26
Sep

Wednesday – Oil Inventories, Dry Bulks, Crack Spreads, and More…

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Commodities Watch:

  • Crude Oil: After a second day of heavy selling (profit taking) yesterday, November crude is up $0.50 to $0.60 in pre market trading to just reclaim $80.
    • BP delays Whiting Indiana crude unit restart. No reason given.
    • Russian oil exports to fall 120,000 bopd in October due to unscheduled maintenance at a Baltic Sea port.
  • Natural Gas: The October contract expires today and will be volatile going off the board around the $6.30 mark. I've been paying more attention to November for awhile now (just over $7) which puts a different spin on the whole hat eating debate.

Housekeeping Item: If any of the charts or tables are too wide for your screen, click on them and they will open in your browser in all their glory. 

Irony Watch: The Valley County Wind Farm project has been scaled back from 500 Mw to 50 Mw because of pressure from environmental groups. 

EIA Oil Inventory Report Expectations

exp-092507.jpg

Comment: I feel like a broken record here but the crude withdrawal could / should again be bigger than the expectations given the GOMEX production shut in late last week. I'd also bet we see another drop in refinery utilization to a level below 89% [I felt so much like a broken record I copied and pasted that last bit from Tuesday's post]. Crude trading off yesterday pretty much discounted the 2 million barre expected draw in my mind. Crude probably trades a bit lower $77-78 if we don't get a bigger draw than consensus. However, anything close to 3 mm (or more) and look out $81 here we come.

Tropics Watch: Getting A Little Busier

  • Nobody Cares about TS Karen But I wouldn't write her off just yet. The 12th named storm of the year is spinning towards Bermuda so maybe they care but not the energy sector. Looking at the multiple storm tracks available to the modern amateur meteorologist these days I would be remiss if I did not point out that yesterday one pointed to the possibility of Karen heading on a more Westerly course (towards Cuba) and today three do.
  • TD 13 Formed In The Extreme Western GOMEX: It is expected to strengthen slightly in coming days, possibly becoming a tropical storm over Mexico's offshore oil fields before coming ashore in Mexico by Saturday. This may give prices a boost early. 

Stocks / Sectors We Care About Today Watch:

  • (APA) - Nice gas shows seen in an Australian project (testing next week, by no means a company maker...what is for a company this size but it's another bit of success for a very well run large cap E&P). Continue to hold the Oct $80 calls here but will likely look for an exit and roll longer soon following any weakness. I like how this one played up with oil and sideways with the little retrenchment in crude over the last couple of days but I don't want to overstay my welcome in short dated calls that have worked so well. 
  • Oil Sands Tax Impact: According to consultant and super brain trust Wood Mckensie, the cost to Albertan Oil Sands producers would come to $26 Billion (US or Canadian, take your pick this week) if proposed tax changes are implemented.
  • Deepwater Drillers: (HES) locked up the deepwater drillship Stena Drillmax I for a five year period beginning 2009 for $950 million. Why I care? Two reasons: 1) that's a lot of money a long time (sort of) away and it speaks volumes as to the strength of the deepwater trend and scarcity of available capacity to pursue this trend. 2) $950 million / (5y X 365d) implies a day rate of $520,000. This Stena rig is capable of drilling in water depths of 7,500 feet. The ship (GSF) / (RIG) just ordered is capable of drilling in depths of 10,000 feet initially and is upgradable to 12,000 foot capability. The line in the worry sand for analysts has been a day rate of $500K (which they sounded smugly sure of on their conference call). This HES/Stena deal makes hiring RIG's new build a $550 K engagement worst case in my mind. RIG/GSF will merge by year end and they have an option on another ultra-deepwater capable drillship which I bet gets exercised.
  • Dry Bulk Shipping Conference Today:

(DRYS) - I picked some up two days ago and like it long and short term. It still remains cheapest in group and is in "the heart of the play" with it's large fleet of Panamax sized carriers with more new builds on the way.

drybulk-092507aaa.jpg

The long term economics look compelling and 2008 is shaping up to be another year of higher rates for these shippers. DRYS speaks at the Jefferies Bulk Shipping Conference at 11 est. There's a long list of companies presenting and live and recorded presentations are available at www.jefferies.com.

  • Refiners: Cheap with upside as some product inventories remain low.

refiner-multiple-092507.jpg

VLO will almost always be cheapest on this list (it's much bigger than the others in terms of Market cap and especially in terms of throughput capacity) but when cracks are rising in one of their core regions (at least as I think they will as you'll see at the bottom of the crack spread section) then I think it's time to narrow that gap rather quickly. 

refiner-lt-multiple-92507.jpg

Crack Spreads Update: Treading Water.

cracks-092507.jpg

Biggest takeaway: Cracks aren't plummeting nor are they in the basement for this time of year. Mid-Continent should stabilize and tick back up based upon a large amount of region specific maintenance scheduled to take place in September and October. Gulf Coast cracks should remain above year ago levels given the following table:

 gulf-coast-pieces-092507.jpg

Who benefits? (VLO) for almost certain. Majors and mini-majors as well but the effects will be harder to separate from their global ops.

 

Holdings Watch:

CALLS:

  • VLO 70 October calls for $1.75. Last bid $1.60.

PUTS: No action 

Odds & Ends

Analyst Watch: (ALJ) cut to hold at Credit Suisse, (CEO) cut to underperform at BS, (STO) cut to neutral at JP Morgan,

 

 

 

 

 

 

 

134 Responses to “Wednesday – Oil Inventories, Dry Bulks, Crack Spreads, and More…”

  1. 1
    Sambone Says:

    8:53 am EST

    Nymex Crude Higher, Awaiting US Inventory Data

    Dow Jones Newswires
    From Market Talk:
    [Dow Jones] Nymex crude edges slightly higher, hovering around $80 a barrel in morning electronic trade, after low US consumer confidence readings and home sales data pushed prices lower Tue. Traders await US petroleum inventory data from the Department of Energy, scheduled for 10:30 am EDT release. If the report shows a smaller-than-expected withdrawal from crude supplies, there may be a further pull-back to $78 a barrel before the market consolidates and goes higher, says Addison Armstrong of TFS Energy Futures in a report. Dow Jones Newswires survey calls for a 1.8-million-barrel decline in crude stocks in the week ended Sep 21. Nymex Nov crude +59c at $80.12 after hitting a low of $79.30/bbl overnight. (elizabeth.landau@dowjones.com)

    1231 GMT [Dow Jones] Short-term long position holders could hold the key to where oil prices move next, says Peter Beutel at Cameron Hanover. “Last week, we saw traders get out of about 135,000 contracts of crude oil, as prices were making new highs (through Thursday),” he says. “That suggests that short-covering was behind the moves higher last week, and it further suggests that many of the traders who had gotten long two and three weeks earlier were taking profits into the higher prices.” With short-covering now apparently having dried up, short-term longs’ next move “could well determine where we go. They could be waiting for a dip into which they can buy.” Nymex November WTI +55c at $80.08/bbl, ICE November Brent +21c at $77.83/bbl. (NHE)

  2. 2
    zman Says:

    nice open…pretty meaningless before inventories except for RIG and DRYS.

  3. 3
    zman Says:

    Looks like DRYS is getting hit by “buy the lead up, sell the conference” action.

    Will look at adding more

    Test: anyone at home. Had a report of trouble logging in.

  4. 4
    Sambone Says:

    I had somewhat of a problem earlier. I just kept trying until it finally came up after a while. I estimate 30 minutes?

  5. 5
    redjack Says:

    Ditto on the connection problems

  6. 6
    zman Says:

    30 minutes?! That stinks.

    Did it just time out or did you get an error message?

  7. 7
    fraser921 Says:

    i just got in.. had 30 minute problem

    i expect drys to earn 9.50 this year before cap gains on ship sales which will add another 3.80 so 13.30 vs the 7.18 above

    The analyst are woefully short on their estimates

  8. 8
    zman Says:

    DRYS got a little profit taking out of the way, ready to rock now

  9. 9
    redjack Says:

    Kept timing out

  10. 10
    redjack Says:

    Still is timing out

  11. 11
    zman Says:

    Apologies will check with host but I’m sure they’ll tell me its a problem they’ve already fixed.

  12. 12
    zman Says:

    OII rallying back after a 1 day rest; most likely it’s up due to tropical activity.

  13. 13
    rseidman Says:

    Connecting is a REAL problem today

  14. 14
    zman Says:

    DRYS getting whacked

  15. 15
    Sambone Says:

    Network Error (tcp_error)

    A communication error occurred: “Operation timed out”
    The Web Server may be down, too busy, or experiencing other problems preventing it from responding to requests. You may wish to try again at a later time.

    For assistance, contact your proxy support team @ *GT NA Proxy-EPO SUPPORT.

    Error generated by webproxy 199.67.140.84

  16. 16
    QUARRYMAN Says:

    Good morning, everyone.

    I’m happy to hear that DRYS is ready to rock. I’m waiting for some momentum to add to my position.

    It looks like I’m about to buy some more VLO Oct 70s @ 1.50

    Am lowballing some XLE Jan 76 puts for hedge.

    Have fun and be safe!

    Q.

  17. 17
    Nicky Says:

    Morning all

    WTI makes it to the 50% retracement level of the fall.

    Distillates still hasn’t made it that far – 22181 is the 50% retracement and high so far is 22121.

    RBOB has only got as far as the 23.6% retracement level.

  18. 18
    zman Says:

    Thanks…it’s out of my hands. Call in with support but since they’re not actually answering the phones I’d say they know about it.

  19. 19
    zman Says:

    Host says they’re on it, it’s upstream from them but they are told it should be fixed soon.

  20. 20
    Nicky Says:

    CNBC appear to have forgotten to do the oil inventories

  21. 21
    Nicky Says:

    WTI – BUILD OF 1.8
    RBOB – BUILD OF 600K
    DISTILLATES – BUILD OF 1.6

  22. 22
    Popeye Says:

    Big surprise!

  23. 23
    Nicky Says:

    That crude number is very bearish

  24. 24
    zman Says:

    1.8 add on curde
    +.6 on gaso
    +1.6 on distillate

    86.9% util

    waiting on adding to VLO calls

  25. 25
    Nicky Says:

    Charts now looking very bearish…

  26. 26
    QUARRYMAN Says:

    Nicky,

    VLO seems to be bottoming at 68, let’s see if it recovers from here.

  27. 27
    zman Says:

    Big imports component in the gasoline build…that’s unlikely to hold there.

    TRADE: VLO 70 CALLS for $1.20.

  28. 28
    Nicky Says:

    Quarryman – I would imagine stocks are holding up better than futures.

  29. 29
    zman Says:

    Very surprised by the build in crude…big imports number but still, you’d think the TS would have kept it negative.

    DRYS getting popped (down $2) – will listen in 15 to their spiel at the conference.

    RIG down makes little sense as it should be more insulated from the OIH than this.

  30. 30
    zman Says:

    Pretty muted reaction in RBOB

    Nicky were you saying the charts for crude and products look very bearish now?

  31. 31
    Nicky Says:

    Z – yes and RBOB

  32. 32
    Sambone Says:

    10:39 am EST

    Nymex Crude Pares Gains On Surprising DOE Data

    DOW JONES NEWSWIRES
    From MARKET TALK:
    [Dow Jones] Nymex crude prices pare early gains after the DOE releases data showing crude oil stocks unexpectedly rose last week by 1.8 million barrels. Nov crude, which had been trading around $80.50/bbl before the data, are now +27c at $79.80. (matt.chambers@dowjones.com)

    Reported earlier:
    NEW YORK — Crude oil futures rose early Wednesday as traders awaited U.S. inventory data from the Department of Energy expected to show a fifth straight fall in crude stocks. A suspension of Iraqi oil exports through a pipeline to Turkey also boosted prices.

    The front-month November light, sweet crude contract on the New York Mercantile Exchange was recently up 89 cents, or 1.12%, at $80.42 a barrel. Brent crude on the ICE futures exchange added 45 cents to $78.07 a barrel.

    “We’re seeing some positioning ahead of the day’s (DOE) numbers,” says Jim Ritterbusch, president of trading advisory firm Ritterbusch & Associates in Galena, Ill. “The story regarding the fact that Iraqi exports through Ceyhan, Turkey, were suspended might have given us a little upside incentive.”

    Oil flow from Kirkuk’s oil fields in Iraq to an export terminal in Ceyhan, Turkey, have been suspended since Sunday, a Middle East shipping agent told Dow Jones Newswires on Wednesday. It isn’t known yet why the flow has been suspended, but the export pipeline was attacked Sept. 18 by unknown gunmen and part of it was damaged. The pipe had been expected to be pumping 480,000 barrels a day of crude as of Tuesday.

    The market’s reaction to the DOE data, due at 10:30 a.m. EDT will be telling this week because buying by institutions and funds, which had helped the advance of crude prices this month, has dwindled in recent sessions, Ritterbusch said in a research note.

    Front-month October reformulated gasoline blendstock, or RBOB, rose 1.41 cents, or 0.69%, to $2.0520 a gallon.

    October heating oil was up 2.07 cents, or 0.95% at $2.2020 a gallon.

    Crude stocks are expected to fall by 1.8 million barrels in the Department of Energy data. Gasoline stocks are seen increasing by 200,000 barrels, and distillate inventories, which include heating oil and diesel fuel, are expected to gain 1.1 million barrels. Refinery use is projected to drop by 0.6 percentage point to 89% of capacity. A bigger draw in crude stocks would push prices higher, Ritterbusch said.

    “If we get a draw of 3 or 4 million this overnight rally should prove sustainable,” Ritterbusch said.

    Other analysts say it’s too soon to tell if crude has begun to turn back to higher prices.

    “We would not be surprised to see a further pull-back to $78 before the market consolidates and moves higher -particularly if today’s inventory report shows a smaller than expected withdrawal from crude supplies,” said Addison Armstrong of TFS Energy Futures.

    —By Elizabeth Landau, Dow Jones Newswires

  33. 33
    Sambone Says:

    Mr. Big himself!

    http://www.321energy.com/reports/flynn/current.html

  34. 34
    sane Says:

    API

    Crude Build 895K
    Gasoline Build 1M
    Distillates Draw 1.9M

    Sorry about the delay, on the boat and my connection is painfully slow

    Sane

  35. 35
    Nicky Says:

    WTI has support at 78.95, 78.25 and 77.20.

  36. 36
    Nicky Says:

    Distillates has support at 215.70 and 21300.

  37. 37
    Nicky Says:

    RBOB has major support in the 19400 area.

  38. 38
    zman Says:

    Bill,

    The DRYS slide show is starting, just went through them. Bitter as always about the naysayers but good slides on China growth

  39. 39
    Nicky Says:

    RBOB also has good support at the 20000 area which we have just bounced off.

  40. 40
    Brian08 Says:

    VLO seems to be holding it’s line a little below 68…Good to see…

  41. 41
    zman Says:

    DRYS joking about their lack of subprime exposure. That’s a little out of hand but I read them on it.

    Statement about China: need 66 Capsize ships for China’s iron ore growth alone in 2007.

    Drys should run now.

  42. 42
    Popeye Says:

    I’m not a big HAL fan but it sure is holding up well today for you guys.

  43. 43
    zman Says:

    DRYS Q&A:

    plan to stick to spot market strategy, will not shift to charters if they see a slowdown, very hard to time the market. May do some but most remain spot.

    brazil iron ore: no shift to Australia (shorter routes) seen. Brazil iron ore production is going full bore (30 day trip to China) vs half that from Australia.

    cash generation: how to use? In this order, continue to grow the company through accretive ship acquisitions, increase dividend, the reduce debt (which is about 33% debt to TC (low))

  44. 44
    zman Says:

    Nicky thanks for the levels.

    P – and I’m not in right now!?@#$

    Brian – it’s early, could go either way. There’s always that time period where they sell everything on a “bad oil number”, then starting weeding through and bargain hunting.

    What is up with CNBC, just not caring about oil today?

  45. 45
    zman Says:

    RIG and DO make no sense at to me today.

    DRYS is all over the map…maybe people are a just relaxing before the run/taking profits. Maybe they’re disappointed the CEO didn’t say the words BIG BUYBACK but they should know better.

  46. 46
    zman Says:

    Sane – how did API look?

  47. 47
    Popeye Says:

    HAL green, go figure.

  48. 48
    zman Says:

    They’re a low multiple powder keg with a pressure pumping discount. I think they surprise people over the next year and significantly close the fwd multiple gap to slb.

  49. 49
    zman Says:

    Midwest and Gulf Coast gasoline stocks both dropped in the things that are important to VLO file.

  50. 50
    fraser921 Says:

    The entire dry sector is under some selling today as people take profits. I added to my oversized positions.

    I give George credit for taking on his critics. He was personally insulted and he took the opportunity to tweak them back as he has been correct. They were dissing him when the stock was at 15.

    He has a slide on what he assumed and what the current rates are. It doesnt take a rocket scientist to figure out that they will blow away earnings estimates.

    the key point is that 99 % of 2008 are “unfixed” Thats like ng at 20.. and a gassy operator sitting there with an unhedged position on production

  51. 51
    zman Says:

    Bill – exactly my thoughts or unhedged with $150 oil!

  52. 52
    zman Says:

    Bill – you watching GNK today? They speak at Jefco as well but it’s not available to listen to; up 4%

  53. 53
    Sambone Says:

    11:11 am EST

    Nymex Crude Falls Below $80; Inventories Build

    By MATT CHAMBERS
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures turned negative Wednesday, paring early gains and falling below $80 a barrel after the Department of Energy said U.S. crude stocks built for the first week in five. Analysts had expected a draw in stocks.

    The front-month November light, sweet crude contract on the New York Mercantile Exchange was recently down 40 cents, or 0.5%, at $79.13 a barrel after rising as high as $80.75 before the data. Brent crude on the ICE futures exchange fell 83 cents to $76.79 a barrel.

    Crude oil stockpiles rose 1.8 million barrels to 320.6 million barrels last week, the DOE’s Energy Information Administration unit said in its weekly report. The average forecast in an earlier Dow Jones Newswires survey of analysts was for a draw of 1.8 million barrels.

    “Prices are coming off on the build in crude stockpiles,” which did the exact opposite of analysts’ forecasts, said Michael Cambria of PNDR Energy on the Nymex floor.

    Gasoline stocks grew by 600,000 barrels to 191.4 million barrels, compared with expectations for a 200,000 barrel build, and distillates, which include heating oil and diesel fuel, grew by 1.6 million barrels, more than the 1.1 million barrels expected. Refinery use fell by 2.7 percentage points to 86.9% of capacity, a bigger drop than the expected fall of 0.6 percentage point.

    Front-month October reformulated gasoline blendstock, or RBOB, fell 3.29 cents, or 1.6%, to $2.005 a gallon. October heating oil was down 1.74 cents, or 0.8%, at $2.1639 a gallon.

    The unexpected build in stockpiles could be a turning point for crude oil prices, which hit a record $83.90 on Sept. 20. Prices have dropped for the previous three sessions, after a strong run-up helped by fund buying, and analysts had been saying this week’s inventory report would be key to deciding crude’s future direction.

    “The $80 barrier may be difficult to overcome, the momentum has shifted to downside,” said Mike Zarembski, an analyst at OptionsXpress in Chicago.

    —By Matt Chambers, Dow Jones Newswires

  54. 54
    zman Says:

    Sambone – anything new in the world of weather?

  55. 55
    sane Says:

    Z,

    API #34

  56. 56
    zman Says:

    Thanks Sane. Dist down, that’s odd.

  57. 57
    sane Says:

    Z,

    That BP crude unit restart was delayed d/t a steam pipe explosion. My neighbor works out there and said the explosion almost shuddered the whole plant.

  58. 58
    zman Says:

    Thanks Sane! Doesn’t sound like an overnight fix…they left it open ended in their comments. More unexpected Midwest downtime.

  59. 59
    Nicky Says:

    Z- you are right about CNBC – extraordinarily muted now oil is moving down. Seems they are just about ramping it hysterically when it is going up!

    Just seen our tropical weather update and there is really nothing out there to be worried about. They have said that Karen will be no threat to land even though it will probably become a hurricane shortly.

  60. 60
    Sambone Says:

    Weather – OK, here we go.
    Karen – Should track north and a slight chance it will then move west, so the Southeast needs to keep an eye out.
    13 (GOMEX) – will move west to Mexico
    98L (Fl Keys) – will cross Florida and then move up the coast. Not expecting much.
    97L – Alot of shear, but will lessen somewhat and then go back up. Not expecting much.

    The one that has me interested is the blob SE of Karen that came off Africa. Too early yet to make anything out of it, but it is the only one that has me interested.

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

  61. 61
    zman Says:

    Thanks guys

    very quiet trading energy land

    DO trying to make a run, wonder if RIG follows.

    DRYS like a yo-yo

    VLO sideways down $0.60-.70

    otherwise zzzzzz.

  62. 62
    Nicky Says:

    Thanks Samborne –

    this is an interesting piece of (probably) useless information but never the less interesting statistics:

    Since 1950, the following has held true for tropical cyclones that formed after September 20:

    East of 40W: 0/27 (0%) made U.S. landfall
    40.0W-49.9W: 1/27 (4%) made U.S. landfall (Lili in 2002)
    50.0W-59.9W: 1/33 (3%) made U.S. landfall (Hazel in 1954)

    East of 60W: 2/87 (2%)

  63. 63
    Nicky Says:

    I am seeing that normal and much above normal temperatures are now forecast in the NE through at least the middle of October. What do you think Z – near term bullish for nat gas but same then becomes bearish?

  64. 64
    zman Says:

    I spoke to soon, oil and refiners taking another hit and offshore rigs.

    N – As long as the warm weather doesn’t persist to the end of October it’s good for gas. I’ve heard both hot and cold 4Q scenarios of late, and all have said more ice for florida so buy OJ! The juice you drink, not whako, him you sell short.

  65. 65
    Nicky Says:

    Nat gas has support at 6.910 and then 6.870.

  66. 66
    Denise Says:

    Z- since it is a quiet day-for those of us new to trading NG stocks and the commodity, would you mind going through what normally happens after hurricane season and before winter unfolds?
    Thanks
    Another question-would hal pick up some of slb’s bus because of dollar decline?

  67. 67
    Denise Says:

    Sorry typo on Hal question- meant biz-busineess?

  68. 68
    Denise Says:

    Is spell check a future possibility?

  69. 69
    Sambone Says:

    I second #68

  70. 70
    zman Says:

    Denise

    Spellcheck – in Firefox, tools, options, advanced, check my spelling as I type. Don’t know about microtard’s explorer.

    This period (Sept-end Oct) is called the second shoulder season (the first is mid march to end Apr). These periods are characterized by slack cooling and heating demand so you get storage builds but prices generally move sideways to up (but not always) during this period in anticipation of winter.

    From our perspective ZEB, what’s more important is the furtures strip which is now pretty strong $7 to $8+ currently in the winter months 07 to 08 and high 7s to low $9s for the winter of 08 to 09.

    This is important because it is this strip the hedging E&Ps use to lock in prices like NFX did yesterday for more of it’s late 08 production. Only a few of the gassy E&Ps I like don’t hedge (MCF comes to mind but they are an odd duck). Anyway, the beauty is that a lot of people use costless collars for a good chunk of their hedging (take a look at NFX’s @NFX schedule for example availalbe on their web page).

    These collars establish a flow (like $7.50) and a ceiling (like $10). If gas is in between for the period the producer gets that price. The worst they would do is 7.50 and the best $10 (which no one would fault them for). This process stabilized CF and secure CapEx.

    Not sure if that answers your question so please feel free to redirect.

  71. 71
    Sambone Says:

    I know everybody thinks Ngas is going up, but I think it’s going down. Why, well I’m looking for a warmer fall, etc., and I’m watching the injections. As I mentioned about a week ago, by the end of October, we should have overflow if everything continues as it has, and then the price will crash. EIA Storage capacity is 3593 BCF. If we have a mild fall like we did in 2003 we should have 3668 BCF. We should hit fill during the week of Oct 26th. So weather watching in the next 7 weeks is important. No cold snap, overflow. IMHO

  72. 72
    Nicky Says:

    I am looking for a fall too Samborne.

  73. 73
    zman Says:

    For the record:

    I’m thinking 3,400 – 3,500 Bcf end Oct. Still very full and you’ll have some areas, like parts of the Rockies, where prices will suffer. I’m still looking for the next couple of months in the $6 to $7.50 range.

    How old is that capacity number…I keep seeing small adds to it.

  74. 74
    zman Says:

    Respectfully, based on storage filling up last year you guys would have expected a fall in prices last year too and you would have been wrong.

    See first chart on this post:
    http://zmansenergybrain.com/?p=711

    I’m not saying it won’t happen but I’m just pointing out that full storage is not the only item in charge of price determination.

  75. 75
    Denise Says:

    Thank you both-very helpful

  76. 76
    zman Says:

    VLO approached LOD again in the mid 67s

  77. 77
    Sambone Says:

    My research tells me it’s 3,550 to 3,600. It changes. If injection hits 3,500 before Nov 2nd (End of injection), the market will take notice.

  78. 78
    zman Says:

    I’ll buy you a beer if it tops 3,550 in 2007.

  79. 79
    zman Says:

    Schaeffer light or Black Label?

  80. 80
    scoop006 Says:

    Z ZPYJN deserve a triple buy?

  81. 81
    zman Says:

    Scoop – maybe…but this could go on until Monday…I’ll take the $67.50s if it gets much lower.

  82. 82
    Sambone Says:

    PBR baby

  83. 83
    scoop006 Says:

    Z, Do you expect a general market sell off at end of fiscal 3 qtr.?

  84. 84
    zman Says:

    PBR the stock or the 50 cent beer?

    Scoop – I don’t but I’m not a general market guy but I’ll bet Mr and Mrs Doom and Gloom do, lol.

  85. 85
    QUARRYMAN Says:

    Maybe you were talking beer, Sam.

    But, there’s a thought.

    PMJJO

  86. 86
    Nicky Says:

    Nat gas – line in the sand for the bearish case is 8.230.
    That said at the moment the move off the August low of 6.230 looks corrective. It does not look done yet and should still move above last weeks highs of 7.374. Once done the market should turn sharply lower.

  87. 87
    Sambone Says:

    Bet is for Pabst Blue Ribbon on my side. Established in Milwaukee in 1844, this is the original Pabst Blue Ribbon beer. Nature’s choicest products provide its prized flavor. Only the finest of hops and grains are used. Selected as America’s Best in 1893. If I win, you can pay me with PETROLEO BRASILEIRO. LOL

  88. 88
    QUARRYMAN Says:

    Sam,

    Someone’s ill-spent youth memorized that beer label.

    Do you know the beer that said: “Just the kiss of the hops… the beer that made Milwaukee famous”?

  89. 89
    QUARRYMAN Says:

    Think Sid the Sloth from Ice Age saying “slits”

    … must be a slow day.

  90. 90
    Sambone Says:

    Schlitz baby. I bet old Zman drinks that famous beer called “Blatz”, nastiest beer I ever drank.

  91. 91
    Sambone Says:

    Off subject – Anybody see anything on ENOC? I own it and no news that I can see.

  92. 92
    zman Says:

    I think they drink Pacifico down so that’ll be my side of it.

    So much for TSO’s move to join the S&P500. This really wasn’t that bad a report (if at all for refiners). Waiting for them to stop falling before I buy more. It’s early yet.

    Wow oil recovery…who woulda thunk it.

    VLO about to run

    ENOC – no news I see… yesterday said will present at william blair on Oct 3

    Sorry, no. Porter, stout, corona, wheat, none of that yellow water beer from college.

  93. 93
    Nicky Says:

    First leg down looks like it may be done. I didn’t think wti was falling very convincingly.

    Probably find they have upgraded Karen to a hurricane and market is getting jittery about a storm that is heading in the opposite direction.

  94. 94
    Nicky Says:

    Either that or the top is not yet in. Would take a move above the highs at 82.40 to confirm that.

  95. 95
    Nicky Says:

    Distillates now positive. Any news anyone?

  96. 96
    sane Says:

    Sambone I thought I was the only sorry fool who ever drank and can of that waste they call Blatz

  97. 97
    Nicky Says:

    Totally bizarre from a fundamental point of view but the virtually straight line move off the lows looks somewhat impulsive to say the least.

  98. 98
    drdavis124 Says:

    A question??? What happens when the spread between “BTU equivalent cost” rises as NG price drops & Crude stays in range or goes up?????. Will there be switching to NG from Crude to soak-up the excess in storage????

    Phil

  99. 99
    Nicky Says:

    Hey anyone out there watching this market – what on earth is going on. Crude up another 40 since the close 4 minutes ago.

  100. 100
    rammastr Says:

    I saw Mr. Flynn saying the market needs to go higher.

  101. 101
    zman Says:

    Dr Phil,

    It’s a good question. The short answer is no, there won’t be significant switching from oil to natural gas. Most things are not dual fuel. Some electricity is but very small.

    What you will get is increased stripping of the wet gas stream for NGLs which will reduce gas volumes and lead to lower injections. For instance, much of the Barnett Shale is wet gas and the midstream processing stations there will pull out BTUs in the form of NGLs to get the gas into pipeline specs. When the oil gas btu ratio is this far out of kilter, they’ll pull more out of the gas stream than is usual. So in effect, the high value of oil will result in lower gas production via extraction loss.

    Nicky – I’m watching it and I think it’s just a function of my sheer will power since I’m more long than short right now.

  102. 102
    Nicky Says:

    That explains it then Z!

    Ram – he’s long again then!

  103. 103
    drdavis124 Says:

    Or CHK might cut production

  104. 104
    rammastr Says:

    Long or short – who cares – stocks are getting pummeled!

  105. 105
    BigJim Says:

    Hey Z:

    TLM showing good bullish strength and volume today. I am keeping hope alive for a good pop up soon.

  106. 106
    Nicky Says:

    Computer models now all show Karen heading out into the Atlantic. HOWEVER, according to our local tropical update there is now a chance way down the line due to an upper level high pressure that Karen could make a turn to the west again. That said it has to hold together through a lot of shear in between.

  107. 107
    Nicky Says:

    Ram – energy stocks you mean? I only ask as the broader market looks pretty strong today.

  108. 108
    rammastr Says:

    Strong is right – they’ve been strong since 8/16. I tried to make sense of waves, graph’s etc. the first couple weeks and got killed. Now I am not “fighting the FED” and actually doing much better. RE #100 – sarcasm!

  109. 109
    zman Says:

    Nicky’s other favorite:

    Kilduff “the rally was technical in nature…it’s not untypical to get a reversal off the inventory report as again some “value buyers” come in. The report wasn’t as bearish as it appeared”

    I added the quotes to value buyers

  110. 110
    Sambone Says:

    N – #99, I think it’s the realization that 4th quarter is going to be tight. If we do have a cold snap (Early winter), then we may have shortages. That’s my take on it.

  111. 111
    Nicky Says:

    Ram #104 – ‘stocks getting pummeled’? I am english so forgive me but to me that means they are going down! Glad to hear you are doing better though.

    Samborne – very little sign of a cold snap. In fact due to La Nina winter temperatures could be very mild.

    Z – what is Kilduff smoking now??? It was very bearish against expectations.

  112. 112
    zman Says:

    4Q is going to be tight with or without a cold snap. About 1.8 bopd difference between last years supply (which we won’t meet) and this year’s expected demand, which is a base case (not cold snap driven early winter)

    this is from a post of mine two weeks ago:

    Here is global consumption by quarter last year in millions of barrels of per day:

    1Q06: 85.04
    2Q06: 83.22
    3Q06: 84.02
    4Q06: 85.45

    1Q07 was 85.40 mm bopd (up 0.4%) and that’s the last full quarter of available data from the EIA but 2Q months April and May were running higher than their 2006 counterparts suggesting the growth in global consumption you would expect (low single digits). The EIA sees 4Q07 demand at 87.6 (up 2.5%).

    Here is global output during same time frame (mm bopd):

    1Q06: 84.22
    2Q06: 84.13
    3Q06: 85.13
    4Q06: 85.55
    1Q07: 84.08 (note this was down YoY, thanks OPEC)

    As of May world output was around 84 (data still not final). OPEC production has crept up a little since then. Non-Opec has been flat for quite some time now. It is a given that OPEC production will be down from 4Q06 to 4Q07.

    Even if the rest of the world manages to offset the 600,000 bopd of lower OPEC production expected for the fourth quarter relative to year ago levels that leaves a short fall of 1.8 million bopd between last year’s 4Q production and this years expected consumption. When you spread that out over 92 days for the 4Q that comes to nearly 170 million barrels that would be shaved off global inventories which I think might be noticed.

  113. 113
    zman Says:

    N – I would say it was 180 from expectations on crude BUT still in deficit and driven by a surge in imports and falling refinery consumption. To me it’s bullish refiners, neutral for crude once you get past today.

  114. 114
    Nicky Says:

    ps it was Kilduff who less than 24 hours ago said we were going back to 75. Now the market is good value at 80 again. Flip Flop!

  115. 115
    Nicky Says:

    Z – I don’t disagree re Q4 and as energy cycles are not going to top out until end of this year/early next it works well.

    That said we are due a correction now and wti should see 75 at a minimum.

  116. 116
    Nicky Says:

    Warren Buffet considering a stake in Bear Stearns!

  117. 117
    zman Says:

    Kilduff should run a political campaign for someone.

    broad energy recovery underway

  118. 118
    Sambone Says:

    N – Saw that on BSC up 12.

    Z – I thought you were considering a flip/flop link?

  119. 119
    Sambone Says:

    3:21 pm EST

    Nymex Crude Rises Above $80 On Fund Buying

    By MATT CHAMBERS
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures rose Wednesday for the first session in four, reversing intraday losses as funds shrugged off an unexpected build in U.S. inventories and sent prices back above $80 a barrel.

    The front-month November light, sweet crude contract on the New York Mercantile Exchange rose 77 cents, or 1%, to $80.30 a barrel after slumping as low as $78.44 after the Department of Energy said U.S. stockpiles rose. December crude rose 25 cents to $78.86. Brent crude on the ICE futures exchange fell 2 cents to $77.60 a barrel.

    The late rally, which saw prices surge $1.50 a barrel in the last hour before settlement, erased losses that had been made after the DOE said U.S. crude stockpiles unexpectedly rose. A draw in stockpiles at the Cushing, Okla., delivery point for Nymex crude to their lowest since December 2005 widened the difference between the front- and second-month contracts, which itself triggered more buying from funds, traders said.

    “It seems the funds took a closer look at the statistics and emphasized the draw in Cushing barrels,” said Jim Ritterbusch, president of trading advisory firm Ritterbusch & Associates in Galena, Ill. “The draw pushed the November-December spread higher, which is seen as bullish, and that appears to have encouraged some fund buying.”

    When front-month prices are higher than months further out it as seen as an indication that immediate supplies are tight. The situation, known as backwardation, also encourages commodity investment funds to buy crude because it reduces the cost of rolling over near-month contracts to the next month as they expire.

  120. 120
    Brian08 Says:

    Boy those DIA puts that I got are looking better and better every day…When does the self-fulfilling prophecy known as October get here?

  121. 121
    rammastr Says:

    NICKY – English….nice. Energy stocks are doing poorly, except for chinese oils. Momentum tech stocks are doing well.

  122. 122
    QUARRYMAN Says:

    Sam,

    I think you called the daily bottom on PBR. I was ready to pop the top on the Oct 75s, too, but got distracted.

  123. 123
    Sambone Says:

    3:40 pm EST

    Nymex Crude Rises Above $80 On Fund Buying

    By MATT CHAMBERS
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures rose Wednesday for the first session in four, reversing intraday losses as funds shrugged off an unexpected build in U.S. inventories and sent prices back above $80 a barrel.

    The front-month November light, sweet crude contract on the New York Mercantile Exchange rose 77 cents, or 1%, to $80.30 a barrel after slumping as low as $78.44 after the Department of Energy said U.S. stockpiles rose. December crude rose 25 cents to $78.86. Brent crude on the ICE futures exchange fell 2 cents to $77.60 a barrel.

    The late rally, which saw prices surge $1.50 a barrel in the last hour before settlement, erased losses that had been made after the DOE said U.S. crude stockpiles unexpectedly rose. A draw in stockpiles at the Cushing, Okla., delivery point for Nymex crude to their lowest since December 2005 widened the difference between the front- and second-month contracts, which itself triggered more buying from funds, traders said.

    “It seems the funds took a closer look at the statistics and emphasized the draw in Cushing barrels,” said Jim Ritterbusch, president of trading advisory firm Ritterbusch & Associates in Galena, Ill. “The draw pushed the November-December spread higher, which is seen as bullish, and that appears to have encouraged some fund buying.”

    When front-month prices are higher than months further out it as seen as an indication that immediate supplies are tight. The situation, known as backwardation, also encourages commodity investment funds to buy crude because it reduces the cost of rolling over near-month contracts to the next month as they expire.

    Crude oil stockpiles rose 1.8 million barrels to 320.6 million barrels last week, the DOE’s Energy Information Administration unit said in its weekly report. The average forecast in an earlier Dow Jones Newswires survey of analysts was for a draw of 1.8 million barrels, leading to a mid-session drop in prices. Cushing stockpiles fell by 200,000 barrels to 18.1 million barrels, their lowest since Dec. 2, 2005.

    “There was no downside follow through” after crude’s immediate fall after the data, giving some chart-focused, or technical, traders a signal to buy, said Tom Bentz, an analyst and broker at BNP Paribas Futures in New York. The late increase in the front-month spread was also seen as a signal to buy, he said.

    November’s premium to December was $1.44 a barrel at settlement, up from 92 cents on Tuesday.

    Gasoline stocks grew by 600,000 barrels to 191.4 million barrels, compared with expectations for a 200,000-barrel build, and distillates, which include heating oil and diesel fuel, grew by 1.6 million barrels, more than the 1.1 million barrels expected. Refinery use fell by 2.7 percentage points to 86.9% of capacity, a bigger drop than the expected fall of 0.6 percentage point.

    Front-month October reformulated gasoline blendstock, or RBOB, fell 1.05 cents, or 0.5%, to $2.0274 a gallon. October heating oil rose 13 points, or 0.1%, to $2.1826 a gallon.

    Ritterbusch said the late strength in the crude market, despite what appeared to be a price-negative inventory report, suggests there is solid support for prices around $80 a barrel.

    “I’ve got to view this as bullish trading,” he said.

    —By Matt Chambers, Dow Jones Newswires;

  124. 124
    Nicky Says:

    Ram – Ah so pummeled means the same here as home then. Think I see what you are saying – energy stocks down but broader market up.

    FWIW (and you won’t want to hear this!) but broader market is in v up – iii of v to be exact.

  125. 125
    Sambone Says:

    Cramer’s 4 horseman – Has anybody looked at their PE’s? Wow. Reminds me of the tech bubble in 99/00.

  126. 126
    zman Says:

    ah, things starting to feel a little better, OII back up

    VLO outperforming TSO as they sort through where there is too much and too little product.

    DO actually positive, RIG couldn’t pull that off.

    as much as OII, CAM and FTI are up I’d say someone is worried about storms again.

  127. 127
    scoop006 Says:

    Sambone Cramer has been telling his viewers to take profits on the 4 horseman in anticipation of a market correction. Funny, when he touts a stock it moves up, but when he says sell, nobody listens.

  128. 128
    rammastr Says:

    Nicky – I am not sure what you meant after FWIW. The only wave that has been great is the 4 horseman! People love to bash Cramer, but he called the latest move and specific stocks dead on.

  129. 129
    Nicky Says:

    Well you have been riding 5 up and you tell me thats been great too! Lets hope Cramer can see the top when it comes.

  130. 130
    rammastr Says:

    ZMAN – Thank you for the information late last night. It looks like the CEO of CHK bought 25,000 shares in the last couple of days. I hope that moves that stock along.

    NICKY – Is this the top you have been looking for that is going to lead people to jump out of windows? I was under the impression that this was going to happen a couple of weeks ago. After I stopped fighting the FED, I started to do well. Regardless of when the short term top comes in, you have to ride the right direction and keep adjusting stops accordingly or you keep doing poorly and your positions are further away when the top does come.

  131. 131
    scoop006 Says:

    Just noticed 6X avg. volume in TSO. Due soley to S&P or is there other news?

  132. 132
    Nicky Says:

    Ram – I have NEVER said that people are going to jump out of windows. I believe that statement from the Great Depression was greatly exaggerated.
    And no it was never going to happen a couple of weeks ago. It will take much lower markets for that to happen and what you saw a couple of weeks ago was just a warning shot. If this current rally up had been wave ii (and I don’t believe it was although it cannot yet be discounted) then quite often they are a vicious countertrend rally when everyone believes that everything is going to be okay again. As the upside is probably not yet done then we still have wave ii to come somewhere down the line.
    Let me ask you how you know you are riding the right direction? Tell the people who bought houses in 2005 that they were right riding a bubble which they thought was a one way street. Sadly for many of them they have not been able to get out because it just is not that easy. When the top comes in the stock market it will be no different. You saw a few weeks back 1500 points off the Dow in just over a week.
    I am not particularly interested in fundamentals but if I was then I would be even more alarmed by the Fed’s actions last weeks. They are only delaying the inevitable. Years of cheap money is finally coming home to roost.
    Don’t misunderstand me but a week of market rallying does not change anything. If you are riding the rally then good for you and I hope you make money. There will be many very sharp rallies along the way when everyone tries to call a bottom just as they are in the housing market. I have just opened our local paper and seen what I always maintained would happen – the first house I can see selling at a 50% loss.
    Finally I am not a Cramer fan. No particular reason except I cannot get past all the screaming and shouting and blowing stupid whistles etc to listen to what he is actually saying. But someone on here posted an article some months ago(it may even have been me!) which referred to his track record. Again I cannot remember specifics except that he underperfomed the market and you would have done a lot better to follow someone else! I have a friend who watches his recommendations closely and says they have not performed at all well. But even Jim Cramer gets some things right! And no doubt he stood a good chance at at least a countertrend rally when the market had had such a big fall.
    Anyway as said I am very pleased you are making money however you are doing it. You will no doubt feel much happier if you ignore my posts to be honest.
    Bulls and bears – its what makes the markets and we need both.

  133. 133
    rammastr Says:

    NICKY – Sorry, didn’t mean to upset/ annoy/etc. I always look forward to your comments. I am not a fan of Cramer either, although I think my 5 month old is because of the screaming and shouting.

    I guess housing is a good analogy about being on what you would think of is the right side until the bottom falls out.

    I could care less about anyones prior performance – it’s all about “what have you done for me lately”.

    Anyways, I am more intersted in learning and doing good in the energy sector. That is why I am here. I sincerely believe that you and others have educated me very quickly. I thank everyone for that.

    As to what makes me happy…going home to a handsome little boy who is starting to giggle after making faces at him…actually that is priceless.

  134. 134
    Nicky Says:

    Ram- you did not either annoy or upset me. I was more concerned that with your comments about people jumping out of windows you may think I have misled you.
    I try hard when I make TA posts to make them very factual ie support and resistance levels and keep all emotion out of these posts. I normally have a ‘rant’ in another post! I also sometimes try and give the ‘count’ I am following. I am the first to admit that it is’nt always right. Like Z – when trading myself I scale in rather than jumping in both feet first.
    My own thoughts about the housing market are different to many who told me that a house was a better asset than a stock. Well maybe so but these same people are now finding that it is much easier to offload a stock than a house! So to a degree if and when the stock market falls you will at least be able to get out at some price!
    You sound like you have your priorities right – your post last week about teething and sleepless nights took me right back 14 years to when my one and only daughter was that age – something you said brought it all back clearly to me and I wondered where all the years in between had gone so quickly. It is the hardest but most rewarding of all the jobs we will ever do. What you said made me want to turn back the clock even though the sleep deprivation was hell! 14 years on the problems are somewhat different – she is so lovely that every boy she meets seems to fall instantly for her giving my husband sleepless nights of a very different kind!!

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