Jim Letourneau's Blog

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Bull of a Different Kind

You can rarely go wrong telling a lawyer joke. I've noticed that speculators occasionally get a bad rap as well.

A recent article by Steve Maich in Macleans took a shot at speculators.

It's true, oil rose more than 40 per cent this year. That kind of spike makes people downright jumpy. As always, there were legions of speculators only too happy to stoke the anxiety, spinning tales about catastrophic energy shortages and insatiable demand.

There may be large volumes of oil and natural gas left to exploit, but they are in increasingly lower quality reservoirs with a low deliverability. For a "made in Canada" example we can look at how high deliverability fields like Ladyfern in Northeast British Columbia perform vs. expectations. Companies and countries are often rewarded for inflating their reserves of oil and gas and there have been several cases where major oil companies have been forced to admit they have less oil than they claimed. Countries do it as well to increase their OPEC production quotas.

The articles by Marshall Auerback posted on PrudentBear.com provide speculators with better analysis and usable information instead of opinion. At times speculation is as simple as recognizing supply/demand imbalances and not being distracted by media opinions.