03
Mar

Monday Morning – Fairly Quiet On The Energy Front

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After 6 weeks of earnings and commodity prices that have shot the moon, this week slows down a bit for the energy sector.  I suspect energy, which has been outperforming of late, will move back to trading more with the broader markets as the catalysts of earnings, reserve reports, and Spring analyst conferences become a memory. 

Commodity Watch:

  • Crude Oil closed up 3% to $101.84 last week on the back of a weaker dollar, even as parts of the geopolitically tense landscape that propelled crude north of the century mark began to ease (Turkey withdrew troops from Iraq on Friday). This morning crude is trading off $0.50 to $0.75 and I'd expect it to be a volatile week as rumors swirl about what OPEC will and will not do at its meeting this week.
  • OPEC Watch: March 5 Meeting. The jury is still out on whether the Cartel will hold quotas even or reduce production slightly to counteract seasonally weaker demand that this year may also be seeing some signs of recessionary pressure.  Some interesting comments over the weekend from Saudi Arabia's oil Minister Ali al-Nuaimi:
  • "a line has been drawn below which prices will not fall" indicating that that price is between $60 and $70 per barrel. Minister al-Nuaimi's rational is that products that compete with conventional oil reserves (he mentioned biofuels and oilsands) are highly subsidized and that below the mentioned price band no producer could turn a profit.
  • al-Nuaimi also said that everything you hear before this week's OPEC meeting from various ministers is pure conjecture and that he did not have an opinion on maintaining or lowering volumes prior to the meeting.
  • Finally, he said Saudi Arabia's current production capability is 11 mm bopd and that spare capacity is currently 1.5 to 2 mm bopd (which sounds a bit aggressive but its all one big poker game).  He expects to be at 12.5 mm bopd by the end of 2009 (which is in line with prior statements). He also scoffed at peak oil theorists and said that Saudi would soon be boosting its reserve estimates by 200 billion barrels and stated that Saudi Arabia is not yet fully explored.
  • Hugo Is A Nutbag Watch: Venezuela is massing troops on the border with Columbia because Columbia crossed the border of Ecuador to take out the #2 man at FARC (a communist, hostage taking, drug running rebel group). Columbia, the U.S. and the E.U. consider FARC to be a terrorist group...so it's not surprising Chavez would be upset by anyone messing with them. Doubtful much comes of this but it may be spun by traders as yet another hot spot that could pinch oil supplies.
  • Russian Exports Fall To 4 Year Lows. Despite continued strong production levels approaching 10 mm bopd, higher export taxes continue to keep more Russian oil in Russia. Don't expect much change in that policy either as Putin turns over the reigns to his hand picked successor, Dmitry Medvedev, Gazprom's chairman, who vowed to uphold Putin's policies.  
  • Natural Gas closed up 2% to $9.37 last week. Blame an attempted short squeeze and persistent cold weather. This morning gas is trading off as much as $0.06. 
  • Weather:  once again gas-weighted HDDs came in slightly higher than forecast.
    • Last week's tally was 193 with 181 originally forecast.
    • The early look at this week shows a general warming trend with degree days falling to 164 (see red dot in chart) ...hopefully the CPC gets a little closer on this one.
      • that's warmer than normal and warmer than the year ago period.
  • This week last year saw a withdrawal from storage of 99 Bcf so the warm up comes just in time

hdd-030308.jpg

Stocks We Care About Today Watch:

Pemex Boosts 2008 Capital Budget To $20 Billion. In an attempt to stave off declining production PEMEX has increased its capex for 2008 by 28% with over 80% of that figure going towards exploration.  More good news for offshore drillers, especially names like (ESV) who have had recent contract wins in the country.

(SWN) Had A Great Report Friday; Stock Fell Victim To General Market Sell Off. Here's a link to the Friday SWN post. I don't own it at present but will be watching it closely for an entry point as a hedge to my natural gas puts. 

(PQ) Successful At Pelican Point Well. 22% NRI in a 20,000 Mcfepd IP exploratory test. All things being equal the well would boost their net production by about 5% when it come on line in the next 2 to 3 months. Perhaps, more importantly, based upon pre-drill reserve estimates (70 Bcfe) and in consideration of the 147 net feet of pay they encountered, this single well probably adds about 10% to total company reserves...a nice early boost to reserve replacement figures for next year's reserve report.

Odds & Ends

Analyst Watch: (SWN) cut by SunTrust to neutral, (JASO) price target cut from $80 to $27 (not a typo) at Lehman. I'll have a solar update piece out soon but suffice it to say that the Street is starting to have doubts about the long and medium term sustainability of margins in this space and several firms are downgrading a majority of their coverage in the sector.

 

 

102 Responses to “Monday Morning – Fairly Quiet On The Energy Front”

  1. 1
    zman Says:

    Tupp- I show DRYS short interest at 5.75 mm shares, or 16.21% of outstanding.

  2. 2
    zman Says:

    Oil and products suddenly taking off. Anybody see the refinery fire that’s behind this?

  3. 3
    Sambone Says:

    7:41 am EST

    Nymex Crude Down More Than $1 On Profit Taking

    By Nick Heath
    Of DOW JONES NEWSWIRES

    LONDON — Nymex crude oil futures Monday fell more than $1 a barrel in London as investors extended the profit-taking that contributed to lower closes Friday.

    But with the dollar remaining under pressure against other major currencies, alongside strong fund inflows into crude futures, recent support for crude is likely to persist, many said, despite concerns that market fundamentals don’t justify current record-high prices.

    “The market is breaking downwards but in slightly dull fashion,” said Christopher Bellew, broker at Bache Commodities in London. “It seems to be a little bit of a tug of war between technicians, funds, and speculators, who see it going higher, and fundamentalists who see it lower.”

    At 1213 GMT, the front-month April Brent contract on London’s ICE futures exchange was down 80 cents at $99.30 a barrel.

    The front-month April light, sweet, crude contract on the New York Mercantile Exchange was trading 80 cents lower at $101.04 a barrel.

    The ICE’s gasoil contract for March delivery was up $0.50 at $915.50 a metric ton, while Nymex gasoline for April delivery was down 82 points at 266.17 cents a gallon.

    —By Nick Heath; Dow Jones Newswires

  4. 4
    Sambone Says:

    New Gasoline ETF – UGA

    http://biz.yahoo.com/seekingalpha/080227/66321_id.html?.v=1

  5. 5
    zman Says:

    How quickly that guy was wrong:

    oil up $0.70
    HO up 3 cents
    RBOB up 2 cents

    thanks for the heads up on the UGA!

  6. 6
    Sambone Says:

    Friday, Feb 29th

    After Record Feb, A March Higher For Crude?

    By DAVID BIRD
    A DOW JONES NEWSWIRES COLUMN

    NEW YORK — After a record-setting February, oil prices look set for further gains in March, if historical patterns hold true.

    All eyes shift to OPEC’s March 5 output policy meeting. Typically, heading into the seasonal slump in crude oil demand between winter and summer in the Western Hemisphere, OPEC could consider trimming output. But with prices firm above $100 a barrel, such a move isn’t in the cards.

    Instead, the Organization of Petroleum Exporting Countries is expected to keep its official output level unchanged. Analysts, though, will be looking for signs as to whether OPEC informally changes output to try to cool down prices.

    “The price is screaming not to cut,” said Michael Wittner, analyst at Societe Generale in London. “It’s screaming make some money, take it to the bank.”

    Repeat calls from the Bush administration for OPEC to formally raise output are falling on deaf ears, amid concerns about the impact of rising fuel costs on the already battered economy.

    As crude oil, heating oil and gasoline futures set record highs during February, the retail price of diesel fuel — the lifeblood of goods transportation — soared to its highest-ever levels. Pump prices of gasoline, in what is supposed to a seasonal lull ahead of peak spring-summer demand are 17 cents above the government’s prediction and 75 cents above year-ago levels.

    The Energy Information Administration repeated this week that peak driving season gasoline prices will top the record of $3.218 a gallon of last May, while some dire forecasters warm of potential $4 a gallon fuel prices.

    Rising U.S. oil prices are at odds with increasingly improving fundamentals, mainly rising crude oil and gasoline inventories, and in the face of sluggish demand.

    Funds, Not Fundamentals
    In the four weeks ended Feb. 22, U.S. oil demand is down 2.4% from a year ago, when extreme cold temperatures pushed up consumption. That’s a 500,000 barrel-a-day drop in the world’s biggest oil customer, more than the anticipated 2008 growth of 440,000 barrels a day from China, the number two consumer, whose appetite for oil has helped fuel the price surge over the past four years.

    Global oil output is at record highs, notes analyst Edward Morse at Lehman Brothers.

    He sees the surge in investment funds into commodities as a driving force behind the decoupling of market prices and fundamentals. In a note to investors Friday, he noted that crude oil’s 5.5% return this year stacks up as “the sixth-worst performing commodity out of 24 in the Goldman Sachs Commodity Index. Crude is left in the dust by wheat (+34%), aluminum (+18%), gold (+12%) and so on.

    “Fund flows have dominated price movements, obfuscating recent fundamental data that should be moderating oil markets, not lifting them,” Morse said.

    Big speculators lifted their net-long position in Nymex crude oil futures by 50% in the week ended Feb. 26, to the highest level since Jan. 8.

    Crude prices hit successive highs in the latest week, making for a record-breaking February.

    April delivery crude oil futures settled at $101.84 a barrel on Friday, down 75 cents from a record level of $102.59 a barrel on Thursday, when the first 10 contracts through January 2009, all topped the century mark. Prices are hovering fractionally below the inflation-adjusted record of $103.76 a barrel, set in the cash market in early 1980.

    Pattern Points To March Gains
    The average front-month crude futures price during February was a record $95.35 a barrel, up 2.6% from January and nearly $36, or 61%, above the year-ago average.

    EIA had forecast an average price of around $87 a barrel in the month. The Nymex average crude price in the latest month eclipsed the November 2007 record of $94.93.

    If historical patterns hold, as they did in February, Nymex crude prices are set for a fresh record in March. In the past four years, crude futures have gained in March from February, by average of 6.1%. A similar rise would yield an average price in March above $101 a barrel.

    Heating oil futures prices for March delivery expired at $2.8397 a gallon Friday, fractionally below the record high settlement a day earlier of $2.8456 a gallon.

    In February, heating oil futures averaged a record $2.6504 a gallon, up 3.5% from January and 56% above a year ago, beating out the November 2007 record average of $2.6004 a gallon. In the past three straight years, average heating oil futures prices in March have gained by about 3.4% from the February level. Heating oil prices in March posted the highest monthly average for the year, just once, in 1993 and were the lowest of the year in 1994 and 1995.

    The March forecast from the National Oceanic and Atmospheric Administration shows March temperatures are likely to be warmer on average in the Mid-Atlantic region, where most of the U.S. heating oil is consumed. While in New England, which combines with Mid-Atlantic states to form the world’s biggest heating oil market, NOAA sees equal chances of normal, above- or below-normal temperatures in the month.

    Costlier Gasoline Ahead
    Nymex gasoline futures prices rose 1.66 cents a gallon Friday, to expire at $2.5123 a gallon, about 9 cents below the record high hit on Feb. 19.

    For the full month, gasoline futures set a record at $2.4335 a gallon, up 3% from January and 47.7% above a year ago. The price topped the previous monthly record, set in November 2007, by around 5 cents a gallon.

    Average front-month gasoline futures prices in March have risen from February levels in each of the past four years by an average of 15.2%. Part of that gain reflects the higher costs associated with making summer-grade gasoline as the driving season approaches.

    The April delivery gasoline futures contract, which trades as the front month from Monday, averaged $2.5877 a gallon during February, a 6.3% premium to the March-delivery gasoline price in the month.

    (David Bird is senior energy correspondent for Dow Jones Newswires)

    —By David Bird, Dow Jones Newswires

  7. 7
    Sambone Says:

    THE WALL STREET JOURNAL Monday, March 3rd

    Americans Start To Curb Their Thirst For Gasoline

    By ANA CAMPOY
    From THE WALL STREET JOURNAL

    As crude-oil prices climb to historic highs, steep gasoline prices and the weak economy are beginning to curb Americans’ gas-guzzling ways.

    In the past six weeks, the nation’s gasoline consumption has fallen by an average 1.1% from year-earlier levels, according to weekly government data.

    That’s the most sustained drop in demand in at least 16 years, except for the declines that followed Hurricane Katrina in 2005, which temporarily knocked out a big chunk of the U.S. gasoline supply system.

    This time, however, there is evidence that Americans are changing their driving habits and lifestyles in ways that could lead to a long-term slowdown in their gasoline consumption.

    As supplies have outstripped demand, gasoline inventories have been on the rise for the past four months, reaching their highest levels since February 1994. Yet, in a sign of the growing disconnect between demand and the market, prices at the pump are being driven higher by a powerful rally in crude oil.

    Investors piling money into commodities as a refuge from inflation have helped push oil prices close to their inflation-adjusted record of $103.76 a barrel, set in 1980. On Thursday, oil closed at $102.59 a barrel on the New York Mercantile Exchange, a new high in nominal terms, but slipped back 75 cents on Friday to settle at $101.84 a barrel.

    As refiners pay more for the oil they use, gasoline prices have gained sharply in recent weeks to an average of $3.13 a gallon in the week ended Feb. 25, up 40% from $2.24 a gallon in January 2007. That’s stoking worries that prices will rise even more sharply as demand gets a boost from the approaching vacation season, when more Americans take to the road. Some experts predict gasoline could cost as much as $4 a gallon this summer.

    If oil prices pull gasoline higher in the current economic climate, Americans are likely to pare back consumption even more, which should help at least damp the rise in prices as refiners build up a safety margin against fears of supply disruptions, experts say.

    Of course, if the economy perks up, gasoline consumption could rise again. After softening between 1989 and 1991 as U.S. economic growth slowed, gasoline demand started to recover in 1992 and continued to expand until 2007, according to the U.S. Energy Information Administration. However, economists and industry executives say demand would be likely to grow at a slower pace than in the past as Americans gradually become more fuel-efficient.

    Economists and policy makers have puzzled for years over what it would take to curb Americans’ ravenous appetite for fossil fuels. Now they appear to be getting an answer: sustained pain.

    Over the past five years, the climb in gasoline prices, driven largely by the run-up in crude oil, hardly seemed to dent the nation’s growing thirst for the fuel. Conventional thinking held that consumption would begin to taper off when gasoline hit $3 a gallon.

    But $3 came and went in September 2005, and gasoline demand didn’t flinch. Consumers complained about the cost of filling their tanks, pinched pennies by shopping at Wal-Mart, and kept driving.

    Economists who study the effects of gasoline prices on demand say consumers tend to look at short-term price spikes as an anomaly, and don’t do much to change their habits. They might spend less elsewhere to compensate, or take short-term conservation measures they can easily reverse, such as driving slower or taking public transportation, but the impact is minimal.

    Regular gasoline prices jumped to $2.34 a gallon at the end of 2006, up 62% from 2003, according to the EIA. Yet demand continued to grow at an average 1.1% a year. Consumers were better able to absorb the increase because it was spread over four years, and the economy was doing fairly well.

    Today, a weakening economy is intensifying the effects of high gasoline prices, at the same time Americans are being pinched by broader inflation. In January, consumer prices were up 4.3% from a year earlier, a 16-year high, led by sharply rising food and energy costs. Even stripping out food and energy, the so-called core inflation rate was up 2.5% from the previous year, reflecting higher costs for purchases such as education and medical care.

    The combination of forces is prompting Americans to cut back on driving, sometimes taking public transportation instead. It’s also setting the stage for what may be a long-term slowdown in gasoline demand by forcing Americans to become more fuel-efficient faster.

    “If you think about the fact that U.S. motorists are responsible for one out of nine barrels of oil consumed in the world … and that consumption is no longer growing the way it used to, that’s a major structural change in the market,” says Adam Robinson, analyst with Lehman Brothers.

    The longer gasoline prices remain high, the greater the potential consumer response. A 10% rise in gasoline prices reduces consumption by just 0.6% in the short term, but it can cut demand by about 4% if sustained over 15 or so years, according to studies compiled by the Congressional Budget Office.

    As consumers make major spending decisions, such as where to live and what kind of vehicle to drive, they are beginning to factor in the cost of fuel. Some are choosing smaller cars or hybrids, or are moving closer to their jobs to cut down on driving. Those changes effectively lock in lower gasoline consumption rates for the future, regardless of the state of the economy or the level of gasoline prices.

    Anne Heedt, of Clovis, Calif., has been moving toward a more fuel-efficient lifestyle for the past few years. She owns a Toyota Prius hybrid but takes her bike on errands when weather permits.

    “We’re not always going to have the same accessibility to gasoline that we’ve had in past decades, so we do have to start thinking about what we’re going to do over the next 50 years,” said the 31-year-old Ms. Heedt, who used to work at a medical office but is between jobs.

    A weaker economy gets some of the credit for lessening demand. The EIA estimates that a 1% reduction in personal income cuts gasoline demand by 0.5% as consumers, along with truckers who deliver goods, cut back on driving, says Laurie Falter, an oil-industry economist at the agency.

    The nation’s slumping housing market has magnified that effect. In past years, when the housing market was booming, consumers used home equity to finance spending, including the cost of filling their gas tanks, says Antoine Halff, an analyst with Newedge, the jointly owned brokerage arm of Societe Generale and Credit Agricole’s Calyon unit.

    The housing boom encouraged the development of far-flung suburbs, contributing to longer commutes. Now developers are building more walkable neighborhoods close to city centers and public transit, and Americans are beginning to migrate back toward their workplaces, city planners and other experts say.

    David Hopper, who lives in the rural community of Markleville, Ind., is preparing to move to a new house in Plainfield, cutting his commute to Indianapolis to 15 miles from 47 miles. Mr. Hopper decided to move closer to the city last summer, when gas prices hit $3.40 a gallon in his area.

    “I’m expecting to save quite a bit,” said the 52-year-old engineer. Not only will his new home be closer to his job, but to shopping and schools, which he calculates will save him 90 to 100 gallons of gasoline a month.

    Pinched consumers also are speeding up their shift to more fuel-efficient cars. Sales of large cars dropped by 2.6% in 2006 and by 10.5% in 2007. In January, they plummeted 26.5% from a year earlier, according to Autodata Corp.

    Car dealers are selling fewer minivans and large sport-utility vehicles. In fact, only small cars and smaller, more fuel-efficient SUVs, are showing a rise in sales. Small-car sales in January were up 6.5% from a year earlier, while sales of crossover vehicle grew 15.1%, Autodata Corp. says.

  8. 8
    zman Says:

    IOC selecting Bechtel for early engineering work on its proposed LNG facility. Sort of putting the cart before the horse…not that they shouldn’t be looking at getting everything lined up in case they have enough gas at the Elk structure but to PR this news is a bit hypey in my book. Still away from the name.

  9. 9
    zman Says:

    The pop in oil was definitely a news item, not something OPEC related. If it was the somalia strike by the US that is completely nutty and not sustainable.

    Natural gas erased its losses and turned green with oil. Ugh.

  10. 10
    Sambone Says:

    Z – I can’t find anything (News) at this moment to pop oil.

  11. 11
    Sambone Says:

    Maybe this is it?

    http://uk.reuters.com/article/topNews/idUKKIM34394720080303?rpc=401&feedType=RSS&feedName=topNews&rpc=451

  12. 12
    T-Tupp Says:

    shouldent you calculate the drys’s percent short by means of the float not the amt. outstanding? btw, that 5.75m shares was in the middle of Feb., and the report from as of friday should be out today.

  13. 13
    Nicky Says:

    Morning all. This rise in energy on the back of that news is surely nuts??

  14. 14
    Nicky Says:

    But… technically we did need another leg up to complete the pattern.

  15. 15
    zman Says:

    #11 probably the most likely although it makes little sense. RBOB and HO both up a nickel?!

    T – I would agree with you float is more important, that’s just how my provider gives it. Wanted to check with you with the 5.75 number as they didn’t put a date on it so I had no reference point.

    PBR seeing some large block trades, strange to see it off $2 back into the mid 1 teens here on oil through $103.

  16. 16
    Sambone Says:

    7.0 Earthquake in the Philippines

  17. 17
    zman Says:

    Drybulks off again today and again big ups for day rates…makes no sense unless you figure the group is just marking the broad market.

    Capesize up another 9000 per day to 132Kpd, Panamax rates up >1000 to >$61kpd.

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

  18. 18
    zman Says:

    ZTRADE: Entered EOG $125 March Calls for $3.50 for a quick trade.

  19. 19
    Sambone Says:

    9:37 am EST

    Nymex Crude Trades At $103.17/Bbl, New Record

    DOW JONES NEWSWIRES

    *DJ OIL FUTURES: Nymex Crude Surges On Weak Dollar, OPEC

  20. 20
    zman Says:

    #18 – running away, I would not have chased as I split the bid /ask right before it ran. Likely to be another day trade if it doesn’t hold the high near the close.

  21. 21
    Dman Says:

    CLB has looked like it wanted to hit the central BB line on a daily chart, as it corrects a recent run up. The strong action today & decent holding up in the carnage on Friday suggests it wants to resume its run. Earnings call a few weeks ago was *very* positive and money managers can’t really point to much else that is working …aside from all the other energy plays 🙂

  22. 22
    Nicky Says:

    Some analyst on CNBC now saying oil is overprice and natural gas is cheap…..

  23. 23
    zman Says:

    Sambone – must be fun to be a DJ writer. coming up with reasons every 15 minutes for a move in commodity prices.

    Dman – still kicking self for not play CLB. Will wait for things to settle a bit before entering. OII bouncing here, need a better move there soon.

    SWN – as per this morning post tried but missed a grab there.

    CHK – onward and upward,

    NG move unreal at up $0.21 and climbing. Thankfully have bigger offsets in the gassy names but the UNG puts are smarting. $40s most likely toast. $43 and 42s still have a shot as this is a weather driven house of cards that could collapse soon.

    Nicky – Did you catch his name or what firm was he with?

  24. 24
    Nicky Says:

    It looks to me as if energy could reverse here. $ showing a bit of life…

  25. 25
    zman Says:

    NFX breaking out.

    APC thinking about, forming a small flag that given another buck could break the stock out. I added a decent sized position here on Thursday at a bit higher price

  26. 26
    Nicky Says:

    Andy Bischel, SKBA Capital Management Z

  27. 27
    Nicky Says:

    WTI would need to take out this mornings lows for confirmation that this leg was done…100.77

    Broader market….401K money should come in today. 5 waves down complete we should see a move up to 12400 – 12500 area on the dow.

  28. 28
    zman Says:

    Thanks Nicky – he has no swing but I can tell you which way his book is leaning, lol.

    Can’t believe the broad market is thinking of a rally here with oil and especially products so high.

  29. 29
    Nicky Says:

    Its just very oversold short term Z. Went right down to support and bounced. Very often reverses the first move made on a Monday…. Any bounce should be short lived however….Still expecting the spx to test anywhere between 1285 and 1309 in the next week and a full retest of the lows is not out of the question.

  30. 30
    Dman Says:

    Vince Farrell at TSCM sez that Fridays WSJ had an article containing a “buried nugget” in it, namely that global crude inventory is down to 51 days of usage. Vince sez (or quotes the article, I can’t tell) that this is very low and usually means higher prices.

  31. 31
    zman Says:

    Thanks D – that would be a lowish number on days supply…still don’t think it justifies current $ level of crude. I’d be happier with crude in the mid to high $80s or even low $90s.

  32. 32
    zman Says:

    CIBC bumps (SU) target from C$122 to C$135

  33. 33
    T-Tupp Says:

    i think drys hit its 38% retrace level from its dec low to its high

    seems like everything has decoupled from the us stock market- emerging markets and commodities….

  34. 34
    jimmyo Says:

    ioc powering ahead.

  35. 35
    zman Says:

    J – right, but I don’t care for the news that’s making it go. Contracts for the early work on a potential LNG plant. Rather see some long overdue news on the ELK 4 well. I don’t mind that they are planning ahead but turning that into a press release is a bit pumper like to me.

  36. 36
    zman Says:

    more IOC – the timing of this PR reminds me of the timing of the financing PRs last summer before the ELK 2 disappointed. Those press releases virtually implied pending success by say “look, Merrill likes what they see in the results so far to back us”. This press release implies they like what they see enough to go ahead with planning…just seems manipulative to me. Also, the delay here on the ELK4 news reminds me of the last time we were waiting on the ELK2 news (last summer).

    I may go back to the well here (so to speak) but not without a straddle or some hedge in place. Was happy to walk away with a 30% ish gain last week.

  37. 37
    Sambone Says:

    10:40 am EST

    Nymex Crude Tops Inflation-Adjusted High

    By Brian Baskin

    Of DOW JONES NEWSWIRES

    HOUSTON — Crude oil futures have topped the inflation-adjusted high set in April 1980, as the U.S. dollar’s descent continues to send investors into the commodities markets.

    Light, sweet crude for April delivery traded as high as $103.95 a barrel on the New York Mercantile Exchange, topping a 1980 trade of $103.76 in 2008 dollars. The April contract recently traded at $103.59. Brent crude on the ICE futures exchange was trading up $1.72 at $101.82.

    The 1980 record predates the creation of the crude futures market on Nymex, and represents a deal on the cash market.

    Oil began to take off Monday morning after the U.S. dollar fell from a stable position overnight against the euro. Shortly after 9 a.m. EST, the dollar hit a new low, and oil began to rise rapidly. A fresh record for crude in real dollars came minutes later, and deals above the 1980 high were completed at about 9:55 a.m. EST.

    “It doesn’t look like it’s going to come down anytime soon,” said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.

    The dollar’s decline makes Nymex futures, priced in U.S. currency, appear relatively cheap. The U.S. Commodity Futures Trading Commission reported Friday that net long positions in Nymex crude futures held by large speculators hit a seven-week high last week.

    After hitting the inflation-adjusted record, futures traded slightly lower, as new data showed the U.S. economy in worse shape than expected. Spending on construction in the U.S. fell by 1.7% in January, the fourth drop in a row. The U.S. manufacturing sector also shrank in February, the Institute for Supply Management reported.

    “Right now, bad news is good news, just as long as it isn’t horrible news,” as it will likely inspire the Federal Reserve to further cut interest rates, restarting the commodities buying cycle, Flynn said.

    Front-month April heating oil was recently up 5.23 cents, or 1.9%, at $2.8592 a gallon. Front-month April reformulated gasoline blendstock, or RBOB, was up 5.23 cents, or 2%, at $2.7222 a gallon.

    —By Brian Baskin, Dow Jones Newswires

  38. 38
    Nicky Says:

    Energy doesn’t seem to have noticed that the $ is bouncing….

  39. 39
    zman Says:

    I agree with PF’s second statement about rate cutting by the Fed. However, I think oil has a 500,000 bopd OPEC quota reduction in it and if we don’t see that that prices could cool a bit.

    Nicky, I’ve got the Euro slightly up on the day, but off its highs.

  40. 40
    zman Says:

    Chavez trying to grab headlines with by saying “Latin America on brink of war” … looks like a shameless and obviously inflammatory effort to boost oil prices.

  41. 41
    Nicky Says:

    Euro well off its highs Z and chart looks very spiky.

  42. 42
    reefguy Says:

    z- if ioc has no well data of signifigance to report at the presentation today, then i may be out

  43. 43
    reefguy Says:

    z-slides don’t show anything new

  44. 44
    zman Says:

    Reef- Is there reason to think they will say something at the RJ conference? Again referring to last summer, they went through several conferences with the same set of data and no updates on the well. No doubt this thing explodes or implodes on the well news, just thought I’d wait a little longer before putting on a straddle.

  45. 45
    Nicky Says:

    energy doing no more than consolidating sideways at the highs so should still go higher….

  46. 46
    zman Says:

    Reef – did you see that PQ Pelican Point well. Looks like it came in in line or potentially a little better than pre-drill…stock’s had a good move of late and not giving much today for the success there but if I’m reading them right their share would boost company reserves 10%.

  47. 47
    Popeye Says:

    The more I looked at IOC the more red flags I saw. I’m not sure which side the smart money is on.

  48. 48
    zman Says:

    Nicky – think maybe this morning’s rally was just a delayed reaction to the Venezuela news this morning? That would explain the rally in gasoline as they produce quite a lot as well as oil. I don’t see anything coming of this except maybe a higher fear premium. Chavez has been saying for years that the U.S. would attack him any day. So maybe he figures he’ll start a war with a U.S. ally to try and get something going on his own.

  49. 49
    reefguy Says:

    z- why did rj schedule this after trading
    hours if something interesting(positive?) wasn’t on the agenda?

  50. 50
    Nicky Says:

    Z – problem now with oil is that it has gone way beyond fundamentals which really don’t matter as everyone just piles in regardless. When it ends as we know there will be much blood spilt as with all of the commodities but nothing to stop it going higher right now when any sort of sanity is out of the window….

  51. 51
    zman Says:

    Nicky – agreed and nat gas is following it up. There have got to be some busted hedge fund announcements soon.

  52. 52
    apbd Says:

    Stratfor says that Hugo’s boys are absolutely no match for Columbia’s. He would really be crazy to invade.
    apbd

  53. 53
    zman Says:

    Reef – re IOC timing. It’s been on the schedule for awhile now so maybe they thought they would have been at TD when they scheduled it. In my experience, little companies don’t get to pick their time slots at these conferences. Also, maybe they alway go to this one, not sure if that’s the case or not.

    A – guaranteed Columbia has next generation U.S. weaponry in comparison to VZ. I just think Hugo is trying to lure us down that path. I’d think the U.S. will send military advisors at most.

  54. 54
    Nicky Says:

    CNBC not mentioning the Venezuela story at all… not that that means much but they normally grab every headline they can to talk the bullish case up….

  55. 55
    Nicky Says:

    Broader market struggling to make any headway. 12318 may prove formidable resistance in the Dow….

  56. 56
    Nicky Says:

    Anyway see that piece on Berkshire Hathaway. If you had invested $10,000 in BH in 1965 it would be worth $31 million today.

  57. 57
    zman Says:

    Nicky – and now he’s nervous about the insurance market and not bailing out the muni bond funds…so what does that tell you?

  58. 58
    Nicky Says:

    They keep saying the reason for oil at these levels is the dollar so someone tell me why when the dollar is rallying energy is not falling????

  59. 59
    zman Says:

    um… because “they” are wrong.

  60. 60
    Nicky Says:

    lol!

  61. 61
    Nicky Says:

    wti looks like an ending diagonal now….

  62. 62
    zman Says:

    Nicky, looks like a round number rally to me…meaning “they” are going to $105. Hard to believe products are doing so well, especially gasoline (14 year highs and all as the news will tell you although I would add that half of it being blending products has got to make it more pricey)

  63. 63
    kyleandy Says:

    z how bout a little drilling 101?? when these companies (IOC, PBR, etc) drill how many people are directly involved that can tell whether it is a success or not, and how do they stop these people from discussing the results with their friends, etc before the company releases info??

  64. 64
    zman Says:

    K – that’s going to vary widely from well to well and company to company. Reef can probably provide better insight than I can but in a case like IOC ‘s ELK 4 no one on the site should be communicating data (and there could be several who have it) to the outside except to management. In other areas like EOG and their oil play in Barnett announced last week, they would probably fire a guy for talking because they are accumulating acreage and don’t want the lease prices to escalate on them any more than necessary to get their position.

  65. 65
    Nicky Says:

    Aye Z and nat gas could hit 10….

  66. 66
    zman Says:

    Nicky,

    you know how to hurt a guy.

  67. 67
    Nicky Says:

    I saw colder weather forecast again for later this week is that ‘behind’ this move in nat gas. Looks stronger than even wti…

  68. 68
    zman Says:

    I dunno, I just waiting out the gas storage number which should be in line with last year.

  69. 69
    Nicky Says:

    Inventories don’t seem to make any difference any more – ie look at crude, weeks of builds and it just continues to climb every time they announce that.

  70. 70
    zman Says:

    …of course the builds in crude are seasonally normal.

  71. 71
    zman Says:

    Natural gas is up $1.60 or 20% since 2/6/08.

    Crude is up 19% for the same period. Doesn’t make a whole lot of sense.

  72. 72
    reefguy Says:

    K- most wells have a number of companies as joint interest owners. I the case of IOC- the folks with an interest Liquid Niugini(IOC 1/3) have been on the ground and at the well site. I suspect info flow(leaks) are coming thru this side which is unencomered by SOX.

  73. 73
    zman Says:

    Thanks Reef.

    Crude looks like a run on $104 by the close is in store. Stocks not really buying the move.

  74. 74
    Nicky Says:

    I am thinking will Wednesday see the end of this crude move short term if we see another build and with OPEC finally out of the way…

  75. 75
    reefguy Says:

    ioc- buyers lining up on the 22.50 march calls…

  76. 76
    zman Says:

    I am thinking its completely up to OPEC… I think they hold steady and don’t cut…if they do cut = $110.

    NG only up $0.15. Bet they buy the dip.

  77. 77
    texana Says:

    sd out tomorrow should be strong with 40 rigs running in the tx overthrust . A lot of these wells make oil also. The big volume purchases of he last couple of days cont. & I ‘m not sure if its just fund related to o&g prices or erngs tomorrow. the stock had a triple top breakout on the p&f chart on 2-25-08. 7th most active driller in the cont US. hard to get bite on options without going ask. bought more on the dip this mrng

  78. 78
    zman Says:

    Tex – I’m just happy to hold the common SD and CLR. SD has nice long term potential, near term I could see analysts cutting ratings after tomorrow as it has gotten a little pricey on ’08 numbers. It’s a long term hold for me.

    Ya know, were it not for the increases in rig activity at SD and CHK, the U.S. gas rig count would be well off year ago levels instead of just barely so.

    NG only up $0.05 and falling fast now…hmmmmm.

  79. 79
    Nicky Says:

    Whole complex moving down hard now….hmmm as you say!

  80. 80
    Nicky Says:

    my god oil off $2!

  81. 81
    zman Says:

    Now that’s some volatility in oil. Back up $0.70 into the close.

  82. 82
    Nicky Says:

    But nat gas looked weak right to the close …..that’s a huge bar down….

  83. 83
    zman Says:

    Nicky – shhhh, don’t tell anyone, lol. 20% in less than a month…that’s crazy.

  84. 84
    zman Says:

    Of course, the market can’t go up without the energy sector.

    EOG back to where I bought it this morning. Still like being back in the name.

  85. 85
    T-Tupp Says:

    just found out that short interest for nasdaq stocks gets posted to the website on the 8th day after its due (15th & last day of month).

  86. 86
    T-Tupp Says:

    anyone else find something wrong with DJ ading chevron to the 30 stocks, its already so squed being only 30 stocks and price weighted.

  87. 87
    zman Says:

    does seem a bit odd

  88. 88
    zman Says:

    Anyone see news on RIG? Been getting hit all day, now much worse as energy stocks have come in with oil and gas this afternoon.

  89. 89
    zman Says:

    Think the sell off in oil is buy the rumor, sell the news on a third round of sanctions from the UN on Iran.

  90. 90
    Sambone Says:

    Z – Only thing I could find on RIG is that the Nigerian govt wants to tax their rigs as ships. RIG is fighting it in their court, yea, good luck.

  91. 91
    zman Says:

    Thanks Sam…that’s probably it. Nigeria is another place that is going to be giving service companies and majors more trouble as 2008 progresses…they are going to be looking into contract “renegotiations”

  92. 92
    Nicky Says:

    Sounded completely about face but CNBC reporting that oil dropped because OPEC president announced they would not be raising production and would contemplate a cut as there is a plentiful supply of crude and market is just being run up by speculators.

    And it drops on that????

  93. 93
    zman Says:

    You’re right, that makes absolutely no sense. Sometimes Sharon E gets her logic backwards, was it her, lol?

  94. 94
    zman Says:

    Very impressed with the equity buy in E&P, oil service, refining this afternoon. That reversal on crude and gas tanked them all but the dip buying that came into the group erased the low volume sell off after lunch. Not at the high of the day buy any means but most everything is back in the green and they are dragging up the general market now.

  95. 95
    Sambone Says:

    3:32 pm EST

    Crude Ends Higher After Breaching 1980 Record

    BY BRIAN BASKIN
    Of DOW JONES NEWSWIRES

    HOUSTON — Crude-oil futures ended higher after breaching the inflation-adjusted record high Monday, as the surge into commodities sparked by the weakening dollar continued.

    Light, sweet crude for April delivery settled 61 cents higher, or 0.6%, at $102.45 a barrel on the New York Mercantile Exchange. April Brent crude on the ICE futures exchange closed at $100.50, up 40 cents.

    Futures jumped by more than $1 to $103.95 after the dollar hit a fresh low against the euro. The latest surge left the April 1980 inflation-adjusted high of $103.76 in the dust. Having blasted through the last record still standing, the front-month contract spent the rest of the day trading in a narrow range, between $103.10 and $103.90 before falling in the final minutes of trading.

    Crude has hit a new intraday record during each of the last five trading sessions.

    As was the case last week, the weakening dollar sent money flooding into the crude futures market, as oil priced in the U.S. currency has grown relatively cheaper. Oil trading off the dollar is a persistent trend, so as long as the dollar’s value continues to sink, there is little that can stop crude moving higher, said Tom Bentz, a broker with BNP Paribas in New York.

    “I don’t think there’s a ceiling,” Bentz said. “We’re still in this .. very strong uptrend, with funds flowing into these markets.”

    While the focus Monday was on the dollar, traders also acknowledged the March 5 meeting of the Organization of Petroleum Exporting Countries. The producers group is widely expected to hold output steady, with representatives of several member nations publicly expressing concerns about well-supplied markets and slowing U.S. demand.

    “Because of the economic slowdown in the United States which is effecting world economic growth and world demand on oil this year .. with these considerations I don’t think OPEC will consider increasing its production,” OPEC President Chakib Khelil said.

    With oil so fixated on the dollar and other technical factors, OPEC meetings have become something of a “non-event,” Bentz said.

    The supply of oil hasn’t been the driving factor behind the crude market in recent weeks, analysts and brokers said, with prices moving in ways seemingly unrelated to world crude inventories or the state of U.S. demand.

    “I don’t think the market is moving on fundamentals as such,” said Nauman Barakat, senior vice president at Macquarie Futures USA in New York. “The market is quite aware that the oil fundamentals for both crude and products is still a bit on the weak side.”

    U.S. oil inventories are expected to continue to grow, with an eighth straight increase predicted when the Department of Energy releases figures for the week ended Feb. 29 on Wednesday. A Dow Jones survey of nine analysts shows an average forecast of a 2.3 million-barrel build.

    Front-month April reformulated gasoline blendstock, or RBOB, settled 21 points, or 0.1%, higher at $2.6720 a gallon. April heating oil ended 3.39 cents higher, or 1.2%, at $2.8408 a gallon.

    —By Brian Baskin, Dow Jones Newswires

  96. 96
    Sambone Says:

    Tini time!

  97. 97
    zman Says:

    power nap time

  98. 98
    skinsel Says:

    Fairly quiet? ZMan – did you ever look at BZP like we discussed? Up 17.63 percent today. It seems like that when companies retain Netherland Sewell (sp?) the reports usually help the stock because of their conservative reputation. Just my two cents.

    SK

  99. 99
    reefguy Says:

    ioc – rj conference, listened and learned notta. Three questions asked, nobody asked if there is pay behind pipe at 6557′. Wish i could be at breakout session…Mulachek is articulate but says very little of substance. Give me oil and gas facts not “at the doorstep of asia” bull.

  100. 100
    zman Says:

    Skinsel – it’s still in the hopper for a re look. I kind of figure I missed it near term. Netherland Sewell is top notch, maybe a tie with Ryder Scott for best in class reserve engineers.

    Reef – agreed…I’m contemplating a straddle but would not be willing to just go naked long again there, not with the delays, not with history.

  101. 101
    isleworth Says:

    As mentioned earlier, Oppenheimer downgraded EOG to Underperform from Mkt Perform on valuation. Firm thinks the 20% surge in the price on Thursday, the day of the analyst meeting, was unjustified by even the most optimistic expectations. EOG uses the 6:1 oil-to-gas ratio in its presentations, which firm says could be somewhat misleading since gas prices have historically traded at a large discount to oil. Although firm thinks both oil and gas prices are inflated, they expect the drop in gas prices to be steeper than oil in the next six months because of the weather.

  102. 102
    zman Says:

    I – thanks, you’re on the Monday post by the way. The Opco analyst is reaching when he says their 6:1 presentation of reserves is misleading. That has nothing to do with the move and is not misleading to anyone. Did they mention the liquids content and the historically astronomical realizations for EOG is getting for the NGLs stripped from the gas stream? I didn’t think so. The move was probably a bit overdone but underperform, I don’t think so. RBC went that route as well. Jefferies went to a target in the $140s. If you look at the reserve pool they think they are on to in just the four new plays and figure that they can really be proving it up in earnest beginning later this year and accelerating from that point, I don’t think a 20% move in the near is unjustified. Also, EOG may be gassy but it moves with oil, much better correlation than with NG.

    Also, that analyst has been at market perform (which is basically neutral) since August of 2007 so he missed the move from $70 to $120 and is now trying to show that he has some swing here. He may for a day or two but the dip will ultimately prove to be a buying op.

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