Interview: Analyst with Pickering energy partners
>> oil prices continued to retreat from record highs, but analysts and traders we survey anticipate prices could rise once again next week. coming on expectations storm repair efforts on the gulf coast could last for months. let’s get some more perspective on the oil story with dave pursell, analyst with pickering energy partners. joining us right now from houston, texas. houston itself very much a part of the story. it’s nice to have you on with us today.
>> thanks for having me.
>> i’m curious among your client base. what are you hearing from your clients in terms of what they’re most interested in talking about when it comes to the energy story?
>> a couple things with regard to natural gas how long is production going to be impacted by katrina? right now we have still almost four billion feet of gas shut in because of the storm, a combination of platforms and pipelines. that’s 8% of the u.s. supply. so that’s a very big number and there’s no visibility on when that’s coming back and we’re coming up on winter. so people very focused on natural gas. we think about oil. it’s when are we going to get these refineries back up and running? we have almost a million barrels a day of u.s. refining capacity offline. you have almost a million barrels a day of oil production in the gulf of mexico still not back yet. so big numbers. now you also have the release of government-controlled stocks, the s.p.r. in the u.s. and in european countries that are helping take the froth out of the oil markets . but, still, people are trying to figure out and assess when are things going to get back to normal?
>> so those are the questions. let’s talk about some of those answers. we’ll start with crude and then move on to natural gas. when it comes to crude prices, what are you telling them in terms of the duration that you’re anticipating?
>> it looks like based on the information we have now the refineries are―the four trouble refineries, three new orleans area and pascagoula, mississippi, likely offline for another three months-plus. damage assessment still ongoing but the initial news doesn’t appear to be very favorable. so although you might see some relief in oil and gasoline prices in the very near term, i don’t think we’re anywhere near out of the woods yet.
>> so today you’ve got a barrel of oil closing just about $64 a barrel. cibc out with a report we were just talking about a few minutes ago saying oil may average $84 next year. what’s your best guess? what are you calculating?
>> i’d say oil is going to stay about where it is, maybe trade down a little bit. and the reason is the strategic petroleum reserves the governments are putting out, putting more oil on the market , and we don’t really need more oil here. we need more refined products and my sense is as i look at the numbers if these refineries are offline for three, four, five months, we’re still going to have refined product tightness and crude prices will likely stay where they are or drift down a little bit but you’ll see refined product, motor, gasoline, and heating oil prices move higher.
>> and let’s talk about natural gas. you use the word visibility, not having much visibility. so when you look at the landscape then, how do you make your calculations in terms of what you tell your clients they should anticipate?
>> well, it’s really you have to watch the daily reports coming from the gulf of mexico, how much production is still shut in and then really lay out a few scenarios, what if this four billion cubic feet of gas doesn’t come on stream for another two or three months? what if we only get half of it back? so you really have to run a number of scenarios and then think about what happens then in a variety of winter weather scenarios. so the extreme case is we don’t get much of the production back for the next six to eight weeks. we have some early cold and that’s a scenario that natural gas prices move significantly higher from the current levels.
>> in terms of consistency of prices, what do you anticipate trading is going to look like in the coming weeks as information comes out both conflicting information and then more information on what production is starting to look like?
>> i think very volatile. you looked at yesterday. it looked bearish. the commodity markets traded down until 1:00 when the manipulate rals management service put out the statistics on gulf of mexico production that showed a lot of production still shut in and the commodity markets reversed itself. so very data point driven and i think the production reports we get monday at 1:00 central are the data everybody is going to focus on.
>> and, david, very briefly in terms it have demand, what kind of dent to demand have you been seeing?
>> tough to say. the gasoline demand numbers that we saw yesterday in the u.s. oil statistics i don’t think are very reliable. i think that data is very suspect because of the―all the moving parts around the hurricane. we did see the international energy agency put out their monthly report that showed china demand continuing to be soft, so we’re keeping that out -- watching that very carefully.
>> dave, thanks for joining us.
>> thank you.
>> a good weekend to you. dave pursell of pickering energy. taking a closer look at what has been fueling the post-katrina rally in stocks. ari levy will join us.
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Listen Market briefing --- Ellen (slow)
Chart of the day --- Tom (slow)
Money & Sports --- Mike (fast)
as for the s&p ending friday with a gain of .8%. 1241 there. and the nasdaq a rise of .4%, 2175. stocks being helped as the dow, in fact, reaching its best week since may. oil declined today. also, traders speculating -- continuing to speculate, we should say, that the federal reserve may limit its rises in interest rates, that is, in the wake of hurricane katrina. oil very much again a factor for traders as prices could average, in fact, as much as $84 a barrel next year and climb to $93 a barrel in 2007. at least that is according to the canadian imperial bank of commerce. our chart of the day taking a closer look and explaining why and here to explain away is bloomberg news editor-at-large, tom. a lot of interesting numbers in the report today.
>> what’s interesting, ellen, is every friday there seems to be that, oh, wow report. this is it. i did an interview yesterday and he didn’t give the secret away. cibc is saying oil prices have every chance to move higher. two reasons, katrina a bit but much more continued demand out of china. and the reason this is important is they’ve been real good this year, ellen, on guessing oil prices. they’ve been ahead of the pack in moving prices up. and they’re saying the trend is going to continue. here’s the trend as we go to the chart. the blue line over in the left corner, that’s the iraq war and then we start off the relief rally in 2003 and up, up, up. what they’re saying essentially is we continue on trend. it may sound shocking 65, $70 the record high during the early part of hurricane katrina. $84 is a continuation of the trend. i think that’s the real story here.
>> very briefly, though, because we’re going to run out of time, some conflicting data. you had people cutting estimates for what might come out of asia.
>> this is the moving story as we go into the weekend. and what we’ll see next week, some people saying higher. some people saying lower. it’s a mixed bag. cibc of toronto saying we could see $93 a barrel two years out.
>> tom, thank you.
>> sure.
>> ok. an interesting look at oil. let’s continue right now and switch gears a little bit as we take a look at money and sports. the national football league season kicking off with the new england patriots defeating the oakland raiders on thursday night. but for about 13 million americans the season began a month ago, and that is when they drafted their fantasy football teams. let’s get some more on the story now out of our atlanta bureau. hi, mike.
>> hi, ellen.
>> so just how big has fantasy football become?
>> well, it’s tough to really put some specific numbers on it unless you asked your friends. probably somebody knows somebody who knows somebody who is involved in fantasy football. as you know about 13 million people play it. cbs and fox this year aired segments, actual hourlong shows, helping people pick their teams. the nfl has determined that fantasy football players watch games on tv about twice as much as people who don’t play fantasy football. so that stat speaks volumes for the nfl.
>> mike, let’s talk tennis. very much on people’s minds these days. tell us about corporate entertaining at the u.s. open.
>> we’ve talked about it all over at every sporting event there is. you can’t go to a major event without one. and the u.s. open is no different this year bringing in about $50 million in corporate entertaining and we’re joined now by david newman who is the director of marketing for the u.s. tennis association out there in flushing meadows. mr. newman, thank you for joining us.
>> it’s great to be here, mike. thank you.
>> this week or the last two weeks you’ve had pretty good weather out there at flushing meadows. how much does that help in selling the product of entertaining at the u.s. open? i think there’s a confluence of events. part of it is the athleticism of the great athletes from around the globe that converge upon new york for the open, part it have is is the vibe of attending the open, part of it is it becomes the hottest ticket in new york and that makes the entertainment aspect of it that much more valuable. but when you have great matches, great talent, great stories, great weather, it’s a very special combination.
>> to a lot of average sports fans there’s no john mcenroe anymore, no pete sampras. why does it hold the attention of the new york business audience as much as it does?
>> it’s a global event that’s seen worldwide in 199 countries. the biggest players in the sports marketing market plays a part of it. american express, olympus, i.b.m., etc. it’s really the last vestige of summer, the last real opportunity amidst a beautiful setting to be entertained and really when you think about some of the charismatic personalities that are competing in the sport be it roger federer, kim clijsters, maria sharapova, be it andre agassi or even robby now, there is a new generation of stars to join andrei. it’s bridging―andre. it’s bridging young and old and from the usda perspective the people attending are a desirable audience. to grow the sport to involve more people in the sport of tennis we’ve diversified and reached out to every particular audience that there could be whether it’s a kid who lives here in queens or somebody that’s working on park avenue.
>> david, how tough of a sell is it for you? you’re looking at about 225,000 dollars per box yet you’ve managed to sell out every single one of them. is it a tough sell at all?
>> anything in the sports marketplace is not an easy sell. it’s challenging for every corporation. i think the u.s. open is one of the most special events in all of sports, the highest annually attended event in sports. it throws off more economic impact to any city than the super bowl does or a seven-game world series or seven-game nba final. so in reality this must-see, must-attend event and all the new things that they introduce whether it’s more shade, specialty restaurants, more relaxed --
>> david, i apologize. we’re going to have to cut you off there. we’ve run out of time. i appreciate you joining us. back to you, ellen.
>> ok, mike. thanks to you and david. we’ll take a quick break and come back with more on the oil story.
