01
Nov

Red Thursday As Refiners Tee Up Misses

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Exxon missed by a nickel which is just a rounding error when the problem is that you only made $9.5 B instead of $10, Sunoco missed the mark a little wider margin, and Tesoro completely fell out of the boat. Expect red early amongst the majors and independent refiner patch. The question becomes why did the analysts miss on the independent refiner estimates so badly and what does the future hold. 

Commodity Watch

  • Crude Oil: Rallied hard yesterday on another large draw down in inventories. December crude closed up $4.15 to $94.53, another nominal record which outpaced the prior days, Goldman related sell off by a buck. Crude has traded higher still overnight reaching as high as $96.24 and is currently up another $1.10 putting into the mid $95's in quite active trading.
  • Fed Rate Cut: The 25 basis point rate cut served up by Bernanke and Co. served to send the dollar lower and exacerbating crude's rally. Click to expand the Euro Charteuro-103107.jpg


  • Cushing Inventories Hit 2 year low. Traders attach enormous importance to this tiny sliver of U.S. storage capacity. We may be well above average inventory levels in aggregate but if Cushing is low, watch out $100.
  • Perma Bull Watch: CNBC had John Kilduff on early this morning who said that he absolutely believed $96 oil was justified, especially given the dollar, that he'd never seen so many supply risks, that China demand is running 6-10% per month YOY, and that he'd never seen demand outstripping supply by so much. Comment: Gotta hand it to him, he knows how to talk his book and he's been calling for $100 oil by year end for some time now. I could argue that his China growth is inflated and I would certainly argue with him on price relative to current supply and the potential threats to supply being at record levels comment but what's the point. Oil is headed to $100. As I was saying last week, $95 or bust, then a dip to $90 and then a rally back through $95. And here we are. Could be today, could be tomorrow but $100 is in the cards. I suspect we'll see a pretty share round of profit taking once we hit triple digits. I also suspect that we see another large draw next week as Mexico's GOMex was shut-in for at least 2 days if not 3 to the tune of 600,000 bopd this week. Another big draw and your trip digits no problem.
  • $300 Oil Watch. Never mindful of examining both sides of the coin, CNBC then ran a story reviewing "what if oil hits $300 per barrel" scenarios. They covered possible causes and included graphics of exploding ship graphics and simulated news casts (I guess so we could see how concerned the actor/reporter would look in the event of an actual emergency) and potential effects but left out the fact that I would retire. 

  • Nigeria Watch: Growing Tired of the Majors. The country has said it wished to favor smaller players in the oil lease bidding process in the future. The head of Nigeria energy department said, "We are getting tired of the Shells and Exxons and companies like that. We want the small independents," They also indicated they want a "small improvement" in the royalty rate. Comment: bye, bye production.
  • The pile on action of speculators in crude drove it higher relative to products over the last 30 trading days, however this pattern has shifted in the last week or so and products are now holding there own quite nice.

Click to expand 30 day comp chart crude-vs-ho-vs-rbob-103107.jpgclick to expand 10 day comp chartcrude-vs-ho-vs-rbob-103107aaa.jpg

  • Natural Gas: Closed up $0.31 to $8.33.
  • NEB says Canada has enough gas stored even if winter is cold, long.
  • Snow Flurry Watch: both NYC and Chicago. In all seriousness, cold traders on their way to work is supportive of gas prices.
  • Snow Storm Watch: Nov 11/12 Accuweather.
  • Tropics Watch: Tropical Storm Noel is over Cuba and still expected to make a U turn to the northeast and into the Atlantic. Some strengthening is expected but it will be no threat to GOMex production unless they've got it's course very wrong which is unlikely.

EIA Inventory Review: 

exp-vs-act-103107.jpg

Crude: 

  • Refinery utilization fell at a time when it should be rising. Utilization hit 86.2%, the lowest level since March. Crude demanded by refineries eased off slightly. 
  • Import: Averaged nearly 9.4 mm bopd, an almost 300,000 bopd recover from last week's low levels.

Crude Stocks Continue Their Slide. Despite some "lumpiness" in stocks caused primarily by fluctuations in imports the near term supply / demand imbalance continues to evidence itself via tumbling inventories. While we are still well stocked to average levels for this time of the year the deficit to last year's levels is rapidly growing while the surplus to the five average is rapidly shrinking. It is the velocity of this move which has been somewhat startling and while I don't believe it does anything like support current prices, it is making it a lot easier for the "crowd" to get to $100 oil.

crude-stocks-103107.jpg

 

cushing-stocks-103107.jpg

Gasoline: Imports drive stock build as production slips and demand remains robust.

  • Production Still Near Record Level: Although production slipped slightly week to week, this past week's level of 8.971 mm bpd was just off a record for this time of year.

 

  • Imports: at 1.2 mm bpd this was a 0.4 mm bpd increase causing the surprise build. 

  • Demand: off just slightly week to week but still healthy for this time of year at 9.335 mm bpd. We may be seeing some demand elasticity relative to price as this level of demand is 1.5% lower than last year while prices for the last week in October remained 29% above those of last year's comparable week.

gasoline-demand-103107.jpg

  • Gasoline Stocks Are Popping Into The Bottom End Of The Fairway. As can be seen in the table at the beginning of today's post, gasoline storage remains about 5% off year ago levels. 

gasoline-stocks-103107.jpg

Distillates: We remain fairly well supplied in aggregate although certain areas in the Northeast are running well off normal heating oil inventories and it is showing up in heating oil prices.

dist-stocks-103107.jpg 

 

 

Natural Gas Storage Preview:

  • My number: 50 Bcf. 
  • Imports: were off another 0.5 Bcfgpd versus last week and are down 0.6 Bcfgpd from the year ago week.
  • Weather:
    • CDDs have left the building
    • HDDs continue to build.
  • Consensus Number: mid 50s Bcf injection. This will push us into record territory for this time of year but for the near term gas is likely to continue to trade in sympathy with crude with an eye on the more winter like weather forecast next weak.

Holdings Watch: (I'll post updated positions this morning to the holdings tab).

Calls:

  • (HAL) - Added to the November $40 Call position for $1.00, average price now $1.10; last bid $0.90. 
  • (EOG) - Half out of the November $85s picked up just prior to earnings for $4.00, a 122% two day gain. Last bid here $4.80.
  • (CHK) - out November $37.50 calls for $2.40; 60% gain. Still hold the Jan -08 $37.50 and $40 strike calls.

Puts: No action. 

Earnings Watch / Stocks We Care About Today:

  • (GSF) (soon to be part of (RIG)) reported EPS of $2.02 vs consensus of $1.89. The top line exceeded expectations as well coming in at $1.19 B vs an expected $1.16. 
    • Cited strength across all segments, in particular contract drilling which produced a 70% YoY increase in operating income as it it kept costs below projections.
    • Average daily rate: $185Kpd vs $130 in 3Q06, and up nicely from the 177 seen last quarter.
    • utilization 96%, down 1% from year ago levels but up strongly from last quarter's 90% rate. These results should go along way toward alleviating fears among RIG shareholders that the large number of Jack Ups in GSF's fleet is going to hinder the combined entity (at least in the short term this does not appear to be the case although longer term, there is a lot of JU capacity on order).
    • Conference call at 11:00 EST
  • (SUN)  Reported $1.81 vs $2.14 expected and sales of $11.5 vs expected of $9.5 B. Weaker margins cited. No kidding. Somebody wake up the analysts that follow this. No guidance in the pr.
  • (TSO) Reported $0.34 vs $0.85 expected. Again, wake up the analysts. The Tricenda offer will backstop losses to a certain extent but estimates will be coming down for the fourth quarter as well. 
    • Conference call at 10:30 EST
  • (XOM) Reported $1.70 vs $1.75 expected. So they ony made $9.5 billion this quarter.
    • Conference call at 10:00 EST
  • (SWN)
    • Reported EPS of $0.30 vs estimate of $0.27; CFPS looked a little light at $0.91 
    • Total production up 56% vs year ago quarter to 30 Bcfe
    • Fayetteville Shale gross operated production rises to 260 MM/d from 200 MM/d in July. Net production 194 mm/d as of last week.
    • They announced some monster wells in new pilots coming on in excess of 5 mm/d (pretty monster for the  Fayetteville) and said that production from three new pilots were responsible for 28% of the incremental 60 mm/d between quarters. That's big as the pilots were in the east part of the play and could be seen as expanding the core.
    • This above paragraph will see the stock continue to make record all time highs and if it does not I will be taking down some calls prior to or during the conference call.
    • They did not put forth any guidance in the pr.
    • They also picked up 70,000 acres in a new potential shale play in Pennsylvania.
    • Conference call at 10:00 EST
  • (CAM) reported $1.31 vs first call estimate of $1.09.
  • (OII) reports after the bell. They need a beat, not a meet.  

Odds & Ends

Analyst Watch: (VLO), (SUN) and (HOC) cut from buy to hold at Soleil, FBR upping price targets for (RIG) from $135 to $140, for (SWN) from $49 to $60

Asleep At The Wheel Watch: RBC raised gold miner (NEM) from underperform to sector perform this morning. With gold breaching $800 an ounce you've got to wonder what tipped the analyst off.  

 

191 Responses to “Red Thursday As Refiners Tee Up Misses”

  1. 1
    zman Says:

    Oil going negative…don’t see the news

  2. 2
    scoop006 Says:

    I think CNBC said Citi will have to cut Dividend

  3. 3
    freeflow Says:

    lots of red out there

  4. 4
    aitrader Says:

    With the Citibank and Exxon news seems logical the market will correct and the refiners will be hit hard. Good idea to buy refiner puts off the open…?

  5. 5
    zman Says:

    I want to see how they open…generally the stock will open down and the options open minutes later …still don’t the oil thing…think it’s may Citi/economy?

  6. 6
    zman Says:

    Site slow to anyone else? Need to report it as soon as possible.

  7. 7
    zman Says:

    test

  8. 8
    cattleman Says:

    Yes, not refreashing. Had to log off and start over.

  9. 9
    O.W. Says:

    a little..

  10. 10
    O.W. Says:

    scratch that: site is majorly slow again.. let’s take it over to the backup site

  11. 11
    kiaora Says:

    took two minutes to refresh

  12. 12
    aitrader Says:

    Z – taking 2x – 5x page refreshes to load.

  13. 13
    freeflow Says:

    very slow

  14. 14
    zman Says:

    been on phone with host, should be fixed momentarily.

    Dow down 185; oil stocks getting slammed; everything looks like it did on Tuesday.

  15. 15
    zman Says:

    guys, shift to backup, email blast just sent

  16. 16
    zman Says:

    test 2

  17. 17
    freeflow Says:

    site working great now

  18. 18
    zman Says:

    They rebooted the server…stay here.

    Wow is it red out there. Dow off 202

  19. 19
    aitrader Says:

    Oil just seems to be profit taking after the overnight bump. Can’t see any change in fundamentals, though I just saw some pundit on CNBC claiming lower refiner numbers were due to lower US demand. Still seems a technical correction in crude tho.

  20. 20
    zman Says:

    If he’s talking about the 3Q numbers EIA demand figures do not bear him out. The problem comes from skyrocketing oil relative to products prices which is driven the kind of people they have as guests on CNBC.

    Current mentality is head over heals buy the dips so I won’t be surprised if oil is back up by the close. Now off $1.80.

  21. 21
    O.W. Says:

    loaded up on some RIG at the open.. up 20 cents now, hope it holds

  22. 22
    zman Says:

    SWN the only green stock on my board

    TLM calls climbing despite a falling stock which is pretty odd…

    OW – re RIG – those GSF numbers looked very good to me.

  23. 23
    zman Says:

    XOM call in 5 minutes…I’ll probably listen for a bit and then drop off…they go for a long time and should not contain any surprises. I’ll be on the SWN call instead.

  24. 24
    zman Says:

    SWN Conf Call:

    Fayetteville:
    longer hz, larger fracs resulting in better production and EURs there.

    Guidance: 111 Bcfe 2007 (previously 107-110 Bcfe)

    Oil down $2.25

    XOM steady as conf call begins

  25. 25
    Sambone Says:

    10:04 am EST

    Nymex Crude Pauses Post Rally, Falls On Stronger Dollar

    By Gregory Meyer
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures were down early Thursday, as the market took a breather after a strong rally into record territory and the dollar gained slightly.

    Light, sweet crude for December delivery on the New York Mercantile Exchange was recently down $1.80 cents at $92.73 a barrel, down sharply from a high of $96.24 hit in overnight trade. Brent crude on the ICE futures exchange fell $1.44 cents to $89.21 a barrel.

    Nymex futures remain near record territory, driven up Wednesday by an unexpected depletion in U.S. crude stocks and the Federal Reserve’s quarter-point cut in its chief lending rate. With a lingering imbalance between global demand and supply, many observers still believe the ingredients are in place for prices to climb higher.

    “This could be profit-taking,” said Jim Ritterbusch, president of Ritterbusch & Associates, a Galena, Ill.-based oil advisory firm. “We’re just going through the usual backing and filling process as we gravitate higher toward that big round number, the $100 mark.”

    The dollar rose slightly after the Fed’s rate cut, potentially pressuring dollar-denominated crude futures. But the currency’s longer-term downward trend continues to support crude, Ritterbusch said.

    On Thursday morning in New York, the euro was at $1.4416 from $1.4487 late Tuesday, while the dollar was stronger against the yen, trading at Y115.18 from Y115.31.

    Ongoing uncertainty over Middle East oil supplies has also been pushing up prices. Turkey’s foreign minister Thursday indicated growing frustration with the government of the semiautonomous Kurdish region of northern Iraq, accusing it of inaction against rebels staging attacks on Turkey. Turkish Prime Minister Recep Tayyip Erdogan is scheduled to discuss the matter with U.S. President George W. Bush on Nov. 5.

    “The drumbeat in the markets for $100.00 crude oil keeps getting stronger with each passing dollar and it appears that a small spark in one of the troubled oil producing areas of the world could catapult prices to that level,” said Addison Armstrong, an analyst at TFS Energy Futures in Stamford, Conn., in a note.

    Also keeping price aloft is pinched U.S. oil supplies.

    The U.S. Energy Information Administration on Wednesday reported a surprise draw in U.S. crude stocks, including a big drop in supplies at Cushing, Okla., the delivery point for Nymex crude futures. “The driver is Cushing,” said Nauman Barakat, senior vice president at Macquarie Futures USA in New York.

    Front-month December reformulated gasoline blendstock, or RBOB, rose 6 cents, or 0.03%, to $2.3376 a gallon. December heating oil fell 1.97 cents, or 0.78%, to $2.5096 a gallon. Thursday is the first day of trading for both contracts.

    —By Gregory Meyer, Dow Jones Newswires

  26. 26
    zman Says:

    SWN shaved drilled time in the Fayetteville to 16 days from 18 days despite adding 200 feet to the avg lateral length.

    doing all fracs as slickwater fracs.

    good results so far on the longer laterals and have another test that will test even longer laterals

    Pennsylvania – will start pilot in 2008

    Performing well in other conventional areas.

  27. 27
    zman Says:

    may add a little COP soon.

    this market may pull SWN back, call all good so far (just shaved $1). If so I buy.

    NG in 10 minutes and I suspect no one cares.

  28. 28
    aitrader Says:

    BTU is down 12% today and no options listed on my quote screen. Is this because of the PCX spinoff?

  29. 29
    zman Says:

    Gasoline and HO not seeing the fall oil is.

    VLO/TSO not off as much as you’d think on the day now. We knew VLO was a throw away quarter as they already pre-announced. I’ll be on the TSO call at 10:30 est and they will hopefully comment on Tricenda…they have 10 days so maybe not yet decided but the stock is climbing like people expect it.

    Hopefully this will give a boost to the sector and let me recover some on WNR and FTO

  30. 30
    zman Says:

    I show BTU down 4.5% which is more or less in line with a lot of energy today but yes, the spin off is effective today. I don’t show any options traded which must mean they are resetting them for the special dividend.

    Bulk shippers looking to go green.

  31. 31
    zman Says:

    HAL / SLB /

    oil down $2 now.

  32. 32
    zman Says:

    66 Bcf – that a big gas number and swings us back into YoY surplus and thus a record high for this week of the year.

  33. 33
    sane Says:

    Z,

    Does that get us to 3.5T ?

  34. 34
    zman Says:

    3509 Bcf…and gas went from down a nickel to up $0.03 since.

    sector looks like it wants to rally

  35. 35
    O.W. Says:

    40 % on my RIG in 1 hr. not too bad ..I’m cashing out

  36. 36
    zman Says:

    OW re RIG you are fast! Nice. If this market improves you will see 121 here today.

  37. 37
    aitrader Says:

    Shippers coming back online – DRYS re-entering its old 120/2-128/9 trading range.

  38. 38
    Dman Says:

    Z: Any views on FTI here?

  39. 39
    zman Says:

    RIG taking out 120

    For a trade KWK likely to bounce in sympathy with the SWN results. Everyone is shrugging off the gas storage numbers and is eyeing a midwest snow or cold rain storm next week.

    Oil recovered 50% so far….green by days end.

  40. 40
    zman Says:

    Dman – their earnings were good yesterday if my memory goes back that far right now. I have to say I like them in the FTI/OII/CAM long term rock solid line of thinking.

    RIG at $120.60

    Days like today are the reason why I never panic sell.

  41. 41
    O.W. Says:

    Days like today are the reason why I always panic buy πŸ˜‰

  42. 42
    O.W. Says:

    c’mon RIG, you gotta hold those new 52 week highs of yours.. HAL recovering

  43. 43
    zman Says:

    OW – you’re funny guy πŸ˜‰

    Cannot to save my life get admitted to the now 20 minute TSO call. My email address is probably blacklisted because of all the short comments last summer.

    Mogas and HO flat now, oil down $0.90

  44. 44
    Popeye Says:

    CNBC talking peak now. Why do I listen?

  45. 45
    zman Says:

    Popeye…I’m an early riser by nature and I’ve found that I have a much better day if I just read the sites I travel and not flick them on at all. This morning I watched Kilduff say, with a straight face, that oil should be 96 or higher, and then the whole run through on the $300 what if scenarios.

    Are you saying they are now saying it has peaked?

  46. 46
    Popeye Says:

    They were asking the question, kind of like a push poll. The network news was driving me mad so I switched over there.

  47. 47
    Popeye Says:

    Z I should clarify that was “peak oil” not a price peak.

  48. 48
    zman Says:

    P – I thought you meant price peak! Thought that sounded strange . Peak oil is the one topic around here I refuse to discuss.

    RIG: 121.50! Somebody tell this market its ok to recover and you’ll be looking at some serious move there into the 125 to 130 land by year end. Still cheap ya know.

  49. 49
    zman Says:

    RIg over 123, $4…guess they thought those GSF numbers were pretty good too.

  50. 50
    jazzkool Says:

    Z, nice call on RIG. You’re going to get my $100K that I lost on tech stocks earlier this year before the end of this year. Keep up the great work!!

    Jazz

  51. 51
    zman Says:

    Thanks Jazz (tell your friends, lol). Came close to punting some of the $120 calls on that spike, think $5.50 and hold the second half which would be mostly house money and the $115s for a further move up in the stock on a more equity friendly day.

    TSO obviously didn’t comment yet on Tricenda

    market looking a little uglier

  52. 52
    O.W. Says:

    5.50 coming up again on the RIG 120’s .. you punting half, Z ?

  53. 53
    Brian08 Says:

    HAL breaking $40…

  54. 54
    zman Says:

    OW – I’m going to try somewhere closer to $6, was busy reading and glancing over at the quote line simply will not do. Noticing the strength coming in HAL / SLB

  55. 55
    aitrader Says:

    HAL breaking 40. Glad I doubled up this AM πŸ™‚

  56. 56
    aitrader Says:

    Zman – what’s your read on the Nov 37.50 CHK calls?

  57. 57
    zman Says:

    CHK I was mulling buying them back this morning but at this point I’ll either do nothing or maybe take 40s. Still own the Jans.

    Also want to be long APC 60s for the call.

    Look at VLO

  58. 58
    zman Says:

    NFX about to go positive and then it will run to $55

  59. 59
    zman Says:

    You just can keep a cheap COP down.

    If oil does manage to go green, now down 70 APA probably reverses the $2 loss to a $2 gain on the day for you day trader types.

  60. 60
    Brian08 Says:

    CHK $40!!!!

  61. 61
    zman Says:

    B – yeah, it certainly doesn’t feel like a 200 pt down day around here.

    HAL up 25% on yesterdays 40 calls, I’m holding out for a move to $42 plus but it could go a lot higher…still very cheap and with SLB bouncing, hey, all the better.

  62. 62
    aitrader Says:

    Z – APC, any brief background info for the long position?

  63. 63
    O.W. Says:

    I’m sensing a ZEB Blast any moment now!

  64. 64
    zman Says:

    APC – biggest E&P (basically a mini major), gassy but less than it used to be so oil is going to help their bottom line this q and current at least, diverse, very smart guys, that Independence hub in the GOMex that just opened up with 1 Bcfgpd of capacity (largest gas prod in the gulf in a single facility) that’s theirs, bought Kerr-McGee and Western Gas last year and then sold off non core assets to retire debt…been hitting on all cylinders and is cheap to the group, lengthening reserve life and its run by a guy you would want to marry your daughter, Jim Hackett who used to steer Ocean Energy…very smart, very well liked by the Street. People thought he overpaid for the assets with what were at the time big premiums…now those guys probably can’t believe they helped him double his company up in assets so cheaply. Given their mix they are unlikely to disappoint, only worry would be cautious tone to gas prices but right now they must be ecstatic with where gas is and they have said they won’t curtail but will ride out almost any weakness in the near term as they see gas only going higher longer term.

    Their natural gas forecasting gurus are kept in a cold room with lots of computing power and that was 6 years ago when I went in there. Their supply / demand modeling on NG was something to behold.

  65. 65
    ram Says:

    Therefore ……..

  66. 66
    aitrader Says:

    (Note to self – why I joined Zman. The guy actually ate lunch at most of the companies he trades. Wow.)

  67. 67
    zman Says:

    Morning Ram… if you’re asking why I just wrote that AItrader wanted a little background on APC. We made good money on this one a few months back in the 40s and since then I’ve been watching it rise, and stupidly waiting for the pullback which never came. I’m mulling $60 calls front month for a trade on earnings.

  68. 68
    zman Says:

    Aitrader: Only in the E&P realm. Refining, oil service…um…drybulk, that’s all an ongoing project for me.

  69. 69
    scoop006 Says:

    Z Bought CHKKR on Oct 22 2.95 just sold @.2.80. Did I do right. ha ha. U Z BEST

  70. 70
    scoop006 Says:

    Re # 69 Bought @.95

  71. 71
    cattleman Says:

    Z Dec APC calls currently below theoretical value, IV around 35, and it trades, what are the odds?

  72. 72
    cattleman Says:

    Should have noted “at the money”.

  73. 73
    ram Says:

    Thank you.

  74. 74
    zman Says:

    Cattle – that’s the strike I like too!

  75. 75
    zman Says:

    Too quiet around here without Nicki

    check out NG up $0.20. Who cares about storage, everyone is thinking winter hits next week.

    Sam – any chance Noel keeps heading west instead of the predicted bend?

  76. 76
    Sambone Says:

    Noel – He’s heading to tha Bahamas man

  77. 77
    Sambone Says:

    BTW – Lovin my BQI

  78. 78
    zman Says:

    Thanks Sam:

    BQI aaarrrgggg. can’t kiss em all.

  79. 79
    ram Says:

    Info. on NIKI’S buddy public post, it seems he wants to be the modern day Joe Granville.

  80. 80
    QUARRYMAN Says:

    ZMAN,

    Hey, where do I find the ‘Holdings’ tab?

    Q.

  81. 81
    mimster90 Says:

    zman do you follow BQI at all?

  82. 82
    zman Says:

    Q – under subscriber data, zeb holdings at upper left of screen. I will update tonight, was going to do this morning but had some issues my option last bid quotes.

    Anyway, what’s in there now is from 10/26 and the only changes are listed in today’s holdings watch section of the post.

    Mimster – only out of curiousity…that’s a little more NAV work than I get into plus I’m mostly a south of the border guy. The plan seems to be prove it up and sell it before every a grain tar cover sand is refined.

  83. 83
    mimster90 Says:

    sorry, I posted #81 without refreshing thus I didn’t see #77, 78

  84. 84
    zman Says:

    Good opportunity on HK for those not in. Stock got off on the wrong foot with everything else this morning, then gets left behind when the bigger gassy names start to rally (NG up $0.24 now). Sounds like a recommendation but you know it’s not.

  85. 85
    Alhambra Says:

    FYI: China (Asia) – drybulks, steel, iron ore
    http://www.reuters.com/article/marketsNews/idLTAHKG9520820071101?rpc=44

  86. 86
    Nicky Says:

    Afternoon all!

  87. 87
    zman Says:

    Alhambra,

    That reminds me I got your email and but failed to put it in today’s post due to pilot error. Thanks for the headsup on FRO’s potential move to convert tankers to drybulks…there will come a time (probably late in 2008 from what I understand) where the tide turns for the tankers and against the drybulks caused by a shift in capacity.

  88. 88
    Nicky Says:

    Reading your comments on Kilduff Z – he is despicable! And now CNBC have him as a regular presenter so he is on every 5 minutes.

    Did you see that other guy (can’t remember his name now) say the whole oil thing was a load of B! He said the Iran thing was ridiculous and if they blocked the Straits of Hormuz the USA would have it unblocked in a heartbeat! Kilduff when the color of a tomato and looked a complete twit!

  89. 89
    Nicky Says:

    Energy looks like it has another leg lower to me. Cycles are pointing to a high for wti between 5th and 9th November. Distillates may come later in the month.

  90. 90
    zman Says:

    NICKY…they are rallying oil for you, lol.

    Alhambra…you know there’s probably a play on increased demand for drier coals (as they weigh less per ton). The western coals are often very wet…might even be a play in their for tiny EEE that dries coal out in its K-Fuel process

  91. 91
    Nicky Says:

    You thrown the hat away Z?

  92. 92
    zman Says:

    I’m sending it to you for consumption at $9 πŸ˜‰

  93. 93
    Nicky Says:

    I would be surprised if the don’t take oil over 100 but that said we have a fib level at 98.20.

  94. 94
    sheenka Says:

    Hello,

    Zman, I’am a new member. should I buy your open picks?

    Thx.

  95. 95
    Nicky Says:

    Lol! Looks like my $4 is delayed but its still out there!

  96. 96
    Nicky Says:

    9050 or higher looks doable Z before the top is in.

  97. 97
    Nicky Says:

    The open interest is what is gonna hold wti up short term methinks. As expiry gets closer they are gonna have to make their minds up though…..

  98. 98
    Nicky Says:

    Seems incredible that $2 moves a day have become the norm (in each direction twice!).

  99. 99
    zman Says:

    broad market whacking everything again.

    sheenka welcome!

    While I don’t make recommendations (no longer licensed to do that) I do tell you what I’m doing and right this second I’m holding off on further purchases. You’ll get a notice both here in the comment section and an email blast if you would like when I actually do a trade. If you’re look over the holdings list and want to get a quick feel for what’s more front burner in my mind right now you want to take a look at the cheap plays like HAL, CHK, NFX (cheaper than people think and I will add more soon) HK (ditto), COP (cheapest major), PQ (which isn’t on there but is likely to be soon), RIG (although again not right this second as it finally put in a new all time high for us this morning and I hate to chase). Not SU as that’s just not working out although it does have the virtue of time and may fall if oil suddenly calls in sick one day). OII I’m holding through earnings I’ve decided but am not adding pre earnings. That leaves BTU and TLM which again, I’m just holding for the moment.

    Thanks for subscribing and please ask questions

  100. 100
    Nicky Says:

    Broader markets have potential for a bit more upside in the next couple of weeks but ONLY if 1492.60 holds in the SPZ.
    Either way they should roll over after that.

  101. 101
    TTupp Says:

    blue horseshoe love Annacott steel

  102. 102
    zman Says:

    Re-read what I wrote this morning on SWN and I’m an idiot for not buying at the open, red day or not. I’m not doing it now but if this market will give us one more ugly look and drop it below a $3 gain today I’m in again. The big wells in the east of the play are driving analysts to the assumption that reserves are bigger. Add the longer laterals and the better completions they are getting and you get even more reserves. Suddenly this expensive, almost entirely gas name is less expensive.

  103. 103
    Nicky Says:

    Dollar getting close to an intermediate low and then should rally into the middle of next year. It could see a blow off low as far down as 75.40 but it is not essential.

  104. 104
    ram Says:

    NIKI – Imagine I am also holding up little RAM in front of you while I am asking this question – Didn’t the TA also say this was going to roll over before and money just keeps driving the S&P higher? Not a challenge and holding up little RAM in front.

  105. 105
    TTupp Says:

    xom holding down cop, what was the chatter to adding to the cop calls Z? what do you think about rolling the exm’s to december since we need like 20 in like a week and a half to B/E

  106. 106
    aitrader Says:

    TSO looking to break to the downside of 58 – most of the volume is in the downside moves today.

  107. 107
    Nicky Says:

    Ram – we haven’t taken out the highs and if you look at the charts this has been nothing more than a corrective move higher. That said I am not discounting a move to 1605 on the spx. But yes it has been slow. Tops always take much longer to form than bottoms and this one is no different! I have absolutely no doubt that this IS going to roll over.
    How is the gorgeous little one?

  108. 108
    Nicky Says:

    As I thought energy needs another leg down. It would have to take out 88.92 before we questionned a top of more significance.

  109. 109
    Sambone Says:

    Welcome back Nicky, missed ya.

    Welcome aboard Sheenka. You’ll have fun here and learn a bunch.

  110. 110
    Sambone Says:

    The famous talking head!!!!

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

  111. 111
    Sambone Says:

    12:27 pm EST

    Crude Down As Mkt Recovers From ‘Hangover’

    DOW JONES NEWSWIRES
    From MARKET TALK:
    [Dow Jones] Nymex crude continues trading slightly lower as traders assess Wed’s inventory report and Fed rate cut. “The market has just got a little hangover from yesterday,” says Andy Lebow, senior vice president at MF Global. The market is “just trying to find its bearings today.” Dec crude -33c at $94.20/bbl. (greg.meyer@dowjones.com)

    [Dow Jones] As oil slumps about $3 from its $96.24/bbl intraday high, one broker says volatility should be expected despite factors such as declining inventories, a weakening dollar and Middle East tensions, that are supportive of prices. “I think the market is going to be vulnerable,” says Tony Rosado of IAG Energy Brokers. “You almost have to give yourself a guideline of a $5 range when the market gets up to these levels.” Dec crude -$1.27 at $93.26/bbl. (greg.meyer@dowjones.com)

  112. 112
    Nicky Says:

    Tell me he’s talking $110 at least. I laughed as when I last read him despite all the ramping he didn’t appear to even be in a long position. Kept missing it.

  113. 113
    zman Says:

    Afternoon Tupp – COP …it almost came positive but that was probably 100 dow point ago. Thinking about the Nov 85s to add to my current and punting my 80s.

  114. 114
    zman Says:

    PF – sounding more and more like a politician, he seems to swing from bullish to bearish between sentences in his posts now. He said he had just started trading option a month or two ago…wonder how he’s doing matching that with the schizophrenia.

  115. 115
    TTupp Says:

    oh i have the 85’s, ACB of$265

  116. 116
    zman Says:

    those cop 85s are pretty sensitive, tried to pull trigger at 1.90 now we’re 2.05 x 2.10

  117. 117
    TTupp Says:

    kida big poition, but not looking to add out of economics not out of strategy since i went in big all at once. one of my fatal flaws; nevertheless, im up a few bucks over costs

  118. 118
    ram Says:

    NICKY – Thank you. Dominic got his 6mo. yesterday, shots etc. He is 31″ and 17lbs., cute as ever and wondering when he is going to back off on growing so fast! His 12 mo. stuff barely fits!

    P.F. was even more negative about everything in his public post. I think he is ready to call the end of the world.

  119. 119
    zman Says:

    T – yup, mine are a little higher than yours…think I’ll wait until we get a little close to the close to decide but nothing has changed here except that cracks are improving for them and they sell a ton of gas on a percent of production basis relative to their peers so $8.66 can’t be making them sad.

  120. 120
    sheenka Says:

    Zman, Sambone

    Thank you guys.

  121. 121
    TTupp Says:

    thats true forgot about gazzz. gartman was touting NG on fast money. what a sell-out, i used to get his weeklys at BMO, funny stuff, but smart guy- kinda a jack of al trades type tho

  122. 122
    zman Says:

    Sheenka – one other thing. I sometimes talk in strings of acronyms. If you’re an energy head that’s cool but it can be frustrating if you’re not. There is an acronym link (Z’s Dictionary) at upper left that should be of use to you.

    Everyone here (at least the ones that speak) are very helpful types. On any given day only about 15% comment but the others are out there and the information runs deep so feel to ask questions.

  123. 123
    Sambone Says:

    Question – If OPEC goes to a mixed currency basket that will be proposed at their upcoming meeting, what will it do to oil? Up, because it’s traded here in the states with the US$?

  124. 124
    Sambone Says:

    French government released 250,000 metric tons of crude oil from it’s strategic reserve on Monday because of shortages.

  125. 125
    scoop006 Says:

    Z looking @ APALT=Dec. $100C @ $5.80.Do you think the premium is to rich?

  126. 126
    zman Says:

    Sambone,

    Short term I think it means a continued rally as OPEC, which has massive $ stores, dumps them at an even greater pace than they have been of late. After that, I dunno.

  127. 127
    Sambone Says:

    Z – If SA delinks with the US$, watch out below.

  128. 128
    zman Says:

    Scoop – that’s another one we did well on a couple of months ago and then missed the after party run from the 80s to current in lockstep with oil. Premium is pretty hefty on that inflated IV and after such a run but at the same time I’ve got to say, $90+ oil, CFPS of $18.50 next year and that’s predicated on a oil price of $65 to $70 and a gas deck around $6.50 to $7.00.

    I’ll get back with you on that estimate once I confirm the average price decks the Street is using at present but what I’m getting at is holy cow, Apache is trading sub 6x cashflow and discounting nowhere near the current 12 month oil or gas strips. The same can be said for most E&P companies from a valuation standpoint at present…that the historical valuation norms would see the stocks higher than present given commodity prices but few of the have the linkage to oil that this oily one does. They recover when oil does so if oil is up a buck or two tomorrow, today’s loss gets erased.

  129. 129
    Nicky Says:

    Sam – are you talking watch out below for the $ or oil?

  130. 130
    zman Says:

    N – I would say $ down, oil flys at first.

  131. 131
    Sambone Says:

    130 agreed. US$ will go into freefall.

  132. 132
    Popeye Says:

    Nicky I have been waiting for your T/A on the broad market. Thanks!

  133. 133
    zman Says:

    Not even thinking about selling my RIG now. Got to wait on the Broker comments in the morning on both GSF and RIG and also the Cramer I told you so.

    My wife looked at some Italian print wallpaper the other day that I’m pretty sure worked out to more $/square inch than papering with greenbacks. Thankfully it was for a doll house.

  134. 134
    ram Says:

    SAMB – that goes back to the inquiry about which currency would appreciate more. AUS, CAN, JAPAN, EURO, etc. AUS has been on a tear, they have alot of natural resources per capita. CAN also.

  135. 135
    scoop006 Says:

    Z Thanks for reply #128. Please don’t do any extra work on my behalf. Thought you could just look at premium and determine if there was value to it. I will enter with a small position. Thanks

  136. 136
    ram Says:

    ZMAN -Which energy company’s would get the additional boost from not being tied to the $?

  137. 137
    Sambone Says:

    Ram – Here’s your answer.

    http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a7Yy4VHfagTQ

  138. 138
    scoop006 Says:

    Z I have some really beautiful S&L stock certificates circa 1989 that Mrs.Z could paper the wall with

  139. 139
    zman Says:

    yuan / PTR

  140. 140
    ram Says:

    SAMB – Thanks. I also own Chinese stocks in my 401k that have given it an additional boost. The same subscription also rec a dry bulk stock as well that I purchased the stock and call options today. I do not want to upset ZMAN’s esquire by being more specific.

  141. 141
    ram Says:

    Thanks ZMAN!

  142. 142
    texana Says:

    z i know u don’t follow dnr but their co2 projects are tremendous and they have the only natural source east of the mississippi and they are building a pipeline to texas where they are going to buy more co2 fields take a look thx tex

  143. 143
    zman Says:

    still can’t keep a cheap, good COP down.

    Ram – you’re a funny guy.

    Funny how the cheap ones are doing well in down 225 point dow and down $1.08 oil session.

    HAL, RIG, CHK, – not just cheap but also very liquid.

    VLO should be on that list but is feeling the pull of TSO despite the fact that cracks had yet another good day today.

  144. 144
    zman Says:

    texana – I have a bottle of wine, something like eua de crude on my mantle from I think the french concern that is a partial owner them. I remember you asking before, and I will look tonight. They still oily and doing lots tertiary floods…they sell the excess co2 right, how’s that price these days?

  145. 145
    TTupp Says:

    my streamers bleeding, plus i havent been out of the house in 2 days…… im out. hopefully tomorrow will bring a sea of green

  146. 146
    ram Says:

    ZMAN – Is CHK running again?

  147. 147
    texana Says:

    z from erngs report today: est prod for 2008 47,500boepd a projected organic growth rate of 25%. I don’t find anything about the french wine co anywhere there is a canadian co that trades under dnr symbol that may be assoc with the frenchman. I think they use all the co2 they produce and have a deal to buy coal emmission co2 in the future from new coal plants

  148. 148
    Nicky Says:

    Popeye

    Looking for a 3 wave bounce off whatever low we make here (1515 would look nice) but we may have already bottomed – target area is 1540 to short.

  149. 149
    zman Says:

    texana – it was Beringer which I think is California, not France, and they owned some Denbury stock back in the 1990s a printed up some DNR labels. I never opened it because I thought the bottle looked cool but I’m sure it didn’t have the structure to make it 10 years being a low end 1997 Cabernet.

    label is Premier Cru De; Chateau Denbury. You can google meridian vineyards denbury and see they owned

    Anyway, will look

  150. 150
    Nicky Says:

    Non Farm could even take us a low as 1500 tomorrow.

  151. 151
    aitrader Says:

    TSO fighting valiantly to stay above 58.

  152. 152
    aitrader Says:

    Beringer – is in Napa, CA. Bought out by Nestle in 1972.

  153. 153
    zman Says:

    TSO. yeah, its the broad red tape and not the stock itself. everything is starting to get pantsed.

  154. 154
    Sambone Says:

    TRIN just jumped. She’s (DOW) roiling over.

  155. 155
    aitrader Says:

    TSO – look out belowwwwww…

  156. 156
    Popeye Says:

    OIH going down with the market.

  157. 157
    Alhambra Says:

    Gulf states follow suit and cut rates:
    http://www.bloomberg.com/apps/news?pid=newsarchive&sid=anhyaVpPVi_Y

  158. 158
    zman Says:

    Alhambra – I guess its not just Bernanke that is relatively unconcerned about inflation.

  159. 159
    Sambone Says:

    Inflation? What’s that? I thought that it’s all about saving Wallstreet. See “Cramer meltdown”.

  160. 160
    Sambone Says:

    Helicopter Ben cranking up his printing presses.
    http://biz.yahoo.com/ap/071101/fed_markets.html?.v=2

  161. 161
    O.W. Says:

    Volume on this day is relatively low compared to what you’d think…

  162. 162
    cattleman Says:

    Is this a head and shoulders top we see on the OIH, is it time to be looking on the other side of these trades? Inflation – hmmm $8.00 wheat, $10 soy beans, and the fertilizer (oil derived) used to grow all this stuff cost twice what it did 5 years ago.

  163. 163
    Alhambra Says:

    They’re forced to at this point.
    http://www.sama-ksa.org/en/news/2004-10/3.pdf

  164. 164
    Sambone Says:

    5 minutes to go and it looks like the DOW will be down 400, IMO.

  165. 165
    Alhambra Says:

    Don’t forget your economic history: the Plaza Accord in 1985 and the Louvre Accord in ’87

  166. 166
    zman Says:

    Fundamentals don’t bear out a put trade on the OIH…everything continues to get better for a majority of the makeup of the index.

    A – rock and a hard place

  167. 167
    freeflow Says:

    what usually happens after a big down day – more red or a bounce?

  168. 168
    freeflow Says:

    more red… I’m so happy I have 60% cash…

  169. 169
    aitrader Says:

    Z – one more red day and time to punt SUxs or will you hold off a bit longer?

  170. 170
    zman Says:

    FF – I’m not a TA guy but in general if you close at the low, you open lower. If you have a big down day with a recovery near the close, you can go either way. And a full or near full reversal is bullish. However, we have more data in the morning that could help recover some of the day’s loss or exacerbate theme.

  171. 171
    zman Says:

    Probably bail in another week or two. First, oil now looks to me at least more likely to recover and get to new highs before falling back into the 80s and second, it’s full of hot money and people talking about how Alberta’s tax regime doesn’t hurt them when I wanted to be short not just for down oil but also b/c the thing is not exactly cheap when you consider it’s a refining operation, with no upside other than price (growth comes slowly in lumpy increments) and long term costs continue to climb there. I won’t hang on to it forever just because I think I’m right.

  172. 172
    zman Says:

    TSO – finally got into the replay.

    thoughts:

    q4 earnings to look like q3 earnings which means #s are coming down 4q by about half unless crude falls and products rise or at least crude falls and products maintain. That’s not surprising since cracks so far only up slightly from 3Q averages on the west coast and pac nw

    Tricenda has not yet formalized the offer, but once they do TSO has 10 days to respond. They had no comment. I’m going to hold a little longer and see if what has begun to look like a crude / product convergence catches on.

  173. 173
    zman Says:

    out for a bit

  174. 174
    aitrader Says:

    Z (or anyone) – ? on IV. Folks talk about “low” IV versus “high”. Where does IV seem “low” vs. “high”?

  175. 175
    TTupp Says:

    al trader: spend a few hours on this site: http://www.ivolatility.com punch in tickers at the top and select “basic options” in the drop down menu to the right of where you type n the ticker.

  176. 176
    TTupp Says:

    click on the chart of the contract index on the right after it loads your company’s screen and look at the charting over the year of the index of the implide volatility of that particular stock.

  177. 177
    TTupp Says:

    didnt exm report today?

  178. 178
    O.W. Says:

    T : Nov 13th – after close

  179. 179
    ram Says:

    OII reported today.

  180. 180
    TTupp Says:

    OW, re:178- in Z’s earnings calendar it says they repot today, and DRYS reports the 13th

  181. 181
    zman Says:

    T – EXM was last shown to be tonight on Yhoo but it does not show up any longer and Thomson is not saying either. Still show DYRS as 13th

    OII beat pants off estimates tonight. Guidance is up for 2007, 2008 mid point of range is in line with current ’08 consensus.

  182. 182
    TTupp Says:

    oh, i hope they arent going to stall the date that is never good….

  183. 183
    zman Says:

    T – agreed, rarely good unless there’s a deal in the works that they want in the pr. Don’t think that’s the case here or that they have delayed…think its a squirrelly original report. I don’t find a PR for them saying when they are going to announce.

  184. 184
    scoop006 Says:

    ZMAN, My understanding is when the RIG/GSF merger is completed RIG stockholders receive $33 cash dividend and shares in the new entity.How does this affect the value of RIG calls.

  185. 185
    zman Says:

    Scoop,

    Here’s the latest memo I have on that.

    http://www.optionsclearing.com/market/infomemos/2007/oct/23704.pdf

    Shareholders meet on 11/9 plus they need a Caymen court’s approval. They still expect to close before year end but it may not happen in November.

    According to the deal, if approved RIG holders will get .6996 X RIG + $33. The parity on that trade is about $109. At the current price of $121.47, you would get $118 the next day. I personally plan on taking a vacation from the stock from the day before the shareholders meeting to just after it closes as it can get a bit messy and there are often delays in your ability to sell an option that is having it’s symbol changed.

  186. 186
    aitrader Says:

    Zman – just saw BB TV reporting “Baltic Dry” on their rolling ticker. I assume they are now reporting this just like other indexes.

  187. 187
    aitrader Says:

    Zman – sorry to pepper you with early morning ?’s.

    If you have time, what do you think of Helix Energy? They beat Q3 earnings and expectations but production declined slightly due to delays in field startups. The street punished them with a 5.6% drop yesterday. Seems their might be worth a look for a rebound..? Dec 2007 45 calls are $2, which on a pure “IV” numbers basis is 77.78% – still their 52 wk high is 47.35 and energy is on a tear so my gut says watch them for a day and buy on further weakness.

    ??

  188. 188
    zman Says:

    Aitrader- HLX that’s run by Robert Murphy, the ex head of exploration from Remington Oil and Gas. Very smart, very good gas finding guy on the GOMex Shelf. Delays are a fact of life anywhere and especially offshore and Street is often unreasonable.

    Thanks for the headsup will have a look.

    Good to see Bloomie has a BDI feed, I wonder if their website will have delayed access to it?

  189. 189
    zman Says:

    should have said that Robert runs the oil and gas side of the business, not the servicee (ex Caldive part)

  190. 190
    zman Says:

    Scoop – did you see my thoughts re RIG and the deal?

    Also, BTU pricing got interesting yesterday with their spin out.

    reading the HLX transcript now.

    stocks looking for pretty good open;

  191. 191
    zman Says:

    HLX – Ok, good on the service side, as you said a bit softer than expected on the E&P side. Will look at more over the weekend but the responses of management were spot on with accepting responsibility for setting the bar a bit too high for the division which goess a long way in my book, will look at more over weekend as have not run valuations here in awhile but they are solid guys and it looks to have been an overreaction.,

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