04
Mar

Tuesday Morning – OPEC Meeting Eve, Crack Spread Update, SD Knocks Cover Off Ball and APC Holds A Yardsale.

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Housekeeping Item: We've added a "Print This Post" link at the top of the daily post. It appears when you click the main title of the site and it takes you to a printer friendly version of the post. Do it at the end of the day and it will print all the comments as well. Good for getting your Z-fix on the go but, alas, bad for trees. I say "we" added this feature but in reality it was a very talented member of the site. Thanks Scott!  

Commodity Watch:

  • Crude Oil: April crude pierced the inflation adjusted previous all time high from April 1980 ($38 at the time during the Iran Hostage Crisis), reaching $103.95 in weak dollar and fear premium driven trading yesterday before settling up $0.61 at $102.45. Oil is now up 16% in a little under four weeks which isn't likely to be a sustainable move. This morning oil is up just over $0.60 to reclaim the $103 level.
  • Early read on this week's oil inventory report (expectations from the Bloomberg survey):
    • crude expected up another 2.4 million barrels (the eighth consecutive weekly rise which is normal for this time of year but I would point out that the slope of the line is a little steep),
    • gasoline inventories down 275,000 barrels (that's a little surprising),
    • distillate inventories down 1.88 mm barrels.
  • OPEC Being Watched Watch: According to Bloomberg, 29 out 30 analysts said OPEC will make no reduction in production quotas at its meeting Wednesday. AP is also reporting that a number of oil ministers are signaling that the Cartel has virtually ruled out a production quota reduction at the meeting. 
  • OPEC Watch #2: From Apache ~ according to tanker-tracker Petrologistics, shipments by OPEC members are forecasted to drop by 250,000 barrels per day (Bpd) to 32.4 million barrels per day (MMBpd) in February. 
  • Shell Repairs Nembe Creek Pipeline, Nigeria. 130,000 bopd shut in since January is back on line.
  • (BP) May Delay Restart At Texas City Refinery. As I mentioned last week, a good portion of the EIA's assumptions regarding increased refinery utilization this Spring are attributable to the timely restart of this facility. Yesterday BP indicated it may delay the 
  • Current 12 Month Crude Strip: $100.96,
  • Analyst Price Deck: $79.87 average for 2008. If prices persist for long at these levels, the E&P group will see significant upside estimate revisions. 1Q estimates have begun to slowly rise already and will rise further still as March draws to a close and analyst teams mark their estimates to market. 

street-vs-strip-030308.jpg

  • Natural Gas: April natural gas tracked oil higher for most of yesterday's regular trading session before succumbing to afternoon selling, closing down $0.056 at $9.29. This morning gas is recovering yesterdays small loss as it marks oil's move higher.
  • Natural Gas 12 Month Strip: $9.81.
  • Analyst Price Deck 2008 Average: $7.45. While some key players like (EOG) have declared a temporary moratorium on hedging as prices have rallied over the last 3 to 4 weeks, others are locking in excellent prices assuring both 2008 and 2009 capital budgets and debt reduction plans. I expect to see both analysts raising estimates and E&P companies announcing increased hedge positions in the near future.

street-vs-strip-ng-030308.jpg

  • Natural gas imports were flat with the prior week at 9.8 bcfgpd, down 2.1 Bcfgpd from year ago levels ... LNG and imports from Canada share equal blame here for the deficiency on a year over year basis.

ng-imports-022908.jpg

  • ... But Supply In December Was Running 3.85 Bcfgpd High To Year Ago Levels. So you've got roughly 2 Bcfgpd less in imports but nearly 4 Bcfgpd of increased domestic supply, largely a function of the burgeoning resource plays (shales, tight gas sands, coalbed methane). See this coming Thursday Night's Natural Gas Report Summary post for a review of the most recent supply and demand figures.

Crack Spread Update: Still Unimpressive Relative To Year Ago Levels But Not Falling Out of Bed Either.

  • Cracks continue to tread water with levels roughly equivalent to those seen in the fourth quarter, which were low.
  • First quarter spreads are very likely to come in below year ago levels in all regions of the country.
  • 1Q08 EPS estimates for the independent refining group generally reflect this mediocre performance.  
  • I may add to VLO and add a longer dated position in TSO, which is awfully cheap to its historic trading range and it is one of of only 2 names in the group expected to show real growth in earnings over the next two years (the other being (HOC) which I won't touch).

crack-spread-022908.jpg

 

Refinery Multiple 

refiner-multiple-030308.jpg

Stocks We Care About Today Watch:

(APC) Monetizes Two Deepwater Projects For $1.8 Billion. APC sold:

  • 1) its 50% stake in the heavy oil Peregrino project off Brazil and
  • 2) its 25% stake in the massive (800 feet of pay) Lower Tertiary 2006 Kaskida discovery way out in Keithley Canyon, in the deepwater Gulf of Mexico.

Depending on oil prices they can reap an additional $300 million from the sale. Both of these projects were expected on stream in 2010 so there's no reduction to the 2008/2009 production profile and debt reduction continues ahead of schedule. As of year end, debt stood at 47% of equity or $14.7 billion (13.7 as of last week), so this is a significant step towards further reducing leverage, coming just days after APC completed paying off the Kerr-McGee / Western Gas purchases of 2006. Furthermore, both projects would have required increasing amount capital as they approached fruition, capital that can now be redirected to potentially higher return projects.

(CHK) - Aubrey Stockpiles Another 100,000 Shares...all in a week's work. That brings the CEO's ownership to 30.1 mm shares or ~ 6% of the total count. 

(SD) Reports 4Q Strong 4Q and Full Year Results:

CEO Tom Ward declares his intention to purchase up to $100 million in the open market for his personal account during 2008.  

4Q Results:

  • Production of 20.4 Bcfe, up 152% vs 4Q06 (82% natural gas)
  • LOE was $1.40 per Mcfe, another nice sequential improvement and when you back out the CO2 floods (tertiary oil recovery) to get a handle on their primary business (producing gas) LOE falls to $1.14 per Mcfe (vs $1.55 just last quarter!)  
  • CFPS was $0.85 vs Street expectation of $0.67.
  • EBITDA was $135.3 mm vs Street at $128 mm.
  • Earnings were $0.09 vs expectations of $0.10. Not important. Probably a variance in DD&A and/or deferred tax rates in the quarter vs expectations. 

Reserves Up Strong:

  • up 19% since the third quarter to 1.516 Tcfe, up 51% YoY
  • Drill bit only finding and development costs were a very low $1.61 per Mcfe for 2007.
  • All in finding and development costs of $1.99 per Mcfe, better than they were looking for and pretty close to best in class for 2007. The average E&P company in 2007 is see finding costs closer to $2.75 per Mcfe or double their costs. Wow.

Guidance:

  • Production: 2008 volumes of 95 Bcfe (87% gas), equates to 48% growth from 2007 levels of 64.2 Bcfe.  
  • Costs: looks like pretty conservative guidance:
  • LOE per Mcfe of $1.58 to $1.73 straddles the 2007 and looks to be a pure bag job that they will easily beat.

 

Hedges: 76% of anticipated volumes hedged as follows:

  • Natural Gas: anticipated gas production volumes (65.87 Bcf) hedged via swaps with an average price of $8.21. They produced nearly Bcf of gas in 2007 so they are well over the 75% of expected gas volumes hedged for 2008.
  • Crude oil: 920,000 barrels (5.5 Bcfe) hedged at $94.55 plus another 100,000 barrels (0.6 Bcfe) hedged with collars with floors at $50. They produced 12.3 Bcfe of oil in 2007 so they've got a little under half of their expected 2008 oil hedged.    

If you're not familiar with SandRidge, take a quick look at my summary of it as it IPO'd last Spring. Also, there's a 3Q note on the reports page with more details about last quarter's report.

Conference Call: 9 EST

They will also be hosting an investor/analyst meeting on Thursday March 6th in New York which I'm sure they will refer to as the time they get into greater detail on their operations.  

 

Holdings Watch:

CALLS

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

Odds & Ends

Analyst Watch: (EOG) cut to underperform by Oppenheimer; (COP) to neutral by Lehman,

 

97 Responses to “Tuesday Morning – OPEC Meeting Eve, Crack Spread Update, SD Knocks Cover Off Ball and APC Holds A Yardsale.”

  1. 1
    zman Says:

    Re the EOG downgrade: 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.

  2. 2
    Dman Says:

    Hi Z,

    um … if EOG is gassy, why does it move with oil??

  3. 3
    zman Says:

    D: My guesses on that would be:

    1) it trades with the large cap E&P stocks and they tie to oil better than natural gas, at least over the last 5 years or so.

    2) it’s Trinidad gas volumes used to be priced based on the price of bunker fuel in effect making it seem less gassy (this one is pretty thin)

    3) it has an increasing NGL cut as it exploits the Barnett which also key off crude and

    4) it may be gassy but it has been getting oilier for some time now via the Bakken in North Dakota and now it will get even oilier as it goes horizontal in the Barnett looking for crude.

    those are my best shots.

    woops, oil just went flat on the day.

  4. 4
    zman Says:

    Natural gas definitely taking its pricing cues from crude. Crude falls from up $0.40 to flat and gas goes from up $0.05 to down $0.05. So far in Feb and March they’ve bought all the dips…but maybe this time will be different…

  5. 5
    Sambone Says:

    7:45 am EST

    Crude Steady As Market Looks To OPEC

    By Nick Heath
    Of DOW JONES NEWSWIRES

    LONDON — Crude oil futures strayed little from Monday’s closing levels in London trading Tuesday as crude markets focused their attention on Wednesday’s OPEC meeting.

    Prices had veered earlier lower in the session on a bout of profit taking, but the pullback was limited by expectations that a weak dollar and strong fund commodity buying will continue to provide resilient support for crude prices.

    “I would imagine we are in for some turbulent sideways trading ahead of the meeting and (U.S. Department of Energy) stats tomorrow (Wednesday), but overall it doesn’t look as if the funds are going to let it fall too much just yet,” a London-based oil trader said.

    At 1230 GMT, the front-month April Brent contract on London’s ICE futures exchange was up 66 cents at $101.14 a barrel.

    The front-month April light, sweet, crude contract on the New York Mercantile Exchange was trading 55 cents higher at $103 a barrel.

    The ICE’s gasoil contract for March delivery was down $2.50 at $934.50 a metric ton, while Nymex gasoline for April delivery was up 130 points at 268.50 cents a gallon.

    While crude prices brushed aside both nominal and real record levels Monday, analysts are struggling to find fundamental justification for the moves. Instead, increased fund flows and insulation against the falling dollar are perceived to be the main drivers. The dollar was little changed against the euro Tuesday.

    “Fundamentals have flown out the window in this market,” said analysts at ANZ investment bank. “With equities tanking and the U.S. currency plummeting, the world’s spare cash seems to be flowing straight into commodities, with oil a clear favorite.”

    Trading Tuesday is expected to be dictated by Wednesday’s OPEC meeting, and while — with prices near record highs — market expectations now appear to have settled on a “no change” decision from the organization, traders still retained some caution ahead of the event.

    Speaking after a meeting with Saudi Oil Minister Ali Naimi Tuesday, OPEC President Chakib Khelil said he doesn’t know if OPEC is going to keep output levels unchanged.

    “I don’t know, I think we will wait for the meeting tomorrow,” he told reporters Tuesday. Monday, Khelil had said that he didn’t think OPEC would consider increasing production.

    Meanwhile weekly U.S. Department of Energy inventory data this week vies with the convening of OPEC ministers in Vienna the same day.

    Analysts expect crude stocks rose for the eighth week in a row last week, signaling an improving stock picture for the world’s largest consumer of crude oil.

    However, with the crude market broadly seen to be less responsive to fundamentals recently, a bearish price response to confirmation of a build should not be taken as a given, some said.

    “Do not underestimate the power of the speculative traders who are seeing this bull run intact and looking to buy dips,” said Glen Ward, energy broker at ODL Securities in London. “The bears are learning that it is dangerous to try and pick market tops.”

    Concerns over the health of the U.S. economy have taken a back seat in crude’s record breaking rally, although fresh indications of its condition are due later in the week.

    Among the releases due this week, U.S. non-farm payrolls data, scheduled for publication Friday, are expected to be particularly closely watched. Some analysts said fresh concerns over the U.S. economy, and with it crude demand, could be a catalyst for lower crude prices.

    “For a correction to take place, a trigger will be needed. We think this trigger will ultimately appear from the macro side of the ledger, especially if the growing U.S. slowdown starts to spread into other markets, finally impacting global demand,” said Edward Meir, analyst at MF Global in New York.

    Supply concerns eased slightly late Monday on news that Royal Dutch Shell had lifted force majeure on crude exports from its Nigerian Forcados and Bonny Light fields, boosting confidence that oil output from Africa’s largest exporter of crude oil may stabilize in coming weeks.

    “Until the next militancy attack there will be more oil flowing from West Africa and, with its higher light-end yields, it will have more of an impact than any increase from Saudi Arabia,” said Olivier Jakob of Petromatrix in Switzerland.

    —By Nick Heath; Dow Jones Newswires

  6. 6
    zman Says:

    Shipping rates jump yet again.

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

  7. 7
    Sambone Says:

    9:01 (Dow Jones) Crude’s recent rally has been driven not by investor buying
    but by the same long-term structural supply issues that have driven the energy
    price rally of the past decade, Goldman Sachs says. “Escalating industry costs
    and the need to further motivate new investment in an industry that has largely
    exhausted spare production capacity continue to be the main driver of oil
    prices,” firm says. While speculative activity has “arguably had an impact on
    recent price developments,” fund buying is “more likely the result of rising
    prices rather than the primary cause.” Nymex April crude +60c at $103.05/bbl,
    ICE April Brent +62c at $101.10/bbl. (NHE)

  8. 8
    zman Says:

    Bernanke speaking in Florida…what better way to doom the market at the open?

  9. 9
    zman Says:

    Nigeria: first foreign worker of the year kidnapping.

    Dry bulks: Bill, any thoughts on the divergence in group vs rates?

  10. 10
    freeflow Says:

    UNG got a nice pump from Cramer last night. He said Natural Gas is going to $16.00.

  11. 11
    zman Says:

    FF – no doubt his reasoning for $16 is that it should be trading at BTU parity with oil which at $16 would equate to $96 oil?

  12. 12
    zman Says:

    BPZ – someone named Broadpoint Capital took their price target from 19 to 24. I had a quick look at them last night and liked what I saw after a little more digging. Interesting low risk, high cash flow generating story.

  13. 13
    zman Says:

    IOC suffering from a little bit of lack of information withdrawal this morning.

  14. 14
    Sambone Says:

    Uncle Phil

    http://www.321energy.com/reports/flynn/current.html

  15. 15
    reefguy Says:

    z-added to April call position at IOC. In breakout, Mulachek stated “beach sand”
    (oolites-matrix porosity?!) behind pipe above 6500′

  16. 16
    zman Says:

    Did he give a time table?

  17. 17
    reefguy Says:

    “Mid month” scary for March 22nd expirations!

  18. 18
    zman Says:

    I take it he implied shows?

  19. 19
    reefguy Says:

    Mud weight 15 pound plus with gas in system. Feels good

  20. 20
    zman Says:

    that is some fat porosity… so what’s taken so long, tool problem or just being extra careful?

  21. 21
    reefguy Says:

    Extra careful, based on near blowout in Elk 1

  22. 22
    Sambone Says:

    OPEC President Rules Out Pumping More Oil

    DUBAI (Zawya Dow Jones)–Organization of Petroleum Exporting Countries, or OPEC, president Chekib Khalil ruled out member countries pumping more oil to control rising prices.

    Chekib Khalil, who is also Algeria’s oil minister, indicated that OPEC will either maintain the current production levels or cut production despite the continuous increase in oil prices, Kuwait’s state-run Kuna agency reported Tuesday.

    Khalil ruled out increased output as OPEC expects a decrease in demand in the upcoming months due to the U.S slowdown, adding that the organization might hold an extraordinary meeting by summer to reevaluate the oil markets condition, especially in supply and demand.

    Khalil linked the high oil price to speculations, political turmoil, the weakening dollar and stated an output increase will not affect the prices.

    Newspaper Web site: http://www.kuna.kw.net

    —Dubai Bureau, Dow Jones Newswires

  23. 23
    zman Says:

    Ben is the kiss of death…anybody got a list of his speaking dates. Every time he speaks it clubs the market like a baby seal.

  24. 24
    freeflow Says:

    retest the lows but bring UNG with it!

  25. 25
    Sambone Says:

    Z – This is as of 10:54 am EST

    Nymex Crude Up; Rally Pauses For OPEC, US Data

    By Brian Baskin
    Of DOW JONES NEWSWIRES

    HOUSTON — Crude oil futures traded slightly higher Tuesday ahead of Wednesday’s OPEC meeting and release of U.S. petroleum inventory data.

    Light, sweet crude for April delivery was recently up 24 cents at $102.69 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange was trading up 31 cents at $100.79.

    Futures displayed a similar pattern of behavior Monday morning, before reports that the dollar had hit a record low against the euro sent crude shooting past its inflation-adjusted record high to hit $103.95 a barrel. In the absence of such milestones in foreign exchange markets, oil has lately tended to remain fairly stable.

    The market appears to be waiting for Wednesday’s meeting of the Organization of Petroleum Exporting Countries in Vienna, where the group will decide whether to alter output quotas. Several representatives of OPEC member nations indicated this week that the body wouldn’t change quotas. Qatar’s oil minister was the latest to speak out, saying Tuesday that the market is adequately supplied.

    “OPEC’s hands are tied,” said Addison Armstrong, an analyst with TFS Energy Futures in Stamford, Conn. “They really have no ability to influence the price other than upwards, and that’s not in their interest at this time.”

    More important for oil prices is the release Wednesday of weekly crude and product inventory data by the U.S. Department of Energy, Armstrong said, adding that the effect of swelling crude stocks will be seen long-term rather than immediately.

    Analysts expect an eighth-straight increase in crude stocks. The market has reacted only tepidly to these indicators over the past few weeks, a trend most traders see continuing in the near term.

    “With the market largely focused on the dollar as a primary driver behind daily price swings, a discussion of supply/usage fundamentals anywhere within the complex has become a secondary analytical effort,” wrote Jim Ritterbusch, president of trading advisory firm Ritterbusch and Associates, in Galena, Ill., in a note to clients.

    Crude could break out of its current holding pattern with a sustained run over $103.90 — which would point to prices approaching $106 — or a drop below $101.77, which could see oil headed back below $100, wrote Stephen Schork, editor of the Schork Report.

    Front-month April reformulated gasoline blendstock, or RBOB, fell 25 points, or 0.1%, to $2.6695 a gallon. April heating oil climbed rose 27 points to $2.8435, a gain of 0.1%.

    —By Brian Baskin, Dow Jones Newswires

  26. 26
    Sambone Says:

    The “Crowd” is exiting.

  27. 27
    zman Says:

    Oil down $2.75…looks like the market wanted them to cut despite the fact that no one expected it.

  28. 28
    zman Says:

    Sambone – exiting everything but natural gas…they just won’t let go of it.

  29. 29
    Sambone Says:

    Z – I know this obscure, but I’m watching Chavez pretty close. Because of the dust up between him and Columbia, he is sending troops to the border. Now Columbia has a better force, but Chavez is a crazy guy and since Columbia now is going to take him to criminal court, this guy make lauch an attack. His reason is to deflect attention from his problems at home. IF he does, which is a big IF, then the oil market will spike.

  30. 30
    zman Says:

    Most people, myself included, don’t see much coming of their little squabble. But Hugo is crazy. He’s ticked because the FARC is “his” rebel group…government funded, and meant to cause problems with US ally Columbia. They are a bunch of commie thugs.

  31. 31
    Sambone Says:

    Agreed that not much is coming from it, BUT!? Don’t count the little dictator out. He’s a “wild and crazy guy”.

  32. 32
    zman Says:

    He does remind me of pesci

  33. 33
    freeflow Says:

    Anything in the news holding up NG?

  34. 34
    zman Says:

    Nothing to account for this kind of divergence with oil. Just looking at news stories for the excuse of the day but don’t see anything. I could see how someone might argue the Ukraine gas cut off but thats pretty thin.

  35. 35
    Sambone Says:

    11:53 am EST

    Crude Below $100/Bbl On Stable Dollar, Oil Supply

    By BRIAN BASKIN
    Of DOW JONES NEWSWIRES

    HOUSTON — Crude oil futures fell below $100 a barrel Tuesday for the first time since Feb. 28, as speculators who entered the market on the weak dollar bowed out.

    Light, sweet crude for April delivery was recently down $2.70 at $99.75 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange was trading down $2.73 at $97.75 a barrel.

    Futures fell more than $3 to an intraday low of $99.30 over the course of two hours, in what one broker termed “a very serious bout of profit-taking.”

    “The market is just looking a little bit at its own bearish fundamentals, and coupled with a market that is run up very sharply over the last two weeks, one would have to expect to see some profit-taking,” said Andy Lebow, senior vice president for energy at brokerage MF Global in New York.

    Crude hit a record high of $103.95 on Monday, topping even the inflation-adjusted level set in 1980. Much of the market’s strength came from a series of five straight sessions where the dollar hit an all-time low against the euro. The dollar held its ground Tuesday, however, and with no other events immediately stepping in to rescue oil, futures fell.

    Aside from the dollar, market activity has focused on two events: Wednesday’s meeting of the Organization of Petroleum Exporting Countries, and the release of fresh U.S. oil and product inventory figures on the same day.

    OPEC is widely expected to decide to hold output steady, while analysts forecast that government data will show a large build in U.S. oil inventories for the week ending Feb. 29.

    But the dollar’s hold on crude markets hasn’t been broken, and the abrupt end to the recent rally may be short-lived, said Peter Beutel, president of Cameron Hanover.

    “It seems investment money has just taken a little hiatus,” he said. “It could come back in five minutes, it could wait until after the OPEC meeting, or it could wait until after the (inventory) report.”

    Front-month April reformulated gasoline blendstock, or RBOB, recently traded 10.17 cents lower, or 3.8%, at $2.5703 a gallon. April heating oil traded 5.39 cents lower, or 1.9%, at $2.7869 a gallon.

    The large drop in gasoline futures may also be weighing on crude, Lebow said.

    —By Brian Baskin, Dow Jones Newswires

  36. 36
    zman Says:

    Sharon Efferson on CNBC has the perfect lead in opportunity to talk about natural gas and completely skips it. Meanwhile stocks stuck in a holding pattern for the last two hours while the broader market continues to slip. Ugly.

  37. 37
    Nicky Says:

    Afternoon all. Nat gas starting to tick me off! Oil looks like we should at least get another leg down….

  38. 38
    zman Says:

    Afternoon – Nicky – couldn’t agree more…glad we still have some time left btween now and expiry on the 22 b/c I’m going to need it. Did you see Efferson has a blog on the CNBC site, she just mentioned it but I didn’t get the link.

  39. 39
    freeflow Says:

    Anything is possible with NG. Maybe Cramer could be holding it up?

  40. 40
    xweto Says:

    Nah, I think it’s a personal issue traders have with Z!

  41. 41
    Nicky Says:

    What are we looking at with storage numbers for ng this week Z?

  42. 42
    zman Says:

    X with the most plausible theory of the day. When you look at the guys who were oil bulls up through November, Phil Flynn, Kilduff, etc, you see that they turned bear on oil and went bullish on gas and the move in gas has been accelerating. So it could be swapping dollars out of one and into the other.

    The basic equation S/D (I know, I know, don’t think the fundamentals should apply) but if imports are off by 2 Bcfgpd and supply is up by 4 Bcfgpd (relative to year ago levels) then when the cold snap ends you will quickly rebuild storage unless demand is up at least 2 Bcfgpd. That’s not going to happen.

  43. 43
    zman Says:

    Nicky – I was think low 100s (maybe 110 to 120). Have not yet seen a Street Consensus there.

    On crude and products, big divergence between the surveys on gasoline, some seeing a draw down (like I said this morning that seems surprising). My question is do inventories matter at all tomorrow and is today’s reaction to the stories that OPEC will not cut maybe changing OPEC’s mind? Maybe since the market had built in a cut early on, now they need one to sustain triple digits.

  44. 44
    zman Says:

    Yona – if you’re out there, have you seen the NG storage estimate yet?

  45. 45
    zman Says:

    CNBC Energy Blog:

    http://www.cnbc.com/id/21884075/site/14081545/

  46. 46
    Alhambra Says:

    You got some stiff competition Z!

  47. 47
    Nicky Says:

    OMG Z so you think this pullback may actually give them the catalyst to cut tomorrow???

    Announcement will come in overnight won’t it?

  48. 48
    zman Says:

    Thanks A! I’m going to redouble my efforts.

    Nicky – I was just mulling that over. They do have a habit misdirection and sending up trial balloons…I think they don’t do it but issue some statement about cutting in the near future. It should come out overnight or early morning.

  49. 49
    Nicky Says:

    Broader market. Next support for spx is 1297.
    Its pretty clear the market wants to retest the Jan lows. Cycles are weak this week into Thursday. I think we could test 1285 on spx and 11950 on Dow.

  50. 50
    zman Says:

    Financials looks to punching through to new lows already.

  51. 51
    Nicky Says:

    To be more precise this down cycle is due to bottom between today and Thursday…

  52. 52
    zman Says:

    Oil really taking it in the shorts now, down $3.

  53. 53
    zman Says:

    Speaking to reporters, Bodman said an increase in production by Opec “would be good”.

    “It is clear that if they were to increase supply we would have some pressure to decrease the price,” Reuters quoted Bodman as saying.

  54. 54
    Nicky Says:

    z – very interesting points re OPEC and sounds very plausible. They probably need a face saving statement having banged on about cutting production for weeks now too.

  55. 55
    zman Says:

    I find it interesting that the tanker tracker companies saw a slight reduction in deliveries February vs January but that volumes were 400,000 bopd OVER quota. They could say we’re going to just get back to quota levels and boost crude prices that way.

  56. 56
    zman Says:

    Ok , I’ll say, natural gas is going red.

  57. 57
    zman Says:

    For those of you with live NG quotes and tick charts you can watch the desperate battle to prop up NG prices unfold.

  58. 58
    Nicky Says:

    Really would like to see nat gas take out this mornings low of 9250 to get this moving to the downside. We need to see 9981 taken out for confirmation a top is in.

  59. 59
    zman Says:

    8.981, right?

  60. 60
    Nicky Says:

    sorry Z yes 8981 – losing my marbles!

  61. 61
    zman Says:

    N – just watching the trades on NG. Looks like an organized effort to prop it up. Little to know volume in the strip. Once the front month fell to even on the day, regular but small trades have kept it in place. As long as nobody panics they can preserve the price.

  62. 62
    Nicky Says:

    They are gonna have trouble holding 99 on wti into the close. What a fall.

  63. 63
    Nicky Says:

    Nat gas looks to be about the only commodity not to take a hit today. Metals well off their highs….

  64. 64
    zman Says:

    OPEC’s gotta think that doing nothing tomorrow assures them of a trip to $95. I may take a little APA at the close. Wow, look at the foreign oils: PBR down 6%, SNP, CEO, PTR down 6 to 7%.

  65. 65
    kaman Says:

    My DUG position starting to pay off.

  66. 66
    scoop006 Says:

    Z-Re PBR Does the strenghth of the Brazilian currency have an effect on the stock price?

  67. 67
    uop Says:

    a new face here:

    my UNGs and DUGs still need to pay off,

    my UNGs at average cost of 50$ have a protective put at 46$,

    so, now what ??

    my DUG at 50$ still a looser, cannot believe that oil will crash enough to make this pay,
    any view???

  68. 68
    reefguy Says:

    My screen almost pure red-save GMXR up 1.54%- why??

  69. 69
    uop Says:

    PBR:

    happy that I sold in time.

    But is it a chance now to buy again ?

  70. 70
    zman Says:

    Scoop, yes I would say so, after the local market direction. They had a big swing down there today in the real plus all the red ink up here.

    Asia going to get popped tonight.

    Welcome uop – still betting on a NG correction here. See post comments on imports vs supply. But I’ve been on the wrong side of the trade since mid $8s.

    Re: PBR – not taking it back yet…kind of like roulette in front of OPEC tomorrow.

    Sorry Reef – Don’t follow GMX. This baby and bathwater day. Amazing some of the things that are down including APC (nobody expected those asset sales and that was a good price), SD – guidance there looked very good…down. Very little differentiation to what gets sold today. Cheap, expensive, does not matter in almost all cases.

  71. 71
    zman Says:

    uop Re DUG – I don’t play those as they are tough from an options standpoint. Giant spreads. Will often play individual names for a hedge but right now only short exposure is UNG.

  72. 72
    yona Says:

    BLMBRG NG -142

  73. 73
    zman Says:

    Nice to say small rally starting in the E&Ps … again that Oppenheimer reasoning for the EOG downgrade was bogus and came from an analyst who has been dead wrong since last August.

  74. 74
    ram Says:

    Are we seeing a test of 1/22/08 when the S&P close at 1310?

  75. 75
    Sambone Says:

    OPEC Cut Seen Too Great A Risk With Oil At $100/Bbl

    By ANGELA HENSHALL
    Of DOW JONES NEWSWIRES

    LONDON — With crude oil still flirting with $100 a barrel, market participants are asking whether the Organization of Petroleum Exporting Countries could be seriously considering forcing members to cut the amount of oil they supply to the global market.

    In the run-up to the March 5 meeting energy ministers from Iran, Algeria and Venezuela have voiced support for a cut.

    But with prices at all-time highs, oil traders based in London said it would seem nothing short of crazy to consider tightening supply this week, and argue market reaction to an OPEC cut could push crude to $115/bbl.

    Barely 24 hours ahead of the group’s output meeting in Vienna, the price of Nymex light, sweet crude oil surged past its all-time inflation-adjusted high of $103.76 but profit taking subsequently pulled it lower Tuesday.

    Demand has remained resilient even with oil at $100/bbl, but it’s unclear what the consequences of dramatically higher prices would be.

    “The question is how long is a high price sustained before it affects demand, ” said Harry Tchilinguirian, analyst at BNP Paribas. “Over the recent years, obviously the threshold has shifted higher.”

    But Tchilinguirian said if most of the growth in oil demand is attributed to countries outside the Organization for Economic Cooperation and Development, where retail prices are subsidized by governments, then consumption should continue. Also, some of the fat profits from higher commodity prices will inevitably be plowed back into the economies of those producer nations.

    Members of the OPEC club are left scratching their heads: Oil prices have shown a flagrant disregard for fundamentals, which in theory should be tugging prices down.

    Some analysts blame large speculators, who dominate action on both the Nymex and ICE Brent front-month contracts, while others point the finger at investors piling into commodities as a tool to hedge against inflation and dollar weakness.

    Recent highs leave even April 1980 real-term records in the dust, in spite of “growing evidence of demand jitters, rebounding inventories and generally easing fundamentals,” said Antoine Halff, deputy head of research at Newedge USA.

    The oil crisis in the “70s saw prices quadruple almost overnight to $12 a barrel, prompting sudden inflation for importing countries such as the U.S. and severely damaging economic growth.

    Halff argued that in view of heightened U.S. recession risks, a soft landing in oil prices may be crucial to keep the economy going and contain demand volatility.

    An enforced cut in output from OPEC producers could contribute to a weakening global economy, said Halff, which makes a rollover seem to be a more likely conclusion.

    “Whether enshrined in a formal quota hike or more surreptitious, an OPEC output hike seems a distinctly stronger possibility than the market has apparently priced in,” he said.

    And there is only so much spare supply to play with: extra effective capacity is around 2.5 million barrels a day.

    “Not only prevailing politics, but also the realities of engineering a production cut at current prices suggest a roll-over in quotas will be the most likely outcome,” said David Kirsch, the manager of Market Intelligence Service PFC Energy.

    Kirsch expects to see quiet use of the member states’ official price-setting mechanisms to take some additional barrels off the market in coming months.

    However, clouds on the horizon include a large build in second-quarter crude and gasoline inventories, which will coincide with seasonal drop in demand for products, plus an inevitable weakening in demand anticipated as the U.S. economy slows.

    But Halff argued that if market strength has indeed decoupled from fundamentals, then where is the downside in boosting production? “And why should producers deny themselves windfall revenues from steady or even heightened exports at current prices.”

    “While it is true that OECD oil inventories are on the rebound and the New York Harbor gasoline storage capacity is filling up, global stocks remain far too tight for comfort,” said Halff.

    “OPEC have a tough decision — all fundamentals suggest they should cut. I suspect they will rollover and the market will come off as a result,” said Jim Rintoul, an analyst at theoiltrader.com.

    Those pushing for a cut include Iran, while Venezuela favors a decision to keep production steady or possibly cut. Iraq has also voiced support for standing pat.

    On the other side of the debate are those, led by Nigeria, who want to make hay while the sun shines and would be quite happy to see output increased significantly, enabling them to make the most of high prices.

    Whatever OPEC does, Tchilinguirian said market reaction to the next batch of economic indicators will be crucial, and should show whether market participants will return to focusing on potential weakness in demand.

    At the end of “07, concerns over the economy pushed the focus on demand weakness, and oil prices and equity prices moved in tandem. But the emergence of supply fears saw oil and equities part company.

    —By Angela Henshall, Dow Jones Newswires

  76. 76
    reefguy Says:

    z- took your last chk blast. Had March 45
    calls out at $2.20 this morning with a 35% gain

  77. 77
    Nicky Says:

    Another AMBAC rumor….the deal is about to be done in the next hour…that’s the rumour….but its not done yet…..Charlie Gasparino.

    That’s what has caused the pop. Watch spx 1320 to see if it provides any resistance.

  78. 78
    uop Says:

    with all this depression and lower economic activity,
    the world will need less of everything soon: less oil, less metals

    this would speak for shorting these sectors

  79. 79
    zman Says:

    Thanks Yona, little bigger than I’m looking for.

    Nicky – I think Ram’s ? is for you.

    Reef- hear ya, CHK is one of the valuation based exceptions to the bathwater action as they are cheap and they aren’t getting hit bad today. SD crossed green a minute ago.

    Charlie Gasparino is the Dan Dorfman of our time.

  80. 80
    Nicky Says:

    Hi Ram,

    This move is a retest yes, nothing to say spx can’t go all the way back to 1270…but I am trying to work it with cycles too along with the fact that we are now down 4 days in a row so my gut says we are getting close to a low…
    The levels I gave earlier which is spx 1285 and Dow at 11950 may be close enough…and we may see them by Thursday.

  81. 81
    Dman Says:

    Resilience in CHK is remarkable. Correcting in time but not in price … so far.

  82. 82
    ram Says:

    Thank you Nicky.

  83. 83
    Sambone Says:

    N – #77 Hmmm, last time this cat had anything to say about ABK was Friday, Feb 22nd when his announcement (3:40 pm) that ABK would be bailed out that weekend by banks, he moved the market 242 points. So, I guess he can move the markets on his world? My question is, “If Citi is going to have 18B loss, how can they bail out ABK? Where’s the beef?

  84. 84
    Nicky Says:

    Another Gasparino rumour rallies the market. Now he is trying to back peddle…..

  85. 85
    Nicky Says:

    I may be being over cautious but volume suggests that lower lows are still out there with the broader indices. If spx takes out 1336 before the close we may have a low in place…

  86. 86
    zman Says:

    D – agreed, actually outperformed gas through earnings season. Still holding the half position of 37.50 CHK calls and the position reef sold.

    Uop – just saw your #78…stands to reason although still hearing management teams on conference calls referring to China/Asia as the commodity black hole sucking up coal, iron ore, oil, nat gas, beans without end.

  87. 87
    zman Says:

    maybe Charlie G can get the dryubulks back into rally mode and a few of my gassier names back on track. I’ll miss him when he goes to jail for market manipulation, lol, but until then…come on EOG.

  88. 88
    Sambone Says:

    OPEC, Mindful Of Politics, May Informally Cut In Coming Months

    By GRAINNE MCCARTHY
    OF DOW JONES NEWSWIRES

    VIENNA — Mindful of the political challenge of slicing oil production at a time of triple-digit crude prices, OPEC may opt to informally trim in the coming months as it seeks to act ahead of an anticipated slowdown in energy demand.

    The Organization of Petroleum Exporting Countries holds its second meeting of the year Wednesday as oil prices skirt all-time highs and a surge of investment suggests they could move higher still.

    The price surge has come at a time when the oil producing body, which accounts for 40% of the world’s crude supply, might otherwise be considering a cut in production, with global oil inventories ample and a slowdown or possible recession looming in the U.S. economy.

    Some voices within the group — principally Iran, Algeria and Venezuela — have come out in favor of a production cut now. But the oil price surge — New York crude futures hit an all-time inflation-adjusted high of $103.95 a barrel Monday — has rendered it politically difficult for OPEC to take barrels off the global oil market, a view endorsed by many ministers.

    Still, analysts believe that with so many questions hanging over the U.S. economy and oil inventories in the world’s largest energy consumer once again on the rise, OPEC will push through a cut in production at some point.

    “Once U.S. headwinds feed through with a clearer picture that demand is actually easing, it could send prices lower,” said Bill Farren-Price, energy director at Medley Global Advisors. “They’ve got to cut at some point, whether it’s officially or unofficially.”

    Record Prices A Strong Incentive To Keep Pumping
    With oil prices this week surpassing their cash market equivalent record hit in April 1980 in the wake of the Iranian Revolution and start of the Iran-Iraq war, the incentive to keep pumping on all cylinders is strong. Even now, most OPEC members are producing at near full capacity, the main exception being OPEC heavyweight Saudi Arabia.

    The kingdom is pumping about 9.2 million barrels a day, above its OPEC quota of 8.9 barrels a day, but some way below its known capacity. If OPEC were to agree on raising production, Saudi Arabia would be most in a position to do so, as the only true custodian of spare capacity in the group. But there’s little evidence to suggest the world’s largest oil producing nation is inclined to raise output in a market where oil demand is slowing and inventories are rising.

    Instead, suggests David Kirsch, head of the markets intelligence group at PFC Energy in Washington, Saudi Arabia over the next several weeks will likely seek to take more heavy oil of the market.

    He said Saudi Arabian Oil Co., or Saudi Aramco, will shrink the discounts it applies to its Arab Heavy and Arab Medium grades of crude-oil relative to the price of the benchmark price for high-quality crude, especially to the already well-supplied U.S. market. Saudi Aramco probably will also allow its regular buyers to take smaller volumes, Kirsch said. This could help ease expected second-quarter inventory builds, which could force regional high-sulfur crude grades to catch up in price relative to the benchmark.

    Kirsch said the kingdom used this strategy successfully in 2006 to remove 300,000 barrels a day from global markets before OPEC was asked to make similar moves.

    “The Saudis certainly have some room to tighten the taps quietly in order to consolidate the gains OPEC has achieved over the past year and a half,” he said in a report.

    Developing World Demand Is Big Question
    A big question in this scenario over the next few months centers on demand in the developing world, particularly India and China. A recession in the U.S. already presents a worrying picture for oil demand from an OPEC perspective, but one made more worrying if it spreads to the locomotives of the developing world.

    “Resistant oil demand in Asia and the Middle East is based on a perception of a less degree of linkage between the U.s. economy and Asian economies,” said Tor Kartevold, a special adviser on oil trading to Norway’s StatoilHydro ASA (STO). “The jury is still out on that.”

    He said the demand outlook in the U.S. could worsen the longer oil stays around $100 a barrel.

    “We won’t know this for a few months,” he said.

    Already, large consuming nations have ratcheted up the pressure on OPEC to bring more oil to the market and alleviate scorching prices.

    “I think it’s a mistake to have your biggest customer’s economy slow down, or your biggest customer’s economy slowing down, as a result of high energy prices,” said President George W. Bush on Tuesday. “My advice to OPEC is understand the consequences of high energy prices.”

    —Grainne McCarthy; Dow Jones Newswires

  89. 89
    Sambone Says:

    Tini time!

  90. 90
    Nicky Says:

    WTI – 3 pretty clear waves down so far. Have they already sold the OPEC news I wonder. Of concern to me is that the dollar appears to be ready to put in a final leg lower for this move – is energy going to ignore it? If not then another bounce could be on the cards….

  91. 91
    Nicky Says:

    Broader market feels pretty bullish to me – they really wanted it up after we started to retest key levels. We look to need a small pullback (ADP in the morning)….
    Yes of course its still possible we go lower but somehow I am just not feeling it so maybe it waits a week or so!

  92. 92
    Nicky Says:

    1314 needs to hold on spx if a long is going to work here…

  93. 93
    T-Tupp Says:

    when time does the opec announcement come early tomorrow morning?

  94. 94
    zman Says:

    T – It depends on how long they meet. Could be anywhere from 2 am to 9 EST.

  95. 95
    Nicky Says:

    RBOB looking extremely weak – still looks like it is leading the way in the complex.
    Nat gas still seems to be the only commodity that has yet to roll over! I think that could change in the next 24 hours…

  96. 96
    zman Says:

    From Reuters and Upstream just after 1 am Wednesday Vienna time:

    Saudi Oil Minister Ali al-Naimi said in markets published today he saw no need to change production because oil market fundamentals were steady and “healthy”, and blaming record high prices on “tremendous speculation”, a London-based newspaper reported.

  97. 97
    zman Says:

    Live OPEC meeting broadcast:

    http://www.opec.org/home/Multimedia/liveStreaming.aspx

    Decision expected around 4:00 pm Vienna time = 11 am EST

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