14
May

Monday Morning

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Here's a brief look at last week.

wrap-051107.JPG

And here are a few brief comments on the week that was before we get to the week that will be:

Stocks: Performance was nothing to write home about:

  • The service stocks put on a show late in the week with the OIH ending at an all time high. Multiple comments from service company stalwarts about improving conditions along with multiple buyout rumors and a very resilient natural gas strip pushed the group higher. Current service positions include calls in (HAL) and (NE).
  • Producers, majors and indpendent refinings alike turned in a more mixed performance pacing volatility in the broader markets. We took losses in multiple (TSO) put positions last week.

Commodities:

  • Crude: Quiet trading buoyed late in the week by continuing acts of violence in Nigeria (kidnappings that prompted (CVX) to withdrawal ~ 300 workers from Delta facilities and  bombings which shut in another 100,000 bopd).
  • Gasoline: The first build in stocks in 13 weeks wass met with a mixed price response. However as Nigerian tensions mounted, June RBOB prices soared to new 2007 highs. Crack spreads also reached record levels for the year last week.
  • Natural Gas: Flattish trading on an "as expected" 96 Bcf build in inventories.

Data from the CFTC indicates the speculative net short position remains near record levels. Everytime natural gas has weakened it has consistently been met with buying. Cooling load is starting to pick up and as much as I hate to admit that it's a driver of price, hurricane season is around the corner.

That large short position will likely be supportive of gas prices at least into earlier summer. After that, the direction of natural gas prices is likely to key off heat, hurricane activity, and the balance of imports. It's expected to be a hot stormy summer so I wouldn't expect to see gas prices fall thorugh $7 / Mcf anytime soon.

Natural gas imports continue to be volatile from week to week:

  • As expected, LNG imports are rising as high local prices attract stranded gas from far off shores and

lng-weekly-051107.JPG

  • Canadian imports are slipping with lackluster production growth and increased demand from oil sand developments.

canadian-imports-weekly-051107.JPG

 

Taken together, and holding exports flat for comparison purposes, natural gas imports are running in minor deficit to year ago levels. This is modestly bullish for prices as I'd expect continued weakness in Canadian imports to more than offset an increase in LNG shipments. My thanks to (APA) for compiling and publising the weekly data used to generate the 2007 figures in the preceding charts.

 

Odds & Ends

 

Analyst Watch: nada

 

Holdings Watch: In general I'm still long the gassy E&Ps, getting  longer in service and tankers again, and despite  my thoughts that we are going to see crack spreads peak in the near future, I'm getting less short the refiners (after enduring a bludgeoning I won't soon forget).

 

Hurricane Mania Watch: Accuweather's Joe Bastardi just released an update on his thoughts for the 2007  hurricane season. Two words: lookout Florida.  I give credit where credit is due and Joe was the first, to my recollection, to nail the colder late winter call in mid January. He's looking for 13 to 14 named storms in the Atlantic with multiple strikes on Florida and even some storms which strike both Florida and the Gulf Coast. Comment: Seemingly bullish for natural gas and gasoline and we're still months away from the most active part of the season.

 

Nigeria Watch: MEND snatched an AGIP manager yesterday. Look for the daily violence and kidnappings to only increase through May as we head towards the changing of the presidential reigns on May 29. International observers have deemed the April elections "non-credible" which will only add fuel to the rebel's fire.

 

Clean Energy Confernce: Austin, TX, today through Wednesday. Check out the participants and agenda here.

 

 

18 Responses to “Monday Morning”

  1. 1
    zman Says:

    Thanks Nicky – so either sub $60 or back to the mid to high $60s. Coin toss?

  2. 2
    zman Says:

    NFX takes bite out of Stone.

    $575 million for purchase of SGY’s Rockie Mountain assets. 200 Bcfe proved. ($2.88/mcfe). Seems a little high but you’ve got another 150 of probables and you’re getting 600,000 net acres with deep potential in the Uinta.

    This will bump reserve life another ~ 5%

    They confirmed they’re marketing their North Sea properties in addition to Bohai Bay, China.

    SGY is trying to sell itself by streamlining the story. Maybe the third time will be the charm.

  3. 3
    zman Says:

    Thanks Nicky

    How about natty gas?

    TK gets early FTC clearance on it’s purchase of OMI.

  4. 4
    zman Says:

    Nicky, those hurricane forecastors are going to try to give you your $8.11 today!

  5. 5
    T-Tupp Says:

    z i get my cracks info from the vlo or tso website, is there a site out there with updates up untll last Friday that comes out in a more timely manner? i would like to know monday mornings where they stand… when do those site usually publish the previous weeks data, like thursday or friday right?

  6. 6
    zman Says:

    TSO published I think Monday night, VLO I dunno.

    I haven’t given it a good look yet lately.

    There’s also futures for gas and distillate cracks which may be available slightly delayed on some sites.

    We could of course just calc a 3-2-1 but it wouldn’t be representative of any particular location. I’ll snoop around more this week and if anybody finds anything please let me know.

  7. 7
    zman Says:

    PQ – Took some July $12.50 calls

  8. 8
    zman Says:

    check out the insane volume in GSF’s May calls. Even the $70s(five points in five days?) are going like hot cakes.

    I’m strongly considering the June 67.50s for $2.25 ish.

  9. 9
    zman Says:

    Nicky – how do you like n. gas now?

  10. 10
    zman Says:

    Agreed…like clockwork. The stocks took a pretty good hit off that slight pullback in in gas. Even the refiners are down on wee bout of profit taking in RBOB.

  11. 11
    zman Says:

    I show RBOB lod of 2.3121 Friday last.

  12. 12
    zman Says:

    Still have TSO $115 and $110 May puts. This action may allow me to recover a little.

  13. 13
    zman Says:

    I guess that close was a disappointment for n. gas as it failed to hold $8. It’;; be interesting to see if the next substantial dip lower is immediately met with buying.

  14. 14
    bill fraser Says:

    Musings:

    I love it when ng trades above 8 as i put my shorts on, covered them all and made 10 k. lets do it again tomorrow. huricane, i dont see any hurricanes.

    Zman, I like you gas commentary today, which conflicts with your normally bearish tendicies. i like to see both sides.

    Picked up today, that berkshire hataway might buy Valero. anyone else heard or seen that?

  15. 15
    T-Tupp Says:

    i seen a story about WB interested in VLO Bill F.

  16. 16
    T-Tupp Says:

    they wont buy it at these prices though…

  17. 17
    Trading Goddess Says:

    “Crack Spread”?

    Heavens!

    I need to get out more!

    Just what is goin’ on around these parts!

    Crack Spread?

    HAHAHAHAHAHAHAHAHAHA!

  18. 18
    H Says:

    How do I register?

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