01
Sep

Weekly Wrap – Week Ended 08/31/07

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Hope you are having a great Labor Day holiday weekend! I'll keep this one pretty short.

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Rigs Drilling For Natural Gas Hit A Fresh Record. At 1,523, the number rigs specified as drilling for natural gas in the U.S. is at a record since Baker Hughes started breaking out oil vs gas rigs in its reporting back in mid 1987. The locations and rig types give you a good picture of the unconventional natural of the plays here.

  • The Barnett Shale in Texas has driven must of that rally in the rig counts over the last six or so years.
  • Note then the horizontal ramp a little later as completion methods improved and horizontal laterals became more stream in costs effectively drilling up the shales.
  • I included Arkansas because it's piece of the Arkoma Basin, the Fayetteville Shale has taken the state from a gas nobody to a science project to a respectable and growing major player in a much shorter time frame than previous play developments. This is no long just (SWN) country and land prices were bid up as everyone and his broke brother-in-law bet this was the next Barnett. $5 gas is marginal and will not work for the non legacy asset players involved here. If prices do fall below $5 watch the drilling permits in these plays slow down and the rig counts come off these peaks pretty quickly.
  • Click the chart to view in its entirety.

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Natural Gas Storage: The YoY Surplus Declines Slightly. Click the natural gas storage link at left for more looks at storage, injections, etc... 

Natural Gas Prices Continued To Slide Last Week. The October gas contract fell another 5% and is down 23% in the last two weeks, the result of seasonal "full" storage and the sell off in the wake of the Hurricane Dean near miss. This past week gas traded back and forth in a narrower range than in the prior couple of weeks but it continues to teeter on the brink of falling to $5 or worse. I'm beating a dead horse but since it's dead I'll hit again. $5 gas means a much lower number at the wellhead in many places including the Rockies. Press releases will be crafted and released regarding shut ins. 

CFTC: The Net Short Position Continues To Decline. Longs were up 14% while shorts were down very slightly after last week big cover. Traders are seeing the writing on the wall. We are setting up one heck of a opportunity to go long gas and gassy stocks. 

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Holdings Watch: Light week for trading last week as we just added a little to our refiner positions and watch our gassy E&Ps suffer a little more. Oil service continues to please.  Click table to view in its entirety. 

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Tropical Storm Hurricane Felix. The current track is further south than Dean. This track may be disappointing enough for natural gas traders that we see lower $5s next week. On it's current path it will cause Pemex to once again shut in a majority of their production which will cut imports to the US by 1.4 to 1.5 million bpd (about 15%) for the majority of a week which should produce another big draw down in crude inventories in two weeks even if there is no damage.

Have a great rest of the holiday weekend everybody!

22 Responses to “Weekly Wrap – Week Ended 08/31/07”

  1. 1
    Sambone Says:

    I’m in, works fine

  2. 2
    scoop006 Says:

    Z Time to update performance page

  3. 3
    zman Says:

    Will do this weekend.

  4. 4
    zman Says:

    TS Felix…Dean little brother look alike on the current track.

    http://www.intellicast.com/Storm/Hurricane/Active.aspx?storm=3&type=track

    Off to blast some doves!

  5. 5
    zman Says:

    test comment

  6. 6
    zman Says:

    Felix – much stronger, still very south

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

  7. 7
    zman Says:

    Felix Cat 5 storm track. Somewhat bullish for oil but it will get severely weakened as it crosses the Yucatan Peninsula (crossing more of it than Dean) before it reaches the Bay of Campeche – This will still cause Mexico to shut all Gomex production for several days.

  8. 8
    aaatest Says:

    Can see comment notice in comment side bar, get “no criteria” notice when click while logged out.

  9. 9
    zman Says:

    good

  10. 10
    BigJim Says:

    Zman:

    I see US-EIA Petroleum report comes out Thursday rather than Wednesday. Any clue about inventory from this report.

  11. 11
    zman Says:

    Yeah, it looks like they’ll be doing simultaneous release of oil and nat gas reports which is always a hoot.

    Haven’t seen estimates yet as they’re all out skiing or whatever.

    I’d guess another draw for gasoline is in the cards and probably oil. Distillates: I’d bet on a small build. Next week’s likely to show another big draw for oil with Felix calling the game in Mexico on account of rain.

  12. 12
    BigJim Says:

    Zman:

    Thanks

  13. 13
    BigJim Says:

    Some articles out today about oil and drillers. Barron’s article concerning Nabors and land drillers. Another story on Bloomberg about oil.

  14. 14
    calvino Says:

    Greetings, Zman. Joined up after you pulled the freebie postings from Seeking Alpha. Nice job, the marketing worked. The high rig count and low nat gas price is a bit of a conundrum. Perhaps the drillers are betting on a seasonal price spike coming soon? In the macro pic, I can not square the ever growing gas draw form oil sands and even ethanol, and the Canucks capping wells.

  15. 15
    rammastr Says:

    Twenty-one out of 23 analysts polled by Thomson Financial said the cartel was likely to keep production levels unchanged at its September 11 meeting on worries that volatility on equity markets might crimp oil demand.

    “OPEC is like everyone else. It is going to wait for more clarity before they make any decisions on policy,” said Alaron analyst and trader Phil Flynn.

    What clarity?

  16. 16
    zman Says:

    Thanks BigJim

    ——————————–

    Cal – this is one of those things that works until it’s broken. Everybody expected a light year on volumes from Canada but lately they’ve ramped back and are around 10 Bcfgpd. That’s not bad at all. Another shoe has to drop here. Oil sands aren’t demanding as much gas as people thought they would and several systems are using “off” gases instead of nat gas. Ethanol is demanding more along with fertilizer c0’s but so far this offset by the increasing domestic onshore resource play “shale” gas.

    ————————————

    ram – check your email

    ————————————

    Felix – how it plays. It’s weakening and heading toward the very southern coast of the Bay of Campeche. Slight up for oil, disappointing for natural gas.

  17. 17
    QUARRYMAN Says:

    Hey Z,

    Phil was shorting XOM on Friday expecting a drop on Tuesday.

    Mine’s not to wonder why? It had a XXXX after it and he really hit a 125% home run for me with his snap-shot buy call on AAPL Wednesday p.m.– two days.

    But, what’s your read on XOM. Also, I’d posted somewhere earlier a question on IO.

    Thanks for your rapid response.

    “Rope off before you walk near that highwall, son!”

  18. 18
    calvino Says:

    Z, a little tid bit apropos the tar sands…

    Devon confirmed the view heard on the Chesapeake Energy (CHK) conference call about natural gas supply. They think demand for oil sands development will pick up and noted that all the production gains have come from the independents as the major integrated have declining production profiles.

  19. 19
    zman’s Energy Brain ~ oil, gas, stocks, etc… » Blog Archive » Tuesday – One Small Sway For Felix, One Giant Walloping For Gas Says:

    […] Comments calvino on Weekly Wrap – Week Ended 08/31/07 QUARRYMAN on Weekly Wrap – Week Ended 08/31/07 zman on Weekly Wrap – Week Ended 08/31/07 Cap on […]

  20. 20
    drdavis124 Says:

    QUARRYMAN
    I Chickened out on xom but did buy AAPL 09 Leaps. I never trade,I am not smart enough, lost fotunes trying.. AAPL is going to blow the doors off. The sleeper is the retail MAC PC market. M.I.T.’s best & brightest use MACs.

    THE “LAW OF BIG NUMBERS” makes is impossible for big caps like HAL SLB GE MSFT

  21. 21
    drdavis124 Says:

    Hit the send by accident. big caps are to big to give you a 2X or 3X in
    2-3 years like chk UNT HOC & XTO did. I am doing DD (due dilligance on FTI & SPN. Both will be higher than HAL a year from now.

    Phil

  22. 22
    zman Says:

    Dr D – we try to keep new comments on the latest (today’s) post, that way everyone sees them.

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