Split the difference?
That's how I felt about the price of oil after listening to Charif Souki, the man behind the largest natural gas export program in America, and Harold Hamm, the man often credited as the biggest beneficiary of the U.S. oil and gas renaissance.
And conveniently enough, Carly Garner, one of our own, would probably agree with me after interpreting her chart work analyzing the price of crude.
First, though, here's something pretty interesting: Souki, the man behind Cheniere (LNG), Hamm, who is the CEO of Continental Resources (CLR), and Garner all think the price is going lower. All three. Garner thinks it heads to $77, where it has held before, a level that will wash out the speculators and put oil into firmer hands. Hamm thinks it doesn't have much downside from here and then bounces back to $90. He's bullish and points out that as much as we keep finding oil here, there are plenty of places where the fields are just tuckered out and there won't be any major new discoveries. Plus, he's not so sure that beyond the Saudis there's all that much spare capacity anyway. He's really not a believer that we can sustain these low prices with any real uptick in economic activity worldwide.
But Souki? Oh my, he's the most bearish about oil I have ever heard. Now, to be sure, he's a natural gas guy. He's about exporting it, and he's got billions of his company's money involved in doing so. The LNG facility is going to be the principal export terminal in our country, and Souki's got long-term contracts for most of what he's building or contracted to build.
But that doesn't mean he isn't sensitive to the idea that low oil couldn't hurt his business long-term, so it isn't like he is going to benefit from his view. He just thinks that we are discovering and finding so much oil in this country that we will eventually impact the world price and in the interim we will be importing less and less, which will magnify the glut. It won't mean that gasoline will get that much cheaper, because we will export the refined product, but we do not have enough refinery capacity or storage capacity to keep our oil from flooding the market. We don't have enough transportation to get it to where it has to go.
How confident is Souki? He tells me that the amount of oil that's going to be taken out of the ground in just Texas in the next couple of years will exceed Saudi Arabia's production. Not the U.S. Just Texas.
However, he points out that unless the U.S. grants more export privileges, we are going to have a glut in this country that could take West Texas well through the $70s. He predicts that the U.S. will start exporting in earnest when it is obvious that we are cutting back on drilling, something that Hamm says could happen soon, too.
In other words, I heard nothing to be bullish short-term about oil from any of these three people, all of whom have real knowledge of the issues about which they speak.
Normally, again, that would be terrific for the American consumer. But first, there are 16 states that rely on this industry for growth. Second, Ebola scares are going to keep people from doing anything but trading the big beneficiaries of this, travel and entertainment.
The contrarian in you might say, wait a second, all three think it is going lower, so it is going to bounce.
I say, fine, but geez, I don't like betting against a threesome who knows what they are talking about.