29
Oct

Monday Morning – Energy Going Higher

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Housekeeping Watch: Please bookmark this site: zmanbackup.wordpress.com.  Service on the regular site has at times been fast, slow, and non-existent. Right now it looks to be working fine but I have not yet been told that its fixed (again) so book mark this site. Note: you do not need to login or register when using the backupsite. 

Commodities Watch:

  • Crude Oil: After a 6% rally last week crude is trading up another $0.60 to $1.00 (to $92.45 to $92.85) in the early session having breached $93 overnight in heavy trading. I think we're close to done on the current run with a move back towards $90 and then a bounce for $95 in the very short term cards.Expect to see me take more profits into strength this week.
  • Mexico - bad weather induced by a cold front in the GOMex forces Pemex to shutter 600,000 bopd, about 20% of Mexico's production. Mexico's three main export terminals were shut Sunday and are expected to go back to work in two days. Port volumes were already high after last week's high seas caused loading delays and the deaths of 21 oil workers, the result of a collision between a JU rig and a production platform.
  • Turkey -  their military chief promises the rebels will "grieve with an intensity they cannot imagine". Them's fighting words. 
  • Dollar hits yet another record low in its bid to be the 21st Century Peso. Bernanke's soon to be published book, How To Export Your Way Out Of A Looming Recession, will hit shelves next month for $100 copy making it the cheapest business book no one bought for Christmas.
  • Natural Gas: NG also had a good week last week rising 3%. This morning gas is trading slightly up at $7.23

Holdings Watch: (if your screen can't show the right hand image of the following graphic just click on it).

open-options-102607bbb.jpg

Earnings I Care About This Week:

  • E&P: Light week for E&P earnings and I'm likely to shun SWN as they've had a huge run of late on the back of a strong group. Great company but they are another one that not only needs to beat (and possibly guide higher) but they will need to address the cost creep and the marginal nature of some of their non core acreage at gas prices just $1 south of present levels.
  • Refiners: Still hold the (TSO) calls as you can see above but will likely retire the $47.50s as the premium is now shot and roll into something a little closer to the money in a December and /or January strike as I expect The Tricenda offer to put a floor under the stock while I expect West Coast cracks to continue to firm up. I may use a downgrade here this morning to pick up those longer dated calls first.
  • Oil Service: I should have rolled the NBR puts from October to November but will wait for numbers now. FTI, CAM, OII all need beats to stay at these levels. And I expect them to deliver. RIG will likely spend another conference call talking about multiple drillship contracts with day rates north of $500,000 per day  and the incredible long term demand seen in the global deepwater market as evidenced by its already high utilization rates through 2010. OII will almost certain echo the deepwater sentiments the following day as it describes ROV rates and utilization as well as the increasing demand for ultra deepwater subsea trees, and it's new ultra deepwater capable vessel. 
  • Dry Bulks: Most interested in EXM towards the ends of the week but will be listening to all the calls for near term direction on rates, the BDI and port conditions in Australia which have been boosting rates on runs from Brazil to Asia.
  • Coal: Still holding my entry position in (BTU). Will look to add or reduce based on this week's comments from the competition.
  • Majors: Late in the week XOM and CVX report. If XOM hasn't warned by now it's because it successfully bludgeoned analyst's estimates so that there was no need. XOM will set the tone for the reporting date and potentially for Friday as well.

earnings-4th-wk-octaaa.jpg

Stocks We Care About Today:

  • (PTR) raises $8.94 Billion US in China's largest ever domestic IPO. I'm my biding my time on a short here as the valuation is quite stretched but I want to see the momentum wane. I never need to be in the top or bottom 10% of a move.
  • (ALJ) aka, The Refining Girl We Didn't Kiss Friday Watch: Guiding down severely for 3Q. Estimates earnings will fall in a range of $0.23 to $0.29 versus Consensus of $0.61 (and a range of $0.47 to $0.74). Results were hurt by high crude oil prices relative to products on the west coast and that its asphalt business (about 15% of sales) was especially impacted as it is priced with long term contracts that don't immediate ratchet to reflect the soaring crude prices. Comment: sounds like analysts were completely asleep at the wheel here as this is no small miss (a third to a half off one quarter's estimates???!!!).

Eye Off The Ball Watch: I have often noted the inelasticity of analyst estimates among the smaller names, especially in the refining group. While the big household names like Valero, Tesoro, and Sunoco often see two to three estimate tweak per week as analysts mark their crack spread estimates to market and make other adjustments the same cannot be said of the smaller names which often go with little to no revisions for 3 and 4 weeks at a time. Nearly all refiners produce some asphalt and the danger is that the analysts have taken their eyes completely off this ball. Both (WNR) and (FTO), which I bought on Friday produce asphalt though its significance on their income statement is less pronounced than at (ALJ). Momentum from Friday in the energy markets and WNR's upgrade this morning (see below) should help carry them higher but look for me to reevaluate and potential exit these plays earlier than normal. 

This Week's Refiner Valuation Table: Tricenda Raises The Valuation Bar.  

 refiner-multiple-102607.jpg

  • Coal Stocks On Fire. Coal stocks have sported a tremendous run on the back of surging demand (real and speculative) from China. We done pretty well with the BTU long but missed out on some of the other interesting names include (ANR), now approaching $30 and oft commented on in the low $20 this past Summer and Fall, as well as names with regulatory problems like (MEE) which have announced plans to hike production of metallurgical coal specifically citing Chinese demand. I'll be adding a Coal tab in the members section at upper left this week which will include the usually valuation metrics and some ancillary, domestic transportation plays. 

Odds & Ends

Analyst Watch: BMO downgrades (TSO) to hold. UBS upgrades (WNR) from sell to neutral (I bought WNR twice on Friday in the wake of Tricenda's partial purchase of TSO so I agree it's at least worth holding; (BHI) cut to hold at FBR; FBR boosts price target for (DO) from $139 to $174. In another example of an analyst being asleep at the wheel, Carris raised their price target on (MEE) from $26 to $36 with the stock already over $32. 

Cantarell Watch: Production inched back up to 1.4 mm bopd in September for Mexico's biggest oil field from 1.3 mm bopd in August. Pemex is doing everything it can to maintain production (workovers, new subsea pumps, etc) but production is still off 130,000 from January and the company has forecast double digit production declines in 2007 and 2008 here.

57 Responses to “Monday Morning – Energy Going Higher”

  1. 1
    aaatest Says:

    test

  2. 2
    zman Says:

    test comment

  3. 3
    zman Says:

    comments running extremely slow

  4. 4
    aaatest Says:

    test 2

  5. 5
    aaatest Says:

    cleared cache, restarted browser…seems to help some.

  6. 6
    zman Says:

    roger that

  7. 7
    zman Says:

    all right, we’re going to try and make a go of it over here this morning…if I get reports of delays or can’t loads we will move over to

    zmanbackup.wordpress.com.

    Please bookmark that site as it appear that service is still hinky.

  8. 8
    Sambone Says:

    3:11 am EST

    Oil Hits New Trading High

    Dow Jones Newswires

    SINGAPORE — Crude oil futures surged to new highs Monday in Asia as the bull run, fed by momentum buying on the back of strong fundamentals, forced traders to abandon outstanding bets on a price retreat.

    The market, which has chalked up nearly 8% in gains over the past two weeks, is being firmly underpinned by a tightening outlook, with global inventories below seasonal norms and amid expectations for demand to stay robust into the Northern Hemisphere winter.

    Heightened geopolitical tensions in the Middle East, where Iran has joined the rhetoric as Turkey mulls a possible military incursion into northern Iraq against Kurdish rebels, are also putting at risk oil flows from the region, despite the absence of an immediate threat of disruption.

    Further, predictions that the U.S. central bank will cut interest rates this week — a Federal Open Market Committee meeting ends Wednesday — are weighing on the dollar, drawing increased investment to dollar-denominated commodity markets such as oil.

    “Of all the factors.. only one of them seems capable of ending the bull market in crude oil: that’s a recession,” said Peter Beutel, president at trading advisory firm Cameron Hanover.

    “Right now, the Fed seems determined to prevent one.”

    On the New York Mercantile Exchange, light sweet crude for December delivery traded at $93.01 a barrel at 0640 GMT, up $1.15 in the Globex electronic session.

    The front-month contract, which tacked on 1.5% in value to its settlement Friday, earlier spiked to $93.20 — the highest nominal figure since the exchange introduced crude futures trading in March 1983.

    While oil in real terms remains below the all-time high of $101.70 registered in April 1980, it has already climbed 34.3% over the past year.

    On London’s ICE Futures exchange, December Brent crude also punched into record territory, trading $1.15 higher at $89.84 a barrel after touching $90 a barrel for the first time ever.

    Despite oil futures looking overbought on technical charts, talk about a looming price pullback has failed to materialize as traders keep their eyes on a long list of supportive factors.

    “The push higher may appear overdone from time to time but there is no denying that reasons for buying are well defined,” Mike Fitzpatrick, vice president for energy risk management at MF Global, said in a Friday note to clients.

    Unease about the market’s thin supply buffer was brought onto center stage last Wednesday after the U.S. Energy Information Administration in a weekly data release reported unexpected and steep falls in the country’s crude and products inventories.

    Crude stockpiles in particular are expected to stay low, with the Organization of the Petroleum Exporting Countries reluctant to supply more than an additional 500,000 barrels a day agreed in September.

    OPEC pumps about 40% of the world’s crude.

    This may, in turn, leave futures prices in backwardation — where prompt prices are at a premium to forward — for “at least six more months,” Merrill Lynch said in report.

    “Lower inventories should decrease the market’s ability to cope with temporary shocks, potentially resulting in increased oil price volatility,” said commodity strategist Francisco Blanch.

    Meantime, Iran’s foreign minister accused the U.S. and Israel of supporting Kurdish separatists in northern Iraq, although his Turkish counterpart distanced himself from the claim.

    In recent weeks, Turkey has demanded more action from the U.S. and Iraq to rein in the Kurdistan Workers’ Party, or PKK, which has killed at least 42 people in the past month, including about 30 Turkish soldiers in ambushes.

    Both Egypt and Jordan have cautioned against a military offensive against the rebels and urged dialogue, while Syria has voiced support for Turkey.

    At 0640 GMT, products futures also traded strongly.

    Nymex heating oil for November jumped 227 points to a record-high 245.52 cents a gallon, while November reformulated gasoline blendstock traded at 229.30 cents, up 190 points.

    Both contract expire at the close of trading Wednesday.

    November ICE gasoil changed hands at $768.50 a metric ton, up $11.50 from Friday’s settlement.

    —By Yee Kai Pin, Dow Jones Newswires;

  9. 9
    Sambone Says:

    Weather – Noel, Noda in GOMEX, Nothing else of interest.

  10. 10
    scoop006 Says:

    Z-If you expext XOM to miss should’nt we sell our COP calls now

  11. 11
    zman Says:

    I don’t expect them to miss. I expect them to come in close to in line. I may take those off for the second half of the week and buy them back after the call though.

    I’m told people still can’t get in so we may be switching to the alternate site.

  12. 12
    irished Says:

    Z-have any thoughts on NOV

  13. 13
    cattleman Says:

    Z – site refreashing now here on the plains

  14. 14
    zman Says:

    CHK breaking into new territory over $39

    NOV – Irish – nothing too fresh but I think it could make a little run here if oil marches on $95. I would have thought the stock would have softened a bit more than it did post split and the strength will give buyers a little more confidence now that it’s back over the 2/1 level. Fundamentally they are hitting on all cylinders…your risk from an options perspective is oil price.

  15. 15
    dooch Says:

    what do you think of FTI today? Should I wait until after earnings to sell my position? Or should I sell into strength?

  16. 16
    Sambone Says:

    Test

  17. 17
    aitrader Says:

    Looks like the shippers are also on a run. NM, DSX, QMAR all up 2-4%. I wonder if DRYS will break its 120-128 trading range today. Whadya think Z?

  18. 18
    zman Says:

    Aitrader – let’s move it over to the backupsite

    zmanbackup.wordpress.com

  19. 19
    zman Says:

    we’re moving over to the backupsite for the time being.

  20. 20
    zman Says:

    test

  21. 21
    zman Says:

    test 2

  22. 22
    zman Says:

    test 3

  23. 23
    zman Says:

    test 4

  24. 24
    ram Says:

    This site is working great , now.

  25. 25
    Sambone Says:

    Testing

  26. 26
    zman Says:

    hey ram, thanks…it won’t last….just to be safe we are using the back up so we stay all on the same page (so to speak)

  27. 27
    Sambone Says:

    Z – Little slow posting, but got back on OK

  28. 28
    ram Says:

    SAMB – Are you still long the FXA’s?

  29. 29
    Sambone Says:

    Roger #26

  30. 30
    zman Says:

    Hey Ram – come see us on the backup site.

    zmanbackup.wordpress.com

  31. 31
    ram Says:

    I tried, but I couldn’t conquer.

  32. 32
    aaatest Says:

    ram …what does that mean?

  33. 33
    aaatest Says:

    the backup site address is:

    http://zmanbackup.wordpress.com

    note the lack of www

  34. 34
    ram Says:

    I can only see you guys on the other site. That’s probably good enough.

  35. 35
    zman Says:

    test comment 5

  36. 36
    zman Says:

    it just happened very slow…try clicking submit comment if you are watching this screen

  37. 37
    zman Says:

    test test test

  38. 38
    scoop006 Says:

    test 1:10pm est

  39. 39
    zman Says:

    scoop any problems, was it slow to get in?

    I’m told Austin,Tx can get in now after days of shut out.

  40. 40
    Sambone Says:

    Test 1:20 pm EST

  41. 41
    Sambone Says:

    Test 1:20 pm EST, slow though

  42. 42
    scoop006 Says:

    1:29 pm site does not refresh immediately after clicking on “submit comment”

  43. 43
    TTupp Says:

    z – admit it your server in your garage is a comdose 64 & a P.E.T. computer spliced together with jumpers and SCUSI plugs… jk

  44. 44
    zman Says:

    ouch…it’s actually a jury rigged Atari 2400 with a piece of string and some cans.

  45. 45
    zman Says:

    test 15 million

  46. 46
    zman Says:

    watch this

  47. 47
    scoop006 Says:

    3:04pm est main site ok

  48. 48
    zman Says:

    yet another test comment

  49. 49
    zman Says:

    thanks scoop, I’ve been on with one tech guy or another all day.

  50. 50
    zman Says:

    time check 30 million

  51. 51
    zman Says:

    34 second refress…might as well be smoke signals.

  52. 52
    zman Says:

    test, test test, a thousand times test

  53. 53
    zman Says:

    test … is anyone there

    EOG reported will be in tomorrow’s post

  54. 54
    zman Says:

    EOG – strong 2008 guidance, great Barnett Shale performance with a big up for the year end exit rate from the play.

    They are getting oilier which is probably good for them as they are the gasssiest of the big cap E&Ps at present. More in the post tomorrow

  55. 55
    TTupp Says:

    atari 2400? wow i think that was b4 i was born

  56. 56
    zman Says:

    late test

  57. 57
    zman Says:

    early morning test

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