13
Aug

Monday Rebound

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If you missed the weekend wrap click here. It contains all the news you can use regarding last week’s commodity and index numbers (would you believe energy stocks were up on the week while oil fell 5% and RBOB retreated another 4%?). Also, comments on the CFTC and the breakout for natural gas prices … a must!

Oil- Back over $72. Technically it’s probably due a small bounce. Here are some items that will likely be supportive at least for the first hour of trading.

  • Nigeria Watch: Rebels released a kidnapped oil worker for medical treatment but he died. MEND and other gang activity appears to be increasing again.
  • Hugo Watch: A PDVSA oil rig exploded on Friday according to Reuters. Hugo is trying to increase production by using the army to operate rigs. Guns and oil rigs don’t mix.
  • Ahmad Watch: Ahmed fires Iran’s oil minister Kazem Yaziri-Hamaneh. Reuters sources speculated that Ahmadinenejad is trying to increase his control over Iran’s oil interests which will probably translate into rasher statements from the country regarding its use of oil as a weapon as well as on the price of oil being too low. I’ve often note Iran’s ability to turn on a dime from dove to hawk. Getting ready for more consitent hawk in their oil talk.

Natural Gas Surges. Gas is making a push towards $7 (up another $0.12 this morning to $6.95) on a combination of heat and increased tropical activity.  Shorts have got to be getting concerned in their crowded little theater.

cftc-081107.jpg

  • Heat Wave Watch: Cooling degree days last week soared to 91. The Climate Prediction Center’s early read calls for CDDs of 88 this week but looking at the forecasts for many of the more gas-centric regions it appears that even high gas demand for cooling load is in the near term cards.

weather-081307.jpg

Earnings We Care About This Week: Slim pickin’s. If you know of one I should care about but missed please comment or email me. Thanks.

earnings-3rd-wk-aug.jpgHoldings Watch: Open and closed option positions have been updated on the ZEB Performance tab.

Odds & Ends:

Analyst Watch: (GSF) and (RIG) to buy at Jefco, (MRO) upped to hold at FBR, (EGY) upped to hold at RBC. (OSG) raised to outperform at Credit Suisse.

125 Responses to “Monday Rebound”

  1. 1
    zman Says:

    Sambone,

    Models I saw are calling for a Florida hit to a central GOMEX event.

  2. 2
    Sambone Says:

    http://www.ecmwf.int/products/forecasts/d/animate/catalog/products/forecasts/medium/deterministic/msl_uv850_z500%21Wind%20850%20and%20mslp%2172%21North%20America%21pop%21od%21oper%21public_plots%212005101800%21%21%21step/

  3. 3
    Sambone Says:

    http://euler.atmos.colostate.edu/~vigh/guidance/northatlantic/track_early1.png

  4. 4
    zman Says:

    Sambone: I like the exculpatory clause on the second one: Use for informational purposes only. DO NOT USE FOR LIFE AND DEATH DECISIONS! I’ll have to add that to my terms of use page!

  5. 5
    scoop006 Says:

    ZMAN What’s behind the strength in IOC

  6. 6
    zman Says:

    Goldman bailing out GEO fund for $3. Said losses significant there and in the Alpha fund.

    IOC ELK2 well good; stock at $40, up $7. It probably sees a little profit taking later this morning but then closes at an all time high. Mulling taking a little after the open in the Sept 45 calls but want to see what the options looks like 10 minutes after the bell.

  7. 7
    Nicky Says:

    Morning all. Samborne I can’t get the link to the second one – just says server error. Hope the first one is wrong or its coming straight over my head!

  8. 8
    Nicky Says:

    Maybe I am looking at it wrong though as our tropical weather here says it won’t even be in the eastern caribbean until the end of the week. So a landfall in Florida by Monday would be unlikely.

  9. 9
    zman Says:

    TRADE: HAL Sept 35 calls.

  10. 10
    Nicky Says:

    Sorry scrap that last comment – I see they have landfall on Thursday next week.

  11. 11
    zman Says:

    Nicky – I saw August 20th hitting Florida.

  12. 12
    Sambone Says:

    Watching GOMEX. Little water vapor, BUT the stuff from Cuba might get into it.

    http://www.ssd.noaa.gov/goes/east/gmex/loop-wv.html

  13. 13
    Nicky Says:

    Well that’s what I saw initially Z but now it is showing the 23rd.

    But note that this is well away from the rigs etc.

    That said looks like it is going to provide the impetus for our wave ii up which looks to be underway.

  14. 14
    zman Says:

    Nicky – I’d think you’d want it to get there faster and not brew so much over that bathwater.

    One of the other models shows it hooking west into the Central GOMEX. See the link to that in today’s post.

  15. 15
    Nicky Says:

    Timing is all a bit of a nightmare Z as I fly back to the UK on the Saturday! Mind you I am looking for an excuse to cancel the trip and a code 5 would be as good as any!

  16. 16
    zman Says:

    NDOG – re TSO …it’s gotten pretty cheap and although things look bad for cracks its a seasonally weak time. It may recover $55.

  17. 17
    Nicky Says:

    Z – that looks like the Canadian model that is saying central gulf? Others still saying a Florida event I see. And if it hits east coast of Florida it is likely to be a real non event in the Gulf.

    Well if technicals are going to lead the way then this is going to be the latter and will have no effect on rigs and market once it sees that will turn lower.

    Of course there is a but…. the but is was that only iv with v up to come – not my preferred count but its still out there. Even so the new highs would be marginal imo.

  18. 18
    zman Says:

    planes should still be around on Sat I’d think. I was there for Georges in 98 in New Orleans. No plane. Lots of HUMVEEs and sand bags. That was the dress rehearsal for Katrina. Not fun.

  19. 19
    zman Says:

    HK seeing a little profit taking. Could last a good chunk of the day and I’ll likely take some longer dated calls on it.

  20. 20
    zman Says:

    CRK back over $30.

  21. 21
    zman Says:

    $7.10 gas. I’d like to see use hold $7 close. Nicky – thoughts on gas technicals?

  22. 22
    El Diablo Says:

    Global Alpha, its the new Amaranth….

  23. 23
    Stephen Says:

    That thing in the Atlantic looks impressive, plus it has plenty of time to grow. I’ve picked up some MDR, for offshore platforms and infrastructure, much cheaper than others FLR, SGR, and also better margins, they also seem to have got a good Katrina bounce as well, good 2Q results, building a cash mountain, plus 10% off peak.

    Still looking at some gas plays, that net short position looks very inviting, CRK has run up quite a bit today. Do you know when the results of the DVN horizontal test will be out?

  24. 24
    zman Says:

    Stephen – yeah, I hadn’t looked at MDR in awhile but probably not a bad spin on the play here.

    CRK / DVN test. No but they may not PR it standalone. Unless it scores in the 10mm/d range as well.

    NFX is on the warpath today. HAL too.

  25. 25
    Nicky Says:

    z – Nat Gas – major resistance is at 7180 and 7264. And then 7530 which fwiw I think we should exceed. It looks higher whilst 6430 holds.

    Long term is much more difficult as there are two perfectly viable counts one bearish and one bullish. However should May’s 8230 high get taken out the count will swing in favor of the bullish count.

    Short term I can now count five waves up so market may put in at least a short term retracement.

  26. 26
    zman Says:

    EL D – I suspect that Amaranth kid is feeling a little less lonely these days.

  27. 27
    zman Says:

    Thanks N! That’s a big addition to my so technical “I think it goes higher.” And “I want a close over $7.”

  28. 28
    zman Says:

    Very much considering taking the small loss on my NFX August 50 calls. Still have the Septembers but it’s getting a little late and the Augusts are roughly a double on the bid side today.

    I always have to remind myself that the only one who cares what you paid for an option, stock, future, house, car, boat etc is you. The market certainly doesn’t. So trying to get your money back is simply bad logic.

  29. 29
    KL Says:

    According to FT, China’s oil imports were up 39% yoy in July.

    http://www.ft.com/cms/s/9dce328c-470f-11dc-9096-0000779fd2ac.html

  30. 30
    zman Says:

    KL – sounds like a scary number doesn’t it? It would be better put in barrels and % of global demand. Ahhh, reports. Guess I’ll have to go do that for them.

    HOC up 9% today. Last week I said that thin little beasty can burn a short faster than just about any stock I know. I won’t play this unless it reaches the ends of the pendulum’s swing.

  31. 31
    zman Says:

    Where’s Cody?

  32. 32
    El Diablo Says:

    I don’t believe this sharp move in gas has anything to do with tropical waves or technicals.

    We all know there is a market-wide reduction in leverage in progress.

    Only makes sense to see a reversal in some recent (and some longer term) trends as positions get dramatically reduced.

    Also, don’t believe Goldman’s rosy call that the deleveraging is 75%-100% complete. My guess (as good as theirs) is that we are still less than half way.

  33. 33
    Sambone Says:

    90L, now 04L, which means it is a TD. Next step is Dean.

    http://www.ssd.noaa.gov/goes/flt/t1/loop-rb.html

  34. 34
    zman Says:

    El D – heat and tropicals have a lot to do with it. As far as open interest goes there hasn’t been a big decline or unwind so I have to disagree with the “anything to do” comment

  35. 35
    ulto2001 Says:

    Z-Are you still holding the VLO Aug 70′s? If so, what’s your latest thinking there with expiry coming soon?

  36. 36
    zman Says:

    ulto – still holding, thought they were dead a week ago, it’s small and I’ll punt early this week but I’ll likely try to milk it for a little more in complete disregard of #28 above.

    Sambone – nice pix!

  37. 37
    zman Says:

    Now SWN breaking out and NFX taking profits. Fund managers still engaged in selling the bumps activity today in the energy patch.

  38. 38
    codydog Says:

    hey Z – wazup?

  39. 39
    KL Says:

    In terms of barrels per day China’s oil imports were up 19.7% yoy for June 2007.

    China imported 14.12 million metric tons of crude in June 2007, equivalent to 3.45 million barrels a day.

    For the first six months they totaled 81.54 million tons, or 3.3 million barrels a day, up 11.1% yoy.

    Still scary numbers.

  40. 40
    zman Says:

    KL – hear ya scary #s. That’s nothing if not bullish.

    IOC opened up $7, fell to up $2 and change, now marching higher again. It could easily close on it HOD. Probably worth a trade but the options are pretty pricey here so you’ve got buy right. I’m looking at the September 40s and 45s now.

  41. 41
    zman Says:

    me thinks that’s enough profit taking in NFX for a bit. looking for a quick trade.

  42. 42
    sane Says:

    I think China’s oil imports are going to run high YOY d/t them starting to fill their strategic reserve as of Aug/Sept last year.

    Sane

  43. 43
    zman Says:

    Sane – right. They’re also searching the world over for new and old reserves. They’ll be active in Vz and could flatten the slide there. Also, look for them to play off the Florida coast with Castro.

  44. 44
    Sambone Says:

    Wow, I’m now tracking 3 this morning.

    http://www.ssd.noaa.gov/goes/east/gmex/loop-rb.html

    If this continues to build, then watch out Texas.

    http://www.ssd.noaa.gov/met8/eatl/loop-rb.html

    Check out the wave that just came off Africa, behind 40L.

  45. 45
    scoop006 Says:

    Z Is the volume in AUG VLO $70&$72.50 calls considered exceedingly high by your measures?

  46. 46
    El Diablo Says:

    Sorry, I still disagree. You can’t rely on the net short position. Its historic and subject to manipulation–ie reporting of hedges. Just ask (former) Enron traders about that game.

    The ‘weather’ has been bullishly ‘marketed’ to the world by the funds that are shorting. We all know the effect that one single trader (Brian Hunter) had on the market.

    Further, there is absolutely no conceivable weather event that can put us into any kind of ‘shortage’ situation this winter. It would take more than Rita and Katrina, two powerful direct hits, to even get us close such a concern.

    And on the demand side: we all know there has been no growth in demand for nat gas for the past 10 years of rampant economic expansion. If anything, the demand risk is for a fall.

    This is all fear. My call is that $1.10 (18%) fear premium in one week is a bit overdone. Not saying it can’t continue, just that the reason for the rapid rise needs some more consideration.

  47. 47
    codydog Says:

    scoop–I think volume is a great sign,

  48. 48
    codydog Says:

    El–Interesting comments – but Amaranth went further than talking, they walked the walk.

    I get your points, but the mkt is what it is, fighting with it only results in losses.

  49. 49
    SLM Says:

    FYI BQI up to $5.50 today. It stayed strong in the recent stock market decline.

  50. 50
    Nicky Says:

    El D – some very good points. If this tropical activity leaves the rigs unscathed nat gas could fall very fast again ie this move up could be very short term.

  51. 51
    zman Says:

    Thanks Cody – agree

    El D – I’m not saying $1.10 is overdone, but the pendulum often swings past overdone as we all know. Full winter storage hasn’t been a question for 2 months now. That’s not a driver of price right now. If you look at the short position, forget net for moment, the short position is off the chart. Looks like Everest. Fear will drive them to cover and that cover is what I’ve been looking for. So far they haven’t panicked yet.

    I’m not sure what you’re disagreeing with. It is hot outside. That’s part of what’s taking gas up. There is a strong wave, about to be named Dean headed across the Ocean. That plays a part too.

  52. 52
    codydog Says:

    z–a large short could always buy direct from a producer and basically swap out of their position. Keep in mind, el didnt say it, but in times of extreme turmoil, the exchange memebrs can always change the rules for covering, del’y etc…

  53. 53
    Sambone Says:

    SLM – If BQI breaks above $6, it should go to $9.

  54. 54
    El Diablo Says:

    I’m disagreeing, in general, with the calls for natural gas prices, short-term or long-term. For the same reasons that Global Alphs is imploding as we speak: Global Alpha’s (and, apparently, natural gas traders’) perceptions/models were based on rather recent (past 2 yrs) of price relationships. Things were so rosy, no one can even conceive of natural gas trading below $5. Yet the long-term fundamentals say that is precisely where we’re headed. (add in the fact that at least one rogue trader was responsible for driving the prices to record territory in the first place, further warping our perceptions).

    Recall this spring: nat gas prices will go higher because of a fall in canadian exports, blah, blah, blah

    There were calls for a doubling of natural gas from the $8 level! at least those calls are more tame now…

  55. 55
    zman Says:

    Hear ya cody re fighting it doesn’t help.

    El D – I understand what you’re saying and Nicky’s point is of course true.

    This spring and most of summer gas was fall as the YoY storage deficit eroded and we finally went into surplus, now it looks like we can sink back below the line again and falling into YoY deficity rather quickly with this extended heat wave relative to last years CDD comps and rising storage injections. That’s supportive of gas.

    Furthermore, when you look at the fact that gas prices and absolute storage levels don’t correlate and haven’t for a long time, it tells you that high gas prices, relative to historic levels and summer levels, can and do occur even with record storage.

  56. 56
    zman Says:

    Imports from Canada didn’t fall nearly as much as people expected though but the evidence is mounting that they will.

    $5 gas simply doesn’t work for a lot of the recent growth onshore. Anyone older than Mitchel/Devon to the Barnett can tell you $5 gas is either marginal or doesn’t work for them. Further, that growth is dependent on continuous drilling programs due to high first year decline rates. You have flush production that is likely down by 20% by the end of the first month, and half by the end of year 1. To grow they have to drill and the E&Ps have been doing that. And the prices paid for land marched right on up with the soaring activity levels. So you either drill or you don’t or you slow your pace and when you slow Tx production (among others) comes down and then you realize that the $2-$3 gas prices of yore are just that. of yore.

  57. 57
    zman Says:

    Cody

    except that the producers are largely hedged themselves at higher prices. What impetus would they have in delivering gas to a short below $8 rather than seeing them squirm?

  58. 58
    El Diablo Says:

    I’ll try one last way: a bet that weather drives prices higher is implicitly a bet that there is a near-term supply risk. Nat gas doesn’t go up because of weather, it goes up because of the risk of the impact of the weather.

    Also, I hear you on ‘some’ of the marginal cost argument, but betting in that direction is implicitly a bet against technology/investment. Marginal cost is not ‘fixed’, and in a true capitalist system, it never rises for any meaningful period of time, especially for commodities, maybe not always true for specialized products like cancer treatment drugs.

    ’nuff said, thanks for keeping the dialog interesting.

  59. 59
    codydog Says:

    el d scores a point as NG declines

  60. 60
    Brian08 Says:

    NFX at LOD.

  61. 61
    El Diablo Says:

    Cody-that was all me, I just shorted two more minis, painting the tape….

  62. 62
    codydog Says:

    zman–its a rational decision unless you’re >100% hedged – and for both parties its transparent to the mkt

  63. 63
    codydog Says:

    go El….

  64. 64
    MMarkkk Says:

    El – here is a fact to consider when discussing supply and demand of Nat Gas. We have an abundance of supply right now for one reason and one reason only: high prices are driving a lot of drilling for a lot of very expensive gas. If prices were $4 and had never risen above $4, you would find that our supply would be much much lower. The rigs running in many of the “hot” plays right now would be shut down at $4 gas as the wells they are drilling just aren’t economic. Then as that supply went down we would have to rely on LNG imports ot meet the demands. LNG competes on a global market and I really don’t think we want to compete with Japan for our NG needs as they drive the price up. When Europe has a “normal” weather pattern, their drive for LNG goes up as well. As weird as it may seem, the supply/demand situation for North American nat gas is still pretty tight. And it is auto compensating. If prices drop, rigs get shut down, production gets shut in and LNG imports aren’t as attractive due to higher prices elsewhere. As the supply goes down, the price goes up, the rigs increase, the expensive wells go back on production and LNG imports become attractive again as our prices compete with other worldwide markets. Then, the whole cycle will repeat itself until something major changes. The Alaskan gas pipeline could be one of those “major” events. However, the politicians and their ilk have seen to it that that project is still a good 8-10 years away. The Canadian MacKenzie Delta project is closer to realty (maybe 5-8 years??) but that gas will help replace the dwindling canadian supply and will be scooped up by the oil sands projects.

  65. 65
    zman Says:

    El – You’re right about the marginal cost. It’s not static. It’s been nothing but up for the last five years but that’s a long term point.

    Of course weather drives price during this time of the year at least if you’re talking about the tick by tick as apparently you and Cody are.

    Rising heat = rising price
    Storm in GOMEX = rising price
    Storm actually hurting infrastructure = perception vs actual impairment.
    Storm going to Nova Scotia = falling price

    Getting an education from EL D as I exhaust his patience = priceless.

    Mark is so much more eloquent than me, especially for a Louisiana boy! Put him in charge!

  66. 66
    Sambone Says:

    91L – http://www.ssd.noaa.gov/goes/flt/t2/loop-rb.html

    Water temp is 86. Florida stations starting to talk about this.

  67. 67
    codydog Says:

    z–of course, the fundamentals drive everything and the mkt can be irrational. But the mkt can remain irrational longer than most of us can remain liquid, so I am simply a trend follower.

  68. 68
    El Diablo Says:

    MMarkkk, I hear you. All valid points.

    I just focus on the big picture: our commodity markets are not as precariously perched as some would have you believe (21st century bulls). Even 2% changes in supply (or demand) take years to evolve. That’s kind of the definition of a commodity. Many of these market participants would have you believe that these changes occur in days, weeks, or even hours. They often accomplish this by focusing on one side of the equation at a time. 10 years ago it was a demand story–power plants. That never panned out, so now its a supply story.

    Oil, copper, etc, are demand (China) stories now. If that doesn’t work, they will be supply stories (George, the earth called, its running out of rocks….).

    Common theme in all these is the ‘fear’ that they ‘may’ be true. That gets you right to the source, the financial terrorists (hedge funds), who like physical terrorist, thrive by detecting and exploiting fear, not by actually inflicting meaningful damage.

  69. 69
    codydog Says:

    el d– that works because people always over-estimate the impact of remote events. Why else buy insurance/

  70. 70
    El Diablo Says:

    To all-no exasperation here, I just like getting all sides out there for discussion. Helps me seeing your views, hope it helps seeing mine.

  71. 71
    Sambone Says:

    40L – Cat 2 in 5 days
    http://weather.unisys.com/hurricane/atlantic/2007/index.html

  72. 72
    zman Says:

    El – I’m exasperated…but not with you man. Been all tech support all day with my host regarding my shift to a new one. They are making it exceedingly difficult. Anybody know the AG in Illinois?

  73. 73
    Sambone Says:

    91L – Cane Hunters scheduled tommorow, and Wednesday.

  74. 74
    DrT Says:

    El D, re:comment 46,I don’t buy that. I think traders going to jail fixed the false reporting to the government problem. We still get a lot of BSing about unofficial things like expected gas injections/withdrawals but I think anything that has to be reported to the government (stockpiles, short positions) is pretty clean.

  75. 75
    codydog Says:

    z–dont know if it helps, but maybe looking or posting your questions at dslreports.com may help…

  76. 76
    zman Says:

    Thanks Cody but no. I’m posted on enough sites as it is right now between Forex and SeekingAlpha. No, I’m moving my site to a new host. Should look the same to all of you except that it should be faster and a lot more reliable…which won’t be hard.

  77. 77
    El Diablo Says:

    DrT: If I short 10,000 nat gas on NYMEX and simultaneously purchase 10,000 nat gas in physical market and stick it in storage, NYMEX open interest drops by 10,000. Nothing illegal, just an illustration of what the NYMEX number does and does not reflect.

    Traders certainly know the limitations of numbers that the market relies upon, and they use those to their advantage without breaking laws because there are no laws that cover that activity. Ame with the round-trip trades of Enron-era, none of those traders went to jail for roundtripping.

  78. 78
    Nicky Says:

    Absolutely brilliant discussion re nat gas – all the comments are great food for thought and all have merit. What I love about this board is how everyone is able to discuss stuff without it getting personal and anyone flying off the handle. This way we all learn so much or at least I am.

    For sure nat gas is one of the hardest things to trade as the illiquidity in the market makes the moves so extreme and often very overdone.

    Even so it still throws up a clear Elliott wave count (or two!). Support is at 6820 and 6650.

    El D – just looking at your comments re other commodities do you trade metals and if so do you have an opinion on them right now?

  79. 79
    zman Says:

    should have taken my own advice on the nfx front month calls.

  80. 80
    Brian08 Says:

    That one’s a noodle scratcher Z…Breaks out like gangbusters this morning then falls back to earth like a rock…Figured those storms in the Atlantic would prop this guy up…

  81. 81
    Sambone Says:

    Phil Flynn
    August 13, 2007

    Need to calm down? Just take a few shots of liquidity and call me in the morning. Panic selling averted as central banks around the globe pumped billions and billions of dollars of liquidity in the market place to try and stop a worldwide sub-prime inspired market meltdown. That sound you heard last week was the sound of credit going crunch. It went from almost anybody would give you a loan for just about anything to the fear that even the most worthy will come away empty handed with no loan at all. So central banks are prepared to inject more and more money into the system until all our problems go away or at least until they are swept under the rug.

    Oil prices bounced off the lows and came back as the stock market began to recover. Battered funds that fled from risk may start to creep back into the market especially those with limited sub-prime exposure. Some big hedge funds have taken significant losses as their computers spitting out signals have basically spit up a lot of losses. The funds that actually had less exposure to sub-prime may be primed to make a killing on undervalued venues. Oil for example will look cheap to buyers if the world’s stock-market show signs of life and demand expectations looking out over the next year remain unchanged.

    But how much control do the funds have over the price of oil. Can oil rally even if the funds don’t come back? Well believe it or not it can. Of course if the outlook for oil demand remains unchanged then the funds will be driven back to the complex.

    The stock market and the perception of the health of the economy for the moment will overshadow the seasonal and other fundamentals regarding the oil. In fact in this emotional environment oil may exceed a price level on the upside that it might not have been able to achieve without this sub-prime crisis. Of course the same is true on the down side if it looks like things start to melt-down again.

    This should present good day trade opportunities. Call me at 800-935-6487 for the latest updates in this fast moving market and to open your account.

    We are far from being out of the woods and it may take some time to learn just how bad things are. But what we do know is that no matter how bad things are it will take a while for it to show up in the energy demand numbers. Look for a 3 million barrel draw down on crude as the industry continues to draw on inventory. Look for gasoline to be up 1 million barrels and distillates up 1.5 MB. Look for runs to be up 0.5%.

    The Lundberg Survey is out and is showing what most drivers already knew and that was that retail gas prices have fallen in the last two weeks. The Midwest got a big 10 cent drop as the refinery in Coffeyville Kansas and good old BP in Whiting Indiana came back on line. Retail gas prices have fallen 41 cents from the all time high set on May 18.

    Buy September crude at 7080 – stop 6970.

    Stopped on short September RBOB from apprx 19400 at apprx 19550. Buy September RBOB at 19500 – stop 19350.

    Buy September heating oil at 19600 -stop 19400.

    Buy September natural gas at 670 – stop 650.

    Have a GREAT day!

  82. 82
    El Diablo Says:

    This time I really mean it–this is my LAST salvo:

    The huge run up in 2005 pre- and post-Katrina was somewhat attributable to the ‘momentum frenzy’ in the market, momentum players, hedge funds, commodity funds, leveraged bets.

    We know for a fact that those types of players are on their heels right now, unsure of near-term credit costs and availability.

    Therefore, a similar ‘momentum frenzy’ when a hurricane strikes is less likely this year than in either of the past two years.

    While I’m certain that hurricanes will hit this year as they have every year in history, we are not getting conclusive evidence that the price reaction may not be the same because the market participants’ behavior is changing.

  83. 83
    El Diablo Says:

    that last comment should read “NOW getting conclusive evidence”…

  84. 84
    Nicky Says:

    WTI and Distillates appear to be in ii up and appear to have concluded the a up and are now in b down.

    Distillates has fib retracement levels at 20049 (23.6) 199137 (38.2) 19803 (50)
    and 19693 (61.8).

    WTI has fib retracement levels at 72.41 (23.6), 7199 (38.2), 71.66 (50) and 71.32 (61.8).

  85. 85
    Nicky Says:

    Sorry first two levels in wti should be 72.50 and 7204.

  86. 86
    zman Says:

    major profit taking in the gassy names. HK down 6%.

  87. 87
    jimbo Says:

    http://euler.atmos.colostate.edu/~vigh/guidance/northatlantic/track_gfs2.png

    More storm models

  88. 88
    codydog Says:

    sold out my DEEP just now from friday

  89. 89
    zman Says:

    jimbo – got an access forbidden error on that.

    Cody – nice one.

  90. 90
    Nicky Says:

    CNBC saying that weather forecasters have said that wave is not likely to move into the GOMEX but up the Eastern Seaboard, hence the sell off I guess.

  91. 91
    codydog Says:

    i heard NG fell because the mkt got the sell signal from El D.

  92. 92
    zman Says:

    Thanks Nicky

    IOC – did what I thought…without me ever biting. One eye here, one eye tech support..aaahhhhhggggg.

  93. 93
    El Diablo Says:

    Nicky-I haven’t traded metals, just note their high price correlation with energy, real estate, ag commodities, and easy credit.

    I look for excess froth, so Copper is the play there, its just less liquid than energy.

    If a large wave of liquidity caused the price appreciation of these assets, they will all depreciate when credit (or fear of it) tightens.

    My problem with Global Alpha quants (and generally, TA, no offense intended) is that they look at past price movements, come up with an ‘acceptable’ explanation for them, then assume those explanations will work in the future. Problem is that there is more than one way to explain price movements. If your assumption there is wrong, you will end up wrong in the future. My contention is that the run up in these assets has nothing to do with supply/demand and everything to do with too much cheap money. When the cheap money goes away, all that’s left is fundamentals.

    Ironically, although I often find myself on the opposite side of the ‘price movement’ in the market, not the same as being opposite the ‘market’.

  94. 94
    yunker Says:

    I got the same “404″ access forbidden error on jimbo’s link. Suggestions?

  95. 95
    Stephen Says:

    I’m assumed that a factor in the drop in NG was caused by TD FOUR losing the circular, spinning structure it had this morning, as it has hit some dry air.

    http://www.ssd.noaa.gov/goes/east/tatl/loop-wv.html

    Would you agree Sambone?

  96. 96
    El Diablo Says:

    Cody-market irrationality works both ways!

  97. 97
    Sambone Says:

    SPECIAL FEATURE…

    TROPICAL DEPRESSION FOUR FORMED NEAR 12.0N 31.6W AT 13/1500 UTC
    MOVING WEST 18 KT. THE MINIMUM CENTRAL PRESSURE WAS 1005 MB.
    THE MAXIMUM SUSTAINED WIND SPEEDS WERE 30 KT WITH GUSTS TO
    40 KT. PLEASE REFER TO THE LATEST NHC FORECAST/ADVISORY UNDER
    AWIPS/WMO HEADERS MIATCMAT4/WTNT24 KNHC AND THE PUBLIC ADVISORY
    UNDER MIATCPAT4/WTNT34 KNHC FOR MORE DETAILS. NUMEROUS STRONG
    SHOWERS AND THUNDERSTORMS FROM 11N TO 12N BETWEEN 33W AND 35W.
    ISOLATED MODERATE SHOWERS AND THUNDERSTORMS ARE FROM 8N TO 10N
    BETWEEN 30W AND 34W.

    A 1011 MB SURFACE LOW PRESSURE CENTER FORMED AT 13/1500 UTC
    NEAR 22N86.5W IN THE YUCATAN CHANNEL. UPPER LEVEL WINDS ARE
    BECOMING MORE FAVORABLE FOR DEVELOPMENT OF THIS SYSTEM…AND
    IT IS POSSIBLE THAT A TROPICAL DEPRESSION MAY FORM LATER TODAY
    OR TOMORROW AS THE LOW MOVES TO THE WEST-NORTHWEST AT 10 TO
    15 MPH. RESIDENTS IN THE WESTERN GULF OF MEXICO SHOULD MONITOR
    THE PROGRESS OF THIS SYSTEM. AN AIR FORCE RESERVE RECONNAISSANCE
    PLANE IS SCHEDULED TO INVESTIGATE THIS SYSTEM TOMORROW IF
    NECESSARY. THIS LOW CENTER FORMED ALONG A TROPICAL WAVE ALONG
    86W/87W SOUTH OF 26N. ISOLATED TO WIDELY SCATTERED MODERATE
    SHOWERS AND POSSIBLE THUNDERSTORMS ARE SOUTH OF 27N BETWEEN
    82W AND 88W. UPPER LEVEL DIFFLUENT WIND FLOW HAS BEEN CREATED
    IN THE WESTERN CARIBBEAN SEA DUE TO THE CYCLONIC FLOW AROUND
    THE CENTRAL GULF OF MEXICO MIDDLE TO UPPER LEVEL CYCLONIC
    CIRCULATION CENTER…AND THE NORTHEAST-TO-SOUTHWEST ORIENTED
    CARIBBEAN SEA MIDDLE TO UPPER LEVEL TROUGH. ISOLATED TO WIDELY
    SCATTERED MODERATE SHOWERS AND POSSIBLE THUNDERSTORMS ALSO ARE
    NORTH OF 14N WEST OF 78W. THE SCATTERED MODERATE TO ISOLATED
    STRONG SHOWERS AND THUNDERSTORMS SOUTH OF 12N BETWEEN 78W AND
    79W ARE PROBABLY MORE RELATED TO THE MIDDLE TO UPPER LEVEL
    TROUGH THAT STRETCHES FROM THE NORTHEASTERN CARIBBEAN SEA
    TO THE SOUTHWESTERN CARIBBEAN SEA.

  98. 98
    codydog Says:

    sam–s0, what does that mean?

  99. 99
    Sambone Says:

    Stephen – As far as I’m concerned the NGas traders are an emotional group. They move on a rumor, etc. What I concentrate on is IF a Hurricane gets into the GOMEX, what will it do. My main concern is the platforms. I’ll post a map soon of the platform locations. Anybody remember Thunder horse, BP’s Billion dollar floater?
    http://www.flickr.com/photos/xjbei/25649287/

  100. 100
    Stephen Says:

    Thanks

  101. 101
    Sambone Says:

    Cody – It means “Tis da season”. NHC is starting to watch these closely. Everything is starting to crank up. Watch 91L. Could hit TX. 91L/40L could become Dean, and then Erin. Could be either or both. Water is bathtub temp. By the way, 40L looks like Hugo track.

  102. 102
    zman Says:

    Sambone,

    Hear ya. They move on the smallest things. Some production gets shut in when anything gets near as the companies pull men off but real damage takes real wind in the central and western gulf. Nothing over Florida way but a bunch of undrilled Shell leases.

  103. 103
    Brian08 Says:

    TSO, FTO, VLO, HOC all weakening…

  104. 104
    zman Says:

    I used to plot those platforms on a big map and plot out the platform by platform oil and gas production from the MMS database back when I had a day job. Of course, that was before the dept of the interior decided to mess over the American Indian and a judge locked up the database for all but the most high level data access. You can see it in the EIA’s data which for a time stopped breaking out even GOMEX total production.

    My point is, damage will be hard to see unless companies point out specific platforms and amounts…some do, some don’t. The MMS will say what they think shuts in are but it’s pretty loose. What you can do is plot the storms and see if they’re Cat 3 or great when they pass over the thickest platform country.

  105. 105
    zman Says:

    This a fun little storm site to play around with:

    http://www.wunderground.com/tropical/tracking/na200702_flashtool.html?extraprod=flashtool#a_topad

  106. 106
    codydog Says:

    http://www.rodnreel.com/gps/semisub.asp

  107. 107
    Nicky Says:

    http://intellicast.com/Storm/Hurricane/Active.aspx?storm=2&type=track

  108. 108
    Sambone Says:

    Zman gets it. Companies spend huge amounts of $ in the GOMEX. If a platform gets run over by a Cat 3/4/5, game over. If this happens then we see supply drop off. Companies don’t want to report. What is scary is IF a Cane hits Houston. Big refiners down there.
    Here is the link for the platforms.
    http://www.gomr.mms.gov/homepg/lsesale/Visual1.pdf

  109. 109
    zman Says:

    Man that IOC worked like I thought in #6 above!

  110. 110
    zman Says:

    NOTE TO THE GROUP: MAKE CERTAIN THAT YOU DO NOT POST THINGS HERE FROM SUBSCRIBER SITES. THANKS. I’m not going to get into what is and is not a copyright violation but DO NOT post anything from a site with restricted access. Thanks.

  111. 111
    Popeye Says:

    XOI@LOD

  112. 112
    zman Says:

    ditto DJIA.

  113. 113
    zman Says:

    IOC @ HOD LOL

  114. 114
    El Diablo Says:

    Here’s a big IF for you to consider:

    Given the perception of the lackadaisical response to Katrina and Rita, what IF Dept of Energy announces it is releasing strategic reserves well before the first storm approaches the first platform in the GOM?

    Just as the Fed has learned from past credit supply crises, so to maybe the DOE has learned from past gas supply crises.

    IF there is nothing more than a temporary disruption to supply, who cares? That’s the purpose of the strategic reserve, it was used after Katrina, just too late to calm the market.

  115. 115
    T-Tupp Says:

    back from Budapest F1 race… what i miss Z lol.

  116. 116
    Sambone Says:

    El – After Katrina and Rita, the refiners was what disrupted the markets. They were down. The US released from the Strategic reserve, but the US could not refine it. What saved us was an massive injection of distillates from Europe.
    Now, if a Cane hits the platforms, we watch what was hit, whether it is Ngas or Oil, then play it accordingly. What is intersting was after Rita, Oil/Ngas stocks all went down. The crowd left.

  117. 117
    DrT Says:

    it’s too bad the feds don’t reserve products like they do in europe. it’s the euros tapping product reserves that stabilized the markwt

  118. 118
    El Diablo Says:

    Another difference from 2005, the economy is perceived to be more fragile now. Fallout from credit concerns, etc. Can’t withstand a big hit on energy prices today as it could in 2005. More reasons for feds to be proactive this time and quell the fears before the ‘fears’ put us into a recession…

  119. 119
    DrT Says:

    greenspan understood better that he had to deal with market psychology

  120. 120
    Sambone Says:

    El – Question – When has this administration been “Proactive”? This market is all about emotion at this point and reminds me of 1987 – See August 1987 charts.

  121. 121
    El Diablo Says:

    Sambone: canned Rove today, Bernanke stepping up on credit markets. Things change. Situations change. Assuming everything will happen precisely as it has in past could be a dangerous assumption.

  122. 122
    lman Says:

    Zman – what happened to NFX?

  123. 123
    zman Says:

    Group got tanked second half of the day.

  124. 124
    Insurance Agents and Insurance Services Says:

    Insurance Agents and Insurance Services

    I couldn’t understand some parts of this article, but it sounds interesting

  125. 125
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