01
Jul

Weekly Wrap – Week Ended 06/29/07

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What happens every Wednesday at 9:25 CST? The oil report with Phil Davis and Zman on MN1.com! Don't forget to tune as we give the blow by blow on the oil numbers and our best ideas for quick trades based on the reaction to the numbers. These week listen on Thursday due to the holiday.

Holdings Watch: Not a bad week as far as trading goes. Lucrative but quite a bit quicker than my usual.

CALLS:

  • Bought (EOG) $75s for $1.45 on 6/26. Still holding. Last bid $1.25
  • Bought more (EOG) $75s for $1.15 on 6/27, sold at $1.50 (30% gain) later that day.
  • Bought (HAL) July $35s for $0.55 on 6/27, sold at $0.90 (64% gain) on 6/28.
  • Continue to hold a 2x position in (PQ) July $12.50s bought 5/14 for $1.70. Last bid $2.05.

PUTS:

  • Bought (FTO) August $40s for $1.45 on 6/27, still holding. Last bid $0.70. I also have a 1x position in the July $35s from before my trip which are done for.
  • Bought a 2x position in (SWN) upon the gas number (6/28) for $1.10. Sold on a further early morning gap down on 6/29 for $2.05 (86% gain).
  • Bought (TSO) July $60s for $3.20 on 6/28. Still holding. Last bid $3.80.

CFTC Watch: As you can see from the table above the Commitments of Traders report shows that the net short position remains very close to a record. In recent weeks I've said that the large short position would lend support to natural gas prices. While I was out La Nina went on vaction too and the fundamental fact that there's a lot more gas in storage than is usual this time of year and a lack of early summer heat contributed to a steep drop in gas prices.

What I said before about the CFTC position being a contrarian indicator remains true (in my brain at least) but let me be clear(er) on the point. The natural gas market, perhaps more than most, is subject to the "pendulum always swings way too far maxim". It is at the very extremes of price, highs and lows, when the seemingly overlarge CFTC position in opposition to price comes into play.

Waiting for support. $6.50? $6? $5.50??? The pendulum is swinging slower now but $6 may be in the cards (or even lower) for a very short time frame which will set up an excellent buying opportunity. I'd also point out that the Rockies continues to suffer with prices ranging from $1.58 t0 $1.78 which unlike natural gas prices in most regions which remain higher than year ago levels are down roughly one-third versus the comparable week in 2006. I've got my eyes on (BBG) for less than stellar results in 2Q as estimates have come down significantly in recent weeks in contrast to the chart which hovers near all time highs. (PINN), (SJT), and a few others may show adverse affects as well. Just food for thought for now. More later.

 August Contract Looks Pretty Iffy For A Fall To $6. I think you'll get a number of PRs announcing curtailments, especially from Rockies producers but also in Arizona and New Mexico. When you see these it'll be time to get long...then you have hurricanes. I'm never one to tout hurricanes as a reason to buy but it's a fact they can quickly jack gas prices and this year more than ever with the giant short on. A few curtailments and news that Atlantic windshear is falling off a month ahead of schedule could quickly put a V shaped bottom in gas prices.

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3 Responses to “Weekly Wrap – Week Ended 06/29/07”

  1. 1
    Art Says:

    Z,
    I follow the Weather Channel and Accuweather. I didn’t see where Joe B changed his forcast. Have you?

  2. 2
    zman Says:

    art – no, he hasn’t as far as I know, but La Nina was a component of the “more active season” camp.

  3. 3
    Art Says:

    Z,
    Thanks. Joe B has an very accurate track record. My $s on him.

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