12
Oct

T.G.I.F.

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Busy day yesterday. The analysts and traders who come up with expectations for the EIA report got two out of three of the big numbers very wrong while the natural gas number came in at the bottom end of expectations. I was active as well selling Oct CHKs while beginning a roll into November RIGS. I also added a very stupid gunslinger of a call with October CAM OOTM calls (live and fail to learn). This morning oil is looking a little green and producer prices should give the market a green feeling as well as they showed inflation at the wholesale level, once you cut away bothersome things like food and energy, to be well contained (1.1% PPI and 0.1% Core PPI). Since food and energy are up about 20% YoY (that not what they'll tell you but it is what I'll tell you and gasoline is actually up 22%) I have a solution for us all. Simply fast one day a week and ride your bicycle to the library (don't use your computer that day b/c that uses electricity). If I don't see you in comments have a great weekend.

Commodity Watch: Today: Flat to down

  • Crude Oil: Oh what a rally. Strikes in Nigeria carried through from the prior days to help support crude in the morning and an unexpected drawdown on inventories sent it shooting higher to close up $1.78 to $83.08. This morning's early session has crude trading around par with yesterday's close +/- a dime. $83 seems to be the current line to hold and in coming days, with a little help from Turkey and the actions of the U.S. Congress, I think we will make a run on $85+.  
  • Natural Gas: 73 Bcf and all is well. Gas closed off $0.13 to $6.88 in boring trading. Everything was focused on oil yesterday. This morning gas is looking to open down another dime. From a laymen's technical standpoint gas probably needs to hold $6.75 to prevent a slide into the lower $6s in advance of the first really cold weather of the year now that the tropical threat has said aloha.

 EIA Oil Inventory Report Review

exp-vs-act-101107.jpg

  • Oil: Two weeks ago I posted an inventory chart entitled "crude stocks, just another bump in the decline?" Here's an updated copy. As the refiners come back on line at the tail end of maintenance season look for crude stocks to resume their downward path. Maybe not until the end of the month but it will happen and by then, with the help of a little cold weather, "$85 or Bust" will be tattooed on every one of the CNBC anchor's foreheads. At worst I think we could dip into the high 70s again but that's about all the dent I see in oil prices for the fourth quarter (unless winter takes a holiday).

crude-stocks-101107.jpg

  • Gasoline: Got A Big Build When The Street Was Looking For A Draw. Case remains fundamental neutral to slightly bullish.
    • Production: 8.932 mm barrels, up 230,000 bpd from a week ago to set a new high for this week in history. Utilization rose 0.4% to 87.8% which was also slightly above expectations. It appears that we reached the nadir for refinery maintenance season with last week's report and are now climbing back towards the 90%s.

gasoline-production-101107.jpg

  • Imports: up 170,000 bopd on the week also helping to explain about half of the jump in inventories.
    • Demand: up as well by 80,000 bpd from the prior week to 9.2 mm bpd. Last year fourth quarter demand averaged a record of just over 9 mm bpd. This year prices are 22% higher and demand looks like a mirror image of last year. People just love to drive. 

gasoline-demand-101107.jpg

    • Days Supply recovered slightly with the build but we still remain near the low end of the long term chart of this supply / demand metric.

gaso-days-supply-101107.jpg

    • Inventories: Still low. On a regional basis this week's jump in inventories came in the middle of the country (that high imports number bolstered Gulf Coast volumes). The West Coast was flat with the prior week and remains down almost 5% to year ago levels. The east cost witnessed a small decline in inventories and is now almost 15% shy of year ago levels (probably not bad news for (SUN)).

gasoline-stocks-101107.jpg

  • Distillates: We remained well supplied in aggregated but heating oil stocks continue to languish.

distillate-stocks-and-ho-101207.jpg

 

EIA Natural Gas Storage Review

Week Ended October 5, 2007: 73 Bcf Injection. My number was 60. Street was 70 to 90.

  • Storage as of October 5, 2007: 3,336 Bcf
  • Max storage for this week in history: 3,380 Bcf (2006).
  • We are now 44 Bcf below (1.3%) year ago levels.
  • We are now 237 Bcf (7.6%) above the 5 year average which includes 2006's record levels

Bottom Line: I still think we come in around the 3.5 Tcf mark for storage at the end of the injection season (late October/early November) which is "full" by most standards but not at the record levels seen way back in November 1990. Fear of 3.5 plus is already factored into prices at this point so anything less would be supportive. We will however need to get some cooler weather soon. While warmer than normal shoulder season temperatures have helped to keep injections below normal of late there's nothing like a blast of cold to flip us over to withdrawing instead of injection gas.

gas-table-101107.jpg

Holdings Watch

CALLS:

  • (CHK) OCT $32.50 Calls at $5.10, nice 144% move since 9/5 entry. Still hold the Jan 08 37.50s and 40s.
  • (RIG) Bought November $115 CALLS for $5.55. Last bid $5.10. I still hold the RIG October $115s (but not for long)
  • (CAM) Bought the October $110 CALLS for $0.80. Last bid $0.35. This one was termed to be of "hate your money" risk level.

PUTS: No Action.

Odds & Ends

Analyst Watch: (MEE) and (ANR) to underperform and market perform respectively at FBR. FBR also lowered their price target on (NBR) from $37 to $35 but maintained their outperform rating (oh just admit that you are wrong; it's cheap for a reason!). They also cut their PT on (BRNC), a small land driller which they have rated underperform.  (MRO) picked up at Carris with at "above average" - nice rating system there. 

 

 

156 Responses to “T.G.I.F.”

  1. 1
    Sambone Says:

    7:54 am EST

    Unchanged Amid Quiet Trade, Reflect On Gains

    By Nick Heath
    Of DOW JONES NEWSWIRES

    LONDON — Crude oil futures were unchanged amid quiet trade in London Friday morning, pausing after surging to near-record highs Thursday.

    Given the extent of Thursday’s gains, a calm start Friday came as little surprise to some, and futures spent much of the morning trading lower, steered by light profit-taking.

    But a return of strong buying interest that contributed to Thursday’s climb continued to offer the potential for fresh rises.

    “We were down this morning, which you’d expect after yesterday’s performance, but I think there will still be buyers out there,” said Kevin Blemkin of MF Global.

    At 1129 GMT, the front-month November Brent contract on London’s ICE futures exchange was up $0.06 at $80.21 a barrel.

    The front-month November contract on the New York Mercantile Exchange was trading $0.05 higher at $83.13 a barrel.

    The ICE’s gasoil contract for November delivery was down $4.25 at $700 a metric ton, while Nymex gasoline for November delivery was down 51 points at 206.15 cents a gallon.

    “I wasn’t surprised to see it (the market) retracing after three aggressive days to the upside,” another broker said. “I think the market is probably due a retracement.”

    Many analysts agreed that the price response to Thursday’s data flow had been excessive.

    “In my opinion, it was a bit overdone,” said Andy Sommer, oil markets analyst at HSH Nordbank.

    The surprise drawdown in crude inventories unveiled in the latest U.S. Department of Energy inventory report offered ground for some price advance, he said, but not to the extent seen in the aftermath of its publication.

    “If every week you see a weak figure then you can say, the situation is worse than expected — then the oil price can accelerate. A little increase due to the figure is all right, but I wouldn’t say it’s reasonable for a new high,” Sommer said.

    Questions remained over how long current price levels could be maintained, with U.S. refinery maintenance season underway and the Atlantic hurricane season drawing to a close.

    But with the crude oil markets riven by volatility in recent days, participants were hesitant to dismiss the prospect of further rises.

    “It’s such a difficult market to predict where outright prices are going,” another broker said. Moves in the U.S. dollar and other financial markets continued to exert strong influence on crude prices, in addition to a possible resurgence of support from investors looking to buy into any dips, he added.

    Oil markets were again monitoring developments in Turkey, with anticipation of a Turkish incursion into Northern Iraq increasing.

    In latest developments, Turkish Prime Minister Recep Tayyip Erdogan said Friday that Turkey would be ready to pay the price of any military action against Kurdish rebels in Iraq. He said the Turkish cabinet would debate a decision to obtain Parliamentary approval to send troops into Iraq.

    “An escalation in the region could put at risk of militancy attack not only the Iraq to Ceyhan pipeline but as well the Baku-Ceyhan pipeline,” said Olivier Jakob of Petromatrix.

    “We will increase some of the geopolitical risk when and if the Turkish lawmakers authorize further action from the army.”

    The National Hurricane Center Friday began issuing advisories on Tropical Depression 15. But with the center of the system located almost 1,000 miles east of Bermuda, and forecasters predicting it will weaken during the next 24 hours, it had no impact on crude prices.

    —By Nick Heath; Dow Jones Newswires

  2. 2
    zman Says:

    From BRIAN last night:

    Hey Z, had a CHK related question…I read their investor presentations from time to time and in their last one (and others I have read) they give their NAV based on the price of NYMEX natty gas…The NAV that they project is always substantially above the price they are trading at…

    For example at $7 gas they project a NAV of about $45…

    Do you have any ideas of why there is such a disparity?? Is management overvaluing their assets or having incorrect calculations (I highly doubt this)?? Does gas have to be at $7 for a year for them to have that NAV?? Is the market undervaluing the company this badly???

  3. 3
    zman Says:

    Brian – to answer your last question first: yes. They are.

    On the reserves yes to get that NAV they are doing a PV10 calculation with an unescalated deck of $7. That gets them a value for the present value of future cash flow stream of the reserves, the standard is to bring it back at a 10% discounted rate (PV10). Then you throw on value for midstream and other assets, net out the debt and wala, you have an NAV.

    Net Asset Values are useful for mergers and useful in comparing one company against another but in a vacuum they don’t mean much for the day to day trading of the stock since many of the the high potential names (lots of drilling inventory) trade at substantial discounts to NAV – seek KWK and SWN.

    Management is definitely not doing anything wrong with the calc. They err on the side of conservatism especially with a flat price deck. The PV calculation isn’t for 1 year but the entire life of the reserve stream, which is in excess of 10 years. So you have a stream of discounted cash flows from each of those years with a gas price of 7. I’d bet gas will be well over 7 in 10 years. That sounds pretty conservative to me.

  4. 4
    zman Says:

    Q –

    on the CAM 105s and CHK 37.50s …those are both pretty gunslinger. If I knew which way the market was going I bet a little less gunshy, lol. I think oil goes higher soon. Of the two, the CAM has the higher chance of staying aloft because of its higher IV.

  5. 5
    zman Says:

    “If every week you see a weak figure then you can say, the situation is worse than expected — then the oil price can accelerate. A little increase due to the figure is all right, but I wouldn’t say it’s reasonable for a new high,” Sommer said.

    I agree but I think they are going to go for a new high soon.

  6. 6
    Sambone Says:

    Z – Didn’t you say you would be out of pocket today?

  7. 7
    zman Says:

    Next Friday

  8. 8
    zman Says:

    PTR up 16 to 209

    Buffet sold rest of stake

    this thing is super pricey now.

  9. 9
    robert shoenfeld Says:

    Why would PTR go up if WB is out?

  10. 10
    Brian08 Says:

    Z, Re #3…

    I would expect nothing but a conservative report from Aubrey…Thanks for the answer…

  11. 11
    zman Says:

    It was seen as an overhang as he dumped the shares I’m guessing. It’s also up counter Asian markets which is odd but with CEO and SNP running hard as well.

    They announced a big gas discovery yesterday but I doubt that’s at all responsible for this and it was during market hours.

    There will come a day when I try to short it again

  12. 12
    zman Says:

    Brian if you want to do a little algebra you can take the reserve section from their 2006 annual report and the interim reserve update later in 2007, and see what effect the change in prices between the two reports (they use period end held flat) has on the PV10 $. Since the periods are pretty close to each other you could use the resulting relationship to back into your own estimate of PV10 using your own gas price assumption. It’s pretty back of the envelope but as long as you stay within I’d say +/- $1.50 their $7 price you shouldn’t lop off the economics of any of their reserves.

  13. 13
    zman Says:

    Noreaster hitting the, um, northeast. Look for cold, very windy, wet weather, to provide support for HO and NG today.

  14. 14
    texana Says:

    something didn’t feel right went to cash

  15. 15
    dooch Says:

    what do you guys think of HAL and FTI at these price levels?

  16. 16
    zman Says:

    I like them both long term. They’ve had a good run as you know. Despite that the safer / cheaper of the two is HAL (but also slower growing).

    In the FTI realm their long term business is next to bullet proof. But after their run they are subject to what could be some nasty profit taking along with OII and CAM (which I’m currently long)

  17. 17
    Sambone Says:

    9:57 am EST

    Nymex Crude Steady, Eyes New Record High

    By MATT CHAMBERS
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures were steady early Friday, trading near $83 a barrel and well in sight of their all-time high $83.90 a barrel.

    Prices surged to their second-highest ever close Thursday after the U.S. Department of Energy said crude stockpiles unexpectedly fell last week. A lower dollar and anticipation of a Turkish incursion into northern Iraq also supported prices.

    Tightening global oil stocks and forecasts for strong fourth quarter demand are supporting prices near $80 a barrel. While many market watchers are touting a potential warmer-than-normal winter as a risk to demand and high prices, monthly forecasts this week from both the DOE and the Paris-based Energy Information Administration continued to stress the tightening supply and demand mix.

    The front-month November light, sweet crude contract on the New York Mercantile Exchange was recently down 5 cents, at $83.03 a barrel. Brent crude on the ICE futures exchange fell 27 cents to $79.88 a barrel.

    Traders are now focussed on whether there is enough buying interest to pull crude prices to beyond their record intraday high of $83.90 a barrel set Sept. 20. Since the record was set, prices have twice mounted attacks on the record level, only to fail around $83.70.

    “We’ll maybe give the highs one more try, but if that fails, you can expect crude to head back and make a new low” beneath Friday morning’s intraday low of $82.69, said Michael Cambria, who works on the Nymex trading floor for brokerage PNDR Energy.

    Turkish Prime Minister Recep Tayyip Ergogan said Friday that Turkey is ready to pay the price of any campaign if it decides to stage a cross-border offensive against Kurdish rebels in Iraq. The preparations to move into Iraq come after deadly attacks on Turkish soldiers by the Kuridstan Workers’ Party, or PKK, that has been fighting Turkish forces since 1984.

    “The Ceyhan pipeline, which carries crude from Kurdish-controlled northern Iraq through Turkey, figures into oil traders’ worries,” said Peter Beutel, president of trading advisory firm Cameron Hanover in New York.

    Front-month November reformulated gasoline blendstock, or RBOB, fell 1.51 cents, or 0.7%, to $2.0515 a gallon. November heating oil fell 1.08 cents, or 0.5%, to $2.2365 a gallon.

    —By Matt Chambers, Dow Jones Newswires

  18. 18
    dooch Says:

    I bought some Jan $50 hal calls and Jan $70 FTI calls.

  19. 19
    zman Says:

    Good luck dooch and nice entries

  20. 20
    zman Says:

    talk about some sleepy trading in crude and natural gas. flat and flatter.

    If TSO takes another $ hit with the rest of the group flat to up today I’ll add to my Nov calls.

  21. 21
    scoop006 Says:

    Z- misssed the BTU trade;any value @$3.entry

  22. 22
    zman Says:

    Scoop, I’m waiting for it to come in a little more before I add a second tranche as I just don’t trust the market up here.

  23. 23
    Sambone Says:

    Off subject. This is great, tells me we’re near the top.
    http://www.reuters.com/article/newsOne/idUSN0941966120071010

  24. 24
    zman Says:

    Turkey thing looks to be heating up, bet oil rallies into the weekend close. News of more gunship and shelling into the north of Iraq from Turkey. Way to go Congress.

  25. 25
    apbd Says:

    Sambone:
    That’s one deal I’d ” lay off.”
    apbd

  26. 26
    Sambone Says:

    “Stick a fork in ya”!LOL

  27. 27
    zman Says:

    The Wednesday radio show is probably now dead as the host quit today.

  28. 28
    QUARRYMAN Says:

    Money you Hate trade:

    Oct 200 PTR puts at 4.

    passed on the CHK or CAM play.

  29. 29
    QUARRYMAN Says:

    Andrew quit over at MN1 ?

    What sort of co. is MN1? Was that set a bluescreen backdrop in his brother-in-law’s basement?

  30. 30
    zman Says:

    Q – CAM trying to put in a recovery with the group. I almost did the 105s but it’s Friday and I’m sleepy.

    PTR – I know, I know. That is likely not a bad trade at all but if mo-mo is bad here, it’s unbelievable bad there. I may do that and just not tell anyone. Some people are buying all of my heavily disclaimered trades and blowing themselves up. These are little trades for me. They won’t kill me if they go to 0. That goes for all my trades but especially for the “hate your money” variety.

  31. 31
    zman Says:

    Q – they wouldn’t give him a contract which I think is a mistake but I don’t know their financials. Could be in a basement. I know he’s sitting in front of a green screen.

    He emailed me that he’ll likely resurface in some capacity at a popular option site.

  32. 32
    zman Says:

    Crude up = Turkey. People are going to be worried about the border exploding over the weekend. The Turks are officially mad at us now and violence in that part of Iraq is thing we need right now. Plus 30% of Iraq’s oil flows through there…hmmmmmm….danger Will Robinson. Bet they take a shot at $84 today.

  33. 33
    zman Says:

    No Nicky on a Friday? I think maybe people thought I would be out today…oops, that’s next Friday.

    CAM kissed even and shot lower . Still contemplating taking a real, longer dated strike call position here and in OII

  34. 34
    zman Says:

    PQ through $13 – nice breakout

    HK new high

  35. 35
    TTupp Says:

    mornin yall

  36. 36
    zman Says:

    Tupp – you should be able to post now. I guess it doesn’t like Canadians., lol.

    there will be a new spam blocking software package installed over the weekend.

  37. 37
    TTupp Says:

    test

  38. 38
    Nicky Says:

    Morning all. The insanity continues I see…

  39. 39
    TTupp Says:

    im in vegas tho, so im sure its coming off a us server 😉

  40. 40
    TTupp Says:

    our servers run off snow cones and maple syrup

  41. 41
    zman Says:

    N – blame the US Congress today.

  42. 42
    TTupp Says:

    mornin yall. z i dont now how you get up so early with the time difference! +3 would be nuts to get used to

  43. 43
    zman Says:

    T – I guess its true then, what happens in
    Vegas stays in Vegas.

  44. 44
    Nicky Says:

    Anyone see Phil Flynn on with Joe Kernan this morning – it was hysterical. Joe Kernan said he thought PF was talking such rubbish that he bought the Paris Hilton clip on!

  45. 45
    Nicky Says:

    PF tried everything. Colder than usual winter (total garbage) holiday driving season… Kernan said to him why don’t you start worrying about next years driving season now and really drive it up!

  46. 46
    zman Says:

    I said they go for 84 and what do you know, higher highs baby

    Even RIG is up and threatening new HOD which would probably let it run to 118 pronto.

    N – I would pay money for a clip of that. Will check youtube

  47. 47
    aitrader Says:

    Curious where folks see oil going in Q1-Q2 2008? Is $80+ bbl sustainable? Seems like a lot of speculative hot air here.

    A contrarian sees it going to 45 bbl http://online.barrons.com/article/SB118981092541828147.html? .

    Thoughts zman?

  48. 48
    Nicky Says:

    Aye Z – I thought they made him look a bit of an idiot. Just showed him as the ramper he is. Kernan said what about the 4 winters in a row when oil was at 12bucks??? PF said yes but we MAY get an early cold snap this year. Where the hell did he get that from? All weather forecasts calling for a mild winter due to La Nina albeit colder than last year which was super mild.

  49. 49
    Nicky Says:

    It feels like 80 is the new 60? I mean hasn’t it always been at 80 cos it seems like the norm now.

  50. 50
    Nicky Says:

    WTI I can see a clear 5 wave count off Tuesdays lows – now up nearly $6 in 3 days!

  51. 51
    zman Says:

    Welcome AI, will read and get back to you. Q1 is a little ways off in the eyes of an option trader but we are suffering from some pretty good level of spec excess at present. Very near term I think we punch to new highs. 4Q I’m thinking we’re in a range from 85 down to no lower than 75 but if winter completely takes leave or world peace breaks out that could drop to 70.

    Turkey in large force over the border into Iraq, which I doubt, could put oil to $90.

    Supply demand 4Q is somewhat tight with a 1.8 mm bopd gap will take a lot of barrels out of US and OEDC inventories.

    …more in a minute

  52. 52
    Nicky Says:

    Z – we saw your new highs a few minutes ago.

  53. 53
    zman Says:

    Nicky – don’t put much faith in long term forecasts based on La Nina. I did some correlative analysis and found that predictability is only good at the extremes. Weak or mild La Nina could mean anything for temps. Same goes for an El Nino.

  54. 54
    Nicky Says:

    Broader markets – Asia pretty resilient last night. It feels like we have another high out there or at least a retest.

  55. 55
    Nicky Says:

    Z – you are starting to sound like PF!

  56. 56
    rammastr Says:

    OII JAN 85 @5.60?

  57. 57
    Nicky Says:

    Sooooo…. if wti is in the process of completing v of i of v this will be followed by a pullback in wave ii. Then iii of iii which will be crazy, small pullback in iv followed by a final blip up. 88 within a couple of weeks for a blow off top.

  58. 58
    ndog Says:

    Z – what’s the range you are looking at for the TSO calls?

  59. 59
    zman Says:

    N – Ouch, them’s fighting words. I assume you’re referring to #51?

    I’ve been saying downside $75 for quite some time now.

    If you are referring to 53 I did that study and another one on the impact El Nino has on temps and hurricanes in my former life. It is statistically accurate that the correlations between weather predictability and sea surface temperatures (SSTs), loosens substantially as the SSTs approach mean levels. In other words a weak La Nina is now reason to think you know something about temps, maybe rainfall totals, but not temps.

  60. 60
    ndog Says:

    Don’t know if you are Fast Money fans but Guy Adami likes that one for a pop before earnings on the 1st.

  61. 61
    Sambone Says:

    12:16 pm EST

    Nymex Crude Hits New Record On Global Supply Concerns

    DOW JONES NEWSWIRES
    From MARKET TALK:
    [Dow Jones] Nymex crude oil hits intraday record high of $84 a barrel, as rally extends on continued supply concerns amid tightening global inventories. US Energy Secretary Samueal Bodman’s comments helping drive that push. Speaking on CNBC, he says high crude prices are being driven by fundamentals, not speculators. “It’s clear we’ve got suppliers unable to keep up with demand,” Bodman says. “That’s what’s driving prices.” He says tight oil output capacity means producers don’t have the flexibility to easily increase supplies as they had in the past. Nymex Nov crude +80c $83.88/bbl. (grainne.mccarthy@dowjones.com)

  62. 62
    zman Says:

    Ram – are you asking me? I’m not in OIIs at present.

    ndog – it would have to be down 1.40 from present ($2 on the day to get me interested in adding)

  63. 63
    TTupp Says:

    thats quite the crystal ball N

  64. 64
    Saeed Says:

    The higher bills are due not only to higher fuel costs and increased demand, but also because of colder weather. The National Oceanic Atmospheric Administration predicts this winter will be 4 percent colder compared to last winter, but 2 percent warmer compared to the 30-year average.

  65. 65
    zman Says:

    That Bodman comment is offbase re Oil access and the price.

  66. 66
    Nicky Says:

    Sorry Z – I was sort of kidding you! It was #53. Flynn was all over the weather earlier with ‘what if this and what if that’. Sure but what if its all okay?

  67. 67
    rammastr Says:

    NICKY – After I read your info several times over yesterday about key levels and dates ( it took several times because I just got through reading a technical manual that made my eyes bleed)I totally understand. Thank you so much!

  68. 68
    Nicky Says:

    Colder than last year would not be difficult. Surely warmer than average is what matters.

  69. 69
    zman Says:

    TSO – I’ve got the Nov 47.50 and 50s now. I’ll most likely hold them close to earnings but not through. Already nice profits. They may warn ala all the other refiners. They’re also subject to the takeout rumor from SUN which I don’t give a lot of credence to as it would prove difficult to make that combo accretive for SUN shareholders although they’d love the improved margins. Could be someone else gets them.

  70. 70
    rammastr Says:

    ZMAN – I was just talking out loud to see if you might think that was a good idea since you mentioned OII.

  71. 71
    Nicky Says:

    Ram glad if it helped. I never like to give advise but be cautious here – that move down yesterday was an early warning sign. Today’s move right now still looks corrective. I still think we have higher highs ahead but I don’t think this is going to last much longer.

  72. 72
    zman Says:

    N – no, no…I’m shattered …sort of kidding?! Relating me to THAT guy. You just can’t apologize for that kind of thing.

    RAM – oh, sorry…got lost in thought on that one and was looking back to see if I had set a price. I dunno. So spikey. Could be good by Monday but I feel like I’m chasing the name and it could easily correct more, like my brilliant CAM trade yesterday.

  73. 73
    Nicky Says:

    WTI – clearly 83 is key now. A move below will say this wave is done. We can then fine tune levels for the wave ii retracement.

  74. 74
    Nicky Says:

    Okay Z – well you just have to be better looking and tell me you don’t have a lisp.

  75. 75
    Nicky Says:

    Distillates trying to make a run now.

  76. 76
    QUARRYMAN Says:

    Boy, Z., it sure is tempting to add some OCT o-t-m puts going into the weekend. OIH, XLE, PTR.

    OIH – -ODLVT @ 3.20
    XLE – -XTGVY @ 0.90
    PTR – -PTRVW @ 4.10

    …just a thought. All of these are at ATH and a week left before exp. I think the premiums will remain high.

    Q.

    “SAFETY PAYS”

  77. 77
    rammastr Says:

    NICKY – You do not give advive. You do give info that helps me and others make more intelligent decissions. Thanks.

  78. 78
    QUARRYMAN Says:

    … nudge … nudge

  79. 79
    Nicky Says:

    Completely off topic but I hear talk today that China may raise their interest rates as early as today – what is that going to do to the markets if anything. Is it bearish for the Chinese stock market (which also looks to be in a bubble) or not?

  80. 80
    rammastr Says:

    ZMAN – Oct PTR puts ??

  81. 81
    Sambone Says:

    12:31 pm EST

    Nymex Crude Hits Record $84 On Supply Concerns

    By MATT CHAMBERS
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures hit a new intraday record Friday, rising above $84 a barrel on concerns that there will be a big shortfall in supply going into the Northern Hemisphere winter.

    The front-month November light, sweet crude contract on the New York Mercantile Exchange rose as much as 97 cents, or 1.2%, to $84.05 a barrel, the highest price ever for a front-month futures contract. Prices recently traded at $83.88. Brent crude on the ICE futures exchange rose 66 cents to $80.81 a barrel.

    Energy Secretary Samuel Bodman supported prices Friday when he told reporters the U.S. economy is being “remarkably resilient” in the face of high oil prices. In a separate interview with CNBC shortly after, Bodman said oil prices are high because supply is unable to keep up with demand, rather than speculators being at fault.

    Tightening global oil stocks and forecasts for strong fourth quarter demand have led prices to $80 a barrel, a level they have hovered at for the past month. While many market watchers are touting a potential warmer-than-normal winter as a risk to demand and high prices, monthly forecasts this week from both the DOE and the Paris-based International Energy Agency continued to stress the tightening supply and demand mix.

    “Bodman was saying the economy is adjusting to higher prices and we’re seeing a rally across the whole commodity sector, there’s a lot of sympathy buying,” said Tony Rosado of IAG Energy Brokers in Fort Lauderdale, Fla.

    Also supporting prices are concerns that Turkish troops will enter northern Iraq.

    Turkish Prime Minister Recep Tayyip Ergogan said Friday that Turkey is ready to pay the price of any campaign if it decides to stage a cross-border offensive against Kurdish rebels in Iraq. The preparations to move into Iraq come after deadly attacks on Turkish soldiers by the Kuridstan Workers’ Party, or PKK, that has been fighting Turkish forces since 1984.

    “The Ceyhan pipeline, which carries crude from Kurdish-controlled northern Iraq through Turkey, figures into oil traders’ worries,” said Peter Beutel, president of trading advisory firm Cameron Hanover in New York.

    Front-month November reformulated gasoline blendstock, or RBOB, rose 2.81 cents, or 1.4%, to $2.0947 a gallon. November heating oil rises 96 points, or 0.4%, to $2.2569 a gallon.

    —By Matt Chambers, Dow Jones Newswires

  82. 82
    zman Says:

    AI,

    Couple of comments:

    1) 1st he’s a contrarian. Question is how long has he been calling for lower oil. Since 40 and then 50 and so on I’d bet.

    2) I don’t see $45 w/o a real recession in the US. Not a hit and run 1 or 2Q deal but 4 quarters of negative growth.

    3) Saudi motivations and supply ability. Saudi is the swing factor with OPEC and works to remind people of that constantly. They are trying to engineer his soft landing scenario for oil prices but they are also working to counter an increasing chorus of voices that are decrying Saudi’s ability to increase deliverability. They like to remind people who is the big dog from time to time. They are adding new fields but they are also facing some pretty hefty production declines in many of their core assets so it’s not as simple as tying in a new field and away you go. I know you know this but that’s how the guy in the article acted.

    4) As far as oil’s reaction to the increased production and the fact that there were some differences between what opec did, up it 1.4 mm bopd and the 500,000 it announced…I agree with him, a rally in crude prices surprised me.

    5) there are mixed signals on Chinese oil demand at present. The numbers he sited are correct but I think the demand increase will go only in one direction, up.

    6) flat oil demand for 2008? not without a recession.

  83. 83
    Nicky Says:

    some early signs of weakness?

  84. 84
    zman Says:

    N – I look like this guy:

    http://www.upstreamonline.com/multimedia/archive/00020/bodman_20967f.jpg

  85. 85
    aitrader Says:

    > 6) flat oil demand for 2008? not without a recession.

    I agree. I’m looking at the dip to $51 in Jan 2007 as stocks overshot the mark and the speculators turned to bears (temporarily). If the OPEC turns up the volume will we repeate the Jan 2007 overshoot with a 1-2 month lag?

    Agree it’s a bit long-term in light of near-the-money options on stocks. Just thinking of shorting Feb 2008 WTI-CL on the Nymex and trying to weigh the risk factors.

    Thanks for the feedback Z.

  86. 86
    zman Says:

    Q and RAM – PTR puts – Makes sense to me, the other oil shorts seem a little more scary if we get the oil pop and I mean pop on some geopol. Plus, as my good friend PF said, there could be a cold snap any second now, LOL

    AI – what about writing naked calls on it?

  87. 87
    rammastr Says:

    ZMAN – Who’s Al?

  88. 88
    zman Says:

    Anybody got a better read on the PTR gain today than Warren is out of the house so the selling pressure is off. Surely there must be some better reason for this rally. I’d note that Asia was down last night so its not that either.

  89. 89
    zman Says:

    sorry – AI = new site member AITrader.

  90. 90
    aitrader Says:

    > AI – what about writing naked calls on it?

    Risk I can take. Naked anything seems more like potential suicide 🙂

  91. 91
    Nicky Says:

    #84 – Eeek!!!!

  92. 92
    Sambone Says:

    N – His momma loves him though!

  93. 93
    zman Says:

    AI – good, I like to know where folks stand, lol. Your hypothetical move towards $51 would smash a name like SU.

    http://finance.yahoo.com/charts#chart5:symbol=su;range=3m;compare=uso;charttype=line;crosshair=on;logscale=on;source=undefined

    just throwing something out there.

  94. 94
    QUARRYMAN Says:

    Happy says:

    “PTR
    something is going on. Isn’t their IPO in Hong Kong coming soon? I think it goes higher.”

    Q.

  95. 95
    zman Says:

    Oops, wrong photo. This looks more like me.

    http://www.upstreamonline.com/multimedia/archive/00021/nigeria_21786f.jpg

  96. 96
    zman Says:

    ZTRADE: out second half VLO October 70 Calls for $4.20. 184% gain on a position that was once thought to be toast.

  97. 97
    Sambone Says:

    Z – “Silly rabbit, tricks are for kids”!

  98. 98
    Nicky Says:

    #95 – hmmm the body shows potential.

    Distillates needs to come under this mornings low of 22307 rbob 20477.

  99. 99
    zman Says:

    N – You got to be tough to bag those urban quails!

    OII – looks to me like it could drop another 3 or so on Monday.

    Cheap little TLM keeps drifting higher.

  100. 100
    Nicky Says:

    I think they may sell this off into the close or perhaps I should say take profits!

  101. 101
    rammastr Says:

    QMAN – I am with you on the PTR puts. Dive baby dive.

  102. 102
    aitrader Says:

    Found a video of the contrarian Mike Rothman, ISI Group, on OPEC’s site – http://www.opec.org/home/Multimedia/videos/2007/145%20OPEC%20Meeting/AnalysisMikeRothman.htm .

    He makes the argument that IEA’s OECD 4Q demand numbers are high by 2 million bopd. My confusion is why OPEC would want to emphasize that oil demand will be lower and prices are too high? If oil really is in short supply and the current near 85 bbl numbers supportable why would OPEC be pushing the opposite view so hard? Are they *that* scared of a recession pushing demand lower or is there a lot of non-fundamental speculation driving the markets that they see as unsutainable…?

    Still has no bearing on short-term trading but is interesting as a longer-term possible back-end hedge IMO.

  103. 103
    QUARRYMAN Says:

    Why am I PeTRified about holding puts in this issue?

    Still running flat for the day since I bought them.

    If I want to hedge an oil sector dropoff,

    would you use OII, OIH, XLE?

  104. 104
    QUARRYMAN Says:

    As a perspective,

    optiondragon says

    starting to visualize the ptr oct 220 calls overnight or short term hold…risk reward very nice, techs very nice , fundamentals very nice.

    This guy’s good.

  105. 105
    zman Says:

    AI – his argument re 4Q demand is the same as OPEC’s. They were saying repeatedly prior to their last meeting that there was no need to raise production. The EIA and IEA both claimed otherwise. Of course, IEA cut its fourth quarter demand level literally within hours of the OPEC quota rise. Something happened with Saudi in the 11th hour prior to the meeting, a deal with the US perhaps that got them to lift, plus they exhibit the fact that they can lift. I’m not a conspiracy theorist but there is some tit for tat between the US and Saudi and they work together to keep prices within a certain band. The bearish rhetoric before the last congressional elections would be a good example which helped to drive gasoline prices down for a short time. Within days of completion Bodman was making more oil bullish comments. Probably just a coincidence. Will watch the video tonight.

    Q – perhaps b/c there over a billion screamin Chinamen who are buying it.

    XLE or OIH, maybe USO

    RE OptionDragon – we’ve had some phone conversations and the guy is very very smart.

  106. 106
    Nicky Says:

    Very bullish close for wti – no sign of profit taking.

  107. 107
    zman Says:

    Agreed…a little surprised they couldn’t get it over 84 for the headline…it’s all up to the Turks and Kurds this weekend now.

  108. 108
    Nicky Says:

    Distillates somewhat strangely – as lets face it this is the one they site as being short on supply – not going with this move today.

  109. 109
    zman Says:

    Tepid action Friday afternoon. Stocks are going with the direction they chose in the morning…strong getting stronger, weak getting weaker for the most part.

  110. 110
    zman Says:

    feels like beer thirty

  111. 111
    Nicky Says:

    So is that all that’s holding this up Z -Turks and Kurds? what happens to this market if nothing happens over the weekend then?

  112. 112
    rammastr Says:

    Q – You still like the PTR trade?

  113. 113
    zman Says:

    N – depends on if we get a last minute hurricane

    T – you still doing the DRYS

  114. 114
    Sambone Says:

    OPEC exports
    http://economictimes.indiatimes.com/News/News_By_Industry/Energy/Oil__Gas/OPEC_exports_to_leap_670000_bpd_to_Oct_27/rssarticleshow/2450425.cms

  115. 115
    zman Says:

    N – and I read somewhere there might be a cold snap!

    Thanks Sambone – that makes sense on the UAE. They’ve had maintenance scheduled forever but I bet the bulls trot that out when the time comes.

    Beer thirty achieved.

  116. 116
    Sambone Says:

    Nicky’s favorite boy toy! LOL

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

  117. 117
    zman Says:

    thorough and in depth as usual.

    I like how every cloud has an oily lining.

  118. 118
    sane Says:

    That guy makes me nauseous.

  119. 119
    Sambone Says:

    Z – That’s why he’s on TV! LOL

  120. 120
    Sambone Says:

    Weather – Will watch the low over the Yucatan this weekend. Moving slowly east with little shear. Could pop over water Sunday, and could become a TD. Steering currents would then take it into TX. Will watch it and report on weekend (Sunday) and Monday morning post. Lots of “Coulds”. Nothing else of interest at this time.

  121. 121
    scoop006 Says:

    Z- Questimate on a top for HAL? Thinking of selling stock and redeploying funds

  122. 122
    Nicky Says:

    Do we have a hurricane on the horizon then?

  123. 123
    zman Says:

    Scoop – what time frame you thinking of? Options or stock?

  124. 124
    Sambone Says:

    Hmmm, lots and lots of BQI Oct 5’s trading.

  125. 125
    Nicky Says:

    Oops thanks Sam – posted #122 before I refreshed the page!

  126. 126
    Sambone Says:

    N – Not saying that, BUT?

  127. 127
    zman Says:

    OII flys better than any play in a hurricane. not playing just saying

  128. 128
    scoop006 Says:

    Z Up $10.+ p/s in 1 year. Can you see $50 p/s within 12 months

  129. 129
    zman Says:

    http://www.youtube.com/watch?v=ib32xesJNb0

    T Boone back when oil first crossed $80. He says the reason he wasn’t surprised by the move was the tight 4Q supply of 85 mm bopd vs demand of 88 mm bopd.

    So the delta there was 3 mm bopd (this is a few months back)

    Now it’s a 1.8 mm bopd gap…he said down to 87 mm bopd demand wouldn’t hurt, now were sub 87 on even IEA estimates.

    He also says that if you are on the brink of recession that $80 oil could push you into one…

    Always interesting to go back and listen to these guys a few months later. He was betting everything in the interview on 4Q07.

    He also thought it was too early to play natural gas long.

    Be sure to listen to the end…lots of fun quotes from PF. Plus the lisp is great.

  130. 130
    zman Says:

    Scoop – yes I can.

  131. 131
    scoop006 Says:

    Z- Thank you. I will remain a proud HAL shareholder

  132. 132
    zman Says:

    you should be proud, that’s good company with an overly discounted multiple and some very strong long term fundamental growth prospects. If you had said BHI or NBR I would have said, ask someone who uses there services what they think of them, ha,ha,ha

    insert standard clause here about how I don’t give advice blah,blah,blah.

  133. 133
    zman Says:

    Actually, here’s some advice:

    read the Master and Commander series. There are about 18 of them and I’m have way through them now. Hilarious, informative (as historical fiction goes) and addictive.

  134. 134
    scoop006 Says:

    Questimate is not a solicitation of advise(in my opinion)

  135. 135
    rammastr Says:

    QUARRYMAN – You still around?

  136. 136
    Sambone Says:

    10 minutes to “Tini time”.

  137. 137
    zman Says:

    Sam – an pix of that low worth sharing? Service stocks getting a late boost.

    Scoop – re questimate: duly noted.

    PTR up $20.70 or almost 11% – Confucius say Chinese Momentum very strong.

    See that’s the thing about beer thirty I like so much, it generally starts before tini time.

  138. 138
    zman Says:

    Very happy with the downside hold in TSO on profit taking today. CAM too although it could still drop or gain 6 in the near future.

  139. 139
    Sambone Says:

    Man, now I know why I don’t watch those talking heads!

  140. 140
    Sambone Says:

    Sam – an pix of that low worth sharing? Huh?

  141. 141
    zman Says:

    Sam – yup, did you watch until the end when the guy was saying this market couldn’t get through 13,500 with oil at 80. Now we’re at 14,100, oil is basically $84 and we’ve had the sub prime melt since that was taped! Back to school for that pup!

  142. 142
    zman Says:

    Sam – that thing near the Yucatan.

  143. 143
    Sambone Says:

    Like I said in #139, Wow!

  144. 144
    Sambone Says:

    142 – http://www.ssd.noaa.gov/goes/east/watl/loop-rb.html

  145. 145
    zman Says:

    Chart to be very happy with for the weekend: CHK – monthly.

  146. 146
    Sambone Says:

    Tini time, talk to ya on Monday!

  147. 147
    zman Says:

    PTR up 23

    Thanks Sam, have a great one.

  148. 148
    Wyoming Says:

    Scoop,

    Just wanted to chime in about HAL. Just arrived off a job with their tools in the completion (Ensco rig-sorry). Good stuff and people. They are too undervalued, low PEG. Multiple needs to come up. I don’t buy the BHI merger stuff. BHI has a tough time delivering product, we try to give them work but can’t wait for months.

  149. 149
    rammastr Says:

    ZMAN – Thanks for the PTR update.

  150. 150
    TTupp Says:

    you here z?

  151. 151
    scoop006 Says:

    Wyoming- Thanks for your reply.
    Maybe I should DD

  152. 152
    Nicky Says:

    A huge increase in the open interest yesterday to the tune of 51k. This is going to get interesting when they look for the exit.

  153. 153
    Wyoming Says:

    I compare them to SLB and historically too. SLB is only up because of the street. I think you will find that if HAL has a similar PEG as SLB, they will be in the $60 range. I played in and out of the $35 ’07 call leaps from the beginning of the year. I have the 42.5 Jan Call with some of the profits.

  154. 154
    TTupp Says:

    you were asking if i was still doing the drys thing? yea i am….. now dont give away the Nabisco secret lol, kiding. today was good, but IV as i said got killed by as much as 20% in some contracts. still a cash cow though.

    funny thing being short some of the same call strikes at the same time though, and im still pretty convinced on the credit call spread i put on the other day.

  155. 155
    TTupp Says:

    look at the spam getting through on the public post… priceless…. cialis and hanah montanah..

    maybe they’ll get some customers from here with the ED drugs, but they have a better chance of seeing Jesus than finding a hannah montana fan on this blog.

  156. 156
    zman Says:

    T – yes, it’s great to be popular. I could turn the blocker back on but then we wouldn’t get to hear from you, you spammer! 😉

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