08
Oct

Monday Morning – Citi Sees The Refiners My Way.

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The traditional start to earnings season begins this week as usual with Alcoa. 3Q07 energy stock results won't start trickling in until after the 20th and the real deluge doesn't hit until month's end. I'll be using the time between now and then to carry on business as usual and will use any weakness to establish longs in November and later contracts on select E&Ps.  

Commodity Watch: Lower.

  • Crude Oil was off 1% last week. Early trading this morning has it off $0.60 to $80.65 despite:
    • China's oil imports up 18% through August.
  • Natural Gas was up 3% last week, in part due to a smaller than expected injection and in part due to fears at least early in the week for a GOMex tropical storm.  Sentiment may shift to looking for heating demand this week as reports of the first heavy snow of the season come out of the Rockies. This morning gas is called down a dime early to just under $7.

China Watch: May allow investors to directly invest in the Hong Kong market beginning this month. We knew this was coming but just not when it was coming. To me it is unclear if this means immediate higher highs for the Big Three Chinese Oils ((PTR), (CEO), (SNP)) which  rallied hard initially on the rumor as it may be "sell the news time". 

Holdings Watch: Current Holdings

open-positions-100507.jpgclick to enlarge

For those of you who missed the weekly wrap the following was worth re-posting (plus I made a few additions).

Dry Bulk Shippers: The group shot the moon this past week led by (QMAR) up 20%, (PRGN) (up 15%) (no options but interesting new comer) and (DRYS) (up 9%). From a projections standpoint none of these moved much since most of them work largely on a time charter basis. As shipping day rates surged only DRYS which has almost 100% of vessels in the spot market moving they are essentially repriced every 30 days or so immediately benefits. Annual consensus estimates for DRYS for 2007 and 2008 jumped 4% and 3% respectively this past week so while the company's 9% move on the week yielded a little multiple expansion it still remains the big, cheap dog on the block.

drybulk-100525aaa.jpg

This is a great set of charts showing you the "we're going ballistic Maverick!" style charts for Capasize, Panamax and Supramax vessels. These are not the actually day rates but indexes of them. Note the slight pullback on the Capesize chart and the others still going ballistic as they play catch up.  

  • (DRYS) I plan to trade in an out on volatility and to be in for 3Q earnings on the November 13, the last of the bulk shippers to report.

  • (EGLE) is high on my radar screen as they have a roughly one third of their fleet "repricing" at much higher Supramax rates in the next few months (see the third chart in the great set of charts link above). Moreover, based on current second hand pricing of Handymax vessels (a little smaller and older than the Supramaxes) it would take roughly double EGLE's total enterprise value to replace their fleet of 49 vessels. Sounds like an accretive deal to me Bob! On top of that, a nice 7% yield will keep the value guys coming into the name.

Speaking of third quarter earnings here's a calendar for the major dry bulks above:

drybulk-3q07.jpg

Refining Sector: Things Are Looking Up. Citigroup raises (SUN) and (VLO) to Buy.

On July 13, I wrote a piece calling for an end to the big 2007 in refiner share prices and the refiners, luckily enough, turned down that very day. Here's an excerpt from that piece:

If they went up in lockstep with higher cracks, it stands to reason that the stocks, especially the smaller caps that have experienced significant multiple expansion will full the same pull, if only seasonal in nature as estimate growth slows, and eventually falls.

Finally, I was taking a look at historic forward multiples of earnings and valuations look pretty lofty here. Even (VLO), my favorite refiner is trading a little higher than it normally does on a forward basis. As you go down the market cap chain, the relationship between past trading range multiples and present multiples of forward earnings gets truly stretched.

Here's a link to the full piece in July.

July 13 turned out to be the peak alright, and the little but expensive guys suffered the biggest pullback

refiners-since-peak-100507.jpg

I think the 3Q bad crack spread "news" is largely behind us. I'll be rolling to November positions next week in VLO and TSO and looking at some other, more expensive little names in the group that nevertheless can put on a good run.

refiner-multiple-100507.jpg

Cracks Appear To Be Bottoming. Given heating oil supplies I expect this to continue for the next several weeks with weakness only occurring if November turns out to be as warm as October has been to date.

RBOB Crack Spread: With demand for gasoline remaining robust for this time of year and stocks  ~10% below year ago levels the benchmark gasoline crack spread appears poised to at least hold its current levels if not rebound a bit.  

rbob-crack-100507.jpgclick to enlarge

Heating Oil Crack Spread: High Sulfur distillate inventories needed for home heating are low. These cracks should improve as/when/if winter approaches.

heat-crack-100507.jpgclick to enlarge

Odds & Ends

Analyst Watch: (OXY) and (HES) downgraded at FBR, (GLNG) price target upped from 25 to 30 at FBR. (CHNG) price target boosted from $8 to $10 at Brean Murray, (TOPT) target edged up from $7 to $8 at Cantor.

Hugo Watch: We've Got Jobs! Chavez announced a plan to boost oil field jobs by 35% to over 100,000 during 2008. The company plans to be 60% larger by 2010, a necessary increase in labor required to run recently stolen assets. 

 

 

83 Responses to “Monday Morning – Citi Sees The Refiners My Way.”

  1. 1
    Sambone Says:

    7:33 am EST

    Oil Down, Storm Threat Eases, Demand Weighs

    By David Elliott
    Of DOW JONES NEWSWIRES

    LONDON — Crude oil futures were lower in London Monday morning as relatively benign weather forecasts for the western Atlantic saw more hurricane risk premium eroded.

    Also, a slight recovery for the dollar — a move which makes dollar-denominated oil less attractive to foregn buyers — and concerns over longer-term demand also weighed on prices but activity has been, and is expected to remain, subdued as a result of a holiday in the U.S. and Japan.

    “We’re caught in the middle of the range and look set for a period of consolidation over the next few days,” a trader in London said. “But, with hurricane’s being discounted and demand a worry, there seems to be a sway toward the downside.”

    At 1107 GMT, the front-month November Brent contract on London’s ICE futures exchange was down 33c at $78.57 a barrel.

    The front-month November contract on the New York Mercantile Exchange was trading $0.42 lower at $80.80a barrel.

    ICE’s gasoil contract for October delivery was down $0.25 at $691.50 a metric ton, while Nymex RBOB gasoline for November delivery was down 101 points at 203.92 cents a gallon.

    On the weather front, the one disurbance in the northwestern Gulf of Mexico that was a threat to oil facilities dissipated over the weekend and the National Hurricane Center has stopped issuing warnings on it.

    This has knocked sentiment in the oil market and, while the NHC still has its eye on a number of Atlantic disurbances, all are in the early stages of development and don’t look likely to hit U.S. or Mexican oil production facilities.

    “The storm season in the U.S. is nigh on finished with experts suggesting any storm will be shallow and short-lived,” said Rob Laughlin, senior broker at MF Global in London.

    Even the potential for two more hurricanes isn’t enough to worry investors.

    “The hurricane season is almost over and the warnings from meteorologists that two more hurricanes have to be expected is not preventing the risk premium being gradually priced out,” said Peter Fertig, analyst at Dresdner Kleinwort in Frankfurt.

    This supply-side factor won’t be completely ignored while there remains a slight risk for the emergence of a further hurricane but question marks are also being raised over the demand side.

    Fears that current high oil prices will have a detremental impact on global oil demand growth are gathering support and could be enough to prevent the market retesting all-time highs.

    “Any global economic slowdown will affect demand for products and a fall in price from these “lofty levels’ could be aggressive,” Laughlin said.

    But, until signs of dwindling oil demand growth appear, bulls in the oil market will cling onto relatively tight fundamental forecasts for the next 12 months.

    And renewed concerns over Persian Gulf oil supply also offer support.

    This follows a report in U.K. daily newspaper The Sunday Telegraph suggesting the U.S. plans to target stikes on Iranian Revolutionary Guard bases.

    “Aside from military retaliation, the big risk is that Iran closes the Strait of Hormuz, said Simon Penn, a trader at UBS in London. “If you think the price of oil is a bit strong now, consider what it might look like if Iran effectively shut down the Persian Gulf.”

    —By David Elliott, Dow Jones Newswires

  2. 2
    bill Says:

    Cramer mentioned that cracks were improving. He must read you

  3. 3
    Sambone Says:

    “One thing I’ve learned is that people can come on TV and say anything”, Jim Cramer, explaining his TV career

  4. 4
    Sambone Says:

    Z – How are the Ngas fills going? Three weeks til end of fill.
    http://www.abcnews.go.com/WN/story?id=3700733&page=1

  5. 5
    Sambone Says:

    9:01 am EST

    Crude Lower; Dollar Gains Prompt Profit Taking

    DOW JONES NEWSWIRES
    From Market Talk:
    1257 GMT [Dow Jones] Crude oil futures extends earlier losses as further gains for the dollar prompt renewed profit taking. “It’s just a bit of a washout of the weak longs,” says a trader. Easing concern over Atlantic hurricanes and worries over the robustness of longer-term demand forecasts are also weighing on prices but the underlying picture of a tight fundamental situaiton should underpin prices around $79/bbl for WTI, he adds. ICE November Brent trades -36c at $78.54/bbl. Nymex Nov WTI trades -40c at $80.82/bbl. (DWE)

  6. 6
    zman Says:

    S – still looks 3450 to 3500 to me.

  7. 7
    zman Says:

    go VLO!

  8. 8
    drdavis124 Says:

    To;Z & Nicky– Trading NG stocks. My ECA has recently gone up 10 TO 15% MORE than US gas stocks due to the “dollar drop” . ECA Options could be a good tradin vehical. ECA isn’t on the Watch list here.

  9. 9
    irished Says:

    VLO 100% climb before 10am.!! How do you “see” that Zman and company? Wow. I’m impressed. Great job!!

  10. 10
    zman Says:

    Thanks Dr. D. ECA – I watch it but don’t model it…I might someday but you can’t kiss all the girls.

    I would point out that KWK and SWN have outperformed ECA over the last recent bit.

  11. 11
    Sambone Says:

    9:53 am EST

    Nymex Crude Falls Below $80; Storms Ease, Dlr Up

    By Matt Chambers
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures slumped early Monday, falling below $80 a barrel as storm threats eased and the dollar made a slight recovery.

    As the Atlantic hurricane season moves further past September, its peak month for major storms, there is less chance of major production damage in the Gulf of Mexico. The one disturbance in the northwestern Gulf of Mexico that was a threat to oil production dissipated over the weekend.

    The dollar continued to garner support from stronger-than-expected employment data released Friday. A weaker dollar has helped boost crude prices because it makes oil cheaper for buyers using other currencies.

    “Crude is being influenced by mild strengthening in the dollar and reduced concerns about the impact of hurricanes on oil and gas production in the Gulf of Mexico,” said Addison Armstrong, an analyst at TFS Energy Futures in Stamford, Conn.

    The euro was recently at $1.4092, from $1.4139 late Friday.

    The front-month November light, sweet crude contract on the New York Mercantile Exchange was recently down $1.24, or 1.5%, at $79.98 a barrel. Brent crude on the ICE futures exchange fell $1.20 to $77.70 a barrel.

    Prices have now been trading in a fairly tight range for more than three weeks, trading since Sept. 13 between $78.25 a barrel and its record $83.90.

    The premium of the front-month contract over the second month continued to narrow and was recently at 57 cents a barrel. The difference extended out as much as $2 a barrel last month and was taken as a sign that crude oil stocks were tight. The narrowing is being viewed as a sign crude prices may be set to weaken.

    Front-month November reformulated gasoline blendstock, or RBOB, fell 2.07 cents, or 1%, to $2.0286 a gallon. November heating oil fell 2.91 cents, or 1.3%, to $2.1944 a gallon.

    —By Matt Chambers, Dow Jones Newswires

  12. 12
    Nicky Says:

    Morning all – quiet here this morning.

    Nat gas has resistance at 7.170 and 7.230. Looking for a move below 6.753 to confirm the bearish scenario.

  13. 13
    Nicky Says:

    WTI has a load of support at the 79 area. Until we see a move below 78.91 and then 78.44 this is still all consolidation.

  14. 14
    Nicky Says:

    Distillates – support is at 21650 and then much firmer support in the 21500 region.

  15. 15
    Nicky Says:

    RBOB underperforming on the downside today. Support is at 20155 and then much firmer support in the 198 – 19900 area.

  16. 16
    zman Says:

    aye Nicky, it’s not a dag until sub 78.44

  17. 17
    Nicky Says:

    The 20 dma for RBIB is at 203.24.

    Important support levels are last weeks low of 194.85 and the continuation low which is 193.50.

  18. 18
    calvino Says:

    Good morn! I can attest that Z watches Encana – we passed a celebratory note when ECA decide to flip Alberta the bird last week.

  19. 19
    Nicky Says:

    What was with the spike up in nat gas – any reason? fundamental i mean!

  20. 20
    zman Says:

    Search me gas spike …could have been a cooling degree day forecast or just a jump on the snow out west…doesn’t appear to have much grip now.

  21. 21
    Brian08 Says:

    Nicky, I think traders woke up this morning realized they could be wearing shorts to work and thought that this “Indian Summer” thing was here to stay…

  22. 22
    QUARRYMAN Says:

    Z. James River Coal Co.

    It’s been on a tear this past month. Currently about 7/sh high at 15.75 low at 4. Up 25% in past month vs. 15% for WLT.

    Balance sheet doesn’t look as good, but it has momentum.

    Take a look, I’d like to know what you think.

    Q.

  23. 23
    QUARRYMAN Says:

    Re: VLO

    I’m close to green and need an exit point on my remaining half position left of VLO Oct 70s, do you think we can see 72 this week?

    Q.

  24. 24
    zman Says:

    JRCC – already looked, thought it was a thin trader wide spreads re options and a not so good earnings outlook compared with peers. Also think it was a rumored takeout candidate…will look again.

    Q – re VLO given a better market day yes, although HO needs to hold up a little better than it is now.

    Looking at CAM and RIG longer…think oil bounces soon and gives them a boost.

  25. 25
    calvino Says:

    bqi got a big write up, independent reserve estimates coming in in a few weeks that could boost shares several times over. i missed it at 2, after locking stares with it, and now don’t want to pay double. still, one can’t always buy the bottom.

  26. 26
    scoop006 Says:

    Z, Any value in RIG OCT$115 @.70?

  27. 27
    Nicky Says:

    Interestingly now all 3 – wti, rbob and distillates – all sitting on major support.

  28. 28
    zman Says:

    Scoop – still holding mine, had nice gain…no more. Would I buy them right now, I’m not but looking at something a little longer dated. Bloody red screen right now and I’d rather buy on the way back up or at least later in the day.

    At least the ESV is starting to bear lower and the new put position in NBR.

    Shell lifted force majeur at Forcados (Nigeria)

    N – thanks

  29. 29
    Sambone Says:

    12:01 pm EST

    LATEST ON OIL Format For Printing

    Nymex Crude Falls To $79, Down $2 As Dollar Rises

    DOW JONES NEWSWIRES
    From Market Talk:
    [Dow Jones] Nymex crude touches $79/bbl as the dollar continues to strengthen. Nov crude -$2.09, or 2.6%, at $79.13 after falling as low as $78.98. A lack of storm activity and a Shell (RDSB.LN) announcement signaling it is set to lift a force majeure on oil exports from Nigeria are also weighing on prices. (matt.chambers@dowjones.com)

    [Dow Jones] Nymex crude continues its slide lower, falling below $79.50/bbl. Prices are weighed down by a stronger dollar and a lack of storm activity in the Gulf of Mexico. Nov crude -$1.94 at $79.28. Over the past three weeks, crude has been finding support at just below $79 and hasn’t fallen lower than $78.25, which it hit Sep 17. (matt.chambers@dowjones.com)

    Reported Earlier:

  30. 30
    cadillac Says:

    z – isn’t ESV buying back shares? Quite a drop if they are. How much lower do you think it will drop before your options expire.

  31. 31
    Nicky Says:

    Z – am I wrong but there seems virtually nothing to fundamentally support the energy market right now?

  32. 32
    calvino Says:

    It does appear that sinopec is having a rought time of it today.

  33. 33
    Nicky Says:

    I posted this over the weekend:

    http://www.321energy.com/editorials/maund/maund100507.html

    You can see how important the $79 area of support is. If it goes we are likely to make a quick trip to 75 which would be the technical objective for the h and s formation.

  34. 34
    calvino Says:

    There are several non technical factors that may be influencing oil. Over this weekend, all US media repported that General Petreaus, our CO in Iraq, accused the Iranian ambassador of supplying explosives to the Iraqi elements sabotaging our efforts. Additionally, the ever present need to put money to work. They print it and we recycle it. It appears that oil is a beneficiary of this inflationary phenoemenon.

  35. 35
    calvino Says:

    Bloomberg just reported, breathlessly, that the only time we had an equivalent skew in the s&p put call ration was JUly 2001. Then that by oct 2001, the S&p is down 35%. Are the missing a significant variable in the comparison. Bloomberg turning into bimbo tv , say it’s not so.

  36. 36
    zman Says:

    Cadillac – Re ESV when our traders did buybacks they would try to be supportive on sideways days but step out of the way when the onslaught was just too much opting to get a better price later. or just to follow the company’s instructions…so they may be taking the day off. It’s also a cheap stock if you believe the far forward estimates so that favors support as well. They warned back in August on the quarter and I think they do the same in the 3Q pr for the 4Q on 10/25. I think they can fall 1 to 2 more by then at most and I be in Novembers on the bounce from this fall.

    N – breaking it out by sectors:
    Crude I agree should fall to mid 70s, but no worse this quarter. As refiners come back up in next 2 weeks from maintenance S/D is going to get tight. But there could be the Iran thing lurking too which is not FA or TA but more FM (fear mania)

    Gasoline – that’s just low historically so you need some bad travel weather to take pressure off RBOB

    HO – low but hard to tell how low since history doesn’t apply except in NE where it looks low.

    Nat Gas – fundamentally supported at $6.50 I’d say as drilling will slow below there and this current warm weather is much more “demanding” on gas than you normally see this time of year. If we go to winter with a real “I don’t need my AC on Fall” that’s keep gas up.

    Cal – SNP, CEO and PTR all dragging lower

    Nicky – good post but I love the TA caveats about if a level is broken, that should be a reason for it to go more that way.

  37. 37
    zman Says:

    Coveted E&P names taking a nice dip today. Another day or two of this and I’ll be long NFX Nov calls, and maybe some SWN, HK , PQ etc…

    DVN getting clocked close to 2x the rest of the massive cap E&Ps …sold their Egypt play but that seems a silly reason to dock them. May be taking more looks at that as they’re also very well run and have a huge portfolio most of which is high grade.

  38. 38
    Nicky Says:

    Z – I don’t disagree with your comments on fundamentals except to say are these still reasons for oil to be over $80 – I just don’t see it. Oil could be at 50 as it was earlier in the year and we could be having the same conversation. Only speculation has pushed it here – the same fundamentals applied when we were at 50.

    Not sure I understand your last comment:

    Nicky – good post but I love the TA caveats about if a level is broken, that should be a reason for it to go more that way.

    You may not be referring to the 79 level and if it breaks etc but if you are then this is very clear because of the h and s.

  39. 39
    zman Says:

    N – I agree except for the state of the dollar and the degree of the coming supply/demand imbalance this winter. And I don’t think it should be $80 but a number close to 80 than 50, lol.

  40. 40
    calvino Says:

    You did predict an October buying opportunity for NG, so far so good – let’s see what happens.

  41. 41
    Nicky Says:

    Calvino – buying opportunity for natural gas in October? presume you mean Z and not me?

  42. 42
    calvino Says:

    Yes, Z.

  43. 43
    TTupp Says:

    z- congrats on the vlo’s… you gona hold em till the recent resistance looks pretty good…

    i have some slb calls, any thoughts, oh btw they are oct’s 🙁

  44. 44
    Nicky Says:

    energy complex back at major support…

  45. 45
    TTupp Says:

    z congrats on the vo’s…. you gona hold unti the recent previous resistance ? lookin good…

    i have some slb oct calls, any comments about whats going on here?

    also, i have some HES puts that i initiated lat week, who is this analyst and do you think their will be price follow through and other ratings changes from other houses? i would like to ratchet up this position.

  46. 46
    zman Says:

    Note: COP sitting flat on a day like to day. I call this bad news exhaustion.

    TRADE: COP NOV $85 calls for $2.77. Still hold my October 85s.

  47. 47
    TTupp Says:

    z congrats on the the VLO’s, you gona hold em till the recent resistance of ~71-72?

    also, who is this analyst fbr? i have some hes puts and want to add, think there will be follow through?

    also, i have some slb calls, what do you think is going on with this stock…. to be honest i dont know much about service companies– it was kind of a hair brained trade to tell you the truth, i looks like it could possibly break out

  48. 48
    TTupp Says:

    test

  49. 49
    zman Says:

    TRADE: RIG October 110 for $2.45 (Risky given the time of month so this one will likely be quick)

  50. 50
    zman Says:

    RIG CALLS that is

  51. 51
    rkpagadala Says:

    z- are you still holding oct 60 COP calls
    also i am not getting trade alerts by email

  52. 52
    calvino Says:

    The market seems sluggish today

  53. 53
    TTupp Says:

    Z- nice one on the VLO calls. you gona toss em right at resistance?

  54. 54
    QUARRYMAN Says:

    Keep an eye on VMC, if it pokes its head above 95 with volume, you are finding another short term buying opportunity.

    Else, set a GTC buy order at 89.50 or so and wait for a deep market sell off.

    This is a great stock to own, IRAs, 529 plans, etc.

  55. 55
    QUARRYMAN Says:

    RIG TRADE STOPS?

    Where are you setting them?

  56. 56
    drdavis124 Says:

    Blast in at 2.72 Got Luck

  57. 57
    zman Says:

    Q – I don’t set hard stops as it’s an entry but around 1/3 off would kill it for

    RK – never had $60s just the OCT 85s. Will check on the email thing. Please make sure zmanalpha@gmail.com is in your e-mail address book.

    Tupp – sorry about that damn spam filter.
    I’ve de-spammed your comments. Please post a test comment.

  58. 58
    zman Says:

    RK – your set up on this end is good. Please check your bulk mail. Your email provider seems to love to block me. That’s why in the end GOOG will be running everything, LOL.

  59. 59
    TTupp Says:

    good call on the VLO’s, what contract you holding? what was your entry?

  60. 60
    TTupp Says:

    z- sorry , when i was trying to post i kept repeating myself….

  61. 61
    zman Says:

    All right the spam blocker is off so if you see something that looks unsafe for work it probably is.

    T – I’m in the Oct 70s which I pretty much thought were toast until Friday and then today. Average cost is 1.48 so I’m breakeven b/c of my first batch. You can always check the ZEB perf tab to see positions if I’m not around. I try to update it at least 2 a week.

    TSO is in a little better position from a geographic fundamental basis right now and I’m doing a little better with a couple of option positions there.

    I may add some of the more expensive little guys on weakness as I think the group moves high in coming weeks and the Street love to jack them in either direction (and they just got car jacked in the most recent selling): ALJ, WNR, HOC, FTO on the radar but not today.

  62. 62
    zman Says:

    T – No, I’m sorry, that stupid spam filter has been acting very buggy lately. I need to get a stop watch and just check it every 10 minutes or replace it entirely.

  63. 63
    Sambone Says:

    2:16 pm EST

    Note – Matt may be repeating.

    Nymex Crude Falls As Dollar Strengthens

    By Matt Chambers
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures slumped to a one-week low Monday, falling below $79 a barrel as the dollar strengthened and as storm threats to U.S. Gulf of Mexico production diminished.

    Signs that Royal Dutch Shell’s (RDSB) Nigerian production is set to increase and warmer-than-normal temperatures heading into winter also weighed on prices in quiet trading during the U.S. Columbus Day government holiday.

    The front-month November light, sweet crude contract on the New York Mercantile Exchange was recently down $2.52, or 3%, at $78.70 a barrel, after trading as low as $78.35, the lowest price for a front-month contract since Sept. 17. Brent crude on the ICE futures exchange fell $2.44 to $76.46 a barrel.

    “There is a bit of bearish news out there and the thought process that the market is tight is diminishing a bit,” said Tony Rosado of IAG Energy Brokers in Fort Lauderdale, Fla. “The products (gasoline and heating oil) are weak because we are in a quiet zone for demand” after the end of the summer driving period and before the onset of peak winter heating oil demand.

    In a sign that Shell is set to pump more oil in Nigeria, it lifted force majeure Monday on its Forcados oil terminal, which operated at a capacity of 380,000 barrels a day of oil before militant attacks shut it down in 2006.

    Storms threats are also starting to ease. As the Atlantic hurricane season moves further past September, its peak month for major storms, there is less chance of major production damage in the Gulf of Mexico. The one disturbance in the northwestern Gulf of Mexico that was a threat to oil production dissipated over the weekend.

    The U.S. dollar continued to garner support from stronger-than-expected employment data released Friday, as traders bet there was less chance for more U.S. rate cuts. A weaker dollar has helped boost crude prices in recent months because it makes oil cheaper for buyers using other currencies. The euro was recently at $1.409, from $1.4139 late Friday.

    “The oil market seems to be disconnected from oil fundamentals and is being driven more by exogenous factors such as the value of the dollar — if the dollar strengthens, as is the case today, oil goes down,” said Nauman Barakat, senior vice president at brokerage Macquarie USA in New York.

    Prices have now been in a fairly tight range for more than three weeks, trading since Sept. 13 between $78.25 a barrel and its record $83.90. If prices move below that range, technical traders, who look to chart patterns for signs of where crude will head next, are expecting further losses.

    If prices fall below recent support, they “could get sucked down to $75 very quickly and in the process drag the complex a whole lot lower,” Barakat said.

    The premium of the front-month contract over the second month continued to narrow and was recently at 56 cents a barrel. The difference extended out as much as $2 a barrel last month and was taken as a sign that crude oil stocks were tight. The narrowing is being viewed as a sign crude prices may be set to weaken.

    Front-month November reformulated gasoline blendstock, or RBOB, fell 5.73 cents, or 2.8%, to $1.992 a gallon. November heating oil fell 6.2 cents, or 2.8%, to $2.1615 a gallon.

    —By Matt Chambers, Dow Jones Newswires

  64. 64
    TTupp Says:

    so do you think SLB might get a pop this week , land drillers got ganked last wek but their busine=inessis much more than that isn’t it?

  65. 65
    TTupp Says:

    also, i have some HES puts i bought last week, i want to add, but do you thing there will be more follow through with the ratings? i think crude might take a dip into the 70’s for a breather…

  66. 66
    Sambone Says:

    Man, I’m not going to Caracas anytime soon.
    “Venezula official: No more US dollars for Whiskey importers”. Which means no liquor in Venezula.

  67. 67
    Sambone Says:

    Can’t spell is my problem. Venezuela

  68. 68
    calvino Says:

    Z sent notice that he’s off the board, due to power failure!!!!!!!!!!!

  69. 69
    TTupp Says:

    that sucks

  70. 70
    zman Says:

    Ok, I’m back. UPS for this kid tonight!

    T – did you get my email re HES.

    On SLB I just saw it…they’ve got so many business lines they are not as good a leverage play on land drilling but yeah, it would still hurt them if things get real slow.

    CAL – nothing like an energy guy with no energy.

  71. 71
    zman Says:

    Check out the daily chart on VLO now. Could go to 75-78 in my layman’s technical opinion if we can close above 72.30 tomorrow.

  72. 72
    zman Says:

    …which would be half of today’s gain which is not far fetched. The stock is still under 9x 2008 earnings.

    TSO could hit 52 short order.

    Tempted to buy small CALL positions in ALJ and WNR here

  73. 73
    zman Says:

    Can somebody who listens to Cramer let me know if he says I told you so on VLO? ty

  74. 74
    Denise Says:

    Afternoon Z-aside from a small mention as a sidebar on his Real Money Silver site have not heard a peep on VLO.
    Maybe he will bull tonight on his show?
    We can only hope

  75. 75
    zman Says:

    Thanks Denise.

    Go COP Go and TSO and VLO

  76. 76
    Denise Says:

    Reading a few posts that crude has made 3 consecutive lower highs and failed to hold $80-saying some support at $78.20
    and then lower
    also the ta person i subscribe to featured USO as a short in her news letter

    any opinions?

  77. 77
    bill Says:

    Another great day for drys. Still long and strong

    closed at 105

    z’s oct 85’s are worth 20 +

  78. 78
    bill Says:

    http://www.brs-paris.com/index.php?page=news&type_news=drybulk&page_news=1&numero_news=556

    for your reading pleasure

  79. 79
    rammastr Says:

    ZMAN – The link in item #79 means people like DRYS with no long term commitments will keeping printing money as the chart is exponential. Any thoughts.

    With regards to #73 – Little ram now likes me repeating “The wheels on the bus go round and round” over and over again than watching mad money for entertainment.

  80. 80
    bill Says:

    people like drys since q3 earning’s will be 8 times higher than last year

    simply stated, high rates means hi profit

    no this condition won’t last for infinity but for the next 2 years it looks pretty good.

    If you want to know z’s opinion read his column today

  81. 81
    zman Says:

    Denise – I’m thinking oil high to mid 70s low

    Ram – I think you are correct. As far as 73, I’m not surprised. Sounds like a smart kid.

  82. 82
    aaatest Says:

    RSS test comment 1

  83. 83
    aaatest Says:

    rss test comment 2

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