31
Jan

Thursday Post – Gas Preview and Oil Review and lots, lots more…

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Ok, even I thought the euphoria of a 50 basis point rate cut would last longer than an hour. But it turns out that Ben used some harsh language when he gave us our medicine. Phrases like: "recent information indicates a deepening of the housing contraction and some softening in labor markets", and "financial markets remain under considerable stress" were met by the markets with a very cool reception. Like I wrote yesterday, the market is addicted to rate cuts but at some point it has to stop and ask the question, "how sick is the patient". I'd say, "considerabl[y] stress[ed]."
 
 
In Today's Post: my gas estimates, the Street's consensus gas estimate, my review of the oil numbers, various earnings and other news tidbits, an update on the drybulks and lots more. Also, two weeks left until February expiration. Time to think about scud prevention as I'll be taking some losses and more February strike profits very soon. 
 

Commodity Watch:

  • Natural Gas: traded quietly up a dime yesterday in anticipation of what could be a monster withdrawal today.

 

  • My Number: 225 - 275 Bcf. I know, I know, you can drive an LNG tanker through but the numbers get kind of squirrelly when it gets as cold as it was last week. Last year saw a withdrawal of 185 Bcf and the five year average is 177 Bcf. The highest withdrawal I show on record for any week was 260 Bcf back in 1997. So anything over 260 is probably going to be seen as pretty bullish. Anything less and the fuse starts burning again on how long we can hold $8 gas in the face of approaching (someday, right weather guys?) milder weather.
  • Imports: imports bumped up almost one Bcfgpd from the prior week but 1.7 Bcfgpd lower than year ago levels (on a gross basis, Canadian pipes and LNG combined). As such, the change from last week should have little impact in the face of last week's weather (see next bullet)
  • Weather: it was very cold last week with a reading of 272 HDDs. This was by far the coldest week this winter to date and was 21% colder than normal and last year's weather.  

  • Street Consensus: 250 Bcf. I've seen estimates as low as 200 and as high as 300.
  • Crude Oil: rose yesterday on speculation that OPEC will lower production from its current quota level of 29.67 mm barrels.
  • OPEC Watch: Qatari oil minister Abdullah bin Hamad al-Attiyah in Doha Wednesday, told Bloomberg News that OPEC would not raise output at this meeting and will contemplate a cut 'if the world economy moves toward a recession'. OPEC meets on Friday (no cut expected by me or just about anyone) and again in March.
  • Flynn Watch: "This year we will see some big challenges for this market, and I won't be surprise if oil falls precipitously in the following few months," said Flynn. "We could see a potential drop to the $70 range. But I don't think it will stay there very long: it will start to build on the base to go higher". This guy gets a ton of press. I really like the part about how he says crude went too high last year...he was one of the lead talking heads on every news show and print rag touting oil higher towards $100. Now he's on the other side of the trade and all tightness and global strife has vanished.
  • I see several analysts saying they see OPEC doing what it can to maintain a $80 to $100 band and I think that's probably pretty likely...that they will defend $80 and walk softly near $100 but generally try to keep prices there through any recession in the U.S. One analyst pointed out that as refiners cut utilization, OPEC is subsidizing a return to higher margins if they don't cut production, something they are unlikely to want to do, and I would add very true and especially with a weak dollar to his sentiment. 
  • I'd also add that we don't need $100 oil for the producing stocks to do very well. The Street continues to play it very safe with the oil decks used to calculate E&P bottom lines, at least as compared to how traders see the future for oil prices at present. The first quarter works out to a $10+ surplus to the deck so estimates will necessarily be marked higher unless oil just falls out of bed very soon.

street-vs-strip-013008aaa.jpg

EIA Oil Inventory Review

exp-vs-act-012508aa.jpg

ZComment: A generally bearish report from a strictly snap shot view point. YoY deficits improved for both Crude and Distillate which are down 10 and 9% respectively. Gasoline will become more important very shortly and supplies are adequate. Demand for gasoline fell again (second week below the 9 mm bpd mark which is considered healthy for this time of year) and the refiners are all talking recession at this point.  

 

Crude Oil: Big Build As Refiners Take A Nap.  Stocks built a little more than expected on a bigger than expected drop in refinery demand. Stocks remain 10% below YoY levels and are rising during a time when they normally rise. Not a big deal. Not bearish beyond the fact that they came in with a bigger than expected build. The thing to watch for that may soften oil prices is length and depth of the maintenance season (see below). If it drags on and on that could significantly work off the deficit. No wonder OPEC is dragging its feet on boosting production. 

Utilization / Refinery Demand Continue To Soften: Utilization continues to fall faster than analysts expected reaching 85% which is near the lows for this time of year. Commensurate with the drop in utilization, refiner's demand for crude fell by 300,000 bopd to 14.6 mm bopd, also low for this time of year. Refiners are tired of making product for margins as small as they have been.

utilization-013008.jpg

Imports Tracking Seasonal Norms. Imports fell by exactly 100,000 bopd to 10.056 mm bopd according to the EIA and when these things trade in big round numbers one has to view them with a somewhat jaded eye but the main point is is that we are still within seasonal norms and there is no big gush of oil from OPEC showing up on U.S. shores (sorry Bodman).

crude-imports-013008.jpg

 

crude-stocks-013008.jpg

Gasoline: The key points here are stocks are full and demand appears to be falling in the weekly data. This doesn't make me want to jump back into the group no matter how beat up they are or how much (VLO) beat the Street by. Valero bagged the numbers. Those numbers were falling up until a couple of weeks before the earnings report and that doesn't without some nudge from investor relations as they go over year end model tweaks. Crack spreads have improved for one week and the jury is still out on their near term direction. We'll see if (TSO) and the rest of the gang pulled the wool over the analysts eyes as well or not. 

Imports are running a little high to norms, no doubt chasing recent unseasonably high prices. This year, new international sources of supply are expected to increase imports to the U.S. by significant percentage later in the year.

gasoline-imports-013008.jpg

Demand Appears To Be Declining More Than Seasonally Normal. Could it be price + the sagging economy finally having an impact? 

gasoline-demand-013008.jpg

Stocks: The following EIA graph kind of says it all. We are well supplied although summer grade gas is more difficult and costly to make so I would not expect prices to fall off beyond early Spring.

gasoline-storage-013008.jpg

Distillates: Stocks remain low but adequate. 

distillate-stocks-013008.jpg

Holdings Watch: 

CALLS

  • (DSX) March 25 DSX (drybulk) Calls for $4.30.
  • (PBR) - Sold the Feb $110 Calls for $7.20, up 44% since entry 1/15 and frankly I was a little worried about these taking a hit. The $105s worked well earlier in the week but the market had taken a turn against me on the $110s. Thanks to Ben and his rate shears I was able to get out with a tidy little profit. I plan to add March calls here soon.

Earnings Watch & Other Stocks We Care About For Various Reasons:

Dry Bulk Update. Added (DSX) calls as consolidation fever collides with approaching Chinese New Year. They could be a nice target given their fleet size (about 2 million DWT or a little over 50% of the size of the combined EXM/QMAR) and valuation and I will likely exit (DRYS) soon who I'd bet would be on the acquiring side of a trade.

dry-bulk-multiple-013008.jpg

Rates are turning higher: note the Capesize rate increase in the table below...first one we've seen in quite some time. According to an analyst at Dahlman Rose, the first five year time charter in some time for a Capesize vessel was conducted yesterday as well. News that China is down to 8 days of coal stocks for its power plants (usually a 16 day supply is on hand) isn't hurting either and while coal mining delays in Australia and South Africa have weighed on shipping rates, those too will get worked out in the near term.

drybulk-rates-013008.jpg

 

I'll have more EPS comments in the comments section when I have them.

Odds & Ends

Analyst Watch: (BHI) cut at RBC and Wachovia, (SLB) cut to neutral at RBC, (WTI) cut to underweight at JPM.

Claim of the first cellulosic ethanol plant online in the U.S. See the release here.

97 Responses to “Thursday Post – Gas Preview and Oil Review and lots, lots more…”

  1. 1
    zman Says:

    CAM beat by a penny but 1Q08 guidance is light to estimates, stock indicated off a little over 10%.

  2. 2
    Sambone Says:

    7:55 am EST

    Crude Lower As Economic Concerns Prevail

    By Nick Heath
    Of DOW JONES NEWSWIRES

    LONDON — Crude oil prices traded around $1 lower in London Thursday as global financial markets proved unable to shake off fears of a U.S. recession, fueling oil traders’ concerns of reduced future demand for crude.

    The market again looked to global equity bourses for direction Thursday. Stock markets continued to struggle with ongoing subprime-related write down concerns in the financial sector, overshadowing any optimism linked to the U.S. Federal Reserve’s 50 basis point interest rate cut Wednesday.

    With the Organization of Petroleum Exporting Countries widely expected to leave output levels unchanged Friday, economic concerns are expected to remain to the fore in the oil market in the short term.

    “Whereas the Fed’s rate cuts have given a boost to the oil market over the past few days, we expect disappointing news from the U.S. economy now to result in another correction,” said Eugen Weinberg at Commerzbank in Frankfurt. Friday’s U.S. job numbers and manufacturing index data “could start the ball rolling in the event of surprised bad news,” he said.

    At 1237 GMT, the front-month March Brent contract on London’s ICE futures exchange was down 76 cents at $91.77 a barrel.

    The front-month March light, sweet, crude contract on the New York Mercantile Exchange was trading 92c lower at $91.41 a barrel.

    The ICE’s gasoil contract for February delivery was down $2.50 at $807.75 a metric ton, while Nymex gasoline for February delivery was down 315 points at 230.25 cents a gallon.

    Analysts continued to mull Wednesday’s U.S. Department of Energy inventory data.

    Crude stockpiles rose more than expected, by 3.6 million barrels in the week to Jan. 25, while gasoline inventory builds also exceeded expectations, growing 3.6 million barrels. Distillate stockpiles fell 1.5 million barrels, close to forecasts.

    Inventory levels were received as bearish overall, while product demand data also raised concerns after figures showed demand for gasoline, distillates and total product were all lower week-on-week.

    “This tells us, that on top of an increasingly comfortable stock situation, markets will have to start discounting a weakening U.S. demand picture, something we don’t think they have adequately done in recent weeks,” said Edward Meir, an analyst at MF Global in New York.

    Coming two days day before OPEC meets in Vienna, the data helped curb further any lingering doubts over whether the Organization will do anything other than leave production levels on hold, offering crude prices some support in the process.

    “The likelihood of OPEC adding any additional barrels to the market are rapidly diminishing amidst all the economic gloom from the U.S., and of course the content of yesterday’s DoE stock data,” said Rob Laughlin of MF Global in London.

    In a press briefing with reporters in Vienna Thursday, OPEC President Chakib Khelil said it would be hard for the oil body to either raise or lower production amid U.S. economic concerns.

    “I don’t see what increasing the supply of oil could do, I doubt it can help on the price issue,” he said, while “production cuts are not in the cards because psychologically it’s not possible” due to their potential to unsettle the world economy.

    —By Nick Heath, Dow Jones Newswires

  3. 3
    Sambone Says:

    Ya know, I had the Flu for the past three days (Don’t get it, it sucks) and so since I was bored I watched CNBC. After watching it for a couple of hours, I now confirm why I don’t watch the “Talking heads”. They don’t have a clue. It got to the point that it was funny.

  4. 4
    scoop006 Says:

    Z check Feb. Expiration. Feb 15

  5. 5
    bill Says:

    good link on rates

    http://www.fearnresearch.com/pdf/fw_week_5_2008.pdf

    as z points out rates are turning back up for bt the “wet” tankerss and “dry”

    if you have an hour to kill, yesterday ccall with 4 ceo’s on bulker can be accessed here

    http://www.capitallinkwebcasts.com/2008/ceo_virtual_forum_january/main.html

    Z nice move from 50 to 68 with drys. Nice trade on the options. I want to be long going into q4 earnings 🙂 GLA

  6. 6
    zman Says:

    Just checking to see if you’re reading the post Scoop, lol. Thanks…knew the date (which seems early in a month but it seemed even earlier when I wrote that last night)

    Welcome back Sam!

    Welcome back Bill! Thanks…got luck re the DRYS…any thoughts on potential consolidation candidates that would be high on your list.

    Market’s going to take a beating this am, oil to follow.

  7. 7
    zman Says:

    BTU to get flogged at the open …more in a bit …

  8. 8
    scoop006 Says:

    BTU down on earnings drop? Time for entry on this pullback?

  9. 9
    Sambone Says:

    Dow Jones News 8:56 am EST

    Analysts are predicting that gasoline prices will increase by 16% because of a shortage of an additive called “Alkylate”, which is called “Liquid Gold”.

  10. 10
    zman Says:

    Scoop – I’m holding off, guidance on 2008 looks waaaayyyy light. I’ve got a piece now that is going to get flushed. Will wait on call to see if there is some apples to oranges thing here. Also, this market is heading south. Worst January ever for the S&P and the Nasdaq Mark Haines just said.

  11. 11
    zman Says:

    BTU saying $1.00 to 1.85 in 2008…consensus at $2.86 … trainwreck.

  12. 12
    zman Says:

    TSO bricked their quarter too…reported a loss …thankfully not back in that group yet.

  13. 13
    Sambone Says:

    BTU trading at 51.25 premarket.

  14. 14
    zman Says:

    BTU: 1Q08 estimates well consensus,

    conference call at 10 ET…should be lots of yelling.

  15. 15
    sane Says:

    Re 9:

    Always a reason

  16. 16
    zman Says:

    markets and oil going to get murdered on the open

  17. 17
    freeflow Says:

    When’s the gas # z?

  18. 18
    zman Says:

    10:30 et

  19. 19
    zman Says:

    PQ has a little update piece out, not too shabby, nothing to write home about except the production growth rate guidance which is admirable.

    crude trying to hold 90 with OPEC tomorrow but more tied to equities.

    ng is flat before the number

    drybulks opened lower with everything else, but are rebounding a bit – a turn higher for them in a red market would be seen as significant.

    service getting crushed by slb and bhi downgrades and the CAM miss.

    everybody is going to be glad to get this ugly month into the history books. There have got to be some hedge funds in trouble out there.

  20. 20
    zman Says:

    still waiting on APA entry. volatility there is high.

    BTU rallying off lows…I’m waiting on the call.

  21. 21
    Sambone Says:

    9:45 am EST

    Nymex Crude Drops Below $92 On Recession Worries

    BY GREGORY MEYER
    OF DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures succumbed to worries about a recession early Thursday, dropping more than $2 a barrel and erasing the gains it made after a Federal Reserve cut.

    Light, sweet crude for March delivery was recently down $2.20, or almost 2.4%, at $90.13 a barrel on the New York Mercantile Exchange after dropping as low as $89.95. Brent crude on the ICE futures exchange fell $1.34 to $91.19 a barrel.

    Nymex crude was trading at its lowest price since Tuesday. Analysts said the decline reflected weakness in the equities market and concerns that the Fed’s combined 1.25 percentage points cuts in interest rates over the last two weeks may not be enough to guide the U.S. economy away from a recession. An increase in jobless claims also may have stoked selling.

    “The feeling is the Fed has done everything it can to ensure we do not have a recession,” said Peter Beutel, president of energy risk management firm Cameron Hanover in New Canaan, Conn. But with new concerns about subprime-mortgage related losses among bond insurers rattling the stock market, “That could in and of itself signal that we’re moving towards a recession,” he said.

    A recession could slow down oil demand, pressuring prices. A first estimate released Wednesday showed the U.S. economy grew an anemic 0.6% in the fourth-quarter, and some say subsequent revisions could be weaker than that.

    “Should this happen, and should we also get a negative readings for this quarter, we would have met our technical definition for being in recession,” said Edward Meier, an analyst at brokerage MF Global. “Given this potentially sobering scenario, it is hard to justify crude prices being where they are. Therefore, we think it is lower still from here, as the more bullish energy props seem to be getting knocked out from under the markets.”

    Traders are turning their focus to a special meeting of the Organization of Petroleum Exporting Countries in Vienna on Friday. Oil’s ability to stay near $90 a barrel may in part be due to the belief OPEC keep its production quota for countries excluding Iraq steady at 29.67 million barrels a day, market watchers say.

    In a press briefing with reporters before the meeting, OPEC President Chakib Khelil said it would be hard for the oil cartel to either raise or lower production now, given economic uncertainties.

    Analysts at Barclays Capital said oil prices have remained relatively firm because of OPEC’s position.

    “While oil market fundamentals are still tight, we expect OPEC to maintain a defensive policy in the face of the increasing macroeconomic gloom,” they said in a note.

    Front-month February reformulated gasoline blendstock, or RBOB, was down 4.98 cents, or 2.1% to $2.2842 a gallon. February heating oil fell 3.93 cents, or 1.5%, to $2.5100 a gallon. Contracts for both contracts expire Thursday.

    —By Gregory Meyer, Dow Jones Newsw

  22. 22
    zman Says:

    oops, BTU call at 11 et, not 10.

    drybulks going positive

  23. 23
    Sambone Says:

    OPEC President Says Cut Not On Cards

    By Natalie Obiko Pearson and Majdoline Hatoum
    Of DOW JONES NEWSWIRES

    VIENNA — OPEC has not “gouged” the global economy by pushing up oil prices and is powerless to influence the turmoil on world financial markets, the group’s president said Thursday, putting the possibility of a recession in the U.S. at 40%.

    “We have not gouged the world economy,” said Chakib Khelil, who is also Algeria’s oil minister, noting that OPEC continued to supply global oil markets even when production plummeted in some member countries.

    “The (oil) price is not set by OPEC,” he said. “OPEC neither wants nor has the ability to control prices.”

    In a press briefing with reporters ahead of an OPEC ministerial meeting Friday, Khelil said it would be hard for the oil cartel to either raise or lower production now, given economic uncertainties.

    “I don’t think we have seen the (full) extent yet,” of the U.S. subprime mortgage crisis and economic slowdown, he said. “We may not see the full ramifications before 2009.”

    “I don’t see what increasing the supply of oil could do, I doubt it can help on the price issue,” he added. Conversely, “production cuts are not in the cards because psychologically it’s not possible…”, noting that this would potentially spook the world economy.

    OPEC is scheduled to meet at 0900 GMT Friday to discuss its oil output policy in light of a potentially steep slowdown in the economies of the U.S. and Europe. OPEC officials and analysts think the formal output quotas in place for 12 of the 13-member cartel will be unchanged but that there could be a move to cut output at its next meeting in March.

    Led by the U.S., large consuming nations are calling for the cartel to boost production and make a dent in benchmark oil prices that continue to trade over $90 a barrel, off their all-time highs above $100 hit in early January but still sharply up from year-ago levels.

    Khelil acknowledged that some producers within OPEC were under more pressure to raise output. “Some members are most exposed to political pressures and may be more in favor” of taking action to relieve those pressures, Khelil noted. But present conditions “militate in favor of not doing anything.”

    Premature To Talk Of Cuts
    Khelil said 2008 is looking to be “probably the worst year we’ve had.”

    “Everything is hodge podge,” he said. “There’s no clear view on anything, politics, monetary and fiscal policy.”

    Echoing others within the group, the OPEC president cited a hefty speculative premium as responsible for some of the froth in benchmark oil prices.

    “I’m estimating that the premium is around $30,” he said. “If you take a premium of $30, you have about that (a fundamental price of some $60).”

    Some OPEC countries are already pushing for an OPEC production cut when the group next meets in Vienna on March 5, but others say it’s premature to even talk about such a policy move.

    “We have many things to look at before anything like that, like how inventories and how the (global) economy are doing,” said a senior Gulf OPEC delegate.

    The head of Libyan oil policy and Chief Executive of Libya’s National Oil Co. Shokri Ghanem said the group would need to gauge the effect of deep interest rate cuts by the Federal Reserve on economic growth in the U.S. and beyond.

    “The aim of the cut is to stimulate the economy,” Ghanem said in an interview. “If it works, there will be more demand for oil, which is a good thing. But we have to wait and see what the effect will be, we cannot assess it in a short period, its going to take some time.”

    Likewise, Ghanem said the group would need to look at demand projections for the traditionally weaker second quarter before deciding what to do on OPEC policy in March.

    A big question, he noted, is to what extent demand from emerging markets, in particular China and India, will offset weaker demand in the major industrialized economies.

    —By Natalie Obiko Pearson and Majdoline Hatoum, Dow Jones Newswires

  24. 24
    zman Says:

    “The (oil) price is not set by OPEC,” he said. “OPEC neither wants nor has the ability to control prices.”

    …well now that’s just a lie.

    Khelil said 2008 is looking to be “probably the worst year we’ve had.”

    at $90 oil, the worst year you’ve had, try 1998 and $12 oil…man this guy is full of em.

  25. 25
    Sambone Says:

    Hmmm, could this guy be right?

    http://www.mbtmag.com/articleXml/LN736359382.html

  26. 26
    kaman Says:

    DRYS – did I recently around read here that 70 is a significant resistance number…break thru and it goes much higher?

  27. 27
    Popeye Says:

    No reaction to monster draw?

  28. 28
    zman Says:

    274 Bcf, number looks clean, no reaction

  29. 29
    zman Says:

    Buckee is no idiot. The peak oil name is a misnomer since there is of course a finite supply of the stuff. It should be labeled something more like peak oil at a given price but I find subject is pretty worthless to invest upon.

    K – that $70 price was on the site yesterday in comments.

    P – if anything gas is acting like the number wasn’t big enough, even though it was the biggest on record AND the CPC will once again have to revise their HDD total up next Monday as looking at the weather I would say they underestimated the cold yet again.

  30. 30
    zman Says:

    Regarding gas storage:

    East region is now within a few % of their five year average…this is the biggest region for storage.

    West region is now below the five year average (for the west)

    traders likely just selling it off with oil pointing to the potential for demand destruction from a recession.

    again, 274 biggest draw on record. Al Gore eat your heart out.

  31. 31
    zman Says:

    BTU rallying into the conference call. The earnings hit is partly due to non-cash items. However, the top end of EBITDA guidance ($1.0 to $1.3B) is still below the Street Consensus at $1.5B. Mostly bullish pr otherwise, call starts now.

  32. 32
    freeflow Says:

    Lots of rallying going on. Bought some MA 210 calls this morning for 5.00 – now worth 10.20. People can’t ignore a rate cut for long.

  33. 33
    Denise Says:

    Good morning-had a small position in VMC
    going to add to just tagged it’s 200 day and volume is good
    May take awhile but seems low risk

  34. 34
    kaman Says:

    …and $70 was indeed resistance, like a brick ceiling.

  35. 35
    Denise Says:

    Sorry meant 50 day -look at the long term call options on VMC-someone is making a bet today

  36. 36
    zman Says:

    BTU talking up need for transportation, especially rail.

  37. 37
    zman Says:

    great quote: China added the equivalent of Great Britain’s entire power grid via coal fired capacity just in the last year.

  38. 38
    zman Says:

    I’m very tempted to add to BTU with a lower strike…the downside is, it could catch a downgrade in the morning as estimates will be coming down.

  39. 39
    zman Says:

    see near term and long term strong demand for power coal and metallurgical coal. everything very positive. Q&A about to start.

  40. 40
    zman Says:

    markets going green

    BTU call still ongoing…sounds like they are playing way safe on 1Q guidance…people are scratching their heads over how the number could be this low on EBITDA and the answer was pretty conservative.

    DRYS looking like it wants to test 70 again.

  41. 41
    zman Says:

    IOC hmmmm

  42. 42
    zman Says:

    more from BTU

    much more coal moving into the export market, both to Europe and to Japan, China , India. U.S. inventories fell to 2 to 3 mm tons per week this past January vs only 1 mm tons for the entire month of Jan 2007

  43. 43
    scoop006 Says:

    Which shipping co’s benefit from moving the coal from US to ASIA & EUROPE

  44. 44
    zman Says:

    dunno off the top of my head, most of their coal comes up from Australia to feed Asia, one good play would appear to be RAIL who makes railcars and who had been under pressure until recently for lack of orders…that appears to be changing.

  45. 45
    zman Says:

    Not sure if it matters if you get the right one, new routes increase tightness across all the drybulks.

  46. 46
    zman Says:

    DSX finally starting to move. DRYS touching 70, RAIL looks like its breaking the downtrend today.

  47. 47
    zman Says:

    east coast actually seems to be seeing greater export growth and the coal from the east (Appalachian Basin) is being replaced with coal from the Illinois Basin and increasingly from the Powder River Basin (PRB) coals which is lower cost (wetter and lower BTU) than east coast coals. Again, rail demand to get it across the country. That would also good for the Burlington Northern types , train companies.

  48. 48
    kaman Says:

    everybody out to lunch?

  49. 49
    zman Says:

    dunno, got tired of talking to myself…its like this on red days sometimes. DRYS almost at $72.

  50. 50
    zman Says:

    Think of selling my deep in the money calls and taking a little 75 call action, with the thought that if it falls to 70 but holds I’ll double down.

  51. 51
    kaman Says:

    With you on DRYS, really wants to go higher than $72.

  52. 52
    zman Says:

    yesterday’s DSX drybulk add not disappointing either. Just running the traps with my transportation analyst buddy to see if I picked a good horse there.

  53. 53
    cattleman Says:

    Z – Your view on APC was conditioned on gas storage numbers causing a pop right? What do you think now?

  54. 54
    kaman Says:

    Note- stopped out on HAL 32.50’s earlier today (at 0.90)…trying to be more disciplined after January’s trip behind the woodshed.

  55. 55
    zman Says:

    This bit will sound like bragging but it is not. For those of you looking at the IOC and thinking, yea, sure, whatever.

    This is the first report I wrote on them.

    http://seekingalpha.com/article/39923-interoil-corp-massive-drop-presents-huge-buying-opporunity

    Note date on the report is 7/2/07. Then look at a stock price chart. This speaks to the potential of what a good well means to the stock. Immediately after I wrote that report the market temporarily thought the second well was good. Check the stock price that ensued.

  56. 56
    Sambone Says:

    11:18 am EST

    Nymex Crude Front-Month Spread Collapses

    DOW JONES NEWSWIRES
    From Market Talk:
    [Dow Jones] The spread between front-month Mar and Apr crude oil futures has collapsed, with Mar contract trading just 7c higher than Apr. It is the smallest difference between the two contracts since Jan 15. “This weakness has been a bit perplexing,” writes analyst Jim Ritterbusch of Ritterbusch and Associates, as stocks at the Nymex crude delivery point of Cushing, Okla., have fallen since the beginning of the year. One explanation is slower refinery activity, and another is that some traders may be trying to get ahead of commodity index funds “rolling” their holdings into the next month’s contract, he says. Nymex Mar crude -$2.31 at $90.02/bbl; Nymex Apr crude -$2.21 at $89.95/bbl. (greg.meyer@dowjones.com)

  57. 57
    zman Says:

    Hey Cattleman – APC is nat gas price contingent to an extent for my purchase but that one really is for earnings next week. They’ve got a lot going for them as a turn around story 7/8ths of the way complete. The guy at the top is a master, little chance of a miss hear, guidance would be the hot button issue but I think they reiterate recent guidance from the 3Q pr for 2008. Should be a great conf call.

    For pure gas price moves I like a name like SWN which will move with the price very well although its at times a thin trader on the option side. I’d say CHK but they are mired in concrete I assume until earnings. Ditto NFX both of which I will absolutely, positively own for earnings.

  58. 58
    zman Says:

    BTU looking like it may be close to flat by end of day. Compelling story, squirrelly numbers.

  59. 59
    cattleman Says:

    Thanks, holding some APC’s. Watching the dry bulks with interest. Curious what Sam thinks about the rise in financials today given the miserable fundamentals. Snowing on the plains.

  60. 60
    zman Says:

    snowing in the south which is one of the few instances I can remember the last three years.

  61. 61
    Dman Says:

    Anyone got the gist of CAM’s prang this morning? As in, why their guidance was light?

  62. 62
    zman Says:

    thought I saw weak Q1 guidance but don’t have details, plan to look in a bit.

    Just got a piece on BTU of an analyst who had EPS in 2008 at $3 (the company said $1 to $1.80 you’ll recall). He went on to say this is a buying op given the value of their coal in the ground and the long term coal growth story makes the coal industry attractive by itself without concern for near term earnings.

  63. 63
    Sambone Says:

    Cattle – I’m going to add to my SKF, probably today. Ok, what is interesting is that the street “Thinks” all is well. What I’m watching is MBI. Two articles of interest to me today as follows. 1st is the bear story, which by the way, I believe. This guy has done his research IMO
    http://www.bloomberg.com/apps/news?pid=20601109&sid=aoOhO7Qk3bD0&refer=home

    2nd is the company line, remember Enron?

    http://www.bloomberg.com/apps/news?pid=20601087&sid=aXlv1OM7luuQ&refer=home

    The second thing that has my interest is that there are 500 Trillion OTC derivatives out there.

    http://jsmineset.com/ARhome.asp?VAfg=1&RQ=EDL,1&AR_T=1&GID=2&linkid=5710&T_ARID=5765&sCID=204&sPID=2&cTID=0&cCat=&PRID=0&cSubCat=&archive=&highstr=&UArts=

    Third is that I still don’t think the banks are out of it yet. I’m looking for a major Hedge fund to blow up soon. Also I believe that if S&P, etc. really were non baised, then the Monolines would already be downgraded. It’s now political and S&P is in a rough spot, damn if you do, damned if you don’t. Looking for downgrade at anytime. The government cannot bail them out.

    More later if you want it.

  64. 64
    zman Says:

    NFX over beat up here down $1.40 – makes no sense, getting itchy trigger finger for an earnings own here.

  65. 65
    Dman Says:

    Hats off to Z on the DRYS trade. A thing of beauty. And to think of all the scolds who oppose bottom fishing 🙂

  66. 66
    cattleman Says:

    Sam – Thanks. I’ll follow the links. My background reading supports your contention. I’ve been using puts on the XLF, liquid and easy to own, bumping up on 20 Bollinger Band and the 50 day moving average. Been watching SKF and seems like a good tool. A frozen water tank and an ax await. Later

  67. 67
    freeflow Says:

    Gas just went positive.

  68. 68
    Denise Says:

    Z-IOC very insiteful-thank you
    Sorry Sam and Cattleman-I am of the opinion buy the rumor sell the news-think we will “ease” our way out-too big too fail
    I think it will be choppy but the financials were buy of a decade last week.
    Perhaps leadership change? Could be wrong but happy for the time being

  69. 69
    apbd Says:

    I’ll let someone else have the
    ” financial ” opportunity. I’m keeoing my retirement $ away from the financials.
    apbd

  70. 70
    zman Says:

    FF re nat gas going positive…all it took was a dollar rally in crude, lol. (and the big fat broad market rally).

    Quote from Nicky via email referring to the broad market:

    “I think we may test yesterdays highs but it should turn lower again after that”

  71. 71
    Denise Says:

    Sorry off energy but
    The best idea I read about this week-
    What two areas are making money hand over fist?-energy and ag-how about some regional banks in those geographic areas that do not have all the sub prime garbage?
    I live in Dallas and our housing market has not really dropped(of course we never went up)Houston doing well-look at TSCO earnings.. the farmers doing well.
    Just have to figure out the best regional banks to buy.

  72. 72
    Denise Says:

    Z-IOC noticing large call buys of June 30’s and March 22.5’s not seeing a lot of put buying-mean anything?

  73. 73
    Sambone Says:

    Cattle – That’s why I live in the south. Don’t know nuthin about frozen water tanks, and guess what, don’t wanna know. LOL

  74. 74
    zman Says:

    Denise – its the crowd taking the long bet and forgetting that the well could come in dry. My strategy is to get the initial results which aren’t likely to include a production test but being in close proximity to the discovery well gives you some comfort that they will see the formations soon. That’s what I’m holding the call for now. Probably not bad news at that point…could be …but probably not…stock then pops, and I take a protective put and either cash the call and buy another or hold the call.

  75. 75
    Alhambra Says:

    Hey Z – any thoughts on Hero Offshore today and what is says about that marketplace?

  76. 76
    zman Says:

    Capesize rates were up another $6,500 per day today, breaching $100. Panamax rates starting to bounce as well. If you don’t use the transports tab above it has a wealth of information from various providers on it.

    here’s the link where I get that data:
    http://www.dryships.com/index.cfm?get=report

  77. 77
    zman Says:

    A – re HERO wasn’t watching them. will have a quick look.

  78. 78
    zman Says:

    Alhambra – I’ll have to look at it more closely. Mixed signals in the press release…they seem to be seeing an upturn or looking for an upturn in demand in the shallow water drilling but utilization is in the can and prices are soft now due to weak demand. I dislike the liftboat part of the business but only due to a past bad experience…kind of like those investors who will never buy an airline stock. But the stock is beat up, fairly cheap and the chart cooouuuld be due for a turn higher (long road down so far). I’ll try to listen to the call tonight there and on CAM.

  79. 79
    zman Says:

    Alhambra – am I missing the boat on something at HERO?

  80. 80
    Alhambra Says:

    Not that I know of… checking out this sector, stock prices have been fairly depressed so looking for opportunies, they have nice low PE with bfairly large EPS. Looking for Value plays here, since market is at low (maybe not lowest)

  81. 81
    Alhambra Says:

    Dios mio – DRYS is boomin like the good ole days

  82. 82
    TTupp Says:

    here comes the 4th aproach to 1375-1390 in two days

  83. 83
    Dman Says:

    Z, Alhambra,

    Regarding HERO: maybe there is a notion of a turn in the GoM as per this

    http://www.reuters.com/article/marketsNews/idUKN1664485220080116?rpc=44

    (Note however that this is from 2 weeks ago)

  84. 84
    zman Says:

    Thanks Dman, I remember reading that very article then and its part of why I’m warming up to ESV who shot many of their rigs from the Gomex to make it possible to stabilize things there. The thing I don’t know about HERO is how important the lift boat segment is to them or the health of that business.

  85. 85
    Sambone Says:

    Hmmm, 419 point swing today.

  86. 86
    Sambone Says:

    Off subject – Just added to my SKF.

  87. 87
    zman Says:

    Ok, staying on the crazy train and holding everything into Friday.

  88. 88
    TTupp Says:

    600pt swing from yesterdays close , to early morning today, to close. like seriously this is ridiculous.

    i really hope the employment repotr shows negative growth so i can put my entire account in an otm qqqq put and go on vacation. disappointment on that tomorrow and dows headed to 11,000 – 11,500 imo.

  89. 89
    freeflow Says:

    I agree TTupp – lots of bad news still to come.

  90. 90
    zman Says:

    T – negative growth would drop oil $3 to $5.

  91. 91
    apbd Says:

    Should I buy more DRYS or go to Las Vegas? Hmmmmmmmm
    aobd

  92. 92
    Sambone Says:

    3:29 pm EST

    Nymex Crude Ends Down, Weighs Economy, Stock Market

    By GREGORY MEYER
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures slumped Thursday, halting a five-day upward trend, as a Federal Reserve interest rate cut failed to stem concerns oil demand would stumble in a recession.

    Light, sweet crude for March delivery fell 58 cents, or 0.6%, to settle at $91.75 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange settled 32 cents lower at $92.21 a barrel.

    After trading as low as $89.58 a barrel, oil staged a late comeback alongside a rally in the stock market. But the market was pressured by lingering concerns the world’s thirst for crude wouldn’t hold up in a weaker economy.

    It was the first drop in crude prices since Jan. 23, and like that session’s decline, Thursday’s price action came a day after the Federal Reserve chopped interest rates.

    “The fact that the Fed cut rates 75 basis points a week ago, and 50 basis points again, is an indication that maybe the economic situation is worse than most of us expect,” said Nauman Barakat, senior vice president at Macquarie Futures USA in New York. “With the economic situation being poor and possibly getting worse, it’s going to have an impact on demand.”

    Economic pessimists were also handed ammunition early Thursday when the Labor Department reported new claims for jobless benefits rose last week to their highest level since October 2005.

    Front-month Nymex crude has still closed above $90 a barrel for five days in a row. Analysts say uncertainty around future supply from the Organization of Petroleum Exporting Countries member nations has helped bolster prices. OPEC nations pump about 40% of the world’s oil.

    OPEC meets Friday in Vienna to discuss its production quotas. Oil ministers from several OPEC nations have suggested the cartel won’t alter its 29.67 million barrel-a-day output quota at the conclave. As a result, many market watchers have shifted focus to OPEC’s subsequent meeting March 5.

    Some OPEC leaders are already pushing for an oil production cut in March, but others say it’s premature to even talk about one.

    “Past years have showed us that a cut in production might be needed at times like this,” said Iranian Oil Minister Gholam Hussein Nozari, referring to projected lower world oil demand during the second quarter and a possible slump in the U.S. economy.

    He stressed, however, that it was premature to conclude a cut would take place. “We have to monitor the market closely before the March meeting,” Nozari said in Vienna.

    Front-month February heating oil, which expired Thursday, fell 1.48 cents, or 0.6%, to $2.5345 a gallon. The more actively traded March heating oil contract slid 1.33 cents, or 0.5%, to $2.5291 a gallon.

    Also expiring Thursday was February reformulated gasoline blendstock, or RBOB, which settled 2.49 cents, or 1.1%, lower at $2.3091 a gallon. The more active March RBOB contract fell 1.98 cents, or 0.8%, to $2.3572 a gallon.

    —By Gregory Meyer, Dow Jones Newswires

  93. 93
    Bob Says:

    S&P failed to take ot yesterday’s high by 0.22 points. I took a small short on ACI into big gain before earnings

  94. 94
    Sambone Says:

    452 point swing today.

  95. 95
    zman Says:

    nice Bob

    beer thirty, see you guys later

  96. 96
    scoop006 Says:

    Jim Cramer “We know from the CEO of DSX that group is overvalued”

  97. 97
    zman Says:

    Scoop – thanks for #96. Ok, Cramer fans, bow your head in shame. That has got to be the dumbest thing the mad monkey said this week, or at least today. He didn’t like how the interview went with that CEO back in October and declared the stock a sell then. How’s that for fresh info and research?!

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