04
Oct

Thursday Oil Review And Gas Preview (Public Post)

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Commodity Watch:

  • Crude Oil: Closed down a whole $0.19 at $80.05.
  • (SU) says output back to full by weekend following small fire, currently down by 85,000 bopd.
  • Iraq says it resumed exports to Turkey after a 10 day outage.

Tropics Watch: Accuweather is beating the GOMEX storm drum. Read all about it here.

  • Natural Gas: NG enjoyed a bit of profit taking yesterday as weather forecasters cast doubt on whether the weather in the GOMex would be threatening enough to worry about. For their part, Gulf players announced no evacuations.

Natural Gas Storage:

  • My Number: 60 Bcf. Last year's number of 74 Bcf. I'm a little light of the Street due to a combination of tumbling imports and increased cooling load.
    • Imports: Down 1.3 Bcfgpd versus the prior day. In a vacuum this would result in 9 Bcf less gas available to put into storage.
    • Cooling degree days of 40 which was roughly double year ago levels. This corresponds to Edison Electric Institute date which shows generation was up 3.4% relative to year ago levels. This and the impo
  • Street Consensus: 70 to 75 Bcf. The over / under should be last year's number of 74  Bcf for gas prices. No storm though and I think we test $7 very soon. If we get my 60 Bcf number I'd look for a brief, unsustainable spike up to around $7.50.

Oil Report Review: 

exp-vs-act-100307.jpg

Crude Oil Stocks: despite a 300,000 barrel recovery at Cushing and a 1.2 million barrel surprise increase in crude stocks oil prices refused to flinch yesterday. One analyst attributed crude's resilience to the fact that most of the increase in stocks was on the left coast. A fact that should be (and was) good for TSO's share price.

Crude Stocks Appear To Recovering Nicely From Almost Falling Into The Realm Of...Average.

crude-stocks-100308.jpg

The Belief That Inventories Will Be Overly Tight Is Probably A Bit Overblown. I think stocks will tighten but the EIA's unchecked ability to overestimate demand on a weekly basis, only to rather quietly revise it lower when the monthly data is released (month after month after month) makes one strongly question their 4Q global oil demand assumption, especially if we enter a non-"normal" winter as it now appears we are. Just a thought I thought Id throw out there.

Here's the regional breakdown for crude stocks just so you can see what that analyst was getting at when he said prices shouldn't fall over the surprise build in crude being a regional thing. Of course last week the tiny draw at Cushing was seen as justification to rally crude so I don't get it but here's this week just for kicks. If you can't make out the Cushing change it was up 300,000, more than erasing the 200,000 barrels it fell last week. And I'm probably the only go whose going to point that out.

 regional-crude-100307.jpg

 

Gasoline

  • Production: Gasoline production fell again despite a slight boost to utilization levels. I think utilization will resume its downward trek into the fourth quarter and that gasoline production will probably fall another 200,000 bpd to around 8.5 mm bpd. This level will likely result in further reduction in stocks unless imports stage a winter rally (which I really doubt) or demand falls below year ago levels (which is possible but I would think unlikely, at least more than one or two weeks).

gasoline-production-092807.jpg

  • Gasoline Imports: Increased by 10% over the prior week to 1.154 million bpd. This isn't out of line for this time of year but it is approaching the upper end of the band. It'll take higher prices to get a significant boost in imports.

gasoline-imports-092807.jpg

  • Gasoline Demand: Continues to be strong for this time of year, up 0.5% relative to comparable week last year.

gasoline-demand-092807.jpg

  • Gasoline Stocks: Definitely Below Average: All of the above yields gasoline stocks that fell to just under 90% of year ago levels...

gasoline-stocks-100307.jpg

  • ...And We Are Down Across The Board on a Per Region Basis: Gasoline stocks are down in all regions relative to last year and the three year average.

regional-gasoline-stocks-100307.jpg

Holdings Watch:

CALLS:

  • (TSO) NOV $50 TSO CALLs for average $1.80. Last bid $1.85. Call volume was very high in the $50 strikes yesterday. Still hold the NOV $47.50s as well but the EIA data prompted me to get a little more aggressive with my expectations. 
  • (DRYS): OCT $100 CALLS for an average of $3.18. Last bid $3.00.

Stocks We Care About Today

COP Crack Spreads From Their Press Release Yesterday. This table corresponds with the crack spreads I've been talking about for quite some time now. The media just keeps pounding on the idea that crack spreads are horrible right now. Horrible was the late 90s. This is just a little below last year's 3Q levels which were very good.  

cop-cracks-3q07-comps-100307.jpg

What's more interesting is that COP basically recycled the press release from last year and reissued it one year to the day later. I'm not sure of the wisdom of highlighting sequential results in what is obviously a seasonal pattern instead of YoY results which look pretty good as you can see from the table above but they didn't ask me. No matter. What does matter is the reaction to this "news" last year. The stock sold off for two days then began a long journey higher and actually jumped on the day 3Q06 earnings were announced. Does it happen again, who knows but the scenario is similar and you'll note from the second graph that oil fell for the remainder of 2006 and yet COP rose the whole time. As a B of A analyst summed it up yesterday The update contained no material new information, and we expect the current consensus earnings-per-share estimate of $2.36 to come down to meet our $2.26-per-share forecast,". Comment: not that big a deal.

 

 cop-2006.jpgclick to expand and see what happened last time they give a very similar interim update.

 oil-2006.jpgclick to expand and see oil fall so that wasn't the driver for COP's year end performance.

Chinese Oils - I'm just watching for now but man what volatility. It appears that investors fled the group of three today (PTR), (SNP), and (CEO) ahead of a week long mainland Chinese holiday next week, opting to take some profits after what has been an incredible run. 

(IOC) - Still No Confirmation From Elk 2. in a blast from the past, IOC got creamed (down 24%) yesterday after stating that it was moving the rig off it's Elk 2 borehole. The stock has been the subject of much speculation for quite some time regarding the Elk reservoir's ability to support a proposed LNG development off Papua New Guinea. Investors had previously taken positive comments from a banker regarding interest rate leniency and intentions to build an LNG gassification plant as a positive sign about the well and the company's prospects. We played this one on the upside back in early July sensing that it had fallen too far too fast and have been away ever since awaiting hard data on Elk 2. And we still don't have it. Although the well encountered a large hydrocarbon column (600+ feet) in "well fractured rock with good porosity" the market wanted a test rate and didn't get it. In my opinion this goes to credibility of management. They are trying to buy time and I will short this puppy on any significant dead cat bounce.

I said this about (IOC) back on August 1:

  • (IOC) - Merrill Lynch Commodities division hooked up with IOC and Pacific LNG Operations Ltd to develop a LNG facility in Papua New Guinea.
    • Each will have one-third of the new holding company.
    • Project start up is “hoped” for in 2012.
    • The way the press release is worded Merrill will pay for engineering and design,
    • Pacific LNG will pay the $2 billion plus price tag this will cost (at a minimum) and
    • IOC “will be the preferred natural gas supplier to the project”.
    • That’s a bit fishy. There’s still no news on ELK2 and that’s the news I play ball on.
    • IOC is chunneling through cash. To sign and announce this deal before definitive results from the delineation well seems like a play designed to pump the stock prior to doing a secondary. They seem to be saying see, Merrill liked it but there are other players in the regions who may be able to supply enough gas for an LNG facility and they’ll source from them if they and Pac LNG really want to build one here. [their cash position is two months worse now and they continue to fail to deliver on ELK]
  • IOC has two main areas of operation: 1) a small 38,500 bpd refinery which accounts for the vast majority of the company’s revenues and 2) an exploration arm that has had some notable successes. A LNG project is expected to be underpinned by one of these, Elk, discovered in November 2006. At present revenues and cash flow are derived almost entirely from the company’s midstream assets. But the snap to the story is the potential for the LNG project.

Odds & Ends

Analyst Watch: will add in comments

Reader Request Watch: Precision Drilling (PDS)

  • Almost 480 land rigs split roughly 50/50 between drill and workover rigs.
  • They operate in the U.S. and Canada  - they've been moving into the U.S. as the Canadian market weakened starting about 15 months ago. As of last quarter, the U.S. represented 9% of revenues and 17% of operating earnings.

canadian-rig-counts-100307.jpg

us-land-rigs-100307.jpg

  • You can see from the US land rig escalation why they might want to shift more of their capacity south of the border.
  • First risk that comes to mind...falling Alberta drilling if the new tax regime comes into place.
  • The second is that they might be mobilizing rigs to a market that is becoming saturated.
  • Technically it's either bottoming or about to leg down again. Tough call but with all the chatter about cutting bugdets up there can you really trust their estimates, which appear to make them fairly cheap? I will stay away but put back on the watch list

land-driller-multiple-100307.jpg

  • On the flipside: Their debt load is almost non existent and they've got rising but still very low short interest. The long term fundamentals of the North American natural gas industry are such that  rigs will continue to be in demand to support a growing need for gas (LNG is just not going to cut it for growing US demand over time as China will compete for gas in bubble ships on the water) and you need more rigs to get at non-conventional reserves where a majority of the new gas growth has come from.

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124 Responses to “Thursday Oil Review And Gas Preview (Public Post)”

  1. 1
    Sambone Says:

    7:29 am EST

    Crude Down, Mulls US Inventories, Weather, Dollar

    By David Elliott
    Of DOW JONES NEWSWIRES

    LONDON — Crude oil futures were slightly lower Thursday morning in London as the market mulled latest U.S. inventory levels, Atlantic weather and a further recovery for the dollar.

    Traders said the market’s next move will be key as a break of underlying support, just under current levels, could trigger further liquidation of the substantial fund long position.

    “If we can hold up above $78.87 a barrel (basis WTI November) we have a chance of mounting another assault on the highs but there’s a growing suspicion this correction (lower) has further to run,” a broker at a London tradehouse said.

    At 1102 GMT, the front-month November Brent contract on London’s ICE futures exchange was down 20 cents at $76.99 a barrel.

    The front-month November contract on the New York Mercantile Exchange was trading $0.35 lower at $79.59 a barrel.

    ICE’s gasoil contract for November delivery was down $4.75 at $674 a metric ton, while Nymex gasoline futures for November delivery were down 59 points at 199 cents a gallon.

    Much of the reason for Thursday’s tight trading ranges is the set of contrary U.S. inventory data from the Department of Energy Wednesday which, although against expectations, offered little direction.

    An unexpected build in crude inventories initially added pressure to that market but this was balanced by a fall in both distillate and gasoline stockpiles.

    Analysts have since said the crude stock build is in line with seasonal trends at a time when demand tends to tail off as a result of the refinery maintenance period.

    Following on from that, a dip in distillate inventories shouldn’t come as a significant surprise but is said to have offered support to prices.

    U.S. distillate stocks are holding slightly above the five-year average in the main heating oil consuming region of the U.S. northeast, according to Harry Tchilinguirian, senior oil analyst at BNP Paribas in London, but as the refinery maintenance period starts to bite, the fundamental picture will become tighter.

    “Concerns will emerge over a repeat of this spring’s refinery maintenance season and potentially an inadequate level of distillate stocks ahead of winter (which, after two consecutive mild seasons, is expected to revert to more normal and colder patterns),” he said.

    Short-term, concerns over U.S. and Mexican oil production in and around the Gulf of Mexico being affected by the Atlantic hurricane season, while lessening, haven’t gone away.

    An area of low pressure over the north-central Gulf of Mexico has the potential to become a tropical or sub-tropical storm in the next day or so.

    “Interests in the northern Gulf of Mexico Coast should continue to monitor the progress of this system,” the National Hurricane Center said Thursday morning.

    But investors aren’t panicking. “Whilst a threat, (it) is not exciting any Gulf of Mexico operators and with the season nigh on done, bullish vibes are receding,” said Rob Laughlin, senior broker at MF Global.

    The other factor attributed by some traders as a pressure on oil prices is a further recovery for the dollar, a move which lowers the relative value of dollar-denominated oil for foreign buyers.

    But, with the dollar still not far off all-time lows, only a sustained recovery for the U.S. currency is expected to have a noticeable long-term effect on oil market fundamentals.

    —By David Elliott; Dow Jones Newswires

  2. 2
    drdavis124 Says:

    GOLD:: Sy Harding “Street smart” letter Called for selling gold this AM. His calls have correct about 80%. Can anybody suggest Gold Options??? There are not many stocks with options.

  3. 3
    zman Says:

    Analyst Watch:
    NHY to overweight at JPM
    SII and WFT from buy to neut at BofA
    WTI from add to neut at Calyon
    BIOF to neut at JPM
    BJS picked up at add with 31 pt at Calyon
    HK picked up neut Credit S with 18 pt
    ANR pt praised from 24 to 28.50 at FBR

  4. 4
    zman Says:

    oil down 60 cents and active in early trading,
    nat gas down a nickel
    HO of 1.2 cents at 2.1661

    yesterday late Nicky said: Distillates has support at 21660 but if that goes…

  5. 5
    redjack Says:

    Z..looks like DRYS is going open higher…good call and I followed you, except I went with the 85 calls

  6. 6
    redjack Says:

    OXY has traded 3,200,000 shares in pretrading..

  7. 7
    benbobby Says:

    zman: what is the status of the Oct 70 VLO calls? didn’t see it referenced above.tks

  8. 8
    zman Says:

    Redjack…so far so good but I’ll lose both sets of my calls on any turn, esp the 100s

    OXY – story on mideast being growth driver, say a big block 894K shares at 64.10.

  9. 9
    QUARRYMAN Says:

    Try the index options on XAU, they have LEAPS as well.

  10. 10
    zman Says:

    Ben Bobby – I’m looking to dump them this week.

    I wrote much of this on Tuesday but I still agree with, especially after yesterday’s EIA report. Cracks made a 10% recovery yesterday on the HO and gasoline spreads but the stocks are trading with oil, not margins and were down on the COP news.

    The story is still very much intact and VLO should have less maintenance than it’s peers during the fourth quarter, a quarter which promises to be maintenance intense meaning prices should be elevated for the larger than normal piece of production they will have on line.

    Looking to cut bait on the 70s and roll into November strikes next week. If I add anything soon it will likely be the $67.50s.

  11. 11
    calvino Says:

    pwi got bid up 80 cents or 3.2% in pre at 10k shares , not good for me

  12. 12
    zman Says:

    PWI – is there news? I’ve got a news indicator but nothing comes up.

    red energy day

    broad mkt threatening to go red is sapping DRYS

  13. 13
    zman Says:

    For Kyleandy

    Coremark cuts Precision Drilling price target from $33.50 to $24.50

  14. 14
    calvino Says:

    pm harper gave a talk yester and said the rule changes wont apply to pwi, it is an ongoing deal and the he will not become a protectionist state

  15. 15
    zman Says:

    Cal – wonder how many of his staff bought in on the dip?

  16. 16
    scoop006 Says:

    Z, Thoughts on support level for RIG
    See volume on VLO Oct. $67.50C’s

  17. 17
    zman Says:

    Scoop,

    RIG – 108 to 109

    67.50s pretty high volume, but even higher is the 72.50s. I’d bet the 72.50s are call writers. Saw an article last night that mentioned now was the time to write calls on energy stocks, mentioned VLO specifically.

    So far heat and gas cracks improving again today…so naturally VLO is off a buck.

  18. 18
    kyleandy Says:

    z i didnt ask about precision drilling my question was on dvn

  19. 19
    zman Says:

    factory orders weaker than expected causing broader market dip and a pretty sharp downward reaction in oil.

    payrolls tomorrow

    HO just under Nicky’s 2.16 support level from yesterday.

    Sorry, meant Dman on the PDS

  20. 20
    kyleandy Says:

    ok glad you’re thinking of me

  21. 21
    MMarkkk Says:

    Industry news says Chevron’s Tahiti DW GOM Development will be delayed from mid-08 to late-08 or 2009. Remember BP’s Thunderhorse delays? originally 1 year, then 2. isn’t on production as of today!! These DW developments have a lot of “schedule risk” and little things blow up into big delays. Also, said that this might impact other developments as this project was supposed to be out of the shipyard; now they look like airplanes at Love Field…all backed up and delays across the board.

    Kudos to Anadarko getting their Independence Hub up and running on schedule.

    Cal: The Abu Dhabi PWI deal is still going to be debated; may never happen as the protectionists are coming out big time. I think the PWI kick is over but looks like you played this one short. Could still happen, but very risky.

  22. 22
    zman Says:

    M – who made those bad moorings at Tahiti?

  23. 23
    Sambone Says:

    10:12 am EST

    Nymex Crude Lower; Inventory Build Still Weighs

    By Elizabeth Landau
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures were lower Thursday, hovering below $80, as traders reassessed U.S. petroleum inventory data that showed an unexpected rise in crude stocks.

    The data, released Wednesday, showed crude oil inventories rose by 1.2 million barrels to 321.8 million barrels in the week ended Sept. 28. Analysts had anticipated a 400,000-barrel draw.

    Light, sweet crude for November delivery recently was trading 65 cents, or 0.8%, lower at $79.29 a barrel. Brent crude on the ICE futures exchange fell 39 cents to $76.80 a barrel.

    “The surprise inventory build put a little pressure on (crude prices),” said Tom Bentz, director and senior analyst at BNP Paribas Commodity Futures.

    The market is in a lull at the start of refinery turnaround season, which usually results in a dip in crude demand, Bentz said.

    “There could be some downward pressure here in the short term,” he added.

    Gasoline and distillate inventories posted unexpected declines last week.

    Front-month November reformulated-gasoline blendstock, or RBOB, was down 83 points, or 0.4%, at $1.9876 a gallon. November heating oil was down 1.58 cents, or 0.7%, at $2.1629 a gallon.

    The 300,000-barrel increase in stocks at Cushing, Okla., the delivery point for Nymex crude, is putting pressure on the front-month spread, the difference between the prices of the front-month contract and the second-month contract, said Tony Rosado of IAG Energy Futures in Ft. Lauderdale, Fla.

    “The crude market has been holding a tight range, which tells us the market can still work higher,” Rosado said. “The builds were light, which tells us there’s a certain tightness in the marketplace.”

    The unexpected increase in crude oil inventories hasn’t snapped futures’ upward momentum, traders said.

    “These (inventory) numbers show a consistency in demand that means it will only be a matter of time before this market resumes its upward trajectory,” said Phil Flynn, senior market analyst for Alaron Trading Corp. in Chicago, in a note. “At the first sign that seasonal demand kicks in, we should see oil again test the highs and, more than likely, exceed them.”

    The dollar, which has rebounded slightly from recent record lows against the euro this week, is still around $1.41 to the euro. Analysts are split on whether dollar volatility has played a key role in crude’s swing past $80 and current stagnation.

    —By Elizabeth Landau, Dow Jones Newswires

  24. 24
    zman Says:

    Sambone – any thoughts re the weather off the bahamas?

  25. 25
    zman Says:

    57 Bcf vs my 60 number and the Streets 70 to 75. A bit bullish for NG

  26. 26
    drdavis124 Says:

    Chk: bt call CHKKG Nov $35

  27. 27
    zman Says:

    Natural Gas Storage

    Year over Year (YoY) Deficit increases to 1.6% from 1.1% last week

    and

    Surplus to the five year average falls to 7.5% from 8% last week

  28. 28
    zman Says:

    Dr D: what does bt mean in #26?

  29. 29
    drdavis124 Says:

    #28 Bought

  30. 30
    Sambone Says:

    Weather – 90L in GOMEX = DOA, rain in TX.
    92L off NE of Bahamas, under 20 to 30 shear, which should go down tommorow to 10-15. Will be in Gomex/ Western Carribean sometime early next week. High pressure west of it will probably push it to Mexico. I’ll look at it Sunday.
    91L = DOA, shear too much for it.

  31. 31
    zman Says:

    DR D – ah, good luck

    Oil turning positive, NG positive slightly gassy E&P like SWN running, CHK, EOG, APC all running. KWK down and even though it’s had a good run it will likely advance with gas.

    COP could start to recover as the majors may rebound but broad market thinking about jobs tomorrow has it hovering close to flat.

    DRYS down 3.7%, may add another slug of the 100s

    Thanks S

  32. 32
    Sambone Says:

    The great PF!
    http://www.321energy.com/reports/flynn/current.html

  33. 33
    zman Says:

    Now he’s breaking the jobs number on CNBC…what’s that saying jack of all trades, master of none?

  34. 34
    zman Says:

    DRYS linked at the hip with the broad market. Any broad market thoughts out there? Looks like they both want to rally a bit.

    Nicky, HO tested 2.16 (just under it) and bounced, now just under 2.18, RBOB back over $2 at 2.01

  35. 35
    texana Says:

    spec continues as to major minor acq of a land rich co with exposure all along the quachita overthrust , most exciting new play woodford shale. hot list: hk, nfx, pq, kwk, crzo, clr ; &dnr for co2 any thoughts

  36. 36
    zman Says:

    T –

    NFX would be the first and most obvious choice, most active driller, biggest acreage, company has good assets after recent streamlining, nice deepwater GOMEx component and a big deep shelf play with little value assigned. I don’t think these guys are around in a year.

    PQ has had some big wells in the woodford but acreage is 25,000 so a little smallish, still its in the core of the play and could be a nice bolt on acquisition.

    HK – good Fayetteville exposure, not nearly as expensive as SWN and a good company to boot.

    CLR – oily, wouldn’t have thought of that but don’t know what their acreage there is like, it is in their backyard so maybe they have more exposure than I’d thought.

    KWK – that’ll make somebody a nice gassy, unconventional resource division someday.

    CRZO and DNR – haven’t heard anything on them get acquired in a long while. Isn’t DNR large part of another firm….guess that could make it harder or more difficulty depending on the parent.

  37. 37
    rkpagadala Says:

    testing

  38. 38
    zman Says:

    see you rk, what’s up?

  39. 39
    MMarkkk Says:

    Z – Gulf Island Fabricators

  40. 40
    zman Says:

    M – TY

  41. 41
    Nicky Says:

    Morning all (just morning still that is!)

    Boy its a quiet nothing sort of day. As Z had very kindly been pointing out this morning you will notice that all the energy complex held the support levels given yesterday almost to a tee.

  42. 42
    Nicky Says:

    The moves off Tuesdays’s lows are right now nothing more than a very small correction. Working off any oversold and getting ready for the next move lower I would say.
    But all look still in need of a little more upside.

  43. 43
    zman Says:

    What can I say, she’s good.

    Mark – do you know if things are getting backed up along the Gulf Coast in terms of construction. GIFI’s chart is up,up,up…know they and others are busy but if schedules slip it should impact eps.

  44. 44
    REgards Says:

    Hello Z, I am planning an entry in COP Nov85C

  45. 45
    REgards Says:

    Testing

  46. 46
    calvino Says:

    Mark – the shares look like it’s going to happen, no discount in today’s bids. I still held my short b/c what i lost is already gone, only upside for me. This PM is not doing much for his career with the flip flops, b/c the leak came right out of the finance office yester and made every wire, so it was policy, until 6pm. Zman was right to keep out of the political games, which have been particularly stinky in alberta/canada lately, but I just don’t know what’s good for me.

  47. 47
    REgards Says:

    testing 2

  48. 48
    rammastr Says:

    ZMAN – Finally into DRYS yesterday. Is CHK undervalued amongst its peers?

  49. 49
    redjack Says:

    for those interested in BTJ…here is a good read. http://regulationfd.blogspot.com/2007/10/nuts-and-bolts-of-bolt.html

  50. 50
    zman Says:

    Hey Ram,

    On a Price to cash flow basis which is arguably the most accepted quick measure of valuation and against gassy E&Ps, yes:
    vs 08 CF:
    CHK 4.0x
    APC 4.8x
    EOG 6.0x
    XTO 6.7x
    All of those save XTO have slower production growth short and medium term than CHK. XTO may be around the same level but I don’t remember their rate right off the top of my head.

  51. 51
    zman Says:

    CHK gets penalized for having paid up for a string of acquisitions over the years. Now its transitioning from being an acquiror to being a developer of those assets while divesting non core operations in planned lumps of 500 million over the next 2.5 years.

  52. 52
    rammastr Says:

    REDJ – Nice article on BTJ. I will add to my 401K. Thank you!

  53. 53
    rammastr Says:

    ZMAN – Thanks.

  54. 54
    Nicky Says:

    Distillates make it to just above the 38.2% retracement which is at 21984.
    50% comes in at 22142.

    Resistance is at 220.63.

    10dma is at 221.21

  55. 55
    zman Says:

    RAM – DRYS – needs a broad market rally. They are cheaper on a P/E basis than their peers because of their nearly 100% exposure to spot market, vs their peers who either do a mix of spot and contract or some who do all contract.

    The stock trades with the Baltic Dry Index which looks asymptotic. A fried on the site just sent me an article basically saying run away from DRYS b/c the BDI is over done.It says a 1% drop in the BDI yesterday was responsible for the drop from 100 to 92. I would say it had a good run but the things driving the BDI higher, (not enough ships) and the increasing magnitude/importance of coal from places like Brazil are not going away. The BDI volatility will increase but it’s directionality is unlikely to shift to bearish for any length of time.

    Here is a link to a page with BDI charts, I think they are through Oct 1:
    http://investmenttools.com/futures/bdi_baltic_dry_index.htm

  56. 56
    Nicky Says:

    WTI also at the 38.2% retracement which is at 8077.

    50% is at 8134.

    10dma is at 80.77

  57. 57
    Nicky Says:

    RBOB through the 61.8% retracement which is at 20318.

    76% comes in at 20491.

    Now above both 10 and 20 dma.

  58. 58
    zman Says:

    Thanks Nicky – even VLO can see the good in those HO and RBOB levels relative to oil.

    TSO moving nicely

  59. 59
    Nicky Says:

    RBOB has a downtrending line which comes in at 20560.

  60. 60
    zman Says:

    Alfred, try posting now.

    EVERYONE – if you ever don’t see your comment immediately please contact me as its been routed to the spam block for the site. I don’t get notified of them and I just don’t remember to check. So don’t let your comment hang out with all the celebrity sex tape peddler comments in there (over 1000 right now and I clear the thing a month ago). It’s probably a better business model than running an energy blog but I don’t know any celebrities I’d want to see in their birthday suits!

  61. 61
    Nicky Says:

    Z – i see no fundamental reason for the bounce to be honest. Bulls just won’t give it up!

  62. 62
    zman Says:

    Nicky – PF said this would happen, you of all people should have been the first to get notice 😉

  63. 63
    fraser921 Says:

    drys has moved up 50 % in the last 2 weeks. It was overdue for a pullback

    on 18-Sep-07 the stock was at 66.56.

    The whole sector was down yesterday as well as the market. Everytime someone raises money the individual stock gets hit which then spills into other companies in the same business.

    Exm announced yesterday they were raising 125m. Drys has the highest market cap so buyers of these other companies offerings short drys to hedge themselves.

    So why the pullback?

    1. profit taking
    2. market hedging
    3. Offering by other companies
    4. Slight pullback in bdi

    beyond the short term trading, as z pointed out, there are simply not enough ships to meet demand and drys 100 % spot exposure means they will capture the highest rates on record at least for the next 5 qtrs.

    When they report earnings my expectation is the stock will leap forward.

    im using pullbacks to build a position in jan 2009 85 calls. today i bought 9 at 36.

    You must be prepared for 10 to 20 % moves..the stock could go to 80 before it leaps to 120.

    Earnings will be out in early nov.

    I also noticed also have noticed alot of volitility in option expiration week (either way)

  64. 64
    Sambone Says:

    12:44 pm EST

    Nymex Crude Turns Positive As Dollar Weakens

    By Elizabeth Landau
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures rebounded Thursday past $80 a barrel, supported by a further weakening of the dollar.

    The front-month November light, sweet crude contract on the New York Mercantile Exchange was recently up 56 cents, or 0.7%, at $80.50 a barrel. Prices had fallen in early trading to just below $79 a barrel before shooting higher.

    Brent crude on the ICE futures exchange was up 84 cents to $78.04 a barrel.

    The dollar is “the current focus in the market, the current sexy thing to talk about,” and its weakness is buoying prices, said Mike Fitzpatrick, an analyst with MF Global in New York. When the dollar is weak, oil is cheaper for traders abroad, and a recent fall in the currency has helped crude prices rally in the past month.

    Still, the intraday upward turn in crude was not a significant development, Fitzpatrick said, adding that he “wouldn’t be surprised to see it finish towards unchanged.”

    Front-month November reformulated gasoline blendstock, or RBOB, was up 3.86 cents, or 2%, at $2.0345 a gallon. November heating oil was up 2.05 cents, or 0.8%, to $2.1992 a gallon.

    The dollar weakened amid rumors that an Asian central bank had heavily bought euros and traders positioned themselves ahead of payrolls. One euro is now about $1.4132 from 1.4105 late Wednesday.

    —By Elizabeth Landau, Dow Jones Newswires

  65. 65
    Nicky Says:

    Oh heavens Z – I better read him!

  66. 66
    Sambone Says:

    Love this line “current sexy thing to talk about”. Z – Is that how you talk? LOL

  67. 67
    zman Says:

    Fraser, I agree and obviously I should have dumped the rest of my 85s at 15-16 when the stock double kissed 100 on Tuesday. Got a little cut adding another pos the next day and its off on me today. Still playing with profits but the pullback could get more pronounced, especially if jobs result in a poor market in the morning.

    Rookie mistake in a group I’m still learning to play.

    With the premiums in the group I still think cover call writing near term options could get you to a very low cost basis in stocks like EGLE and DSX in short order.

  68. 68
    REgards Says:

    test1

  69. 69
    Sambone Says:

    N – I thought that you read “Mr. market” (PF) every day. LOL

  70. 70
    zman Says:

    Sambone – sounds like me:

    NFX is establishing a 10% pro forma target for 2008 (which is a bit sexier than is usual for these guys!)

    and from one of my first HK comments
    (HK) – very gassy little E&P in all the sexy onshore plays!

    on refining analysts:
    The refining analyst has never had the sexy job of the E&P analyst since refining is a dull boring grind it out style business with no new discoveries of potential company maker proportions. I like the BMO guys and I think they put out fairly accurate forecasts. With that said they too think these levels are unsustainable as their average 2008 EPS number falls > 30% from the “toppy” 2007 projections.

    Guess I’m a perv. My point in showing that stuff is actually to point out that this site is fully searchable. In the left column you can search for anything I’ve said in a post and get a list of posts including tickers

  71. 71
    Nicky Says:

    Broader market looks in need of a 5th wave up.

  72. 72
    zman Says:

    Holy smokes RIG and ESV moving in opposite directions. I’m sure its nothing but it seems like a miracle.

  73. 73
    Nicky Says:

    Z – what happened to that post? Its not copyright – its on a public site.

  74. 74
    fraser921 Says:

    one other thing re DRYS

    Most of their ships are panamax’s

    you can go to their site for daily rates

    The bdi is a index for 4 types of ships, the BPI is a better index

    http://www.dryships.com/index.cfm?get=report

    But the big picture from 30,000 feet

    the current spot panamax rate is 75 k per day,

    For q2 2007, they earned an average of 36 k per day.

    SO CURRENT RATES ARE 75 K VS LAST QTR 36K!!

    HERE IS Q2 EARNINGS PRESENTATION

    http://www.irwebpage.com/dryships/files/drys2q2007.pdf

    CHECK OUT PAGE 13– They assumed rates would be 55 k for spot…and so did all the analysts.

    So you are going to get an upside suprise when the release q3

    I have 3.57 for q 3 and 4.93 for q4.

    Q1 was 1.87 and q2 actual was 3.11 so 4.98 ytd 2007 and my forecast of 8.50 for the last 6 mos or 13.50 for the year.

    If rates hold up in 2008 earning will be 16 to 17 per share

    Big risk is rates falling but that wont happen unless demand drops or new ships are delivered which will ultimately happen in 2 to 3 years

  75. 75
    zman Says:

    Nicky – Sorry about that. Could you post a link to the site? We’re doing that with PF now too. Even if it’s on public site, it’s still copyright and since we are private they can whack us.

    DRYS – thanks F

  76. 76
    zman Says:

    Fraser – is there a place to get live or slightly delayed access to BDI and BPI on the web.

  77. 77
    zman Says:

    Natural gas storage charts and tables are updated on the gas storage tab.

  78. 78
    Nicky Says:

    Distillates 61.8% retracement comes in at 22300.

  79. 79
    zman Says:

    Can’t wait to see PF on oil tomorrow up $1.50 now. We go to war with someone else?

  80. 80
    Nicky Says:

    I have to say this near vertical ascent is taking me by surprise.

  81. 81
    zman Says:

    If I wre PF I’d say “we’re going ballistic Mav!” on CNBC. Up $1.75. It could be a story out of Shell on the timeline for restoring Nigerian produciton. They’re saying July 2008. That’s slow to my recollection of their last boast.

  82. 82
    Nicky Says:

    Oh I thought we must have declared war against Iran.

  83. 83
    Nicky Says:

    The preferred EW count says we are completing the c part of the abc wave ii correction in a 5 wave move lower.

    The near vertical rise today is very typical of a c wave.

    That said until we take out yesterdays lows there is no definite confirmation that this whole b wave isn’t done and we are heading higher although it would look very short and is pretty unlikely.

    A move below 8050 wti would be an early indication that ii is done.

  84. 84
    Sambone Says:

    1:54 pm EST

    Nymex Crude Trades Above $81, Rallies With Gasoline

    DOW JONES NEWSWIRES
    From MARKET TALK:
    [Dow Jones] Nymex crude rises above $81 a barrel after dipping below $79 earlier in the day. A gasoline market rally and a weaker dollar are pushing prices higher, analysts say. Nymex Nov crude +$1.44 at $81.38. Nov gasoline +5.41c at $2.05/gal. (elizabeth.landau@dowjones.com).

  85. 85
    zman Says:

    Hey Scoop,

    CLR on fire again, up 5%

  86. 86
    fraser921 Says:

    you cant get it minute to minute, daily is the best as far as i know. refer to link in msg 74 above

    I had a match trade idea..

    as good as the dry sector is the ‘wet sector” is the exact opposite.

    Buy puts on nat. suggest the nov 40 or 45 puts

    Nat is a shipper of crude oil . They also are exposed to spot day rates yesterday the spot rate was 18 k per day!! Last year it was 43 k .

    Earnings will drop and so will the dividend and so will the stock price.the stock should be no higher than 30 imho and its trading at 38.70.

    Most investors are mesmerized by nats payout but a good portion comes from depr which is a non cash item. they pay out 100 % cash flow

    http://www.nat.bm/IR/press_releases/1151950.html

    i view this as a pre warning

    as i mention current rates are 18 k a day and normal q4 rates are 60 k +

  87. 87
    zman Says:

    F – thanks. The inquiring mind has to ask the question…where are rates going? If OPEC is increasing output and tanker scrappage picks up a bit (which I heard somewhere the other day) then aren’t rates near a bottom. Again, I’m a neophyte in these waters so please be patient with me.

    Attempting to kick myself in back of head now for not being in HK despite the fact that I recently wrote it up and then pointed out that I was still not in it and that I would regret it.

  88. 88
    Nicky Says:

    So what happens tomorrow –

    trying to work out the scenarios for what i think looks like it needs another pop higher in the indices.

    Non farm better than expected – dollar rallies (energy should sell off) but wouldn’t be that good for stocks as would mean that Fed unlikely to cut rates again.

    Non farm worse – dollar falls some more (crude rallies some more?) but stock market loves it eventually as probably means another cut.

  89. 89
    REgards Says:

    test2

  90. 90
    scoop006 Says:

    Z,Nice call. I was out on 9/27/@$18.25

  91. 91
    Sambone Says:

    N – I gave up trying to figure this market out long ago. My advice is to go with the flow. It doesn’t make sense, so why stress it?

  92. 92
    zman Says:

    I just can’t seem to pull the trigger on buys today with jobs tomorrow. Thinking long COP, a little Nov RIG, …just can’t make myself join the green team today.

  93. 93
    zman Says:

    oh yes and HK and PQ which are leaving and have left the station respectively. And NFX of which at least I own the shares. Almost bought back some APC and now even APA is running after a good pullback.

    Sambone – agreed.

  94. 94
    REgards Says:

    test4

  95. 95
    Nicky Says:

    Samborne – well right now the flow is going nowhere. A 10 point range on the spx in 3 days! It will break one way or the other tomorrow. Charts say up.

    Not stressed I promise – going jet skiing!

  96. 96
    scoop006 Says:

    Z, Strange reading #’s 92&93 considering you pulled the trigger on DRYS @ par, even though it was house money.
    NO GUTS NO GLORY

  97. 97
    Nicky Says:

    One final scenario – bad jobs number and an initial pop on the perception that rates will be cut and then the market falls when reality sets in anyway!

  98. 98
    rammastr Says:

    ZMAN – What was the reasoning for DRYS yesterday and not the stocks mentioned in #93?

  99. 99
    MMarkkk Says:

    Z- sorry I was out for a while. I don’t think the backup will impact Gulf Island’s profits as long as the problems aren’t related to their lack of performance. Most of these contractors have gotten smart enough to quit bidding lump sum jobs, so if a job takes longer they have a way of squeezing more money out of the owner. Now, if the delay is due to their mistakes, then it could hit them. But from I’m being told by family members, they can’t hire enough people and they can’t get enough raw material! Its boom time again!! A couple of yards have expanded, which is a far cry from a few years ago when many of these yards were empty and no one was working.

  100. 100
    fraser921 Says:

    re rates.

    Yes Z..they will go up but it is all relative. So far ytd rates for a suezmax is 34 k per day. in 2006 it was 46 per day. That means avg rates are down 25 % yet the stock prices are higher than last year. Last year rates for today was 43 k, today 18 k. So even if rates climb to 50 k per day, they will be lower than last year on a ytd basis and will be lower than they were last year as there are more ships available to ship product.

    More ships are being delivered in 2007 so the supply is better than last year.

  101. 101
    zman Says:

    Ram – DRYS had come off a bit after the recent run, figuring on a quick bounce there which we got this morning but it tracked the dow and baltic rates lower.

    PQ was running too hard to chase (it’s up 15% in 3 days)

    HK just got away from me

    COP you’ll see a print on in a minute but I was concerned it would fall again today since they dropped the PR on me the night after I bought back in.

    APA I pretty much topticked on my sale and it was off several points including today…I didn’t think oil would rally today like this or I would have been back in early.

    APC I had good month in last month and I’m looking for a position to get back in , again didn’t think it would run this hard and don’t want to chase now.

  102. 102
    fraser921 Says:

    ytd vlcc rates are down even more about 35 %

    last year 51.3 vs 33.7 this year with yesterdays rate at
    20.5!!!

    I have no idea why anyone would be buying a tanker stock

  103. 103
    zman Says:

    Marrk – my earlier question about the moorings was attributable to a story I thought I saw saying they were defective.

  104. 104
    Sambone Says:

    N – “reality sets in anyway”? Hmmm, never happen.

  105. 105
    zman Says:

    Fraser – Thanks. Just watching for now. FRO looked like it wanted to move recently wondering if the rates weren’t already factored in but the charts are ahead of last year. What other dynamic besides rates could be driving the stocks up besides the perception that OPEC will pump more soon and rates will rally.

  106. 106
    zman Says:

    Missed adding COP – not chasing probably should but not in front of jobs …feeling patient.

    “impatience and the “need” to make money on a daily basis is an account killer, even in options” ~ ancient energy options trading proverb

  107. 107
    scoop006 Says:

    Z, I should tatoo #106 on my index finger
    What happens to the general market if they report +/- job report.

  108. 108
    redjack Says:

    fraser921…thanks for the tip, it seems you are “right on”

  109. 109
    MMarkkk Says:

    Z – you are right, that’s being blamed. Don’t know who’s in the wrong, Gulf Island or another contractor/supplier. Could very well be GI

  110. 110
    Sambone Says:

    3:28 pm EST
    Note she may be repeating.

    Crude Led Higher By Gasoline, Heating Oil

    By Elizabeth Landau
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures shot past $81 a barrel Thursday, reversing early losses, dragged higher by gains in gasoline and heating oil, and a further weakening of the dollar.

    Crude and refined products rallied a day after the Department of Energy released a mixed report on inventories, with crude stockpiles unexpectedly rising 1.2 million barrels, and gasoline and distillates — which includes heating oil — falling for the week ended Sept. 28.

    The front-month November light, sweet crude contract on the New York Mercantile Exchange settled up $1.50, or 1.9%, at $81.44 a barrel, well off the session low of $78.91. Part of the reversal in Thursday’s trade came after the front-month contract failed to sustain a break below $79 a barrel.

    Brent crude on the ICE futures exchange was recently up $1.77 to $78.96 a barrel.

    Also supporting crude prices were plans to shut down crude oil processing operations at the Harvest Energy Trust oil refinery in Newfoundland earlier than expected. The turnaround will take place in November instead of April or May 2008, a spokeswoman said.

    Crude oil prices have gyrated around the $80 mark in recent sessions in New York, apparently lacking clear direction as the market tries to gauge winter energy demand and decipher the influence of a weak dollar.

    The dollar is “the current focus in the market, the current sexy thing to talk about,” said Mike Fitzpatrick, an analyst with MF Global in New York. When the dollar is weak, oil is cheaper for investors buying in other currencies.

    The market’s focus has tilted toward heating oil futures ahead of winter, but inventories are healthy and 3.2% above their five-year average at the end of September, latest government data show. Gasoline stocks, meanwhile, are at their lowest outright level since September 1969, when U.S. motorists consumed 70% less gasoline than now.

    Front-month November reformulated gasoline blendstock, or RBOB, was up 5.63 cents, or 2.8%, to $2.0522 a gallon. November heating oil was up 5.26 cents, or 2.4%, to $2.2313 a gallon.

    “Gasoline is both trying to price in what was a supportive DOE report on Wednesday combined with refinery outages in California,” said Tim Evans, analyst at Citigroup in New York.

    Valero Energy Corp. (VLO) and ConocoPhillips (COP) began the restart process at their refineries in Wilmington, Calif., on Wednesday following a power outage.

    In determining whether oil prices are likely to stay above $80 a barrel, the immediate focus for the market will the September U.S. employment report, set for release Friday.

    Strong employment numbers would initially support oil prices, but might later “dash hopes of interest rate cuts’ and send a negative signal for oil, said said Phil Flynn, senior market analyst for Alaron Trading Corp. in Chicago.

    Economists surveyed by Dow Jones Newswires see payrolls growth of 100,000 for September. That would reverse the 4,000 decline the prior month — the first negative number in four years. August’s drop in payrolls is seen as one of the factors behind the Federal Reserve’s decision to cut interest rates by half a percentage point last month.

    —By Elizabeth Landau, Dow Jones Newswires

  111. 111
    zman Says:

    wahhoo TSO

    COP green – big volume Oct and Nov 85 and 90 Calls, no doubt the result of this mornings COP chart, LOL.

    Thanks Mark. I remember when Upstream first broke that … nobody cared then either. Thought I some other platform using same mooring fabricator had probs as well.

    I second RJ’s comments, nice calls on stuff that floats Fraser!

  112. 112
    Alhambra Says:

    Re: Tankers
    https://www.citigroupgeo.com/pdf/SNA07662.pdf

    Re: FRO http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aldvegmZseAM

  113. 113
    zman Says:

    A – thanks, will look at the citi report tonight. FRO I’ve watched since they went public. I think every member of management made a bundle on the Frontline IPO as they always wanted our firms research on it.

  114. 114
    redjack Says:

    Tankers & NAT….I’m in Nov 30 @.65 (going for a home run) and Nov 35 @ 2.9

  115. 115
    zman Says:

    will do a little tanker work for the morrow or weekend.

    CHK – that monthly chart just gets better and better. Compare to NFX, very similar basing action.

    Then look at XOM, just up , up , up despite an inability to significantly grow volumes and elevated valuation. <= CROWD

  116. 116
    MMarkkk Says:

    XOM – maybe they don’t need to grow, just sustain! When you are 7′ 8″ and 650 lbs of pure muscle, do you need to get bigger, or just avoid getting fat or losing? You can still crush everyone, even if they grow by 25%!

    Also, watch XOM’s investments that don’t lead to volume growth but lead to boat loads of cash generation. Like LNG. LNG doesn’t grow volume but it generates a 20+ year sustained cash flow that pays dividends and makes profit. But may not add one barrel of reserves to the often watched but very poor indicator of company health. Until the SEC fixes the way they measure booked reserves, I find it hard to use this as a reasonable indicator of corporate health. When prices go down, some reserves are written off the books, even though those volumes are still sitting there in the ground, waiting to be recovered. And prices go back up, the reserves are produced. But this outdated methodology allows the SEC and the goofy lawyers to sue/prosecute companies for poor booking methods. When in fact, it is the rules/guidelines that are poor.

    Okay, someone else can have the soap box.

  117. 117
    jimbo Says:

    Re Tankers…..comments on Golar LNG (GLNG)? It’s had a great run and payout ratio is excellent.

  118. 118
    QUARRYMAN Says:

    XOM calls of hot interest at He Who Must Not Be Named’s World late today.

    What are you thinking about XOM?

    Refer me to a past post if you’ve answered this one today.

    Q.

  119. 119
    zman Says:

    Q – check your email

    Jimbo – I know but TGP has gone the opposite way. worth a look in a future post.

  120. 120
    jimbo Says:

    Thanks Z-man

    TGP vs GLNG YTD

    http://finance.yahoo.com/charts#chart3:symbol=tgp;range=ytd;compare=glng;charttype=line;crosshair=on;logscale=on;source=undefined

    different critters 😉

  121. 121
    Syrupjib.Com » Comment on Thursday Oil Review And Gas Preview (Public Post) by jimbo Says:

    […] wrote an interesting post today on Comment on Thursday Oil Review And Gas Preview (Public Post) by jimboHere’s a quick […]

  122. 122
    texana Says:

    thx z went long clr nfx hk and went to work came home life is good. another excellent stock is ard (oily) run by the former heads of magnum- hunter who sold out to cimarex. ard is down spacing fuhrman mascho field to 20 acres & getting better wells than orignal wells and this field will co2, does trade options—-don’t know if this type stuff is of interest thx again tex

  123. 123
    zman Says:

    HK – almost 18 now, just keep shaking my head

  124. 124
    compare tom tom gps products Says:

    compare tom tom gps products

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