rough couple weeks in the energy sector

It has been a brutal last few weeks for energy, and I’m not at all sure that it’s over.  Demand has been surprising on the downside, and supply on the upside.  EIA.gov now predicts that oil demand will increase only by about 1mmbbl/d year over year for 2014, while non-opec production will grow by 1.8mm bbl/d.  Amazingly the USA alone is growing production by 1.4mm bbl/d year over year, an almost unbelievable 14.5% growth rate vs 2013.  US production for 2014 will grow more than total world oil demand.

WTI price.

Right now it feels a lot like the beginning of the year, everyone thinks the price will decline.

Increasing the complexity to the situation in the USA, nearly all the new production is light oil, and the US refineries are the most complex in the world, ideal for handling heavy sour oils.  This is part of the reason that crude imports are still relatively high at 8.8 million barrels per day: heavy crudes are still imported, especially from Mexico.  So while the US imports large amounts of crude, some of the refined products that come from it are re exported.  We are also increasingly exporting propane and other natural gas liquids.

This is since three weeks ago.  It is pretty ugly considering that the S&P was basically flat over this period.

I certainly wish I had cashed out some of my WLL after that big run!  I am glad that I sold my CHK though.  I picked up a bit of EOG at 101.32 a few days ago, but I don’t feel particularly good about it.  So my holdings now are WLL, APA, and EOG.  WLL position is about 3x the size of each of the other two.  I would particularly look to add to EOG if it continued to fall.  EOG is the company that I’ve always wanted to own but always felt like I’d be chasing to buy it.