Wrap – Week Ended 12/26/08

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A week that was ill-attended even by holiday standards with little volume and less news. While the markets did little before Christmas that wasn't reversed on Friday there are a couple of interesting data points to take away.

1) Rig Counts Continue To Fall. Not unexpectedly both gas and oil counts fell again last week. What is interesting to see is the stronger than to date seen dip in horizontal rig activity. This is where your big wells comes from, be it oil from the Bakken or natural gas from any one of a number of supply / demand busting equation (at least that's the perception) shales. Take away the horizontal activity and U.S. onshore production will follow all the more quickly. 

2) Gas In Storage Fell With Cold Weather, Again ... Ok, usually that's a given. But three weeks ago it appeared the wheels had come off the Industrial natural gas demand train as big heating degree day readings translated into sub par storage withdrawals. Then the last two weeks of cold and an erradication of the front six months contango disincentivized traders from storing gas and selling it later and wa-la, average-ish storage withdrawals.

3) ... And Natural Gas Noticed... Again, usually not a big deal for gas to move up into colder spells during the winter but so far no joy until this past week. The week just past is likely to show warmer temps when the numbers are out on Monday so this little rally of last Tuesday ("Gas-OPEC's" first meeting) and Wednesday may not be sustainable through the arrival of this week's storage number but we appear to be putting in floor.

4) ...But The Natural Gas Monthly For October Revealed A Mixed Bag for Production. The Gulf of Mexico was still far from recovered from September's stormy weather so I won't give them much thought except that they continue to decline. Texas suffered from power outtages in September but was more than recovered in October setting a new State gas produciton record at 20 Bcfgpd. Notably Oklahoma and Wyoming, two important and recently growing states eased slightly in October and who can blame them given the differentials they are getting they should take a breather on new wells. I don't expect to see a reaction in the supply math to those falling rigs until the February or March numbers are out) but I'll have more comments in Monday's piece with more thoughts there.

5) Last but not least, oil fell again even as OPEC threatened to hold another emergency rate slashing meeting for mid January. Stories are circulating that this time they mean it. We'll see. The market liked news that production cuts out of several names were being confirmed by Asian crude buyers on Friday giving crude its best performance since the day before the last disaster of an OPEC meeting, albeit under very light trading conditions (less than one-third of normal volumes). Analysts and those traders that like to go on TV are for the most part setting their sites on numbers like $25 for 2009 I think with the intention of getting numbers too low so that they can offer the pleasant surprise of raising company numbers in the case of the former and get long before they suddenly pronounce the light at the end of the tunnel to be a candle and not a train in the case of the later. Since its end of the year prognotication time I'll be adding my guestimate for prices (for natural gas too) in posts this week.

If I don't see you in comments this week have a happy and safe remainder of 2008 and a more prosperous 2009.

2 Responses to “Wrap – Week Ended 12/26/08”

  1. 1
    zman Says:

    Crude up $1.55 in early evening trade on more OPEC chatter.

  2. 2
    Zman’s Energy Brain ~ oil, gas, stocks, etc… » Blog Archive » Monday Morning + Gas Supply Update Says:

    […] Wrap – Week Ended 12/26/08 […]

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