21
Feb

Thursday – Simultaneous Oil & Natural Gas Inventory Reports

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Yesterday was fun aside from some turbulence in the Dry Bulks as our oily plays rose (as oil topped $100), CHK hit another all time high (looking less like Rodney Dangerfield all the time and reporting their 4Q after the close tonight), and (RIG) rallied on a great quarterly report. This morning Goldman Sachs is jumping on the (RIG) bandwagon raising it to buy and boosting their price target.  (OII) will suffer early but I think that is largely unwarranted (read on) and T Boone Pickens agrees with me not only on (IOC) but also that oil and natural gas prices have rallied too far, too fast. Anyway, nice rallies like the one we have seen in the energy sectors over the last few days have been rare in this two steps forward and three steps backward market since early October and make me want to take some chips off the table so don't be surprised to see me lighten up into further strength. 

Commodity Watch

  • Crude Oil: The March contract closed out its run up $0.73 at $100.74. April finished unchanged at $99.70 and is trading off just under a buck this morning. At least briefly, oil prices will pay attention to oil inventory numbers this morning before quickly refocusing on what OPEC will or will not do on March 5th, whether or not Nigerian rebels will step up their efforts to halt Nigerian crude flows, and the current lingering spell of cold weather.
  • Henry Okah Watch: The fate of Nigerian rebel leader Henry Okah (or the $100 man as I think of him) remains a mystery. The government says he's alive and well but has not provided anyone with any proof after rumors surfaced that he died in a military hospital. According to a Reuters story out this morning, the rebels are not convince he's ok.

The EIA Oil Inventory Preview (with estimates from the Bloomberg survey)

expected-021508.jpg

ZComments:

  • Just from reading the nightly EIA snafu reports there seem to be an inordinate number of, well, snafu at refineries in the U.S. We could see another leg down this week or next for utilization which would be bullish for heating oil and even gasoline if we can get another week of demand back over 9 mm bpd.
  • EIA is now looking for gasoline prices of $3.70 retail this Spring and I don't disagree with them even if oil falls back towards $90.
  • On oil inventories, a big (3 mm barrel plus) build in stocks will have a chilling effect on prices but at the same time, an unexpected draw will send oil through $101.
  • As my long time readers know, I don't try to peg inventory numbers as the week to week EIA data is suspect at best. Sometimes I have an angle and think "bigger build or smaller draw" but usually not during the shoulder season and this week, it could go either way.
  • Given the cold and recent lack of sizable draws I think the distillate number could be a bit conservative (bigger draw likely either this week or next) but I've got no real feel for or against the relatively middling estimates for crude and gasoline this week.
  • I do however think that we're running out of near term umph for the upside case from oil, certainly from a fundamental, if not an anecdotal, standpoint. However, the fear factor is not to be underestimated and if the numbers today are of the "middle of the road" variety than attention will re-focus immediately on OPEC, Nigeria, pictures of refineries on fire, etc. 
  • Some oil quotes from Bloombergosphere: ``Overall demand would have to be holding at fairly solid levels or prices wouldn't be where they are at the moment,'' said David Moore, commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. ``There is a question of even if the U.S. went into a recession, how much of an impact on oil demand that would have.''

Zcomment: His first comment makes no sense. The price of oil and demand don't always relate as we well know. His second statement sounds like me a month ago except I actually had a chart showing GDP vs oil demand in the States.

  • Natural Gas: Think we're getting closer to rolling over. March gas actually fell a penny to 8.965 today, failing to follow crude on its historic march to $101. Natural gas is now up $1.45 per Mcf or 20% since the beginning of the year with most of that rally coming in the last two weeks. I expect natural gas prices to fall, perhaps precipitously, soon. First stock, $8.50 and then $8. What about my UNG trade? Still holding but not adding until it starts to break down. This morning gas is off slightly.

The EIA Gas Inventory Report Preview:

  • My Number: 160 Bcf withdraw. The year ago draw was 228 Bcf.
  • Weather: 224 HDDs, up from 167 in the prior week. The very simple math says we've just come off a warm week and the HDD count here is equal to what it was for the week ended January 19th. In that week, 155 Bcf were withdrawn from storage.  However, two weeks ago, HDDs came in at 212 and that week saw a 200 Bcf draw. So I'm splitting the difference and shaving it a bit for coming off a prior warm week.
  • Imports: Natural gas imports were relatively flat week to week at about 9.7 Bcfgpd.
  • Street Consensus: 173 Bcf.
  • The Street''s number would put storage at 6.2% over the five year average which is up slightly from last week's surplus to the 5 year average. While this is not exactly bullish most eyes are still turned towards the weather and given to thinking that if this cold spell continues we could see the surplus to the 5 year completely eroded.

Holdings Watch:

CALLS

  • CHK Out half March $37.50 calls at $7, up 290%.
  • HK - Entered the March $15 calls for $2.65. Earnings next week.
  • OII - Entered the March $70 calls for $2. Earnings this morning - see below.

Earnings Watch:

(OII) : Anatomy of a "Non-Miss" Miss.

On a reported basis the company missed by 1 penny in the 4Q. However, this was due to some well above consensus numbers skewing the EPS estimate for the quarter. For the same group of analysts, OII beat on both top and bottom lines for the full year 2007. Now how can you really miss the quarter and make the year ... when its the fourth quarter. That math just doesn't work...or some analyst teams can't add 3 actual quarters + 1 estimated quarter and get to a number that makes sense. Don't take my word for it, see the following table:

oii-022008.jpg

  • Notice that OII's top line exceeded Street estimates by 7% for the quarter and 3% for the year (more on that in a minute).
  • Also note that the company had provided guidance and came in near the top of said guidance.
  • Taking a look at the fourth quarter, they beat on revenues but missed on earnings. Hmmmm....
    • Subsea Products operating margins took a couple of what I'd characterize as "one time hits" in the quarter, dropping from 21% in the third quarter to 14% in the fourth quarter.
      • The first was the re-manufacture of an umbilical that failed to meet customer specifications in the U.K. and
      • The second was a delayed umbilical construction in Brazil that did not have raw materials cost over runs in the contract when it was originally penned in 2005.
      • While these are not things you want to have happen every quarter they are what I'd call one time. Operating margins have been rising for this segment of their business which accounts for nearly one-third of company revenues.
      • Had margins for this segment remained at 3Q levels, OII would have delivered an extra $11 million of operating income. Tax that at their 35% rate and that yields net income of $52 million or EPS for the quarter of $0.94
  • 2008 EPS guidance of $3.50 to $3.80 was reiterated (equating to 8 to 17%YoY growth).
  • 1Q08 guidance was initiated at $0.65 to $0.75.
  • Street Consensus is $0.81 so this is no doubt disappointing.
  • Shame on the Street for not paying attention watch: The company pointed out that 1Q has seasonally been weaker than 4Q EPS for the last 6 years. They have chastised the Street for this in the past and the Street never seems to learn.  Recall from above that the Street had $0.82 for the 4Q and was expecting $0.81 for 1Q08...that's not a lot of seasonality.
  • The initial reaction was to pummel the shares after skimming the headlines. The message should not be that they missed by a penny but that demand remains strong with visibility into 2009. But to see that, you have to be willing to read.
  • One last thing I would point out is that their initial projection for 2007 earnings was a range of $2.60 to $2.90 ... and here we are at $3.24. Makes you wonder if these are still "under-promise and over-deliver" kind of guys.
  • Conference Call at Thursday at 11 EST.

CHK reports after the close.

Other Stocks of Interest:

(IOC) Short Squeeze Starting?

  • As of January end 11.6 mm shares short (39% of outstanding) or just over half the float.
  • Using 10 day average volume it would take > 18 days to cover.
  • This is as pure an exploration play as you get (1 well can make or break the stock) and I will take some cheap puts shortly as a little protection to my calls. 

Odds & Ends

Analyst Watch: (CRZO) upped at KeyBanc to buy, (RIG) upped at GS to buy with a price target raised from $157 to $164, (BP) cut from hold to sell at Citi, Brean Murray ups its price target from $51 to $65 for (WLT), 

 

104 Responses to “Thursday – Simultaneous Oil & Natural Gas Inventory Reports”

  1. 1
    Sambone Says:

    2:08 am EST

    Nymex Crude Hovers Around $100 On Bullish Mood

    Dow Jones Newswires

    SINGAPORE — Crude oil futures rose Thursday, with the front-month contract on the New York Mercantile Exchange hovering around $100 a barrel ahead of the release of U.S. oil inventory data later in the day.

    Although the data are forecast to show an increase in U.S. crude oil stocks, given current bullish sentiment, traders may ignore the build if it comes within an expected range, said Ken Hasegawa at brokerage Newedge in Tokyo.

    He added that a smaller-than-expected rise in crude inventories could even trigger another rally in prices.

    Crude oil inventories are expected to rise by 2.9 million barrels, according to the mean of 14 analysts’ forecasts. The analysts are unanimous in predicting an increase, with estimated increases ranging from 600,000 barrels to 6.1 million barrels.

    Gasoline inventories are forecast to grow by 1 million barrels, according to the analysts’ average.

    Hasegawa said although the market may remain volatile, bullish sentiment is likely to persist on supply worries and strength in overall commodities markets amid a weak U.S. dollar, pegging support for front-month crude futures on the New York Mercantile Exchange at $98.50 a barrel.

    Nymex crude settled at new record highs overnight for a second straight session as funds bought. The March Nymex crude contract, which expired overnight, settled at $100.74 a barrel.

    Further support came from minutes from the most recent meeting of the Federal Reserve’s interest-rate policy committee which revealed concern about risks to the U.S. economy, which in turn weakened the U.S. dollar.

    At 0640 GMT, new-front month April crude contract on Nymex traded at $99.99 a barrel, up 29 cents.

    March heating oil rose 33 points to 275.79 cents a gallon, with March gasoline trading at 259.05 cents a gallon, up 53 points.

    On London’s ICE exchange, Brent futures for April gained 29 cents to trade at $98.71 a barrel.

    —By Jun Yang, Dow Jones Newswires

  2. 2
    Sambone Says:

    T Boone Pickens

    http://www.247wallst.com/2008/02/t-boone-pickens.html

  3. 3
    zman Says:

    Thanks Sam, the link above contains his comments on that natural gas for transportation stock CLNE and also his prediction that oil goes to $150 in two years if the world doesn’t get on the alternative energy bandwagon. He is building massive amounts of winder MW.

  4. 4
    zman Says:

    Drybulks called up this morning: Capesize rates failed to fall for a third day. These “biggest of the big ship” rates have been leading the Panamax and Handysize rates around by the nose for weeks now.

    http://www.dryships.com/index.cfm?get=report

    Also, (NM) (62 ships) reported a strong quarter and boosted its dividend.

    PRGN) also reported a nice beat

    China soybean demand seen causing record price for summer soybean prices at CBOT this morning.

    China iron ore shipments hit record high in January – reported on Friday.

  5. 5
    zman Says:

    DNR beats estimates this morning. Production guidance going up. Conf call 11 est.

  6. 6
    reefguy Says:

    IMHO-Boone sounds like he is trying to talk down crude prices…

  7. 7
    Sambone Says:

    9:12 am EST

    Nymex Crude Futures Drop Ahead Of Inventory Data

    Dow Jones Newswires

    From MARKET TALK:

    [Dow Jones] Nymex crude is off 66 cents at $99.04, as traders anticipate government oil inventory data that could dampen — though perhaps not entirely stop — the recent rally. A Dow Jones survey of 14 analysts finds a mean expected rise of 2.9 million barrels, which would mark the sixth straight week of swelling inventories. Just-released U.S. employment data offers mixed news about the health of the economy: the report shows jobless claims falling last week by 9,000, but with the overall number of claims still high. (brian.baskin@dowjones.com)

    SINGAPORE — Crude oil futures rose Thursday, with the front-month contract on the New York Mercantile Exchange hovering around $100 a barrel ahead of the release of U.S. oil inventory data later in the day.

    Although the data are forecast to show an increase in U.S. crude oil stocks, given current bullish sentiment, traders may ignore the build if it comes within an expected range, said Ken Hasegawa at brokerage Newedge in Tokyo.

    He added that a smaller-than-expected rise in crude inventories could even trigger another rally in prices.

    Crude oil inventories are expected to rise by 2.9 million barrels, according to the mean of 14 analysts’ forecasts. The analysts are unanimous in predicting an increase, with estimated increases ranging from 600,000 barrels to 6.1 million barrels.

    Gasoline inventories are forecast to grow by 1 million barrels, according to the analysts’ average.

    Hasegawa said although the market may remain volatile, bullish sentiment is likely to persist on supply worries and strength in overall commodities markets amid a weak U.S. dollar, pegging support for front-month crude futures on the New York Mercantile Exchange at $98.50 a barrel.

    Nymex crude settled at new record highs overnight for a second straight session as funds bought. The March Nymex crude contract, which expired overnight, settled at $100.74 a barrel.

    Further support came from minutes from the most recent meeting of the Federal Reserve’s interest-rate policy committee which revealed concern about risks to the U.S. economy, which in turn weakened the U.S. dollar.

    At 0640 GMT, new-front month April crude contract on Nymex traded at $99.99 a barrel, up 29 cents.

    March heating oil rose 33 points to 275.79 cents a gallon, with March gasoline trading at 259.05 cents a gallon, up 53 points.

    On London’s ICE exchange, Brent futures for April gained 29 cents to trade at $98.71 a barrel.

    —By Jun Yang, Dow Jones Newswires

  8. 8
    zman Says:

    R – yeah, he talks his investment book, or to the benefit of his future book.

  9. 9
    Nicky Says:

    Morning all – Boone certainly spooked the oil market this morning. I watched it sell off 50 points when he had finished saying he was shorting it! I guess he needs it to go his way.

    Chart certainly looked short term bearish last night at the close and I expect follow through to the downside today once inventories are out of the way.

    Nat gas looks close to breaking down too…sitting on support here.

  10. 10
    Nicky Says:

    Broader market – still waiting for spx to get above 1369 and dow above 12530 but cycles are positive for the next few days. SPX should head towards 1390 if it can get above resistance here.

  11. 11
    zman Says:

    tried to split the spread on OII $65 March calls …no luck

  12. 12
    scoop006 Says:

    Z got them @ 1.20 should i sell or should i hold

  13. 13
    zman Says:

    Nice trade Scoop.

  14. 14
    Nicky Says:

    WTI has support at 98 and then not much until 96.

  15. 15
    Nicky Says:

    SPX back into support at 1360. Further and more important support at 1348.

  16. 16
    zman Says:

    ZTRADE: March $65 OII Calls for $2.10 average.

  17. 17
    zman Says:

    Since when does a Goldman upgrade get yo down 1.5% on a stock (RIG)???!!! They used to have some swing.

  18. 18
    Dman Says:

    Z – Maybe the market thinks the bosses at GS are busy shorting into the recommendation, like with the subprime ๐Ÿ™‚

  19. 19
    zman Says:

    Re GS shorting their own recommendations. no way, can’t happen, not those guys, lol.

  20. 20
    Sambone Says:

    10:10 am EST

    Nymex Crude Drops Ahead Of Oil Inventory Data

    By Brian Baskin
    Of Dow Jones Newswires

    HOUSTON — Crude oil futures dropped more than $1 Thursday morning, as the market awaited U.S. government data expected to show growing inventories.

    Light, sweet crude for April delivery was recently down $1.01, or 1%, at $98.69 a barrel on the New York Mercantile Exchange in its first day trading as the front-month contract. April Brent crude on the ICE futures exchange was down $1 at $97.42 a barrel.

    Nymex crude has hit fresh records above $100 a barrel for two days running. While some believe the weekly oil and product inventory data release, scheduled for 10:30 a.m. EST, could at least temporarily cool the market, others see futures as too removed from supply concerns. The data is usually published Wednesday, but this week’s release is delayed by one day due to the Presidents Day holiday Monday.

    “The only thing that matters is sentiment and money flow,” said Kyle Cooper, director of research at IAF Advisors in Houston.

    A Dow Jones survey of 14 analysts finds an average prediction of a 2.9-million-barrel increase in crude inventories, as well as a 1-million-barrel rise in gasoline stockpiles. Distillates, which include heating oil and diesel, are expected to drop by 1.5 million barrels. Another jump in oil inventories would mark the sixth straight week of increases.

    “Any bearish surprises will likely be shrugged off while any unexpectedly bullish figures could well send (futures) screaming higher again,” writes Jim Ritterbusch, president of trading-advisory firm Ritterbusch and Associates in Galena, Ill.

    No single factor can explain oil’s recent ascent, with unrest in Nigeria, a refinery explosion in Texas and the upcoming meeting of the Organization of Petroleum Exporting Countries all contributing. The OPEC meeting, scheduled for March 5, could have a profound effect on futures, especially if members decide to cut exports, but the decision remains too far off for many traders. With crude topping $100 again, many now believe that OPEC is unlikely to reduce quotas.

    The uncertain strength of the U.S. economy is alternately weighing on and boosting the market. A recession would likely reduce oil demand, and each new data point is watched closely by Nymex traders. Employment data released Thursday morning showed jobless claims decreasing 9,000 last week, but to a still-elevated 349,000. Data released Wednesday found U.S. housing starts in January coming in lower than expected, while consumer prices increased 0.4%, sparking renewed fears of high inflation.

    Some analysts say futures no longer reflect the fundamentals of supply and demand, and as a result, the current rally as unstoppable but short-lived.

    “Funds are using the market as an active hedge against inflation and due to a weak dollar,” wrote analysts at TFC Energy Futures in Stamford, Conn. “The strength in the crude market without any type of new development is leading some analysts to question the longevity of this rally.”

    Cooper, with IAF, said that oil billionaire T. Boone Pickens’ prediction on CNBC early Thursday morning that oil prices will drop as much as $15 this quarter has as much to do with Thursday’s declines as anything else.

    Front-month March reformulated gasoline blendstock, or RBOB, was 2.62 cents, or 1%, lower at $2.5579 a gallon. March heating oil fell 2.64 cents, or 1%, to $2.7282 a gallon.

    —By Brian Baskin, Dow Jones Newswires

  21. 21
    zman Says:

    dualing inventory reports in 5 minutes…stay tuned.

    DRYS trying to stage a rally rally amid those better than expected dry bulker earnings reports. Think the group may need to get a broad market rally to get a move kick started.

  22. 22
    Dman Says:

    Interesting that FTI is keeping in the green even with the OII hit. I was hoping to swoop in on any collateral damage. Got some OII stock at 60.10 but too slow for the options. Nice one Scoop!

  23. 23
    zman Says:

    Gas number 172 Bcf – in line

    Oil inventories: up 4.2 mm barrels (that’s a little big)
    gasoline up 1.1
    distillate fell by a whopping 4.5 mm barrels (this is what I was talking about in the post)

  24. 24
    zman Says:

    FTI had a $60 something million dollar contract win last night.

  25. 25
    zman Says:

    Utilization fell to 83.5% – see thoughts in the post.

    2 mm of the increase in crude comes from a re-rally in imports to 10.1 mm bopd

    This set of numbers won’t do anything to hurt OPEC’s argument that there is enough oil around and that they can cut production on March 5.

  26. 26
    zman Says:

    crude trying to rally off that last part of comment #25

  27. 27
    Nicky Says:

    CNBC oil trader saying the data was bullish and that the crude build wasn’t big enough – ten seconds later he is saying he is selling the rallies and crude is way too high! Go figure.

  28. 28
    zman Says:

    Nicky – yeah, you gotta hate the fair weather fan. Guys like that need to be on lithium.

  29. 29
    zman Says:

    DRYS back to 4Q report levels.

    Oil rallying, down $0.40 now from an immediate number reaction of down $1.50.

  30. 30
    zman Says:

    Refinery utilization falling is pretty key. Its what the refiners need to get off the ground. Going back to the mid 1990s, 83.5% utilization is a record for this time of year and only bested (worsted?) by the discombobulation surrounding Katrina.

  31. 31
    md Says:

    How are the gasoline demand comps. Is that in the 1.30PM report.

  32. 32
    zman Says:

    Re gasoline: 9.125 mm bpd. Guess we’re all getting used to $3 gasoline.

  33. 33
    zman Says:

    OII call starts in 5

  34. 34
    Sambone Says:

    http://africa.reuters.com/wire/news/usnL21790711.html?rpc=401&

  35. 35
    Nicky Says:

    There is a possibility with WTI that this mornings low was a wave iv and we now need a new high in wave v.

    Damned if I can see how they can ramp it up on that data…

  36. 36
    Sambone Says:

    US Retail Diesel Price Record High $3.503/Gal – AAA

    Dow Jones Newswires

    NEW YORK — The national average retail price of diesel fuel rose 3.2 cents, or 0.9%, on Thursday to a record high $3.503 a gallon, according to AAA’s Daily Fuel Gauge Report.

    The price is 92.3 cents higher than a year ago and compares with $3.394 a gallon a month ago, according to the report by AAA, the former American Automobile Association.

    The jump comes as crude oil prices set record highs above $100 a barrel in recent days, pulling gasoline and heating oil fuels prices to records, as well.

    Planned and unplanned maintenance work at refineries has added to pressure on prices as has cold weather in some regions, analysts said.

    Diesel fuel is a low-sulfur distillate fuel that powers trucks that carry goods across the country, and rising fuel prices can have a tremendous economic impact, driving up consumer prices, analysts said. High-sulfur distillate is used as home-heating oil. At times of tight supplies, diesel can be substituted for heating oil.

    U.S. traders on Wednesday reported a surge in cash-market diesel prices amid strong demand for the product for export to South American and European markets. Ultra-low sulfur diesel sold in New York at 16.25 cents above the futures price for heating oil on Wednesday, traders said.

    — By David Bird, Dow Jones Newswires

  37. 37
    zman Says:

    OII Conf call notes:

    1Q08 guidance: midpoint of guidance is 25% YoY increase. They chastised analysts for getting 1Q wrong (again).

    Added a net 6 ROVs during the quarter, that’s a little faster than usual.

    Nicky – thought is that that data gives OPEC the greenlight to cut production.

  38. 38
    zman Says:

    OII – ROV market share of > 55%, over 3x the next guy.

    Quest (deep sea data analysts) data shows a 55% increase in the umbilical business 2008 vs 2007.

    They’ve won 20 of the 21 ROVs for new deepwater rigs (total of 24 ROVs)…this deepwater rigs all need ROV’s so the increase in deepwater rigs is very good for them.

    stressing that any acquisitions will come out of cash flow, not capital markets.

    Add 30 ROVs in 2008, see increased revenue from both number of units in service and higher rates.

    outlining strong growth in subsea products (25 to 30%)

    then subsea construction falling off (as previously outlined) as hurricane work wraps up.

    Q&A coming up.

  39. 39
    freeflow Says:

    ung still climbing

  40. 40
    zman Says:

    natural gas not yet rolling over.

  41. 41
    Nicky Says:

    Looks like they want to hold it up on this cold weather which you did say was going to last for a couple of weeks.

    I think Boone said it could come down very fast – we are waiting!

  42. 42
    zman Says:

    OII – Q&A

    Backlog in umbilicals did not grow quarter to quarter. They’re saying they see some slippage with subsea tree orders still strong but umbilical order slowing. They have not been awarded as many umbilical contracts as they expected but they also point out that the list of umbilical projects has not been awarded to a competitor either.

    They have no issues like the Brazil cost over run situation in the hopper.

  43. 43
    Sambone Says:

    11:12 am EST

    Nymex Crude Sees Slight Uptick From EIA Data

    Dow Jones Newswires

    [Dow Jones] Front-month April crude futures are trading at $98.87, off 83 cents, following the release of weekly U.S. oil and product inventory data. Oil stocks grew by 4.2 million barrels, topping analyst expectations. While still down on the day, futures are trading about 40 cents above levels seen immediately before the data release. While a larger-than-expected build in crude stocks is typically seen as exerting downward pressure on futures, many in the market believe the forces behind the recent rally are ignoring the data. “I don’t know how much we’re looking at inventory anymore these days,” says Jim Murphy, assistant vice president at futures brokerage R.J. O’Brien in Chicago. (brian.baskin@dowjones.com)

  44. 44
    reefguy Says:

    looks like CL and NG are going green

  45. 45
    zman Says:

    NG – yes, they are squeezing me. Number was in line, actually shrank the deficit from year ago levels to 6.7% which is down from 13.3% from just two weeks ago. The deficit to the five year number held pretty much flat. Nicky is right, everyone is just watching the lingering cold, buying gas and squeezing the shorts.

  46. 46
    zman Says:

    PQ at $15, wow did I pick the wrong quarter not to pay attention to those guys.

  47. 47
    zman Says:

    OII call ended well. One analyst was coming up with $0.95 of 4Q earnings had they not run into those one time items.

  48. 48
    reefguy Says:

    PQ up with big well at weekley prospect- caution on this one!

  49. 49
    Nicky Says:

    wti and distillates seem to have de- coupled from rbob again.

    I can’t see OPEC cutting Z re your earlier comments and I think traders know that realistically.

  50. 50
    Nicky Says:

    Z – any more info on the weather? when we you see it warming up?

  51. 51
    zman Says:

    Nicky – OPEC. They certainly will not raise production. But I can see them cutting it and citing today’s trading action as an example of speculators, not inventories dictating price.

  52. 52
    Nicky Says:

    Not a chance Z – you have the EIA screaming at them daily to raise production – not that I think they will do that either.

    if we get back down to 80 – 85 then maybe but not next week.

  53. 53
    zman Says:

    Accuweather not showing a real warm up for another 10 days.

  54. 54
    zman Says:

    OPEC could care less about the EIA or IEA, both scream and scream and then, as you’ve pointed out before, they overestimate demand and then have to chop it back.

  55. 55
    zman Says:

    Tristone capital just raised OII from mkt perform to outperform.

    Who is Tristone? An energy focused banking firm. Their analyst was the one backing into was 4Q numbers would have been on the call. These guys do have some swing in energy land and its nice to know they agree with me here.

    http://www.tristonecapital.com/tristone_team.html

  56. 56
    Nicky Says:

    Yuck re the weather forecast – may take until the middle of next week for them to react to that.

  57. 57
    Nicky Says:

    Today’s lows important for wti. if we break them then we may just have seen a ii up and are now in iii down.

  58. 58
    Dman Says:

    It does seem that OPEC are experimenting to find the level at which the wheels fall off the global economy. The used to think it was $65 & got surprised that the world seemed to be OK with $75, then $90 & now they are trying the $100 experiment. But since the only way to be sure is to take it high enough to crash the economy… well I’m just saying they might not be actual geniuses when it comes to finessing a unprecedented global experiment.

  59. 59
    Nicky Says:

    Wti has support clustered in the 98 – 9850 area which needs to get taken out to get this moving.

  60. 60
    Sambone Says:

    Any news on FDG? Can’t find any.

  61. 61
    Dman Says:

    Accuweather: I haven’t kept all the charts for forensic analysis, but I have the impression that for the last 6 weeks or so, the warm-up has always been in the second week of the forcast period (which I expect includes a lot of historical statistical work)…but never graduates to the 1st week of the forecast (mainly based on numerical modelling). Certainly the numerical simulations are not worth much beyond the 1st week.

  62. 62
    zman Says:

    Dman – agreed re OPEC and weather. Not that this matters but they sure botched the “warm winter” forecast.

    DRYS one bit of green in a sea of red today, now above pre4Q levels.

  63. 63
    Nicky Says:

    if this is a iii 98 should not offer too much support….
    rbob really tanking…

  64. 64
    Nicky Says:

    a bit of support at 97.75…..

  65. 65
    Nicky Says:

    and then the 9700 – 9720 area. until that region breaks this can still be a wave iv….which means another leg up to come.

  66. 66
    Nicky Says:

    could this have a positive effect on the indices later?

  67. 67
    Nicky Says:

    Okay nearly through 97 next stop 96 which has greater support.

  68. 68
    Nicky Says:

    nat gas starting to wake up and move down…… needs to get through the 8880
    area and then can really start to move down.

  69. 69
    jy Says:

    From McMoran press release this AM. looks like they have accelerated the ultra Deep shelf (South Timbalier Area) Blackbeard wildcat by about 18 months!

    “….McMoRan also announced today that it has contracted the Rowan Gorilla IV rig to re-enter and deepen the Blackbeard No. 1 ultra-deep exploratory well located at South Timbalier Block 168 in 70 feet of water. The rig is on location and drilling operations are expected to commence in the coming weeks. The rights to this project, which was previously drilled to 30,067 feet in August 2006 but temporarily abandoned prior to reaching the primary targets, were acquired in the Newfield transaction in August 2007. McMoRan holds a 26.8 percent working interest in the Blackbeard prospect…..”

  70. 70
    zman Says:

    Thanks for the headsup JY! You know you can play that through the Treasure Island warrants (TISDZ). Also, NFX still has a piece of the play.

  71. 71
    zman Says:

    Funny, market seems to like green, not red oil, lol. Energy has been providing leadership, something the financials, retails, and the defensive stocks are incapable of. Energy is > 15% of the S&P 500 so be careful what you wish for on oil.

  72. 72
    jy Says:

    Z- You are right about the warrants, but those are as speculative as IOC stock.

    McMoran had the usual rambling operations info in their press release about finding 30′ of pay in one section of a Flatrock prospect delineation well and 20′ in another etc…. Very hard to get any solid info from their drilling pronouncements.

  73. 73
    zman Says:

    JY – MMR will remind you of IOC when Blackbeard is underway.

    You ever look at MCF? Very interesting.

  74. 74
    zman Says:

    CHK reports tonight. Holding what I’ve got. I’d be hard press to figure out something for them to say in the PR or in the call that hasn’t already been covered in recent PRs and calls. It should all be positive but we already know and the stock could key off NG which is actually, believe it or not, slightly lower right now.

  75. 75
    Sambone Says:

    1:32 pm EST

    Crude Below $97 As Long Rally Ends

    By Brian Baskin
    Of Dow Jones Newswires

    HOUSTON — Crude oil futures briefly dipped below $97 a barrel on Thursday after a failed final run at $100.

    Light, sweet crude for April delivery was recently down $2.55 at $97.15 on the New York Mercantile Exchange. The contract, in its first day of trading as the front month, had reached as high as $99.94 shortly after noon. April Brent crude on the ICE futures exchange was down $2.60 at $95.82.

    The push late Thursday morning toward $100 came in the face of government data showing a 4.2 million barrel increase in U.S. oil inventories, much larger than expected. That, combined with a lack of new threats to supplies, allowed for profit-taking after a gravity-defying run, analysts said.

    “The market technically was overbought,” said Mark Waggoner, president of Excel Futures in Huntington Beach, Calif. “A lot of funds were buying into this, and a lot are going to take profits.”

    Various events in oil-producing countries, including new rebel threats in Nigeria and inflammatory rhetoric from Venezuelan President Hugo Chavez, have helped propel the market to fresh records. Until the oil inventory data was released Thursday morning, the ailing U.S. economy was the only major factor countering rallying futures.

    Waggoner sees futures dropping into the low $90s by the end of next week. Others have made similar predictions, including a forecast for a $10 to $15 second-quarter drop by oil billionaire T. Boone Pickens on Thursday.

    On top of the oil stock build, reformulated gasoline blendstock, or RBOB, futures are leading crude down. U.S. gasoline inventories rose 1.1 million barrels last week to 230.3 million barrels, the highest level since February 1994. Stocks are now up 15 straight weeks, a record, and by 18.5% since Nov. 9.

    The front-month March RBOB contract trades at $2.4928 a gallon, off 9.24 cents, or 3.6%. Gasoline is likely to exert a growing influence on the oil market in the coming months, as peak summer demand approaches. Heating oil, which holds sway in colder months, is already on the wane as a force behind trading.

    “For the most part people realized we are getting toward the end of the season and we’re going to see (distillate) inventory draws .. people are looking to get rid of it,” said Tom Bentz, a broker and analyst at BNP Paribas Commodity Futures in New York.

    —By Brian Baskin, Dow Jones Newswires

  76. 76
    Dman Says:

    Re 71: one of the sad aspects of the recent disintegration of Cramer’s performance is that he has been undone by one of his absolute rules. He always insisted that diversification was “the only free lunch in investing”. So even though he has (broadly) gotten energy right lately (eg. was long RIG until a few weeks ago and was relentlessly positive on oil) and has also been right on infrastructure (FWLT etc), he has been hard hit by the financials, retail etc. All because his diversification rule made him do it.

  77. 77
    zman Says:

    QMAR shaving the arb spread today…odd. EXM reports on March3.

    DRYS – if you don’t count the momentary spike to 90 after earnings, DRYS now at levels not seen since mid December.

    Sam – that guy’s headline may be pre-mature.

    D – Cramer will probably be ok. He has a great selective memory, lol.

  78. 78
    Popeye Says:

    One of my rules (never chase) cost me big buks last year about this time.

  79. 79
    zman Says:

    Popeye – agreed good rule in stocks, sometimes works in options.

    One of my big rules, never swing for the fences which ties in with one of my other rules, always average in.

  80. 80
    zman Says:

    Scoop – your instincts have been dead on in drybulk of late, nice thought yesterday morning.

  81. 81
    scoop006 Says:

    Thanks, always had good instincts on the buy side;just never know when to sell.

  82. 82
    jy Says:

    Z- re #73 Contango. Only follow their work in the Gulf of Mexico where they have had good success in the shallow Marsh Island Area (just east of McMoran’s Flatrock & Hurricane areas). They are a very lean outfit as they outsource nearly every function. This strategy sometimes makes it hard to keep your various contractors aligned w/the company goals, especially as you grow.

  83. 83
    zman Says:

    JY – re MCF, yep, not your daddy’s E&P. Last I heard they had 8 people on the in house payrol. Its a nice trick if you can pull it off and control the LOE but agree, it becomes more of a trick as you grow. Anyway, watched them rally all of 2007 following some big discoveries last Spring. Only recently saw options were now available and am thinking of updating some very basic looks I had on them.

  84. 84
    zman Says:

    Does UNG and natural gas look like a double top to any of you TA inclined people? Or is it just my wishful thinking? Look like we have a gap fill coming at the very least.

  85. 85
    zman Says:

    what’s wrong with the broader market today, anyway, can’t get out of its own way.

  86. 86
    Dman Says:

    Z – maybe not a perfect double top, but the retreat from the second spike seems purposeful. The second spike being a lower high is even more bearish, isn’t it?

    Plenty of gaps to fill below, if that means anything to a gaseous commodity ๐Ÿ™‚

  87. 87
    scoop006 Says:

    Z re CHK Think all news already priced in stock price?Thinking of buying $45P’s

  88. 88
    zman Says:

    Pelosi taking energy tax bill back to the floor next week citing $100 oil. Sites cutting $18B in tax incentives to oil companies that will be repealed to reduce our dependence on foreign oil. These people amaze me.

    Scoop – unless they plan on raising guidance or gas turns back up (no, no, no) then yeah, they’ve largely shot their wad. The story is still great and its still cheap and it will get better as the next two years roll out. I think its early for them to take up the production forecast but they did get a 24% bump sequentially 3Q to 4Q in the Barnett. That’s just unreal growth. So maybe they knock it up a touch but again I doubt it as Aubrey will get to walk numbers up all year long if he bags them early in the year. The other areas that could burn you are the possible announcement of another asset sale package and downwards cost talk.

  89. 89
    zman Says:

    Just read a positive technical piece on DRYS and shortsqueeze.com points to 20.6% short interest.

  90. 90
    zman Says:

    I guess it figures that the ugliest day in recent memory follows on the heals of one of the best days in recent memory.

    ugh, tylenol-thirty.

  91. 91
    rseidman Says:

    Z: Do you use stops on your calls, OII as an example?

  92. 92
    Sambone Says:

    Energy Bulls Take Long-Term View

    By ROB CURRAN andGEOFFREY ROGOW
    Of DOW JONES NEWSWIRES

    NEW YORK — Options trade Thursday suggested $100 oil may not have signaled the end of the energy spike and that natural gas could be next for a rally.

    There was geyser-like call volume in natural-gas company El Paso Corp. Thursday. Even as some market participants dubbed oil’s recent move to $100 a barrel — which boosted other energy products — a short-term pop, options traders took a long view of the sector.

    For example, about 17,670 El Paso calls with a $17.50 strike price and a January 2009 expiry traded, even as shares remained relatively flat at $16.90. Most of that volume appeared to be a single $2.8 million trade that occurred at 10:52 a.m. EST, said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research.

    “Someone’s making a longer-term bet that natural gas stocks will continue their” strong streak, Detrick said.

    Given the premium traders paid for that option, the company’s stock would have to rise above $19.32 for the trade to become profitable, which would mark a new 52-week-high. Shares are currently at $16.85.

    Joe Kinahan, chief derivatives strategist for brokerage thinkorswim.com, noted the trade bucked thinking that commodity prices, especially oil, would come down following the election and early days of a newly elected U.S. president, thinking driven by candidates’ pledges to explore energy alternatives.

    “The person who bought this thinks oil is going to explode even through the election,” said Kinahan.

    Another oil-related play with heavy options activity Thursday was Oceaneering International Inc., which provides engineered services to the oil and gas industry. While the company’s stock fell 5.6% to $61.86, March expiring calls with a $65 strike price were active, with investors looking for the stock to rise near $67 within a month.

    Some of the action may have been related to unwinding of other positions, Kinahan said. In that scenario, traders may have short the stock, selling borrowed shares in the hopes of a fall, and bought calls to hedge that position. After the stock’s decline, those market participants may have exited the trade, and sold the calls Thursday.

    Put options on an exchange-traded fund that mirrors the sector are an increasingly popular hedging tool. Indeed, the Energy Select Sector SPDR Fund, traded heavily Thursday, with about 52,000 puts trading versus 23,800 calls.

    “It’s simply a function of hedge funds using that vehicle — they go long specific energy stocks, then hedge themselves by actively trading puts,” said Detrick of Schaeffer’s.

    Demand was particularly strong for the right to sell shares of the fund in April at $77, $75 and $72. The ETF, currently at $74.47, has fallen 2.2% Thursday, reflecting a decline in oil futures with which it shared a rally earlier in the week.

    “People are thinking we’ve had a nice run, it’s time to hedge somewhat,” said Kinahan.

    —By Geoffrey Rogow, Dow Jones Newswires

  93. 93
    Sambone Says:

    3:36 pm EST

    Crude Settles Lower For First Time Since Feb 12

    By Brian Baskin
    Of DOW JONES NEWSWIRES

    HOUSTON — Crude-oil futures settled lower for the first time since Feb. 12, after a build in U.S. crude and gasoline inventories pulled oil back from $100 a barrel.

    Light, sweet crude for April delivery settled $1.47, or 1.5%, lower at $98.23 a barrel, in the contract’s first day as the front month on the New York Mercantile Exchange. March futures had settled at $100.74, a record, in the contract’s final day of trading.

    April Brent crude on the ICE futures exchange closed $2.19, or 2.2%, lower at $96.23 a barrel.

    Crude oil reached as high as $100.33 in electronic trading overnight, but failed to enter triple digits once pit trading commenced. After hitting $99.94 shortly after 12 p.m. EST, the contract quickly plunged below $97, before recovering in the final hour of trading.

    “I think this is the end of this push,” said Mark Waggoner, president of Excel Futures in Huntington Beach, Calif. Waggoner believes that crude will fall back to a range of $92.60 to $94, as a staging ground for another rally.

    The market at first appeared to shrug off U.S. Energy Information Administration data showing a 4.2-million-barrel rise in oil inventories last week. The gains topped analyst expectations, and marked the sixth straight week of increases.

    Traders instead focused on potential supply threats that have fueled the rally over the last week, including unrest in Nigeria, the legal battle between Venezuela and Exxon Mobil Corp. (XOM) and a Texas refinery explosion. Recent interest rate cuts by the Federal Reserve also offered hope that a downturn in the U.S. economy would be less severe than expected.

    “From a fundamentals standpoint, (Venezuela) really won’t have that big of an impact, but it makes the market nervous,” said Rick Mueller, director of the oil practice at Energy Security Analysis Inc. in Wakefield, Mass. “It’s hard to justify.”

    Eventually the swelling oil stocks, along with a record 15th-straight increase in gasoline inventories, turned crude around just short of $100.

    Reformulated gasoline blendstock, or RBOB, futures — the Nymex benchmark gasoline contract — saw greater losses than crude or heating oil futures.

    Although distillates, which include heating oil and diesel, saw a larger-than-expected draw in the EIA data, their importance is waning. Gasoline, which sees peak demand during the summer, is likely to play an increasingly important role in determining prices. Inventories last week hit their highest level seen since February 1994.

    “Gasoline may be the Achilles heel in this entire complex,” said Phil Flynn, an analyst with Alaron Trading Corp. in Chicago. “That’s where we’re seeing demand destruction .. and supplies are high right now.”

    Front-month March reformulated gasoline blendstock, or RBOB, closed 6.32 cents, or 2.4%, lower at $2.5220 a gallon. March heating oil settled down 1.65 cents, or 0.6%, to $2.7381 a gallon.

    —By Brian Baskin, Dow Jones Newswires

  94. 94
    zman Says:

    Generally no, not as a stop loss. Many of my best performers go low on me during the course of the holding and stops would shake me out too soon. Definitely would have happened on CHK this past month. Its personal preference thing and not a hard and fast rule for me. If I get new data, then I may sell and maybe my approach is riskier as I could stop out and come back in but in general I find I do better to stay in.

    On the flipside, when profits are in hand I sometimes set a stop when I’ve got what I feel are “enough profits”, the I’ll set them under the bid and maybe get up for lunch.

  95. 95
    Popeye Says:

    IOC went 22.50 at the bell?

  96. 96
    zman Says:

    Re 93, Flynn is right that there is a lot of gasoline in storage right now but saying there is demand destruction is pretty questionable. It just rose for a second straight week and is just under last year’s levels despite being quite a bit more expensive.

  97. 97
    zman Says:

    Popeye – people playing games in the name. No one can know anything there, probably just somebody trying to inspire a rally and hinting or suggesting that news will be out soon. I’d bet news will be out soon…its been since mid Jan since they spoke about what’s arguably the second most important well in their company history. But this is exploration and the news could be bad news.

  98. 98
    scoop006 Says:

    Z what constitutes “enough profits”? Is it a % of the entry price? i.e.25% or do you just rely on your knowledge.As previously stated I have yet to master the art of selling. All suggestions very much appreciated. TY

  99. 99
    Popeye Says:

    Eighty cents on that volume, I wonder how it would move on good news with 40% short. Fun stock for sure.

  100. 100
    zman Says:

    Scoop – that’s a great question. Mind if I table it for a bit? Don’t want to short the answer there but I’ve got to bop. In a nutshell, it depends on the underlying issue. Like HAL I expect less from than OII, just based on volatility and history. Also, it depends on timing of catalyst. IV floods away when big expected news comes to pass. So while my profit expectations for OII were a quick 2 to 1 or so on a beat, they are now much more humble. (give that one another couple of a days a more congenial market and we shall see if I’m right that the reaction was assbackwards and overly simplistic…at least one analyst out there agrees with me so far but I digress and I do have to run for a bit. I’ll try to write something more coherent on the subject tonight or tomorrow.

  101. 101
    scoop006 Says:

    thank you take your time

  102. 102
    bill Says:

    chk .93 vs .81 is that good?

  103. 103
    irished Says:

    I know boss zman is awol but anyone have thoughts on chk earnings stuff? Is it good or not good enough.
    Thanks

  104. 104
    Nicky Says:

    Broader markets are building up for a big move here. Clearly now trading in a large range between 12200 and 12600 on the dow – the break out when it comes should be good for a few hundred points.

    WTI – just seen Dennis Gartman on CNBC who says you just have to be buying oil above 100 etc. I would never bet against this guy but…..this move off yesterdays highs is getting big for a iv if we still have v yet to come. A move above 9994 and yes we have another leg up to come but I thought there was a lot of signs of nerves today as it fell.

    Nat gas. Really needs to break 8775 as another new high is still not out of the question. We have yet to see it fall impulsively although I thought there were finall signs of some weakness today.

    With both the above commodities even if there is a higher high out there they are on borrowed time. Oil traders couldn’t get to the exits fast enough today as it started to fall…

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