23
May

Which Way Wednesday

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C Stands For Cartel Stupid! The so called NOPEC Bill which has passed the House and Senate in slightly divergent forms would essentially allow the U.S. government to sue OPEC members countries for price manipulation. As Congressman John Conyers of Michigan, chairman of the House Judiciary Committee and the bill's sponsor, said Opec's production quota system is a "conspiracy" which "has unfairly driven up the cost of imported crude oil to satisfy the greed of the oil exporters". Comment: If you think oil prices are high wait until you try to haul the OPEC 10 before the Hague. You don't like it don't buy their oil. Because it is their oil ya know.

Oil Inventory Survey: (from Dow Jones survey).

  • Crude: down 200,000 barrels.
  • Gasoline: up 800,000 barrels. Yesterday consensus, at least according to Bloomberg, calling for a build of 1.5 million barrels. In other words, more traders and analysts in the survey have added their last minute 2 cents to pull the number down. I wonder if they're long gasoline now?!

Crack Spreads. Yesterday in comments we were all scratching our heads over the continued strength amongst the independent refiners contrasted with falling oil, gasoline, natural gas commodities and the E&P and oil service sectors who were indeed taking it on the chin most of the day. After looking at the available crack spread data I pointed that a paired trade of long VLO, short TSO was probably a good idea to revisit. I haven't pulled the trigger on that and won't until after the inventories and furthermore, it won't happen all at the same time but I still like the plan.

  • West Coast and Pacific Northwest cracks have stalled and appear to be falling. Don't get me wrong, they may not tumble from here and remain extremely high but the velocity of the move has faltered. This is what has been driving (TSO) higher.
  • On the other hand, Mid-Continent and Gulf Coast spreads ((VLO)'s backyard) continue to shoot the moon and the stories of shortages you are hearing about these days are taking places in places like Des Moines not LA,

cracks-052207.jpg

Odds & Ends

Two Minutes Of Your Time Watch aka Shameless Plug of the Week Watch: OK, I'm going to put on my NPR hat and beg you for something. Money oh no. Volunteerism, nah. How about a vote. Please skip the rest of this paragraph if you've already voted with my deepest thanks.

For the rest of you, in the upper right hand corner of the screen there is a vote for this blog for best business blog button. It takes about two minutes. I thought I'd point it out because we're tipping the scales at just over 600 unique visitors a day around these parts and at last look a whopping 7 votes had been cast for this site. It's free, you don't even have to get out of your chair. I'll even put a link here to take you directly to the place you vote so you don't have to scroll back to the top. Maybe you don't think the site or I deserve such high accolades. Best business blog he says, ha! But this was the closest category available to Best Energy Stock and Option Blog on the planet. lol. Alas that category does not exist...yet. So the choice is either go get that third cup of coffee or vote. I'm zman and I approved this message. You can always go get that cup in two minutes.

Analyst Watch: Bernstein ups (RDS.a) and (COP) to buy while cutting (CVX) to hold. Jefferies raises (TNP) price target from $68 to $85.

For Jeff: Here's a link list of refiners and their capacities. Enjoy!

The Nukes Are Back In Town Watch: The 1,155 MW Browns Ferry Unit 1 in Alabama was brought back into service after a 22 year outage!  Nuclear power accounts for roughly 20% of the U.S.'s generating capacity (a close race with natural gas) while coal easily leads at roughly 50% of capacity and wind, solar, oil comprise the remaining 10 or so percent. The restart of BFU1 effectively increases nuclear generation capacity by a little over 1% and although that doesn't seem like a lot it will most likely supplant natural gas when it returns to full service over the Summer and Fall as it completes its restart tests.

Coal Trains Running Behind Schedule. Year to date shipments are off 2% due to a combination of strikes, fires and floods. Inventories remain higher than normal but this will be supportive of higher gas prices to some degree.

Hurricane Watch Watch: NOAA says to expect 7 to 10 Atlantic hurricanes this season with a 75% chance of above average activity.Bottom Line: Holdings Watch: - see the new improved OPEN and CLOSED CALLS portions of the ZEB performance page (redesigned after I failed to recover my excel interface file). I'll be adding the respective put pages in coming days.

  • Calls:
    • (NE) Added to our position bringing it back to a 2x position for $3.00 (June $90s) late in the day as the service guys took a beating into the close.
    • (TK) - Yesterday I forgot to mention we still own a 1x position in the June TK $60s. I may add to this quickly today if that crude import drop last week turns out to be a one time event.
  • Puts: No Action.
  • Stocks: No Action.
    • (SCU) cut loose their former president for $350,000.
    • (END) edged back over the $2 mark.
    • (CLR) continues to perform admirably in a choppy E&P market - see last Thursday's post for my thoughts on those newcomers to the public energy arena.

Minnow Watch: (WHT) scores good test rate at one its Hill County Barnett Shale wells. Recall that these guys have a JV with (FST) and way back on May 8th I wrote the following which still applies:

(FST) / (WHT) - I’m looking for comments on Forest’s Hill County Barnett Shale progress as a gauge of the future fortunes of little Westside Energy (WHT) with which Forest has a 50/50 JV on 7,000 acres.  Shale leaders (DVN) and (EOG) have been very active in Hill county and in close proximity to Forest/Westside’s leasehold. EURs in the area have been estimated at between 1.2 to 2.5 Bcfe  and sell-side analysts are putting numbers of between 10 and 40 Bcf per 1,000 acres on the JV acreage. The high end of that range is probably not realistic (seems highly unrisked). However, at a pretty conservative $2/Mcf in the ground (they’d likely get $2.30 to $2.50 in a sale) that would put WHT’s Hill county assets at ~ $50 to 200+ mm versus the company’s tiny $75 mm EV. 

90 Responses to “Which Way Wednesday”

  1. 1
    zman Says:

    Morning folks,

    WHT off to the races up 13%, not going to chase before the inventory numbers.

  2. 2
    Kevin Says:

    VLO down before inventory numbers. We better see a REF rate of 90% or higher or we may see new high on XOI IMO.

  3. 3
    zman Says:

    K- agreed . I’ll be looking for the change in production and inventories most of all but % util will be the point number and 90 is the over / under.

  4. 4
    Kevin Says:

    CNBC is sooo shameless,..LOL.

  5. 5
    Kevin Says:

    Could a Gasoline build of over 1.5 million signal a trend change here with ref rate over 90% or are we still so far under water that the oil patch should move higher over most of the summer?

  6. 6
    zman Says:

    K – I think we’re closer to a top on gasoline but not oil.

    I was trying to say in the post that I think traders are increasingly short gasoline. Listening to their tone on CNBC and seeing how they’re trying to pull down the expectation of a gaso build so that if you get that big 1.5 mm barrel build its bearish and not in line. Like Cramer said, they lie for a living. What they really believe and what they can achieve by going on TV and spouting non sense is an entirely different matter.

    Speaking of TV, what’s CNBC up to now? I’ve got mine off.

  7. 7
    Kevin Says:

    Z, They are LIVE from the NYMEX and talking about how to make money in refineries. Alos live form a refinery,..somewhere. They are definetly bullish on refineries.

  8. 8
    Kevin Says:

    CNBC will probably be on a commercial break as the numbers roll out. They have done that before.

  9. 9
    zman Says:

    I actually like VLO long here relative to the others but not before we see inventories.

    Somebody explain to me this continued run in SU. It’s my only open put right now and it runs with high oil, lower oil, high ng, lower ng. well…you get the pix. It’s T Boones favorite, maybe thats it.

  10. 10
    zman Says:

    K – they come back from commercial about 20 second after the numbers are released. I think it gives them a little time to develop their spin. If you’re like me you need to see all the #s and not just what they spoon feed you. Click this link:

    http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/weekly_petroleum_status_report/current/txt/wpsr.txt

  11. 11
    Kevin Says:

    Thanks for the link Z.

  12. 12
    Kevin Says:

    Those are good numbers esp 91.5%

  13. 13
    Kevin Says:

    sorry 91.9%

  14. 14
    zman Says:

    1.5 mm barrels. Which is where consensus was Monday before they started pulling it down. Traders are definitely trying to sink RBOB here.

  15. 15
    zman Says:

    MRO puts here

    Crude imports were back up, TK ok.

  16. 16
    zman Says:

    Contrary to the popular message, they managed to stick a little more oil into the SPR again.

  17. 17
    zman Says:

    Sane – you’re out there, I’d love to see the API numbers

  18. 18
    Kevin Says:

    What’s our concensus here? I think those numbers were pretty good but when will the bears come out and say,..”hey,..we are way below the 5 year average and demand will not be met, even at this 91.9% rate”. I really wouldn’t be surprised if the oil patch completely recovers.

  19. 19
    Kevin Says:

    900k for dist

  20. 20
    Kevin Says:

    up that is

  21. 21
    Kevin Says:

    VLO 76.07 and moving up.

  22. 22
    zman Says:

    taking opening position in WHT at $3.17.

  23. 23
    zman Says:

    OIH soaring. 175 soon.

    NE
    HAL

  24. 24
    sane Says:

    The American Petroleum Institute reported a fall of 975,000 barrels in crude supplies for the week ended May 18. The Energy Department had reported an increase of 2 million barrels for the latest week. Motor gasoline supplies were down 2.3 million barrels, the API said. The government reported a rise of 1.5 million barrels. Distillate supplies were down 836,000 barrels, the API said. The government posted a 500,000-barrel rise.

    Sane

  25. 25
    Kevin Says:

    Bolling is pimping uranium,..CCJ, usu,.etc…

  26. 26
    zman Says:

    CNBC has turned into a personality show. Anybody remember Dan Dorfman in the 1990s. He got into trouble for front running trades on the names of stocks he’d pimp on his show. Now that’s all CNBC does. Amazing!

  27. 27
    sane Says:

    Looking at past API Numbers VS DOE numbers, In general the numbers seem to be lining up in the totals between the two and I would not call it a state for panic.

    Sane

  28. 28
    zman Says:

    ok, I got that wrong this morning on the shorts setting the market for a fall. It was the longs who wanted a dip to buy.

  29. 29
    zman Says:

    don’t see the Iran report. Do see that we’re conducting military exercises off their coast again.

  30. 30
    Kevin Says:

    Yeah Z and they get away with it,..SEC just looks the other way. It’s back to the 90’s again.

  31. 31
    T-Tupp Says:

    what with the ridiculous discrepancy in the two reports? like they are the complete antithesis of one another….

    are these number actual measurements? and which ones are followed, im thinking API

  32. 32
    sane Says:

    T, As for the numbers that are followed, It depends on which one suits the bull market sentiment. It seems the eia report is generally followed more.

    As to accuracy of numbers… I used to think the API was more accurate, but I believe the best way to really look at the numbers is to take the current stock totals for both and split the difference. The numbers in appear to be roughly the same, or if there is a discrepancy they seem to even out at a point. This week is a good example. The API had been reporting gasoline builds for about 5 weeks now and they have been bigger than the eia’s also. Total gasoline stock reported by the API were higher than the eia’s by about 6-7M barrels. This week that number moved closer together to about 3M barrels.

    Sane

  33. 33
    J Says:

    Z, you got my vote for best blog, but if you want to win this thing I would suggest you get one of those “adult content” flags. Perhaps you need to include an oil & gas honey of the day on your blog.

  34. 34
    zman Says:

    just doing a little work on tankers and got to say a huge hats off to Bill F with his TOPT call.

  35. 35
    H Says:

    Goodmorning,Zman and company ,,

    zman, whats your reaction to todays, report..I ben away all morning and just this second came in and sat down..and I C , two dverging numbers-DOE and API-

    Did you do a run down of the report,?

    Can you break down the reports- production ( product produced ) imports, and your favorite metrics?

    I have to learn to read the reports better, so I will copare what I see to your run down, TIA,

  36. 36
    zman Says:

    J – Thanks – Adult content ROFL. Hopefully I won’t have to result to anything beyond MEND AK/RPG file photos!

    Oh I don’t plan to win but moving onto the front page with the likes of Trading Goddess would do wonders for site hits.

    Sane – I agree … a mix of the two is best as they likely equal out over time.

  37. 37
    zman Says:

    Morning H- I’ll do a run down of the report tonight but the nutshell version for gasoline is this: the ship is righting itself. Imports up, production up. Storage rising as it should. I’ll look at demand in a bit here but I don’t think its soaring any longer.

    On crude, imports continue to flood in.

    I’d say bearish but now traders used that to buy the dip and are driving commodities higher.

    XOI,XNG,OIH all leaping.

    Having fun with my usual suspects:
    EOG breaking out right now on a chart – in fact, Nicky, if you ever look at stocks let me know I like that sort of chart.
    CHK – ditto
    CRK – should be bought now. In fact I’m trying to double my pos there.
    HK – through 16 now
    PQ looking hard at 14 and the news for their big well is still out there.
    TK – flatline since the report. I should have listened to Bill F
    SU – rising beyond this dimensional plane,
    Refiners – I’m not in but I think MRO has potential. I got scared the trade earlier
    NE – running and they presented today, I’ll see what I can get there but it’s a big bbreakout with the OIH.
    HAL – liking a 37 handle and I think sentiment there is getting much more frindly. I think it tops 38 on and OIH move to 180.

  38. 38
    J Says:

    Z, regarding the SU run, I’ve been in and out of SU about 10 times over the past 3 years, and what I have noticed (after being burned once or twice on puts)is that geo-political events really seem to drive it at times (more so than your average oil play). Seems like everytime a carrier battle group steams into the gulf SU gets a pop. Could be a long hot summer in the Gulf, and we all know that once we leave Iraq things are going to be ugly. I don’t see peace breaking out anytime soon.

    Just seems like SU is given a premium because it is a safe and secure oil source. Not to mention growth in the sands going forward should be more robust with high oil sticking aound.

  39. 39
    zman Says:

    J- hear ya. It does seem to get more keyed up than just about any other oil. Someone with extra time on their hands could probably run a correlation to oil price moves and figure out just how much of a difference it enjoys.

    EOG same. Trades with oil though it’s a big cap GAS stock.

  40. 40
    zman Says:

    Nicky – about what time on Wednesday does the ICAP nat gas storage number get released?

  41. 41
    H Says:

    Thank You- Zman! Great RunDown-As Always !

    My take is that the take up is in full effect, ahead of the holiday- and we still need to be mindfull that this has more steam( as far as puts and shorts ) the reports of a bullish bent….Nest Weeks will be a intresting tell…since I love puts I am on the sidelines, but am long enough common-

  42. 42
    H Says:

    Hi Nicky….nice TA work up their , thanks for it-

  43. 43
    zman Says:

    N – that figures. I used to get it off Bloomberg but I’m no longer a subscriber. Any other ideas there? I was pretty excited about that?!

  44. 44
    Loren Says:

    Hey, if you want an alternative to posting screenshots of Excel, check out thinkfree.com. They’ll let you link to a view-only version of a spreadsheet. Plus, their online spreadsheet app is far more robust than any of the others, so you can actually do all of the work there and sell your copy of Excel. 🙂

    Loren

  45. 45
    zman Says:

    Thanks Loren…I’ll check it out! But I could never leave excel. I look at google’s offering and while nice I’d have to relearn all my hotkeys and nothing felt quite the same.

    Nicky – it can’t be a coincidence. lol. You’d think they want to let people know where consensus stands…but maybe not…

  46. 46
    zman Says:

    SWN just keeps hitting new highs daily. May remaining June $45 Calls go before #s tomorrow.

  47. 47
    sane Says:

    Hey z,

    Voted for you on the bloggers choice awards.

    Sane

  48. 48
    zman Says:

    CRK – went with the Sep $35 for $0.80 as a new 2x.

  49. 49
    zman Says:

    Sweet Sane – thanks.

  50. 50
    zman Says:

    And thanks everybody for voting. We’re now at 16 votes from 7 this morning. This actually took the site from page 7 in the rankings to the bottom of page 2. My sincerest thanks. This of course is no reason to stop voting and just shows you that voting is free and easy and a right you enjoy as a member of a democratic society. Again, many thanks!

  51. 51
    zman Says:

    Nicky – do you see RBOB hitting the mid teens?

  52. 52
    sane Says:

    Demand was up a slight tick from last week. YoY 4 week average was %1.2.

    Sane

  53. 53
    zman Says:

    From an EIA post on inventory report today. Proof that our government just doesn’t get it:

    Thus, while the setting of record prices may be immaterial for many drivers, prices are high and are expected to remain high throughout the entire summer, they are not yet at levels which imply the same impact on U.S. households or the economy in general as the level seen in March 1981. Arguing over whether a particular record has been set does not change that fact.

    So $3+ gasoline is now “immaterial”. I guess if you start repeating that often enough it will become truth.

    They did report that all regions reported higher prices for the past week save the West Coast where prices are beginning to slacken. Again, look out TSO. VLO and SUN saw their regions for the most part continue strengthen in terms of cracks.

    By the way, crude oil stocks poked out the top of the band again which is already at the seasonal high of the year. In other words, we’re awash with crude. But, that doesn’t mean crude will tumble given the lower (at least everyone says so OEDC inventories) and demand will continue to pick up as the refiners slowly slowly slowly head towards the 95% utilization level they will reach this summer. This does however imply that gasoline prices will be falling which hurts cracks and again the refiners should see lower profit (still very high though) going forward. Since the stocks traded in lock step with cracks and retail gasoline move, you’d expect them to soften a bit here.

  54. 54
    sane Says:

    The rough numbers are showing gasoline demand at ~9.36 for the 4 week average

    Sane

  55. 55
    zman Says:

    Nicky –

    Production was up and we’re now once again producing more than we were a year ago in aggregate. Conventional is a little down vs the year ago but is more than offset by an increase in YOY reformulated production.

    Imports actually tumbled but I wouldn’t expect that to be anything more than a glitch in the timing of offloadings as crude proved to be last week.

    Demand: for the week it was pretty flat with the prior week but is running 2.6% ahead of the year ago week.

  56. 56
    H Says:

    I don’t have cable ( imagine trading without CNBC ) I don’t like paying 100$ a month when I get 15 good channals for free and great stuff on PBS! ( yikes )

    So whats CNBC spinning today, or whats the spin, on the stks? Is eric on ? if so whats he yaking?

    I think servise rallys into the close….to few shares being chased rentlessly!

  57. 57
    zman Says:

    H – earlier they had Eric B on with the caption “don’t get mad, get rich trading energy”. That should tell you everything you need to know.

  58. 58
    zman Says:

    H – re service: I agree. A little longer term, but not much, I think you see the private equity folks start picking off some names.

  59. 59
    H Says:

    Nicky Says:Smartly as always!& with excellent T&A…Thanks Nick !

    “”Crude and distillates pretty strong. Need them to take out the days lows to accelerate this to the downside”””

    I agree but I really don’t think thats about to happen anytime soon, espeissaly today, the nest 2/3 days will be intresting, from the pits~

  60. 60
    H Says:

    I’m waiting maybe Monday- some consolidation should take place soon with fundies as they are-even E$P, lots of reserves need to be filled-

  61. 61
    zman Says:

    woohoo CLR

  62. 62
    zman Says:

    Last night the EIA said there’s another strike for the 31st. They didn’t mention the the 24th or the original 28-29th.

  63. 63
    zman Says:

    June 120 MROs puts taken @ $4. Very small, very high risk but a nice hedge to all my other longs and the stock moves like a banshee.

  64. 64
    H Says:

    Any News, the market seems spooked!

  65. 65
    H Says:

    I always wanted too know what ababshee was? and if it really is a word_

  66. 66
    zman Says:

    This won’t help relations with the villagers:

    Nigerian diplomat nabbed trying to smuggle $2.3 million out of the country.

  67. 67
    zman Says:

    http://en.wikipedia.org/wiki/Banshee

  68. 68
    H Says:

    LOL Zman……great , quick comback…

    Nice diplo story, no surprise, they got 1% of whats been going on for years!

    On another note….

    Cramer seems funnley quiet today, on the service trades..but I still like HAl-

    Cramer quiet…strange!!!

  69. 69
    H Says:

    ” omen of death ”

    Whats she saying….

  70. 70
    zman Says:

    OIH bouncing off 170 like a shot.

  71. 71
    H Says:

    Zman, I see it, it will have a very tough time staying below 170, for the time being-…..upgrades should come to defense! I really doubt todays buying gets sold…but whats happening on cnbc i c the market taking a hammer…tihngs tippy—buyers tired—hetting exusted?—or a little headfake for the shorts. before the next run?

    So many questions…if i only knew !

  72. 72
    H Says:

    Nicky, where did I say “distillates” were strong?

    But refiners are gonna have a gangbuster Q2!

    And the service has the fundies, to many backlogs/Biz and dayrates are on fire..I.E NOV( Which I been in and out 100 times )

    anyways whats with HO run? My head aches, I really wanted to sit back today and let everthing wash, but I’ve been looking all damm day! 🙁

  73. 73
    H Says:

    I don’t believe this service move down right now- it will be short lived!( of no money on this just a subconscious gut I have )

  74. 74
    H Says:

    I just think gas will move higher with todays report, way sooner then lower, specially before the holiday- the report did not releave much concern, near term.

  75. 75
    H Says:

    same with service…..even through it getting a bit tired, so it needs a short rest!

  76. 76
    zman Says:

    Interesting post close rally in oil (USO)

  77. 77
    H Says:

    I AM CALLING A 3PM RUN UP- PIMPING IF YOU WILL – ON OIH~

  78. 78
    zman Says:

    Heating oil prices much more out of kilter than gasoline and I think gasoline is high here. Got a find a play on heat to short. HO is up 33% relative to year ago levels yet crude is lower YoY and HO stocks are much higher. This has to suck for the guys that are rebuilding inventories after winter (distributors). Anybody living in the northeast feel free to give me a tutorial on when you refill your home heating tanks normally after winter and when you’re doing it this year.

  79. 79
    H Says:

    Wait to sept/aug-

    BTW I WOULD LIKE TO FESS I HAVE BEEN BUYING SOME AIRLINES,Brought some last week, on the dips. form the crushings, from the highs…I LIKE cal amr uaua lcc jblu…did I leave anyone out : )

  80. 80
    H Says:

    DId I metion Monday ( someone look I’m sure I did ) that I brought the TSO JUN 115 P’s for 2.70- yesterday I almost sold glad I waited till eariler, sold some at 3.4- and still have 20% of my postion-

  81. 81
    H Says:

    SLB RIG the mother of all MOJOs’s, Good call on NE z….and newfield…

    Boy when these reverse…when they reverse.

  82. 82
    zman Says:

    Pricing gouging bill passes the house but it’s to vague to be enforcible.

    http://news.yahoo.com/s/ap/20070523/ap_on_go_co/gasoline_prices_congress

    Congrats on those trades H!

  83. 83
    H Says:

    Yea nicky, odd …remember the warm weather in sept/oct/nov….HO was not moving up but down- and thats when it should’hsve moved up=

    ooooo Some service station in LI NY is selling gas for 2.27, its on the news and he has lines around the block!!

    and its getting warmer in the NE…

  84. 84
    H Says:

    WOW–someone just brought like 400, LCCJUN 35 C’s ….I own some, the worst of the worst-I’m in them at buck and 5.

  85. 85
    sane Says:

    My take on it is gasoline is propping up oil, heat, and nat.

    Sane

  86. 86
    zman Says:

    Nicky – right. And usually when you see that kind of abnormal activity its a clarion call for making money. Any thoughts on who gets hurt there when it reverses (or who will make $ on the boost this year over normal)?

  87. 87
    lawdymama Says:

    on the bullish side, June ATM TSO and VLO calls didn’t suffer as much as the stock, and drillers are still doing well… Don’t know when this is going to reverse but staying long for now.

  88. 88
    zman Says:

    Nicky – it varies. I can trade the futures but I usually stick to the stocks and ETFs.

  89. 89
    zman Says:

    Thanks again to everyone who voted. There are over 500 readers of the PSW site that come in here on a daily basis. We’re up to 19 votes. Please vote.

  90. 90
    golf Says:

    golf…

    […]Zman’s Energy Brain ~ oil, gas, stocks, etc… » Blog Archive » Which Way Wednesday[…]…

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