27
Sep

Thursday – Oil Review – The Little Engine That Cushing

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The A B C Story of Yesterday: A) Crude rallied a little early after 3 count 'em 3 consecutive lower closes, B) get a seemingly bearish report (for crude) and dive like demand for Chinese-made plastic toys, and C) then rally again and close up $0.77 to $80.30 as hedge funds realize that a little place in Oklahoma saw a decline in crude inventories.

Commodities Watch:

  • Crude Oil: adding another buck to cross back up through $81 this morning in early trading. 
  • Natural Gas: Trading off a dime to $6.95 on the November contract as Tropical Storm Karen weakens and looks increasingly likely to turn North towards Bermuda.

Childish Statements Watch:

Flip: "After yesterday's sell-off it appears that the delayed seasonal top might start to finally be in place," said Phil Flynn of Alaron Trading. - PF 9/25/07

Flop: People might be looking at the build in crude supplies as an aberration," said Phil Flynn, an analyst at Alaron Trading. "If you look at year-on-year levels, we're still down." "Cushing [inventories] continue to fall," he said. "That of course is the key area for Nymex crude." -9/26/07. Z Comment: Yes, crude stocks are down to 321 mm barrels vs 325 mm barrels a year ago. Wow...1.3%!!! And WTI was $83.38 for the end of the reporting period last week, up slightly from the $59.79 it was worth as of 9/22/06. Sometimes it's better to say nothing than embarrass yourself like that....oh wait, he won't be embarrassed because no one in the mainstream media will call him on it.

Flip:  "With the market showing signs of technical exhaustion, multiple events of fundamental import like weather or political strife that produce actual supply disruptions will be required to get the market moving steadily to the upside again. For now, a considerable shakeout looks likely to play out," Kilduff said. - 9/25/07

Flop: (after yesterday's $1.50 rally off the lows) "The [inventory] report wasn't as bearish as it appeared to be given the situation down in Cushing, [Okla.]," Kilduff said, explaining that there was a draw in the inventories at Cushing. -9/26/27. Z Comment: Yes, Cushing, OK, home to about 6% of U.S. crude storage saw a decline of 200,000 barrels from 18.3 to 18.1 million...better send lawyers, guns, money...

And here's a new comment addict: "Crude-oil prices have fallen in two consecutive sessions for the first time since August," Lafakis said in a research note after the data. "Tropical storms have not materially affected crude-oil production on the Gulf Coast as speculated." Z Comment: Look at the imports and wait for the impact next week pal.

And ..."Gasoline demand is very weak, and refiners are demanding less crude to be converted into gasoline because margins are currently razor thin," Lafakis said. Z Comment: Gasoline demand was the second highest on record for this week of the year...did you even read the report? Furthermore, margins are not razor thin. I just don't know where they get this stuff but they're all tripping over themselves saying cracks stink when in fact cracks are, on the whole, just a little under year ago levels.

These are heat cracks on a weekly chart: down but the third quarter average is in line with 3Q06 levels. Razor thin my ...

heat-crack-092607.jpg

These are RBOB cracks: down also but also NOT razor thin. These are well above year ago levels and in fact only recently turned lower as gasoline demand fell off (yeah right, don't make me laugh - see gasoline demand below) and oil went through $80. The big dip on the end of both of these charts is attributable to the fact that products did not keep up with the last minute pump rally for crude yesterday. That big hump was summer and as you can see, it extended well into the third quarter.

rbob-crack-092607.jpg

 

Stocks We Care About Today:

  • (CVX) approved a massive $15 billion buyback over the next 3 years on Wednesday morning but it was largely lost in yesterday's trading action. It should have a nice effect on the majors today combined with rising oil. I'll likely take cheaper (COP) calls for a trade.
  • (CHOLF.PK) China Oilfield Services just came public with the second largest IPO ever in China. This is the oil service arm of CNOOC (CEO) and will probably run wild today. I know nothing about these guys but I bet it's off to the races and potentially (CEO)
  • (COP) - On Monday I wrote: China also issued new rules today increasing the opportunities for foreign firms to explore and develop new fields in China. Should be good news for (COP) who picked up some large onshore acreage positions with the BR acquisition. Wednesday night (COP) said it is offering its 295,000 acre Chuan Zhong block in the Sichuan province. The PR then goes on to talk about the 10.3 MMcfgpd (nothing for a company of Conoco's size) that a field in the block currently produces. What it doesn't tell you is that this is a tight gas sand reservoir potentially holding several Tcf of recoverable reserves which should attract a pretty penny yuan. You've got to admire COP's timing of the sale announcement, coming just two days after the Chinese make it easier for foreigners to get involved.
  • (UPL) sells Bohai bay assets for $223 million, big impact for (NFX). Based on Ultra's year end 2006 reserves in China of just under 4 mm barrels this is a very strong price equating to $9.32 per Mcfe. This bodes well for:
    • (UPL) as that is a fat price,
    • (NFX) as it is planning to close the sale of its Bohai Bay asset during the fourth quarter. At year end 2006 NFX had reserves of 5.3 million barrels in Bohai Bay on it's books. Last week I was shocked by the $9+/Mcfe sale price it achieved for its North Sea assets. Now they could do it again meaning that this little piece, which most analysts saw as just the wrap up of their divestiture program, and could rake in another $300 million. And then NFX still has select Gulf Coast properties on the chopping block after that. You really couldn't pick a better time to streamline your ops given prices.
    • and (COP)'s coming producing asset sale from the previously bullet. 
  • (TLM) - BigJim keeps point out the huge call activity and the fact that the stock is quietly marching higher. This is a perpetually discounted but incredibly solid Canadian E&P run by top notch guys. I'd call it a gift at 3x forward cash flow for any major willing to take it in but there are issues with the decline of its core Canadian gas properties and whether or not the growth provided by its international operations is enough of a enticement to either rally the stock or allow for a takeout.  Acquisition plays are hard to do with options since options are a wasting asset. I like the company and am thinking about leaps or the common. 

Tropics Watch:

  • Karen is Tricky: Overnight she weakened considerably and 3 models now show Karen abandoning her much anticipated vacation in Bermuda for Florida. This is far less troubling than yesterday evening's tracks which made a couple of cases for a GOMEX visit. 
  • TD 13 - unlikely to cause trouble in the U.S. but could force some evacuations and shut ins in the Bay of Campeche if it lingers and becomes TS Lorenzo.

Oil Review - A Picture Show

exp-vs-act-092607.jpg

Total Crude Stocks Unexpected Rally: Oil stores remain in YoY deficit territory despite an unexpected (by me and everyone else) build in crude stocks. I think this is simply a bump in the decline as the 4Q tightness scenario I outlined two weeks ago points to a 1.8 mm bopd shortfall in supply relative to demand.

crude-stocks-092607.jpg

Crude Stocks At Cushing, OK, Home to 6% of U.S. Storage Capacity But Still The Tail That Wags The Dog.

cushing-stocks-092607.jpg

Crude Imports: Highest level in five weeks led by a surge into PADD III (Gulf Coast). May mean we see smaller numbers next week.

  • Gasoline: Strong demand, falling production.
  • Production - dropped 348,000 bpd with biggest declines coming from the East Coast and Midwest regions.

gasoline-production-092607.jpg

  • Utilization: Time For Some Downtime: We're hugging levels not seen since the industry was in the middle of getting bashed by Katrina/Rita/Wilma in 2005.

 utilization-092607.jpg

  • Imports: Held steady at just over 1 million bpd.
  • Demand: Second highest level for this week in history. That's really saying something when you consider average retail prices were $2.81 last week, 18% above year ago levels of $2.38 (which set the record for gas demand). What it's saying is "yeah, gas is expensive but so is every other out of pocket, non capital good you can lay your hands on buddy from milk to stamps. And no, I don't want to get a car that lets me and an overnight bag drive in the HOV lane by myself. I have friends who need leg room and furthermore I don't want to resemble Ed Bagley Jr in any way, shape, or form. I'm a selfish American and I'd rather drive up a mountain to watch a pollution enhanced sunset from the air-conditioned comfort of my Hummer than bicycle half way there and get run over by the Hummer guy who is already on the way back down. And we don't mind paying the extra $0.43 difference in gas prices as its money we all save on stamps by texting each other as we eye that empty HOV lane." At least that what it seems to be saying. I could be way off base.  

 gasoline-demand-092607.jpg

  • Gasoline Stocks Remain Low: Still, stocks rallied (barely) for a second week in a row which is what is supposed to happen this time of year.

gasoline-stocks-092607.jpg

Natural Gas Preview:

  • My Number: 70 Bcf. Which takes into account the lower cooling load and continuing decline in imports but my confidence is low given the disruption of production in the Gulf of Mexico.
  • Street Consensus Range:60 to 70 Bcf. This week's number should push storage a little more into the YoY deficit side given the 77 Bcf injection in the year ago period.

Injections from now until the end of the season (Nov 2 or so).The following chart depicts the injections (green bars) seen until the end of the injection season relative to the mid September gas in storage level (red blocks). As you can see there is an inverse correlation meaning that if storage is low at this point in the cycle more gas is likely to be injected a the storage injection season wanes and vice-versa. This is just food for thought but my thinking is it augers for a 3400 to 3500 exit. By the way the average of those green bars is 378 Bcf which would yield 3,510 Bcf peak storage this year and the max is 536 Bcf which would get us to nearly 3,700 Bcf. 

gas-injections-092607.jpg

Holdings Watch

CALLS:

  • (VLO) Added some more October $70s for $1.20 bringing my average to $1.48 upon reading the Inventory Report and thinking to myself, this isn't so bad, and seeing VLO, a sub 8x forward multiple stock with less planned downtime in 3Q and 4Q than many of its peers begin to tank. It was a bumpy ride but last bid was $1.25 (saved by that last minute crude rally). Further additions will likely come in the $67.50 strikes on any further significant weakness.

PUTS: No Action.

Odds & Ends

Analyst Watch: (STO) cut to neutral at Credit Suisse, CPX price target trimmed 10% to $34 (stock is just under $21) also at CS. 

Bravo Brazil Watch: Brazil says it won't "renegotiate" contracts with foreign oil companies like it's communist wannabe neighbors. Director of Brazil's oil agency ANP commented "Hugo Chavez has a good relationship with Brazil, but he is only a neighbour. This movement by Mr Chavez has no reception in Brazil," Comments: nice to see someone lives up to their word in the state run oil nation world. This is a positive for (PBR).

 

 

139 Responses to “Thursday – Oil Review – The Little Engine That Cushing”

  1. 1
    Sambone Says:

    7:57 am EST

    Crude Up, Funds Buy, Weather, Stocks Eyed

    By David Elliott
    Of DOW JONES NEWSWIRES

    LONDON — Crude oil futures stretched higher Thursday on continued fund buying triggered by a fall in inventories at a key U.S. delivery terminal and worries over the weather threat to Gulf of Mexico oil output.

    While the smattering of weather disturbances in the western Atlantic and Gulf of Mexico aren’t an immediate threat to oil facilities, traders said the market is taking a cautious approach given the erratic nature of past hurricanes in the region.

    This, and the fall in inventories at the WTI delivery point of Cushing, Oklahoma, are expected to see the market hold strong short term but technical analysts warn the prices still looks overbought.

    “This (rally) looks to me like an attempt by the longs to support the market,” a trader in London said. “But they’ll have a difficult job given the fact there’s plenty of people happy to book profits at $80 a barrel and above.”

    At 1134 GMT, the front-month November Brent contract on London’s ICE futures exchange was up 69 cents at $78.10 a barrel.

    The front-month November contract on the New York Mercantile Exchange was trading $0.65 higher at $80.95 a barrel, having earlier climbed over $1 to $81.36 a barrel.

    ICE’s gasoil contract for October delivery was up $6.50 at $696.00 a metric ton, while Nymex RBOB gasoline for October delivery was up 106 points at 203.80 cents a gallon.

    Top of brokers’ explanations for the early rally is Atlantic weather disturbances which, while expected to target Gulf of Mexico oil facilities, are adding a degree of caution to the market.

    Tropical Depression 13, about 170 miles east of Tuxpan, Mexico and heading inland, doesn’t look to be a problem for oil installations in the southwestern Gulf of Mexico and state-run Petroleos Mexicanos said Wednesday it isn’t taking any preventative action against the storm.

    Tropical Storm Karen, east of the Windward Islands, is of no immediate threat and its predicted path will miss oil installations in the northern part of the Gulf of Mexico, according to National Hurricane Center prediction charts.

    While these storms don’t look likely to impact oil production short term, there is also an area of low pressure across the Florida Peninsula and a tropical wave over portions of Hispaniola and it’s the uncertainty over how these will develop that may be bolstering prices further.

    “The market, through bitter experience, is taking a cautious approach to any weather disturbances in the Atlantic and that’s probably why there’s little resistance against the current rally,” a broker said.

    But while the weather may be responsible for the short-term arbitrations in the oil market, expectations for a tight supply and demand balance in the fourth quarter of 2007 and during 2008 is the main factor underpinning prices.

    Even a relatively bearish set of weekly U.S. inventory data Wednesday, showing an unexpected build in crude inventories, couldn’t negate this view.

    The market, seemingly searching for bullish signs, has ignored the overall stock build and chose instead to focus on the continued slide in inventories at the WTI delivery point of Cushing, Oklahoma.

    “This explains why Brent has been lagging behind WTI on this morning’s rally,” the trader said.

    Mike Wittner, an analyst at Societe Generale in London, also pointed to a sharp fall in crude runs.

    “Utilization rate was 2.7% lower week-on-week, the lowest level at this time of year, partly due to a slow restart in refineries shut during (hurricane) Humberto and to continuing maintenance,” he said.

    These factors, have helped encourage the funds, who have been booking profits over the previous few sessions, to return to the market as buyers.

    —By David Elliott, Dow Jones Newswires

  2. 2
    zman Says:

    Sambone – did you see the chart I put in there for you today on season end injections?

  3. 3
    Sambone Says:

    I like the colors!

  4. 4
    zman Says:

    yes, yes, very Christmassy. The whole flip flopper section was for you too come to think of it. I’m sure the explanations for today will be no less ludicrous. I agree with the tightness argument but saying things like, we’ve got less than last year (1.3% less) when prices are up by something like 40% is just lame. And, of late, he’s got about as much conviction as OJ.

  5. 5
    Sambone Says:

    9:02 am EST

    Nymex Crude Higher; Cushing Stocks In Focus

    DOW JONES NEWSWIRES

    [Dow Jones] Nymex crude jumps past $81 in morning trading following Wed EIA petroleum inventory data. Speculative funds are responding to the decline in crude stocks at the light, sweet crude delivery point of Cushing, Okla, which dropped 200,000 bbl to 18.1M bbl in the week ended Sep 21. Cushing crude stocks are at their lowest since Dec 2005. But this number may not be as important as the hit that refined products took, says Peter Beutel, president of energy risk-management firm Cameron Hanover. More supportive for crude prices in the EIA report were the decline in refining capacity utilization, which fell 2.7% to 86.9%, and gasoline output, which dropped 3.8% to 8.722 million b/d. These are both pushing gasoline and, thus, crude prices higher, Beutel adds. Nymex Nov crude +$1.01 at $81.31/bbl after hitting a high of $81.49/bbl overnight. Oct benchmark gasoline +2.07c at $2.0481/gallon. Nov Brent +86c at $78.29. (elizabeth.landau@dowjones.com)

  6. 6
    Sambone Says:

    By the way, I own some flip flops also. I like the new section. Can you put Cramer in also?

  7. 7
    Sambone Says:

    Weather – Not much to talk about. Only thing that has my eye at the moment is a wave that came off africa, just SE of Karen.

  8. 8
    zman Says:

    wow APA

    that asset sale at UPL is going to get me back into NFX long and it also bodes well for CHK and their coming string of asset package sales as the banker on the deal for UPL is the same as for CHK

  9. 9
    zman Says:

    Nicky – HO up 4.5 cents at 2.2275

    Any trouble with site access today?

  10. 10
    zman Says:

    BigJim – nice move TLM

    Nat gas getting hit 17 cents on lack of weather

    Crude rally is hitting the refiners again, products are keeping up though

  11. 11
    Sambone Says:

    Not me

  12. 12
    zman Says:

    TRADE: TLM April 2008 CALLS for $1.90. Sometimes where there’s smoke there’s fire.

  13. 13
    benbobby Says:

    Re:#8…When did you sell NFX ?

  14. 14
    rseidman Says:

    TLM
    You are referring to the 20 calls. right?

  15. 15
    Nicky Says:

    Morning all.

    Loved the flip flop section Z.

    Ram – thanks for the email. What a stunner!

    They cannot seriously be running this market up on the storms or rather non events that are out there? Just ridiculous.

    And Cushing as you say home to 6% of US storage – they have got to be kidding if that is yet another reason to run it up.

    I looked at the market and thought we must have gone to war against Iran!

    Technically (this is what I am supposed to stick to!) until we take out the highs then this can still be the b of an abc decline but I am not holding my breath right now!

  16. 16
    zman Says:

    BB – I still hold the stock but the last batch of options (Septembers) expired worthless on me.

  17. 17
    zman Says:

    Nicky – those are oily storms apparently, lol, as NG is getting taken to the woodshed today.

    Iran – could happen. New sanctions yesterday

    R – yes, sorry for the ommision. TLM APP 20 calls. That should give a little time and they don’t cost that much.

    ESV proving that I’m still wrong on the jackup market …I guess.

    RIG – not convincing

    DRYS – wow talk about IV , all over the map again today.

    NFX exploding, I really think it’s UPL’s N. Sea sale…will wait for it to cool a bit and also to see what the gas # looks like.

    APA – 2x wow

  18. 18
    zman Says:

    anything below 60 BCF should rebound NG and I’d be on KWK or SWN quickly…little safe would be APC

  19. 19
    zman Says:

    Nicky – in the flip flop section those are weekly charts. As you can see cracks are off summer peaks but those were record peaks. Where do these crack heads come up with razor this. RBOB retail of $2.80 doesn’t yield razor thin anything.

    DRYS – I may sell and reload same day. The thing is a traders dream

  20. 20
    Nicky Says:

    Z – yes funny nat gas has taken the opposite view! More speculation?? surely not!

    Iran – well after listening to Democrats last night they ain’t about to do it. So Bush will have to pull the trigger fast and I just cannot see that happening. They would lynch him. Most likely would get Israel to take out the nuclear sites.

  21. 21
    Nicky Says:

    Agree Z re the cracks – the spin is maddening!

  22. 22
    zman Says:

    Nicky – got any thoughts on HO back over 2.2255 from a technical perspective?

    Israel hit an undisclosed site in Syria earlier this month 3 days after a N Korean cargo ship docked. Hmmm. They’d do Iran in a heartbeat.

    APA is on fire.

  23. 23
    zman Says:

    TSO down 4% on top of yesterday’s loss. Welcome to the S&P500.

  24. 24
    zman Says:

    Injection: 74

    NG down a quarter at time of release

  25. 25
    fraser921 Says:

    BOT 1000 VLO AT 67.73

  26. 26
    Sambone Says:

    N- Iran, see “Gulf of Tonkin”. I wouldn’t be surprised after watching this guy at work.

  27. 27
    fraser921 Says:

    is 74 bad or good

    is 6.80 a good buy in price,in your opinion

  28. 28
    zman Says:

    74 is in line, a little high. gas trading same level of 23.5 cents on the nov.

    Uh oh, EIA changing format of NG releases…details to follow.

  29. 29
    zman Says:

    EIA change – nevermind, just looks like formatting changes, also moving to a better server b/c of people like me who repeatedly hit the refreshed key every other second.

  30. 30
    calvino Says:

    good morning. the bombing trick won’t work, imho. partroops will need to land and go inside the bunkers to blow everything – after the bombing runs kill everything above ground. i have a theory as to the timing, but it is so preposterous, i can not offer it.

    ahhh the Jimmie Jimbo the Magic Talking Baboon watch? Sambone – that is a great idea. If I was going to pump the Canroy’s as he I see the news leads conveying, I would sure do it exactly between the ex date and the date of record.

    Missed the board yesterday, as I was corraling in a runner.

  31. 31
    calvino Says:

    I just read what I wrote, and realize I need to get coffee.

  32. 32
    Nicky Says:

    Z – heating oil looking the strongest right now.

    That said at the moment we have only 3 clear waves up off yesterdays lows so this could still be a correction. If we take out 21900 (ish) it will confirm that this was just a retracement. 71.6% retracement came in at 22307 and obviously we are passed that.

  33. 33
    Sambone Says:

    9:58 am EST

    Nymex Crude Rises On Gasoline Rally, Inventory Data

    BY ELIZABETH LANDAU
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures rallied Thursday, pushed by higher gasoline prices and government data showing sharp drops in refinery use and gasoline output.

    The front-month November light, sweet crude contract on the New York Mercantile Exchange was up $1.27, or 1.6%, at $81.57 a barrel. Brent crude on the ICE futures exchange rose $1.23 or 1.6% to $78.66 a barrel.

    Nymex Front-month October reformulated gasoline blendstock, or RBOB, rose 2.78 cents, or 1.4%, to $2.0561 a gallon. October heating oil was up 2.64 cents, or 1%, to $2.2090 a gallon.

    Inventory data from the U.S. Department of Energy revealed that refining capacity utilization last week fell much more than expected, by 2.7 percentage points to 86.9%. Gasoline output in the week ended Sept. 21 dropped 3.8%, or 348,000 barrels a day, to 8.822 million barrels a day.

    The surprising drops in utilization and gasoline output were still supporting crude oil prices, a day after the data were released, said Peter Beutel, president of energy risk-management firm Cameron Hanover.

    “The best thing about crude (prices) is that refined products took a hit in this week’s report,” Beutel said.

    Crude stocks at the light, sweet crude delivery point in Cushing, Okla., dropped 200,000 barrels last week to 18.1 million barrels, their lowest level since December 2005. Some analysts said this may have encouraged funds to buy more crude.

    While Cushing is the central hub for many refineries, Beutel doesn’t see the falling stocks as a huge issue.

    “I don’t think we’re likely to go through all of the inventories in the next two or three weeks,” he said. “I expect we can get crude there by the time we need it there.”

    Funds were also responding to the weaker dollar and rallying stock market, said Tony Rosado of IAG Energy Brokers in Fort Lauderdale, Fla. He predicted that crude futures would “go back and test the $84 mark” as early as Friday if the dollar remains weak and the stock market continues to strengthen.

    “Everything put together as a package is like a bull trend,” he said.

    —By Elizabeth Landau, Dow Jones Newswires

  34. 34
    Sambone Says:

    PF has eneterd the building.

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

  35. 35
    Nicky Says:

    Dollar I think I heard them say is now down 6 days in a row. I am expecting a bounce.

    The move in energy is no more than speculation by the funds – remember its the end of the quarter. Come next week they are going to run out of reasons to hold this up and they probably won’t need to.

  36. 36
    Sambone Says:

    N – See “Crowd”.

  37. 37
    Nicky Says:

    Sam- perhaps Z could put up a definition for ‘crowd’ – I am sure he could have fun with that one.

  38. 38
    Nicky Says:

    WTI remains below the Gann support line -it is quite normal once broken to see this tested from the downside which is happening.

  39. 39
    zman Says:

    Sambone – I’ll only add Cramer if he says something stupid.

    TRADE: CHK Oct $35 CALLS for $0.90. I still hold the $32.50s and the January 08 37.50s and this one will be quick.

  40. 40
    zman Says:

    CROWD = Cramer Reams Opportunistically With Deception?

    or

    CROWD = Cartel of Really Obnoxious Weasily Deceivers

  41. 41
    Nicky Says:

    Distillates has a Gann line crossing through around 22500 today. Again we are retesting it from below.

  42. 42
    Nicky Says:

    Ooh Z – I love the first one!

  43. 43
    Sambone Says:

    #2 has my vote

  44. 44
    QUARRYMAN Says:

    Nicky —>> USD

  45. 45
    scoop006 Says:

    #1 has my vote

  46. 46
    Nicky Says:

    Q – can you clarify #44?

  47. 47
    zman Says:

    I should have just snapped up the UPL at the open.

  48. 48
    QUARRYMAN Says:

    Nicky —>> USD

    What’s a good vehicle to trade a bounce in the USD… optionable ETF. Just 2-3K to invest.

  49. 49
    Nicky Says:

    An FX trade maybe. Euro/Dollar?

  50. 50
    zman Says:

    If you are nimble COP 90 calls might be good here, its off over 2/3rds of today’s early gain with the drop in the dow and they’ve got a big asset sale in China coming and they just announced a biofuels deal with ADM.

  51. 51
    Dman Says:

    Qs for Z:

    1. What do you make of the gyrations by NBR in the last 3 days (contrast with HAL)

    2. Any thoughts on CLNE? For exampe, are higher NG prices good for it or bad?

  52. 52
    rseidman Says:

    Z:
    What is your strategy with VLO?
    Watching it get hit at the moment

  53. 53
    QUARRYMAN Says:

    Nicky, re: #49

    Please explain ‘FX’ a little further.

  54. 54
    zman Says:

    EOG off on a day like today is a bit odd.

    COP is tempting for a day trade on the CALL side.

    Bill – what do you think of GNK? And Handysize rates? That market doesn’t seem as strong to me as the major bulks market.

  55. 55
    Sambone Says:

    Q – I own FXF and FXE. Swiss Franc and Euro.

  56. 56
    Nicky Says:

    Quarryman – just meant a Foreign Exchange trade.

  57. 57
    zman Says:

    Karen facing strong shear for 3 days…but the tracks are curving back west a bit again.

    http://www.crownweather.com/tropical.html#AL12

  58. 58
    calvino Says:

    Z, the crack charts yesterday were illuminating. I stayed up reading them. I like the NG Christmas tree today also.

  59. 59
    QUARRYMAN Says:

    Thanks Sam,

    I get it now.

  60. 60
    QUARRYMAN Says:

    Those FXE options are very thinly traded.

    What’s a more popular and optionable currency index?

  61. 61
    Sambone Says:

    Z – Like I said yesterday, East coast needs to keep an eye of that girl. Right now she’s getting her clothes ripped off. Naked Karen LOL.

  62. 62
    zman Says:

    man I’m not touching that comment. I had an old girlfriend named Karen and if my wife sees me talking about her naked on the site…Cat 5!

    Last night those tracks looked like one bearing south of Cuba, one end on Cuba and two to Florida. This morning they pretty much all went to Bermuda but now it looks like Cuba to Florida for three or maybe 4 of the 10 or so tracks.

  63. 63
    QUARRYMAN Says:

    XLE Sep 28 PUTS for .30, hmmm… I drop in 30 coins and start pulling the handle… they’re at the money.

    “SAFETY PAYS”

  64. 64
    QUARRYMAN Says:

    XLE Sep 28th PUTS at 75 hghuw

  65. 65
    Denise Says:

    Q-take a look at two new etf’s by Deutsche Bank UUP and UDN -not sure of there size-seems like an easy way to place a bet

  66. 66
    Nicky Says:

    RBOB looking weak.

    If Karen hits east coast it isn’t going to impact oil. Not that they want to hear that!

  67. 67
    Nicky Says:

    Consolidation implies an upside breakout for wti and distillates.

  68. 68
    QUARRYMAN Says:

    Thx, Denise.

  69. 69
    QUARRYMAN Says:

    The Rock Cracker Stocks!

    Look at MLM (Martin Marietta Materials) and VMC (Vulcan Materials)

    I don’t know why both are so strong today, but they are. They’ve been in an extended downturn for some months and may have found their bottom!

    They make the stuff that’s the foundations of everything we live in: rocks, roads, and concrete.

    I’m adding some MLMJG VMCJR calls. This might be a good calendar spread to sell some short calls until the ultimate bottom is found.

    Good companies.

    Q.

    “SAFETY PAYS”

  70. 70
    Nicky Says:

    Karen is actually forecast to weaken:

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

  71. 71
    calvino Says:

    unless it hits Philly or Dover

  72. 72
    zman Says:

    Q – I used to own Vulcan. Nice company. Do you think the equipment types like CAT and JLG will move with aggregates, they used to but it’s been 6 or 7 years since I took a look?

  73. 73
    rammastr Says:

    ZMAN, NICKY – Thanks.

  74. 74
    zman Says:

    volume and price spikes on the CHK minute chart, kinda odd…probably just seeing things from my DT there.

  75. 75
    zman Says:

    Ram – anytime, seriously Gerber.

  76. 76
    rammastr Says:

    Oshkosh owns JLG – Good company. I would prefer CAT or DE. The latter is also a good play on ag.

  77. 77
    Nicky Says:

    Quarryman – they are answering your question CNBC now.

  78. 78
    Nicky Says:

    Mentioned FXC and FXE.

  79. 79
    Nicky Says:

    and UDN

  80. 80
    zman Says:

    thanks Ram re CAT/DE. Q any thoughts re equip when you get a chance.

    oil up $1.86 at $82.10 – rumor that Cushing, OK eaten by a black hole.

  81. 81
    Nicky Says:

    If WTI takes out previous high of 82.40 then continuation high of 84.10 and higher comes back into focus.

  82. 82
    QUARRYMAN Says:

    Re #72

    No. CAT is so global, now.

    A few years back I was in Decatur at the truck plant– I like to see our trucks in the latter stages of assembly– at the automated paint booth. They were painting our manly USA-made, big boy toys: PINK!! Yes, it was the color of choice for some large Chinese excavating co.

    Combine that image with the photo of Mattel’s CEO kissing booty of PRC’s Minister of Commerce and you see the sort of clout we now have with a global economy.

    I’ve got large mining trucks on order for 15mos. I can get them in 10 mos. if I source the large rubber tires myself (24.00-35 Michelins)

    BTW, WOO HOO for VMC and MLM!!

    It’s great to see some good-old USA rock stocks flying and not Chinese or hightech horsemen.

    “SAFETY PAYS”

  83. 83
    Sambone Says:

    TLM – The rumor and I mean rumor only is that CNOOC will take them out at $30.00.

  84. 84
    zman Says:

    Q – How does that 15 month time lag compare to say one and three average? fast, slow…

    Pink is for pinko, makes sense

    Thanks Sambone – that would make a good degree of sense and the asset base won’t bother the Chinese (might bother Parliament). Too bad TLM had to punt their Sudan stuff since CNOOC is already there. Bet the Chinese would love TLM’s Asian / Australian oil and stranded NG assets given the close proximity and their designs for huge LNG regassification capacity. Probably just a rumor but it makes good sense and the stock is very cheap.

    BigJim – always, always, always point these out! TY

  85. 85
    rammastr Says:

    If the Chinese buy oil and gas producers in Canada, isn’t that a threat to our supply line? Would there be a bidding war for TLM or others?

  86. 86
    QUARRYMAN Says:

    My RIG position a nickel away from green again.

    Now for BHI. I’m trying to get 2/3 out whole and leave a 1/3 for the ride.

  87. 87
    zman Says:

    Ram – yes x2 long term – divert more to the west coast in a new Chinese funded pipeline and gassify it on the coast.

    Surprised they haven’t gone after ECA

    Q – nice.

  88. 88
    Sambone Says:

    1:36 PM EST

    Crude Rallies Ahead Of 3Q Mark To Market

    DOW JONES NEWSWIRES

    From MARKET TALK:

    [Dow Jones] Traders and analysts are ascribing a myriad of reasons for crude oil futures’ move higher in the past two sessions, but some are saying it’s a simple case of funds looking to maximize the value of their assets ahead of Friday, the end of the third quarter. Funds usually make quarterly disclosures about performance to their investors. “Crude is getting goosed higher to close out the third quarter tomorrow in the maximum profitable position for funds to rake in big quarterly bonuses,” says one trader, who declined to be named. “Crude should fall next week.” Nymex Nov crude +$1.86, or 2.3%, at $82.16/bbl. (matt.chambers@dowjones.com)

  89. 89
    zman Says:

    there goes 82.40

  90. 90
    Nicky Says:

    Stops must be going off right left and center. New highs for November WTI.

  91. 91
    Nicky Says:

    #88 sums it up nicely I would say.

  92. 92
    zman Says:

    Sambone – that sounds about right. Minute chart looks like a telephone pole

    NG starting to rally

  93. 93
    QUARRYMAN Says:

    Z.

    you wrote: Q – How does that 15 month time lag compare to say one and three average? fast, slow…

    I was intending to show that there is huge global demand for large mining machinery and moreso capital consumables like tires that has persisted for the past several years. Only five years ago, [when I took 3 yr notes for 3.25%] the lag time was about 4-6 mos. Occasionally, you could do a dealer exchange for a truck deal that fell through. But, like steel, milk, beef, dairy cows, etc., the Asian demand has added their layers of demand and upset they typical production balance.

    Cat can’t and/or won’t add new producton cap to meet this demand surge.

    This answer what you were asking?

  94. 94
    QUARRYMAN Says:

    I wasn’t kidding about the dairy cows.

    I have friends who are large dairy farmers. Dean Foods bought the local coop and they cashed out of milking ops.

    They have made millions raising and exporting their prize Holstein stock overseas.

    So, ‘SBUX been berry berry good for ‘dem’

  95. 95
    QUARRYMAN Says:

    I’m setting stops and sell limits and heading out for the day.

    Good luck to all and good day!

    Q.

    “SAFETY PAYS”

  96. 96
    Sambone Says:

    Lorenzo is born. Next one is Melissa.

  97. 97
    zman Says:

    another buck on DRYS (up 4.6%) and I’ll declare it breakout

    CAM / FTI / OII loving this oil price. You could make a mint buying the weak one of three and selling it two days later and so and so on right now.

    CHK – 92% gas looks like it sells a bunch of oil all of a sudden. Ours is not to question why, ours is just to make $.

    Thanks Q – that gets it

  98. 98
    Sambone Says:

    2:03 pm EST

    Nymex Crude Up $2, Above $82 A Barrel

    By ELIZABETH LANDAU
    Of DOW JONES NEWSWIRES

    NEW YORK   Crude oil futures on Thursday surged past $82 a barrel on a weakening dollar, continuing an upswing that began with Wednesday’s U.S. inventory data.

    “As long as the market is convinced that we’re not going to get into a recession, $80 a barrel is a realistic possibility,” said Phil Flynn, senior market analyst for Alaron Trading Corp. in Chicago.

    The front-month November light, sweet crude contract on the New York Mercantile Exchange was recently up $2.30, or 2.9%, at $82.60 a barrel. October heating oil rose 4.94 cents, or 2.3%, to $2.2320.

    Refining capacity utilization last week fell much more than expected, by 2.7 percentage points to 86.9%, according to data from the Department of Energy. Gasoline output in the week ended Sept. 21 dropped by 3.8%, or 348,000 barrels a day, to 8.822 million barrels a day.

    The strong rallies in heating oil and crude are “reflecting trading concerns that we can’t ramp up production to meet winter demand,” said Mike Zarembski, an analyst at optionsXpress. “Fears of further inflation are sparking commodity markets in general.”

    The euro hit a high of $1.4190 against the dollar in early morning trading in North America. A weakening dollar means that consumers buying in other currencies have an easier time bidding up oil prices

    Separately, a foreigner was shot and another was kidnapped in Nigeria, the largest oil producer in Africa, on Thursday. It is unknown whether a militant group targeting the country’s oil industry is responsible.

    Analysts said oil above $80 is not unrealistic, and that crude could reach a new high soon. The front-month contract on the Nymex hit an all-time intraday high of $83.90 last week.

    —By Elizabeth Landau, Dow Jones Newswires

  99. 99
    zman Says:

    PF… always there with the value add, lol

    I agree with the second guy to some extent but the crude rally is BS and is hobbling my refiners.

    How many foreigners were shot in the US today? Bet it’s more than one. That’s Nigeria bit is just inflammatory regurgitation unless its tied to oil and rebels.

  100. 100
    Sambone Says:

    Brent’s up to $80.00 now.

  101. 101
    zman Says:

    Crikey, is Karen going to pull a u-turn and slam the north sea?

  102. 102
    Sambone Says:

    Z – Nope

  103. 103
    Denise Says:

    z-read Jon Najarian pointing out something up with chk -Nov calls going crazy being bought at offer out to 40’s

  104. 104
    zman Says:

    Thanks Denise – he’s no dummy

    DRYS breakout declare, touched all time high of 89.99.

  105. 105
    Nicky Says:

    Looks like they are going to jam it right into the close.

  106. 106
    zman Says:

    N – Bless their greedy souls.

    Should have taken the COP, EOG now flat, breaks par for the day and probably runs.

    DRYS nopw 90.50 up 6.5%

    Chinese oils act like they are the ones being bought out.

  107. 107
    Nicky Says:

    Products expire tomorrow. That and the end of the window dressing should see the turn imo.

  108. 108
    zman Says:

    N – turn at the open or during the day or not until Monday? Best guess, nothing on the line like hat eating.

  109. 109
    Nicky Says:

    Huge surge by RBOB takes it to 61.8% retracement of the move down.

  110. 110
    Nicky Says:

    Z – whole move looks like insanity to me. I mean what the hell can they find to hold this up on??? A couple of non existent storms and Cushing which we have already covered.
    There will be profit taking by the end of trading tomorrow imo.

  111. 111
    Sambone Says:

    N – See #40. That’s my take.

  112. 112
    Sambone Says:

    2:33 pm EST

    Nymex Crude Up $2, Above $82 A Barrel

    By ELIZABETH LANDAU
    Of DOW JONES NEWSWIRES

    NEW YORK   Crude oil futures on Thursday surged past $82 a barrel on a weakening dollar, continuing an upswing that began with Wednesday’s U.S. inventory data.

    “As long as the market is convinced that we’re not going to get into a recession, $80 a barrel is a realistic possibility,” said Phil Flynn, senior market analyst for Alaron Trading Corp. in Chicago.

    The front-month November light, sweet crude contract on the New York Mercantile Exchange was recently up $2.30, or 2.9%, at $82.60 a barrel. October heating oil rose 4.94 cents, or 2.3%, to $2.2320.

    Refining capacity utilization last week fell much more than expected, by 2.7 percentage points to 86.9%, according to data from the Department of Energy. Gasoline output in the week ended Sept. 21 dropped by 3.8%, or 348,000 barrels a day, to 8.822 million barrels a day.

    The strong rallies in heating oil and crude are “reflecting trading concerns that we can’t ramp up production to meet winter demand,” said Mike Zarembski, an analyst at optionsXpress. “Fears of further inflation are sparking commodity markets in general.”

    The euro hit a high of $1.4190 against the dollar in early morning trading in North America. A weakening dollar means that consumers buying in other currencies have an easier time bidding up oil prices

    Separately, a foreigner was shot and another was kidnapped in Nigeria, the largest oil producer in Africa, on Thursday. It is unknown whether a militant group targeting the country’s oil industry is responsible.

    Analysts said oil above $80 is not unrealistic, and that crude could reach a new high soon. The front-month contract on the Nymex hit an all-time intraday high of $83.90 last week.

    —By Elizabeth Landau, Dow Jones Newswires

  113. 113
    Sambone Says:

    Sorry, but this looks like a repeat.

  114. 114
    TTupp Says:

    z – is there a caayst in drys or is their some follow through with brokers after the CC?

  115. 115
    zman Says:

    Tupp – no catalyst that I see, just buying after the profit taking yesterday. It’s cheap, short to medium term fundies are solid

  116. 116
    scoop006 Says:

    OFF TOPIC QUESTION: ANYONE FOLLOW THE HOME BUILDERS AND HAVE AN OPIOION WHY THE ENTIRE SECTOR IS UP TODAY IN LIGHT OF EARNING REPORTS RECENTLY RELEASED FOR LEN BZH HOV KBH THANKS

  117. 117
    Sambone Says:

    Scoop – See #40. I wouldn’t touch that toxic waste.

  118. 118
    Denise Says:

    scoop-bottom calling(or trying to squeeze the shorts) KBH sold off a asset and restructured some debt-has enough cash to keep from going under anytime soon. Not sure about others

  119. 119
    scoop006 Says:

    SAM & D, Thanks for the response. To the contrary, I am sitting with puts on BZH & HOV. Thought they would see new lows today.Perhaps tomorrow, certainly next week.

  120. 120
    drdavis124 Says:

    Brazil: Petrobras Plans 5 New Plants
    September 27, 2007 16 40 GMT

    Brazilian state-owned oil company Petroleo Brasileiro (Petrobras) plans to build five ethanol plants as part of a business plan to expand ethanol exports to 4 billion liters by 2012, Petrobras’ Downstream Director Paulo Roberto Costa said Sept. 27. The new plants will have the capacity to produce 1 billion liters, which will be exported to Japan under several joint ventures. Petrobras’ board of directors is expected to approve the projects in the next few weeks.

  121. 121
    zman Says:

    APA all time high…hooray oil

    Dr Phil – thanks…was reading an article on ehtanol last night. I’ve said for a long time corn based ethanol is a terrible idea. This author really spelled out the differences well.

    Corn: fuel input:1 unit, output 1.3 units
    Sugar Cane: input 1 unit, output 8 units.

    AMD should be engineering sugar cane that can be grown all over the US instead of helping a third of our corn crop to be turned into hooch that takes almost as much fuel to make as it produces.

  122. 122
    TTupp Says:

    filled at the bid on drys 😉

  123. 123
    Sambone Says:

    Z – Sugar in the US is controlled by the Sugar Cartel based in Florida. It aint gonna happen. US consumers pay the highest price in the world for sugar because of those guys.

  124. 124
    zman Says:

    T – nice

    Oil going for 83 in after mkt

    DJ story out saying Venezuela using coil tubing rigs from HAL and SLB to boost production via workovers (so far they’ve boosted production by a whopping 15,000 bopd. Hugo you make me laugh. Rigs on hand are far short of plan 112 vs 191 expected. This is what happens when you don’t play well with others.

  125. 125
    zman Says:

    sugar cane: twice the number of gallons of ethanol per acre planted

    DRYS en fuego

    VLO down 0.9% today while cracks are actually rising.

    TSO down 3.9% hmmmm. Glad I shied away from the S&P 500 trade but that stock is also pretty cheap and will get my attention long with much more weakness

  126. 126
    Sambone Says:

    Z – Sugar is much better, but won’t happen here in the States. How about switch grass, but AMD won’t make any $ off of it so that aint gonna happen either.

  127. 127
    Sambone Says:

    Components of the Sugar Program

    The purpose of U.S. sugar policies is to keep domestic prices artificially high. In recent decades, U.S. sugar prices have been typically two or more times higher than prices on world markets.2 The federal government achieves that result by setting guaranteed prices and backing them up with trade restrictions and production quotas.

    Guaranteed Prices. The U.S. Department of Agriculture runs a complex loan program to support sugar prices. The USDA makes loans to sugar processors, who use their sugar as collateral. In return, processors agree to pay sugar growers certain minimum prices. If the market price of sugar rises, processors can sell their product on the market and pay back the loan. If the market price falls, processors can forfeit their sugar to the government and not repay their loans. The effect is to guarantee prices for both processors and growers. Sometimes other techniques are used to prop up prices, such as paying producers to discard their current inventories.

    Trade Restrictions. Import barriers help to maintain high domestic sugar prices. The government applies a two-tiered system of “tariff rate quotas” to limit imports. A lower “in-quota” tariff rate is for imports within a set quota volume. A higher “over-quota” rate applies to imports in excess of the quota. The in-quota amounts are allocated to 40 foreign countries on the basis of prior import patterns.

    These restrictions prevent lower-cost foreign sugar from putting downward pressure on U.S. prices. Sugar imports are currently restricted to about 15 percent of the U.S. market. By contrast, imports typically accounted for about half of the U.S. market prior to the 1980s.3

    Production Quotas. In addition to controlling sugar imports, the government imposes quotas, or “marketing allotments,” on U.S. production. Each year, the USDA decides what total U.S. sugar production ought to be and then allots it 54.35 percent to beet sugar and 45.65 percent to cane sugar. Most sugar beet production is in Minnesota, Idaho, North Dakota, Michigan, and California. Most sugarcane production is in Florida and Louisiana. The USDA allots each U.S. state and each sugar company a specific quota based on a complicated formula. In sum, the sugar industry is a cartel that is centrally planned from Washington.

  128. 128
    zman Says:

    I think I read the other day that we impose high tariffs on Bz ethanol imports. Correct me if wrong but what in the world?

  129. 129
    zman Says:

    yup, checked the U.S. imposes a 53 cent per gallon tariff on imported ethanol. unreal. Bush asked that it be cut last year but congress laughed

    DRYS soaring through 91

  130. 130
    Sambone Says:

    US limits imports of Ethanol.

  131. 131
    Sambone Says:

    AMD is a big political contributor. Don’t forget the Farm State politicans.

  132. 132
    zman Says:

    TRADE: Half out DRYS $85 calls for $10.

  133. 133
    Brian08 Says:

    All the refiners taking it in the shorts…Especially WNR…That one has been falling like a rock, broke $40 today…

  134. 134
    zman Says:

    saw Texas Tech registered a million shares of WNR yesterday

  135. 135
    zman Says:

    at least VLO only getting a minor mugging relative to the other refiners

  136. 136
    drdavis124 Says:

    Denise: Re #103 CHK Nov calls

    5084 puts April 08-$35 sold today. Could this be sell related to 11-35 buys.

    Thats more puts than all others today.

  137. 137
    Nicky Says:

    Our local weather saying that Karen is being ripped apart by the upper level shear.

  138. 138
    QUARRYMAN Says:

    I’m going to go out and miss the close more often. Maybe if I do it tomorrow, VLO will rally to $72!

  139. 139
    zman’s Energy Brain ~ oil, gas, stocks, etc… » Blog Archive Says:

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