25
Feb

Monday Morning – Holy Hopping Commodities Plus Drybulks & Other Odds and Ends.

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Commodity Watch:

  • Crude Oil continued a two week rally last week, touching $100.86 on the April contract before closing up 3.5% at $98.81. This morning crude is trading flat to up slightly.
  • Turkey Shoot Watch: Turkey continues to press their attack against Kurdish rebels in Northern Iraq. There's probably little danger to oil infrastructure over this. Iraq has intermittently been pumping between 300 and 350,000 bopd over the border to storage facilities in Ceyhan, Turkey however the current incursion is a good ways from the Kirkuk producing field, the pipeline, and Ceyhan.
  • OPEC Watch: "It's The Speculators, Stupid!" The Cartel is still saying a production quota cut is on the table despite prices being a hair off the century mark. To me this isn't surprising given the recent rally in U.S. inventories and their steadfast statement that speculators, not fundamentals, are in charge of pricing.
  • Iran Watch: Iran warned the West that further sanctions would prove costly ... in other words, "we will shut off your oil". The International Atomic Energy Agency has said that a kindler, gentler Iran has been more open about their nuclear program but not open enough to prove that it is not covering a bomb making scheme. The U.S, Britain, and new bedfellow France are pushing for the passage of a third, harsher round of U.N. sanctions. The sanctions are likely to be slow, if ever to pass while Iran's threat is pretty hollow. 

  • How's Henry? A Nigerian judge order "unfettered access" to the rebel leader by counsel and family. That was 24 hours ago. Still no confirmation of his welfare or demise and various rebel groups have joined in MEND's call for anarchy through the country if he turns up dead.
  • Natural Gas. Not to be outdone, NG continued a 3 week rally, climbing $0.50 per Mcf last week, with the March contract (which expires Wednesday) closing at $9.146. This morning gas is trading up yet another $0.10 to $0.20 after heavy snow fell from Chicago to the Northeast. To me this increasingly parabolic move higher looks like an exhaustive blowout to the upside meant to fry the shorts and, given the season, should soon run out of steam.
  • Gas-weighted HDD Watch:
    • 212 recorded last week vs expectations of 193. This is colder than normal and last year's reading and should generate a withdrawal somewhere in the neighborhood of 200 Bcf this Thursday.
    • This week's estimate from the CPC is not yet available.
  • Speculative Net Short Natural Gas Position Continues To Climb. See the weekend wrap for detail.

 

Energy Earnings Calendar - Week 6

week-6-earnings.jpg

Stocks We Care About Today Watch:

Drybulk Watch:  Sector fundamentals update:

1) Dayrates Are Rallying. Shipping dayrates have made the expected February/Chinese New Year recovery after swooning into the latter part of 2007 and January of 2008. For a chart of the latest day rates click here.

2) Drybulk Demand Remains Strong. Demand for coal and iron ore continues and the transport of each continues to climb:

  • China has recently (Feb 22) accepted steep iron ore price hikes clearing the way for further contract fixings in the dry bulk sector.
    • January Chinese iron ore imports hit a record 36.8 mm tons (this ore was probably left port in November). They will need to increase coal imports (which are very low due to recent 100 year winter type weather) to process the iron ore into steel.
  • China is also upping Soybean imports. That recent harsh winter weather destroyed an estimated 40% of China's rapeseed crop. They are sourcing the globe for a replacement of these edible oils.
  • Mexico indicated last week it will be increasing its purchases of international coal (it has little in the way of domestic reserves). The Mexican state utility said it is considering buying coal mines in Colombia and Australia to support growing power needs.

3) 2008 Estimates Continue To Rally; For 2009 Analysts Are Growing More Cautious. 

drybulk-multiple-022208.jpg

Odds & Ends

Analyst Watch: UBS cutting coals (ANR), (BTU), and (JRCC) to neutral. (FTI) cut to sell at Goldman.

 

 

77 Responses to “Monday Morning – Holy Hopping Commodities Plus Drybulks & Other Odds and Ends.”

  1. 1
    bill Says:

    on drys

    http://www.rttnews.com/sp/LongTermStocks.asp?date=02/25/2008&item=1

  2. 2
    scoop006 Says:

    Mr.Bill, Thanks for the link. Very informative article.

  3. 3
    Dman Says:

    Hi Z,

    any color on the Goldman FTI cut?

  4. 4
    zman Says:

    Agree with Scoop, thanks Bill

    Dman – re FTI cut. yes, they cited high relative valuation to the group and lack of near term catalysts. They also put it down as the short part of a long-short pair trade. They are looking for service names natural gas exposure to be long and oily exposure names to be short. That’s a stretch and I think not well thought out from square one.

    The gassy long exposure names they listed were WFT, HAL, BJS while the short exposure (oily) was FTI, CAM, and SII. Again, I disagree with the premise of the call and with some of the components…like saying SII (a bits and mud company) is really that oily as opposed to gassy. Also, from a service standpoint, natural gas drilling rates are down YoY as are rig counts…hmmm.

    Maybe the analyst is thinking this is a short term trading call but a Sell rating on FTI with their increasing level of demand..??? The only reason you do that is to manipulate the stock.

  5. 5
    zman Says:

    gas-weighted HDDs for the week ended March 1 (this week) just hit the tape: 181… that should get next week’s report back into the low 100 Bcf range.

  6. 6
    zman Says:

    Interesting to see NG trading up $0.20 last night…traders playing games. There was no new colder weather forecast and in fact the numbers out this morning show a warming trend as do those longer looks in the post. NG now up 3 cents and falling as oil comes down a bit.

  7. 7
    zman Says:

    Drybulk rates bumped up for 2/25 back close to records for 2008:

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

  8. 8
    zman Says:

    UNG ETF actually down with the front months both up…that’s rare. Looks like profit taking in the ETF itself.

  9. 9
    Sambone Says:

    7:59 am EST

    Crude Oil Steady Supported By Geopolitical Concerns

    By Nick Heath
    Of Dow Jones Newswires

    LONDON (Dow Jones)-Crude oil futures hovered near unchanged Monday, supported by geopolitical concerns and no firm indication that the positive upwards momentum that pushed prices to record levels last week has waned.

    Continued Turkish military activity in northern Iraq and strong words from Iran over a report on its nuclear activity helped bolster sentiment that crude could mount another assault above $100 a barrel in the coming week.

    “An unsettling geopolitical climate is adding to the strong market sentiment, helping keep prices in the vicinity of their all-time highs,” said analysts at Barclays Capital.

    At 1218 GMT, the front-month April Brent contract on London’s ICE futures exchange was down 6 cents at $96.95 a barrel.

    The front-month April light, sweet, crude contract on the New York Mercantile Exchange was trading 16 cents lower at $98.65 a barrel.

    The ICE’s gasoil contract for March delivery was up $1.50 at $891.50 a metric ton, while Nymex gasoline for March delivery was down 50 points at 252.87 cents a gallon.

    While they may have rattled the oil market’s nerves, recent geopolitical developments are likely to have less implications for supply flows than they have for crude prices, analysts suggested Monday.

    Turkish troops continued to pursue Kurdish rebels inside northern Iraq over the weekend, having crossed the border Thursday last week.

    “The Turkish incursion, while troubling, will be of limited duration, and does not seem to be putting any production at risk, since Iraqi pipelines going to the Turkish port of Ceyhan do not pass through the conflict area,” said Edward Meir, analyst at MF Global in New York.

    Meanwhile, Iranian leaders warned over the weekend of “firm reprisals” against any country calling for new sanctions against Tehran, after the International Atomic Energy Agency was unable Friday to confirm Iran’s nuclear program was for peaceful means. The headlines offered some initial support for prices Monday, but the opportunity for the standoff to restrict crude oil flows appears limited some suggested.

    “Any new round of sanctions will be watered down and useful only as a rhetoric purpose. The noise on Iran will continue but it remains extremely unlikely that this will translate into any threat to oil supplies,” said Olivier Jakob of Petromatrix.

    Nonetheless, the developments were likely luring further investment into the crude complex, said Nimit Khamar at Sucden Research.

    “These geopolitical factors are leading to more speculators investing in oil, as they search for better returns and as a hedge against inflation, while equities and credit or money derivative products are suffering from persistent concerns over the state of the US economy.”

    While concerns of a U.S. economic slowdown, alongside impending lower second quarter seasonal demand, and rising U.S. inventories might argue for lower crude prices, investment flows into commodities and technical fund trading are seen to have bolstered crude values to record highs in the past week, in turn attracting further inflows.

    But any failure to confirm the upwards trend could quickly see such support weaken, some suggested, putting downward pressure on prices.

    “This week, the bulls need to break to new highs to maintain the upward momentum. If they cannot, we could see heavy long liquidation on disappointment,” said Peter Beutel of Cameron Hanover.

    Just over a week away before it meets in Vienna, a Persian Gulf Organization of Petroleum Exporting Countries official over the weekend described the dilemma facing the organization ahead of its March 5 meeting to decide on output levels.

    “It will be a very hard decision to make. We have been seeing increasingly higher stock levels in the U.S., an economic slowdown is present and we are approaching a lower-demand season; so all the fundamentals fall in favor of a cut,” the official said. But high oil prices “will tamper with OPEC’s decision,” they added,

    “I think what we’ll see with OPEC is they’ll make the right comments, but they’ll roll over,” said Jim Rintoul of TheOilTrader, suggesting the group was more likely to make informal cuts, rather than a formal announcement which risks spurring prices even higher.

    —By Nick Heath; Dow Jones Newswire

  10. 10
    Dave J Says:

    Very foggy morning in Houston.

  11. 11
    zman Says:

    SWN making a move pre earnings….seems to be the pattern this season. Buy the promise of a beat, sell the report of anything but a really big beat.

  12. 12
    Dman Says:

    Z – sounds like Golman are playing a little too cute. Whilst FTI, OII etc are not cheap, I would have thought they are “expensive for a reason”. Market reaction to the call will be a nice downside test of the stock.

    For some reason, before the open I liked the look of the daily NFX chart. Hard to say why…it’s not a clear pattern or anything. With the 2% up opening, it still looks good but alas I’m still vague as to why. From a non-technical viewpoint, obviously some scope for a bit of catch up with NG cohort.

  13. 13
    zman Says:

    Dman – agreed on the FTI test. Note that this same group of guys (GS) upgraded RIG to no avail late last week…losing some swing I think.

    NFX – It gets my pulse up anytime I see it moving up nearly a buck over when $50…I think, “is this the time it breaks out”. Holding it back are experiment year level F&D costs (which actually weren’t that high compared to the E&P universe for 2007) and the fact that divestitures last year are leading forecasts to flattish looking CFPS growth. So its not cheap but more middle of the road. I really believe people are missing the boat here but only time will tell which is why I’ve got the shares and occasionally, like now, opt to take a bet on the options.

  14. 14
    kyleandy Says:

    IOC—reefguy said we would get an announcement on the 26th stk acting well

  15. 15
    zman Says:

    K – I’d bet the chats have taken up that date. If all quiet tomorrow could see it dip.

  16. 16
    zman Says:

    NFX above 4Q level report, trading here reminds me a lot of APC which foundered after its call, which also was good, before finally firming up and moving to new highs.

  17. 17
    zman Says:

    SD breaking out to new highs. Continuing to hold the stock. This very gassy name reports March 3.

  18. 18
    Nicky Says:

    Morning all. Z they seem reluctant to let nat gas go despite the sell off earlier. Now right back up there….
    WTI tracking the dow again.
    Broader market looks bullish right now.
    Will continue to look bullish as long as Friday’s lows hold.

  19. 19
    zman Says:

    Morning Nicky – agreed, just won’t let it die off…maybe post expiration…even the equities look like they are buying the move which is good for my holdings there but bad for my UNG puts. I posted some weather links for you in today’s post by the way…the orange is warmer, the blue cooler …looks like warming soon to me.

    We probably get an increase to the YoY deficit over the next two weeks then it gets hard to tell.

  20. 20
    Nicky Says:

    Not quite sure what explanation there is for it to be up here though????

  21. 21
    zman Says:

    N – short squeeze?

  22. 22
    Sambone Says:

    OPEC Feb Output Seen Down As Winter End Nears

    Dow Jones Newswires

    LONDON — The Organization of Petroleum Exporting Countries is expected to pump around 250,000 barrels a day less in February versus January as some members start to pull in production ahead of the end of winter next month in the main consuming nations, tanker tracker Petrologistics said Monday.

    Output from the 13-nation producer group is expected to average 32.4 million barrels a day, down from 32.65 million barrels a day last month, Geneva-based Petrologistics said in its preliminary forecast.

    Although still well above OPEC’s production target, output from OPEC not including Iraq, which isn’t part of the group’s output allocation system, is forecast to average 30.10 million barrels a day this month, down from 30.30 million barrels a day in January. The production target of OPEC’s 12 quota-bound members is 29.67 million barrels a day.

    “We’re starting to see some of them reduce output. I expect it go lower in March,” said Petrologistics head Conrad Gerber. “OPEC is not in any hurry to open the taps despite the fact that oil is near $100 a barrel.”

    OPEC is scheduled to review its production policy March 5 in Vienna. The group isn’t expected to cut output as long as oil prices remain well above $90 a barrel. Crude traded Monday at about $99.50 a barrel, up 75 cents.

    Gerber said Iran, OPEC’s second biggest producing member, is expected to lead the production drop with a fall of 200,000 barrels a day to 4.05 million barrels a day in February.

    Saudi Arabia, OPEC’s de facto leader because it holds nearly all of the group’s spare production capacity, is forecast to pump at about 9.1 million barrels a day, down 50,000 barrels a day from January.

    Iraq is expected to produce on average 2.315 million barrels a day, down about 50,000 barrels a day from January, while Nigeria is projected to produce about 2.05 million barrels a day, up slightly from last month.

    —By Spencer Swartz, Dow Jones Newswires

  23. 23
    Sambone Says:

    Uncle Phil tells all!

    http://www.businessweek.com/bwdaily/dnflash/content/dec2007/db2007125_087321.htm?campaign_id=yhoo

  24. 24
    zman Says:

    APA – just broke into all time high territory, came close to a double top with a lower right shoulder…whew.

  25. 25
    zman Says:

    Dman – you see FTI? Green. Same SII. It looks like they were trying to force the issue with the severe downgrade…oops.

  26. 26
    jiveyjr Says:

    looks like TLM is starting to get luv again

  27. 27
    zman Says:

    Re TLM – noticed the move Friday, still holding some nearly worthless April calls. Any news you see other than some LNG contracts a month ago. I don’t see a thing…could be rumors again as its extremely cheap.

    HK trying to break out.

    CHK and SWN hitting new highs

  28. 28
    jiveyjr Says:

    see no significant TLM news..printed and studied a corp. presentation a bit…looked to me as though the missed prod. guidance a while back on account of what they call Tweedsmuir delays…I assumed that prod. miss hurt the stock and that now folks are looking past that…I own the stock and the April calls….see some evidence of accumulation at these levels if I interpret my charts correctly, which is a big IF!

  29. 29
    irished Says:

    Have any thoughts on KWK

  30. 30
    zman Says:

    Hey Irish – they had stellar reserve replacement…I’m staying away in front of the call there (I think earnings after the close but maybe bmo) as its running on gas. They probably beat on price but you’re paying up for it here and I know/like the SWN story (same kind of company) a little better. And I’m not going after that up here either.

  31. 31
    irished Says:

    gracias

  32. 32
    zman Says:

    When are they going to rescue ABK? Wasn’t the CNBC rumor of this what catapulted the market on Friday? Seems like we’re on borrowed time now.

  33. 33
    Dman Says:

    Z – was away but got back in time to see FTI back in green. Interesting to see how it finishes, but I don’t think the market is buying the Goldman thesis. On the daily chart it’s a bit overbought as per BB and MACD, so I wouldn’t be surprised to see it settle back to eg. $50 over a few weeks. I would call it screaming buy at that point. A contract win could easily put paid to any such bargains.

    Amazing to see the strength in energy even as the broad market eases. Amazing but not surprising: “energy isn’t just another commodity” etc.

  34. 34
    Dman Says:

    Z – re ABK: I guess it’s the thought that counts 🙂

  35. 35
    scoop006 Says:

    Re ABK :Thought Charlie Gasparino of CNBC said if a deal was going to be completed it would be by Teus.2/26.Today CNBC said maybe not until Mon.3/3. How do the rating agencies justify doing nothing relative to DOWNGRADES?

  36. 36
    zman Says:

    Anybody notice natural gas only up 3 cents and UNG red? Didn’t know UNG went red these days.

  37. 37
    zman Says:

    Scoop – I’d like to downgrade CNBC and have a look at Charlie’s personal account.

  38. 38
    zman Says:

    Nicky mused over the weekend that the warming weather would be discounted before it arrives by natural gas. I couldn’t agree more with that sentiment. When the real change comes it will be swift and high single digit or even double digit % drop in NG prices. It’s going to be 80 in Dallas today and that weather is moving to the east as the week progresses. Not the end of the cold but definitely getting less blustery.

  39. 39
    zman Says:

    ZTRADE: UNG $43 Puts for $1.10.

  40. 40
    Dman Says:

    HAL on the move

  41. 41
    zman Says:

    Re 39. I may have more dollars than sense here but I’ve been student of natural gas for over a decade and this move just looks to fall into the “too far, too fast” category. Its too good to be true, even if the long term fundamentals support a gradually higher strip which I think they probably due, these kind of snap course corrections seldom have staying power.

    D – yeah, nice profit in the latest HAL trade, holding for just a bit more this week as technicals take over.

  42. 42
    Sambone Says:

    Greenspan: Oil Price Seen Continuing Upward Trend

    DOW JONES NEWSWIRES

    LONDON — Former U.S. Federal Reserve chairman Alan Greenspan Monday predicted crude oil prices would continue their upward march despite fears that a U.S. recession could ripple into other regions.

    “I see the price of oil in an upward trend unless we see a global weakening in demand. And this is unlikely to happen,” Greenspan said, speaking at a conference in Abu Dhabi.

    On Wednesday, front-month March light, sweet crude oil futures traded at an all-time high at $101.32 a barrel on the New York Mercantile Exchange. Prices rallied on a combination of factors: supply concerns, speculative buying and technical charts.

    Despite the recent surge in prices, oil market participants remain concerned that slowing economic growth in the U.S., the world’s largest oil consumer, would dampen oil demand worldwide.

    At 1456 GMT Monday, the front-month April light, sweet contract on the New York Mercantile Exchange was trading $0.42 lower at $98.39 a barrel. The March contract expired Wednesday.

    —By Mirna Sleiman and Lananh Nguyen, Dow Jones Newswires

  43. 43
    bill Says:

    A couple of capesize fixtures at rates above $150,000 a day signalled that the good times are returning to the dry freight market.

    Rates were up across the board with the Baltic Exchange capesize index passing the 10,000 mark, up from little more than 7,000 in January, although still well short of the stratospheric 16,000 levels seen in November.

    Despite the strengthening market a good number of period charters were fixed for panamax and smaller tonnage.

    Capesizes

    Sanko’s 177,000-dwt Elegant Star (built 2005) was fixed as an Armada relet for about six months to STX Pan Ocean at $151,000 a day.

    Cardiff Marine’s 174,000-dwt Ventura (built 2006) is to make a Europe via Brazil trip to the Far East for SK Shipping for $166,000 a day.

    Cosco’s 175,000-dwt Tian Lu Hai (built 2005) was hired for a China – Australia round trip at $115,000 a day by BHP Billiton.

    Panamaxes

    Quintana’s 82,000-dwt Iron Anne (built 2006) was fixed for three years trading by Korea Line at $52,000 a day.

    Transmed Shipping’s 77,000-dwt Nicole (built 2007) was taken by Hanjin for three years at $50,000 a day.

    Yamamoto Kaiun’s 77,000-dwt Oceanic Breeze (built 2005) was hired by Cosbulk for two years trading at $61,000 a day.

    Hung Fu’s 76,000-dwt Carol (built 1999) was fixed for 11 to 13 months trading to Britannia Bulk at $72,500 a day.

    Bottiglieri Rizzo’s 75,000-dwt Maria Bottiglieri was chartered to Cosco for 12 months at $70,800 a day as a Britannia Bulk relet.

    Carras Hellas’ 72,000-dwt Felicia (built 1997) was taken by Cosbulk for five to seven months trading at $66,000 a day.

    Yang Ming’s 69,000-dwt YM Cultivation (built 1997) was taken by Chinese interests for four to six months trading at $55,000 a day.

    Ta Ho’s 78,000-dwt Te Ho (built 2004) was taken by undisclosed charterers for three to four months at $71,500 a day.

    K Line’s 77,000-dwt Mishima (built 2002) is set for a China – Australia – Iceland trip for Furness Withy for $40,000 a day.

    Top Ships’ 76,000-dwt Bergen Trader (built 2002) is to make a couple of trips within the Far East for Sinochart for $53,000 a day.

    Angelakos’ 74,000-dwt Adriatica Graeca (built 2002) was fixed for a South America to Europe trip for Azure for $63,000 a day plus a ballast bonus of $1.1m.

    Enterprises’ 73,000-dwt Bergen Max (built 1994) was hired by undisclosed charterers at $67,000 a day for a couple of laden Wales to continental Europe tripa

    Candida Corp’s 69,000-dwt President G (built 1988) is set for a South Korea – China trip at $29,500 a day for undisclosed charterers.

    Supramaxes

    One of Jinhui’s 55,000-dwt Oshima newbuildings has been chartered straight from the yard by Korean interests for three to five months trading at $58,500 a day.

    Spar Shipping’s 53,000-dwt Spar Lyra (built 2005) was fixed to Chinese interests for a year at $58,000 a day.

    A “Diamond 53” sistership to the Spar Lyra was fixed by Korea Line from its Chinese newbuilding berth in the fourth quarter for three years trading at $39,000 a day.

    Seven Seas Maritime’s 50,000-dwt Arcadia (built 2002) is to make an India – Far East trip for Noble for $68,500 a day.

    Oceanfleet’s 45,000-dwt Ayia Marina (built 1996) is to make a West Africa – Brazil to Bangladesh trip for JKI for $54,000 a d

  44. 44
    zman Says:

    Thanks very much Bill. Rates were up nicely today, odd response in the group. Any currents surrounding Rio and the Chinese you’ve read about.

  45. 45
    Dman Says:

    Z – just thinking some more about FTI: the only negative issue on the earnings call was the idea that the next really big contract (circa $1B) would go to CAM, because the national oil companies like to spread the business around. So if that’s the negative for FTI, where’s the love for CAM?

  46. 46
    zman Says:

    Other than SWN, NFX outperforming the group nicely today. Still holding that batch of beaten up $55 calls.

  47. 47
    zman Says:

    Oil suddenly shooting for trip digits again.

  48. 48
    Sambone Says:

    Jim Cramer

    http://www.ft.com/cms/s/0/66188f9c-e1b3-11dc-a302-0000779fd2ac.html

  49. 49
    Sambone Says:

    ABK assigned AAA by S&P. Still on negative outlook, but off “Watch”. That’s what is driving the overall market and oil stocks with the market.

  50. 50
    zman Says:

    energy stocks are outperforming the broad market 2x-3x.

    APA on fire.

    CHK at 46! who woulda thunkit?! NFX at 53, HK about to tap 18. RIG back over 140. Usually when I’m having a Monday (or any day) like this its getting close to time to take a little off the table.

  51. 51
    zman Says:

    Sam – 48 was funny. He’s now my hero.

  52. 52
    scoop006 Says:

    Z Why is DRYS down today while the majority of the sector is in positive territory?

  53. 53
    Sambone Says:

    131 Auction Rate Securities fail, 44 succeed.

  54. 54
    zman Says:

    Scoop – wondering same thing, maybe a broker comment I don’t have access to.

  55. 55
    zman Says:

    FTO rallying into earnings tonight. I’m staying out of it. Will have a look earnings and decide in the morning. Still holding my VLO.

  56. 56
    zman Says:

    Any of you TA guys, please have a look at RIG, interesting here. Thinking about tossing the $140 calls I picked up when the stock was $130 pre earnings. But I’m tempted to be greedy based on that chart.

  57. 57
    Sambone Says:

    RIG – My target is 180

  58. 58
    zman Says:

    Thanks Sam, you’d have my vote on March 4 if you were running. Ralph just joined so its not too late, lol.

    APA looks like a moonshot now.

  59. 59
    reefguy Says:

    ioc- no press release/no buyers

  60. 60
    zman Says:

    Reef – One would think IOC would have something to say any day now. You had guesstimated 2/26, right?

  61. 61
    Sambone Says:

    Crude Up Slightly On Heating Oil Demand, OPEC

    By BRIAN BASKIN
    Of DOW JONES NEWSWIRES

    HOUSTON — Crude oil futures ended higher Monday on strong oil product prices, but spent most of the day flat as the market waited for new cues following last week’s record-setting rally.

    Light, sweet crude for April delivery closed up 34 cents, or 0.3%, to $99.15 a barrel on the New York Mercantile Exchange. April Brent crude on the ICE futures exchange closed up 64 cents at $97.65 a barrel.

    Futures have now settled higher in seven of the last eight sessions. Lately, the market has stabilized as threats to oil supplies in producing nations have been balanced by expectations of lower demand due to the slowing U.S. economy. Small developments on both sides of that equation sent the market higher and lower throughout the day.

    Record heating oil prices brought on by cold weather across the U.S. Midwest and Northeast helped explain why futures ended higher on Monday, said Tim Evans, an analyst with Citigroup in New York.

    “The main features here are a little bit more heating oil demand than expected .. (due to) colder-than-normal temperatures,” said Evans, adding that the market is “pricing in a supply disruption of some sort that we don’t have.”

    Futures received a morning boost from the Turkish army’s pursuit of Kurdish separatists into Iraq. The conflict was a primary factor behind futures settling higher on Friday.

    The market is also waiting for a clearer outlook for the March 5 meeting of the Organization of Petroleum Exporting Countries. Representatives of several member nations have raised the possibility of a cut, despite oil prices near $100 a barrel.

    “Either we hold (output) steady or we cut in order to restore market balance and stability,” said Chakib Khelil, OPEC president and Algerian energy minister, in the Algerian press. He added that “with prices at $101 a barrel, speculators have already anticipated a possible reduction in OPEC output.”

    The remarks met with skepticism in the market, however.

    “If they cut, they’re going to push (oil) back above $100,” said Jim Ritterbusch, president at trading advisory firm Ritterbusch and Associates in Galena, Ill. “If prices are at where they are now or higher come next week, the odds are slim that they’re going to cut.”

    Oil inventories continue to rise, however, which coupled with the prospect of seasonal low demand in the second quarter keeps the possibility of a cut open.

    Government data scheduled for released Wednesday will show a 2.6 million-barrel increase in U.S. oil inventories last week, according to the average forecast in a Dow Jones Newswires survey. Distillates are expected to see another big draw, of 2 million barrels, while gasoline inventories are seen growing by 300,000 barrels.

    High demand for distillates, including heating oil and diesel fuel, continues to exert an upward pull on crude markets. March heating oil futures hit another all-time intraday record high Monday, after settling at a record on Friday on cold weather across much of the U.S. Distillates in general are soaring, with retail diesel fuel prices hitting a record as well, according to AAA Fuelgauge Report.

    Front-month March reformulated gasoline blendstock, or RBOB, closed 58 points higher, or 0.2%, to $2.5395 a gallon. March heating oil closed 2.20 cents higher, or 0.8%, at $2.7850 a gallon.

    —By Brian Baskin, Dow Jones Newswires

  62. 62
    reefguy Says:

    IOC- all quiet on the PNG front…

  63. 63
    zman Says:

    hmmmm, if they don’t talk soon, folks are going to get worried and scurry for the exits

  64. 64
    apbd Says:

    Green numbers in coal today. Any thoughts?
    apbd

  65. 65
    Sambone Says:

    Crude Seen Up, Distillate Down

    DOW JONES NEWSWIRES

    NEW YORK — U.S. crude oil stocks are expected to rise for the seventh straight week in data due Wednesday from the Department of Energy, according to a Dow Jones Newswires survey of analysts.

    The data, put out by the department’s Energy Information Administration unit and covering the week ended Feb. 22, are due at 10:30 EST Wednesday.

    Crude oil inventories are expected to rise 2.6 million barrels, according to the mean of 10 analysts’ forecasts. Expectations for a rise in crude stocks were unanimous, with projections ranging from an increase of 1.4 million barrels to 3.6 million barrels. EIA said stocks in the week ended Feb. 15 were 305.274 million barrels, the most since Nov 23, 2007. Crude stocks have gained 8%, or 22.4 million barrels in the past six weeks.

    The outlook for already high gasoline inventories is broadly mixed, working out to a mean estimate of an increase of 300,000 barrels in stocks. A rise this week would be the 16th straight increase. Gasoline stocks have soared 36 million barrels since Nov. 2, turning a 5% year-to-year deficit to a 4% surplus, the biggest since October 2006. At 230.264 million barrels, stocks on Feb. 15 were the highest in mid-February since 1994.

    Stocks of distillate, which includes heating oil and diesel fuel, are expected to fall by 2 million barrels, with a lone expectation of a 1-million-barrel rise.

    Refinery use is seen rising by 0.8 percentage point to 84.3% of capacity. Three analysts predicted runs would be unchanged at 83.5%, which was the lowest level since March 3, 2006.

    Jim Ritterbusch of Ritterbusch & Associates in Galena, Ill., said he expects lower output and a drop in imports to pull down distillate and gasoline stocks. But he sees crude oil imports climbing to 10.2 million to 10.3 million barrels, a level not seen since Feb. 1, adding to inventories.

    Analysts’ Estimates
    Analyst Crude Gasoline Distillates Refining
    A.G. Edwards +1.75 -1.25 -3.25 unch
    Alaron +3 +2 +1 unch
    Cameron Hanover +2.75 +1 -2.75 +0.25
    Citigroup +2 unch -1.5 +0.5
    IAF Advisors +3 unch -2.5 -1.6
    MF Global +1.4 +0.8 -2.6 +0.2
    Newedge +2.7 +0.5 -0.3 +0.6
    Ritterbusch & Assoc +2.7 -1.3 -1.5 unch
    Societe Generale +2.9 +1.2 -2.9 +0.5
    Summit Energy +3.6 -0.1 -3.2 +0.3

    Average Estimate +2.6 +0.3 -2 +0.8
    Figures in millions of barrels, except for refining use, which is reported in percentage points. Figures are rounded to two decimal places in table, one decim l place in averages and story. For analysts providing forecasts in a range, the verage of the upper and lower ends of the range is used.

    —By David Bird, Dow Jones Newswires,

  66. 66
    Dman Says:

    Z – RIG has failed at the 140 level twice in December, once in January and also a few days ago, so it seems to be a key level. But the BB & MACD aren’t screaming buy or sell on a daily timescale. On a weekly chart, the MACD suggests a buy but that’s a little imprecise for playing front month calls. What about cashing in & rolling out a bit?

    It looks to me that the technicals are inconclusive; so I guess that leaves the fundamentals, eg. the near term future of WTI. In making an exit decision, is it reasonable to ask the question “would I enter the trade here?”

    Disclaimer #1: I don’t own any RIG & I’m sore about it!
    Disclaimer #2: I tend to be too cautious & exit early, See #1.

  67. 67
    zman Says:

    A – I think they are just up with energy in general. The trend in coal prices/demand is definitely their friend. I don’t coal prices until after the close but I’d bet they are up. Also, if you look at those links in this morning’s post, you can see that a warmer than normal summer is expected due to what could be a very strong La Nina event. Hot= up AC load = more need for coal in the states. On the international front, you’ve got China with another 500 coal fired plants on the drawing board but that part of the longer term demand issue.

    Thanks S, thanks D

    D – long term fundamentals fine, with or without oil anywhere near $100 or $90 or $80. Stock may swing a little lower on a move sub $90 of course but it won’t make a bit of difference to their bottom line. I used to use the “would I enter the trade here” qualified but I find it less useful for options trades than for trading the common.

  68. 68
    zman Says:

    IOC going red into close … I don’t know how widespread the 2/26 pr date rumor is but I’ll be looking for an exit soon without news and perhaps entering a spread with Aprils here very soon.

  69. 69
    Sambone Says:

    Tini time!

  70. 70
    reefguy Says:

    aprils are interesting

  71. 71
    zman Says:

    Hear ya Reef. This is the prototypical anti-candidate for management for me:

    over-promise, (delay, delay, delay) under-deliver…history repeats itself.

  72. 72
    bill Says:

    re drys # 52

    1. It likes to fall on Monday’s (seriously)

    2. Recent filing shows drys bot a 20 m option to buy two drilling rigs for 1.3 b

    Most drilling companies are going for 10 times cash flow. Some are concerned that this strays from primary focus ie dry bulkers.

    I bot some more today

  73. 73
    Dman Says:

    Z – FTI closed green after all that. Bring on the analysts! I want more buying opportunities!

  74. 74
    PackMan Says:

    Bill …. drys …. what did you buy ?
    stock ? options (strike) ?

    just curious. thanks.

    was long Drys; only position now is naked march 60 puts at 1.10.

    Z … UNG … not concerned about owning March puts ? vs. say April ?

    Any thoughts on XLE ?

    thanks.

  75. 75
    zman Says:

    Pack – will respond before morning.

  76. 76
    texana Says:

    Z, Didn’t see anything on today’s comments about Alon’s refinery so Iwill add this from the sunday midland rt paper: Ceo Morris said that they were ahead of schedule & optimistic that they could return to 1st stage operation producing gasoline , diesel & asphalt within 60 days. They did not give a % utilization that they expected. This ref is 75 years old & will benefit from the upgrades. wll reports 2-28-08 & should have a superior report they are drilling some great nd bakken wells which is probably the hottest oil play in the cont. u.s., major chart breakout today. last 2 trading days sd has been kickin it , bet they get taken out before nfx or hk. thx t

  77. 77
    zman Says:

    Packman,

    Re UNG: I think the move down begins this week or early next. If I’m wrong then I’ll roll to April. This is overdone on weather.

    XLE – near term I’d think it trades higher as the signals coming out of OPEC are fairly bullish and the geo-political fear factor remains high. I’m planning to light my oily load a little this week as I had a nice run in the face of some pretty stiff inventory increases …another big crude build is expected on Thursday and if refinery utilization slumps again (quite possible) or imports strengthen we could be looking at a surprise surge in crude. Not saying it happens, again this time of year very hard to get close to the oil numbers. Houston has seen some fog so it could go the other way…but gotta protect those profits. To be fair, cold weather has persisted longer than anyone thought and we’ve got another big snow storm crossing Chicago and headed for the north east…that will likely keep sentiment strong as well.

    Note that the XLE is not yet crossing into record territory and looks a lot like the XOI. The XNG (gassy stocks) are in record territory which makes me laugh when think of all the times I heard talking heads on CNBC and Bloomberg tell investors to sell energy and bottom fish the financials.

    Anyway, back to the XLE. 20% of it is XOM, CVX is a distant second at 12% …both of those names are very expensive compared to the better performing of late COP which I have been in and out of a lot of late. It also contains other names on my holdings list like RIG, APA, and VLO but each are only 3% or so. Yet all three are cheap and RIG and APA, though I plan to take profits soon, are both growing with our without higher commodity prices, at rates XOM can’t approach (if they manage to grow production on a units basis (at least domestically) at all. So all in all, I’m not a big fan of the XLE as it seems set up to lag. If the stocks continue to rally it will move but not as much as some of its under-weight components. I’ll put this in tomorrow’s post as well to make sure you see it.

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