About Me

Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Saturday, June 21, 2008

Jidda Bugs

Oil producers and consumers meet in Jidda, SA this weekend to
hash over the oil market. Since it's the king's dime, the Saudis
can be expected to put out an ass-covering spin, and also to
announce another moderate hike in production. On background,
the Saudis maintain they can add 500k bls daily production this
year to bring them above 10 mil. daily in total. They also claim
that by later in 2009, new fields output would give them production
capability of 12.5 million bd. More than a few think they are
using funny leaf in their water pipes.

At any rate, if the producers / consumers are smart, they will look
for ways to insure greater spare capacity than the current 2 mil
bd, whch has been a linchpin for the run up in the price. And they
will look at agreements to secure production when disruptions
could be at hand. A little co-noodling here and perhaps a dash of
fraud in the way of arriving at a larger surplus production estimate
would help. If the Saudis do have the goods, this would be a good
time for them to show off to the arriving poohbahs.

If I was in attendance, I would also urge the producers and the
major consumers to start fiddling in the oil and dollar futures
markets to make the speculative ride in these markets grow more
painful to the folks who have had rather a free ride for years now.
Periodic bloody noses for the hedgies, indexers and pension funds
might just build some respect. Unlikely? Maybe. But lots of guys
in the room can deliver and take delivery on crude and currencies,
and dropping a few $bil in the process may be much cheaper than
what transpires if oil remains on its happy course skyward.

The oil market is now range bound between (roughly) $130 - 140 bl.
The sharp intraday volatility of late reflects uncertainty in the
market. If Jidda is to be more than a Saudi PR show, the boyz in
attendance best come away with some actionable ideas to create
pain and suffering for the long side only whiz kids.

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