Gravis Oil announces it is steaming heavy oil pattern in Missouri

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The Gravis Oil Corporation (GRAVF.OB) recently announced that it had begun steaming a new well pattern in western Missouri.

Gravis Oil, which used to be MegaWest Energy Corp., said that it began the steaming operation in May on the well pattern that was drilled in April. It is part of the Grassy Creek heavy oil project in Vernon County, which is 320 acres in size.

While the company declined to give figures it said that it has seen encouraging signs in the early-stage production response since it began steaming the pattern. Gravis Oil said that it also measured a high uptick in the temperature of the reservoir.

According to the Calgary-based company, the new well pattern is comprised of six production wells, two observation wells and one injection well.

Gravis Oil said that it would likely have the complete assessment of the results of the recently established well pattern by the end of August of this year.

In addition, the company said that over the last half-year it has installed surface and subterranean equipment that they hope will decrease downtime as well as bring down lifting costs.

According to CNN Money, in 2011 Gravis stock peaked around April at close to 90 cents per share and hit its low around June at 10 cents per share.

Hilcorp Energy acquires Chevron’s Alaska Cook Inlet oil and gas assets

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Hilcorp Energy Corp. recently agreed to a deal with Chevron subsidiary Union Oil Co. of California (Unocal) to acquire its Alaska Cook Inlet oil and gas assets.

The operations – which Chevron had reportedly been trying to sell since last October – produce 3,900 barrels of oil and 85 million cubic feet of gas each day, according to the Alaska Dispatch.

"Hilcorp's entry into Alaska is further confirmation of the fact that tremendous oil and gas opportunities remain in the basin," Alaskan state Senator Tom Wagoner said in a release.

The deal is expected to be completed by the fourth quarter of this year and financial terms have not been disclosed. The Oil & Gas Financial Journal reports that Chevron acquired Unocal in April 2005 for $18 billion.

"The acquisition by Hilcorp allows the company to reinvest its cash flow to bolster its offshore operations and add oily production after divesting its Eagle Ford acreage along with its partner, private equity firm KKR, to Marathon Oil and Gas for $3.5 billion earlier in 2Q11," analysts with Global Hunter Securities told the news source.

It is expected that Chevron will keep its interest in its North Slope oil fields. 

The Outlook for Bankers Petroleum Stock

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Part 2:  The Technical Outlook — and Conclusion — for Bankers Petroleum Stock

While the fundamental aspects of the company provide some measure of safety and understanding of future price potential, the technical aspects of the actual stock price provide additional insight for potential price targets and also when to enter.

Figure 1 is a daily chart of BNK-TSX and shows that since 2010 the stock has been within a large price range between $5.48 and $9.92.  This price range is marked by horizontal pink lines.

Figure1.  BNK-TSX Daily Chart with Volume and On Balance Volume (OBV)

This price range indicates the stock has struggled to move down to $6 since early 2010; at a current price of $5.97 (July 11, 2011 Close price) this potentially provides a buying opportunity.  Note the Volume indicator at the bottom of the chart.  There are four volume bars labelled 1,2,3 and 4.  These represent the times over the last 2 years volume has exceeded 10 million shares/day.  Each time this has occurred a major price reversal has taken place (within the range).

Based on this, we are currently at point 4, marked by a “?” as the future direction is not certain.  Yet the evidence points to an upside move.  Massive selling volume entered the market at point 4 (July 6, 2011) and even on that volume the price could not make it the bottom of the range.  This is a sign of a potential turning point.  Historically a price reversal has occurred within three weeks or less following a volume spike, but price could drift lower within that timeframe.

The price target is near the range high: $9.00 conservatively over the next two to eight months.  This target is slightly below the most recent price high seen in April, 2011.  A slightly more aggressive target would be right near the range high at $9.50.  The potential exists for higher price movement, especially if the stock moves above $10.  Using multiple exits may be useful, for example selling part of a position at $9.00 and holding the rest if the stock moves higher.

A move above $10 provides a technical price target of  $14.00.  This is attained by taking the difference between the high close price and the low close price of the range, $9.85-$5.51=$4.34, and then adding that to the breakout price (old high) of $9.85, providing us a precise price target of $14.19 (It is common to round down when using this method).

If the price drops below $5.50 it is an indication the stock may go lower.   Just as a potential move above the current range (above $10) is likely to spur buying, a move below the range is likely to bring in sellers as all gains since 2010 would be erased and anyone who bought the stock over the last 18 months would be in a negative position. Therefore stops can be placed in the $5.50-$5.00 range to limit potential risk in case of unforeseen bad news.

An additional note in regards to the chart is what is called “divergence.”  Divergence is when an indicator is moving in a different direction than price.  The On Balance Volume (OBV) in Figure 1 is an indicator which measures buying volume versus selling volume.  The OBV indicator shows that buying volume has been trending higher while price has been range bound.  Even though OBV is moving slightly lower now, the fact OBV is moving higher overall is an indicator of buying interest and that a reversal will occur at some point in price as long as the OBV overall trend  continues upward.

One last thing to consider is the massive short position against this stock – it is roughly 10% of the share float, or 25.5 million shares as of June 30.  This up from 17 million shares short as of May 31.  Currently it is ranked in the top 20 most shorted stocks on the TSX.  There seems to be no correlation between stock performance and being on this list.

The new short sale report from the Toronto Stock Exchange for July 15 will be released by Friday, July 22, so we can see if the short sellers have reduced their position on the recent news and accompanying sell-off.  If the short position has been reduced I believe this to be a positive.  If the short position increases there is a danger that a group of traders know, or think they know, something that could hurt the share price which the general investment community has not clued into yet.

Looking at the volume since the announcement, I don’t believe that short shares could have been reduced by more than several million.  Therefore, best case, the short shares would be about 18-20 million.  Alternatively, it may have increased.  “Days to Cover” the short position is at least ten trading days.  Days to Cover is the approximate minimum amount of time it would take for the short sellers to exit their position assuming normal trading conditions.  If the stock begins to rise before they exit, the potential exists for a “short squeeze,” where the shorts are forced to buy back their position, often causing a sharp short-term rise in the share price.

Interesting though is the put/call ratio, which is in startling contrast.  Since March there have been 6,116 puts and 22,198 calls.  This places the put/call ratio at 0.276 over that time frame (which is the major portion of the decline).  This could be interpreted as a hedge against the short, or a bullish signal in traditional terms.  It also could be looked as a contrary indicator as the ratio is quite low.  Therefore we have contrary indicators that conflict, and if we look at the positions in the traditional way, they still conflict.

Short sellers generally do better research than investors who go long.

Conclusion

While recent news caused a selloff in the stock, the company says it has the capacity to fix the issues.  The main issues going forward will be to continue to acquire service rigs to avoid shut-in production which we saw in the recent quarter.  The company is acquiring these but may need to increase that number.

Also, if inventories continue to increase it could hurt short-term performance due to reduction in sales.

Recent Gorami wells are doing well and show promise for the field area.  Bankers will need to ramp up re-activations in Q3 and Q4 to hit their projection.   Investors should also be aware there is likely a large and expensive environmental issue at Patos Marinza that somebody will have to pay to clean up at some point.

Technically the stock is at the low of a price range, which historically has been a buying opportunity providing   a target of $9.00-$9.50.  OBV is diverging with price, indicating a reversal.  If the stock moves above $10 the price could reach $14.00 while a move in the stock price below $5.50 is a warning of major investor concern.

— Cory Mitchell, CMT

Disclaimer: The information provided is as of the date above and subject to change, and it should not be deemed a recommendation to buy or sell any security. Much of the fundamental information is based on company statements and therefore are dependent on company honesty. Trading involves substantial risk and may not be right for everyone. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete.

Cory Mitchell owns zero Bankers Petroleum. Keith Schaefer owns zero Bankers stock. Neither the author nor the publisher have any affiliations or associations whatsoever with the company.
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BHP Billiton pays $12.1 billion for Petrohawk

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The world's largest mining company, BHP Billiton Ltd., recently purchased Houston-based Petrohawk Energy Corp. for $12.1 billion.

According to Bloomberg, Australia-based BHP's acquisition of the shale gas company is seen as a bet that demand for natural gas will increase in the U.S.

"BHP wants to increase the scale of its oil and gas business given that most of its existing energy assets are mature," said Jason Teh, who manages stocks at Investors Mutual Ltd. in Sydney. "This acquisition nearly doubles BHP’s resource base."

According to the Sydney Morning Herald, the deal could greatly increase BHP's output of oil. Currently, the company produces 500,000 barrels of oil and gas per day and that number is now poised to move higher, likely driving up the company's oil stock.

"We're [now] looking at a strong possibility of being a one-million barrel a day oil and gas company within five years,'' BHP's petroleum division chief executive Mike Yeager told analysts at a briefing.

Bloomberg reports that Petrohawk had 3.4 trillion cubic feet of reserves at the end of last year. 

TransCanada defends pipeline route decision

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TransCanada, an Alberta-based energy company, recently shot back at criticism about its pipeline route choice from U.S. senators.

The company said that the route of its 1,661-mile-long Keystone XL pipeline was chosen to have the smallest impact possible, reports Platts.

"Our focus was to reduce the overall footprint of the route by avoiding environmental, engineering and economic impacts," firm spokesman Terry Cunha told the news source in an email. "Route choices also took into account potential impacts on wildlife, archaeological resources, aboriginal settlements, crops and protected areas."

Seven Democratic senators wrote a letter to Secretary of State Hillary Clinton to express concern about the potential environmental impact of the pipeline, pointing to the recent ExxonMobil spill in Montana, reports The Hill.

The lawmakers are hoping that the State Department will further review the proposed pipeline, which would carry oil from Canada to Texas.

"We believe that the DOS should work with the [Pipeline and Hazardous Materials Safety Administration] to more thoroughly review the safety of the proposed Keystone XL pipeline and put in place sufficient safety measures," the letter stated.

According to Cunha, the pipeline has support from four trade groups and 14 American senators.

TransCanada is expected to release its second-quarter financial results on Thursday, July 28, which could potentially affect oil stocks.

Is Bankers Petroleum Stock Still a Buy?

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Dear OGIB Reader,

Today’s story comes from guest writer Cory Mitchell, who gives us an in-depth look at Bankers Petroleum — one of the most widely followed international junior oil companies in the world.

– Keith

Bankers Petroleum Stock (BNK – TSX) Disappoints – Is it still a Buy?
By Cory Mitchell, CMT

Bankers Petroleum (BNK – TSX) provided an update on second quarter (Q2) operations after the market close on Tuesday, July 5 – causing a huge down-spike in price on big volume. This former OGIB pick has become one of the most highly followed junior oil producer in the North American markets – covered by 16 analysts and owned by many Canadian, US and European small cap energy funds.

Bankers’ is developing Europe’s largest onshore field, which is in Albania. Three things have made the market very excited about this field, and therefore Bankers’ stock:

1. This huge field (called Patos-Marinza) has over 7 billion barrels of Original Oil in Place

2. Horizontal drilling has dramatically improved production rates per well, so that wells pay out in 6-11 months. (Anything under 24 months is considered good)

3. Production declines much more slowly out of these horizontal wells than the light oil wells of the Bakken and other horizontal plays around the world.

It was originally a stock based on the huge reserves in the Albanian fields, but now is becoming a cash flow growth story as well – especially as heavy oil has been getting a better price around the world.

Yet, while the company did increase production handily over last year, it did miss the production estimates it gave to the market and downgraded its own expectations for year end production volumes.

The disappointing current and forward looking guidance dropped the stock to its lowest level in 16 months. Based on the fundamental data of the company and technically analyzing the stock performance I will look at whether buying (or holding if already owned) at the 16 month lows is likely to be a profitable endeavour.

Was the Sell-Off Warranted?

BNK reported below expected production and sales levels, producing an average of 12,973 bbl/day, a 7% improvement over Q1, but missing the company’s own forecasts by 1200 bbl/day. Current production is at 13,150 bbl/d, which is up 44% from the same quarter last year.

The company could had have actually come closer to hitting the target (would have missed by about 500 bbl/d) but shut-in production was 60% higher than normal. Shut-in production is when the company pulls out less oil than what the available output is.

Bankers’ management gave three reasons for this:

1. Several wells required service rigs

2. Others were in proximity of new drilling

3. Wells were also shut in because they couldn’t get rid of all the water for wells with high water production.

The company has sourced another service rig which should arrive in Q3, and one or two more in Q4.

Service rigs are required to maintain producing rigs and complete new wells. Wells require regular maintenance including pump changes, with re-activation wells often needing additional work due to deterioration over time. These service rigs should bring the shut in production down to normal levels of 1050-1100 bbl/d but service rig requirements will continue to grow as more production comes online.

Wells being shut in due to proximity to new wells – they are draining the same area of the reservoir and the new wells are modern and do a better job. This is common in the global oilpatch and largely considered good oilfield management.

Water disposal wells are being equipped to handle additional water volumes which should alleviate this issue.

With oil prices higher, especially Brent crude, BNK was able to get better pricing with the average price received increasing 13% over Q1. Despite this increase in revenue per barrel, overall sales lagged. One key factor for this is a major order which was delayed and will be included in Q3 results instead – this accounted for about 600 bbl/day leaving 221 bbl/d unsold.

With increased oil production, Bankers now has the critical mass that it can get several refineries to bid against each other for their heavy crude. Between this competition and overall higher oil prices, its profit per barrel (called the NETBACK) has increased year over year from $20.98 per barrel to $37.22 per barrel – a 77% increase.

Company oil inventory levels went to 239,000 barrels, up from 168,000 barrels on March 31. This is not an issue if it is short-term, as new site and storage tanks required certain operational minimums. If inventories continue to climb, affecting sales, this would have a dampening effect on financial and stock performance.

Several analysts dropping price targets also likely played a role in BNK’s stock value decline, yet ultimately shouldn’t have, as analysts continue to like the stock. According Thompson/First Call, the 16 analysts covering the stock hold a median and average price target of $11 and $12 respectively.

New Projects with Promise

Successful new projects on different areas of Patos-Marinza field will be major factors driving Bankers’ oil production higher.

New test wells in the northern Gorani area of the field is one such project where the company is looking to expand production–if those well tests continue to produce good results. Gorani has heavy oil which is accessed by vertical and horizontal wells.

A third Gorani well is awaiting completion in (Area-1) with the first two wells already producing 170 and 180 bbl/day. Canadian brokerage firm Raymond James says this is a big positive, as those rates are higher than what the independent reservoir engineer used to calculate reserves here. The company stated in their Q2 (2011) Operational Update:

The success of these two wells has now validated primary productivity from the Gorani formation in the northern area of the field and the Company intends to further develop this formation with the addition of a large number of horizontal wells to access more than 220 million barrels of oil in place.

BNK also maintains plans to drill six to eight Driza and/or Gorani wells in another area (Area-2) of this field which, according to Raymond James, could allow for even further reserve potential. Successful results will lead to a much larger program with expectations in the 50-100 well range over the next several years, saysDundee Securities Ltd. “Driza” wells refer to the vertical or horizontal drilling of the area below the Gorani formation where the oil is less heavy, or lighter.

As mentioned, the company plans to drill 82 re-activations of old wells, and to drill 79 horizontal new wells. Bankers’ says 34 horizontals have been drilled through Q2 making it possible to hit the 79 target, yet they are currently behind. Well re-activations are well behind management’s projections, with only 22 so far this year.

That said, they have many re-activation candidates as the company announced in April it would be acquiring 140 active Albpetrol (former sole-operator in the Patos-Marinza field) wells. So the number of re-activations could increase quickly.

NEXT STORY: Part 2 — The technical outlook and conclusions for Bankers Petroleum’s stock.

— Cory Mitchell, CMT

Disclaimer: The information provided is as of the date above and subject to change, and it should not be deemed a recommendation to buy or sell any security. Much of the fundamental information is based on company statements and therefore are dependent on company honesty. Trading involves substantial risk and may not be right for everyone. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete.

Cory Mitchell owns zero Bankers Petroleum. Keith Schaefer owns zero Bankers stock. Neither the author nor the publisher have any affiliations or associations whatsoever with the company.

Keith’s Interview with Michael Campbell of MoneyTalks Radio

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Dear OGIB Reader,

Recently I sat down with Michael Campbell, host of the MoneyTalks radio show, AM980 Canada, to discuss the oil market… along with a few oil stocks in the Oil & Gas Investments Bulletin portfolio.

Here’s the transcript of our conversation. Enjoy.

– Keith

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Michael: Very pleased to welcome back to the show Keith Schaefer with me — he is the publisher of the Oil & Gas Investment Bulletin.

We will go over your individual stock recommendations, but first the big news coming out in the latter part of the week was the IEA releasing 60 million barrels from the strategic reserves. We saw oil taking that as an excuse to drop. But 60 million barrels is what, five hours consumption in the world?

Keith: Yes that’s about it; it’s actually about 17, 18 hours but certainly less than a day. So it was a bit of a head scratcher as to what they were thinking with that amount of fuel being released, because really it truly is a drop in the bucket fundamentally.

Michael: Did that release just provide an excuse for Oil to trade off in the direction it was moving at that point, anyways?

Keith: Well, that was my initial reaction.  I think if you try and make sense of what they were trying to do here, they were trying to act towards speculators. Politically Obama has said that the speculators are becoming a problem again, that they are increasing the price of oil more than it should be, which is hurting the average American.  You know, a great flag waving statement. So the number of long contracts had gone down, the price of oil had gone down. It was a perfect time to do a little pre-emptive strike and just shake the market out.

All the speculators who were still long a bit would get nervous, and it was interesting that they only did that small amount because the street has been saying for fundamental reasons they are not going to do that again. I could see them doing this several times again over the next year because it is such a small amount it doesn’t really affect anybody’s strategic reserves. The United States’ portion of this strategic reserve release was probably 3% or a little bit less of what they keep in their strategic reserve – so it’s not a big deal. So if the traders know that at any given time there’s going to be a coordinated action in the market to put down the price of oil, that is going to give them a little bit more caution in deciding how big a bet they are going to make in the oil speculative market. I am thinking that might be their thinking.

Michael: Only 60 million barrels and they got a $5 reaction at one point in the day. Every investment is a speculation, but if somebody buys a Bell Canada what they are speculating on is future earnings and when you buy oil at this price you’re speculating it will go up. What should the Oil price be if you just looked at the fundamentals, the supply and demand right now?

Keith: Well, mine would be lower but not a lot lower. I know there are other people there who are talking $30 lower, I would say probably $15 lower but that’s obviously a very difficult number to think about; the reality is that oil demand is going higher, the mount of spare capacity in the world therefore is going lower and so we’re getting closer and closer to the world’s true ability to produce as much oil as we need and of course that’s not a geological issue that’s a political issue.

Michael: It’s very interesting, but I mean when we got into that 110, 120 range for oil clearly a lot of that froth was about worry about North Africa, that we’d get a supply disruption. So sometimes it’s good to at least have a marker as I say where current supply demand would be to sort of at least get an estimate of how much is really being added in anticipation of other things.

Keith: Yes and it’s interesting because most of these strategic reserve release was truly geared towards Europe and Asia where there is lots of demand, and in North America where there is so much supply we are absolutely drowning in oil on this continent right now.

Michael: Looking at some of the storage problems they have for oil etc, people are having trouble wrapping their heads around that we are absolutely awash in oil in North America.

Keith: Yes and the main reason for those is because of a lot of the Shale oil that’s being developed down in Texas and North Dakota in the Bakken, and all these new conventional reserves are getting a new life with all the horizontal drilling.  Shale gas, the Shale oil technology that’s being developed – and the big problem is that there is no pipeline, no major pipeline, out of the major US oil storage space which is in Oklahoma. For some strange reason the Americans put the major oil holding place in the middle of the country, not down in the coast where it has access to shipping. So there are no pipelines out of there and all the tanks – they’re actually about 86% full and it’s going higher. So it’s going to be very interesting to see what happens over the next few months as oil production continues to increase in the states. Oil production has not increased in the states for 30 years up until about last year.

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Michael: I am a long term bull and I think you need exposure to the oil market.  What’s the bottom line on Oil, should we look at corrections as an opportunity to get involved?

Keith: Absolutely, there is a strong bid under the price of oil for the next couple of decades because of the Asian industrialization story. Nothing has changed there, there are going to be ebbs and flows but the reality is that demand for hydrocarbons is only going to get greater. The world’s political situation and just the fact that we all have to get along and make a decision together means that those things take a long time and so the infrastructure to get that oil to the market is going to create a constant bid under the price of oil for the next 20 years.

Michael: Let’s talk about varying investments. How price sensitive are junior exploration companies, mid-tier producers and senior producers to the change in the prices of oil?

Keith: You will find that the intermediates have the best data towards the oil price, towards the underlying commodity. The juniors have had a very interesting ride lately, in that as the oil price went from $100 to $120 a barrel, the juniors actually went down. They had an inverse relationship which I have never seen in any commodity market before. Really, what the market was saying is we’re pricing in a recession and so we’re selling our risky assets and that was our first indication that the oil price at $110 and $120 a barrel was unsustainable. They were kind of a canary in the coal mine. So now that oil is coming back down to $90 the value button is being reset on the juniors and I think they are getting ready for another run.

Michael: With junior companies, what are you looking for?

Keith: I am looking for a couple of things… one is I would love to see a management team that’s already built and sold a producing junior and the other thing that I am looking for is a company that has a large land position around a new discovery. With these new shale plays, what they are finding is that they are actually fairly consistent over a large area so, what happens is if one discovery well gets made in the Shale play the market is much more willing to price in future growth very quickly. Much more than they ever did in the old style of deposit.

Michael: It is all geology in the end, is it not?  What you appear to be saying is that if somebody, for example, has a simple one acre lease and the geology is correct for oil and gas, then you know the chances are very good of the structure extending beyond that one acre claim and into a broader area.

Keith: Yes, much more so then ever before. It’s analogous to potash in Saskatchewan, where it goes for hundreds of miles and it’s very consistent. The new Shale plays aren’t quite like that but they’re close. They have that style of consistency over large areas and you can have big area plays in oil and gas now because of that.

Michael: You follow a huge number of companies, can you tell me about of a couple of situations that we can put on our radar screen?

Keith: Sure, one of my favourites right now is a company called Tag Oil (TAO.V on the TSX.V) that has gone into New Zealand. They have an unproven management team which is why we were able to buy the stock so cheaply a little over a year ago. Nobody really knew them but what they did was go in and they’ve gone from about 300 barrels a day for oil up to where they will be doing almost 5,000 barrels a day by the end of this August, September.

They have been able to use new horizontal technology in an area where it hasn’t been used before, on the North Islands of New Zealand, and discovered a lot of oil and gas. What they have discovered over the last three to four weeks, with the different flow rates they have announced on four different wells, it would take them from 1,000 to 4,000 barrels a day in the next few months. Those are the type of stories to invest in, where the geological risk is gone. They have discovered the oil they are just waiting to bring it on stream now and that’s a great opportunity for investors to basically get a low risk entry point in that type of stock.

Michael: Especially if you can catch it in a down market I would think that provides even a better opportunity. I like the idea of it producing and once it’s in the production mode you’ve taken out the exploration risk out and you protect yourself a little bit. Any other name for us?

Keith: Locally here in Canada there are a couple of plays that I really like and they are both Bakken plays. A company called Painted Pony (PPY.A on the TSX) and their management team has done an unbelievable job in assembling two land packages. One oil play in the Bakken where they’ve got a lot of land and probably three to four years worth of low risk drilling to do, and gas up in the Montney gas play in north east BC where they have just a huge land position. They have been very successful in developing it, each quarter they are increasing production like clockwork and the stock is always expensive. But I like expensive stock, that means the Street likes the team and will always reward them.

Michael: Are there any mid-range stocks, perhaps significant juniors that you think are just about to enter the mid-range, or a mid-range about to move to the senior sector?

Keith: Well a few of the juniors that are just busting through that 10,000 barrel a day to 15,000 barrel a day range where they go from being a junior to an intermediate. One is called Angle Energy – NGL on the TSX). They are a very profitable gas company, one of the best gas companies. They have a lot of liquids in their gas — things like butane that goes into your BIC lighter and propane that goes into your barbecue — value added gases that really increases their profitability.

I have to say my favourite company is probably a company called Peyto (PEY on the TSX), they are the lowest cost producer, they are the fastest growing. That team has the best cost structure, their discipline and their management is just second to none in the business.

Michael: Keith, you mentioned the Bakken play and I wanted just to give an outline of the Bakken possibilities.  I think it’s a play that people should be aware of.

Keith: The Bakken has turned into the biggest discovery in North America in decades. It boarders the North Dakota/Saskatchewan border and when it first started getting developed about ten years ago everyone thought it was huge, that they could recover as much as 4 billion barrels of oil, which is a lot of oil. Now that number is up to almost 24 billion barrels, so the industry has done a great job very quickly, very efficiently stretching the boundaries and figuring out ways to get more and more oil out of out if each individual Bakken well. So there are lots of Canadian juniors that are on both sides of the border and actually the report that’s on your website for your listeners is one of my favorites. A little junior company.

Michael: Interesting, Keith thank you so much for taking the time with us today.

 

Speculators Leaving the Oil Market: A Bullish Case for Oil?

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This chart is bullish for oil.  It shows the number of non-commercial net long crude oil positions in the NYMEX (New York Mercantile Exchange) is moving down – these are the people we all call “The Speculators”.  Getting these (politically unpopular) people out of the oil market is what I think one of the primary goals of the IEA was, when they announced a globally co-ordinated release of 60 million barrels into the market in late June.

This shows the speculators leaving the market – but the oil price is not declining.  This shows real demand is taking the place of speculators.  Now of course it could be argued that without the IEA intervention, world oil prices could be $10/barrel higher right now.

With expected demand rising up 4 million barrels a day more through the fall (this seasonal increase happens every year; it’s not a guess) it shows oil investors are going to have to see a dramatic decline in the world’s economy to keep oil lower.

Source: BMO Nesbitt Burns Research Comment July 4 2011

Want to learn more about investing in junior oil and natural gas stocks? If you have a Facebook account, just “like” this article and a hidden link to Keith’s 10 page how-to on oil and gas investing will appear:

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