Today feels great! Just last Friday I got rid of my longs in order to start ’09 with a clean slate– Fly’s orders. I can’t tell you how happy I am to see stocks trade lower today. It also helps that I’m long FAZ (I’m short the banks 3X’s) and short PTR.
It’s amazing to see oil trade like there is no need for it anymore. Just so you know, in case you did not, deep water drilling is a very expensive task.
I would not be surprised to see DO & RIG continue to knife to unthinkable levels. You see, it makes no sense to drill wells when you can order it overseas on the cheap– by doing this you also eliminate the risk of drilling an empty well. Project cancellations will be similar to hedge fund redemptions, everyone wants out.
Note: There is one oil stock I’m considering buying here, UPL.
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Isn’t that the nature of parabolic cycles?
The low will go far lower than it has any rational right to go.
I’m enjoying the defenses of the Peak Oil adherents.
Long term, they’re right.
Their short term view -> kinda messy.
Things are different this time around. I have talked to people in the industry and there is a feeling that rig manufacturers and the drillers themselves are not getting hit along side the price of crude like they have throughout history. This leads us to believe that the industry feels this is a very brief recession in the U.S. and China. Maybe the industry is making the same mistake most die hard bulls are by thinking the world will be cranking again by summer 2009. I personally think there is a lot of pain to come. The collapse of commercial real estate in the U.S. will just be the start.
I am still building a position in NOV while trading in and out of DTO on the way down.
Crude:
You are wrong. The market is always wrong.
Rig makers are going to find themselves in a very bad “no customer situation” very soon.
Fly,this a quote from NOV .Our contracts on major projects do not permit cancellations due to the lack of financing or convenience.
Their backlog for 09 is 5.7 Billion and a balance of 4.6 Billion thereafter.
VERY SOON? No fucking way.
Crude-
It won’t matter. The longer oil stays down here the more people will shun oil and oil service stocks. Remember, you can be “right” and still lose your ass. Oil is dead in the short term.