28
Nov

Wednesday – EIA Inventory Day + A Quick Look At E&P and Refining Sector Valuations

Print Friendly

Obviously still cautious, energy took an across the board drubbing yesterday. Due to a family emergency I will be out this morning through the EIA's report, my thoughts are outlined below.

Commodity Watch:

  • Crude Oil: fell $3.28 to close at $94.42 after Saudi announced production was at 9 mm bopd which is the highest level seen this year and Dow Jones broke a story purporting that an unnamed OPEC official claims the cartel is mulling a 500,000 to 1 million barrel production hike for the December 5th meeting. Impossible to tell what they are up to as the "leaks" of their goings on may or may not be trial balloons designed to test the market's likely reaction to actual news.
  • OPEC Watch: Conflicting signals. OPEC member Qatar today said there is no need to raise production while Libya simply said the group is unable to raise production further.
  • Mini-Nigeria Lookalike Contest Watch: Ecuador says "jungle clashes" have cut production from the newest and smallest (500,000 bopd) member of OPEC by a little over 10,000 bopd. Note to OPEC: you've gotta watch who you bed down with. These guys don't pay off their debts, they have civil unrest, they like to steal other peoples oil assets (bad for foreign investment) and now they keep saying oil prices are too high. Some people join a club because they like the club. Others join because it makes them look more important. President Correa is the latter. Another place to mark off as a place not to invest. By the way, Correa's beef with high oil prices is only that it will inspire further investment in alternative energy which in his mind is a bad thing.  
  • Natural Gas: fell $0.17 to $7.56 in sympathy with the oil decline. Gas should see bigger than prior year draws on storage this week and next. Gas is trading off 4 cents this morning.

EIA Oil Report Expectations (From The Dow Jones Survey)

 

exp-112707.jpg

Crude Comments: OPEC rumors will dominate price, this report will have little impact unless the numbers are well off the market. I think you could get a bigger draw in crude as the refinery utilization should come up, probably above 88%.

  • Reuters has slightly different numbers and I don't see a bullish tone possibly entering into today's trading unless the numbers beat (bigger draws, smaller builds) the following bigger crude and distillate numbers.
  • crude: down 900,000 barrels
  • gasoline: up 600,000 barrels
  • distillate: down 1.3 mm barrels
  • Crude: No good feel for the number. Imports fell back a bit last week as expected and we did have some fog closures at the HSC last week (Monday and Tuesday) so imports may not be especially strong. 
  • Gasoline: Possibility exists for a smaller than expected number. As with crude, no real good feel as the utilization news out of U.S. refiners has been mixed but both production and demand have been strong and last week should have seen quite a lot of shopping and travel traffic; Mastercard's SpendingPulse report shows gasoline demand was 9.317 mm bpd, up from the prior week's consumption of 9.222 mm bpd so without a further boost in production AND higher imports (hard to see either being enough alone) we could get a small disappointment here. 
  • Distillates: Think we may get a draw towards the larger end of the range here. Oil population consuming weighted heating degree days rose to a season high 180 last week. This is 10 more than the year ago period when we saw a withdrawal of 1 million barrels. 

hdd-heat-oil-weighted-112707.jpg

Distillate stocks were recently above average (as were crude stocks this summer) but increasing demand for diesel both domestic and international and a pickup in heating load have recently driven them back to normal levels and I would expect this pendulum to swing towards the low end of the spectrum for this time of year.  

 

 

Holdings Watch: Not ready to get active on the call side.

CALLS:

  • (TSO): December $50s added for $1.90. Last bid $1.85.

PUTS:

  • (SU): Added back the December $95 puts for $3.50. Last bid $3.50

Valuation Tables Update Day. After a big change in prices I like to take a fresh look to see where everything stands

Exploration & Production

ep-multiple-112707.jpg

Key E&P Takeaways and Comments:

  • HK cheap to its history and for its lengthening reserve life (which expanded again yesterday with a producing property acquisition in the Fayetteville Shale).
  • CHK: stupid cheap, tried to fall over $1 yesterday, closed down $0.44 as some sense of order came in late in the session.
  • APA: most oil leveraged large cap E&P won't bounce back until oil does, not expensive, not overly cheap either. A $1 move in crude translates into roughly $0.20 of 2008 CFPS.
  • DNR has been performing well, but at nearly 12x forward cash flow it needs oil price momentum to move higher, like the story, staying away from the stock until oil takes a bigger spill (except for the occasional trade as this is one volatile little beasty)
  • SWN - probably the biggest bouncer in a natural gas rally, pretty unscathed yesterday down a couple of dimes and with the big pop in YoY unit volumes the company is guiding for next year.
  • (PQ) - also stupid cheap but the little guys are getting ignored right now. This is safer as a stock holding.

Refiners these and the ones that follow are Price to Earnings

refiner-multiple-112707.jpg

Key Refiner Takeaways and Comments:

  • Fair Weather Fan Award Goes To Tracinda. Didn't want a seat on the board, were obviously shocked by 3Q earnings (along with every analyst that follows it) and then they get upset over a poison pill. Talk about having the short view. Bought a little TSO $50 December call action after having watched the stock drop like a rock as Tracinda's $64 offer first looked shaky, then as it dropped below the 10/26 pre offer price after the offer was pulled yesterday morning.  Note to readers: 8x forward earnings is slightly below the recent average range for TSO. The 4.0x low is fairly misleading as it stems from when the stock was last earning less than a buck a share (way back in 2002/2003). Don't really see them going back there soon unless the left coasters all give up their mogas powered cars for Ed Begley Jr mobiles. One other thing in their favor should be a YoY and potentially sequential improvement in West Coast and Pacific Northwest cracks.
  • (VLO) I'll wait. Cheap and nobody cares right now. Will buy closer to the money strikes when I do come back in.
  • (FTO) people are starting to notice the wide sweet/sour differential; stock was actually one of the few green islands in a sea of red yesterday.
  • (SUN) home to the strongest cracks of the 4Q.

 

Odds & Ends

Analyst Watch: (ANR) upped to buy at UBS, (HOC) upped to outperform at FBR, (CHK) and (PETD) picked up by Stiffel as Buys, (CNQ) price target cut at FBR and RBC.

 

 

 

45 Responses to “Wednesday – EIA Inventory Day + A Quick Look At E&P and Refining Sector Valuations”

  1. 1
    Sambone Says:

    8:45 am EST

    Nymex Crude Up Ahead Of EIA Inventory Data

    Dow Jones Newswires
    From MARKET TALK:

    [Dow Jones] Nymex crude is up slightly ahead of the US Energy Information Administration’s release of weekly oil inventory data. Analysts polled by Dow Jones eye a 500,000-bbl draw in crude stocks, a 600,000-bbl build in gasoline stocks and a 1-million bbl draw in distillates. Refinery use is expected to increase by 0.6 percentage point to 87.6% of capacity. Crude stocks have fallen four of the past five weeks. Nymex Jan crude +34c at $94.76/bbl. (greg.meyer@dowjones.com)

    Reported Earlier
    LONDON — Crude oil futures recovered some of Tuesday’s losses in London trade Wednesday morning, driven by uncertainty of an OPEC output rise and position juggling by traders ahead of the latest U.S. oil inventory data.

    A combination of short position holders choosing to pocket gains and investors seeking to buy at lower levels ahead of the weekly statistics pushed crude prices higher.

    Uncertainty about OPEC production continued to hang over the session, meanwhile, with comments from Saudi Arabia’s oil minister seen to downplay talk of a hike, raising some doubts over the possibility and size of any production increase.

    “While we wait for the cartel’s (OPEC) decision, it will be interesting to see whether yesterday’s correction will usher the “buy-the-dip” crowd back in and result in a price reversal,” said Edward Meir, analyst at MF Global.

    At 1300 GMT, the front-month January Brent contract on London’s ICE futures exchange was up $0.18 at $92.70 a barrel.

    The front-month January light, sweet contract on the New York Mercantile Exchange was trading $0.15 lower at $94.27 a barrel.

    The ICE’s gasoil contract for December delivery was down $6.00 at $837.00 a metric ton, while Nymex gasoline for December delivery was up 60 points at 237.90 cents a gallon.

    Adding to the uncertainty over what path OPEC may choose when it gathers Dec. 5 in Abu Dhabi, Saudi Arabia’s Minister of Petroleum Ali Naimi reiterated Wednesday that OPEC will look at data on the global oil market to decide whether it needs to increase output further, downplaying talk of a possible output rise.

    He said he was unaware of talk that OPEC is discussing an output increase of 750,000 barrels a day, after an OPEC official told Dow Jones Newswires Tuesday that the oil producer group may increase production by that much.

    Jim Rintoul of TheOilTrader.com. said: “I think, with oil prices $5 off highs, it’s unlikely that we will see a substantial increase at the Dec. 5 meeting.”

    “If they were to up production by 750,000 (barrels a day), that’s not going to start to lift until Jan. 1 and won’t show up until winter is done and dusted. That could have a catastrophic effect when demand naturally falls off,” Rintoul said.

    He predicted a rise of between 250,000-500,000 barrels a day was more probable, and likely to be more readily accepted by members of the organization opposed to an increase in the quota.

    Much of Wednesday’s position adjusting was set against expectations that crude oil stocks will have declined in the week to Nov. 23, although a potential draw in excess of expectations tempted some investors to load upon crude futures in anticipation of the boost it could offer prices.

    Crude oil stocks are 8.1% below year-earlier levels and have fallen during four of the last five weeks.

    Crude oil inventories are expected to decline by 500,000 barrels in this week’s data according to the average of a Dow Jones survey of 16 analysts. Stocks of distillates, which includes heating oil and diesel fuel, are forecast to fall by 1 million barrels.

    With parts of the U.S. languishing in below-average temperatures — notably the northeast, the primary heating-oil consuming region — distillate figures are also expected to be closely watched with an eye on both winter supply levels and crude demand.

    Technical analysts warned Wednesday that further weakness could precipitate a sharp decline in crude oil futures.

    With Nymex futures now trading at technically “critical levels”, any further slips lower pose a threat to the near-term bullish outlook, technical analysts at Barclays Capital warned.

    “Closes through [$93.45 a barrel], would do significant damage to the bull trend, opening $4-$5 of downside in the process,” they said.

    Nonetheless, with crude hovering close to mid-$90-a-barrel, another attempt at $100 a barrel couldn’t be ruled out, a broker said, with this week’s ascent in Nymex crude to $99.11 a barrel and fresh territory for ICE Brent fresh in traders’ minds.

    “Two days ago Brent was touching highs. By the end of the week it could be doing the same,” a London-based broker said.

    Wednesday’s data was seen as a potential trigger for a fresh move towards the psychologically important $100 a barrel.

    “With little evidence yet of any compelling weakness in oil market fundamentals, another move up toward the $100 level should not be ruled out and today’s U.S. inventory may prove to be a catalyst,” said analysts at Barclays Capital.

    Also due for scrutiny later Wednesday, a flurry of macroeconomic data offering the latest insight into the well-being of the U.S. economy.

    An uncertain outlook for global economic health has added to the pressure on crude and other financial markets.

    Concerns center on the possibility of a reduction in crude demand amid any slowdown in the U.S. and beyond.

    Tuesday’s sharp falls in crude ran counter to a rebound on global equity markets, which were seen to be lifted to a large extent by positive news in the banking sector, rather than the economic growth outlook.

    “It was interesting to note yesterday that the rally we had in equity markets failed to provide any lift to energy markets. We can only assume that equities were rallying on the Citibank and HSBC announcements, and not on a possible change of sentiment with regard to the U.S. growth outlook,” Meir said.

    “This may also explain why some of the base metals, like copper, also joined crude in failing to rally; it seems that fears of a slowdown are apparently outweighing the “feel-good” rally we seem to have had in the stock market.”

    The U.S. Federal Reserve’s Beige Book is due out later Wednesday, as are latest U.S. October durable goods sales and U.S. home sales data for October.

    A weakening U.S dollar has provided a column of support for crude prices in recent weeks, but the greenback continued to claw back some of its lost value against the euro Wednesday, reaching its highest levels against the euro in more than a week, and adding some resistance to crude’s gains. The euro fell to $1.4720 against the dollar earlier Wednesday.

    Falling expectations of a Federal Reserve rate cut were seen to boost the value of the dollar while diminishing hawkishness at the European Central Bank weighed on the euro.

    A weaker dollar is seen as supportive for crude prices, lending dollar-denominated crude more appeal to investors holding other currencies.

    —By Nick Heath; Dow Jones Newswires

  2. 2
    zman Says:

    I am out due to a family emergency. Don’t know when I’ll be back if at all today.

  3. 3
    Webloner Says:

    Z, reading all of you at lunch time made my half hour go to fast. I got a novice question. Let say you have over a 100 contracts do you dump them at ones or you try to do it in lots like a stocks. Baring in mind the comish. Thanks.

  4. 4
    freeflow Says:

    Keep the posts coming guys… I’m at work but watching for ideas.

    Hope everything is ok for you Z.

  5. 5
    Sambone Says:

    9:32 am EST

    Nymex Crude Up Ahead of EIA Inventory Data

    By GREGORY MEYER
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures rose slightly Wednesday as traders awaited U.S. oil inventory data and interpreted a statement by a key OPEC oil minister to mean more output from the cartel is not guaranteed.

    Light, sweet crude for January delivery on the New York Mercantile Exchange was recently up 35 cents, or 0.4%, at $94.77 a barrel. Brent crude on the ICE futures exchange rose 53 cents to $93.05 a barrel.

    Bolstering prices were expectations of a draw in crude stocks to be reported at 10:30 a.m. EST, when the U.S. Department of Energy releases its weekly oil inventory report. Analysts surveyed by Dow Jones anticipate U.S. crude stockpiles to have shrunk by 500,000 barrels in the week ended Nov. 23. If the expectation is borne out, it would be the fourth crude stock draw in five weeks. Crude stocks are off 6.9% from a year ago.

    “Last week’s DOE report gave us a combination of lower crude stocks and lower (refinery) utilization, which is a bullish one that we do not yet feel has been discounted fully by traders,” said Peter Beutel, president of energy trading advisory firm Cameron Hanover, in a note. “We may see it this week when there is enough of a quorum present in this market. We need to see both crude oil stocks and refinery utilization higher in this week’s figures, or last week’s combination will seem all much more bullish as a result.”

    The Nymex front-month crude contract dropped 3.4% to $94.42 a barrel Tuesday as traders contemplated the prospect of the Organization of Petroleum Exporting Countries deciding to increase output at its meeting in Abu Dhabi next Wednesday. An OPEC official told Dow Jones Newswires Tuesday that the group is discussing an output increase of 750,000 barrels a day. But Ali Naimi, oil minister of Saudi Arabia, OPEC’s de facto leader, said Wednesday he was unaware of talk that OPEC is discussing an increase of that magnitude.

    Naimi also reiterated that OPEC needs to look at data on the global oil market to decide whether it needs to increase output further, downplaying talk of a possible output hike.

    Crude prices may have stabilized on Naimi’s comments. “The market did seem to firm up on that,” said Gene McGillian, an analyst at TFS Energy Futures in Stamford, Conn.

    U.S. economic worries have also weighed on oil prices. Data released by the Commerce Department Wednesday showed that orders for durable goods decreased by 0.4% last month to a seasonally adjusted $214.45 billion. Durables, which are goods designed to last at least three years, decreased 1.4% in September, revised from a previously estimated 1.7% decline. August orders plunged 5.3%.

    On the Nymex, front-month December reformulated gasoline blendstock, or RBOB, rose 1.35 cents, or 0.6% to $2.3865 a gallon. December heating oil rose 1.66 cents, or 0.6%, to $2.6700 a gallon.

    —By Gregory Meyer, Dow Jones Newswires

  6. 6
    apbd Says:

    Z:
    Hope all is well.
    apbd

  7. 7
    Popeye Says:

    Not much reaction to the numbers.

  8. 8
    sane Says:

    eia

    Crude Down 400k
    Gasoline up 1.4M
    Distillate Down 100k

  9. 9
    Nicky Says:

    Hope all is okay Z.

    Not particularly bullish numbers….

  10. 10
    kaman Says:

    Beginning to crawl out of the House of Pain on DRYS Dec calls today…oy.

  11. 11
    Nicky Says:

    Broader market should make a test of the 18dma and 200 dma between now and Friday which come in between 1464 and 1480. That should set up the first short term top.

  12. 12
    Sambone Says:

    10:39 am EST

    Crude, Distillate Stocks Dip; Gasoline Grows

    DOW JONES NEWSWIRES
    From Market Talk:
    [Dow Jones] US crude-oil stocks dropped 400,000 barrels, near expectations, while gasoline stocks rose a more than-expected 1.4 million barrels and distillate (heating oil/diesel) stocks fell a less-than-expected 100,000 barrels, in the week ended Nov 23, EIA data show. Analysts surveyed by Dow Jones Newswires expected crude-oil stocks would fall by around 500,000 barrels, with forecasts ranging from a rise of 2 million barrels to a drop of 3.7 million barrels. Gasoline stocks were expected to gain by around 600,000 barrels, with forecasts ranging from a drop of 800,000 barrels to a rise of 1.8 million barrels. Distillates stocks (heating oil/diesel) were expected to drop by 1 million barrels, with expectations spanning from a rise of 1 million barrels to a fall of 2.2 million barrels. (david.bird@dowjones.com)

  13. 13
    Nicky Says:

    Sorry amending #11 slightly. 18dma already hit at 1458.77

  14. 14
    Sambone Says:

    Spanking oil!

  15. 15
    TTupp Says:

    re #3, weblonger- what company are we talking about here?

  16. 16
    Nicky Says:

    No sign of that ramper Kilduff on CNBC today – what a surprise! Why don’t CNBC bring these idiots back on and make them accountable.

  17. 17
    Sambone Says:

    11:01 am EST

    Nymex Crude Drops As EIA Data Meet Expectations

    By GREGORY MEYER
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures fell Wednesday after U.S. government data showed a draw in oil inventories last week that met expectations.

    Data released by the U.S. Department of Energy revealed that crude oil stockpiles fell 400,000 barrels in the week ended Nov. 23, the fifth draw in the last six weeks. A Dow Jones Newswires poll of 16 analysts yielded an average expected draw of 500,000 barrels.

    Light, sweet crude for January delivery on the New York Mercantile Exchange was recently $1.48, or 1.6%, lower at $92.94 a barrel. Brent crude on the ICE futures exchange fell 70 cents to $91.82 a barrel.

    The data from the Energy Department’s Energy Information Administration unit was “overall, kind of a bearish report,” said Tom Bentz, an analyst at BNP Paribas Commodity Futures in New York.

    Gasoline stocks rose 1.4 million barrels last week, higher than the expected 600,000 barrels. Distillates, which include heating oil and diesel fuel, fell by 100,000 barrels. The analysts surveyed expected a 1 million barrel draw.

    Refinery runs rose by a large 2.4 percentage points to 89.4%, versus an expected 0.6 percentage point increase.

    “That means oil is coming here and we’re making product,” said Michael Cambria of Eagle Futures on the Nymex floor. “That’s got to be the reason why we’re coming off.”

    Front-month December reformulated gasoline blendstock, or RBOB, fell 4.83 cents, or 2% to $2.3247 a gallon. December heating oil fell 2.92 cents, or 1.1%, to $2.6242 a gallon.

    –By Gregory Meyer, Dow Jones Newswires

  18. 18
    Nicky Says:

    If oil continues to sell off then surely the chances are that OPEC will not increase production next week?

  19. 19
    Sambone Says:

    N – Agreed

  20. 20
    Webloner Says:

    Z, hope all is well.
    TTupp re#3, I mean in general or it depends on the volume of contracts floating. Like the volume of a stock when u sell. For the record the co. is (CHK). Dam lunch was a blur. Thank.

  21. 21
    Nicky Says:

    Kilduff on and flip flopping…

  22. 22
    Nicky Says:

    no actually he remains bullish – now citing the Saudi round up as a reason to be bullish and supply tightness – yawn!

  23. 23
    zman Says:

    Oil Report – not exactly bullish as refiners finally came back with utilization jumping to 89.4%.

    Big bump in crude imports (+500,000 bopd) vs the prior week which was only partially offset by the jump in refiner consumption.

    Cushing saw another 600,000 bopd

    As to equity action it looks like the green market is supporting the sector despite down $3 oil (which is probably an over-reaction as refiner demand is picking up and any slip in imports now will result in a big draw on crude). If the broad market rolls over the stocks get crushed here unless crude begins to recover on OPEC shifting stance.

    I agree OPEC less likely to boost production now as they will be able to point to the numbers (next week’s report willing) and say, “see, the market is amply supplied”

    Webloner Re #3. Case by case basis. Depends on what you want to do and the stock in question. The less liquid the stock and/or option and the less time to expire, the less likely you want to get cute. If you have two months to go on CHK for instance, you can try holding your size position out at the offer or a nickel under the offer.

    Nicky – these guys have been talking it down since the high $90; they’ve got to preserve $90 oil if possible, (although I know Flynn said $80s yesterday) as you know they are getting longer again now. Pump to come soon.

    RIG – currently I’m an idiot for not being there, don’t feel like chasing. Much more of this and people should go “oh yeah, DO” or “Dooh! DO!” soon. Would add $110s here but I’m not able to monitor today and potentially not tomorrow.

    Fair warning, tonight’s post likely to be brief.

    Wow BTU, powerhouse, would buy but am writing this instead + I don’t have time to read the 8K right now.

    Bulk shipping….could run for days, could end in five minutes.

    Got to go. Will try to check in later. Thanks for kind thoughts.

  24. 24
    ram Says:

    I hope all is well Z.

  25. 25
    calvino Says:

    Hi Z, and all my old friends. I bought some DUG shares yesterday, had a feeling crude would dive. However DUG, which is ultra-short crude, is down today,. Z can you make sense of this one to me.

  26. 26
    Alhambra Says:

    Z: Hope all is well and wish you the best.

    RIG merger just went through according to my books.

  27. 27
    Sambone Says:

    Z – Hope all will well!

    Al – RIG did go through, but it is a bear to refiqure the cost basis info.

  28. 28
    TTupp Says:

    cal- dug is ultra short oil type companies, e&p’s, refiners, drillers and integrated’s, not crude

  29. 29
    calvino Says:

    thanks tupp

  30. 30
    TTupp Says:

    web longer– i depends not on volume of the contracts or shares but the bid size and the ask size. chk right now for example could take a few hundred contracts either way. your quote sistem should give you sizing

  31. 31
    aaatest Says:

    Can i get oil, gas, group update? Thanks

  32. 32
    Sambone Says:

    Oil – Down 3.48 to 90.46
    Ngas – down .377 to 7.18

  33. 33
    Sambone Says:

    Group mostly green, with just a few red but not down that much. COP up 1.17 to 77.22, etc.

  34. 34
    aaatest Says:

    ty sam

  35. 35
    Sambone Says:

    DVN and PXD taking the biggest hits, down 3.17% and 2.86%. USO also red at 71.56 down 2.75

  36. 36
    Wyoming Says:

    Short squeeze today?

  37. 37
    Nicky Says:

    Z – I have only been hearing people talk oil up to 100 and beyond for weeks now. Kilduff certainly hasn’t been talking it down! So not sure who you mean has been talking it down?

    That said a lot of technical damage has been done this week. We really still need to see 90.13 taken out for confirmation we have a decent correction on our hands and this last wave is not playing out as an ending diagonal. That said a bounce now towards 93 – 94 should set up the next leg lower.

    Broader markets – its party time as the Fed are going to come to the rescue and cut again! Higher highs still out there short term….

    This may play out as a 3 wave correction in which case after the next short term top expect a decent correction which will not take out previous lows and then another rally into the next cycle high due (guess when??) December 11th!

  38. 38
    Sambone Says:

    Z – Here are the numbers up to the close.
    Oil – 91.47 down 2.94
    Ngas – 7.203 down .354
    USO – 71.90 down 2.40
    Most everything else is green with the market bounce. Gold, and US$ down.

  39. 39
    aaatest Says:

    N kilduff has flip flopped on on number of times last 2 weeks. Your boy pf said 97 was his top and mentioned 80s in article yesyerday…opec now less likely to cut and i think asdemand piles on from refiners for the winter product builds you see on on continuation of crude declines which keeps prices 90+ aslong as they dont break down technically. Since the cfps numbers in todays post are discount 70 and not 90 oil im not concern abouut the producers or oilservice…refining may not recover until early spring however

    Thanks for #s sam

  40. 40
    QUARRYMAN Says:

    Z.

    I hope that your family emergency turned out to be non-event.

    You missed a nice day. CHK did not move much, relatively. I’m going to wait until tomorrow’s reaction or confirmation of upward movement and lesser number of ALs before committing to some Jan 37.5 on CHK.

    … BTW check out VMC up 5 at 86!

    Take a listen to Don James, CEO of VMC on that link from yesterday. It’s pretty impressive.

  41. 41
    zman Says:

    Q – sorry I missed the VMC, I commented on it late last night after having listened to the call and read the presentation. left you a set of questions but it looked impressive and a little recession proof.

  42. 42
    kaman Says:

    Z , time permitting (family comes first), can you elaborate a bit more on why refiners may lag E&P’s and OIH’ers til Spring? Just trying to grasp why they’re showing so much inertia (resistance to movment) compared to the other elements of the supply chain…thanks-Keith

  43. 43
    zman Says:

    K – 4Q looking pretty good as 4Qs go for the refining industry (see bar chart in Monday’s or Tuesday’s post) BUT cracks appear to be leveling. I think you put it best with the use of the word “lag”. People were a little freaked by the EPS volatility going from boom (2Q) to bust (3Q) in the span of a few months. In my book, the fall has been overdone, as much as I believe the rally in summer when things were so great was. They will come back but in a market full of trepidation, and with the recent past being the bust of the boom bust cycle (and really it was more of a rally fade than a boom bust but you get the jist) investors are going to want to see the cracks improve steadily.

    Why do I think spring will be good for them? Forget 5 year averages and concentrate on the here and now. Focus especially on gasoline which by then will have taken sway from heating oil as the driving factor the sector. We are at 91% of year ago levels. You also have to forgive me for buying into tightness in the crude market (see the prior EIA wrap posts with my bumps in the road chart of oil stocks…this is a helpful rhyme “if we weren’t tight, the chart would not be down and to the right” anyway, very little sleep here so forgive the prose. Unless OPEC goes nuts and adds 1 million barrels and does it quick, that chart is likely to extend down and to the right in to January. This will keep oil elevated (anywhere I would think from $85 to $95 for an average). This is heating oil season, not gasoline season and while gasoline demand has been strong for this time of year it will increase in the early spring. If $95 oil gets you $3.10 gas in November, it will get you $4 gas in by say May. Wholesale prices will not remained depressed, as once again, that is gasoline season. A warm winter will lesson the effect of course as the need to replenish HO stocks (low by the way) will be diminished. Anyway, hope that helps, will repost as a late question answered in tomorrow’s post and I’ll look at beefing it up with more data for the morrow.

  44. 44
    ram Says:

    I hope everything is O.K. in Z-land. I bought HAL’s 37.5’s JAN today. As before, HAL runs with the rest of the market as well with energy. Like other people here have said – FAMILY FIRST!

  45. 45
    kaman Says:

    Side note…Pete Najarian (on Fast Money tonight) was pumped about the “VLCCs” (very large carriers of crude) like Nordic Tanker…figure we should bounce them around in here, given how much air time we give the dry bulks (DRYS nearly broke free of the Earth’s gravitional field today trailing vapor) cheers-K

Leave a Reply

You must be logged in to post a comment.

Zman’s Energy Brain ~ oil, gas, stocks, etc… is is proudly powered by Wordpress
Navigation Theme by GPS Gazette

s2Member®
Get Adobe Flash player
%d bloggers like this: