12
Nov

Monday Morning and all is Red

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Commodity Watch:

  • Crude Oil: Off $2.50 to $93.80 as Saudi Arabia hints at the possibility of an output hike to curb rising prices.  Look for quite a bit of volatility as we have contract rollover tomorrow and an unusually high number of calls are outstanding at the $100 level which could draw prices higher despite Saudi's comments.
  • Z Comment: OPEC make up your mind. OPEC has long said the 40% rally in crude prices since August is not the result of lagging production or accelerating demand but is the work of evil speculators; now it appears maybe a hike is planned to curb prices ... hmmm sounds to me like its about curbing the speculators and that as such any "hike" would likely be more talk than action. There was no mention of a "need" to hike output due to the supply/demand balance. Saudi wasn't clear when it would consider this and there is an OPEC heads of state meeting this week in addition to the regularly scheduled full meeting on December 5th so we may have what amounts to an emergency volume hike.
  • This is a tough call for Saudi because analysts, traders, and the press are constantly speculating on Saudi's near term ability to increase volumes, the "Peak Saudi Theory" which they work very hard to combat. If they say they are going to increase output then the bulk of the incremental volumes must come from Saudi Arabia and you can bet that the tanker trackers will be working overtime to "prove up" any proposed increase. 
  • North Sea recovery to be short lived. According to Bloomberg ~ "daily shipments of North Sea Brent crude, will drop by about 21 percent in December." No reason was given in the article but it most likely majority maintenance related although some small amount of damage from last week's storms will keep 200,000 bopd off line early this week.
  • China Imports Hit 7 Month Low in October. Imports ran 2.98 mm bopd in October, down 7.3% from September and the second lowest level of imports this year (February was the lowest). This still represents a 16% gain over October 2006 but fuel shortages and gasoline rationing are becoming widespread as China tires to slow growth while oil remains above $90.
  • Natural Gas: Off $0.12 to $7.78 in early trading. It's not cold enough to sustain $8+ NG at present. See weather map below.

Weekend Wrap Watch: click here for the weekend wrap

Most Interesting Graph and or Table from the Wrap: Drybulk Shippers.

  • EPS Are Rising, Not Falling.
  • Spot rates remain at or near all time highs. See graphs below.
  • China's Sinotrans may  IPO in bid to increase fleet size. They say they will increase their fleet of 26 dry bulk carriers by 4 fold. Good luck finding the capacity to get that done anytime and you better raise more than the $1.5 B planned because that's not going to come close to cutting it. They will likely come public, I'm not questioning that, but this looks like more of a ploy to suggest exploding shipper tonnage in vain an attempt to drop spot rates.
  • What to do: I'm watching and waiting and looking longer. I would expect a continuation of the decline (at least today) as these stocks are joined at the hip with the broad market and it expected to open down again today.  I need to see some signs from industry leader DRYS of support in the mid $90s. Mimster asked over the weekend if leaps here make sense which is a great question and one I'm not sure about yet. There will of course come a time when the group will be back in "Blue Horseshoe loves Anacott Steal" status but I don't know when that will be. I suspect that once annual contract negotiations are settled with the China this month.

drybulk-110907.jpg

CFTC Watch. CFTC shows shorts are still betting on a warm winter

cftc-110907.jpg

Warm Winter Watch: While HDDs hit a season high 123 last week, which should help gas to see its first withdrawal of the season, warmth was quick to reassert control of the weather picture  and this week the CPC is predicting HDDs fall back to 100 this week. 

red-map-111207.jpg

Tupi Watch: Largest Oil Discovery Since 2000. The estimated 5 to 8 billion barrel discovery off the coast of Brazil is not only good news for (PBR) but also for the deepwater service companies of the world as this discovery is the biggest deepwater discovery on record. According to Wood Mackenzie:

“Development of subsalt resources in ultra-deep water presents major technology challenges. Seismic imaging of the reservoir may be poor, making estimation of reserves difficult and location of production wells hard to optimise. Subsalt fields elsewhere in the world have experienced drilling problems that have slowed production build-up. These challenges are particularly acute given the high cost of wells in ultra-deep water.”

Good news for everyone from the likes of Petroleum Geo Services (PGS) to (RIG), (DO) and (OII). 

Odds & Ends:

Analyst Watch:  (HAL) and (BHI) upped to Buy at Bernstein, (APA) to hold at Bernstein, (IMO) to hold at RBC.

109 Responses to “Monday Morning and all is Red”

  1. 1
    zman Says:

    $94 was spoken of on CNBC early this morning as the level which if breached would bring out a tsunami of selling.

    We just went through it and they were not wrong. Of course where we close could be a completely different matter. Right, now the dollar is especially strong which is not helping oil as it tries to recover.

  2. 2
    freeflow Says:

    DryShips-DRYS announces a 3-for-1 stock split
    The Board intends to conduct a 3:1 split of the Company’s outstanding common stock in the form of a stock dividend. :theflyo

  3. 3
    O.W. Says:

    Z, good morning!
    What’s your strategy for the remaining November positions? last week for them and time premium is spiraling down fast… are you looking for any bounce or specific events down the week that could propel them up a little?

  4. 4
    zman Says:

    We’ll open very red today and like you say, I’ll be looking for bounces to exit. It’ll look its worst today or tomorrow but Wednesday’s oil report will be key. I may still do some adds in search of a recovery in names like VLO, HAL, COP but for the most part I’ll just be looking to go into Dec or Jan.

    FF – thanks re DRYS. Stock splits are such an unnecessary game people play. Would have rather seen a real dividend.

  5. 5
    Sambone Says:

    9:09 am EST

    LATEST ON OIL Format For Printing

    Crude Drops As OPEC Hints At More Crude

    DOW JONES NEWSWIRES
    From Market Talk
    [Dow Jones] Nymex crude drops amid talk from OPEC officials that another output boost could be in the cards. Dec crude -$2.20 at $94.32/bbl. Saudi Arabia’s oil minister said a boost would be discussed, though he wasn’t clear whether this would be at the OPEC heads of state meeting at the weekend or the oil ministers’ meeting in Dec. An OPEC official seperately said the Saudis are pushing for another 500,000 b/d in the market, with a decision possible as soon as this week if prices push toward $100. (matt.chambers@dowjones.com)

    1257 GMT [Dow Jones] News of a fire in East London, which has sent a plume of smoke over the city, has failed to worry the oil market. Trader says Scotland Yard’s belief that the fire isn’t terrorism-related has prevented the market getting “overly excited” but players will still keep a close eye on developments. “This market is bid up enough without the need for any new risk premium.” ICE December Brent -91c at $92.27/bbl. Nymex Dec crude -138c at $94.94/bbl. (DWE)

  6. 6
    freeflow Says:

    exactly what I was thinking Z

  7. 7
    zman Says:

    oil trying to hold 94…stocks obviously very red but the downward spiral seems to have abated and is tracking the minute chart for crude.

  8. 8
    O.W. Says:

    there’s our little market bounce.. so far lately, all of these have been met with harsh selling afterwards

  9. 9
    TTupp Says:

    Z- re: Tupi, i was doing some reading over the weekend and DO is probably pretty exclusive to the offshore activity from PBR

  10. 10
    TTupp Says:

    their only drillship is located their

  11. 11
    zman Says:

    #9 – It’s a massive project…can’t see how one operator could handle the demand there. Are you saying up until now DO has worked for PBR in the deep?

  12. 12
    TTupp Says:

    well im not saying they have the whole contract, but thats where their drillship is and where 12% of their 2006 revenue came from. i can see that balooning, and being bullish for dayrates all over– not like you would know it today

  13. 13
    TTupp Says:

    plus they have 2 new semis’s coming online, and two newly repaired ones also, going from 10-14 operational. im liking this company

  14. 14
    Sambone Says:

    Good article in the WSJ today (C-1) on “Ahead of the tape” in regards to the volitity of this weeks energy market. It talks about the options and futures expiration and how it could drive the energy market down. It’s behind a pay site, but I’ll try and find a link.

  15. 15
    zman Says:

    T – that’s great info and nice for my transition idea to DO from RIG at least in adding DO. Once a company has one rig with a national oil company it’s easier for them to get more.

    The broad market may regret getting its wish for falling oil as energy is at least 15% of the S&P. Big bloody day like this and the stocks won’t be able to escape the pull.

  16. 16
    Sambone Says:

    Why Wall Street May Let Air Out Of Oil Balloon
    By ANN DAVIS
    November 12, 2007; WSJ Page C1

    This is shaping up to be a hugely important week in energy markets. The hot oil balloon could rise to $100 a barrel. But don’t be surprised if Wall Street — driven by a mountain of expiring futures and options contracts — steps up and pricks it.

    The sheer speed with which oil has risen could intensify second-guessing as its price hovers near three digits. “Holding that number is going to require a lot more than just a belief in a momentum trade,” says Ben Dell, energy analyst with Sanford C. Bernstein & Co. He says the market is hardly acknowledging that amid oil’s climb, U.S. gasoline demand has slipped.

    Some analysts believe derivatives markets could be making a “Great Unwind” in oil inevitable. Trading desks at big investment banks — from Goldman Sachs Group and Morgan Stanley to Lehman Brothers Holdings — have been active players this year in crude-oil options, which give buyers a right to buy or sell the commodity at a set price in the future. The banks’ role, and the hedging they do to neutralize their exposure, can have a huge influence on crude prices.
    In a recent report, Lehman analysts point to earlier this year as an example. Many oil producers wanted to hedge themselves against falling oil prices. The producers made bets with Wall Street market makers to protect themselves, Lehman says.

    As part of the series of trades that ensued, Wall Street firms gained rights to buy oil at $70 and $80 a barrel. In their efforts to hedge their own positions, Lehman says, the investment banks became sellers of oil, acting as a weight on the market. When the options came into the money, Wall Street removed the hedges. Their selling pressure came off about two months ago and helped lift oil prices.

    Another batch of options and futures expire this week. This time, rather than being a weight on the market as they had been earlier, many trading desks have been fueling it, says Lehman. That is because they have sold options to investors, including hedge funds, to buy oil at $100 a barrel. The closer it gets to that price, the more the investment banks buy oil to hedge.

    Lehman warns a “free-fall” could follow when the investment banks stop their hedge-driven buying after options expire tomorrow. Futures contracts expire Friday. At the very least, says Lehman’s chief energy economist Edward Morse, this week “could be one of the most volatile weeks for oil in years.”

    How big a deal are these machinations? As of Friday, says Lehman analyst Adam Robinson, 30% of all contracts to buy crude at $100 on the New York Mercantile Exchange were set to expire tomorrow.
    Of course, other factors drive oil. The weak dollar supports oil, in part because investors buy it as an alternative to the cheapening currency. Strong demand in developing economies puts upward pressure on oil. And ministers of the Organization of Petroleum Exporting Countries gathering this weekend will shape the supply outlook for crude.

    But when oil rises as far and fast as it has the past few weeks, one has to wonder about the role of Wall Street’s financial engineers. By the end of the week, you will know a lot better.

  17. 17
    Sambone Says:

    9:47 am EST

    Nymex Crude Slides More Than $2 On OPEC, Dollar

    By MATT CHAMBERS
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures slumped to a more than one-week low Monday, pressured by a stronger dollar and OPEC comments that a boost in crude oil production could be in the cards.

    The move prompted traders to lock in recent gains and damped speculation that a big number of outstanding $100 call options, or rights to buy crude futures at that price on the New York Mercantile Exchange, would draw prices to the triple-digit level ahead of the December options contract expiring Tuesday. The move would now need a more than $6 a barrel jump in the next two sessions.

    “The market may now have to wait until next year for its attempt at $100 a barrel,” said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago. “The comments from OPEC have provided a good opportunity for profit-taking, but I think even without them prices would be under pressure from the stronger dollar.”

    The front-month December light, sweet crude contract on the New York Mercantile Exchange was recently down $2.39, or 2.5%, at $93.93 a barrel. Brent crude on the ICE futures exchange fell $1.84 to $91.34 a barrel.

    Saudi Arabia, the world’s biggest oil exporter and the de facto leader of the Organization of Petroleum Exporting Countries, is likely to push for an extra 500,000 barrels of daily output by the group if oil prices continue to move toward $100 a barrel, an OPEC official said Monday. The comments come after Saudi Arabia’s oil minister, Ali Naimi, indicated the 12-member oil cartel may discuss a production increase at their next meeting. Naimi didn’t specify whether he meant an OPEC heads of state meeting this weekend or the formal oil ministers’ meeting in Abu Dhabi Dec. 5.

    OPEC agreed to raise output by 500,000 barrels at its Sept. 11 meeting amid concerns vaulting prices could hurt global economies. This did little to slow crude’s relentless rise to past $90, with prices up 20% since the meeting.

    Also weighing on prices, the dollar was higher against the euro Monday, boosted as an overnight drop in Asian stock markets led investors to seek shelter in the greenback. Early Monday, the euro was at $1.4572 from $1.4676 late Friday. Recent U.S. dollar weakness has played a big part in crude’s recent advance, making crude futures less expensive to traders with other currencies and blunting any negative demand effect in other countries.

    Traders said crude was also being weighed down by concerns about the U.S. economy after recent credit market woes pushed the stock market down last week.

    Front-month December reformulated gasoline blendstock, or RBOB, fell 5.85 cents, or 2.4%, to $2.3975 a gallon. December heating oil fell 4.73 cents, or 1.8%, to $2.5715 a gallon.

    —By Matt Chambers, Dow Jones Newswir

  18. 18
    zman Says:

    Thanks Sambone

  19. 19
    Sambone Says:

    Another article on the options and futures this week.
    http://www.chron.com/disp/story.mpl/front/5293445.html

  20. 20
    Sambone Says:

    US Dollar up today, I guess that is hurting oil somewhat.

  21. 21
    zman Says:

    Z TRADES:

    Bought:

    APC December $60 Calls for $1.25

    DO December $115 Calls for average $3.50

    COP November $80 Calls for $1.55 (expires this week)

    HAL November $37.50 Calls for $0.50 (expires this week)

  22. 22
    O.W. Says:

    think you have a typo there or something on the APC Dec ??

  23. 23
    zman Says:

    Ah yes, that’s the $60s of which I already have some. Sorry, one of the problems of typing too fast.

  24. 24
    TTupp Says:

    nice support on DO @ $108

  25. 25
    TTupp Says:

    one of my trading downfalls is that i have a hard time buying on down days, but i think today looks corrective, and in the words of Nicky, have another leg down. te retail sales #’s wed might have a hand in this because of the warm fall and not so warm sales

  26. 26
    zman Says:

    Sambone: just finished that second article. Have you notice a change in the press articles with those two? Seems they are backing the bear trade now. They’re interviewing different guys than the norm. If I didn’t know better I’d say there was some bias here, lol. That ending paragraphs in the Chronicle are great description of the likely action this week although I have trouble seeing oil make a run to get anywhere close to $100 unless something breaks somewhere and they can hype it.

    T – agreed. This market is not to be trusted though as oil is all over the map this morning. On trading on down days it’s pretty tough.. I try to stick to convictions and not just trade big moves down though as that can kick your head in. If this were Friday I’d be pretty irritated with myself right now. As it is, my scud count (or at least substantial loser count) will be high this month.

  27. 27
    TTupp Says:

    its all about the law of large numbers lol

  28. 28
    TTupp Says:

    you got to love the stock market, and more specifically energy stocks. i have some ccj calls and the stupid ting is down today on absolutely no news. in fact all the fundamentals are all in place for this stock and uranium prices. maybe it was cramers non endorsement in the lightning round.. lol

  29. 29
    apbd Says:

    Z: Are we waiting on Nov FTO or jumping ship?
    apbd

  30. 30
    TTupp Says:

    down 7% i mean to type

  31. 31
    zman Says:

    somebody figure out how NG is aloft this week. The promise of the season’s first withdrawal? Big deal, next week’s report will be a return to builds unless the weather drastically changes.

    re FTO: I’d like to see what futures opex tomorrow (big possibility of a crude rally) and if not that then Wednesday’s oil number bring. I should have punched out and gone long last week I know when the trade was back positive. 20/20 hindsight and it got taken down on sub prime, not fundies…ug

    T – I hear ya, for instance CHK down 2% on a day when gas is holding up but oil is off 2%. Their production is 92% NG…people are just selling energy down on days like this almost doesn’t matter the name. Although VLO/TSO are barely green and we are off the lows

  32. 32
    TTupp Says:

    yea did you se the volume in the vlo dec 85 calls?

  33. 33
    TTupp Says:

    do guys like rig esv and do have receivables in foreign currencies?

  34. 34
    zman Says:

    No I didn’t

    Nov 72.50s > 5K today
    Dec 85.00s > 6K today

    sounds like somebody is buying the 72.50s and writing the decembers to cut their cost.

    not a big fan of ESV…don’t know about receivables…would assume they have some.

  35. 35
    TTupp Says:

    you gotta love how etrade is trading at 4$ a share. 3x’s next years numbers

  36. 36
    TTupp Says:

    tough crowd today…

  37. 37
    zman Says:

    do you like their cust service? I’ve not heard a lot of compliments.

  38. 38
    Denise Says:

    Good morning
    I am selling my financials-better early
    and lucky(plus I am out of town next week)
    FYI-My t/a newsletter mentioned drys and dsxlast night(also note she is generally early)
    said although she thinks drys is rounding top-has support 90-95 and should
    bounce to 110-115 and dsx 36-38

  39. 39
    Denise Says:

    She also thinks until her intermediate indicators line up -no lasting rallies-

    Question-been pondering the oil tankers-if oil is correcting-might it be time to nibble on a few? They seem cheap-but I know little
    Also I intially missed Bill’s response-he seems very knowledgable-is there a way to post late night comments the next morning? Never check site after close
    Thx

  40. 40
    TTupp Says:

    i dont trade with them

  41. 41
    zman Says:

    D – thanks for the bulk ship tidbit…could use all the help I can get there. They are exceedingly cheap and growing fast…and still falling without regard. Hear ya “no lasting rallies” …lot of fear and over reactions.

    Bill said stay away from tankers. I’ll try to pin him down on it as I was thinking the other day that since the seasonally weak period is approaching and we may be seeing more traffic shipped by OPEC their might be a play there.

    T – me either.

  42. 42
    TTupp Says:

    etrade canada is a whole different animal. i hope they arent anyworse that td waterhouse- they are completely shit

  43. 43
    TTupp Says:

    what do you use z if you dont mind me asking?

  44. 44
    zman Says:

    street smart pro and thomson

  45. 45
    Denise Says:

    Just read that crude and gold open interest and net commercial futures positions are very bearish.
    Dollar up oil down makes sense
    (for a short while)
    I am back to even on my long dollar-should have waited until that rapper demanded to be paid in euro’s-was too early on the model they are sharper than rappers!
    Bill might think differently now they dropped so much

  46. 46
    redjack Says:

    if you are thinking about tankers, keep a lookout on this site..http://www.intertanko.com/templates/Page.aspx?id=18831

  47. 47
    Denise Says:

    Thank you redjack–might the market anticipate a turn (if oil corrects)even though the rates do not looked like they have changed yet? They will go up if oil drops correct?
    Just learning about your energy world-

  48. 48
    aitrader Says:

    ATHENS, Greece, Nov. 12 /PRNewswire-FirstCall/ — Diana Shipping Inc. (NYSE:
    DSX), a global shipping company specializing in the transportation of dry bulk
    cargoes, today announced that it has entered into a time charter contract with
    Jiangsu Shagang Group Co., Ltd, People’s Republic of China, for one of its
    Panamax dry bulk carriers, the Dione, at a gross rate of US$82,000 per day for
    a minimum twelve (12) to a maximum fourteen (14) month period.

    This employment is anticipated to generate approximately US$29.1 million of
    gross revenues for the minimum scheduled period of the charter. The charter is
    expected to commence at the middle of January, 2008.

    The Dione is a 75,172 dwt Panamax dry bulk carrier built in 2001. The
    previous time charter contract for the Dione was at the gross charter hire rate
    of US$28,500 per day.

  49. 49
    zman Says:

    Nice nibbling on PQ

    D – I agree, he may have changed mind with the beat down

    RJ – long time no chat! Smooth sailing I trust. Thanks for the link, will check into.

    Why market so happy today, can’t be down oil …wouldn’t think dollar down would be it. This knee jerk recover does not look sustainable in the Fins.

    D – rates are in a seasonal slump but they should head back with increased demand and also a greater than usual number of tanker retirements, and conversions to bulk shipping and to FPSO vessels.

    AI – that seems to be the new Panamax rate of late. It’s spot on with what DRYS got two weeks ago for a couple of their ships. Very high rate when you look at history and the discount to spot is not that great….means only one thing…Chinese know what the real demand is and they are trying hold spot down to grab more charters. Thanks.

  50. 50
    redjack Says:

    Z & D…the 3rd qtr was bad the 4th qtr is usually the best for tankers, however 1/2 way thru this quarter and rates are at or about break even. This could effect earnings for the 4th qtr. Also the price of some of these stocks is supported by hefty dividends, which aren’t so hefty right now.

  51. 51
    zman Says:

    DRYS: unreal, down $9, below $89 now.

  52. 52
    aitrader Says:

    Did you guys see the DRYS split?

    ————————-

    DOW JONES NEWSWIRES

    DryShips Inc. (DRYS) on Monday said it will ask shareholders to vote on
    whether to issue a three-for-one stock split.

    The Athens-based carrier said its board of directors plans to call a special
    meeting of shareholders to approve an amendment to increase its authorized
    common stock.

    The shares will be issued in the form of a stock dividend.

  53. 53
    zman Says:

    yeah, freeflow caught it early this morning. At the time I said I would rather have seen a real dividend, not a split. Splits are stupid…can’t find any other news for this sell off can you?

  54. 54
    aitrader Says:

    No, think it’s partially market lag on the Chinese rates news together with the breakdown in the momentum psychology for DRYS.

  55. 55
    zman Says:

    agreed but this downturn is waaaayyyy overdone…. and with the market up this marks a new turn events. Pure profit taking taking hold.

    Oil bouncing to 94.80… stocks not really following it. Big bounce in natural gas…also no effect on gassy energy

  56. 56
    zman Says:

    here they go for $95…APA down 5% is tempting here. Also tempted to cover the SUxs trade.

  57. 57
    zman Says:

    RJ – thanks re 50…somehow missed it. Any idea what’s keeping rates down?

  58. 58
    Sambone Says:

    Kinda looks like the crowd is exiting a bit from the group to me.

  59. 59
    Denise Says:

    Looks more like someone yelled fire to me

  60. 60
    zman Says:

    The % moves would tend to agree with you. No regard for if a stock is “cheap or not” …They are just looking at once down and selling it. Looking more like panic now.

    4% off the OIH. Looks almost like Goldman with a negative group call although I have not seen anything.

    Having too much fun now. Usually when I start feeling green it’s about to turn (however temporarily the turn may be). We shall see.

  61. 61
    ram Says:

    Would FASB rule 157, which goes into effect this Thursday, get investors nervous about more negative disclosures of American company’s or International company’s disclosures for the first time?

  62. 62
    Sambone Says:

    Ram – I would say yes, but with this crowd, who knows.

  63. 63
    zman Says:

    This is blood in the Street panic time and I agree with Sam’s sentiments in 62…they’re not thinking that much…many of the worst performers today were making 52 week highs late last week like DNR. If you can stomach it those stocks will rally again but if we close on the lows I’m going to take some puts

  64. 64
    zman Says:

    not in DNR mind you but against an index.

  65. 65
    ram Says:

    Thanks.

  66. 66
    zman Says:

    If Cramer is going to quote me he can at least give me credit for the free sub I gave him, LOL. He just said

    SLB did not have a great quarter, HAL did have a great quarter, how about buy HAL which is cheaper anyway and sell SLB…sounds familiar.

  67. 67
    Brian08 Says:

    The SUXS trade is finally looking good Z…One of the only bastions of green in an otherwise red day…

  68. 68
    zman Says:

    B – you know its a bad day if that trade is starting to work. Only green on my screen is VLO, ooops, nevermind.

  69. 69
    Brian08 Says:

    You know its a screwed up day when the financials are up 4-5% and the oils are down 4-5%…

  70. 70
    zman Says:

    NXY falling 7% today after being UPGRADED by RBC.

    Berstein raised its rating on HAL this morning.

    The Crowd just isn’t listening. I’ve seen some comments from analysts calling this an “over reaction”

    B – hear ya, glad it’s Monday and not Thursday. Still sucks though.

  71. 71
    Sambone Says:

    Brian – Finacials = “What, me worry”? GS has hmmm 76 billion of Toxic, level 3 now. The party aint over for the writedowns worldwide, IMO. More to come, and then watch out. See# 61

  72. 72
    zman Says:

    Sambone – it’s just a trade to the crowd and they are flushing cheap to buy stocks that are trading near their 52 week lows. There’s a difference between being cheap and trading at the 52 week low. Like you say, there is a lot of unknown to the earnings future for the financials …they are quite possible expensive on forward earnings and we just don’t know it yet.

  73. 73
    Sambone Says:

    Kinda reminds me of Batman and Robin this market does.
    Robin: “If we close our eyes, we can’t see anything.”
    Batman: “A sound observation, Robin.”

    Note – Tha crowd don’t likum COP today.

  74. 74
    zman Says:

    XOM CEO said he expects global oil supply to catch up to demand in 2-3 years. Sees 2008 as tight market.

  75. 75
    Brian08 Says:

    Of course Sam…Bonuses are being locked up for these guys as we speak (at least a buddy of mine told me his is getting locked up in the near future)…Once that is done, THEN the fecal matter hits the rotating propellor…

  76. 76
    zman Says:

    energy at lod

  77. 77
    Sambone Says:

    GS = 16.9 Billion for bonus’s for first three quarters of 07. The Mask “Thank you, you love me, you really love me”!

  78. 78
    Sambone Says:

    3:16 pm EST

    Nymex Crude Falls On Dollar, Demand Concern

    By MATT CHAMBERS
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures fell to one-week low Monday, pressured by a stronger dollar and concerns slowing U.S. growth could hit energy demand.

    The fall came as traders locked in recent gains and it damped speculation that a big number of outstanding $100 call options, or rights to buy crude futures at that price on the New York Mercantile Exchange, would draw prices to the triple-digit level ahead of the December options contract expiring Tuesday. Prices would now need a more than $5 a barrel jump in one session to accomplish that, a move that would be very unlikely without substantial price-supportive supply and demand factors.

    The front-month December light, sweet crude contract on the New York Mercantile Exchange fell $1.70, or 1.8%, to $94.62 a barrel, the lowest settlement for a front month contract since Nov. 5. Brent crude on the ICE futures exchange fell $1.48 to $91.70 a barrel. Final settlement prices for Brent weren’t yet available.

    Prices fell as low as $93.54 a barrel in intrday trading but made back some losses after Saudi Arabian Oil Minister Ali Naimi told Dow Jones Newswires there will be no output boost this weekend when OPEC heads of state meet in Saudi Arabia. Naimi dismissed earlier talk by an OPEC official that Saudi Arabia, OPEC’s de facto leader, is pushing for a 500,000 barrels-a-day increase in output if prices drive toward $100. The cartel won’t discuss production until its Dec. 5 meeting in Abu Dhabi.

    “This market is maybe setting itself to turn over” and start heading lower, said Eric Wittenauer, an analyst at A.G. Edwards in St Louis. “The options, and the realization we can’t hit $100 before expiration, weighed on prices, as did U.S. and global economic worries and a strong day for the dollar.”

    Weak demand for U.S. refined products such as gasoline and heating oil in recent weekly government reports are weighing on prices and could portend further losses, Wittenauer said.

    The euro was recently at $1.456, from $1.4676 late Friday as investors sought shelter in the greenback after an overnight drop in Asian stock markets. Recent U.S. dollar weakness has played a big part in crude’s recent advance, making futures less expensive to traders with other currencies and blunting any negative demand effect in other countries.

    Crude oil’s inability to stay above $95 a barrel and the increased likelihood that $100 call options will finish out of the money are leading many to suggest that the contract’s intraday record of $98.62 a barrel, hit Nov. 7, will stand, at least in the short term.

    “The market may now have to wait until next year for its attempt at $100 a barrel,” said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.

    Traders will now turn to the International Energy Agency’s monthly supply and demand figures and projections, due Tuesday morning, for further evidence to justify crude levels near record highs.

    They will also focus on U.S. inventory data due Thursday from the Department of Energy. The data is delayed a day because of the U.S. Veterans Day holiday Monday.

    Analysts are expecting the DOE to say that inventories of both crude oil and distillates, which include heating oil and diesel fuel, fell by 300,000 barrels last week and that gasoline stockpiles fell by 100,000 barrels, according to the mean survey in a Dow Jones Newswires survey of analysts. Refinery use is seen growing by 0.7 percentage point to 86.9% of capacity.

    Front-month December reformulated gasoline blendstock, or RBOB, fell 3.95 cents, or 1.6%, to $2.4165 a gallon. December heating oil fell 3.67 cents, or 1.4%, to $2.5821 a gallon.

    —By Matt Chambers, Dow Jones Newswires

  79. 79
    zman Says:

    there’s still hope for PF if he’s calling for a fall in prices. I love the fact that these guys acknowledge that prices are dependent on anything but fundamentals.

  80. 80
    zman Says:

    At least we’re not long the Solars today, see FSLR, down $28 (and they are NOT cheap)

  81. 81
    Sambone Says:

    WWWWHHHAAAATTT, GOOG and APPL down again? Is it possible?

  82. 82
    Sambone Says:

    Looks like overall market might be heading to the red? Is it possible?

  83. 83
    Sambone Says:

    Boys and girls, if this overall market is in the red at the end of today on slow trading, watch out for tommorow.

  84. 84
    zman Says:

    yep, even XLF is giving up the ghost.

  85. 85
    Sambone Says:

    Hmmm, so far a 162 point swing on the Dow today.

  86. 86
    zman Says:

    Benazir Bhutto placed under house arrest…was planning a country wide series of rallies protesting the suspension of Pakistan’s constitution.

  87. 87
    Sambone Says:

    8 minutes to “Tini time”. I need it today, boy!

  88. 88
    Sambone Says:

    Hmmmm, under 13,000 now with 1 minute to close.

  89. 89
    Sambone Says:

    Tini time, talk at ya tommorow.

  90. 90
    zman Says:

    Ugly day.

    Bill, if you are around, any thoughts on rates and when China negotiations will be over? Thanks.

  91. 91
    bill Says:

    Homework assignment:

    Review this: Todays fixtures

    http://www.skaarupshipbrokers.com/fixtures.php

    1. What does it mean to drys?

    Clue> 3 ships listed are drys..

    2. What were the old rates?

    Drys presents at goldman tomorrow

  92. 92
    bill Says:

    Re 90

    rates are at or near record highs

    cape rates

    Cost Per Day
    Cape size
    10/1
    10/2
    10/3 165,698
    10/4 161,055
    10/5 160,759
    10/8 166,655
    10/9 172,188
    10/10 179,030
    10/11 183,816
    10/12 184,469
    10/15 183,997
    10/16 182,268
    10/17 180,840
    10/18 181,157
    10/19 182,765
    10/22 183,682
    10/23 184,216
    10/24 183,922
    10/25 182,829
    10/26 181,730
    10/29 179,887
    10/30 172,087
    10/31 164,728

    average 177,037

    11/1 163,563
    11/2 164,179
    11/5 166,377
    11/6 171,534
    11/7 175,563
    11/8 177,946
    11/9 182,965
    11/12 187,703

    note 187 k all time high

    panamax rates

    Panamax
    10/1 76,615
    10/2 76,298
    10/3 77,245
    10/4 77,811
    10/5 77,989
    10/8 78,281
    10/9 79,700
    10/10 83,219
    10/11 85,675
    10/12 88,379
    10/15 88,885
    10/16 88,513
    10/17 88,013
    10/18 87,499
    10/19 87,901
    10/22 88,396
    10/23 90,248
    10/24 91,235
    10/25 91,975
    10/26 93,301
    10/29 94,387
    10/30 94,977
    10/31 93,362

    86,245

    11/1 92,552
    11/2 91,887
    11/5 90,823
    11/6 90,391
    11/7 90,727
    11/8 91,648
    11/9 91,991
    11/12 92,083

  93. 93
    zman Says:

    Bill , right, I know where the rates are, I was looking for thoughts on what rates rebounding means in light of the China negotiations and when exactly are those negotiations to end and what exactly do they cover. Other than the stock action things only look improved to me for the sector, not just spot but the Pana rates going in the low 80s of late seems pretty positive as it’s not a big discount obviously and it is for its telling of demand that they can get those rates which are far above the old charter rates.

  94. 94
    bill Says:

    Your 2nd question on negotiation is really a question of negotiations on what the ore will cost not the shipping terms.

    answers to my question posed in msg 91

    3 of the ships listed are drys

    the ‘Brisbane’ 1995 151066 dwt dely Continent 2/10 Dec 12 months trading redel worldwide $150000 daily – SK Shipping
    ‘Samsara’ 1995 150399 dwt dely retro Caofeidian 7 Nov 12 months trading redel worldwide $140000 daily – SK Shipping

    both are cape size ships 1 goes for 150 k the other 140 k per day

    the ships are 13 years old

    the old rates 93 and 55 k per day

    the other ship leased out is a panamax at 95 k per day!!! The old rate was 31,550 per day

    ‘Ligari’ 2004 75583 dwt dely Taichung 12/16 Nov trip via Australia redel China $95000 daily – North China Shipping

    What this means is earnings will grow (You can do the math)

    The ffas for capes for 2008 was 135 k per day

    the physcal market is stonger than the futures
    there was no reason for the stock to get battered today..none!

    Mining stocks took it on the chin and the shipping stocks followed. Cnbc said something about unwinding the yen carry trade.

    All i know are the fundamentals are great. What should they be valued at when they should earn 20 bucks per share and generate 1 b in cash flow??

  95. 95
    zman Says:

    Thanks Bill, big rates on the Capes but that last Panamax rate is a monster, is that another 12 mos contract?

    Hopefully they will have a massive recovery day soon (maybe the GS confernece?). I’m in the Dec calls for DRYS so I have time but I need the follow along action in EXM which has also gotten battered.

  96. 96
    bill Says:

    I dont follow the negotiations that closely but saw this. Rumor of a 30 % increase

    http://www.hellenicshippingnews.com/index.php?mod=article&cat=nwsinternational&article=4632

    the panamax most likely one shipment lasting about 2 months

  97. 97
    bill Says:

    Capesize owners were back in the
    driving seat again last week after the
    market’s previous unsteadiness. With
    the Atlantic market in particular showing
    real tightness, the average of the four
    timecharter routes jumped to $182,965
    by week-end, a increase of 11% on seven
    days ago. Owners drew even more
    confidence from the news that Brazilian
    shippers have banned cargo splits until
    the end of the year, in a bid to cut
    congestion. This could push rates further
    northwards. Meanwhile over in the period
    market, a 5-year timecharter was
    reported fixed at $54,000 on an existing
    172,000 dwt vessel built 2001 for delivery
    mid-2009, while at the end of the week
    another incredible 5-year deal was
    reported at $70,000 per day for a forward
    newbuilding delivery scheduled for end-
    2008/early-2009. The charterer was then
    reported to have immediately re-let the
    vessel to Chinese operators for $75,000
    per day i.e. $5,000 profit. Is this market
    for real?

  98. 98
    bill Says:

    Panamax rates slipped at the start of the
    week due to a build up of several early
    ships in the Pacific, and ballasters were
    evident in the Atlantic. By midweek
    however rates, particularly in the Atlantic,
    strengthened as short period interest
    increased. The market too was aided by a
    big upturn in the Cape market as Capesplit
    cargoes filtered into the Panamax
    sector. Short period for BPI type regularly
    traded at mid US$90,000’s and for 12
    months in the low US$80,000’s. The BPI
    finished the week up 152 points and with
    an increase of US$1,168 on the 4
    timecharters.
    Dry

  99. 99
    PackMan Says:

    Z & Bill re: DRYS

    Haven’t had time to be on this site for a few days, just catching up now.

    Seems to me the selloff in DRYS is partly (or greatly) related to the massive selloff in ALL stocks that ran up on huge momentum (you know who they are).

    I was going to ask you guys what to do w/ DRYS, but your posts tonite seem to lead to the conclusion that you gotta be going long here.

    Any thoughts on what the best strike’s would be to nibble on ?

    z …some energy questions coming next post.

  100. 100
    PackMan Says:

    Energy names: Zman, I have followed (or considered following) you on some of your blast picks. Any updated thoughts regarding:

    CHK December 40 calls

    VLO December 72.50 calls

    APC Dec 60 calls

    would you still recommend initiating new positions at current prices ?

    any favorites … these or others ?

    thanks.

  101. 101
    zman Says:

    P – re 99…agreed the direction but the timing in this market is critical. Most of what we were talking about was true a week and 30 points ago on DRYS. Rates are a little strong since and they had great earnings to no avail. Looking around it’s like, hmmm, GOOG off a 100 in 4 days and the solars getting whacked today. This is cheaper but the market taking few prisoners so be extra careful on entry. Catching a falling knife is no good in this market.

    Re 100. Still like all those names and in the order you listed. I still hold them and added to each in the last week, including the APC today. But again, caution is king. Scale as always. There’s rush and you may be able to get each of them 5% cheaper (I hope not but again, take no prisoners market).

  102. 102
    PackMan Says:

    E Trade … customer service has gotten better. I know have a dedicated guy that I can speak to which is immensely helpful, and he is responsive to my needs. FWIW.

    Also, nibbled at some ETFC today.

  103. 103
    PackMan Says:

    re: 101. By 5% cheaper do you mean 5% cheaper on the option price (no big deal) or 5% cheaper stock price, which would cheapen the option prices by alot ?

    Thanks.

  104. 104
    PackMan Says:

    I “now” have a dedicated guy at Etrade.

  105. 105
    zman Says:

    Given the way they tossed everything out today I was speaking of the possibility of another 5% loss in the commons. Don’t think it happens, really would not like to see it happen, but I’m prepared to add lower on those you mentioned and a few more if they come off a bit more. Wednesday may change everything with oil and the group but for now they appear to be in panic sell mode. But hey, tomorrow is a different day, the futures are up, at present, and oil isn’t cratering tonight despite futures option expiry tomorrow.

  106. 106
    aitrader Says:

    Bulk Carrier and Commencement of Time Charter Contract with BHP Billiton

    ATHENS, Greece, Nov. 13 /PRNewswire-FirstCall/ — Diana Shipping Inc. (NYSE:
    DSX), a global shipping transportation company specializing in dry bulk
    cargoes, announced today that the Company has taken delivery of the newly-
    built Boston, a 177,828 dwt Capesize dry bulk carrier built by Shanghai
    Waigaoqiao Shipbuilding Co. Ltd.

    As previously announced, the Boston was purchased at the price of $110
    million and is chartered to BHP Billiton Marketing AG for a four-year period
    with a one year extension at the charterer’s option. The charter contract
    provides for an approximately 47 to 49 month period at a fixed gross rate of
    $52,000 per day. The charterer has the option to employ the vessel for a
    further 11-13 month period at the same daily gross charter rate. The charter
    commenced today.

    During the minimum period of approximately 47 months, this employment is
    expected to generate gross revenues of approximately $75 million. If the
    charterer exercises its option for the fifth year, the charter is expected to
    generate gross revenues of approximately $93 million over the entire period.

    Including the newly-delivered Boston, the Diana Shipping Inc. fleet currently
    consists of 17 dry bulk carriers (13 Panamax and 4 Capesize). The Company has
    also announced the purchase of two additional Capesize dry bulk carriers, which
    are expected to be delivered in December 2007 and February 2008, respectively,
    and two Capesize new-building dry bulk carriers to be delivered in the second
    quarter of 2010. A table describing the current Diana Shipping fleet can be
    found on the Company’s website, http://www.dianashippinginc.com.

    Diana Shipping Chairman and Chief Executive Officer, Simeon Palios,
    commented: “Yesterday the Company announced a new one year time charter
    contract for one of our Panamax vessels at a gross rate of $82,000 per day,
    demonstrating the current strength of the dry bulk chartering market. Today, we
    announced the delivery of our new Capesize vessel and the immediate
    commencement of the four year time charter with BHP Billiton showing once again
    management’s ability to provide consistent growth through a combination of long
    term and short term employment. The four Panamax vessels to be chartered in the
    very near term together with the delivery of the two Capesize vessels during
    the same period are evidence of the strong revenue prospects of the Company
    during 2008.”

  107. 107
    zman Says:

    Thanks AI, note the time line on getting those new builds from drawing board to launch (2010). Shipyards around the world are busy with drybulks, tankers, rigs etc…people talk about the coming glut of tonnage but it’s going to take some time maybe late 2008 before rates are really impacted from what I’ve been reading…why else lock in all the one year contracts so close to spot.

    the four year time charter at 52Kpd is in line with Bill’s comments in #97

  108. 108
    aitrader Says:

    DSX, DRYS, EXM are all up ~5% in after hours trading. It’s probably not enough to save my bacon on the DSX Nov 40’s but might be an early buy signal for Dec shipping calls.

  109. 109
    zman Says:

    true and true

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