06
Feb

Wednesday – Time for a little bounce + The EIA Report Preview

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Yesterday was the worst market day of the year so far. Here's how the world looks year to date:

table-020508.jpg

The routing both "Big Oil" and the service stocks have taken is overdone and unwarranted. For service, see some highlights from a Wall Streeter below that echo my sentiment towards various subcomponents of the group.  

Holdings Watch: No action. I was a little tempted to bottom fish the late afternoon bashing but wanted to see the international markets' reaction to the U.S. pummeling before buying in to some really nice bargains.

Commodity Watch:

  • Crude Oil fell like a rock yesterday as the markets abandoned hope of a quick economic recovery. Oil ended down $1.61 at $88.41 but closed well off its lows having traded off nearly 3 bucks in the middle of the day. Oil is trading up 30 to 50 cents early this morning.
  • Iran Watch: Iran said yesterday that output reached 4.184 mm bopd, its highest level since 1979. Officials there put capacity at 4.3 mm bopd. Iran's OPEC quota is 3.8 mm bopd.
  • Sakhalin 1 Production Peaked, Declining More Rapidly Than Thought. The large Sakhalin project (which at its peak was 225,000 bopd) is a large component that enabled Russia to achieve higher and higher production in recent years. In January, Russian production fell 1% to 9.78 mm bopd and Sakhalin is now seen falling 25% this year. This essentially puts a greater call on OPEC supply.
  • EIA Inventory Expectations (from the Dow Jones Survey)

exp-020508.jpg

Zcomment: At some point (soon) declining utilization is going to have a stronger effect on product inventories (especially gasoline inventories) than it has as of yet. This would lead to further improvement in recently edging up crack spreads and boost my opinion of the refining sector. The other point I would make is that OPEC is watching the crude numbers very closely and I think another 10 mm barrels or so added to inventories yields a production cut from the cartel at their March meeting.

  • Natural Gas: traded up $0.07 to $7.94 yesterday as colder forecasts were published and a spate of nuclear facility outages emerged. This morning gas is trading back over the $8 mark. Here's why.

Friend of the Blog Watch:

From time to time I get a bit of research across my inbox which is ALWAYS appreciated. I'm convinced that Wall Street taught academia the concept of "publish or perish" and many 20 page or 60 page documents are little more than an opening "how do you do?" followed by a data dump (charts, graphs, tables) with little to no text (but it does get that page count up there) and then 3 pages of legaleze. Anyway, the following italicized quotes originate from Credit Suisse, regarding the oil services sector, and I've interspersed my own points having listened to the same conference calls that they did:

  • Presure Pumping Troughing. "Pressure pumping outlook and price were more positive than in prior quarters": The BIG 3 in P.P. are BJS, HAL, and SLB as the piece points out. I take (HAL) both on valuation and on growth prospects. I'm not a fan of BJS and I don't get the valuation premium on SLB. "None of the big three have idle equipment" which is kind of self explanatory and as the guys at HAL and SLB said on their calls they expect pricing to flatten/improve in 2H08. "SLB, the most bearish for several years, said their price erosion was done as of Q108..."
  • "Long term international growth outlook is outstanding". The analyst is talking about oil service in general. Kind of self explanatory.
  • Deepwater Drilling Demand Strong, Getting Stronger. "...growing evidence that an extended deepwater exploration cycle is starting". I offer up as yet another piece of evidence yesterday's rig activity update from RIG.
  • Land Drillers: Not yet. "Spending per rig is rising, while dayrates are not". The group is cheap, and I've seen some brokers, including Jefferies on Monday saying it's time to step back in. I'm still on the bench here.

Earnings Watch

(DVN) reported what appear to be pretty strong numbers on the surface. I don't own it so I'm not going drill down very far here unless something peaks my interest on the conference call at 11 est today.

(RAIL) announced 4Q earnings. Items of interest include a subtle rebuilding of the railcar backlog as of year end. International opportunities appear to be on the rise with a new deal in India that could see volumes in 2009. 

(NOV) beat by a penny. The bigger story will be their recently announced acquisition and the continued growth in their backlog which jumped $1 billion since the last quarter end to $9 B. Conference call at 10 est.   

Tomorrow look for numbers from (EOG) and from offshore drillers (ATW) and (DO).

Crack Spreads Update: Possibly rounding the corner as drop in utilization seen pressuring inventories soon and subsequently boosting product prices.

crack-spread-020108.jpg

refiner-multiple-020508.jpg

 

Odds & Ends

Analyst Watch: Citi increased (TK) from sell to hold. (ALY) cut from outperf to market perf at Wachovia. (APC) price target edged up from $58 to $60 at Lehman (big deal).

117 Responses to “Wednesday – Time for a little bounce + The EIA Report Preview”

  1. 1
    Sambone Says:

    7:53 am EST

    Crude Holds As Market Awaits Stock Data

    By Nick Heath
    Of DOW JONES NEWSWIRES

    LONDON — Crude oil futures flitted either side of their previous.S. closes in London trade Wednesday as traders waited for weekly U.S. inventory data, expected to show U.S. crude stocks have continued to build.

    At 1228 GMT, the front-month March Brent contract on London’s ICE futures exchange was up 26 cents at $89.08 a barrel.

    The front-month March light, sweet, crude contract on the New York Mercantile Exchange was trading 10 cents higher at $88.51 a barrel.

    The ICE’s gasoil contract for February delivery was up $5.75 at $790.50 a metric ton, while Nymex gasoline for March delivery was down 17 points at 226.30 cents a gallon.

    Inventory expectations added to ongoing crude oil demand concerns linked to the health of the U.S. economy, and helped to keep pressure on crude prices Wednesday.

    “U.S. economic data pointing to a steep contraction in the U.S. services sector revived worries about recession risks and sent equities and oil prices lower (Tuesday),” said Antoine Halff of Newedge. “But U.S. oil statistics themselves have recently provided direct evidence of an easing of oil market conditions, and there is likely more to come.”

    According to the latest survey of analysts conducted by Dow Jones Newswires, crude oil inventories are expected on average to have risen by 2.6 million barrels in the week ended Feb. 1.

    Gasoline inventories are seen to have risen by 1.8 million barrels, while distillate stocks, which include heating oil and diesel fuel, are expected to have fallen by 1.8 million barrels.

    Refinery activity is expected to be under the spotlight Wednesday as analysts seek to gauge an indication of future crude stock levels.

    “(U.S. crude) stocks are likely to rise over the next few weeks as refineries enter maintenance — that will push crude lower even further,” said Standard Chartered analyst Helen Henton

    “Growing concerns over the U.S. economy, in particular over the last couple of days, has weighed on prices. There’s nothing pushing prices higher at the moment.”

    News reports indicating that the Organization of Petroleum Exporting Countries raised their output levels in January added to existing pressure on crude prices, analysts said.

    A survey of oil traders, analysts and industry sources published by Dow Jones Newswires Tuesday showed output from OPEC’s 13 member countries rose 1.3% — or 403,000 barrels a day — from the previous month, to 32.60 million barrels day in January.

    “Pressure on prices from increasing supply is compounded by seemingly daily bearish economic releases foreboding oil demand might not be far behind,” said analysts at Lehman Brothers.

    Short covering ahead of the U.S. Department of Energy’s inventory data — due out at 1530 GMT — was seen contributing to a reversal of falls of as much as $1 earlier Wednesday.

    But sentiment remained bearish with traders anxious of a possible U.S. economic slowdown, after further negative macro-economic readings contributed to Nymex crude’s lowest close in two weeks Tuesday, at $88.41 a barrel.

    The U.S. Institute of Supply Management data showed Tuesday that U.S. service sector activity slumped to its lowest since 2001 in January.

    “Recession is in the air, and markets have mercilessly picked up the scent,” said Edward Meir, analyst at MF Global in New York. He suggested crude prices are at risk of falling further.

    “Keep in mind that (Nymex crude) prices are still about $10 higher than where we were only four months ago when the global macro situation was noticeably brighter and crude’s fundamentals significantly tighter.”

    But while the gloomy U.S. economic outlook weighs on investor sentiment, strong oil demand linked to ongoing emerging market economic growth will continue to sponsor high crude prices some predicted.

    “For all the doom and gloom, $88-$90 a barrel is not a weak price,” said senior oil market analyst Harry Tchilinguirian at BNP Paribas in London.

    “While the focus is on the U.S., the (global) oil situation is still tight. It’s a question of people shifting their focus from being U.S.-centric to global — the (economic growth) results from China and emerging markets are pretty evocative.”

    —By Nick Heath; Dow Jones Newswires

  2. 2
    Sambone Says:

    Z – Blackrock likes King Coal here. It is their top sector. They don’t like the shippers because more supply coming online. Ngas short term hold, long term buy. Ngas this year in the 7-8 range, next year 11-13. They like the Canadian E&P names. Refiners a hold because YOY numbers will be flat. Drillers a hold because more offshore coming online. Oil prices at 75, demand might slow somewhat in US, but they are not betting on it. Overseas growth in demand will keep supplies tight.

  3. 3
    zman Says:

    Thanks Sam…very helpful. Their gas price thoughts for next year are pretty extreme.

    Were there any coal names mentioned?

    APC getting hit again. Probably an analyst who didn’t like the pair of deepwater dry holes. Getting close to adding some March calls here.

  4. 4
    Dman Says:

    Nabors is up nicely on the strength of this:

    “future quarters will see diminishing potential for the adverse.”

    in their earnings release.

    Wow, imagine if they actually had any good news 🙂

  5. 5
    Sambone Says:

    CNX is largest postion they have followed by BTU. King coal is 25% of their portfolio. Mentioned the problems in China and South Africa. App coal favored. Interesting that 3 years ago China was the 3rd largest exporter on coal in the world, and now they are an importer.

  6. 6
    irished Says:

    what a sell off in the first ten minutes. Had me worried. maybe my Feb options on CHK and HAL might be worth something. Glad to see things back to normal, losing value!!

  7. 7
    Sambone Says:

    Z – FYI, just found a new ETF invested in nuclear – NLF. UX U308 prices now at $75.00 a lb compared to $130.00+ a lb last year. With CCJ’s mine still under water, looks like to me Nuclear fuel price will go back up. http://uxc.com/

    Your thoughts?

  8. 8
    zman Says:

    Sambone,

    you’ll see that same dynamic for Mexico and oil in the next five years…once a big exporter, going to be an importer.

    market looks directionless…still not fishing. ATW and DO report for Thursday…both acting a little scrared here.

  9. 9
    zman Says:

    Sambone – agreed, the run up was excessive, so the sell off has been. Thanks for the ETF.

  10. 10
    Sambone Says:

    I own COSWF. Here is a report from McDep on COS with a target on oil at $100.00
    http://www.mcdep.com/rtweek80104.pdf

  11. 11
    zman Says:

    S – re COSWF – nice yield. I assume that gets treated as dividend income for tax purposes?

  12. 12
    Denise Says:

    Good morning-
    S-any insight why Blackrock would see such a increase in NG?
    Also Mr K shorting DUG this am-thinks it’s oversold-can’t hurt he is followed

  13. 13
    Sambone Says:

    Yes, 1099 DIV. The Canadian Govt takes 15% tax out, but in a taxable account (US), you get a credit for it back from the IRS. COS-T might consider switching to a Corporation.

  14. 14
    zman Says:

    D – No, I find their target a bit perplexing. Demand growth is very slow to nearly non-existent. Maybe they see an uptick in generation. More likely they are counting on Canadian imports evaporating. Sam, any reasons why on that? I am thinking more flattish pricing held down by a tsunami of LNG.

    RAIL doing nicely this am.

    XOM making a run at green.

    Giving APC another little bit of time and I think they go higher.

  15. 15
    zman Says:

    S – what’s the cap on div income…should know but never do that stuff…what’re tax accountants for?

  16. 16
    Denise Says:

    Taking the other side my ace T/A lady wants to know why no one is noticing the potential head and shoulders top in oil
    and she thinks the dollar is going to reverse and hurt the space-she was highlighting the euro last night

  17. 17
    Sambone Says:

    D – Yes, because nukes are down in Japan, and more shipments of LNG are not making it to the US as time gows on, they expect Ngas prices to increase.

  18. 18
    zman Says:

    Sam – I think the japan LNG story only applies to the now. Looking forward there is massive regas and liquefaction capacity coming. Whether prices will have to be higher to get it to come to the US remains to be seen but with the U.S. production likely to grow again in 2008, I dunno about prices spending much time in double digits in 2009.

  19. 19
    Denise Says:

    S-thank you
    Something to ponder and Question for all
    -Looking like credit will be tight/dear for the foreseeable future-how will that affect the space-who is highly leveraged?
    Who is not?

  20. 20
    Denise Says:

    Re Rail-15% of the float is short and
    this is the second quarter they did not miss-even better I am back to even on my Oct buy(big whoop)
    Well the future in the rail car space is looking a little better

  21. 21
    Sambone Says:

    Big build

  22. 22
    Sambone Says:

    Screens going red

  23. 23
    sane Says:

    7M Crude
    3.6 Gasoline
    100k distil

  24. 24
    freeflow Says:

    Phil’s Stock World has a free piece about oil…

    http://www.philstockworld.com/2008/02/06/walt-disney-wednesday/

  25. 25
    zman Says:

    crude up 7 million barrels
    gasoline up 3.6 mmm bbs
    distillate up 0.1 mm bbs

    refining fell to 84.3%

    this will likely make OPEC cut production which is why you don’t see oil off $3.

  26. 26
    bill Says:

    on coal

    http://www.hellenicshippingnews.com/index.php?mod=article&cat=Ports&article=8589

  27. 27
    zman Says:

    Hey Bill – yes, it seems we have had a perfect storm for coal and iron ore shipping. Problems in S. Africa, Australia, Brazil.

  28. 28
    zman Says:

    Little surprising to see traders not hitting the panic button and sending oil to a critical test of $85.

  29. 29
    zman Says:

    gasoline demand eased a bit more.

  30. 30
    Sambone Says:

    10:33 am EST

    Nymex Crude Steady Ahead Of Oil Stockpile Report

    By GREGORY MEYER
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures hovered steadily Wednesday as the market awaited figures expected to reveal U.S. oil stockpiles are growing.

    Light, sweet crude for March delivery was recently up 29 cents, or 0.3%, at $88.70 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange rose 45 cents to $89.27 a barrel.

    Oil prices had fallen Tuesday on accumulating evidence the U.S. economy may be approaching or in a recession. The Institute for Supply Management said January non-manufacturing business activity index had fallen to its lowest level since October 2001, and contracted for the first time since 2003. A faltering economy could translate into weaker oil demand, analysts say.

    Further pressure on crude futures could follow an expected large rise in U.S. crude and gasoline inventories in weekly data due out at 10:30 a.m. EST. The U.S. Energy Information Administration’s petroleum status report will cover the week ended Feb. 1.

    “Fundamentally, the market looks oversupplied,” said Nauman Barakat, senior vice president at Macquarie Futures USA in New York. “You put more crude in the market and more gasoline into the market, and the easiest move in this market is down. The problem is that there are no other factors in the market that might prevent it from moving lower.”

    In the EIA data, crude oil inventories are expected to rise by 2.6 million barrels, according to the average projection of 14 analysts surveyed by Dow Jones Newswires, while gasoline inventories are seen rising by 1.8 million barrels.

    Stocks of distillate, which include heating oil and diesel fuel, are seen falling by 1.8 million barrels. Refinery use is forecast to fall by 0.1 percentage point to 84.9% of operable capacity, according to the survey.

    Reports indicating that the Organization of Petroleum Exporting Countries raised their output levels in January also fueled arguments that the market has ample supply, pressuring prices, analysts said.

    Helping support the market were reports that in Mexico, protesters were blocking access to oil facilities in the southern state of Tabasco, affecting an undetermined amount of production there. In southern Nigeria, armed men killed a policeman and kidnapped the wife of a prominent politician in oil hub Port Harcourt, Agence France-Presse reported. In October, Mexico and Nigeria were respectively the third- and fifth-largest sources of U.S. crude imports, EIA data show.

    Front-month March reformulated gasoline blendstock, or RBOB, was recently up 50 points, or 0.2% to $2.2697 a gallon. March heating oil was 1.32 cents, or 0.5%, higher at $2.4597 a gallon.

    —By Gregory Meyer, Dow Jones Newswires

  31. 31
    zman Says:

    pretty muted response to the big crude and gasoline builds.

    Most oil levered of the E&P group APA is up now and I see quite a bit of green on the screen with oil off only $1.20.

    DO and ATW continue to trade nervously before the quarter…near term oil prices do not affect these guys. RIG which reports next week looking to put in a bottom here after it was Cramerized. Any TA opinions welcome on it.

    IOC still no word here…maybe cause for concern but I think that’s a little early …yesterday you saw group think in the investor pool here as a down stock triggered more and more selling.

  32. 32
    Sambone Says:

    10:52 am EST

    Oil Inventories: Crude Builds More Than Expected

    DOW JONES NEWSWIRES

    NEW YORK — U.S. crude oil inventories in the week ended Feb. 1 rose more than analysts’ expectations, according to data released Wednesday by the the U.S. Department of Energy.

    Crude stocks rose 7.0 million barrels to 300 million barrels, the department’s Energy Information Administration said in its weekly report. That compared with an average forecast of a 2.6 million-barrel build in a Dow Jones Newswires survey of 14 analysts.

    Gasoline stockpiles rose 3.6 million barrels to 227.5 million barrels, compared with an average survey estimate of a 1.8-million-barrel build.

    Distillate stockpiles rose 0.1 million barrels to 127.1 million barrels, compared with analysts’ forecasts of a 1.8-million-barrel draw.

    Refinery use fell 0.7 percentage points to 84.3% of capacity. Analysts had expected a 0.1-percentage-point fall.

    U.S. Oil Inventories:
    For week ended Feb. 1.
    Crude Distillates Gasoline Refinery Use
    EIA data: +7.0 +0.1 +3.6 -0.7
    Forecast: +2.6 -1.8 +1.8 -0.1
    Figures in millions of barrels, except for refining capacity, which is reported in percentage points. Forecasts are the average of expectations in a Dow Jones Newswires survey of analysts earlier in the week.

    —Matt Chambers,Dow Jones Newswires

  33. 33
    zman Says:

    Energy sectors acting very well given the big builds. APC at best levels of day…fairly shocking.

  34. 34
    Nicky Says:

    Morning all.

    Yes Denise – very clear head and shoulders.

    I am surprised it hasn’t sold off more on that data but I still think it will go sub 80 in the next month or two.

    Broader markets – made a lower low on contracting volume – may indicate a short term low in place. Still need to see 1352 taken out on the spx.

  35. 35
    Dman Says:

    Z – on the LNG thing. I seem to recall reading something about China’s 30 year deal for buying LNG from the Northwest Shelf in Australia. They went to a lot of trouble to make the deal, build the regas facility etc. And after all that it amounted to 3% of their “current* NG demand (this is from memory). It seems to me that there is a lot of scope for Asian demand to soak up just about any new LNG supply, not to mention Europe, which wants to be less dependent on Mr Putin and I would think would easily be prepared to outbid current US prices. Alas I don’t have better details to hand, just impressions from various articles etc.

  36. 36
    dmh Says:

    Nicky:

    Re wave count. Looking at the S&P and the Naz Comp, on this recent rally neither of them went above the bottom of wave i (or A) ending on 11/26 from Oct high, and the DJI just went above it a small amount so the move up from Jan low can be counted as a wave iv in a 5 wave move from Oct high.

    Agreed 1320-1335 is key Fib support on this wave down otherwise we can fall below the Jan low in a wave v.

    So I think we can still be in a B wave up from Jan lows or in a wave v to new lows

    What do you think?

  37. 37
    Nicky Says:

    Alaron predicting a draw of 190 for nat gas tomorrow.

  38. 38
    zman Says:

    Anybody see anything on CLB to account for this dip?

    Dman – good points. It makes you wonder about the valuations of the current U.S. regas capacity under construction. Surely since they are building so much new capacity they expect it to come here. A chart of LNG (Cheniere) for instance looks like investors believe your scenario and not the one they pitch to investors about high capacity at their new facilities.

  39. 39
    Sambone Says:

    Heavy bets on April puts on oil being below $80.00. http://www.bloomberg.com/apps/news?pid=20601103&sid=aR.1DsoxCZCw&refer=us

  40. 40
    Sambone Says:

    CLB – No news on my screens

  41. 41
    zman Says:

    Sam – thank and thanks. OPEC will be cutting. Ya know there’s a heavy bet against NG too and so far they’ve all been wrong all winter long.

    Thanks Nicky – haven’t got mine worked out yet. Imports saw a big week to week rally …will look around for a Street number.

  42. 42
    Nicky Says:

    Hi DMH – agree re paragraph one. Just imo but very short term I think we are in a wave iv correction. We should get one more push up which hopefully will take out the highs of last Friday before we turn lower.
    That said this correction for iv is certainly open to interpretation.
    Cycles are friendly into next week which may give us this last push.

  43. 43
    zman Says:

    Sane – any word out of API?

  44. 44
    Nicky Says:

    Z – you may be right regarding Opec but I suspect oil will be sub 80 by the time they do.

  45. 45
    zman Says:

    N – what can be holding it up in the face of that big build from testing the low at just above $85? Maybe OPEC takes a page out of Ben’s playbook with an emergency price stabilizing production cut.

  46. 46
    zman Says:

    N – I think we may break $85.40 and then shoot rapidly towards $80 but hold that level. If you think oil sub $80 puts on SU, APA, USO, maybe DBR and BRY would be a good bet. Or calls on DUG.

  47. 47
    Sambone Says:

    Ngas

    http://www.nytimes.com/2008/02/05/business/05gas.html?_r=2&adxnnl=1&ref=todayspaper&adxnnlx=1202238356-CNatzhV4ugR1K/AsSO2KBQ&oref=slogin&oref=slogin

  48. 48
    zman Says:

    Anyone have news on IOC, I just saw a newsbug pop up but I get no story.

    Thanks Sam for the NG article – the generation angle could be what Blackstone is thinking on prices. Should be good for GE who has a large inventory of gas-fired turbines in stock after seeing so many orders for them canceled early in the decade as gas prices soared.

  49. 49
    zman Says:

    CLB chart too ugly for me now. That stock should have a great call on the 14th.

  50. 50
    sane Says:

    API

    Crude up 7.6
    Gasoline up 5.6
    Distillates Down 2M

  51. 51
    Sambone Says:

    IOC – Will not have to restate 2007 numbers.

  52. 52
    dmh Says:

    Nicky:

    wave ii was a simple zig-zag so we should expect a more complex correction for wave iv, maybe a flat or triangle.

    Re cycles: are you looking at the 10 week cycle which bottomed in Jan 22?

  53. 53
    Nicky Says:

    $85 is a very key level Z – once through there we could shoot much lower and probably overshoot.

  54. 54
    Nicky Says:

    DMH – agree re wave iv and its not disapopinting in being more complex!

    There is a very short term cycle which looks higher into next week – may only go to the 11th/12th Feb but could extend.

  55. 55
    zman Says:

    Thanks Sane and Sam

    Nicky – agreed re $85.

  56. 56
    zman Says:

    Freeflow – just remember PSW hates oil … its an emotional trade and has nothing to do with supply and demand.

  57. 57
    zman Says:

    Drybulks: rates off 1.3% over slowing activity before the Chinese New Year (feb 8 ) according to an AP story. More importantly, they site two 5 year time charters for Capesize vessels at rates approaching the record levels seen last Oct /Nov. DSX getting a nice pop today , DRYS strangely flat.

  58. 58
    zman Says:

    Interesting cast of smaller E&P and oil service names speaking at a conference Feb 21 – 22.

    http://www.theoilserviceconference.com

    HERO, BPZ, CRR, CLB etc

    couple of big name speakers as well

  59. 59
    Dman Says:

    Z – Do you have a view on CLNE? I traded the stock a few times (it now has options). It always seemed to spring back when it took a hit, but I never had any real take on the fundamentals of it, so I didn’t overstay in it. For example, I don’t even know if higher NG prices help it or hurt it. Any clues?

  60. 60
    zman Says:

    CLNE – not familiar with them. Looks like a utility to me so it should not get hurt or helped by gas prices to the extent its customers want to buy off on NG power cars. I would think it would trade with gasoline prices …as in the higher they go, the more fleet owners would want to burn something else and the more likely it is they make a switch.

    Any ideas what the stock trades with? Its not really correlated to NG tied. It does have a decent tie to unleaded gasoline.

    Nice growth estimates out a couple of years. Not a lot of debt. Will do a little reading.

  61. 61
    Alhambra Says:

    Re: NG & Blackrock – LNG West Coast – here’s some info from the CEC (Cali Energy Comm)
    http://www.energy.ca.gov/lng/projects.html
    California Coastal Commission already killed BHP’s proposal off Ventura b/c it violates Clean Air Act (oh yeah, the govt. guy who did the study is buddy-buddy with the Sierra Club). http://www.energy.ca.gov/lng/documents/cabrillo_deepwater_port/2006-08-08_COASTAL_COMMISSION_COMMENTS.PDF Also off the record he mentioned that would destroy kelp beds and California already has plenty of sources to get NG (??!?!?!). Other reasons to kill the LNG proposals have been that the Coast Guard will not be able to stop terrorist activity in Port of Long Beach, etc. Since the nimby mentality is very strong in Cali, Sempra Energy (who supplies gas to LA and SD) gave up on building LNG in CA and is building a 1 Bcfd facility in Mexico (80% complete, but has to give 30% of imports to Mexico).

    CA has also mandated that no electricity can come from coal (primary input is NG). We can already see other states picking up this policy, as green mindset flows over populous, just depends on the availability of NG and alternative sources of power and electricity. So I could see these factors bolstering their belief in high NG prices.

  62. 62
    zman Says:

    Could be A – California certainly knows how to keep prices high – but total U.S. regas capacity is going to double from 4.5 to 9.0 Bcfgpd in 2Q08 (yep, this Spring).

    New Stuff:
    Northeast Gateway 0.4 Bcfgpd – Excelerate operated off Massachussetts.
    Freeport 1.5 bcfgdp – Cheniere operated, Texas
    Sabine Pass 2.6 Bcfpd – also Cheniere oped, border of Texas / Louisiana

    Surely these guys don’t expect these brand spanking new facilities to just sit idle.

  63. 63
    zman Says:

    Need to own some FTI in here. Subsea tree demand explodes this year which is pretty well know but I don’t think fully in the stock. Chart looks pretty scary.

  64. 64
    Dman Says:

    Z- the main point of interest on CLNE was that T. Boone Pickens owns most of it… so it must be good 🙂

    It IPO’d just as oil was commencing its big ramp, so it enjoyed a nice ride on the alt. fuels theme.

  65. 65
    Sambone Says:

    Overall market pretty flat after yesterdays down day.

  66. 66
    zman Says:

    Dman – ahhh. Well he owns SU and a sizable chunk of IOC in the personal account. Can’t be bad. As gas prices climb again this Spring…it’ll happen, CLNE could make another one of those spikey moves.

  67. 67
    zman Says:

    Sam – agreed…so far this is a pretty lame bounce. Not that I think it should get much of a bounce. I’d much rather see it trade sideways and await data than stay in this cycle of react / over react. Damn pendulum can gut you.

  68. 68
    zman Says:

    CNBC about to run a story on Chinese NY investment plays.

  69. 69
    Denise Says:

    For anyone needing a chuckle today-bald heads and hot ladies-
    http://bigpicture.typepad.com/comments/video/index.html

  70. 70
    zman Says:

    Thanks D – very worth the five minutes!

  71. 71
    Nicky Says:

    SPX has support at 1338 and then 1332.

  72. 72
    Nicky Says:

    Broader market looks in need of one lower low here.

  73. 73
    zman Says:

    N – agreed, just tell me when its over.

  74. 74
    Nicky Says:

    Fed spooking the market – yet again.

  75. 75
    zman Says:

    sort of tempted to take some DO before earnings, perhaps a little DO and a little ATW.

  76. 76
    Nicky Says:

    Lol Z – 1332 – 35 may hold it.

  77. 77
    Sambone Says:

    Just went red

  78. 78
    Sambone Says:

    144 point swing on the dow today, over 1%. Crazy markets

  79. 79
    Sambone Says:

    This is from a buddy of mine.

    “Enjoy this dead cat bounce. The main reason for yesterdays weakness is continued unwinding of hedge fund gross exposure that is taking down the long book and short book because neither has been working. All of my hedgefunds were down in January between 3% and 13%”.

  80. 80
    zman Says:

    Going to take more APC in the morning. Not to put too fine a point on it but the Street’s reactions to APC (down about 5% since 4Q release) and DVN (up almost 4%) are very short sighted. The tone of yesterday’s call with APC was optimistic but the questions like “don’t you wish you had a resource play like some of your peers” were still present. APC does have a resource play…how about 180,000 acres of nearly contiguous shale country in Pennsylvania. But how people discount the hub and spoke deepwater over a couple of dry holes is simply beyond me. DVN is loved for its shale growth but look at them in the deepwater and the footprint pales in comparison. They speak of merganser which is a great development with 150 Mmcfgpd but APC is going after more big swings like Independence (1 Bcfgpd) and is continually optimizing the remainder of the portfolio. The market seems to pick a direction in the morning (right or wrong ) and run with it. The Street is doing little to challenge those moves as you see fewer and fewer interday reversals this quarter. Apologies for the rant.

  81. 81
    Nicky Says:

    Next support on SPX is 1317 which is 61% retracement of the rally.

  82. 82
    Nicky Says:

    These Fed guys are loose cannons – last one now saying they need to worry about inflation hence this drop in the market!

  83. 83
    zman Says:

    Nothing like waiting on a tight hole in a down market. IOC sinking for a second day in the radio silence. Put activity is picking up. Volume on the stock remains unimpressive.

    Nicky – the funny thing is they say things we all know and the market still reacts. The Fed has insured higher inflation with its cuts…should not be a shock to anyone.

    By the way, my little DNE had reserves out the other day and a reiteration of volume guidance for 2008. I have a report all teed up but right now is not the time for sub $5 stocks.

    …unless the ticker is DEEP where the selloff has just been too overblown.

    Oil reclaimed $87 at the close.

  84. 84
    freeflow Says:

    Wow… CME and NMX down big

  85. 85
    zman Says:

    CME and NMX down over DOJ looking into opening up some competition in trade clearing.

  86. 86
    zman Says:

    Nicky …flynn’s 190 Bcf is consensus from what I can tell.

  87. 87
    QUARRYMAN Says:

    Hey Z.

    I still have some TLM April 20s. Bought them way back when on a Z blast and then checked out ZEB and … still hold them.

    Little value left, should I let them ride?
    Is TLM up for any earnings or other accouncements in the next month or so?

  88. 88
    QUARRYMAN Says:

    P.S. – I’ve been buying some BMY Feb 25 calls for nothing and they’ve been creeping up in value penny by penny. This has been my expiry play.

    Q.

  89. 89
    zman Says:

    Q – TLM – they’re worth a dime which I will generally ride out to 0 in the hopes that something comes up. That something could be some news out of Vietnam …earnings on Feb 28. Of late they’ve had some seemingly positive developments in LNG and no one cared.

    Incredibly cheap stock and apparently staying that way in this market. I’ve not heard a thing on the takeout front in quite some time.

  90. 90
    QUARRYMAN Says:

    A ‘talisman’ of this energy market, huh?

  91. 91
    zman Says:

    ZTRADE:

    IOC Adding some more March 20 calls for $2.50 to average down from my original $2.90. This is still a bet and the lack of news here may be cause for concern, as the stock seems to be saying, or it may be nothing at all. This has always been a bet on a single (something I almost never do) and I’m just increasing it.

  92. 92
    zman Says:

    Quarryman – ouch. I take it you like VMC even more at 70 than at 80. That’s not a shot, but a serious question. Or do we wait for a lower point of entry like the near 60 low from two weeks ago.

  93. 93
    Sambone Says:

    There she goes

  94. 94
    Denise Says:

    Z-IOC why aren’t you hedging your bet with some out of the money puts? They seem cheap-?

    VMC-I am long has a higher low(at least today) and we will build again some year out in the future

  95. 95
    Denise Says:

    Vmc-there’s blood in the crete! Could be time to buy-(couldn’t resist)

  96. 96
    zman Says:

    D – just waiting on a greener day so I can get the March $15s for the current price of the March $12.50s.

    VMC – isn’t a large chunk (no pun intended) of their business with the State(s) and thus immune from recession?

  97. 97
    zman Says:

    Solars – up one day, splattered the next.

  98. 98
    zman Says:

    I now miss January.

  99. 99
    redjack Says:

    Z..
    re NOV cc they said Nabors and Weatherford will be large participants with Russia drilling..a lot of land rigs are going to be repositioned there. Also they(NOV) were upbeat regarding deepwater activity, especially Brazil and West Africa. Pretty much ball to the walls…

    UPDATE – S&P REITERATES BUY OPINION ON SHARES OF NATIONAL OILWELL VARCO

    Following this morning’s call, we remain bullish on NOV’s prospects. The company said its proposed acquisition of Grant Prideco (GRP 49.68***) is expected to close in April ’08, subject to necessary regulatory and shareholder approvals. NOV was extremely positive, in our view, on prospects for growth in Russia, which could be a catalyst for expansion of new orders in the rig technology segment in ’08. Updating our models, we are lifting our ’08 EPS estimate by $0.16 to $4.72. And based on our DCF model and relative metrics, we raise our 12-month target price by $4, to $83.

  100. 100
    freeflow Says:

    whats the next support on the S&P?

  101. 101
    Nicky Says:

    This move low has come on weaker volume which is a bullish indication but no firm support until 1317 – 22 spx

  102. 102
    Sambone Says:

    Free – My guy saids 12,250 on the Dow and 1334 on the S&P, which they just broke. This close is very important.

  103. 103
    freeflow Says:

    Thanks

  104. 104
    Sambone Says:

    Tini time, 212 point swing today.

  105. 105
    Nicky Says:

    Cisco coming up shortly is going to be important…. as will Deutsche Bank in the morning.

  106. 106
    Nicky Says:

    Cisco inline. Conference call in a bit.

  107. 107
    TTupp Says:

    gapp earnings were a miss N

  108. 108
    TTupp Says:

    the shares are all over the place on not a whole lot of volume

  109. 109
    TTupp Says:

    man this is gona get ugly. csco reiterates guidance from pr lower

  110. 110
    TTupp Says:

    down 9% after hours

  111. 111
    Nicky Says:

    and they have said times remain challenging. futures sharply lower.

  112. 112
    scoop006 Says:

    Cramer highlighting PBR very bullish

  113. 113
    TTupp Says:

    thank god i bought puts on it yesterday, whens this guy going to get were in a bear market….. i saw the blip in after hours trading when he mentioned it- and i hoe they get their head handed to the for listening to such a numskull. obv prices will get better then near the 52wk high in a bear market in a security they is traded in an emerging country. GOD.

  114. 114
    TTupp Says:

    re 99- s& p need to stick to valuing debt

  115. 115
    TTupp Says:

    t-tupp cynical, but maing money being bearish and trading from the short/ neutral side

  116. 116
    TTupp Says:

    if DO disappoints (ie says one thing that can be spun negatively; just like the rest of the excuses for the sell off in names with the respectable reports have been spun), might be nice short entry, although the OIH’s chart; indicators; and oscillators are very bearish and could be just as profitable at the same time as being more liquid.

  117. 117
    Nicky Says:

    Indices may attempt to bottom in the 1312 – 18 region tomorrow. Now we are down at these levels I think any short term bounce is likely to stall well below previous projections. We may now struggle to get above the 1360 region.
    Japan is down but at the half way mark not heavily.

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