20
Aug

Monday Mop up

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I'm still mobile today and won't be around for comments but look for a thicker post on Tuesday.

The CliffsNotes version of Monday's post reads like this:

Dean targets Mexico...Crude, Natural Gas and RBOB get whacked.

To date, concern over Dean's path has caused the extraction of several hundred oil platform workers but very little curtailment of production (according to the MMS on Sunday 23,000 bopd and 55 MMcfgpd were shut in).

Heat Wave Subsiding. Last week's CDDs came in a little lighter than expected at 83 vs 88 prior estimate. This week's early CDD projection is 79 and this weaker temp forecast should work to exacerbate the pressure on natural gas this morning.

Gas Rigs down 7 from last week - not a big deal as we're still at 20+ year highs

CFTC Net Short Natural Gas Position Slips modestly. CFTC recorded another small decline in the net short position (about 5%) last week as prices rallied into Dean. The majority of the net change came from shorts abandoning their posts but longs weren't exactly firm in their beliefs either as long contracts held declined by 11%.

Nigeria Watch: Dusk to dawn curfew declared in Port Harcourt, Nigeria after some 40 people were killed in fighting between government troops and militant gangs.

Odds & Ends

Damaged from (COP)'s "large fire" at its Pascagoula, MS refinery is still being assessed. The 160,000 bpd capacity unit 2 crude processing facility remains off-line.

Analyst Watch: (FSLR) upped to Buy at Deutsche.

25 Responses to “Monday Mop up”

  1. 1
    Sambone Says:

    Something I’m watching this morning.

    http://moe.met.fsu.edu/cgi-bin/cmctc2.cgi?time=2007081900&field=Sea+Level+Pressure&hour=Animation

    Hit forward on the right of screen. Also good article in the WSJ this morning on Oil.

  2. 2
    Sambone Says:

    I’m calling it 92L, look out Florida. 55W, 23N. http://www.ssd.noaa.gov/goes/east/catl/rb-l.jpg

  3. 3
    Sambone Says:

    Dean heading straight for Cantarell

  4. 4
    Nicky Says:

    Samborne,

    CNBC have just alerted us to that wave too. I am somewhat incredulous as our tropical weather watch which should be watching out for Florida has not even mentioned it! They are all over Dean which is going nowhere near Florida.
    It could get interesting.

  5. 5
    Nicky Says:

    Sell off in energy looks overdone to me -this is very much the start of when things really start to heat up in the hurricane season – late August,September.
    Also is the market discounting the very large oil fields west of the Yucatan which provides 2mbd?

  6. 6
    Nicky Says:

    WTI – major support at 7015, 6960 and 6900.

    Distillates has minor support at 19600 and 19500 and major support at 19300 and 19000.

    RBOB has major support at 19250 and 18950.

    Nat gas has major support at 6430 and 6310.

  7. 7
    Sambone Says:

    Nymex Crude Lower As Dean Heads For Mexico

    From MARKET TALK
    Nymex crude drops as floor trading opens, falling 50c/bbl in minutes. Sep crude -$1.20 at $70.78. Main factor is forecasts saying Hurricane Dean will miss key US Gulf of Mexico oil production, instead smashing into the Yucatan Peninsula. (matt.chambers@dowjones.com)

    –Contact us in New York at 201-938-2030 or cassandra.sweet@dowjones.com.

    Reported Earlier
    LONDON — Crude oil futures were lower in London Monday morning as Atlantic Hurricane Dean’s path looked on course to miss the concentration of U.S. oil facilities in the Gulf of Mexico.

    But the threat to Mexican offshore rigs and a recovery for global equity markets has offered support and should help prevent further losses, traders said.

    “We are seeing people unwind precautionary positions because for now it looks as if U.S. infrastructure is going to miss the worst of the hurricane,” said a broker in London. “But I think it’s too early in Dean’s progress to get to comfortable.”

    At 1122 GMT, the front-month October Brent contract on London’s ICE futures exchange was down 29 cents at $70.16 a barrel.

    The front-month September contract on the New York Mercantile Exchange was trading $0.65 lower at $71.36 a barrel having fallen by as much as a dollar earlier.

    ICE’s gasoil contract for September delivery was down $4.50 at $622.50 a metric ton, while Nymex RBOB gasoline for September delivery was down 663 points at 197.25 cents a gallon.

    Hurricane Dean, the first hurricane of the Atlantic storm season, is expected to be upgraded to a category 5 hurricane — the strongest level — after moving away from Jamaica and heading for Mexico’s Yucatan peninsula, according to the National Hurricane Center.

    Investors were said to have bought oil futures Friday, concerned Dean may end up hitting U.S. facilities further north on- and offshore Texas and beyond.

    The forecasts had prompted oil companies to take preventative action and were enough to shut-in an estimated 10,300 barrels of oil a day, or 0.8% of the Gulf of Mexico’s total oil production by Saturday, according to the U.S. Minerals Management Service.

    “Oil companies have evacuated oil facilities, which might be in the way of hurricane Dean and refineries have reduced operating,” said Peter Fertig, an analyst at Dresdner Kleinwort in Frankfurt. “However, Dean moved more south and is unlikely to hit the oil facilities.”

    But there is plenty of Mexican oil production at risk given the current projected path including the Cantarell and KMZ fields.

    After leaving the Yucatan Peninsula the Hurricane is expected to emerge in the waters of the Bay of Campeche but Olivier Jakob, head of Petromatrix in Switzerland, said it should then be reduced to category one “which should not be a major challenge to oil platforms and floating production assets.”

    Even if Dean fails to cause significant damage to oil production in the region, analysts at Goldman Sachs believe the U.S. refining system remains vulnerable to weather-related outages.

    “The U.S. refining system is particularly vulnerable to weather events given the extremely low level of product inventories and the fact that the system is still recovering from the string of outages that has been plaguing it since March,” they said in a note to clients.

    While the hurricane activity is grabbing the headlines, a recovery for global equity markets following last week’s cut in the discount rate by the U.S. Federal Reserve is helping shore up support levels for both Brent and WTI.

    A sharp slide in equities following recent news of jitters in the credit market has eroded stock markets over the last few weeks but bulls hope the Fed’s move will help prevent a global economic slowdown and ensure current demand estimates for oil remain realistic.

    Much depends on the action of the funds which were said to have been responsible for much of the selling in oil recently.

    The latest report from the U.S. government’s Commodity Futures Trading Commission showed a further drop in the net long position of large speculators, made up mostly of funds, on Nymex crude.

    —By David Elliott, Dow Jones Newswires

  8. 8
    Sambone Says:

    N – Did you see Barron’s this weekend in regards to: “Shorting Cramer”?

  9. 9
    Nicky Says:

    No I didn’t Samborne. Is it possible to send a link?

  10. 10
    jimbo Says:

    Nicky….do the charts suggest the high before a new low in the S&P?

  11. 11
    Stephen Says:

    Z’s favourite OII is definitely getting hit as a result of Dean, may be worth a punt, if that strom off the Bahamas starts spinning, but it doesn’t seem to be …

  12. 12
    Nicky Says:

    Hi Jimbo,

    I expect to see higher highs (ie above Friday’s high) before we see new lows in the spx. We look as if we are undergoing some corrective action first.

  13. 13
    Sambone Says:

    http://internet.seekingalpha.com/article/44923
    Follow link, “Shorting Cramer”.

  14. 14
    Nicky Says:

    Thanks Samborne. So bottom line is he is making money unlike most the people who follow his recommendations.

  15. 15
    Sambone Says:

    Yep, he sold 22,500 shares from option related on Friday, when he still has a long way to go on the ones he sold. Boo-yah!

  16. 16
    Sambone Says:

    Here’s your buddy, Nicky!

    The Energy Report

    Phil Flynn
    August 20, 2007

    Hurricane Dean has been making tracks but the latest track shows his fury might miss key US oil producing and refining areas. This storm that has battered Jamaica and now is ready to pass the Cayman Islands and is now tracking more south than originally projected.

    Obviously these storms can make unexpected twists and turns but as of now the market is sensing that most oil production facilities will be spared.

    That doesn’t mean there wont be any impact but at this time it looks like at least for oil and gas it might not be as bad as it could have been.

    Oil and Gas will see some relief selling but may find a bit of support from the rebounding stock market. Asia is rejoicing in the fact that the US cut the discount rate last week and that enthusiasm may at some point support oil.

    The energy markets are of course looking ahead to the seasonal softness in demand and fears that a slowing economy might make demand for energy softer than usual. Before Dean, oil took its cue from stocks and may do so again today. Dean now looks like it may slam into the Yucatan Peninsula with the potential force of a category five storm and after it does, the hope is its fury will lessen as it enters the Gulf. At this point all we can do is hope and pray that this fury of nature does as little harm as possible.

    Crude supplies should continue to fall as supplies in Cushing, Oklahoma have fallen 12 weeks in a row. Look for crude to be down 3.0 million barrels gas up 2.0 million and distillates up 1.0 MB with runs steady.

    Start the week off right and get on the Phil Flynn energy blast. Please feel free to call me or my team for the latest updates whether you’re a client or not. We will do everything possible to help you during these challenging times. Stops may rise intra day as well as intermediate profit taking areas. Call me at 800-935-6487 or email me at pflynn@alaron.com to open your account. You can also get a free trial of Alaron energies.

    We’re long September crude from apprx 7170 – stop 6970. If not stopped roll to October moc.

    Buy September RBOB at 19200 – stop 18700.

    Buy September heating oil at 19600 -stop 18400.

    Stopped on long September natural gas from apprx 670 at apprx 650. Buy October natural gas at 610 – stop 580.

    Have a GREAT day!

  17. 17
    rammastr Says:

    Nicky, you mentioned that we haven’t seen anything yet with regards to the downside. You also use EWT terminology. Where do you believe we are with regards to the energy/financial market?

  18. 18
    Nicky Says:

    R – do you mean with regard to an Elliott wave count?

  19. 19
    rammastr Says:

    Yes.

  20. 20
    Nicky Says:

    R – line in the sand remains the March lows. These are 11,939.61 in Dow and 1364.06 in SPX. (We came very close to taking out the latter last week).

    In EW terms we look to have completed wave 1 down and are tracing out an abc correction for wave 2. Target areas for completion of 2 are 13340 (23.6%) 13486 (38.2%) 13573 (50%) 13676 (61.8%) 13823 (78.6%).

    SPX has major resistance now in the 1465 – 1480 area. Look for the market to stall there. Until the March lows are taken out we need to keep an eye on an alternative bullish count. A close above 1474 would open the door for this.

    However should the market turn down at the resistance areas (wave 2 is likely to take a week or two) then look for the next low on the spx to come at 1319 or lower and probably in late September/early October. This is likely to be followed by a sharp rally into January which is unlikely to take out the previous highs.

  21. 21
    rammastr Says:

    Thank you Nicky!

  22. 22
    Sambone Says:

    “Mexico’s Pemex declares Force Majeure on energy exports due to Den”.

  23. 23
    codydog Says:

    Just stopping in quickly to congratulate El D on his most excellent short in NG. I am humbled by his trading prowess.

    (And I hope he grabs his profits before the shorts cover!!!)

  24. 24
    El Diablo Says:

    I hate ‘irrational’ days all the time, they muddy the view for everyone. As I said, I’m short until at least $4.

  25. 25
    Nicky Says:

    Makes sense to me:

    http://www.thestreet.com/_htmlatb/markets/activetraderupdate/10375250.html

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