31
Jul

Tuesday – More Earnings Plus Crude, Cracks, and Natural Gas Thoughts

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Yesterday was another pretty good day. 

  • Recently opened call positions performed well as (SWN) and (VLO) ran hard into the close as both approached their 2Q earnings dates. See Earnings We Care About below for notes on Valero's earnings beat. Southwestern reports after the close today.
  • (EOG) ran early and hard with a storm fear / short cover pop in natural gas as did (HK) which picked up a bulge bracket firm upgrade yesterday morning.
  • (HAL), (OII), and (NFX) were somewhat more tame than of late, the former on its ties to the now in question Kashagan project in Kazakhstan and latter as profit taking ensued.
  • Last night (APC) reported a big bottom line beat and although I don't own them at present I'm inclined to listen closely to this mornings conference call (see Earnings We Care About below).
  • Puts on (FTO) and (WNR) came in a little but I'm still comfortable there as gasoline looks poised to fall while crude prices remain robust.
  • (SU) No position there yet but that pipeline capacity constraint story obviously weighed on shares yesterday.

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Oil Stalled. Friday's close was a penny shy of the all time record for WTI (not inflation adjusted of course). Monday's close was 22 pennies shy of the all time record.

  • Bullish factors include continued problems with Iran (production and otherwise), North Sea (CATS) and Mexico (Cantarell) production, Venezuelan labor difficulties and general mismanagement, rebels, terrorists and countries run by terrorists, hedge funds, potential world power leaders who want to steal oil company profits, the EIA, the IEA, OPEC etc.
  • Bearish factors include a whole lot of oil in storage in the U.S., rising Angolan production, rising Canadian production (see yesterday's post for an important caveat), the fact that Kuwait says they have double the reserves previously thought (100 billion barrels in my best Mike Meyers voice), deepwater GOM growth on the way, rising production from Iraq (fingers  crossed on that one) and OPEC who never made their curtailment quotas, continues to slip in terms of sticking with them and has made dovish statements of late regarding their upcoming meeting in September (but seem to waffling on those comments this week).

Early Read On Wednesday's Inventory Report from Reuters and Bloomberg:

  • Crude: DOWN 1.1 million barrels,
  • Gasoline UP 1.3 million barrels. This would put us within a hair of the lower end of the five year band, a region we have not entered since early April.
  • Distillate UP 0.7 million barrels
  • Refinery Utilization: up 0.6% to 92.3%

Crack Spread Watch: Bubble Popped! Yesterday didn't help either and September RBOB could test $2 as soon as this week ($2.0592 as of yesterday's close).  By the way, I've been saying for a while now that numbers earnings estimates (3Q and beyond) marched up in lockstep with crack spreads but failed to come back down with them. Well, taking a look at 3Q numbers, I see that all of the independent refiners finally started seeing their numbers shaved in the last week.

cracks-tso-072707.jpg

Natural Gas Rallied To Close At $6.449. If you're short gas, you've got to be annoying your family by making them watch endless hours of the Weather Channel while carrying around that bottle of Maalox.

  • Heat Watch: Mild Last Week. Last week was actually 2 CDDs short of the prior wee at 70.
  • Imports Watch: Gross natural gas imports to the U.S. fell about 1 Bcfgpd vs the prior week and were roughly in line relative to the year ago week.
    •  LNG - a week to week tumble in LNG volumes accounted for 0.95 Bcfgpd of the over all drop in imports. This is after a sharp spike last week to record highs and the volatility is no doubt attributable to the timing of offloadings (3 extra ships in last week's number could do it).
    • Canadian piped gas inched back a hair from last week to 9.2 Bcfgpd.
  • Imports and continued mild weather probably put us in line for a 60 to 65 Bcf injection this Thursday.
  • And that would push storage to 2% over record levels as the year ago period was experiencing serious egg frying temps.

But That's The Past And This Is The Near Future

  • Heat Watch #2: This Week Is Not So Tame: The Climate Prediction Center is looking Cooling Degree Days to hit 92 this week, by far the hottest levels year to date (but still a bit below last year's swelter fest). That alone could send injections below the half century mark, substantially slowing the gain on YoY storage and reducing the surplus to the five year average.
  • Tropics Watch: Spin Spin Spin - this bears watching.

Forget the net position, the natural gas short position is massive! Nervous, nervous, nervous...A good portion of this position (about 1/3) was added between $0.50 and $0.60 below current levels. Ouch!

cftc-short-pos-073007.jpg

Stocks We Care About:

  • (NFX) - Founding father and current EVP of ops David Schaible named President and COO. Trice remains CEO and Chairman. Street should have no qualms there. In other news CNOOC and Newfield will enter into a new production sharing agreement for an additional S. China Sea block.
  • (SU) Files application to expand oil sands mining by 120,000 bopd by 2012ish.

Earnings We Care About:

  • (APC) Big Beat. Reported $1.09 after backing out gains and charges vs $0.79 expectation. Revenues of $3.3 B handily beat expectations of $2.5 B.
    • Production of 52 MMBOE came in on the high side of guidance of 50 to 53. This is likely due to timing of asset sales,
    • Full year production guidance increased by 2% (midpoint) to a range of 203 to 210 MMBOE,
    • Operating costs were in line with expectations,
    • Conference call at 10 est
    • Operational Update Highlights:
      • Boomvang area (acq from Kerr-McGee) has two  exploratory satellite success,
      • Conger delineation well found significant pay
      • In the Rockies the Greater Natural Buttes, Pinedale /Jonah and the  County Line in the PRB again set gas production records.
      • Offshore Ghana -big well at Mahogany #1.
  • (MRO) Reported $2.25 vs consensus of $2.12. Revenues were in line
    • Refining performance was solid, record throughput.
    • A little slippage in E&P production guidance due delays in project timing
    • Buying Western Oil Sands for $6.2B.
    • Conference call at 9 est.
  • (VLO) Reported $3.89  vs a consensus estimate of 3.75.
    • Discounts to WTI for Mars and Maya crudes and resid continue to widen...good when you like the sour stuff. This should be the whole story. The rest below is nice but mostly history.
    • Throughput margins per barrel: 18.14 (!)
    • Refinery opex per barrel: $3.87 (can't complain)
    • U.S. fuel margin per gallon: $0.202 (!)
    • Bough back 42 million shares (7.5%) during the quarter, up from 15 in 1Q. $2B approved for the rest of the year.
    • Conference call at 11 est.

Congrats to Bill F who at 12:04 est and with the stock down almost 1% wrote:

im throwing caution to the wind and loading up on vlo calls. bot 45 60’s, 45 70’s and 10 67′5’s. rbob is making a bounce and earnings will be good, that coupled with oversold conditions and z comments. lets go baby

 VLO closed up 2.7% on the day. Nice work.
Holdings Watch:

CALLS

  • (NFX) Bought August $50 calls for $1.15 as the stock encountered a bit of post earnings profit taking. Last bid $1.10.

PUTS: No Action.

Odds & Ends

Analyst Watch: (CCJ) upped to outperform at CIBC but price target cut from $55 to $50 at FBR; (DHT) cut to neutral at JPM.

Ohh, Ohh, I Know, I Know Watch: RBC picks up (WRES) with an outperform rating three days before they report second quarter numbers. This is an interesting little E&P company I left off of Monday's earnings table (along with EOG who also reports on Friday) by accident.

88 Responses to “Tuesday – More Earnings Plus Crude, Cracks, and Natural Gas Thoughts”

  1. 1
    Sambone Says:

    99L still looking good, low shear. Models have it hitting Cuba as a Cat 2. Next name is “Dean”.
    http://www.ssd.noaa.gov/goes/east/catl/loop-vis.html
    http://hurricane.methaz.org/tracking/

  2. 2
    codydog Says:

    z–any thoughts on impact of banks getting nervous of funding TXU, bloomberg suggesting the banks prefer a 1billion loss from breakup fee, rather than get stuck with 300Billion in unsellable loans

  3. 3
    zman Says:

    ask we me after the close.

    VLO suffer a little “so now what” selloff early. The call should bring out the importance of the widening differentials to WTI for the sour crudes they source.

  4. 4
    zman Says:

    SWN and EOG up again,

    APC rocketing

    NFX up a buck plus

    OII up $1.50

    HAL and HK a little higher

    CLR still recovering

  5. 5
    ndog Says:

    nfx doing nicely. any predictions on when we can get back to that $2.50 bid 🙂 Whats the price on the stock we need for that to make sense? 51.50?

  6. 6
    zman Says:

    ndog $51.50 today to $51.75 by Friday should get you there on the bid if IV stays about same.

  7. 7
    zman Says:

    APC – conf call

    Rockies constraints soon to be alleviated for processing and transport.

    Reiterated no need for equity and $12 B
    ye debt.

    Costs better than expected across the board as I outlined in this morning’s post.

    more to come

    HAL jumping up
    VLO thinking about coming positive

  8. 8
    zman Says:

    APC Conf call:

    Gatheing looks high but it’s increased NGL processing.

    Still less than a year since the Western Gas and Kerr mergers, better than I or they would have expected bringing it all together.

  9. 9
    ndog Says:

    sweet, need to look at some september options

  10. 10
    zman Says:

    More APC conf call:

    First questions were not big pix. more like housekeeping items for modeling.

    Staffing: don’t see tightness as problem

    Rig fleet: good control still, lot lower rates than their peers. Have options to extend many of the contracts at fav rates, also using rigs to leverage into plays.

    LOE – better than expected due to block and tackling the little things, lot of attention to detail. (also no big workover offshore this quarter). This improvement in per unit LOE a little ahead of schedule.

    SWN exploding to the upside!

  11. 11
    Stephen Says:

    CRK doing well, and there I was trying to get in before earnings …

  12. 12
    bill fraser Says:

    This could be a good day to trade the volitility in vlo.

    Buy calls when stock is 68 and sell when stock is 69.50. CC at 11

    aug 67’5’s will move 50 c per dollar

    stock is 68.56 and the option is bid 3.00 ask 3.10

    so buy at 2.75 and sell at 3.50

  13. 13
    zman Says:

    ACP CC

    Ghana – size: > 100 mm barrel target size. Delineating with down dip step out (pretty close) now but they’re happy so far with original 100s for the area target.

    MMS lease sale: no comment on how aggressive. lol.

    JP Morgan ?: E Tx – Carthage horizontal, good costs, lots of running room, especially with long horizontals under wetlands, good reserves/well. Big program coming next year.

    Deal with CHK – complimentary land position, improving learning curve, utilize collectively controlled rigs there, about to double program to 16 rigs between APC and CHK.

    PRB CBM – County Line unit near 160 mm/d gross, limited by export cap, gas rates per well are exceeding expectations. Som county line IP at 2 mm/d – nice for a shallow coal.

    Indie Hub volumes: 3 wells total at 140-150, adding 2 Merganser wells (another 150 mm/d by late Augsut) as they work towards 1 Bcfgpd. Up and down as they tie in wells.

  14. 14
    zman Says:

    Stephen – CRK – I really like those guys, they’ve been hammered with gas but that’s a huge growth story with best in class opex.

  15. 15
    mdinh Says:

    bill,

    The spread on VLO call is 20 cents; therefore, you can potentially lose 40 on a round trip. First 10% gain goes to pay for the spread and commision.

  16. 16
    zman Says:

    APC call cont.

    F&D guidnace: no change but it’s probably coming in towards lower end (that’s Pickering Partners supposition which makes sense to me)

    Floyd Shale: no comment, evaluating. hmmmm

    Other: NFX giving another op

    Nicky – you back in the office, hows RBOB look to you? Can we get some levels?

  17. 17
    zman Says:

    Looking at HK calls but lower.

    nat gas slide hitting the indie E&P and some service names.

  18. 18
    zman Says:

    APC: tech difficulties ended premature but overall very positive.

    What’s up (down) with nat gas all of the sudden?

  19. 19
    codydog Says:

    have trailing stops on chk, hk etc now as NG rolls over……..

  20. 20
    zman Says:

    Cody – EXACTLY. Just gave back a chunk this morning on that call b/c I forget to set stops. Also may do a little bottom fishing on APC if gas will level out around here.

    Nicky – awesome. That’s b/c they flow through some numbers from prior months as straight estimates (like exports).

  21. 21
    zman Says:

    However, HK is one I’m looking to go long down here Got a little, need more prior to earnings next week (provided ng holds up)

  22. 22
    codydog Says:

    z–as solar plays are kinda energy names, you gonna follow them or just traditional energy names?

  23. 23
    zman Says:

    VLO CC

    down $0.70 at start of call.

    Cody – I watch them and have played occasionally but no promises there.

  24. 24
    zman Says:

    VLO CC

    they’re doing their best to put everyone to sleep. Note management: try to sound a little more enthusiastic. Yawn. Also, don’t just use numbers. Percentage give weight to your statements. Sheeesh!

  25. 25
    codydog Says:

    oh..my stops in chk & hk are at LOD, thinking that next time the better play is UNG for more direct exposure to NG mkt short-covering

  26. 26
    zman Says:

    3Q – turnarounds

    Throughputs for 3Q
    1.55-1.6 mmbpd
    450,ooo mid cont
    280-290 w coast
    550-570 n east

    expense at $3.60 / barrel, -good.

    G&A expected down, int exp slightly up
    33% Tax

    Note to management: don’t pause between each word. Sounds like a eulogy.

  27. 27
    zman Says:

    VLO – their words, our stock remains best value in the industry – very true. I kid them on their tone but these guys are the smartest in the room by far.

    I’m holding my calls here. Think it rallies.

    Notes:
    year end capacity 560,000 bpd.
    blending to 20-22 bpd of ethanol.

    talking with all the proposed pipeline projects to encourage Canadian crude to get to the Gulf Coast.

  28. 28
    bill fraser Says:

    Z

    I agree

    Im still holding the calls until the stock rallies to 70. i heard right they bought 3.1 b of its own stock with another 2 b to go at an average price of about 75 per share so at 68 its a screaming buy, imho

  29. 29
    bill fraser Says:

    Vlo just cracked 68 and a 67’1/2 calls are 2.70-2.80

    Just bought 1000 shares and 20 more calls.

    I will sell into later day strength , (if it occurs)

  30. 30
    zman Says:

    VLO CC – staying within $3.5B capex

    increasing reliability system wide

    no major maintenance in 3Q, modest 4Q maint expected.

    labor resources for turn arounds: cost inflation has plateued but not falling, productivity from contractors remains low by historic standards (dregs of the work force).

  31. 31
    zman Says:

    Bill F – they took out those stops at 67.95, then bounce it nicely.

    Call getting a little smoother now.

  32. 32
    zman Says:

    1Q08 turns – normal to light, more significant turn downtime in ’09 and ’10 (which probably seems way off to you options traders. lol.) But that tells you ’08 is going to be a big utilization year in advance of that. Stock rallying on it.

  33. 33
    zman Says:

    more VLO CC

    Spreads to sour:
    Maya sour in $11 now
    other sours $14+ off WTI

    Imports : down year to date due to turns in Europe and Asia and also in Nigeria (all refinery down now (but if I remember correctly that’s real small). Mexico gasoline demand way up. They think imports fall off due to increased global demand.

  34. 34
    zman Says:

    my internet conncet just goofed up. Did VLO just say Exxon sees fewer barrels of gasoline being loaded and sent this way?

  35. 35
    zman Says:

    VLO call over

    one last thing, they are going to be able to produce ULSD (ultra low sulfur diesel) at all sites by year end.

  36. 36
    scoop006 Says:

    Yes but did not hear Exxon

  37. 37
    codydog Says:

    IEA Head says oil fundamentals are very tense right now – wire headline – Says stocks should not be used to move prices

  38. 38
    zman Says:

    VLO Call Wrap:

    My sense is that the analysts get off the conference call, get on the squawk box and say something like:

    “Ok, we know it was a great quarter. That’s history. Looking ahead, they’re going to be running at good rates in the back half of the year and spending is in check as are operating costs. 2008 looks good as well as they’re planning some major capex and refurb projects in 2009-10. So we feel a little better about 2008 estimates in terms of making product. As far as margins, they’re in a better position as seasonal margins decline than their peers and they’re easily the cheapest of the group. We’d be inclined to sell the more expensive, little names and husband more investment dollars at VLO.”

    At least, that’s what I would have said having been on that call.

  39. 39
    zman Says:

    Thanks Scoop.

    Thanks Cody. “stocks should not be used to move prices”. Once again I ask the age old question: “What do they think the word CARTEL means?”

  40. 40
    codydog Says:

    z–I guess I’m in a quandry here. Everyone knows the inventory #s, everyone sees the cracks getting squished, but crude keeps movin’ on up….could it be as simple as these mega-arms dealsd being finalized now, portend a real conflict and the smarter money is betting on that? Or is it a reflex, come to work, read news, buy crude, have lunch, sell crude, go home?

  41. 41
    zman Says:

    Cody –
    Oil: just a lot of fear that as winter approaches and OPEC prod remains low you’ll see those inventories come off fast.

    Cracks: their squished a bit but they’re still high to historic levels. If imports are going to tail off VLO and others get a bounce, then all long bets are off but VLO.

    OII up $2+
    HAL near HOD
    NFX and HK re rallying

  42. 42
    codydog Says:

    hearing cracks about to get major buy interest

  43. 43
    zman Says:

    Nicky – I generally agree although that crude import comment is a bit horse before the cartish in my view.

    Don’t think crude draw will be that big, that bullish.

    Gasoline maybe that big but I wouldn’t think quite so. It all depends on imports which will certainly be lower than last week.

  44. 44
    Brian08 Says:

    Z– I hope this doesn’t jinx anything but I just have to say this NFX trade is the gift that keeps on giving…I stupidly missed selling what I bought yesterday during the morning rally but was able to double down at the LOD…

  45. 45
    codydog Says:

    appears rumor of banks pulling out of TXU deal are false…

  46. 46
    zman Says:

    Brian: 😎

    Cody – is that related to all the CHK comments regarding new coal fired plants. I don’t follow the utilities so I don’t know what deal TXU is in.

  47. 47
    codydog Says:

    was rumored early that GS, C, JPM would rather pay a $ 1 Bln penalty than risk taking on TXU debt , now it appears banks are saying there is no pullout decision

  48. 48
    zman Says:

    Nicky – Say it isn’t So!

    Cody – Ahhh-So.

  49. 49
    codydog Says:

    z–any talk of banks cutting trading lines or credit lines to energy names ?

  50. 50
    zman Says:

    Cody – Haven’t heard any.

    Nat gas trying to find a home down $0.28 on the day. Latest satellite looks pretty disorganized which I’m sure is the reason for the dip.

  51. 51
    zman Says:

    Murdoch has enough votes to take over WSJ. I’m almost scared to comment.

    http://news.yahoo.com/s/ap/20070731/ap_on_bi_ge/dow_jones_murdoch

  52. 52
    Brian08 Says:

    Z and Nicky– Are we pretty much priced in here on natty gas for the hot weather that we are going to get for the rest of the week??

  53. 53
    Sambone Says:

    Nymex Crude Hits $78/Bbl As Demand Fears Ease

    By MATT CHAMBERS
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures hit a fresh one-year high Tuesday, rising above $78 a barrel and eyeing a record high amid forecasts for a draw in U.S. crude inventories and as fears of a demand slowdown eased.

    The front-month September light, sweet crude contract on the New York Mercantile Exchange was up $1.28, or 1.7%, at $78.11 a barrel after rising as high as $78.27, the highest for a front-month contract since July 13, 2006, when crude logged its intraday record of $78.40. Brent crude on the ICE futures exchange rose $1.15 to $76.89 a barrel.

    Prices were hit last Thursday when the Dow Jones Industrial Average slumped, sparking concern it could be a sign the U.S. economy was about to slow. But a stabilization in equities since and a report Tuesday that said U.S. consumer confidence was at its highest in six years in July have helped push prices to new highs.

    “The focus is on continued strong demand, and the high consumer confidence helped that — it’s the sign of a strong U.S. economy,” said Phil Flynn, an analyst at brokerage Alaron Trading Corp. in Chicago. “I think if we take out $78.40, were on our way to $80.”

    The Conference Board, a private research group, said its index of U.S. consumer confidence for July moved to 112.6 from an upwardly revised 105.3 in June and from 108.5 in May. Economists had expected the July reading to rise to 106.0.

    Crude prices have risen more than 20% in the past two months and hit fresh recent highs in 18 of the past 23 sessions.

    “There is something very strong holding this market up, it’s giving very little back,” said Tony Rosado at IAG Energy Brokers in Fort Lauderdale, Fla. Rosado said a lot of traders are baffled at the strength of crude’s move higher and how little it was dipping on down days lately.

    Expectations for a draw in U.S. crude oil stockpiles and increased refinery demand in U.S. government data due Wednesday are supporting prices.

    The Energy Information Administration, the statistics and analysis arm of the U.S. Energy Department, is expected to say refinery use rose for the sixth straight week and was up by 0.7 percentage point to 92.4% of operable capacity, according the average forecast in a Dow Jones Newswires survey of analysts.

    Gasoline stockpiles are forecast to grow by 1.1 million barrels, and distillates, which include heating oil and diesel fuel, by 1.4 million barrels. Crude oil stockpiles are expected to fall by 690,000 barrels.

    Front-month August reformulated gasoline blendstock, or RBOB, rose 6.94 cents, or 3.1%, to $2.158 a gallon. August heating oil rose 4.14 cents, or 2%, to $2.1065 a gallon.

  54. 54
    zman Says:

    Thanks Sambone. “If we take out $78.40 we’re on the way to $80.” Straight from the department of duh. This guy was just saying in the last week that we’d put the tops in on prices as demand for gasoline had peaked.

    Brian – I agree with Nicky, need more heat that lasts longer. It’ll take a storm to get gas really moving at this point as the easy gas storage comps will make painfully clear.

    NFX taking out stops at $49

  55. 55
    sane Says:

    Yeah consumer confidence is up, but consumer spending is down. I think the consumer spending is the more important of the 2, but that is just me.

    Sane

  56. 56
    zman Says:

    Afternoon Sane, I agree but when oil goes up these guys grasp at anything to explain it. How does confidence stay up with the sub prime stuff and this housing market anyhow?

  57. 57
    Sambone Says:

    Z – I agree, it doesn’t make sense to me either.

  58. 58
    Brian08 Says:

    Z, figured as much…Thanks for the confirm, I’ll take it easy on anything in the natty gas arena…

  59. 59
    sane Says:

    Shooting and praying, shooting for the record and praying for a hurricane or some kinda disruption. I think that confidence number is crap, espically around where I live. I have always questioned how they do their survey or who they are surveying.

    Sane

  60. 60
    zman Says:

    Broader market getting popped again.

  61. 61
    Lije Says:

    z – any thoughts on the hammering VLO is taking… is it the general mkt

  62. 62
    zman Says:

    NFX negative, VLO getting waxed now with an off (and plummeting) DJIA.

    Wow Nicky dropped the I-Bomb! Tell us how you really feel!!!

    NFX again at gift status but this broad market is acting like crap some I’m just watching for a bit. These guys have such short memories regarding real problems in the market it’s really amazing.

  63. 63
    Joe Hosteler Says:

    what’s with the VLO collapse? buying opp?

  64. 64
    zman Says:

    Joe,

    Market drop is whacking a lot of good names again. Anything flat to down slightly an hour ago is down hard now. I’m in watch mode for now.

  65. 65
    sane Says:

    mortgage stuff again, another lender in trouble.

    Sane

  66. 66
    zman Says:

    Hey Cody, is the PSW site down?

  67. 67
    codydog Says:

    its up nothing really worthwhile being said though……

  68. 68
    zman Says:

    It was clear Nicky! Me either re Sambone and comments.

    Cramer. hmmph

  69. 69
    Denise Says:

    Don’t know if anyone follows Helene Miesler technician who used to work with Mamus but she has been saying in her newsletter that nat gas is putting in long term bottom and a buy when the ung takes out 42.
    long ng

  70. 70
    codydog Says:

    trailing stops took me out of all NG plays except HK

  71. 71
    zman Says:

    Thanks Denise – I don’t but I appreciate the input! I think the bottom is $5.50 to $6.50 myself and I realize that’s a broad range but the volatility is (as we saw yesterday) there to produce big swings that don’t technically break gas out or down.

    From a fundamental standpoint full storage = low gas price is not necessarily correct thinking. Sorry if this is rehash but the only way you have full storage is by drilling the hell out of the non-conventional basins (shales, coalbed methane and tight gas sand plays) or by adding big increments like the indie hub. Those are high $ to buy in and drill if not particularly high $ to operate. And in the case of the shales and tight gas sands, you get initial production that’s often cut in half six months down the road. So you have to keep a high rig count going if your to maintain this production, generally through the drilling of thousands of wells per year, which keeps rig rates and service costs high as they’re busier than ever trying to drill and complete all these wells. So you have a fundamental line in the price sand below which it doesn’t make sense to drill which you must to keep production up ….and so the world turns.

  72. 72
    codydog Says:

    still wondering what happens if a producer who sold short as a hedge tries to deliver against his short and is told …sorry, no room at the inn….

  73. 73
    zman Says:

    they deliver the gas to offset the short

  74. 74
    zman Says:

    Lije – if you overlay VLO and the DJI they match up pretty well this afternoon.

  75. 75
    zman Says:

    NFX probably comes roaring back now. Double that thought for SWN with earnings after the close.

  76. 76
    codydog Says:

    psw site just crashed……about 10 error messages culminating in no server message

  77. 77
    codydog Says:

    z–any idea why crude and oil names have such a disconnect ?

  78. 78
    Alan Says:

    TSO flat on the day
    VLO down 2.48%
    FTO up 1.94%
    HOC up 2.5%
    WNR up 4.5% (with three characters pointing wands at the board and chanting “Wingaurdium Leviosa”)

  79. 79
    zman Says:

    Cody – It’s the broader market capitulation.

  80. 80
    zman Says:

    Sub prime shot the energy market.

  81. 81
    Popeye Says:

    Nervous market today.

  82. 82
    codydog Says:

    some big money mgr saying half of all LBOs and hedgies will die in the next 5 years and may take a gloabl bank with them – article on bloomberg –

    http://bloomberg.com/apps/news?pid=20601087&sid=aov5lqQwU2pE&refer=home

  83. 83
    Sambone Says:

    Nymex Crude At Record Close Before Inventory Data

    By MATT CHAMBERS
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures rose to a record close Tuesday, smashing the previous high by more than $1 a barrel on expectations of a fall in U.S. inventories in a key weekly inventory report and as concerns about a potential demand slump eased.

    Hedge funds and other speculators were the main drivers of the move, traders said, as they tried, unsuccessfully, to test the intraday record high of $78.40 a barrel, set more than a year ago.

    The front-month September light, sweet crude contract on the New York Mercantile Exchange closed $1.35, or 1.8%, higher at $78.18 a barrel, beating the previous record close of $77.03, set July 14, 2006. Prices traded as high as $78.28 during the session. Brent crude on the ICE futures exchange rose $1.34 to $77.08 a barrel. Final settlement prices weren’t yet posted.

    Oil prices took a hit last Thursday when the Dow Jones Industrial Average slumped, sparking concerns it could be a sign the U.S. economy was about to slow. But a stabilization in equities markets since has helped push prices to new highs, as have forecasts for a draw in U.S. crude oil stockpiles in U.S. inventory data due Wednesday.

    “The market is expecting a draw down in crude (stockpiles) as refineries start to get their act together” after a series of planned and unplanned outages going into peak U.S. summer demand, said Mike Zarembski, senior commodities analyst at optionsXpress in Chicago. Zarembski said Tuesday’s gains were largely chart-based, or technical, as traders tried to drive prices up to the intraday high, and as so-called momentum funds joined the buying.

    Crude prices have risen more than 20% in the past two months on a combination of refinery outages, supply reductions in Nigeria and the North Sea and forecasts that global supply at the end of the year might not be enough to match demand. The rise in prices has been rapid, with prices hitting fresh recent highs in 18 of the past 23 sessions.

    “There is something very strong holding this market up, it’s giving very little back,” said Tony Rosado at IAG Energy Brokers in Fort Lauderdale, Fla. Rosado said a lot of traders are baffled at the strength of crude’s move higher and how little it was dipping on its down days lately.

    The U.S. Department of Energy is expected to say crude oil stockpiles fell last week as demand from refineries increased, according to a Dow Jones Newswires survey of analysts.

    The report, from The Energy Information Administration, the statistics and analysis arm of the DOE, is expected to say refinery use rose for the sixth straight week and was up by 0.7 percentage point to 92.4% of operable capacity. Crude oil stockpiles are expected to fall by 690,000 barrels.

    Gasoline stockpiles are forecast to grow by 1.1 million barrels, and distillates, which include heating oil and diesel fuel, by 1.4 million barrels.

    The record intraday high of $78.40 a barrel could be hard to break though, with the rapid rise in prices starting to make some traders nervous about buying further long positions, or bets on a gain in price.

    “I’m positioning myself for shorts,” or bets on a fall in prices, said Mark Waggoner, president of Excel Futures in Huntington Beach, Ca. “If you look at the charts, I’m not sure we can sustain these type of highs,” he said, pointing to a big drop in crude prices in early August 2006, when prices fell from near $77 a barrel to below $60 in two months.

    Front-month August reformulated gasoline blendstock, or RBOB, rose 5.04 cents, or 2.4%, to $2.136 a gallon. It was the August contract’s last day. September gasoline rose 4.39 cents to $2.1085. August heating oil, which also expired Tuesday, rose 4.49 cents, or 2.2%, to $2.11 a gallon.

  84. 84
    zman Says:

    SWN – penny miss but it was price as production was above the mid point of guidance at 25.84 Bcfe vs a range of 25 to 26 and

    lease operating expense came in at $0.73/mcfe, down from $0.74 in the prior quarter. The company had expected LOE to run $0.82 to $0.87 for the full year and kept that guidance there

    Fayetteville shale gross production was 200 Mmcfgpd as of July 28, up sharply from 155 Mmcfgpd as of April 30.

  85. 85
    redjack Says:

    News out on IOC…up $5 after hours

  86. 86
    zman Says:

    Nicky – no kidding. As to that last part they just don’t tell them what they’re doing and play until the play doesn’t work any longer. So far, it’s still working.

  87. 87
    Fred Says:

    Z – check out the disturbed atmosphere at the bottom of the map.

    http://www.nhc.noaa.gov/refresh/graphics_at3+shtml/143534.shtml?basin#contents

  88. 88
    zman Says:

    Fred,

    My calls and I thank you very much!!!

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