28
Mar

Wednesday Morning – Oil Inventory Day But All Eyes On Iran

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Wednesday Topics

  1. Oil
  2. Oil Inventories
  3. Odds & Ends

Rumor Driven Oil Market – After a tight day of trading oil spiked in the afterhours market, reaching as high as $68 on rumors of a skirmish between US and Iranian forces. Fortunately it was the white collar types on the trading floor with the itchy trigger finger and not anyone actually holding a gun over there.

  • The U.S. military and State Department officials said they had no information about a naval incident between Iran and the U.S.
  • Rumors that Britain had staged a rescue attempt also wre found to be unfounded.
  • However helping to keep the confilict premium in prices, the U.S. Navy yesterday started the largest show of force in the Gulf since the 2003 invasion of Iraq, the Associated Press reported.

Oil is looking to to open up $1.76 this morning and will likely reach $65 and higher during the day. This will be short lived unless something actually happens and I’m more inclined to add to put postions. I’ll take a few opportunistic long trades this morning but it will be in comments after I see how the market opens (only once the initial surge is out of the way).

Inventory Expectations (from Reuters): (Not sure how much inventories are going to matter on a day like today)

  • Crude – up 1.6 million barrels. Probably the most important number of the three right now. If oil imports keep rising it will put the kybosh on any credibility OPEC might have had. When the Iran thing blows over, if imports are actually higher than they were last fall, crude will come in quickly.
  • Gasoline – down 1.8 milllion barrels. Watching the demand numbers here which are up but not as much as the talking heads would have you believe. I’ll review that tomorrow but suffice it to say that we’re not short of gasoline inventories for this time of year and a rising utilization (see the Snafu page for more of El D’s great finds) will right this ship in time for stronger demand later this Spring.
  • Distillate – down 1.2 million barrels.

Natural Gas Up With Oil. Very resilient and likely to trade higher with oil although what logic applies there I’m not sure outside of “a rising tide lifts all boats”. The April contract was strong all day yesterday closing up $0.25 to $7.50.

Odds & Ends

Potential Longs – these are stocks I have queued up for a trade if I think the rally is sustainable or at least worth a quick trade. (APA), (BHI), (EOG) (still trades with oil more than gas), (SU) see below, (VLO), (TSO), (XLE), and (XOM). You can make money being long anything energy on a morning like this one but these names are highly volatile and trade closer to oil than most. Note that if the initial surge fails the same list works equally well (except perhaps for XOM) on the downside.

Analyst Watch: (SU) from hold to Buy at Deutsch (if you’re looking for a quick long trade this morning this is one to watch…few benefit more from higher oil than the oil sands players. (SGY) from hold to strong sell at Matrxi (ouch).

Nigeria Master Plan Watch: President for now Obasanjo launches Master Plan Niger Development socio econmic development in an effort to ease widespread discontent.

“As we launch the master plan today, it is my abiding belief that we are also launching the commencement of a voyage of hope that will sail the Niger Delta past a legacy of turbulence, neglect and poverty into an assured future as our nation’s most peaceful, most prosperous and most ecologically regenerative region,” ~ Obasonjo. Comment: Words. He leaves office in April, he’s been in charge since 1999 and he does this now. Also, I don’t see any actual details yet but it is a 15 year plan so I’m not holding my breath. I’d expect increased violence leading up to the elections.

Bastardi Watch: He predicted the late winter cold snap and now he sees a mess ‘o hurricanes in the Gulf.

BE CAREFUL OUT THERE TODAY.

Take oil prices with a grain of salt.

I almost didn’t post anything but that today because the market will be moving very fast and it has little to do with fundamentals.

Even if there is a conflict you’d have to sink something in Hormuz or see a blockade to impact the fundamentals, and I don’t think that’s very likely. Mahmoud’s economy is based on oil and he, like his buddy Chavez in Venezuela use oil dollars to keep themselves in power with frivolous social program (cheap gasoline etc) while neglecting their infrastructure. Those guys can’t afford to stop the flow of oil or they’ll be swinging like Mussolini.

65 Responses to “Wednesday Morning – Oil Inventory Day But All Eyes On Iran”

  1. 1
    zman Says:

    Stocks not really buying the crude rally as of yet. Maybe waiting on inventories.

    Eyeing SU which is running up in lockstep with oil

  2. 2
    zman Says:

    Bought SU Mar $75s at $2.50

  3. 3
    zman Says:

    bought a little insurance with may XOM 75 Calls @ $3.00.

  4. 4
    zman Says:

    Anybody else here a claim that the Brits were 1.7 miles inside of Iraqi waters and that they released the coordinates as proof?

  5. 5
    zman Says:

    Doubled May 90 TSO put position for $2.20,

  6. 6
    dave Says:

    Big sell program can in

  7. 7
    Popeye Says:

    Heard something about satellite evidence proving they were in Iraqi waters. ???

  8. 8
    dave Says:

    came out of cop & xom

  9. 9
    zman Says:

    gaso down 0.3
    dist down 0.7

    very bearish numbers

  10. 10
    zman Says:

    was starting to think I was crazy loading up on puts into this. of course, they can still reverse it quickly. alos, thought nobody came by this morning. glad to have you guys talking some.

  11. 11
    sane Says:

    I think the inventory report goes back to those API numbers last week and the discrepancy.

    Sane

  12. 12
    zman Says:

    SU is up $2 taking more puts at $2.50 ish

  13. 13
    zman Says:

    Sane – that’s rigth, thanks for the reminder. We were looking for a snap back and although it didn’t comeply reverse this is a good start.

  14. 14
    sane Says:

    http://www.smh.com.au/news/world/proof-british-sailors-in-iraqi-waters/2007/03/28/1174761571015.html

    Link to the report about the coords of the sailors. Funny thing about it is the first set of coords the Iranians released were also in Iraqi waters.

    Sane

  15. 15
    zman Says:

    silly iranians, tricks are for security council members.

  16. 16
    zman Says:

    TSO plummeting back to earth (ok down $0.20 but it looks like the fix was in)

  17. 17
    zman Says:

    anybody know where to get those API numbers, misplaced that bookmark?

  18. 18
    sane Says:

    API Report

    The American Petroleum Institute reported a rise of 5.9 million barrels in crude supplies for the week ended March 23. The Energy Department had reported a decline of 900,000 barrels. Motor gasoline supplies were down 2.2 million barrels, the API said. The government reported a fall of 300,000 barrels. Distillate supplies were down 4.1 million, the API said, compared with the government’s 700,000-barrel decline

    I got it off of marketwatch

    Sane

  19. 19
    zman Says:

    can’t get fill on SU, measely 2 contracts at $2.55 just went off,

    USO rolling over hard.

  20. 20
    zman Says:

    Thanks Sane,

    That large distillate draw is essentially the end of season restocking.

    Huge build in crude though…very strange

    SU falling out of bed.

  21. 21
    sane Says:

    Z,
    Did you notice in the eia’s report yoy demand growth continues to shrink.

    Sane

  22. 22
    dave Says:

    OIH starting to look like a buy

  23. 23
    Popeye Says:

    Bloomberg says tanker rates falling.

  24. 24
    zman Says:

    The weathergirl on CNBC think this is bullish. What’s up with that BS?

    Yes, Sane, I saw it. I hate how in the Special File they don’t show the prior week on the demand figures, just on the stocks. I’m going to have fun with the numbers tonight. OPEC is obviously cheating and we’re in no danger of running out of gasoline.

    Iran is the only thing hold oil up here.

  25. 25
    zman Says:

    Popeye LOL, you’ve gotta love the press’ five minute attention span. Spot VLCC goes from $30 kpd to $75 kpd and falls a $3 yesterday and that means rates are falling? hmmmm.

    —————————————–

    Dave you actually trade the OIH or the components? The premiums are a lot lower on something like a BHI or SLB and you get pretty much the same movement (although you do have stock risk at that point)

  26. 26
    zman Says:

    Sane – dot a link for that API data?

  27. 27
    sane Says:

    Yeah looking at that special file a majority of the gasoline draw was on the west coast.

    Sane

  28. 28
    dave Says:

    Zman….I trade the components. Actually I use to trade MUR & VLO then stopped about a year ago. I am back to oils again because them seemed to have replaced the techs. as volitale trades

  29. 29
    sane Says:

    All I have is a marketwatch link

    http://www.marketwatch.com/news/story/api-reports-hefty-climb-crude/story.aspx?guid=%7B281730FF%2D4BC2%2D4A86%2DB8BA%2D82DFF85717E6%7D

    I can’t seem to find it on the API site

    Sane

  30. 30
    sane Says:

    z,

    The api report is at accessapi.api.org, but you need a subscription which I don’t have.

    Sane

  31. 31
    zman Says:

    Dave – hear ya VOLATILE!!! Take TSO for instance up $1.70 before the report, down as much as $0.70 after it and now up a buck.

    Thought I was buggered on my XOM calls but Iran mania has prevailed.

    SU on to new highs of day without oil – that’s just crazy talk. I’ll add more when it starts to look tired.

  32. 32
    dave Says:

    Zman when I look at BHI I always think ok oil rigs in Saudi Arabia

  33. 33
    dave Says:

    can’t type…..of

  34. 34
    zman Says:

    So releasing the chick Brit is worth about $0.60 to the price of oil.

    I’m sorry, are Iran and Britain at war? Are they saying these guys are combatants or spies? This is all about propping oil up until demand in the US can takeover.

  35. 35
    zman Says:

    If you think the high price of gasoline hasn’t gotten someone’s attention you’re mistaken.

    Gasoline imports rose to 1.1 mm bpd up from 800,000 last week. That’s the HIGHEST level since late January and the second HIGHEST level since mid November

  36. 36
    zman Says:

    biddign $2.30 SU May 75s here.

  37. 37
    Jessy Says:

    Zman – Love your blog. Keep up the good work.

    I am bullish on oil. But your analysis gives an insight on what is really going on.

  38. 38
    Jon Says:

    I think you need to be a subscriber to get the weekly report from API. Cost: $12,935, unless you’re an API member, then it’s only $9,700.

  39. 39
    zman Says:

    Jessy – How can you not be an oil bull these days? It pays. LOL.

    Glad you like the site! Hit me with any questions and/or suggestions you have.

    I know everybody thinks I’m a bear but I try to call it like I see it (the fundamentals that is). I appreciate you pointing that out.

    And actually, my stock, not option, ideas are almost entirely long.

    God, chech out SU! To the moon. Got my seecond set of 75Ps at $2.30. done on that for the day.

  40. 40
    zman Says:

    Jon – what a bargain!

    OIH and SNG down. XOI up slightly but without the usual big cap leaders. odd.

  41. 41
    Attacking Mid Says:

    z – I thought you were saying you were buying SU CALLS, not puts. I was going to give you a hard time, cuz I was starting to buy puts. I’m doing the April 80’s though.

    Am currently in EOG and SU puts. Up a bit on EOG, down a bit on SU. Hopefully, this Iranian issue starts settling down soon. That guy is truly a nutcase.

    Kicking myself over missing Monday’s brief spike up in BQI. Was touring a college campus in Indiana with son #1, and was unable to shake free when the market opened. Cost me several thousand :(

    AM.

  42. 42
    sane Says:

    Ahhh Indiana

    Ya know, derz more dan korn in Indiana

    Sane

  43. 43
    zman Says:

    AM – I said it would be a good long in the post today but in comments I’ve taken two pieces on the put side, one before and one after the oil report. With that said, it continues to trade higher on the Deutrche upgrade this morning.

    Those ideas were just a trading call on Mahmoud Mania. And yes, he is a friggin nutcase that is overplaying a pretty weak hand.

    Don’t you know the Med looks like the of the movie Top Gun right now.

    Here ya on the timing loss. I dropped a few grand a couple of months back while sitting in a carpool line at daycare. Talk about daddy stress.

  44. 44
    zman Says:

    AM – If you’re going state school UTexas is hard to beat.

  45. 45
    zman Says:

    and you can’t beat it if you’re going private. lol

  46. 46
    Attacking Mid Says:

    Burnt orange (one of the ugliest colors known to mankind), just isn’t his color ;)

    I’m an Iowa State Cyclone, and I couldn’t even get him to go visit the campus despite their offer of significant financial incentives. Kids at this age develop a mind of their own. I’ve got to improve my trading to pay for it all.

    AM.

  47. 47
    sane Says:

    I am half Boilermaker half Hoosier

    Sane

  48. 48
    Attacking Mid Says:

    sane – you’re probably familiar with Rose-Hulman, then. That’s where we were visiting. Neat school.

    AM.

  49. 49
    sane Says:

    Nice school, great engineering program. I had a couple of friends go there. I looked into going there, but they don’t have a nuclear engineering program so I ended up at Purdue.

    Sane

  50. 50
    Attacking Mid Says:

    He was interested in Nuclear a couple of years ago, but has changed his mind to Mechanical. Rose has an excellent ME program, and the campus environment seems like a good fit for him. Of course, it’s the most expensive alternative on his list. There are several schools he can go to for free or close to it, but they’re not places he’s too keen on (one is UT-Dallas). He really liked Rose.

    AM.

  51. 51
    sane Says:

    It is expensive, but you do get what you pay for there

    Sane

  52. 52
    Attacking Mid Says:

    BQI hosted a group of media-types recently, and several articles have been popping up in the press. Here’s one from today…

    http://www.canada.com/calgaryherald/news/calgarybusiness/story.html?id=380400fd-1211-4110-afe7-0d7fa385a045&k=21792&p=1

    AM.

  53. 53
    umagumm Says:

    AM: BQI- Seems like every time I open the paper they’re finding another billion barrels lol. Any idea of their timeline line re. when they are going to start harvesting that bitumen, making oil (and increasing shareholder value)?

  54. 54
    zman Says:

    As a trader, you’ve got to love the volatility of TSO. Now in the red again.

    RBOB gaso down a cent now, that’s a 6 cent swing today. With oil still up a buck you crack spreads are coming in a little bit. I’m short the refining group as you know but I don’t think we get a rteal pullback until rbob goes below $2.

  55. 55
    Attacking Mid Says:

    umagumm – read the article in the link, as it spells out a projected timeline for production.

    I would look for a significant rise in the shareprice immediately following expiration of options that I currently hold ;)

    AM.

  56. 56
    zman Says:

    3rd set of SU puts taken at $2. Man am I a sucker.

  57. 57
    umagumm Says:

    Ahh “Commercial production could begin by 2015″ missed that. Thanks- I’ll keep an eye on it and may take a flier on it myself sometime soon.

  58. 58
    dave Says:

    Looking at XLE to go lower, may enter a trade

  59. 59
    zman Says:

    Dave – check out the SU (misery loves company, lol, actually may be starting to give up some of the gains. Watch the 2:00 est pump though on USO)

  60. 60
    dave Says:

    I figure if it happens after the 2pm will be its last attempt to go lower. Yea I’ve watched SU all day waiting for it to crack

  61. 61
    zman Says:

    From todays EIA petro weekly

    http://tonto.eia.doe.gov/oog/info/twip/twip_gasoline.html

    Gasoline page shows upturn in output and imports and that we’re STILL ABOVE AVERAGE storage for this time of year.

    Look at the big jump in imports as well.

  62. 62
    zman Says:

    SU another dime on the bid and I’m breakeven for the day.

  63. 63
    zman Says:

    Natural gas starting to cool in front of tomorrow’s number.

    Did anyone here what CNBC is calling consensus for Thursday’s report?

  64. 64
    dave Says:

    I give up on a XLE trade, I may hang around for margin calls

  65. 65
    Cap Says:

    Cap Says:
    March 28th, 2007 at 5:44 pm

    Iran:

    Zmann …. I don’t know if you ever visited the Corner blog; but they have pretty good daily coverage of Iran including a daily summary of various types of coverage …. just scroll through today’s posts and you will see what I mean.

    http://corner.nationalreview.com/

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