19
Mar

Monday Morning – New Site Open

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Monday Topics

  1. Welcome to the new site!
  2. Last week's performance
  3. Oil and Gas
  4. Odds & Ends

Welcome To The New And Improved zman's Energy Brain Site! If all goes well you shouldn't notice too many differences other than layout and a couple of new features. I moved the site to get a little more flexibility and because my graph habit was pushing me quickly towards capacity over at the old site. If you're reading this post from somewhere other than the main site we are now located at www.zmansenergybrain.com. A few bells and whistles have been added (Digg it? and Sphere) as well as streamlined RSS and email delivery options. These are pretty fully explained on the Brief Tour of ZEB page but if you have any trouble or suggestions please notify me here on the suggestions or at the old wordpress.com page. As always, thanks for reading!

Holdings Watch: Last week's short ideas underperformed their benchmarks on the whole. My near term seasonal bearishness causes me to stick with the same ideas this week.

week-perf-031807.JPG

Refiners Still Holding On To Massive 1Q Gains: I also talked extensively last week about the joy ride the refiners have been on this year which in some cases, TSO and WNR, seemed to overshoot the $0.40 rally gasoline had enjoyed since mid January. Despite a little end of week profit taking the refiners' buoyancy continues unimpeded. I think this is one of those parabollic rallies that will end in a pretty extreme correction. Right now the group is on fire (pun intended) but as the we move into Spring and more refineries come back on line I'd look for a pretty good snap back here. So far I continue to be wrong and am looking at longer dated puts (May) to play this.

refiner-week031807.JPG

Oil: Crude had a wild ride on Friday plummeting in quadruple witching induced trading to as low as $56.17 before a late session rally pushed the April contract back over the $57 mark. Anything below $58 would have been (and ultimately was) deemed a failure. April crude is back below $57 in pre market trading.

Next stop $55 and then watch your puts because we're likely to get a pretty strong bounce.

Beyond that and crude's direction gets a little more difficult to predict.

  1. I think OPEC is pretty happy with Nymex trading between $55 and $65, their new unspoken price band. Below that and they dust off the sabre rattleing rhetoric.
  2. It also depends heavily on the three legs of the gasoline price stool (I know I've gone into this ad nauseum in recent weeks but the beginning of the decline in gasoline prices I've been looking for was the event that chop blocked oil last week)
  • Gasoline imports rose briefly last week but that needs to continue for RBOB, and thereby oil, to weaken much below $55.
  • Refinery utilization needs to get off the floor. That will happen in the next 2 to 4 weeks barring no new snafus.
  • High retail prices need to put the breaks on gasoline demand...so far that hasn't happened.

Sidebar: Canadian Oil Imports Continue To Rise, Hit Record In January. I'd point out that Canada accounts for nearly 20% of U.S. imports (nearly half of OPEC's current total coming to the US) and production there is growing slowly and has set several records in recent months. Something to keep in mind when the press beats the drum on declining proudction elsewhere.

big-five-oil-importers.JPG

Second Sidebar: Mexico: Up 190,000 bopd in Janaury But Still Second Lowest Level In The Past Year. This is pretty important and the one month rebound does not a recovery make:

  • Cantarell - Production at Mexico's largest field, the Cantarell offshore complex dropped by 12% in 2006 and a 15% decline is expected this year.
  • Pemex just reported another paltry year for reserve replacement (41%) due to a combination of usuriously high taxes which leave little for reinvestment and a prohibition on foreign investment.
  • Bloomberg reports that Pemex reserves have fallen by half since 2002.
  • The Mexican congress rejected calls for opening the industry to foreign investment last year.
  • Comment: They won't be the third largest importer of oil to the US for long.

Natural Gas: Gas weighted heating degree days fell 40% for the week ended March from the prior week and we should get the first non triple digit withdrawal in the last nine weeks this Thursday. Last Monday I said:

April natural gas appears destined for a near term run in with $7 as the weather begins to warm up.

  • On Tuesday April gas fell through $7 and spent most of the week hovering a dime below $7. Gas is off slightly in the pre market session this morning.
  • As I said last week next stop $6.50. And then $6. After that I think we trade sideways for a time (maybe $5.75 to $6.50). I'm getting my buy list ready for mid to late April.

Odds & Ends

Analyst Watch: OMM downgraded to hold at Jefferies after the company announced it was looking at strategic alternatives on Friday and jumped 13%. I'll be taking another look at the tankers with an eye towards longs in TK and TNP if they come in a bit.

CFTC: Not Much Change. Natural gas Commitments of Traders report for last week showed there wasn't mcuh change from the prior week. Both the longs and shorts fell about a 1,000 contracts and the net short position remains about 20,000 short.

42 Responses to “Monday Morning – New Site Open”

  1. 1
    nltd Says:

    Z

    Good morning, looks like it’s working…are people just busy, or having trouble finding their way over here?

    Didn’t think to ask or check before now:
    Is the link on Phil’s sending people here or to old site?

    N

  2. 2
    zman Says:

    N

    Thanks for all you suggestions and thanks for reminding me about that…I just switched it over.

    Mondays and Fridays are typically pretty slow as comments go.

  3. 3
    Rob Says:

    New site is OK, but I really did like the top navigation bar of your old site.

    Interesting about rise in imports from Canada but fall from Mexico. Is Mexico “running out” of oil? Or are their production numbers just lower?

  4. 4
    zman Says:

    COP looking weaker this morning, down first with rest of group still up. Oil suddenly falling out of bed.

  5. 5
    dave Says:

    I posted on Zman’s energy brain by way of Phils and it did not show up here.

    Anyway, took a small position in NE

  6. 6
    zman Says:

    Rob – I know … I liked that too but it was getting a little busy up there. I can go back to it if everybody liked it better.

    Canada is increased produciton from oil sands

    Mexico is by no means out of reserves. They’ver very largely untapped, especially gas but that’s another story. The problem is over taxation…which is a problem in a lot of oil rich, otherwise poor nations. VZ and Iran come to mind where the petro dollars fund everything but reinvestment in finding the petroleum.

    The other problem is a lack of foreign investment. They don’t allow it. They’ll probably have to someday but it may take another 5 years before their Congress can see the writing on the wall.

  7. 7
    zman Says:

    Dave… they’re totally different sites. That one is just a reflection of the daily post and doesn’t have all the tabs or archives.

    I take it the NE was long?

  8. 8
    dave Says:

    Zman Yes long. It looks good tech. & fundamental ( to me )

  9. 9
    Maximilian Says:

    Stumbled accross your site by accident and am greatly impressed. I was lucky to catch your move and look forward to your future blogs.
    Having an O&G background I’m inerested in you view on the industry from an investors side. For my taste the markets mooved too often without technical fundamentals and support. Probably the Hedge Funds and Cramer’s PR effects!
    Trusting my industry understanding to a certain extend I do invest primarily in energy stocks but have not tried futures yet. Albeit, I do support your long term bearish views for April.
    One factor you might take into account, when looking beyond April, is the unusual warm winter in Europe which points to a unusually warm summer. In other words we did not see a substantial heating related Oil/Gas draw down which kept the storage levels high. While the coverage of AC in Europe is by far inferior to the one of the US it starts playing an increasingly important factor in the energy consumption. This might put additional pressure on prices during summer.

  10. 10
    zman Says:

    Dave – thanks, I’ll check it out this morning.

    Max – Glad to have you aboard! In a former life I was an E&P sellside analyst focused on natural gas and gassy stocks and a small cap portfolio manager before that. Never worked in the oil biz but I’ve sat across the table from a lot of management teams.

    I hear your Europe concern but think fear of a hot summer over here (La Nina) and the promise of a busier hurricane season (easy comps) will be supportive of nat gas in May which provides about 20% of electricity vs oil at 3-5%. Plus gasoline demand continues to run strong and even with high inventories I think it puts in a floor on crude in the lower $50s to very high $40s.

    I’ve been bearish since last August and moved into the neutral camp a couple of weaks ago. Although I’m still almost entirely short now I’m making my list of names to own after a March / April selldown.

    Again, great to have you here and let me know if you have any suggestions for the site or angles on stories you’d like to see expounded upon. If you disgree or see a mistake in my logic, call me on it. Also, the archives contain a lot of reading and the site is fully searchable.

  11. 11
    sane Says:

    Lookin good z.

    -sane

  12. 12
    zman testy Says:

    Guys (and Ramana),

    If you like the posts please Digg them with the Digg It? button. It only takes a minute the first time you get set up and it helps me out a lot. Plus, you can see quite a few cool stories over there. Thanks much.

  13. 13
    zman testy Says:

    Thanks Sane.

    Feedback wanted. Can I get a volunteer to sign up for one of the RSS feeds and then let me know when you get the post tomorrow? Thanks.

  14. 14
    zman Says:

    Broader market rally is lifting all boats. I may take a little more APC this afternoon with gas holding below $7 and looking weaker without further weather support.

  15. 15
    Jon Says:

    Hi Zman,

    I’ve set up the RSS feed, it seems fast as usual. This morning’s post came only as a summary, but the comments are complete. I’ll let you know tomorrow when the post shows up.

    Another comment: The new site takes a while to load, it stalls waiting for Sphere, Technorati, Activemeter, Alexa, Statcounter and SeekingAlpha. They aren’t ALL slow all the time, but usually one or two of them stalls for a bit. This may be due to the firewall at my office, so I’ll need to try it at home.

  16. 16
    zman Says:

    Awesome, thanks Jon. The Alexa meter can cause a bit of a problem and if it persists I dump them like a hot stone. Please let me know.

  17. 17
    zman Says:

    Gasoline up relative to a week ago.

    The pullback just won’t engage.

    Here’s an AP story quoting several analysts saying the same things I’ve been saying about gasoline prices and the end of the snafus.

    http://www.msnbc.msn.com/id/17650675/

  18. 18
    zman Says:

    COP still flat to down a dime in big up market. The GS downgrade from last week is weighing along with slipping nat gas prices. If the DJI gives up the 120 pt rally and folds below the 12,200 mark, laggards like COP are likely to get smacked around a bit.

  19. 19
    zman Says:

    IFS beign acquired by PWR has the OIH (not in the same business) up almost 2% to a 3 month high. That’s a ridiculous rally since IFS builds infrastructure for utilities and is in telecommunications. Nothing to do with drilling and completing wells or evaluating seismic etc.

    This merger, in combination with the strength in the DJI is driving the OIH hihger. It has now broken out and while I’m not advocating jumping in front of a moving train with puts just yet I may have to take a closer look in coming days once things settle down a bit.

  20. 20
    zman Says:

    Site back up – database problem at my host…should be fixed.

    PSW site taking more TSO puts here.

    If DJI doesn’t hold 12,200 then look for a pretty good slide that hurt everything from COP to TSO.

    On the OIH, I missed the THE acquision this morning. Marketwatch had the IFS deal but not the THE deal as a potential reason for the OIH rally. Purchase of THE makes a lot more sense. Sorry I missed it, new site distrations, etc…

  21. 21
    zman Says:

    test – helllooooooo

  22. 22
    Rob Says:

    Site still works. I am not believing this action today, added to my XLE put position.

  23. 23
    zman Says:

    Thanks Rob. Me either. DJI leading the way and looking a bit weaker here. Gasoline rally today is a real mystery. No events other than a May 1 restart announced for one of the VLO facilities.

  24. 24
    tom2oc Says:

    Hey Z, brand new site! Nice! Congrats!

    Careful with those oil puts though. I longed OIH today after seeing that bull flag in there under the 140 resistance line. Check blog for TA on it earlier on today.

  25. 25
    dave Says:

    test

  26. 26
    zman Says:

    From Mkt Watch:

    April crude fell 52 cents to close at $56.59 a barrel Monday, marking its weakest closing level since Jan. 29. April natural gas fell 7.7 cents to end at a two-month low of $6.847 per million British thermal units. China’s hike in interest rates helped renew concerns over a potential slowdown in energy demand. The expiration of the April crude contracts after Tuesday’s close also contributed to volatility.

    They left out the part about gasoline being up a nickle and it being up so much is also likely attributable to end of contract soon.

    I’m switching May in the morning comments.

  27. 27
    zman Says:

    Tom – thanks. I came out of the last of my oil service puts about two weeks ago (BHI and SLB) and am not yet too tempted to get back short them. This could play out for a few days on the M&A side.

    Refining very tempting to add more puts here.

    Dave – year ya test. Thanks.

    Guys – don’t forget to sign up for Digg (and then Digg for the posts)- it’s free and it gets these issues in front of more sets of eyeballs.

  28. 28
    tom2oc Says:

    What the hell is Digg Z? Tx

  29. 29
    zman Says:

    It’s a news service where you can vote (Digg) for stories you like. The more diggs, the more likely other people are to see the story. There’s a bit more about it on the brief tour of ZEB page above. Once you’re set up it only takes a couple of seconds a day to vote for the post.

    Conversely, if you hate what I wrote and think I’m an idiot, you can click to “bury it” which takes the post down in the ratings. But heh, who’s gonna wanna do that?

  30. 30
    zman Says:

    One of the other little whistles I added for the new site is Sphere It!. It’s the little disc shaped icon at the bottom of the post. Click that and it pulls up a set of articles and blogs talking about stuff similar to what I wrote about: gasoline, nat gas, Opec , whatever so you can get a differnet perspective pretty quickly.

  31. 31
    tom2oc Says:

    Holy cow, I didn’t know you were that big a techie Z! Tx for the info.

  32. 32
    El Diablo Says:

    Zmann,

    New site looks great. Only comment offhand is that I have difficulty navigating back to the ‘home’ page (your old site had a link right at the top of the page)

    RE: gasoline. Talking heads cite gasoline prices and storage relative to this time last year, but IGNORE price of crude relative to this time last year. When Gasoline futures reached $2.40 last year, Crude futures were $78. This rationale that Gasoline can get back to last year’s level just because of the time of year is unbelieveable.

    RE: Snafus. I will diligently ‘continue’ populating the comments…

  33. 33
    Jon Says:

    El D,
    Just click the title at the top of the page, it takes you to the home page.

    Zman,
    The RSS feed for the comments works great, I’ve got mine set up to check every 10 minutes.

    I had to work in the office today so I didn’t watch the markets closely. I did catch this notice from Knightsbridge Tankers. It looks like they expect to be busy for the next few years. I might buy some for the dividend, now about 13% with the stock at this level.

    http://www.knightsbridgetankers.com/IR/press_releases/1112818.shtml

    One more thing – this comment entry window is sure narrow!

  34. 34
    Seymour Hartman Says:

    You appear to be very bearish oil and gas. Yet you have recommended END as a purchase.

    Do you still do so or are you suggesting this is for a latter time

  35. 35
    zman Says:

    EL D,

    Huge point! Though for them to catch that they’d have to wak up!

    My eternal gratitude for your snafu diligence. Did you see anything at all for the nickle pop in RBOB today?

    Jon – I agree they’re going to busy and maybe sooner than people think. The OMM statement Friday touch off a firestorm among the tankers and I think with cheating season approaching they’re going to a have a great second quarter compared to current forecasts.

    Comment window, yep, that’s driving me nuts as well. Hopefully, I’ll get it worked out this week.

  36. 36
    zman Says:

    Hey Seyour. Good question. I’m not that bearish. I have been in the past but I went more neutral last Friday. Currently I’m looking for:

    a modest pullback in oil – mid $50s and then maybe into the low $50s.

    Gasoline Down after the hysteria wanes but probably not significantly until June.

    Nat gas to $6.50 and then drifting lower through April into the $5.75 to $6.25 range.

  37. 37
    zman Says:

    As to END.

    That one is a long term play and they’ve had the stuffing kicked out of them already. It’s a buy now and check back in a few months situation. As you can see in the ZEB reports area the growth from discoveries alone is massive through 2009 and propelling them well north of their EIBTDA/interest coverage over the next 3 years. Could it go lower, sure but I think a lot of the downside has been taken care of.

  38. 38
    zman Says:

    From Bill F – originally posted on the week ahead page:

    Best long buy, imho and hold is TNP. Assets are worth 70, good mgt. only negative is a lng tanker with no work

    Best speculative stock: Topt battered and beaten up is now at 4.50 book is north of 7.50 and qvt hedge fund has taken an 11 % stake. i think this is a takeover opportunity, imho

    Good thoughts Bill thanks. Hopefully they’ll let TOPT up off the mat some day. How come it’s not supposed to make money for the next 2 years? Thanks.

  39. 39
    bill fraser Says:

    Topt sold 9 tankers and are leasing them back. Additionally, they are drydocking most of their vessals for special surveys which is cutting into billable revenue days. So it’s a utilization problem coupled with higher expenses. The leases have a 50 m “sellers credit” which comes back to topt and the end of the leases. This is recorded on the balance sheet as a long term asset. Ultimately this 50 m comes into equity. Additonally, due to Accounting rules, the profit on the ship sale has not found its way to the PL since their is the contingency on lease performance.

    When you add the 50 m to se of 198 m you get pro forma equity of 248 ans shares o/s is roughly 33 so book is 7.70 even if they break even over the next 2 years and the stock is at 4.50

  40. 40
    Elton Michael Says:

    interesting site. You can find more information here http://www.vsbot.com

  41. 41
    The Rat Says:

    no way:) http://www.lotbot.com

  42. 42
    Oh, Suzi Q Says:

    Oh, Suzi Q…

    news…

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