13
Mar

Thursday – Gas Preview & Oil Review

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Another weaker open for the markets is on tap as more hedge fund implosions and weaker than expected retail sales figures weigh on investor sentiment. Commodities continue to be flooded as capital flees the equity markets and gold hit $1,000 an ounce this morning.  

Commodity Watch:

  • Natural Gas closed up a penny at $10.01 yesterday. It was the third day gas attempted to slip early in the day only to be saved by a general upwelling in crude and other commodity prices. This morning gas is flat to slightly up ahead of today's inventory numbers, numbers that have largely been ignored in the past several weeks.

Preview of Natural Gas Storage Numbers

  • My Number: 80 Bcf.
  • Imports: down 2.1 Bcfgpd relative to year ago levels (all things being equal that would boost the withdrawal by 14 Bcf). Production however is running on the order of 4 Bcfgpd higher than year ago levels so the lower imports are more than offset.
  • Weather: 170 heating degree days versus 190 in the year ago period when 104 Bcf came out of storage and 193 HDDs last week when 135 Bcf were pulled.
  • Street Consensus: 82 Bcf (Bloomberg survey)


  • Crude Oil: Closed up $1.17 to $109.92 yesterday, despite a much larger than expected build in U.S. crude oil inventories as the dollar fell against the Euro. This morning crude reached a high of $110.70 before retreating below yesterday's close.
  • Japan Economy Watch: The dollar fell below 100 yen for the first time since 1995 this morning and that and the rising price of oil is said to be hurting corporate profits and that the risk to their economy is increasing. Welcome to the party pal.

On to the crude oil inventory review ... 

Expected Vs Actual: EIA Inventory Data:

exp-vs-act-030708aaa.jpg

ZComment: In a nutshell, a bearish report with crude and products coming heavy to estimates 

CRUDE OIL: Big Build, Much Bigger Than Expected: Weak Demand, Surging Imports.

Utilization Ticked Lower: Utilization fell back to 85%, the second lowest level I show on record for this time of the year and given the weak current margins for the refining sector, can you really blame them if they take a little time off? This shaved nearly 250,00 bopd of crude out of demand out of the demand picture last week. 

util-030708.jpg

Imports Surged (OPEC could not be happier with these numbers). At 10.55 million barrels per day, imports recouped the constraints imposed by stormy seas in the Gulf of Mexico last week, setting a new seasonal high. This accounts for just over a one million bopd change from the prior week or over 7 million barrels of the week to week swing in the crude numbers. Some of this could be volumes "parked in the GOMEX" by speculators who are now cashing in on $105 to $110 prices but I have not seen in stories about this of late. When Vice Preside Cheney visits Saudi Arabia next week they can show him the following chart and then the door. 

crude-imports-030708.jpg

Crude In Storage Rockets Higher Led By MidWest (Cushing, OK) Stockpiles. Normally, any surge of this magnitude (and they are rare) in stocks at Cushing would yield a commensurately large, negative reaction in the NYMEX but not yesterday. The second chart has in the past been fairly predictive of WTI prices and this trend, if it continues should check prices soon, especially given their meteoric rally of late.

crude-stocks-030708.jpg

GASOLINE: Another bigger than expected addition to stocks driven by ... who knows, the numbers make little sense here. From the prior week we have lower production and imports higher demand and yet the change in stocks is the same (up 1.7 million barrels) as the prior week. The only thing I can guess is that blending components are being imports and not counted (as is the custom).

  • Production was pretty much flat with the prior week at just over 9 mm bpd so I won't bore you or myself with a chart of it.
  • Imports drifted lower as well for the second week in a row and low for this time of year.

Demand Is Picking Up Despite Record (for this time of year) Pump Prices.

gasoline-demand-030708.jpg

 

 

Proof That American's Can't Drive Less No Matter The Price

gasoline-price-vs-gaso-demand-030708.jpg

Gasoline Stocks: Once again, these two charts pretty much say it all. I would just add that I've heard analysts say that this should role over soon as refiners switch to the much harder to produce summer-grades and while that statement is true in essence it does not explain the giant leap here. Only Congress and farmers can do that. Remember that we went from a 10 year low on gasoline supplies in September 2007 to a 15 year high in March 2008 without really significantly shaving demand. Only the rapid rise of blending components in the inventory mix can do this and they continue to surge.  

gasoline-stocks-030708-15yrhi.jpg

 

Holdings Watch: 

CALLS

  • SU - Sold (SU) March $105 Calls for $3.10, up 72%.

Odds & Ends

Analyst Watch: (JASO) upped to buy at Needham and Lehman.

Subscriber Question of the Day Yesterday:  Why did you buy the UNG puts if people use that rule of thumb? {referring to the 6:1 ratio of gas to oil or a gas to oil BTU equivalent basis}.

That is a very fair question. The 6:1 ratio is used for calculating reserves. For years and years the spread between the two has been 10:1 or higher. I respond by employing the age old adage "Oil is global, gas is local". Therefore crude oil, which comes from all parts of the planet and is easily transported and natural gas, which is primarily a local fuel (local being the North American market in this case), have different fundamental drivers. Let me make a couple of observations before I am pilloried.

1) People will say, "oh no, not any more, not will all the LNG out there." I respond with the fact that LNG is a sliver of our supply versus domestic production.

2) U.S. gas supply on the other hand grew at a 4% clip last year, usually it is flat to maybe up a percent or 2 but we are awash in gas right now from the shale plays.

3) This "strength" in natural gas pricing is lingering cold winter weather and guys who know next to nothing about the molecules (that would be Cramer) pumping a story. You can’t have all the big E&P stocks growing digits and have flat (seasonally adjusted demand) and have tightness, let along a supply problem that would justify the recent rally. In fact, we are STILL ABOVE the five year average for gas in storage at this time. Much like in the oil markets, the speculators are large (more so than just about ever) and in charge (direction = up).

 

 

 

 

140 Responses to “Thursday – Gas Preview & Oil Review”

  1. 1
    Sambone Says:

    8:52 am EST

    Nymex Crude At New High As Dollar Falls

    DOW JONES NEWSWIRES

    [Dow Jones]Oil is trading close to a new record high of $110.70 a barrel, set earlier Thursday morning. The weak dollar continues to send prices higher, with the market largely ignoring new retail sales data showing an unexpected drop in February. April crude trades at $110.24, up 32 cents. (brian.baskin@dowjones.com)

  2. 2
    zman Says:

    Sam – I guess everything is not “all right” as the liquidity injection rally of 2 whole days ago indicated.

    gasoline off 4 cents this morning, 1.5%, worst of all worlds for refiners continues.

    dry bulks opening sharply lower again

    stocks almost uniformly off, EOG is slightly green after Fidelity disclosed the E&P was its 35th largest holding as of year end, the highest ranked E&P on the list of 200 positions disclosed.

  3. 3
    zman Says:

    Drybulk rates down for second day:

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

  4. 4
    T-Tupp Says:

    ill be willing to bet that XLE will rally to its $75 pinning level. the pinning action yesterday was so obvious. that would be a great little ETF if it had a constituent weight cap of no more than 10%

  5. 5
    Sambone Says:

    Z – ya know I love this market. B52 Ben said he would loan money on “AAA” paper, whereby the toxic paper is not downgraded by S&P and Moody’s and they are 40% in default. The Feds will loan for 28 days. Overseas markets are telling us that they don’t believe it will help, which I agree with. Carlyle borrowed 32 to 1, and guess what, the banks loaned it. I was out yesterday and watched the “Talking heads” on CNBC. What a joke. They really, really have no clue. This is a market top, because I saw so many commercials on “Online trading” and how to make $.
    The so called smart money tells us that the commodities run is over, it’s a bubble and it is like the Tech bubble. What the commodities market is telling us is that the US$ is falling out of bed, and investors are buying hard goods instead of paper.
    Z – Don’t get me started, because I’ll be worst than you, believe it!

  6. 6
    T-Tupp Says:

    z- sorry about the hit your taking in DRYS, but as i have suspected, the shorts have jumped pretty good and i would also bet they are larger than they were at the end of Feb. (see link). on the bright side if you want to be long this co. the chart loks to be forming a beautiful reverse H&S.

    http://www.nasdaqtrader.com/Trader.aspx?id=ShortInterest

  7. 7
    T-Tupp Says:

    sam- re infomercials

    http://www.sec.gov/news/press/2008/2008-39.htm

  8. 8
    Sambone Says:

    9:40 am EST

    Crude Up On Weak Dollar, Ignores Weak Economy

    By Brian Baskin
    Of DOW JONES NEWSWIRES

    HOUSTON — Crude oil futures are up slightly Thursday after setting a new record in electronic trading on the weak dollar.

    Light, sweet crude for April delivery recently traded 14 cents higher at $110.06 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange traded 28 cents higher at $106.55 a barrel.

    The April contract traded as high as $110.70 a barrel before the start of pit trading, already marking Thursday as the seventh consecutive trading day where a record was set. The dollar hit a new bottom against the euro overnight, as well as a 13-year low compared to the Japanese yen. Commodities priced in the dollar have strengthened for months as the currency has weakened.

    The gains were seen across commodities. Gold futures reached $1,000 an ounce for the first time shortly after pit trading began.

    “It’s still the dollar’s story, though I do think we saw a little bit of decoupling there today,” said Phil Flynn, a broker with Alaron Trading in Chicago. “Gold and silver are higher and oil’s backed off.”

    The dollar’s weakness masks supply-demand dynamics unique to oil that have analysts increasingly predicting that prices are due for a fall. The U.S. Department of Energy reported huge builds in oil and gasoline inventories on Wednesday, while retail sales unexpectedly dropped in February, according to Commerce Department data released Thursday.

    “Fundamentals continue to point to weakness in oil markets .. product demand in every fuel category is suffering this year on account of the dual blow of economic slowdown and high prices,” wrote James Crandell of Lehman Brothers.

    In one scenario, the Federal Reserve could cut interest rates by less than expected in order to defend the dollar, which would pressure oil prices to give back some of their recent gains, wrote Edward Meir of MF Global.

    But don’t count on it, he added, noting that commodities markets considered that possibility on Wednesday, and chose to set new all-time highs instead.

    Front-month April reformulated gasoline blendstock, or RBOB, recently traded down 3.64 cents, or 1.3%, at $2.6922 a gallon a gallon. April heating oil traded 1.65 cents higher, or 0.5%, at $3.0409 a gallon, having also set a record Thursday.

    —By Brian Baskin, Dow Jones Newswires

  9. 9
    zman Says:

    Sam – lots more hedge fund problems will be evident by month end after front month NYMEX contracts expire (next week and the following). If you look at Drake and Carlyse and what happens when one of these goes bust its a long process of selling off at pennies on the dollar with a 12 to 18 month period of no cash for the bagholders, ahem, investors in the fund. Get 15 to 20 of those announcements and large amounts of $ should flee the hedgie-verse and mutual funds.

    T – yea, taking a hit in 3 names in the drybulk space and my UNG short. Not my best month although the rally in the E&P space and simply not having more than a sliver of exposure to the refiners has blunted the impact. NG is a house of cards…

  10. 10
    zman Says:

    What’s the highest paid government job in the state of NY?

  11. 11
    scoop006 Says:

    working under gov.spitzer

  12. 12
    zman Says:

    too easy, should have left off the NY, at $5,000 / hour I think it would be the highest paid anywhere…that’s like 50 barrels of oil Spitzy boy.

  13. 13
    Sambone Says:

    Z – #9 – Just the beginning. I believe a major to mid bank will fail this year. It reminds me of Japan. Paulson will have stronger banks merge with the weker banks. It’s going to be a long summer.

  14. 14
    zman Says:

    Sam – this one’s for you. Name the reporter whose career benefited most from AG Spitzer’s “leaked” evidence, routinely used to smear potential AG targets right before charges were filed.

  15. 15
    zman Says:

    Bernanke wants to mark to market your mortgage so the government is going to be picking up the tab their too. Euro at 1.56 to the dollar…new high.

  16. 16
    Sambone Says:

    I give up. I never watched or followed that stuff. Jim Cramer?

  17. 17
    scoop006 Says:

    #14 cousin charlie gasparino

  18. 18
    zman Says:

    former WSJ reporter Charlie Gasparino…Spitzer made him.

  19. 19
    zman Says:

    Scoop is on fire today.

    Speaking of that, anybody see any news re EOG, abnormal rally here. Thought it might be #2 above but I’d bet it is something more current.

    NG up 6 cents with 15 minutes to the storage numbers.

  20. 20
    Sambone Says:

    Here come the Politicians with your tax money at work.

    http://www.wsbtv.com/news/15575616/detail.html

  21. 21
    kyleandy Says:

    IOC green in a sea of res

  22. 22
    zman Says:

    Sam – they do that and I do a sale and leaseback on my own house.

  23. 23
    zman Says:

    k – little bit o green : EOG, DVN, KWK, SWN, CHK and …HK soon.

  24. 24
    Sambone Says:

    Bears don’t like Bear Stearns (BSC) today

  25. 25
    zman Says:

    Well Duhh Watch: Lehman analyst says “banks are likely to face widening losses on asset write-downs.” the analyst went on to say “any gains BSC would have received from wider spreads would be offset by write-downs on alt A mortgage assets”

    alt-A isn’t sub prime, that’s the minor credit issue folks.

    As the man once said, “quick buck artists come and go”

  26. 26
    scoop006 Says:

    #20 ridiculous:anybody in the market to purchase a home can negotiate a lower price which will be considerably more than $15k

  27. 27
    zman Says:

    86 Bcf withdrawal. Consensus 82. There are taking gas up on it. Wow. 4 Bcf over on 1398 in storage, that’s 0.2%.

  28. 28
    zman Says:

    EOG: I can’t find a thing here, not that I’m complaining as I still hold the 125 calls and 4.25 up is nice, part of it is now gas but there has to be a broker comment this am.

    NG up $0.20 now. absolutely ridiculous

  29. 29
    zman Says:

    APC likely to take off from here. Buying a little more in the April range.

  30. 30
    zman Says:

    ZAccident: Bought the March $65 calls with a slip of the mouse for $1.20, had thought I was on the April 70 calls for the same price.

  31. 31
    T-Tupp Says:

    i love how crude rallys with ng now hahaha. this is like those kids in college who used any excuse/ event to party. whats CL at?

  32. 32
    zman Says:

    110.59, up .68

    More and more of the same people who said oil would fall back to 80 are now talking in increments of $5 and $10 per barrel with several now saying 125, some at 150 and at least 1 looking for 200, lol.

  33. 33
    T-Tupp Says:

    in my exp. when things are a bubble and momentous, the chart does not usually reverse until it goes parabolic. loks to me like the top of the parabola here will be $130 is

  34. 34
    zman Says:

    Would any technical analyst oriented folks around give an opinion on EOG? ty

  35. 35
    Sambone Says:

    10:54 am EST

    Crude Up On Weak Dollar, Ignores Weak Economy

    By Brian Baskin
    Of DOW JONES NEWSWIRES

    [Dow Jones] Crude futures set a new record, just three hours after the last one, trading as high as $110.94 before falling back a bit. The old — term used loosely — record was $110.70, set in electronic trading earlier Thursday. April crude now trades at $110.64, up 72c. (brian.baskin@dowjones.com)

    HOUSTON — Crude oil futures are up slightly Thursday after setting a new record in electronic trading on the weak dollar.

    Light, sweet crude for April delivery recently traded 14 cents higher at $110.06 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange traded 28 cents higher at $106.55 a barrel.

    The April contract traded as high as $110.70 a barrel before the start of pit trading, already marking Thursday as the seventh consecutive trading day where a record was set. The dollar hit a new bottom against the euro overnight, as well as a 13-year low compared to the Japanese yen. Commodities priced in the dollar have strengthened for months as the currency has weakened.

    The gains were seen across commodities. Gold futures reached $1,000 an ounce for the first time shortly after pit trading began.

    “It’s still the dollar’s story, though I do think we saw a little bit of decoupling there today,” said Phil Flynn, a broker with Alaron Trading in Chicago. “Gold and silver are higher and oil’s backed off.”

    The dollar’s weakness masks supply-demand dynamics unique to oil that have analysts increasingly predicting that prices are due for a fall. The U.S. Department of Energy reported huge builds in oil and gasoline inventories on Wednesday, while retail sales unexpectedly dropped in February, according to Commerce Department data released Thursday.

    “Fundamentals continue to point to weakness in oil markets .. product demand in every fuel category is suffering this year on account of the dual blow of economic slowdown and high prices,” wrote James Crandell of Lehman Brothers.

    In one scenario, the Federal Reserve could cut interest rates by less than expected in order to defend the dollar, which would pressure oil prices to give back some of their recent gains, wrote Edward Meir of MF Global.

    But don’t count on it, he added, noting that commodities markets considered that possibility on Wednesday, and chose to set new all-time highs instead.

    Front-month April reformulated gasoline blendstock, or RBOB, recently traded down 3.64 cents, or 1.3%, at $2.6922 a gallon a gallon. April heating oil traded 1.65 cents higher, or 0.5%, at $3.0409 a gallon, having also set a record Thursday.

    —By Brian Baskin, Dow Jones Newswires

  36. 36
    apbd Says:

    Finally found a way to make $. Short XLF on rallys.
    apbd

  37. 37
    Sambone Says:

    A – Why not buy SKF (Long) on rallies? I own it and do not plan on selling it anytime soon.

  38. 38
    zman Says:

    EOG chart pattern in my book looks explosive now.

    HK – bargain after yesterday’s conference call. Reef, love to know what your guys saw on those local logs in the deeper sections, you’ve got my email.

  39. 39
    zman Says:

    Oil back to flat at 109.90 now, gas up 14 cents.

  40. 40
    apbd Says:

    Sam: Your talking SKF long (stock). I’m talking options. Premiums on SKF are way up, while seems much more reasonable on XLF puts.
    apbd

  41. 41
    ram Says:

    Is energy stocks rallying now like looking at a gift horse in the mouth?

  42. 42
    zman Says:

    R – do you mean, should I be selling the rally? Thinking about losing some March options here.

  43. 43
    ram Says:

    Yes.

  44. 44
    Denise Says:

    Reason for rally I believe
    http://www.house.gov/apps/list/press/financialsvcs_dem/press031308.shtml
    (if one calls this a rally)

  45. 45
    Denise Says:

    My voodoo/wave man says if we can close above 1320-
    Also people buying
    Mr K is buying
    reading that naz is signalling DeMark buy signal ect…
    Hmmm… we will see I am joining in

  46. 46
    zman Says:

    Morning D – good to have you in here. Still can’t find Nicky.

    All time high for CHK, probably need to pull the March’s and wait for a “everybody hates energy day to go longer”

    Will punt my APC march I just picked up by accident earlier in a bit, talk about gift horse.

    Comeon HK!

  47. 47
    Denise Says:

    Cramer just bought some NOV he sold a little XTO earlier

  48. 48
    Denise Says:

    Actually I misquoted-Cramer put Nov on his buy list if it drops a few pts
    sorry

  49. 49
    zman Says:

    D – not sure on the NOV buy but XTO is pretty fairly valued up here. Good, fast grower, well run company, just a little rich…think he’s right.

  50. 50
    Sambone Says:

    I guess the worst is behind us as per S&P.

    “Details of Standard & Poor’s comments on subprime write-downs
    Standard & Poor’s Ratings Services believes that the bulk of the write-downs of subprime securities may be behind the banks and brokers that have already announced their results for full-year 2007. “There may be some additional marks to market as market indicators have shown deterioration in the first quarter. However, when we dissect the percentage of write-downs taken against various types of exposures, in our opinion the magnitude of some write-downs is greater than any reasonable estimate of ultimate losses… The write-downs of collateralized debt obligations (CDOs) of subprime asset-backed securities (ABS) by large banks and investment banks (referred to as banks) in North America and Europe to-date total approximately $110 bln. To this amount we add approximately $40 bln in write-downs of insurers (financial guarantors and other insurers) and banks in the Gulf States and Asia to arrive at a rough estimate of $150 bln in global disclosed write-downs to-date… Based on available information, we believe that the largest players can be seen as having undertaken a rigorous valuation methodology to come up with conservative valuations. Citigroup (C) and Merrill Lynch (MER), for example, value their high-grade supersenior tranches at 52% and 68% discounts to original exposure, respectively. The broader range of banks values them at only a 30% discount. Similarly, Citi and Merrill value the supersenior tranches of the mezzanine CDOs at 63% and 73% discounts, respectively, whereas the broader range of banks values them at a 48% discount… We believe Citi and Merrill in particular have taken conservative views in this regard, and have built in liquidity premiums”

  51. 51
    ram Says:

    These are the same guys who gave the highest ratings to garbage. Oh no, now I am really scared.

  52. 52
    apbd Says:

    Boy, I feel a whole lot better now.
    apbd

  53. 53
    uop Says:

    Z, did get stopped out of my CHK ap45,

    UNG makes me impatient, wonder what to do with my apr46puts, my mar 47 puts are just about worthless with UNG at 49.45$, sad.

    Question: I am presently visiting CA, high octane gasoline is over 4$, have you noticed that people drive less ?

  54. 54
    reefguy Says:

    HK -Haynesville Shale- looks to be a science project still. These would be maybe 6MM for a horizontal????

  55. 55
    ram Says:

    High octane gas has been over $4 in large cities and coast for at least a month. I see diesel for $4.30 and higher. People are still driving large vehicles very fast. The pain threshold is still higher – maybe $5.50 for reg gas.

  56. 56
    zman Says:

    APBD – yea, me too. feel lot better, right.

    uop – I think over the summer CHK could go to high 50s but we should see a pullback soon, not just them but group is near highs…could go another 5 to 10%.

    ung – march is almost certainly toast. April should not be able to stay up…just no fundamental support as per my comments ad nauseum.

    re gas consumption I’ve heard mass transit is setting records but the demand data don’t show it on gasoline…weekly numbers sometimes are overzealous but overall, we appear to be logging record mileage. One thing most people don’t know is that alcohol gives you worse mileage than gasoline mixed with MTBE. So that high price fill up is hitting putting less in your tank…way to go congress!

    reef – sounds about right to start just given the drill time to get that deep. If the IP’s in the area (I know there are but few that deep) are correlative to the EUR then its still economic several bucks below here. Definitely a science project but given how cheap these guys are it adds another can to the 6 pack that says they get bought.

  57. 57
    zman Says:

    Reef – another thought is that they have conventional bailouts uphole

  58. 58
    Alhambra Says:

    Z – I remember a little while back that RIG was tickling 145 largely because oil was playing with 100. As higher priced oil further justifies and makes financial sense for the expenses incurred for deep water projects, why aren’t we seeing RIG (& DO, ATW, NE) blast off when oil has cracked 110?

  59. 59
    Denise Says:

    Z-so Hk is one of those tuck away in IRA buys?
    Re gasoline-I am now hearing (for the first time)my upper middle class carpool Mom friends telling me they are trying to figure out how to drive less.
    A few interesting comments this am
    by G.Johnson and T. Au “Saving will soon be the new spending.” This suggests a multidecade retrenchment in Americans’ standard of living.
    Based on income growth since the 1970s, we should be at roughly mid-1980s levels of spending. The difference between that and what we have been spending was made out of credit cards, and worse, home equity loans–a process that culminiated in the real estate bubble and subprime lending. Savings will reverse the process and take us to pre-1980s (perhaps 1970s) spending levels. This would represent the “modern 1930s” (the original of which took America back to 1910s or 1900s spending levels).

    One evidence of this came home to this bus commuter this morning. The bus was unusually crowded, and the car traffic through Lincoln Tunnel unusually sparse. Higher oil (and hence gasoline) prices are finally “biting,” just this week. That’s because gasoline is a so-called “price-inelastic” product; it usually takes a large precentage rise in price to cause a small drop in demand. Until it reaches, as it may have this week, the so-called “kink,” a price above which further rises will be strongly reflected in falling demand.

  60. 60
    zman Says:

    A – I think the same can be said about a lot of service stocks. Couple of things at play 1) equity markets don’t believe oil up here…they simply can’t believe it will stay up long enough for the service guys to see Capital Expansions at the E&Ps and Majors that will actually get to the bottom, 2) parts of the service complex are seeing price pressure for the first time in some time. Rigs are very available onshore U.S. and pricing for some parts of the completion process are falling as well. Reef feel to set me straight there but that’s what the 4Q conf calls and my channel checks have indicated. 3) Rates for the DW players are rising but not as fast as they have been, 4) Deepwater projects around the globe continue to suffer logistical delays, and 5)there is worry down the road 2011-2012 that the DW industry will overbuild. Thanks for the question.

    That’s my view of it and I have been watching pretty closely. DO may be lagging as people think they are in the market for an acquisition. To me, those charts look poised to rally as like you say, their stories are probably a little bit better with high oil than low oil.

  61. 61
    zman Says:

    Denise: HK

    1) it should have near term sizzle (couple of big expectation horizontal wells in the next two weeks – IP of the last was in the teens, if these two are both similar their Davis / Taylor sand play could drive some hype on the stock, putting it low 20s.

    2) long term, the company is cheap, full of prospects, and for sale as they have repeatedly said.

  62. 62
    zman Says:

    ZTRADE ACCIDENT REVERSAL:

    Out the APC MARCH $65 calls for 1.70, a 2 hour 40% gain. Not bad for a mistake.

  63. 63
    Denise Says:

    Z-what is a uphole conventional bailout?
    (sounds like it belongs at the Mayflower with client #9)

  64. 64
    Denise Says:

    Also Z and Alahambra-also saw the other day drillers not participating was leading to some shorting /put buying by the hedgies

  65. 65
    zman Says:

    usually I have to tell the guys to keep it clean, lol.

    say you drill a well to 12,000′ (10,000 -13,000 ish in this case in search of this shale which underlies their Elm Grove field where they have shallower zones up the hole. So if this turns out to be a boon doggle they could conceivable complete the well in one of those zones

    Hosston at 7500-8500′
    Upper Cotton Valley – Davis Sand at 8500-9000′
    Cotton Valley – Davis Sand 9300-9500 (this is what those 2 upcoming horizontal tests are after)
    Lower Cotton Valley – Taylor Sand (9800-10000′)

    The economics will suffer as in essence you drilled a deep hole that gave you data but no production in the target zone but you could compete in one of the other uphole zones so its called a bailout as it bails you out from a total loss.

  66. 66
    Sambone Says:

    Here it is, another S&L bailout. If it passes then we’ll see a huge rally to begin with, IMO. Then the question is, will the overseas markets still think that the U.S Tres is AAA?

    House’s Frank Unveils Foreclosure-Prevention Legislation

    By Alison Vekshin

    March 13 (Bloomberg) — U.S. House Financial Services Committee Chairman Barney Frank unveiled legislation to expand the federal government’s role in shielding consumers from losing their homes as foreclosures reach record levels.

    Frank’s proposal would allow the Federal Housing Administration to insure and guarantee refinanced mortgages after lenders and loan holders reduce principal to a level borrowers can repay, according to a draft of the legislation released today by Frank’s office in Washington.

    “This could potentially refinance between 1 and 2 million loans and help these families stay in their homes, protect neighborhoods and help stabilize the housing market,” according to the draft from Frank, a Massachusetts Democrat.

  67. 67
    uop Says:

    Z:

    i am planning to get USO puts april, there is high open interest in the 83, 80, 70, 72.

    could this behave like the UNG puts?

  68. 68
    zman Says:

    D- 64 thanks. PQ said yesterday lots of rigs around in the Fayetteville and they were not scooping them up but concentrating on reducing drill time to drill more wells with fewer rigs. Its what the smart guys do. They could conceivable boost rate by bumping the rig count but why pressure service costs and increase your finding costs by being less efficient than you can be?

  69. 69
    zman Says:

    uop – I hate to ask but do you mean go to zero? I’m staying away from the oil short for now as their is no logic to this move and as OPEC says, plenty of oil around.

  70. 70
    Denise Says:

    Sambone-they will poo poo it but
    meet somewhere in the middle-you are brave to be long(if you still are skf)
    in my humble opinion
    a more interesting thought I read this am-
    what if the Fed does not cut? the dollar would rise and our markets would look pretty cheap to the rest of the world-
    or some sort of G7 intervention on the dollar
    oil would drop gold ect…
    something to ponder

  71. 71
    Denise Says:

    Sam-also what if the Govt deceides to say they back fnm and fre?
    could be monster short covering rally in financials

  72. 72
    zman Says:

    crude down $0.40 ; NG up a dime.

    E&P exploding to the upside. EOG up another $6, CHK & NFX up $2 plus.

    HK knocking on $19.

  73. 73
    doc Says:

    I am going heavily into Agriculure

    Bought DBC Jan 50 3.80
    Sold off my CROX puts with nice gain

    Bought some SPY & QQQQ puts recently.

  74. 74
    zman Says:

    Ag makes a lot of sense to me Doc. ADM, MON, AGU ??? Got any names for us?

  75. 75
    ram Says:

    MOO

  76. 76
    T-Tupp Says:

    bought the dip this AM in the OIH march calls. good call 😉 it’s up 1.5% on the day, im up 100%

    and may i add; nice mistaken APC trade Z. gotta love returns when the contract has virtually no time premium…

  77. 77
    irished Says:

    have any gut reaction for or against TLM. I have the april 20’s which I triple down to 1.47 and now are selling for a whopping 15 cents, a nice 89% loss. The 17.50’s are around 1.10 while the stock is around 17.90. It is thinly traded option as well.

    Thanks. Just made 500%+ on “your” CHK. If only I could have eliminated all my Jan. and Feb. plus my APPL options sooner.

    Have learned a great deal from your insights. Now all I need is a time machine.

  78. 78
    zman Says:

    Stocks feeling a little weight of suddenly down 0.70 to 1.00 oil. Gas up a dime but weaker than earlier…wishful thinking.

    T – better to be lucky than good unless your name is Sambone and then its better to just be a funny guy. OIH March calls eh?

    Irish – isn’t your favorite day of the year around the corner? TLM near term my gut would say it creeps up. I still hold those Apr 20 calls there which at one point were doing nicely (double) and then it fell apart. Glad at least to hear about the CHK. May lose my $45s there soon.

  79. 79
    zman Says:

    IOC up strong, low volume. Have not heard a thing.

  80. 80
    uop Says:

    doc:

    have DBC shares, would not mind to get some long calls,

    did you buy Jan 09 or 10 ?

  81. 81
    zman Says:

    EOG up $7 bless what analyst said something nice this morning. Could not believe people actually listened to that clown last week who took it to sell after being at hold since last summer.

  82. 82
    reefguy Says:

    IOC Mulaceck and Elk 4 still MIA

  83. 83
    T-Tupp Says:

    SPX rejecting 1320

  84. 84
    ultyguy Says:

    thinking about getting into some april puts on UNG in hopes of recouping the losses on the march puts. Today a good day is should i wait. Just like to hear what the opinions are out there.

  85. 85
    zman Says:

    82 – figures

    83 – see that although its not shooting south either

    84 – I recuse myself from that one

  86. 86
    T-Tupp Says:

    z do you have one of those ubisync monitors?

  87. 87
    Denise Says:

    Hate to post this (for fear of jinx’ing)
    my voodoo man says if we close over 1320 it would be “momentous” have never heard him use that word
    hmmmm….

  88. 88
    zman Says:

    re 86: yes, a 19″ it is one of my favorites although it cost 3x that Dell 17″

    D – just went under, bad mojo

  89. 89
    reefguy Says:

    z-does size matter?

  90. 90
    T-Tupp Says:

    momentus how? good, bad?

  91. 91
    uop Says:

    Z:

    had 19 incher for years and have switched to 22 inches,
    regret not to have it done sooner,

    no comparision, real luxury for 200 $

  92. 92
    zman Says:

    Reef – heck yea. Right now I write on 22 wide, with 2 15″‘s and a 19″ for trading. Another 17 is for spread sheets. I think I’ve got between 5 and 6 sq ft of screen which is about all I can watch/use/fit on my desk.

  93. 93
    Sambone Says:

    D – yea, I’m long SKF. I’m not selling.

    Ags = DBA, RJA, RJI, GRU, EOH, JJA, JJG to name a few. I’m long RJA, GRU, DBA, and EOH.

  94. 94
    Denise Says:

    Tupp- good
    Lets close now-(I wish)means successfull test-all the techies would/might buy

    The fact that we are up with bad news is intersting

  95. 95
    T-Tupp Says:

    i already have a external monitor through the serial port. and i want to add another monitor to my laptop (ubisync thru the usb), with the capability of having 3 different things on all 3 monitors (1 being the laptop screen).

    i called Samsung and comp USA and no one could give me a straight answer if this is possible. think this wil work z?

  96. 96
    zman Says:

    uop, on the 19 inch that was bleeding edge ubisync tech just 2 months ago. The beauty is it is a USB monitor (has its own on board vid card) so no extra video card for your PC and if you use a laptop, theres your third monitor, plug and play, no problem. You can daisy chain another 6 of them as each has additional USB ports. And its a Samsung which is nice monitor in the first place

  97. 97
    zman Says:

    Denise –

    “The fact that we are up with bad news is intersting” … you mean like oil yesterday with a giant sized build in stocks, over 3x the expectations?

  98. 98
    T-Tupp Says:

    z was that directed at me? (96)

  99. 99
    zman Says:

    T – I do exactly that. Here is the lync to buy one:

    http://www.amazon.com/Samsung-SyncMaster-940UX-LCD-Monitor/dp/B000VYBM6G/ref=sr_1_2?ie=UTF8&s=electronics&qid=1205432580&sr=8-2

  100. 100
    reefguy Says:

    Z got a 22 inch apple and a 20 inch dell
    5 year strips- $9.49/ $100.90-Now that is big!

  101. 101
    T-Tupp Says:

    call me spoiled, but i have a 17 laptop, 19 external for trading, but i want a 22 for charting (ubisync is only 19 eh?)

  102. 102
    zman Says:

    It was to both of you, uop mentioned gearing up to 22 which I have on my main writer screen, love it as the more time I spend watching the stock market the worse my eyes get and it was cheap, Envision for about $180, at Bestbuy. But the Ubi is so simple and gave me a third screen like you want on a laptop right out of the box.

  103. 103
    T-Tupp Says:

    wow look at that resistance! 7 tries on the 5min candles!

  104. 104
    Denise Says:

    Z- I meant the Carlye blowup-futures were down starting last night big time-leaked early-
    the dow down 200 this am
    we went green when the Frank plan came out

  105. 105
    zman Says:

    T:

    not sure where to buy it but here it is:

    http://www.engadget.com/2007/11/14/samsungs-syncmaster-2263dx-the-22-inch-ubisync-monitor/

  106. 106
    reefguy Says:

    TMR earnings call- sequal to client #9. These guys are clearly on the receiving end of Cash and ORRI by f—ing the shareholders. How can this bt an NYSE listing?

  107. 107
    doc Says:

    bought BG Oct. @ 6.30

  108. 108
    zman Says:

    reef – that crude strip is a little off from Monday. Was 102.80 as of Monday evening in my Tuesday post. What will producers do, lol?

    D – ah, right, I was just making a comparison.

    what is that, Texas Meridian / Meridian Resource? I’m not up on the story these days. What’s going on?

  109. 109
    zman Says:

    they rescued oil, closed up 0.20, gas closed up $0.20 too.

  110. 110
    zman Says:

    BG = bunge limited …sounds like one for Sambone. I looked it up b/c I thought it might be British Gas before I thought about it a second. Good luck with the trade Doc.

    Saw the MOO by Ram probably the easiest play.. Doc, which ags are you looking at. Also, see comment to you from UOP above in #80.

  111. 111
    reefguy Says:

    I have dug deep into filings. Most overpaid bunch. About $1.3MM salary and bonus each for top three plus an ORRI. On a 150MM market cap. Oh yea, they own very little shares. Cash flow about 1/2 market price. I would take em out but i am afraid of the wiretapes attached to their phones…

  112. 112
    zman Says:

    reef – yikes re TMR. I have a habit of following people in this business. Couple of the names are familiar but no dealings with and never covered them. Will make the usual mental note when I hear that kind of stuff, otherwise I would have said, why is it so cheap?

  113. 113
    T-Tupp Says:

    wave up from this retracement could close us above 1320

  114. 114
    Sambone Says:

    BG – Hmmm, I like it. 4.28 – 06, 5.95 – 07, 6.66 – Est 08, 7.75 est 09. Put a 15 on it and it looks like 116 in 12 months from 91 = 27% return. If I were to buy it, I would like to start in the low 80’s (Head and shoulder chart).

  115. 115
    Denise Says:

    reefguy-
    Would you assume the ELK 4 still MIA makes the probability of a hit more negative?
    Long some common and a March put-trying to figure out if I should sell my common-my puts worthless

  116. 116
    reefguy Says:

    Now if we pay off their 15MM parachutes, debt, 75MM, market cap 136MM makes it 246MM for 440MM net assets. How about 80MM in ebidta da? Selling for 3 years current stk price+debt+parachutes??

  117. 117
    zman Says:

    Reef – hear ya, had not looked at the BS (pun intended)

    TEV/EBITDA it is no bargain. Very common these days to see single digit midget minnows with massive debt loads. How are bankers acting towards the E&Ps these days? The big caps have shed a mountain of debt but I bet bankers are only too happy to overcharge the little guy in this crappy debt market.

  118. 118
    reefguy Says:

    Mulacheck is incommunicado… Holding mucho common mucho March calls and April calls. I am holding over Bagdad with clouds obscuring target…six trading days on my blackjack March calls

  119. 119
    Denise Says:

    I guess I am in good company
    Thank you

  120. 120
    uop Says:

    they will yank UNG to 50$ any moment,
    no one gives me 25 cents for my march ungs

  121. 121
    zman Says:

    RE IOC and ELK. The stock will move hard one way or the other when the well news is announced. No reason to think happens by next Thursday (by the way, market closed next Friday for Good Friday).

    One more day like today on EOG (up $8.50 now) and I’m a very happy camper. This would be a new closing high post their analyst meeting.

  122. 122
    reefguy Says:

    Leaving for the land of Red Stripe. Back on Thursday to see how large or small March options are. Take care!

  123. 123
    zman Says:

    Reef- have a great one! Find some T&T sized reserves down there but don’t go a touristing off the Ritz grounds!

  124. 124
    zman Says:

    wow … coal.

  125. 125
    rseidman Says:

    Z: Do you hold out any hope for OII?
    Are you expecting some news?

  126. 126
    zman Says:

    RS – not much, had thought so earlier in the week but now I’m just holding in case we get a general OIH rally. No catalyst expected.

  127. 127
    zman Says:

    HK a little disappointing today as the rest of the group (at least the big caps) are at or near new all time highs. May be an opportunity here, especially if they is follow through on this move on Friday.

    Out for 20.

  128. 128
    Sambone Says:

    3:17 pm EST

    Crude Settles At Record $110.33/Barrel On Weak Dollar

    By BRIAN BASKIN
    Of DOW JONES NEWSWIRES

    HOUSTON — Crude oil futures settled slightly higher Thursday, as investors tracking the weakening dollar outweighed those concerned with growing U.S. oil inventories.

    Light, sweet crude for April delivery settled 41 cents, or 0.4%, higher to $110.33 a barrel on the New York Mercantile Exchange. April futures hit $111 a barrel in intraday trading, the seventh-straight day where an all-time high was set, but failed to hold most of those gains. A last-minute rally helped oil close higher, after spending much of the afternoon below Wednesday’s settlement.

    April Brent crude on the ICE futures exchange settled $1.27 higher at $107.54 a barrel.

    Crude has gained 18% in the last month, in a rally driven largely by the weak dollar. But while other commodities soared as the dollar hit a new record low against the euro Thursday, oil hit a late-morning peak and then gradually sank. The muted reaction to another decline in the dollar offered some a sign that supply and demand issues could again rise to the forefront of market thinking.

    “Maybe fundamentals in the oil market are starting to reassert themselves a little,” said Rick Mueller, director of the oil practice at Energy Security Analysis Inc. in Wakefield, Mass. “I wouldn’t hang my hat on that for long.”

    Mueller, like many analysts, believes crude prices have thoroughly detached from the actual state of oil supply and demand. Government data released Wednesday showing a big build in U.S. oil inventories was all-but ignored that day, though it gave fuel to those who believe prices are too high.

    “Maybe people are finally waking up to the fact that we built (6.2 million barrels) last week…but it’s hard to say if it’s going to stay,” said Kyle Cooper, director of research with IAF Advisors in Houston.

    Thursday also brought another round of indicators pointing to a downturn in the U.S. economy. The Commerce Department released retail sales data for February, showing an unexpected drop.

    The dim outlook for the economy of the world’s largest oil consumer has the potential to send oil prices lower. The market has often taken the opposite interpretation, however, believing that a looming recession will prompt more interest rate cuts by the Federal Reserve, which typically causes the dollar to weaken.

    Heating oil provided a late-season boost to the energy complex, settling at a record high despite expectations that demand will fall as temperatures rise.

    Front-month April reformulated gasoline blendstock, or RBOB, settled 4.58 cents, or 1.7%, lower at $2.6828 a gallon. April heating oil settled 10.04 cents, or 3.3%, higher at $3.1248 a gallon, the fourth record settlement in a row.

    —By Brian Baskin, Dow Jones Newswires

  129. 129
    zman Says:

    ok, I’m back, stuff just got strong while I was out. Those EGO $125s starting to cook.

  130. 130
    uop Says:

    z
    what is out for 20

  131. 131
    zman Says:

    uop – meant out for 20 minutes

  132. 132
    Denise Says:

    Buying in IOC

  133. 133
    zman Says:

    Denise – looks like monkey see, monkey do action but who knows.

  134. 134
    zman Says:

    beer-thirty!

  135. 135
    T-Tupp Says:

    z re 126- i don’t think OII is within the OIH holdr

  136. 136
    texana Says:

    http://www.financialsense.com/Market/wrapup.htm, didn’t know if u saw this article. Graphs show relationship between $,dow,oil & rates. This says that if the fed cutes rates, oil will continue higher irregardless of fundmentals of how much oil is in cushing. Congrats looks like u have a lot of new subs. i’m positioned that these trends will continue , with a eye on george to sell some oil from spr for effect & stop rise of price. i find it a glaring statement that no one expects anything from geo. & everything from brother ben. good trading, thx tex

  137. 137
    zman Says:

    Thanks for the graphs Texana, will have a look. Agreed if rates go down (we continue to abandon the dollar) then oil goes up. Maybe 115 / 120. 1Q08 mark to market revisions are coming for the oil patch and they are going to be massive for names like APA, CLR, DNR, BRY…

    I’m all long, quite a bit gassier, growthier than I am oily but the oil is pulling the gas up and the stocks I’m in are largely just getting their day in the sun.

    The nat gas puts were not a mistake in my mind but continuing to get shorter before a technical turn was not my best move. The E&P gains have made up for most of the UNG loss. Agreed re 700+ mm barrels just sitting there, I know it’s for a supply disruption but if it will cool prices (and I think it would) why not open the taps for a couple of weeks? Silly to tell them to produce more when we keep tucking it away in a bottomless pit. If it is so little it doesn’t matter (the admins words, not mine) then why not stop refilling?

  138. 138
      Comment on Thursday – Gas Preview & Oil Review by zman — IRA 401k Says:

    […] HSA wrote an interesting post today onHere’s a quick excerptbeer-thirty! […]

  139. 139
    doc Says:

    Chk have a huge profit Chesapeake April calls. We all agree oil has become a very topy.

    Question??? Do to try to sell half now and and lock in the profit??? April expiration is four weeks away

    doc

  140. 140
    How much money do I need » Blog Archive » Comment on Thursday – Gas Preview & Oil Review by Comment on … Says:

    […] Sun wrote an interesting post today onHere’s a quick excerpt[…] HSA wrote an interesting post today onHere’sa quick excerptbeer-thirty! […] […]

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