year, but so is demand. Adjusted for that increased consumption, refiners have stockpiled just 24.5 days worth of demand, just slightly ahead of the five-year low of 23.8 days for this time of year, which was hit last spring, according to Rousseau.

“It’s not like anybody is holding back production,” said Rousseau. “(Refiners) are operating at 90-plus utilization rates and producing as much product as they can.


On a "high" note I had a meeting yesterday with a major oil company and after 7 years of development the field of 500+ million barrels of oil will begin hitting the market next year.

[SLVRBK]

www.chron.com/cs/CDA/ssistory.mpl/business/3161564 (http://www.chron.com/cs/CDA/ssistory.mpl/business/3161564)

In the first quarter, the oil and natural gas industry's profit margin averaged 8.5 percent, according to figures compiled by the American Petroleum Institute. The average profit margin for all industries so far is 9.2 percent, according to Business Week's calculations. The figure for all industries is expected to decline as more companies report first-quarter earnings during the next few weeks.

Last year, the profit margin for the oil and natural gas industry averaged 7 percent, slightly below the 7.2 percent average for all industries. Computer software and services had the highest profit margin at 15.6 percent.

[ctaggie]

Q1 net (after tax) profit margins excluding nonrecurring items based on just reported numbers.

ExxonMobil 9.0
ChevronTexaco 6.6
ConocoPhillips 6.7

For the independent exploration companies, profit margins are much higher, in fact Q1 numbers look to be coming in at between 30 and 34 for the big ones ... Anadarko, Apache, and Burlington. There's a fair amount of natural gas profit in those numbers (especially Burlington) and none of them do the downstream side of the business. That's why the major integrated companies (the first group) have a lot lower margins ... they don't make much margin on the refining and marketing side of the business. ExxonMobil has a big chemical business that at the current time is very profitable.

Best I can tell, the highest margins come from software (mentioned by SLVRBK), big financials and the pharmaceuticals.

For what it's worth.