09
Jul

Monday Brief – The Heat Is Finally Here

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Slow news day. See the weekend wrap for current postions and comments today for any changes. I still think crude traders have a real mission to get $75 and are likely to look at any weakness today as a buying opportunity. Of course, since last week's low volume rally occured without any susbstantive reasons we may see a bit of strong profit taking early today.

Early Indications:

  • Oil looking slightly lower after a three year old hostage was released in Nigeria. As in the 3-year-old daughter of a British worker. That's pretty low even for MEND. Of course, three foreign oil workers were subsequently kidnapped but that's more of the norm than the exception over there.
  • Predictions of warmer than seasonably temps are likely to put a floor under natural gas this week which at $6.45 appears to be holding up just above support levels in the $6.30s. We're getting closer to that buying opportunity. Natural gas is up slightly this morning but a sharp spike in temperatures and the not too distant heart of the Atlantic storm season could forestall and begin to reverse the recent decline in natural gas prices.

Heat Wave. 46 states reached 90+ on Sunday. Forecaster's are calling for continued intense heat (above normal temps) out west with sporadic boughts of extreme heat in the majority of the country, especially the northeast.

ne-heat-070807.jpg

Last Week Was Cooler Than Forecast; This Week Is Expected To Be Very Hot. According to Accuweather, oppressive heat is expected to grip the Northeast for the next several days. CDDs came in at 66 vs 68 in the prior week and a forecast of 71. The CPC shows this week's number jumping up to 85, the hottest of the year and well above normal and year ago levels.

Odds & Ends

Analyst Watch: (FSLR) initiated as hold at Deustche with a $90 target while B of A lifted its price target there from $91 to $115. FBR had a busy weekend raising price targets on the "mini majors" (OXY), (MUR), (HES), and (MRO). FBR also cut (CHK) and (APA) to hold. Credit Suisse cut (ESV) to hold and JP Morgan upgraded (WFT) to neutral.

North Sea Watch: BP may be forced to closed four North Sea oil fields with combined produciton of 75,000 bopd. The closure of the recently damaged CATS gas delivery system is to blame. No time line has been put forward for repair of pipeline which was closed July 1 after being damaged by a ship's anchor.

Hugo Watch: PDVSA sees mini-strike. Workers walked off the job at three rigs in Venezuela on Friday as Chavez laid out plans to replace them with military troops with no oil and gas operation experience. I've said it before and I say it again. Chavez' Venezuela: a model of how not to run an oil rich country.vz-prod-2006.jpg
Iran Worries About Production. Iran indicated production may fall 5% per annum without access to foreign. Comment: if you'd just learn to play nicely with the other children you and your buddy Hugo wouldn't have such problems.

32 Responses to “Monday Brief – The Heat Is Finally Here”

  1. 1
    Sambone Says:

    Did you see th IEA report?

  2. 2
    zman Says:

    Just did.

    According to the IEA’s medium term report:

    “oil looks extremely tight in five years time and there are prospects of even tight natural gas markets at the turn of the decade”

    the increased tightness is attributable to expected declines in supply and increases in product demand resulting in lower OPEC spare capacity.

    they see demand growth at 2.2% / yr through 2012 based on global GDP of 4.5% per yr.

    I saw the other day where Russia is slowing growth and China is still only eaking out gains. The U.S. looks flat to down of course and only Canada is putting on a concerted push right now.

    Pretty bullish talk.

    Brent’s easing anyway after last week’s run.

  3. 3
    zman Says:

    so much for profit taking; the oils are moving higher now.

  4. 4
    zman Says:

    OIH continuing last week’s break out.

    Holdings:

    HAL moving above the $35 mark it’s been stuck to like glue.

    OII – continues to rally

  5. 5
    zman Says:

    Nicky – what’s up with products??!!

    RBOB is soaring 0344 on no oil move!

  6. 6
    codydog Says:

    Probably not bearish that Turkey has massed 150,000+ troops on Iraq’s border, that Iran has been tunnelling into mountains near their nuclear facilities and that the USS Enterprise has been tasked to the Mediterannean & Persian Gulf.

  7. 7
    zman Says:

    codydog: just another day in paradise

    Coals looking strong again with natural gas:

    Looking at BTU and ANR

    IOC getting clocked (down 8+%) on apparently no news. I’ll let you all know when the Elk2 drilling report hits.

  8. 8
    zman Says:

    Nicky – MEND, SCHMEND, it’s all factions backed by politicians of the Nigerian government. As a dad, I’m glad she’s back. Was her capture worth a $2 rally in crude? No.

    Gasoline: Seems odd to catch up now unless crude is expected short term higher. I think this little bit of crude weakness is fleeting and that we’ll see $75 soon (if for no other reason than it’s a nice round number)

    Natural Gas: I’d be muted too if I had taken the pounding some of the longs have taken. Short position out later today.

    IEA – agreed

  9. 9
    zman Says:

    right, with gasoline demand growth decelerating, stocks recovering and crude stocks at 9 year highs and distillates more than a little full.

  10. 10
    zman Says:

    there’s that rebound in oil

    OII to new interday and ATH despite the softer OIH this morning.

    Looking at KWK long here

    How long before the giant move in FSLR and beginning move in STP rubs off on ESLRs of the world? I’m taking a little WFR here. Nice call HAPPY!

  11. 11
    zman Says:

    Nicky – I’ll comment.

    Valero took the Texas city plant down Friday night but it’s up again this morning.

    Why should imports fall Phil? Maybe seasonally but given these prices it’s a crap shoot as to whether or not they fall or rise.

    I like it how he talks about utilization being low at 90% but fails to talk about how gasoline PRODUCTION has been rising for weeks now.

    Two years ago, utilization was running 98% of what was then capacity. Would that be a good number for you Phil. That was pre Katrina? In that week with 98% util., we produced 9,218,000 barrels of gasoline per day. Last week, at only 90% utilization, we produced 9,402,000 barrels of gasoline per day (a 2% INCREASE). Things, it seems, are not as dire as you would have us believe. I ask you, what matters more, gasoline produced or the % by which we measure how busy refineries are?

    Never mind that gasoline inventories have risen 9 out of the last 10 weeks

    Demand growth was running 2% in the Spring, 1.4% in May and is now at 1.2%.

    What a perma-bull. Tell every side of the story or don’t talk about and trade you PB.

  12. 12
    zman Says:

    CLR – this would be a closing ATH.

    OII giving another good entry for calls as long as oil doesn’t just collapse here.

    PTR continues to explode to the upside

    Refiners look a bit tired but not doing anything until I see some sense in the gasoline price market

  13. 13
    zman Says:

    4 oil workers in Nigeria seized from Shell.

  14. 14
    Sambone Says:

    Wow, “Bonny” at $80.00, “Brent at 78+, and WTI down.

    http://www.upstreamonline.com/market_data/?id=markets_crude

  15. 15
    zman Says:

    END made operator of Agat discovery in Norway:

    It’s a small natural gas field so I wouldn’t get too excited here as natural gas is just about worthless right now over there although its a net small positive and the company sees lots of reserve potential in the area fwiw. END will have exploration news around the corner which will move the stock more (direction unknown). Still holding as it’s dirt cheap.

  16. 16
    zman Says:

    USO really getting beat over the head, gasoline still up $0.03

  17. 17
    zman Says:

    Wasn’t watching CNBC this morning. Curious to know how they spun the IEA report.

  18. 18
    zman Says:

    EOG – out of $75 calls at $1.50 (even less commish). Oil just looks a little scary here.

  19. 19
    zman Says:

    NXY looking strong before earnings this Thursday.

  20. 20
    Eric C Says:

    Can anyone explain the surge in COP?

  21. 21
    zman Says:

    COP just announced a large buyback, always a crowd pleaser:

    $15 billion through 2008; $2-3 B per qtr.

  22. 22
    Eric C Says:

    Thanks, I guess with such a low P.E. I’d buy back shares also before inflation really kicks in here in the U.S.

  23. 23
    zman Says:

    Took a little BHI long here on a slow day. It’s helping to lead the OIH high and if it gets through the current level it should break out much like OII last week and the ongoing HAL breakout.

  24. 24
    zman Says:

    Eric – It’s the right move for them to make in lieu of hastily bumping cap ex just to try to spend cash flow. They don’t have the prospects worked up nor do the service cos have that kind of spare capacity.

  25. 25
    Eric C Says:

    Zman- point taken.

  26. 26
    Oilman Says:

    15 Billion shares sound to good to be true

    1.5 Billion shares out –

  27. 27
    zman Says:

    CLR – no options, oil and most likely outperforming their second quarter estimates as they’re just out of the gate on coverage and being public. New closing high today at $16.40…Just an FYI that I still like it for you couple of guys who bought it two months or so ago in the $14s

  28. 28
    zman Says:

    Oilman: that’s 15 B dollars.

  29. 29
    codydog Says:

    zmzn– you still feeling it with OII?

  30. 30
    zman Says:

    not going to get filled on my KWK calls.

  31. 31
    zman Says:

    OII – yes but only August or longer NTM calls. Volatility starting to pick up here but I like the flat OIH day with down oil. No sign of panic, just a little profit taking here and there.

  32. 32
    Kevin Says:

    Z,

    Any thoughts on COG… I was hoping to establish a position if we get some further weakness in NG… it was up strong today (without me! 🙁 )

    Kevin

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