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OIL - OPTISCAN IMAGING LIMITED


theflasherman

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I, for one, will be very happy if the following occurs:

 

OIL

MELBOURNE, March 15 AAP - Demand for oil was growing at a faster rate than supply creating a bull market which should push prices above US40 a barrel and bring energy stocks back in favour, according to analysts.

Asia pacific crude oil prices slipped US59 cents to $US36.19 a barrel at the weekend amid speculation that tourism and travel operators would suffer because of renewed terrorism fears.

At 1650 AEDT oil was trading at $US36.21 a barrel.

However broking house Fat Prophets today said it believed the dip was temporary.

Fat prophets analyst Angus Geddes said the research group believed the industrialisation of China and India would create a sharp upturn in demand for energy, while output from the Middle East faced serious challenges.

"In our opinion oil is in a bull market and prices will rise considerably in the years ahead," Mr Geddes said.

He said while oil has not traded much above $US40 a barrel for more than 25 years, Fat Prophets believed it was now heading significantly beyond this level and energy stocks would benefit.

"We believe that China and India's continuing emergence as consumer societies will drive demand for energy in the years ahead," Mr Geddes said.

"If Saudi Arabian output falls short of meeting global demand the world could face a supply imbalance."

Oil consumption has risen to nearly 80 million barrels of oil per day, up from 55 million in the 1970s.

"We believe the Middle East is not the infallible supplier that it once was," Mr Geddes said.

"Rising political tension, natural oilfield decline and mismanagement could potentially combine to threaten existing production levels.

"Accordingly we believe that oil will rise above $US40 a barrel and that energy stocks will deliver solid gains to investors over the medium to longer term."

The US government's Energy Information Administration (EIA) last week said the country's crude oil inventories had recently slid to the lowest level since the mid-1970s on growing demand and production cuts by the Organisation of Petroleum Exporting Countries (OPEC).

In his report EIA economist David Costello warned the market was tight with inventories low and a low level of imports so far.

"The findings of the EIA surprised the markets because the US normally builds stockpiles ahead of the high-use period in summer," Mr Geddes said.

"With rapid demand growing in Asia, underpinned by China and India, consumption is likely to continue rising in the years ahead.

"The world oil market currently produces around 78 million barrels of oil a day, but given the situation in the Middle East we doubt for a number of reasons that supply will be able to match demand at prevailing prices," he said.

AAP

15-03 1650

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I'm a touch surprised not to see some oilers making headway given oil prices are remaining at high levels, and most analysts are predicting these prices will persist.

 

I'm very surprised that OSH has not put on a few more cents. TAP remains weak despite being a decent sized junior oil producer. However, with Woollybutt going offline shortly I am wondering if they will miss a month of sales at high prices. COE is affected by the options overhang despite an upbeat half year report.

 

Those showing a little strength are WPL, STU, ARQ and AMU. Some of this strength relates to exploration activty and has little to do with the oil price IMO.

 

Out of this lot I would be picking OSH and AMU at the moment as leveraged plays with plenty of upside without relying on exploration.

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  • 4 weeks later...

This from Reuters.

China's growing demand for oil continues to surpass expectations, putting additional pressure on world crude prices, which are nearing 13-year highs, the International Energy Agency says. The Paris-based agency revised upward its estimate of Chinese oil demand in the first quarter by 180,000 barrels a day to a record 6.14 million barrels, an 18-per-cent year-over-year increase. Now the world's second-biggest oil consumer, China's breakneck economic growth is fuelling record oil imports. North American oil demand is also rising. The IEA said consumption is expected to rise by 300,000 barrels a day this year to 24.94 million barrels.

 

The Organization of Petroleum Exporting Countries' recent move to implement tighter supply restrictions is forcing consumer countries to become increasingly reliant on non-OPEC exports, particularly from growth areas like West Africa and Russia. But the IEA said it revised downward its projection for non-OPEC production growth this year by 185,000 barrels a day to just under 1.3 million barrels.

 

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The terrorist risk premium is on the rise again. Oil getting near US$38 a barrel. I would expect this to evaporate again soon, although the oil price may temporarily rise nearer US$40 a barrel if there is some serious incident. I'm puzzled that a few oilers have not performed a little better, but this may be stock specific factors holding them back.

 

Hopefully TAP will have Woollybutt back on line soon to take advantage of these high prices. I'm not a holder but think there is some value in that one.

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agree, oilers bucking the trend... schlumberger, Shell kicking everywhere else, so what ails the oilers? AMU, VPE, HZN, TAP... caught napping? wake up guys, huge opportunity to add value to SP ...slipping... http://www.sharescene.com/html/emoticons/icon14.gifhttp://www.sharescene.com/html/emoticons/cool.gif
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The Answer, My Friend...

"The government has to embark on an absolutely massive effort to develop alternative energies. The most feasible alternative right now is wind. Scientific study after scientific study has shown that wind is the cheapest way to generate electricity."

ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¡ÃƒÆ’‚¬Ãƒâہ¡ÃƒÆ’‚ Stephen Leeb

 

 

Article from "Smart Money" - By Scott Patterson - April 15, 2004

 

< IT'S NO SECRET the price of crude is hitting historic highs. But oil has been expensive in the past, and it has always drifted back to reasonable levels again, so there's no need to worry that things will be different this time, right?

 

Wrong, says Stephen Leeb, co-author of "The Oil Factor," published in February by Warner Books. Leeb, whose wife Donna contributed to the book, argues that the emergence of India and China as major consumers of fossil fuels is placing incredible pressure on a petroleum industry struggling to boost production. Indeed, just last year China moved past Japan to become the second largest consumer of oil in the world, behind the U.S. As demand increases, the price of oil will skyrocket, says Leeb, reaching the staggering mark of $100 a barrel within a decade.

 

OK, we know: $100 a barrel sounds unreasonable, even a tad nutso. But when challenged on the outlandishness of his prediction, Leeb counters that only in the past few years the price of oil has already tripled. "If you go back to the end of 1998, oil was trading near single digits," he says. "So we've had a threefold increase in oil prices in a relatively short period of time, and I'm basically just projecting an ongoing trend."

 

The result, he says, will be a major shock to the global economy, and investors had better get ready, now. "I don't think there's anything more important now for investors to be paying attention to than the price of oil," says Leeb, who's also manager of the New York-based Mega Trends Fund (MEGAX) and editor of the "Complete Investor" newsletter.

 

SmartMoney.com asked Leeb how investors can protect their assets if his predictions bear out, and what the U.S. government can do to protect the American economy from the massive escalation in oil prices he's forecasting.

 

SmartMoney: Is the recent spike in the price of crude oil a long-term, fundamental shift in the industry, or is this just a short-term blip?

 

Stephen Leeb: You could say both in the sense that the price of crude oil does bounce around a lot. And I wouldn't be surprised to see it go down a little bit over the next couple of months. But it's part of a major long-term shift. Oil prices and natural-gas prices are in major long-term uptrends, and Wall Street and America doesn't realize it yet. But we are seeing something that is a major change.

 

SM: In "The Oil Factor," you forecast $100-a-barrel crude-oil prices in the future. That seems like an extravagant number, given that prices now are historically high and they're not even one-third of that.

 

SL: If you go back to the end of 1998, oil was trading near single digits. So we've had a threefold increase in oil prices in a relatively short period of time, and I'm basically just projecting an ongoing trend. I think we'll get another threefold increase, and it may happen in five or six years, or three or four years. The overall point I'm trying to make is that oil prices are in a dramatic uptrend and are likely to remain in an uptrend for the foreseeable future.

 

SM: What's the global economic fallout of such high prices?

 

SL: I think that if it happens in a gradual way, it will be very inflationary. If it happens in a very short timeframe, like this year, because of say a terrorist strike in Saudi Arabia or some other horrible event, it would be recessionary-slash-depressionary. It would have a horribly negative impact on the world economy. Either way, oil is going to turn the global economy on its head. Whether it's short-term or long-term, I donÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢t think there's anything more important now for investors to be paying attention to than the price of oil.

 

SM: How can investors prepare for the shifting trends in the petroleum industry?

 

SL: Investors have to roll back the clock to the 1970s. That's the closest historical comparison you can find to what's going to follow in the next 10 or 15 years. The 1970s was a very inflationary decade, in large part because you had a very sharp rise in oil prices. It was also a decade in which the S&P 500's real total return was the worst ever, even worse than the 1930s. It was a catastrophic decade if you invested in the equivalent of index funds. But it was also a decade in which investors like Warren Buffett and Peter Lynch got very wealthy. If you invested in real assets, whether in oil companies or gold companies or commodities, you did very well. In the next 10 to 15 years, there are going to be a lot more losers than winners. The usual rules just won't apply. If you invest in a collection of stocks that are hedged and leveraged to inflation, I think you have a chance of coming out very well indeed.

 

SM: What's changed in recent years that shifted the way we should view the petroleum industry?

 

SL: Two major changes have happened at once. One is that our ability to increase oil production has become much more difficult. We're no longer able to increase oil production sufficiently to keep up with rising demand. We can produce a lot of oil, but our ability to increase oil production has become limited. At the same time, the world's need for oil has been increasing rapidly. In particular, China and India right now have become emerging economies. With their emergence, 2.3 billion people between them produces wide-eyed increases in the demand for oil.

 

SM: Do the reserve reductions at Royal Dutch/Shell (RD, SC) lead you to believe that total known reserves are less than the industry thinks there are?

 

SL: I don't think it's a trend that's industrywide, but I think it's a sharp reminder that certainly reserves that companies have on their books are not understated and that companies are having a very difficult time replacing reserves. These reserve write-downs have come with oil prices very high, and that's exactly what you would not expect when oil prices are high. Because when oil prices are high, oil companies are able to consider harder-to-get reserves as reserves. It reinforces the fact that oil is becoming an ever scarcer commodity. Probably a more relevant statistic is that finding and development costs across all oil companies have been rising dramatically at double-digit rates.

 

SM: What should the U.S. government be doing to prepare for such a dramatic shift?

 

SL: It's utterly urgent that the U.S. government respond. The government has to embark on an absolutely massive effort to develop alternative energies. The most feasible alternative right now is wind. Scientific study after scientific study has shown that wind is the cheapest way to generate electricity. Forgetting about environmental considerations, wind right now is cheaper than natural gas and coal for generating electricity. Putting into place a wind infrastructure in this economy would take maybe a half a trillion dollars, but it is doable, and it would take half our electric grid away from fossil fuels. Those fossil fuels in turn could be used for other energy uses, such as powering cars. That would buy us enough time to develop more far-reaching alternatives, such as solar and hydrogen, which aren't on the horizon for the next 20 to 30 years. Wind is here and now. It's absolutely desperate that we start doing something about this.

 

SM: You think General Electric (GE) is a good wind-power play.

 

SL: It has the largest wind assets of any company in America. They bought the Enron wind assets for a song when Enron was going bankrupt. If we do build a wind infrastructure, wind could become a multihundred-billion dollar industry, and GE would have a very big role to play in that.

 

SM: Oil expert Daniel Yergin has argued that fears of an oil shortage have cropped up in the past, only to fade as new technologies and new resources drive production.

 

SM: He's right. In 1973 we had a fear of an oil crisis in the wake of the Arab oil embargo. In 1979, the Iranian revolution led to very high oil prices and fear of an oil crisis. In 1990, the first Persian Gulf war drove up prices. This time, it's different. This time, we have very limited excess capacity. In all those previous incidents, the crisis came about because of political factors. Now, there's no war. It's fundamentals. As to technology, just bear in mind that the U.S. is the most technologically advanced country on the planet, and U.S. production has been declining for 34 years. It peaked in 1970, despite all our technology. If it's not there, it's not there, and no matter what technology there is, you're not going to find it.

 

SM: Iraq has a lot of extra, untapped capacity. Won't that alleviate the situation somewhat?

 

SL: There is a potential to develop more oil production in Iraq. That's not going to be something that's going to happen overnight, and it is something that the world desperately needs. But it's not going to satisfy all the excess demand that we have for oil. Even if everything goes well in Iraq, it's still not going to be nearly enough to change the dynamics of this situation.

 

SM: Do you think that with declining supply, the opening up of the Arctic National Wildlife Refuge to drilling is fated to happen?

 

SL: It's going to put more pressure on it, but the key thing is that, even if it was environmentally neutral and it was a no-brainer to open it up, it still wouldn't make any difference. The amount of incremental oil you'd get there would be equivalent to putting a Band-Aid on a hemorrhage. You're talking about a small fraction of 1% of a year's production. Virtually nothing. >

 

http://www.sharescene.com/html/emoticons/smile.gif

LC

 

 

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If OIL reaches prices above US$30 dollars (which it has) other energy sources start looking more attractive (coal can easily be used as a substitute for a price) Nuclear Power is already economically attractive. You will find that as Oil prices go up so do other energy sectors because of this

 

Big sting in this was that in 70's oil prices looked like they would keep increasing! So much investment was spent on alternatives ,only to have oil prices then collapse causing much economic havoc

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I tend to agree that alternatives will stop the rise of oil prices. Nevertheless, I believe oil prices are now firmly entrenched above US$20 a barrel, if not US$25 a barrel. I think we will continue to see above US$30 a barrel over the medium term with perhaps brief periods in the high 20's. Any price above US$25 a barrel makes the oil business very profitable. If any of you have ever wondered why I'm fishing mostly around the oil patch it is because of this belief in the fundamentals of the business.
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Crude Futures Rise in London on Concern of Mideast Oil Security

April 22 (Bloomberg) -- Crude oil futures rose in London for the first time in five days after suicide bombings in Saudi Arabia and Iraq rekindled concern about the security of oil supplies from the Middle East.

 

Four police buildings in Basra and Zubayr in southern Iraq were attacked by car bombs yesterday, killing at least 68 people, U.K. officials said. Iraq supplies about 3 percent of the world's oil and exports mostly through two southern ports.

 

``The bombings in Iraq are moving farther south, closer to the port area,'' said Tony Machacek, a broker at Prudential Bache International Ltd. in London. ``So far, it hasn't had an influence on exports, but maybe exports will be affected in the near future.''

 

Brent crude oil for June settlement were up 22 cents, or 0.7 percent, at $32.68 a barrel on London's International Petroleum Exchange as of 12:54 p.m. Prices reached a 13-month intra-day high at the start of the week, before declining.

 

On the New York Mercantile Exchange, June crude oil was up 20 cents at $35.93 a barrel in electronic trading.

 

Exports from Iraq's Basrah Oil Terminal in the Persian Gulf were unaffected by the heightened violence in the south of the country, according to local shipping agents. Five 2 million- barrel tankers were currently at the facility loading cargoes.

 

Elsewhere in Iraq, a pipeline feeding crude oil to the Daura refinery near Baghdad from oil fields further north, was struck by an explosion, Dow Jones Newswires reported, citing Assem Jihad, an Iraqi Oil Ministry spokesman. A team was sent to the site to put out fires and repair damage, he said.

 

Riyadh Bomb

 

``Prices have gone from making recent contract highs to several downward days in a row, so maybe it should slip lower still,'' Machacek said. The bombing in Saudi Arabia ``is another nasty development, though, so you have to wonder how much the market can fall with these kind of events around.''

 

A car bomb in Riyadh, the capital of Saudi Arabia, the world's largest oil exporter, yesterday hit a government security services building, killing four people and injuring 145, the Saudi Press Agency said. Other news organizations, including Agence France-Presse, had said more were killed.

 

``I think we're going to see an escalation in the violence in the lead-up to the handover,'' said Chuck Hackett, a trader with Access Futures & Options trading in Woodlake, California.

 

Oil prices fell earlier this week on expectations a report from the U.S. Energy Department would show rising stockpiles of both U.S. crude oil and gasoline, at a time when the summer driving season is approaching. The report, issued yesterday, did show those increases, while the rise in crude inventories was smaller than most analysts had expected, tempering losses.

 

Crude inventories rose 200,000 barrels to 295.6 million last week, the department said, which was less than a 10th of the average gain expected by 14 analysts in a Bloomberg survey.

 

U.S. gasoline stockpiles rose by 1.6 million barrels, which was three times more than expected.

 

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