The BP numbers are starting to make sense: If one is blowing $500,000 a day on a rig, one had better be spewing something like 50,000 to 60,000 barrels a day, or else it isn't worth it.
I was always skeptical of the initial reports of the spew because if there really was just a couple of thousand barrels a day leaking out of a big hole in the ground that they spent a fortune drilling, then what kind of risk-reward was that? If it was only spewing 1,500 to 5,000 barrels you have a losing proposition on your hands.
Now, we are getting closer to the truth. This well, perhaps one of the greatest finds in history, was a terrific bargain for the company, despite the expense of the Transocean rig. It was such a bargain that you have to wonder why in heck would BP stint on anything? It should have gone full-out deluxe. It obviously didn't.
The other day, when BP broke down viciously to precisely the levels it is now trading after hours, it took the whole market with it. I have to ask, why couldn't it do it again? It wasn't like we went up on fundamental news. We went up more than 2% on "caught short/expiration" blather that can easily reverse on "caught long/expiration" blather that delivers a decline of 2%.
That's really the issue here: the potential phoniness of the rally. Because, if it collides with real bad info -- say about BP, in which BAC comes out and says business should be curtailed with the company, the first broker to really break ranks with the "don't worry about it long term" crowd -- it could undo the rally, especially now that we are at plus-6 on the oscillator, a level that always makes me countenance much more selling than buying.
In short, as we continue to find out more about BP and it continues to be bad, we can't rule out a repeat of last week's brutal BP-inspired decline, especially when today's rally felt very much like short-covering and options-expiration handiwork.
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