21
Nov

Wednesday – $100 or Bust

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Market Watch Comment: Market risk to the group is on the rise and oil is closing on an inflection point. As such I am going to be a little quicker with the profit and loss taking trigger until such time as market and oil price volatility die down a bit. I'm also contemplating entering (DUG), the Ultra Short Oil and Gas ProShares ETF, as a hedge if it appears that oil is going to reach but then glance off $100 and trade back into the mid 90s (which I would put better than even odds on unless it gets real cold, real fast or we get a monster draw today).

Stocks of Interest:

  • (RIG)/(GSF) received Cayman court approval to merge. The companies tentatively expect to complete the merger on November 27th. 
  • (TSO) board announces it is neutral on Tracinda offer and is such makes no recommendation. I'm pretty neutral on their recommendation. It says they don't really like the $64 valuation it puts on them but they don't want to reject it and tank their stock.  

Travel Watch: Be careful out there...it's going to be a hectic travel weekend. AAA estimates an extra 600,000 people will travel by car in excess of 50 miles on Wednesday in the U.S., that's up 1.6% to a record 38.7 million. If we assume that only a fraction of those people own a Prius vs a majority who own Yukons, that an average of 3 people ride in each car, and a round trip averages 125 miles (seems fair as some will be required to hit the grocery store at least once upon arrival due to misplaced cranberry in a can) this would yield extra consumption of:

thanksgiving-gas.jpg

 

 
Commodity Watch:

  • Oil jumped $3.39 to $98.03 on the back of a weak dollar, refinery glitches, and technical strength amidst a light volume holiday style session. This morning crude is trading up $0.80. Depending on the data, today could be the day we see, at least for a second $100 oil. From their I get pretty nervous and consider going very light in energy. I would not at all be surprised to see oil hit 99.99 and bounce several dollars lower today.  Then the question becomes what next and I think any move higher will need increased utilization, weaker imports and a cold winter and then you still can't justify this price. Yes current supply demand is tight but stocks are only down compared to last year (about 6% down). But compare crude stocks to the five year average and your 5% over.
  • My task isn't to justify oil prices here though, only to try and get a grip on sustainability of the move. The question is can others, with greater dollars behind them, justify these prices. In short, I think they will be able to justify $90-something oil but will need a shock with last impact to sustain triple digit oil by vaulting it well over the century mark. Again, unless the crude number is a monster draw or Cushing slides further I'll be looking for a kiss and retreat from $100.
  • The whole game becomes a bit silly up here in the thin air around $100. Week after week, expectations and not strictly fundamentals, have driven about half of the move up since Summer. Each small beat to expectations compounds upon the next. In between, the meets and misses were over-ridden by geopolitical filler. My point is that while there is tightness at present I don't believe prices are anywhere near warranted. There needs to be a continuing string of beaten expectations and/or geopolitical or even logistical hangups (like fog at the HSC) tp keep crude'30.s momentum riding high. 
  • FYI Dollar impact through yesterday from Bloomberg ~ West Texas Intermediate, the New York-traded crude-oil benchmark, is up 61 percent this year. Oil has gained 43 percent in euros, 53 percent in British pounds and 49 percent in yen.

  • Natural Gas: Fell $0.31to $7.48 yesterday. This morning NG is trading flat.

Nigeria Watch: Shell is getting cold feet. Shell is mulling the sale of two offshore block and otherwise scaling back it's activity in the area. 

EIA Oil Report Preview (from the Dow Jones Survey)

exp-112007.jpg

Z Comments: thinking the numbers may be somewhat bullish: 

  • Crude: last week the number hinged on imports. I would be a bit surprised to see another import as big as last weeks as these seldom come in twos. Demand for crude from refiners should rise again so there is the potential for a flat to slight draw in the number if imports do back down from last weeks peak. 
  • Gasoline: I'll be watching demand here to see if last week's dip was a fluke or the start of some real price elasticity. 
  • Distillates: I would think we will see a bigger draw than the 400,000 barrels expected given both the weather and the time of year.

ho-hdd-112007.jpg

EIA Natural Gas Preview

  • My Number: +/- 5 Bcf. The year ago week saw no change in storage and it was a little colder however, imports were a little higher then as well.
  • Weather: slightly warmer than normal (fewer degree days) and last year.

gw-hdd-112007.jpg

  • Imports Slipped Again Last Week (this is why you still could get a small withdrawal). We are now importing the least amount of gas into the U.S. to date this year and are 0.5 Bcfgpd below year ago levels. From Apache: "The winter forecast for Europe is very cold.  Korea and Japan are also expected to be below normal.  This should support international-LNG demand".  I agree and would add that this lack of LNG growth into the U.S. combined with a recent drop in piped imports from Canada and increasing flows of gas out of the U.S. and into Mexico will help support prices north of $7 in the event Winter gets off to a slow start.  

ng-imports-112007.jpg

  • Consensus: ???

Holdings Watch: No changes.

Odds & Ends

Analyst Watch: Nada...few analysts in the office today.

Hope you all have a great Turkey Day! Z 

158 Responses to “Wednesday – $100 or Bust”

  1. 1
    Sambone Says:

    7:57 am EST

    Crude Futures Volatile Ahead Of DOE Data

    By Nick Heath
    Of DOW JONES NEWSWIRES

    LONDON — Crude oil futures fell back from new record highs in light and volatile London trade Wednesday morning, as traders prepared for weekly U.S. Department of Energy data and the Thanksgiving holiday.

    Position adjusting and concerns over global growth helped pare earlier gains in crude, after continued weakness in the U.S. dollar, and forecasts of a cold spell in the U.S. northeast propelled crude oil prices to new record highs in overnight trade.

    Low volumes also ensured that price moves were volatile, with intraday moves spanning a $2 range.

    At 1225 GMT, the front-month January Brent contract on London’s ICE futures exchange was up $0.04 at $95.53 a barrel, having fallen from a new record overnight high of $96.53 a barrel.

    The front-month January light, sweet, crude contract on the New York Mercantile Exchange was trading $0.17 higher at $98.20 a barrel, just over $1 below the new $99.29 a barrel peak set in Asian trade.

    The ICE’s gasoil contract for December delivery was up $5.75 at $851.50 a metric ton, while Nymex gasoline for December delivery was unchanged at 245.15 cents a gallon.

    Trading volumes were thin in London Wednesday morning, with those sections of the crude oil market still active during the holiday-affected week opting to sit on the sidelines ahead of the Department of Energy’s weekly update on U.S. crude oil and products stockpiles.

    A Dow Jones Newswires survey of analysts points to a small build in crude and gasoline inventories, while distillate stocks, which include heating oil and diesel fuel are predicted to fall slightly.

    But with prices trading in the upper-$90s, any surprise draw in the figures could provide the catalyst for crude to break $100, particularly with the inventory data due to be published amid a recent increase in anticipation over fourth quarter supply levels.

    Forecasts for cold weather in the U.S. have stoked expectations of increased heating oil demand, and reignited fears of tight fourth quarter supply-demand balances, despite U.S. distillate stocks currently holding near the top of their five-year range.

    Nymex heating oil futures hit fresh record highs Wednesday following a record settlement Tuesday.

    Latest weather forecasts predict colder-than-normal temperatures in the U.S. northeast, the country’s main heating-oil consuming region, for the remainder of the month and into December.

    “Frankly, it would make more sense to be long oil than short oil ahead of the U.S. inventory data out later today, and ahead of the extended Thanksgiving holiday with cold weather forecast across the U.S. Northeast,” analysts from Citigroup said in a note.

    While supply concerns continued to overshadow recent indications of weakening crude demand, oil’s gains Wednesday were tempered by sharp falls in equity markets, unable to shake off subprime fears and burgeoning concerns of slowing global growth.

    Providing the latest doubts over economic growth, U.S. Federal Open Market Committee members lowered their 2008 gross domestic product growth forecast Tuesday, to between 1.8% and 2.5% from their previous forecast in June of 2.5% to 2.75%.

    “What that really tells me is that they see the downside as significant,” said Jim Rintoul of TheOilTrader.com. “There is no way that if U.S. growth slows as much as they say it might, that oil could be sustained at these prices.”

    Having helped support crude prices as a result of its sharp fall Tuesday, the U.S. dollar clawed back some of its lost value against the euro Wednesday, although it remained close to historical lows against the single currency.

    Low trading volumes resulted in volatile trade Wednesday morning, raising question marks over the sustainability of the latest surge to record prices.

    “Daily traded crude oil volume on Monday was at the lowest level of the last 55 trading days,” said Olivier Jakob of Petromatrix.

    “In a low volume, pre-holiday market, it would not need much more than a large pension fund implementing an increased asset allocation in commodities to trigger a significant rally.”

    —By Nick Heath; Dow Jones Newswires

  2. 2
    Nicky Says:

    The news is still full of the dollar weakness, the weather and ‘supply’ tightness as justification for the move higher. The heat cracks don’t justify the weather argument and the dollar moves don’t justify the currency argument. As far as supply tightness the same newswires today are carrying stories this morning that the UAE has offered incremental barrels to Far East customers above contracted volumes and found they are not wanted by refiners!!

    So where are is the supply tightness that is even being eluded to on this board? Not only is there not supply tightness, there are continued signs of a relatively benign demand picture at current prices even in the Far East which has been the only area of measurable demand growth. Now add to that the Fed’s downgrades for GDP next year and the fundamental picture should have oil at $50 rather than $100.

    Don’t get me wrong they are now so close to $100 that on these volumes there is every chance we will see it but anything above it should be a great selling opportunity.

    Even Kilduff finally sees the beginning of the end!

  3. 3
    kyleandy Says:

    i’m confused by the TSO offer. can we buy the stock at 57-58 and tender it at 64?? is so, does tracinda have to pay it, or do they have an out?? is there a time limit on the offer?? thks

  4. 4
    zman Says:

    Kyl – Offer ends December 6. Nice idea but I think their may be a long line in front of you. Not sure you’d get the arb but I could be wrong, especially if you decide eary vs some long time holders who aren’t decided yet. Not sure how you actually tender.

  5. 5
    redjack Says:

    Nicky…in support of your argument, tanker rates are still depressed. Until very recently, there have been empty tankers in the Mideast waiting to be chartered

  6. 6
    Sambone Says:

    9:41 am EST

    Nymex Crude Up Ahead Of US Inventory Data, Off $99.29 High

    By GREGORY MEYER
    Of DOW JONES NEWSWIRES

    CHICAGO — Crude oil futures were up slightly Wednesday, pulling back from a new record high, as traders pondered refinery outages and awaited the release of new U.S. oil inventory data that will influence perceptions of tight global supply.

    Expected light trading before the U.S. Thanksgiving holiday also led to predictions that the volatile trading that has marked the week would continue into Wednesday’s pit session at the New York Mercantile Exchange.

    “Everyone is on tenterhooks,” said Andy Lebow, senior vice president at MF Global in New York. “They are waiting to see if the market can get up to the magical, mythical $100 level.”

    Light, sweet crude for January delivery was recently up 60 cents, or 0.6%, at $98.63 a barrel on the Nymex, after momentarily rocketing to a new intraday high of $99.29 a barrel, and settling at a record close Tuesday. Brent crude on the ICE futures exchange rose 47 cents to $95.96 a barrel.

    The prices were solidly above Tuesday’s record settlement of $98.03 a barrel and inched closer to the psychologically significant $100-a-barrel level.

    The answer to that question could come after the U.S. Department of Energy releases its weekly petroleum inventory report at 10:30 a.m. EST. Analysts surveyed by Dow Jones anticipate U.S. crude oil stocks to increase by 700,000 barrels, gasoline to rise by 700,000 barrels and distillates to fall by 300,000 barrels. Refinery use is seen growing by 0.4 percentage point to 88.1% of capacity.

    A draw of more than 2 million barrels of crude oil could push the Nymex contract to $100 a barrel, said Peter Beutel, president of Cameron Hanover, a New Canaan, Conn.-based energy advisory firm.

    Prices were also buoyed by continuing refinery outages, the weaker dollar and concerns about tight global oil supply.

    Valero Energy (VLO) shut boilers and process units at its Three Rivers, Texas, refinery on Monday following an instrument failure at a BTX unit, which removes benzene and toulene from gasoline. Additionally, Valero’s Memphis refinery gasoline-making fluid catalytic cracking unit was shut late Monday for 10 days of unplanned maintenance.

    The euro began to push higher Wednesday toward its all-time high of $1.4856 reached overnight, after retreating below $1.48 earlier in the session. The dollar’s weakness has historically helped propel crude’s price rise.

    Global supply concerns also helped keep prices aloft. Late Tuesday, the Petroleum Association of Japan posted another week of shrinking crude stockpiles. South Korea meanwhile, reported crude stocks at 16 million barrels, down 14.1% year over year. The developments highlight “the tightness in world oil supplies,” said Addison Armstrong, an analyst at TFS Energy Futures in Stamford, Conn., in a note.

    Front-month December reformulated gasoline blendstock, or RBOB, rose 94 points, or 0.4% to $2.4609 a gallon. December heating oil rose 95 points, or 0.4%, to $2.6996 a gallon, above its record close Tuesday.

    —By Gregory Meyer, Dow Jones Newswires

  7. 7
    kiaora Says:

    OK, figure this: DUG & DIG are both in the green!!

  8. 8
    zman Says:

    Sambone – any comment on the insta-arb with TSO…I don’t think you could pull it off but maybe.

    by the way, you were asking about when RIG goes when issued…looks like Nov 27.

    N – re supply tightness. refers to declining inventories from demand outstripping supply. This year’s 4Q supply is lower than last as OPEC is not producing as much as it was a year ago. Everyone from EIA to IEA still expects 4Q demand to be higher than last year. I’ll put an equation up in a bit into the bottom of the post but there is tightness which is how you get inventories to fall like they have. Is the price too high? yes. is it $50 too high, I doubt it. Remember that a slow down in growth in the U.S. is still growth and consumption on contracts if we see negative growth and negative job growth.

    As far as Asias not wanting more crude that is due to a processing bottleneck. Can’t run crude in a car…you gotta refine it which is what OPEC has been telling everyone for quite some time. Their are product shortages all over China and stock in Japan are very low. No point in shipping more oil if they don’t have the capacity to turn it into something useful.

  9. 9
    kiaora Says:

    Opps, DIG just turned red.

  10. 10
    redjack Says:

    z…and when China gets more refining capacity the demand for oil will increase

  11. 11
    Nicky Says:

    Z – you are going to get negative growth and negative job growth in spades if oil continues up. Its crazy but self fulfilling!
    Yes I am bearish on the broader markets -but seriously how can anyone not be???

  12. 12
    Nicky Says:

    China and the rest of Asia are not going to hold up without the US. My only question is is whether they hold China up until after the Olympic games but the chart looks like it could be done for their stock market.

  13. 13
    zman Says:

    RJ: And they adding capacity by the month…No EIA in the way.

    I posted an equation of 4Q tightness about two months ago in which I laid out a case for falling stocks through the 4Q. So far that case is on target …going to go dig it up in a bit.

    Subprime will cost you a lot more jobs than $3 gasoline.

  14. 14
    Sambone Says:

    TSO – Ok, they only want to tender 16%. So if 100% shareholders tenders, then they will prorate it. You’ll only get 16% or less. I have not read the offer, but in past offers like this you could buy 99 shares (Less than whole lot) and you would get taken out first and not prorated. I would have to read the offer to answer that. Hope that answers the question.

  15. 15
    Sambone Says:

    N – I believe that if “Black Friday” is not strong, then next week we will see a sell off (Possible blood on the floor) in the overall markets.

  16. 16
    Nicky Says:

    I am looking for a tradeable low from the broader market. I doubt we have the volume this week to see that but early next week is very likely. There is still a possibility we could test the August lows – in doing so the Dow would give a major sell signal. We should then get a very good bounce into the end of the year.

  17. 17
    Nicky Says:

    #15 – yes Sam – we need to see some sort of capitulation I think for this wave.

  18. 18
    Nicky Says:

    Nat gas needs to hold 7.365 to keep the bullish count intact.

  19. 19
    zman Says:

    crude: down 1.1
    gaso: up 0.2
    dist: down 2.4

    util: 87% is off a bit

  20. 20
    Nicky Says:

    What a mess CNBC made of that!

    Draw in crude of 1.1

  21. 21
    Popeye Says:

    They sure did Nicky and now I need a new TV after taking out my frustration.

  22. 22
    zman Says:

    imports dropped by 667,000 bopd to 9.8 mm bopd as I thought, hard to do two of those big #s in a row

    cushing actually saw a good sized rebound

    probably ought to be buying as this will give the bulls a chance at 100 but you’d have to be very quick as I don’t think there is enough there to punch through leaving me back at my richochet argument. At the same time $100 oil will tank the equity market.

  23. 23
    Sambone Says:

    N – In the overall market I am looking for some type of intermediate term rally that could last anywhere from 3 to 6 weeks. We may have a selling climax like we did in Feb 07 before then. There are a lot of hedge funds raising money out there with the sole purpose of squeezing the shorts. If so, it will be a wild ride and could go up 1000 + points. Then it will continue it’s downward path. IMO

  24. 24
    Nicky Says:

    Yes this should be the impetus they need to get it to 100 although the Cushing data may prove a problem – although probably not as they ignore anything bearish. Distillates not really taking off considering.

    SPX has support at 1418.

  25. 25
    Nicky Says:

    Ditto Samborne. Exactly what I am looking for too! The wild ride will be wave 2 and everyone will think we are off to the races and the worst is behind us. The next leg down after that will be huge.

  26. 26
    zman Says:

    Gasoline demand actually ticked back up a hair week to week…$3 gas not having much of an impact on demand in the U.S. at all.

    Last 4 weeks
    9.355 mm bpd
    9.367
    9.187
    9.222 (that’s up 0.8% with retail prices up something like 40% YoY)

    N – they haven’t picked a direction yet for oil…may take a little longer today than normal. I think at the end of the day we are higher on oil.

  27. 27
    Nicky Says:

    Chart still looks higher for wti Z….

  28. 28
    zman Says:

    we’ll know if they get through the early high today at 98.80, but longer term I have to think they get it up

    note XOM moving up now.rest of E&P and energy land still a broad market induced sea of red.

    just paper trading the DUG. volatile little bugger with 2x factor. Would like to actually enter calls there (later in the day for drop protection) if we can get a sea of green which I would given even odds on a day like today.

  29. 29
    sane Says:

    Z,

    Per gasoline demand and the consumer: People will keep paying till they hit the end of the rope, unlike how it is supposed to be seeing the end of the rope and reigning it back in some.

  30. 30
    zman Says:

    Sane,

    I was talking with a member of the younger generation the other day and she explained to me that higher gasoline prices didn’t affect her. She did not fill up her tank but instead bought $10 worth of gas about once a week. Beer inflation? Now that was a different matter.

  31. 31
    Sambone Says:

    Z – I’ve done an informal survey and they grumble about the cost of gas, but they are not slowing down their driving. Folks have the Tahoe and commute 25 miles one way. I tell them that gas will be $4.00 in the spring and they tell me no way that’s gonna happen. Frog in the pot, ya know.

  32. 32
    zman Says:

    If oil is > $90 no way March RBOB not $4.

  33. 33
    sane Says:

    No API yet. Has been sporadic as of late.

    As for the younger generation, I look at my kids generation ( about a year from driving ) I see them being a tad more aware about prices. My daughter and her friends think my wife’s car is the coolest thing. Hell, my daughter last night gave me the riot act about resources and the environment because I didn’t put the pudding cup container in the recycling bin.

  34. 34
    zman Says:

    Sane: you could tell it would be better not to buy pudding in little plastic (oil) tubs and instead to make it from the little card board box…see how that goes over.

  35. 35
    sane Says:

    Here is your contradicting API report

    Crude UP 1.4M
    Distillate DOWN 3.6M
    Gasoline UP 2.6M

  36. 36
    sane Says:

    Re 34 … Nice 😛

  37. 37
    zman Says:

    Sane: thanks for the API. Distilliate sounds a little bullish, the rest sounds like the import noise didn’t enter into their number. odd.

    As for girls driving, fortunately I’m playing chutes and ladders with mine on my office floor right now so I have a little time before I have to worry about it. Hopefully the people who want to increase taxes on oil companies will have everything running on rainbows by then which you can create yourself with a sprinkler on a sunny day while you admire the grazing unicorns.

  38. 38
    zman Says:

    oil couldn’t top the early morning level, swooning now. stocks paying more attention to the broad market.

  39. 39
    sane Says:

    Z, Did you notice domestic production on the EIA report showed sub 5Mbpd

  40. 40
    zman Says:

    Sane – no. that stinks. and people want to take oil production more here while “reducing our dependence on foreign oil”. hmmmm.

  41. 41
    Sambone Says:

    Z – my son who is 21 and is a welder told me that it took $50.00 to tank his Acura. He was moaning and groaning. I told him get ready for $65.00 and he turned green.

  42. 42
    Sambone Says:

    11:00 am EST

    Nymex Crude Up Slightly On US Crude Oil Stocks Draw

    By GREGORY MEYER
    Of DOW JONES NEWSWIRES

    CHICAGO — Crude oil futures were steady Wednesday, failing to breach $100 a barrel, after U.S. data showed a surprise drop in oil inventories last week.

    U.S. Department of Energy released figures showing crude oil stockpiles fell 1.1 million barrels, their fourth decline in the past five weeks. Analysts surveyed by Dow Jones had predicted a 700,000-barrel increase.

    “I’m kind of surprised. I was anticipating a little more of a bounce,” said Peter Donovan, vice president at Vantage Trading on the Nymex floor.

    “We drew 1.1 million in crude stocks, and some guys were looking for a build. I would expect the market to rally from here,” Donovan said.

    The front-month January light, sweet crude contract on the New York Mercantile Exchange was recently up 41 cents at $98.44 a barrel. Brent crude on the ICE futures exchange was up 27 cents to $95.76 a barrel.

    Crude oil stocks at Cushing, Okla, the delivery point for the Nymex crude oil futures contract, rose 1.179 million barrels, or 8.8%, in the week ended Nov. 16, possibly contributing to the tempered reaction in crude oil markets.

    The rise at Cushing — the biggest since Aug. 31 — was counter to the nationwide drop of 1.1 million barrels. Stocks at Cushing, now at 14.6 million barrels, are the most in four weeks.

    Tim Evans, an analyst at Citigroup in New York, said the overall decline in crude stocks was “supportive” for prices though the build in Cushing stocks “could be considered an offset.”

    Front-month December reformulated gasoline blendstock, or RBOB, rose 15 points, or 0.1% to $2.4530 a gallon. December heating oil rose 1.52 cents, or 0.5%, to $2.7026 a gallon.

    —By Gregory Meyer, Dow Jones Newswir

  43. 43
    kyleandy Says:

    sambone so u are saying it wud be better to buy 99 shares and tender that than say 200?? where can u read the tender??

  44. 44
    zman Says:

    Sambone: 21 eh? Sounds like we should be shorting BUD?

  45. 45
    TTupp Says:

    after katrina i had an avalanche and i put $175 in it that week

  46. 46
    TTupp Says:

    it was like $5 canadian a gallon

  47. 47
    ram Says:

    I think when people don’t get much change back from a $100 bill will be a wake up call.

  48. 48
    TTupp Says:

    z- re 37, are unicorns from austraulia?

  49. 49
    TTupp Says:

    * Australia

  50. 50
    zman Says:

    they used to have them on the lawn at the governor’s mansion in little rock before H changed her accent from southern bell to NYC

  51. 51
    TTupp Says:

    h-clin.

    i was kidding, my girlfriend at a dinner party once, after someone mentioned unicorns, asked: “where are they from any ways? Australia?”.

  52. 52
    zman Says:

    Sambone: RIG anticipating the closing, fighting group here all morning.

  53. 53
    freeflow Says:

    RIG very consistent today

  54. 54
    freeflow Says:

    “they used to have them on the lawn at the governor’s mansion in little rock before H changed her accent from southern bell to NYC”

    Hilarious! I’m glad someone else noticed too…

  55. 55
    gaamblor Says:

    Z you mentioned a couple weeks ago about RIG losing $4/share in value when they convert can you explain that?

  56. 56
    zman Says:

    gaamblor. The deal is partial shares and cash with different ratios for RIG and GSF holders when the merger is actually consumated (looks like the 27th now). When they settle the deal, anything over $109 would see the stock drop back a bit (may only last a minute) but if the deal doesn’t run back up it will really wallop the options.

    the formula is

    new RIG share = 0.6996 RIG + $33.03.

    normally I would think the options would be adjusted accordingly but the information memorandum I read said there would be no change to strikes and no change to number of contracts.

    since the cash component is fixed you can plug that equation into a spreadsheet and see that the breakeven is about 109 with a downward adjustment north of there and a upward adjustment south of 109.

    At present level of $124, the new RIG share comes to about $119.80.

    here’s the memo on it:

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

  57. 57
    Sambone Says:

    K – #43 Not sure, but I’ll look for info. Most cases 99 get the full deal. Anything over a round lot gets prorated in most cases.
    Z – #44 Never short BUD when my three sons are involved with Bud Light. These guys have 4 cases just to start the Turkey day.
    Z – #52 I’m still trying to firgure out when they will trade “When issued”. When that happens, I’m all over it. i don’t want the cash, just both companies combined.

  58. 58
    zman Says:

    S – should be right around Nov 27th, you need the exact day?

  59. 59
    TTupp Says:

    freeflow, a canadian noticed too– i should start throwing out some canadian political trivia.. lol i dont think i would get many answers

  60. 60
    zman Says:

    S – I didn’t want the headache of cash or strange machinations in the options so I’m in their closest comp, DO.

  61. 61
    zman Says:

    FF- she actually went to Wellesley so when she hit the south the first thing to get chucked was the Bean town accent. Flip, flop, flip.

  62. 62
    freeflow Says:

    Something about H makes me hate politics. I think it’s the damn accent switcheroo!

  63. 63
    Sambone Says:

    Z #58 The deal will be done on Nov 27th, so I’m suprised it isn’t already trading WI. Most cases they start trading a couple of weeks ahead of the deals.

  64. 64
    zman Says:

    DO also has less exposure to the JU market which is the shallower, more commodity like business than does RIG/GSF, hence their higher fwd multiple..bit more deepwater focused and not the big list of newbuilds which has concerned some people about RIG/GSf. Don’t get me wrong, love the RIG, will be back when the dust settles. Huge earnings 2009. heck, I may buy the stock

  65. 65
    TTupp Says:

    she is the Belinda Stronach of USA

  66. 66
    TTupp Says:

    i swear she is the reincarnated daughter of Miss rodham

  67. 67
    doc Says:

    Bought VLO leap Jan 09 $60’s @$12.10 VHBAM.
    My best trade have been Leaps out over 13 Months. Howevr, I do have 09 VLO calls that are under water bought at higher prices.

    My largest holdings are assorted CHK 08, 09 & 10 calls.

    Phil

    212.20

  68. 68
    TTupp Says:

    ill give 10 contracts of my vlo dec 72.50’s from my brokerage acct from anyone who can tell me who belinda stronach is without using google lol

  69. 69
    TTupp Says:

    z re 64: do is estimated to double earnings next year too

  70. 70
    TTupp Says:

    they had a great CC too, did you listen to it?

  71. 71
    TTupp Says:

    well looks like well be able to pick up gs at ~ 200 again`

  72. 72
    Sambone Says:

    K – #43 I can’t find anything on the proration, etc on TSO

  73. 73
    freeflow Says:

    Is she from Alberta? Provincial Head of Alberta?

  74. 74
    TTupp Says:

    nope

  75. 75
    freeflow Says:

    now you know I didn’t use google

  76. 76
    TTupp Says:

    ahaha

  77. 77
    zman Says:

    Sambone: I don’t think they expected to get their ducks in a row on the deal this quick.

    T: I had no idea you guys had politics, lol

    Doc: not a bad bet, did you ever look at SD?

    DO: true enough and I did listen to a replay of the call…all green lights there.

  78. 78
    Sambone Says:

    T – No clue

  79. 79
    TTupp Says:

    her daddy is frank stronach im sure a few of you know who that is

  80. 80
    TTupp Says:

    shes a federal MP, ought her way into politics with her daddys money, and went from being a hard care conservative to a bleeding heart liberal because her riding had a better chance of electing her n that party

  81. 81
    freeflow Says:

    why oh why do people vote for those without conviction? Sometimes it’s better to go against your focus group…

  82. 82
    kaman Says:

    Z- Have you got a target call for DUG in mind? Been waiting on DUGLN to go from 3.80 to 3.50…but moved other direction today. Decembers? Later? I think Andy (Wang’s Happy Trading) is watching June’s, but I can’t see going that deep.

    cheers- K

  83. 83
    kaman Says:

    Man there have to be some holders in DRYS in real pain right now…

  84. 84
    zman Says:

    Hey K,

    Been watching the DUG all day, nasty spreads, not settled on a strike yet but yeah, I was thinking Decs.

    Re going to next summer: I like those guys over there but they are huge negative energy folks and I know they don’t track the fundies like I do. I’m sure they think oil should be at $50. I have a ton of issues with it going back there without an econ collapse. Not the lease of which is that the world is producing less and less of the light sweet stuff, like WTI and more of the heavy. A barrel of oil is not a barrel of oil is not a barrel of oil. Then there is service inflation which has slowed but by no means reversed. You think CHK has an influence on gas prices. How about the majors all whacking their capex if oil were to to go to $50. And OPEC, don’t get me started on how they won’t let it happen anytime soon. Not at least if you live in a dollar denom world.

  85. 85
    zman Says:

    DRYS = unreal.

  86. 86
    freeflow Says:

    I bought some January’s yesterday. Down about 20% so far. I’m stopping out at 50%

  87. 87
    Sambone Says:

    Hmmm, not good for the US$.

    http://www.khaleejtimes.com/DisplayArticleNew.asp?xfile=data/business/2007/November/business_November597.xml&section=business&col=

  88. 88
    TTupp Says:

    imagine we would have bought exm puts instead? theyd de 40 bucks itm hahah

  89. 89
    TTupp Says:

    z you ever traded vix options? thats how i hedge more effectively than any other method ive used. and yes it has worked with energy based stocks

  90. 90
    zman Says:

    T – re Vix …not in a long while.

  91. 91
    doc Says:

    Z DO Bought as soon as it came out.

    Also bought GST cause Chk partners with them. It’s only down 50%. Should I double down???

    Phil

  92. 92
    zman Says:

    DOC,

    I like GST but the market is definitely shunning the micro cap E&P names right now. That might take awhile (2 to 3 years) to work but if you have patience it could be pretty good.

  93. 93
    doc Says:

    #91 Not DO. I can’t type. DS SANDRIDGE

  94. 94
    doc Says:

    CHK COULD TAKE OUT GST

  95. 95
    zman Says:

    DOC,

    Got ya, SD. long term hold that one.

    CHK tried to get more and got rejected awhile back on the GST. I have some at about $2.25 so I watch but am not wild about it at present.

    DNE. On the topic of little guys one name that has a whale of potential and given their reserve size / growing production profile I’d say they will noticed soon is Dune Energy. Worth a read over their 3Q and latest presentation over holiday weekend. Very seasoned management here, good assets, big exploration potential in legacy oil fields along the gulf coast that they just acquired. Street is clueless here about the EBITDA generation potential but again, that will change.

  96. 96
    TTupp Says:

    test

  97. 97
    TTupp Says:

    weird -was being blocked

  98. 98
    zman Says:

    Sambone: would this be the worst pre Thanksgiving 3 days in your almanac?

  99. 99
    zman Says:

    Any interest in a month or quarter free sub? My marketing intern says I should offer the following:

    One free month for each new subscriber a member brings in for a quarterly sub and

    One free quarter for getting someone to subscribe for a year.

    Not just a free month or quarter but a refund of your already paid month or quarter. I said you guys would not care as I’ve mentioned something less formal along those lines. Anyway, if your interested let me know.

  100. 100
    zman Says:

    DUG has traded between up $0.20 to up $1.00 all day…pretty hard to jump in with those spreads unless you think this is the energy top.

  101. 101
    TTupp Says:

    dug is junk

  102. 102
    TTupp Says:

    new product z, im scared

  103. 103
    Sambone Says:

    Z – #98 It doesn’t say, but the worst from Tuesday before Thanksgiving through the close on the following Monday was 29.05% in 1973. I calculated if the Dow holds 12,900 today that we’re down about 2% for the three days. So the answer is no, it’s not the worst. 52, 64, etc were worst. Hope that helps.

  104. 104
    TTupp Says:

    looks like vlo might be on its way to 60

  105. 105
    Sambone Says:

    Overall market is down, but Hey, No prob, GOOG is still up (Scratching my head).

  106. 106
    kaman Says:

    DUG spreads are largely a function of thin trading volume?

  107. 107
    zman Says:

    K – absolutely and they may tighten with time as USO and UNG did but the jury is still out for now.

  108. 108
    Sambone Says:

    Z – What are your thoughts on CCJ? U308 has increased from $75lb to current 93lb. They are expecting to increase production by 80% in 8 years. I like this stock in the low $30’s. Your thoughts?

  109. 109
    kaman Says:

    BHP anyone else? Not just a dry materials co.

    BHP Billiton today announced first oil production from its operated Stybarrow project offshore north west Australia. The Stybarrow project involves a nine well subsea development and a Floating Production Storage and Offtake (FPSO) facility, the Stybarrow Venture with capacity of approximately 80,000 barrels of oil a day.

    BHP Billiton’s J. Michael Yeager, Chief Executive Petroleum, said the development was another key milestone this year in the growth of the Company’s petroleum business and expansion of Petroleum’s operated projects.

    “First oil was scheduled for early 2008, however we’re pleased that we were able to deliver Australia’s deepest offshore development to date ahead of schedule.

    “This achievement reflects a solid work plan that was well executed. We have an experienced project team of BHP Billiton and major contractors and congratulate them on this fine work. We expect this high level of performance to continue into our production phase.”

    At a water depth of approximately 825 metres, the development is located in production licence block number WA-32-L in the Exmouth Sub-basin, approximately 65 kilometres from Exmouth.

    Project costs for Stybarrow are approximately US$760 million, of which BHP Billiton’s share is 50% (approximately US$380 million).

  110. 110
    Nicky Says:

    wow talk about gamed in low volumes. nearly a dollar bounce in the last two minutes of trading

  111. 111
    kaman Says:

    DRYS= short squeeze commencing? Dipped my toes at $9.50 for Dec 80 calls…roll the dice.

  112. 112
    freeflow Says:

    I’m actually up on my Jan’s from yesterday now. Selling 1/2 into strength.

  113. 113
    zman Says:

    hey maybe they game the market as well.

  114. 114
    Sambone Says:

    Citigroup – Energy trimmed to Market weight
    “Following our September “Downgrade Watch” on Energy, we are taking the industry group down to Market Weight from Overweight, reflecting its 19% gains year to date (vs the market’s sub- 3% appreciation). Cautious earnings revisions, neutral valuations, and oil prices near three standard deviations above average all suggest it is time to back away”.

    By the way, they also went to Overweight in Banks.

  115. 115
    Sambone Says:

    2:23 pm EST

    Nymex Crude Makes Up Ground, Down 16c at $97.87/Barrel

    DOW JONES NEWSWIRES
    From Market Talk:
    [Dow Jones] Nymex crude makes up some losses Wed after mixed US oil inventory report. Citigroup analyst Tim Evans says neither the 1.1 million bbl draw in US crude stocks nor the 1.2 million bbl build in crude at Cushing, Okla. were big enough to “change the overall calculus’ of supply. “It’s difficult to assign meaning to today’s trading” given light pre-holiday volumes, he says. Nymex Jan crude -16c at $97.87/bbl. (greg.meyer@dowjones.com)

  116. 116
    zman Says:

    CCJ – agree but don’t follow closely enough to offer much of value on a day like today.

    Citi just trying to generate commissions

  117. 117
    TTupp Says:

    sam re 108, i trade that stock, well the options a lot. good open interest / vol, and predictable swings.

    largely being oversold with market esp. now with rebounding uranium prices. growth industry with respect to uranium supply demand fundamentals. once cigar lake is de-watered and the near-term prospects for production are on the table things may become lucrative on the long side.

    i feel this is a great alt energy/ green alternative play and consider it an energy company not a miner.

    at the end of the day look at it this way: india and china have something like 75 reactor coming online in the next 10 years…. and their prime property, cigar lake, holds the world richest reserves of ur. as for mgt. i haven’t studied them to closely, but otherwise looks good to me

    I’m out- everyone have a great thanksgiving, i know i will be enjoying a day off from this crappy market tomorrow while my fiends and relatives are working since we have our thanksgiving on a different time than you….

    cheers– go lions

  118. 118
    zman Says:

    115 – agree completely.

    modest greening of the energy screen occuring.

    oily dnr running, apa probably not far behind

    do running with rig.
    yawn

  119. 119
    zman Says:

    natural gas: build of 4 bcf; I was a +/- 5 Bcf.

  120. 120
    Nicky Says:

    broader market cannot hold any bounce

  121. 121
    Nicky Says:

    CNBC talking oil every ten minutes and wheeling Kilduff out at every opportunity – they are now talking $120.
    Every time they ask him for bullish reasons all he comes up with is Nigeria.

  122. 122
    Nicky Says:

    Dow back at critical levels.

  123. 123
    zman Says:

    121…that’s just lame. if I were to try and justify $100 oil that would only be one piece of the puzzle

  124. 124
    Brian08 Says:

    I don’t watch CNBC much because I’m usually in class, but I’m not today, but damn I’m already sick of seeing this Kildork guy…

    I don’t think I’ve said today how much I love Chuck Prince…At least he hasn’t managed to screw ANF, which I’m shocked at…

  125. 125
    Nicky Says:

    this time on with an analyst who said it for what it was – speculation. I have to say Kilduff had trouble arguing this and said it was now all about Iran!
    This guy (can’t remember his name) said oil should be at 50 but that the speculators could run it as far as they liked until the government stepped in and did something about the speculation.

  126. 126
    Nicky Says:

    KilDORK is sooo much better suited to him than Kilduff!

  127. 127
    Nicky Says:

    In fact Kil (the) Dork sounds about right!

  128. 128
    Nicky Says:

    Selling could really accelerate next week if we close down here. Even CNBC recognise it as a major sell signal for the Dow!

  129. 129
    Brian08 Says:

    Haha Nicky! I say we petition to get one of you guys on this broadcast to talk some real easy fundies and not flip-flop every segment…I can’t get a job on Wall Street but yet these morons get paid high 6 (probably 7) figure salaries…Go fig there…

    If this guy is going to talk $100 oil, why the heck doesn’t he just talk COP up to around $85 (or hell even $80+) so I can get out…

  130. 130
    Sambone Says:

    Brian – “Those who can’t, become CNBC talking heads” Sambone Nov 07

  131. 131
    Brian08 Says:

    Amen to that Sam, Amen…Watch for me on CNBC starting summer 2008!! 🙂

  132. 132
    Sambone Says:

    3:27 pm EST

    Nymex Crude Closes Down On Mixed Inventory Data

    By GREGORY MEYER
    Of DOW JONES NEWSWIRES

    CHICAGO — Crude oil futures drifted lower in choppy trading Wednesday after traders took profits and new data that showed diminishing U.S. oil stockpiles failed to inspire much buying.

    The downward shift stifled anticipation that oil might clear $100 a barrel before Thanksgiving, a prospect that appeared in reach after crude hit an all time intraday high of $99.29 in electronic trading earlier in the day. But mixed signals from a U.S. Department of Energy oil inventory report, coupled with light pre-holiday volumes, added up to a quiet day and a close below Tuesday’s record settlement price of $98.03.

    “I don’t think you have enough activity and enough volume to push us forward to $100 yet,” said Brad Samples, an analyst at Summit Energy in Louisville, Ky. The market is “really taking a breather.”

    Light, sweet crude for January delivery on the New York Mercantile Exchange settled 74 cents, or 0.8%, lower at $97.29 a barrel. January Brent crude on the ICE futures exchange fell 48 cents to $95.01 a barrel.

    Early Wednesday traders braced for the latest oil inventory data from the Energy Information Administration, a unit of the U.S. Department of Energy. The 10:30 a.m. EST release of the data, which showed 1.1 million barrels draining from the nation’s crude oil stocks last week, went against analyst expectations for a build and briefly pushed the price up $1.60 a barrel to $98.70.

    But the data also showed a 1.2 million-barrel increase in stockpiles at Cushing, Okla., the delivery point for Nymex oil futures. That build helped put a lid on prices, analysts said.

    “It appears to me the impact of the increase in Cushing stocks more than outweighed the drop in total crude supply,” said Jim Ritterbusch, president of Ritterbusch and Associates, a Galena, Ill., oil trading advisory firm.

    Partly fed by fears of high oil prices, U.S. equities also declined Wednesday with the Dow Jones Industrial Average recently down 132.90 to 12,877.24. Crude traders saw that as a reflection of potential U.S. oil demand, Ritterbusch said, and took it as a sign to sell.

    After setting the new intraday record, some traders took profits, traders said. Prices’ peak before the U.S. data release may have been a case of “the old adage of “buy the rumor, sell the fact,'” said Harry Tchilinguirian, senior oil market analyst at BNP Paribas Commodity Derivatives in London.

    With trading volumes light, others cautioned against reading too much into Wednesday’s price movements. “It’s difficult to assign meaning to today’s trading,” said Tim Evans, an energy analyst at Citigroup in New York.

    The Nymex trading floors will be closed Thursday and open for an abbreviated session on Friday. Barring significant developments on the supply or geopolitical front, some observers don’t see another run at $100 oil this week.

    “It seems if we’re going to print 100, it’s probably going to have to wait until next week,” Ritterbusch said.

    Front-month December heating oil fell 27 points, or 0.1%, to settle at $2.6874 a gallon. December reformulated gasoline blendstock, or RBOB, fell 1.44 cents, or 0.6%, to $2.4371 a gallon.

    —By Gregory Meyer, Dow Jones Newswires

  133. 133
    Sambone Says:

    Brian – You’d probably do a better job.

  134. 134
    zman Says:

    Nicky – $50 doesn’t work for me either. Much of the production growth of late in Opec and non-Opec countries has been managed through artful affiliation with foreign companies like XOM all the way down to APC.

    In the meantime, the oil nations have, one after another, gotten greedy and “changed the deal on the oil co’s” making the economics less favorable than when they signed up. So the foreign companies are having to re-allocate capital to friendlier shores. Projects that have reached development phase I are seeing development phase II sidelined in favor of a new project somewhere else which means slower production growth globally.

    Concurrently service company inflation has run rampant stemming from a lack of both strong backs and geological and geophysical talent.

    On the market, everybody cares about technicals. How about forward fundamentals versus historical norms. Where is the analysis among the talking heads regarding the S&P and Dow current forward multiples? Are we cheap, are we expensive, they rarely mention it.

    I know you laugh, although I don’t why, when I say things are tight right now but they are. Tight being defined by demand outstripping supply. Also, there is the barrel issue. The worlds oil supply is becoming heavier and therefore harder/more costly to refine. The only way to turn this around is through a combination of increased production (which you won’t get at $50) AND conservation (which you certainly won’t get a $50).

    I don’t know the number maybe $75, maybe higher. But simply saying we’ve gone up too fast because oil was $50 a year ago doesn’t work for me. Its overly simplistic to say we should be back there. Maybe we were too low then.

    When you have the kind of demand growth we have (globally), combined with the kind of problems we are seeing in several of the big producing fields (with no apparent offset) in the near term, I don’t think you can just write off the tightness.

  135. 135
    Nicky Says:

    There goes the broader market….

  136. 136
    Sambone Says:

    15 minutes to “Tini time”. Market closes at 1 pm on Friday. I won’t be here. Remember that the Dow Theory states that if the Dow closes below 12,845, then it is a major sell signal that has been confirmed. Look out below!Everybody have a good turkey day and I’ll see ya Monday!

  137. 137
    Nicky Says:

    Well surely Z demand is about to fall off a cliff as oil hits 100 along with the global slowdown anyway?

    And I also ask why there was no mention of tight supply when we WERE at 50 back in January?

  138. 138
    Sambone Says:

    N – As T. Boone Pickens saids “Demand is 86 million and we’re pumping 85 million”.

  139. 139
    Nicky Says:

    Have a good one Sam – watching for that Dow Theory sell signal myself although if we get there today I suspect they will argue it is negated on low volume!

  140. 140
    Nicky Says:

    Well all i can tell you is once this spike is done the charts point much lower…

  141. 141
    Sambone Says:

    N – Disagree, a number is a number.

  142. 142
    Nicky Says:

    I am with you on that Sam…..

  143. 143
    ram Says:

    It seems the cost of extracting oil hasn’t changed as fast as the commodity price. Aren’t some of the energy names still going to have great quarters regardless oh $99 or $89 or $79 oil. It also seems that energy company’s future revenues are tied to a “mythical” commodity price? Is anyone actually paying and getting delivered $98 oil?

  144. 144
    Nicky Says:

    You can stick a fork in the bull market.

  145. 145
    Sambone Says:

    Monday is gonna be brutal! Sambone Nov 07

  146. 146
    Sambone Says:

    Wow, now down 215

  147. 147
    Sambone Says:

    S&P now even for the year.

  148. 148
    Nicky Says:

    Any rally should now fall short of previous highs and should be the short of the century….. Nicky Nov 07!

  149. 149
    ram Says:

    Maybe a cold winter will help our energy stocks??

  150. 150
    Sambone Says:

    10-4, Tini time, have a good one!

  151. 151
    Nicky Says:

    Ram- its going to be warmer than usual! Mind you tell crude futures that!

  152. 152
    ram Says:

    HAPPY THANKSGIVING EVERYONE – You too Z! I am thankful for our first little one and health.

  153. 153
    zman Says:

    M – People were talking about tightness at 50. Things got tighter as OPEC delayed boosting production and the spread between supply / demand is closer to 1.5 mm bopd in the 4Q which I laid out 2 months ago when I said stocks were going to fall and oil was going to rise. I just look at the numbers and tell you what I think. $100 is too high and $50 is way way way too low. I try not to have a unidirectional bias…

  154. 154
    zman Says:

    Ram – its not mythical, some do a little better some do a little worse to WTI, depends on location and the grade of crude.

    Service co inflation outpaced crude prices for the first three years of the recent rally in stocks. Crude is coming from more costly places to find it. Like BFE northern Canada where they have to build small towns with everything you can imagine just to get people to live and work there.

    Have a great thanksgiving everyone. I will post a quick review of the oil #s for Friday but don’t plan to be around much on Friday.

  155. 155
    Nicky Says:

    Z – I hear you! My problem is that this market is clearly being driven by speculators and not by fundamentals. We MAY have a cold winter, Iran MAY shut the Straits of Hormuz but lets be honest none of these things have happened yet.

    We MAY have a global slowdown and then what?

    Anyway have a great couple of days off.

  156. 156
    zman Says:

    N – Hear you as well! Spec definitely have the last $10 to $20. Agree lots of mays but the numbers point to tightness with out them…see the “bump in the road” chart from last Thursday’s post as a case in point. Like I said, JK would do better to stick to some easy, back of the envelope math on supply, than he does by jacking around with the hypey topics of iran, nigeria (part hype, part real) or china. Anyway, that’s what makes markets and you bears won this week no doubt.

    Have a great bangers and mash day. Z

  157. 157
    TTupp Says:

    re 154- i have stayed in one fr a weekend: fort mcmurray! talk about a manufactured town, 5,000 population 20 years ago and calling for 1million in 10. people at mcdonalds make $15/hr simply not enough people

  158. 158
    TTupp Says:

    my little cousin moved there to work for a oil sands miner and lives in a $400,000 trailer. literally.

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