20
Mar

Thursday – Oil Retreats Below The $100 Mark

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Today is March expiration. After yesterday's absolute blood letting in the equity and commodity markets it will be good to get this week over with. Energy started the day on a weak note that ended in something akin to capitulatory selling frenzy. Some of this action is "hot money" exiting that which it truly does not understand. Some of this action is fund selling to cover margin calls. And some is genuine concern that the economy is starting to impact energy demand. This morning crude and other commodities are seeing hot money flee to another space, perhaps back to the financials...it'll be back. This drop, however unfortunately timed for my remaining March calls creates opportunities and once the volatility dies down the bargain hunting will begin...probably next week.  

Commodity Watch:

Natural Gas: April natural gas fell $0.39 to $9.02, a three week low. The move lower was again inspired by crude and other commodity price weakness. Warmer weather forecasts didn't hurt either. Key levels for gas in my mind are $9 even (which gas broke last night), $8.78 (where it has minor support) and $8.40. After that $8 would appear likely based just on my read of the chart and the fact that Spring will bring weak demand which coupled with strong supply could result in a rapid rebuild of stocks. For the (UNG) puts I'm still in, the preceding gas price levels roughly equate to an (UNG) price of $43, $41, and $39 respectively.  This morning gas is trading off into the mid $8.75s.

  • My Storage Withdrawal Number:  65 to 75 Bcf vs only 21 Bcf withdrawn in the year ago period when it was unusually warm. We're entering the shoulder season when degree day totals start to tie less conveniently to storage withdrawals so the numbers could easily come out +/- 30 Bcf of my number. In think anything north of 80 Bcf could bring a brief but sharp rally to gas.  Conversely, 50 or lower should inspire another sharp decline into the mid $8s.
  • Weather: It was much warmer last week as Heating Degree Days fell to 151, but well above year ago levels of 102. The 151 number is pretty much in line with normal weather for this time of year. Looking to this week the weather gets back in line with last year (when only 11 Bcf were pulled from storage).
  • Imports are essentially running flat with the prior week and 2 Bcfgpd low to last year's imports levels due to a dearth of LNG shipments. The commissioning of a couple of new LNG facilities in the U.S. in April should at least temporarily boost imports as the facilities process several scheduled test shipments.
  • Street Consensus: 80 Bcf withdrawal.
  • Winter End Storage To Be In Line With 5 Year Average: If the Street is close to right about today's number and the withdrawal season doesn't drag on long than usual (one to three withdrawals after this week would be typical) then we are likely to exit the season roughly in line with the five year average storage trough of 1,250 to 1,300 Bcf. From that point, the pace of storage injections will be closely scrutinized 

Crude Oil: The May contract fell $5.96 to $102.54 despite the following table which shows what normally would be considered to be a fairly bullish report. This morning crude is trading off $3 back into double digit territory.

  • Nigeria Watch: Largest Oil Workers Union Threatens To Strike. The strike is in retribution for the recent firing of 100 workers by (XOM) and may start as soon as this weekend.
  • Note From Lehman Sums Up Thoughts On Refiners.  
  • Lehman Brothers analyst Paul Cheng said the decline in gasoline and distillate inventory in the EIA report looked bullish for refiners - on the surface at least. "However, demand weakness is quite noticeable and could be a potential problem," he said in a note to investors. ~ Forbes.
  • I tend to agree. Gasoline will increasingly be in the driver's seat from now through September and despite a bigger than expected decline in gasoline stocks this week, their surplus to year ago levels actually increased. So the data made for a fleeting trade but does not change my medium term choice to stay away from these names.
  • In his piece Cheng went on to say that they believe the group may get a small bounce but will exit the year below its recent lows. Id' add that the first half of 2008 is definitely shot for comps relative to 2007 and since 2Q07 made up the lion's share of last year's earnings I may short the top of Cheng's expected bounce. Weekly charts of (VLO), (TSO), (SUN) etc would suggest the group is still technically vulnerable as well. 

exp-vs-act-031408bbb.jpg

ZComment:  Products saw much bigger than expected draws while a build in crude stocks came up short of expectation as well. Looking at the numbers vs expectations most logical people would not have expected the large drops in crude, gasoline and heating oil prices following the EIA's report.

CRUDE OIL

Utilization / Production: Record low utilization for this time of year. This translates into demand for crude being off about 2.5 million barrels per week relative to year ago levels during the time of year that is already typically weak for demand. If the refiners can extend the "maintenance season" a little longer there may be a bottom in store for crack spreads. Until I see some follow through, I'm not jumping on the "buy the indie refiners bandwagon."

util-vs-inputs-031408.jpg

Imports fell by almost 1.1 mm bopd to 9.5 mm bopd. Peaks are rarely sustainable and I probably should have given this more attention in yesterday's post but as it is, I would have expected the smaller import volumes which combined with the pullback in refinery up time yielded an unexpectedly small build in stocks, to have supported oil prices.  But it was triple witching and that was not to be.  

crude-imports-031408.jpg

Crude Stocks: Still climbing which is normal for this time of year. Note the slope of the angle of the green and blue lines. That's weaker refinery input demand for you.  

crude-stocks-031408.jpg

GASOLINE - Unexpected draw down on stocks is first in nearly 5 months, the result of soft production levels and weaker than expected imports. The production decline is normal for this time of year with some refineries entering Spring maintenance early while others take their time coming back up during this time of slack margins. 

gasoline-production-031408.jpg

Gasoline Demand Eased Modestly Week to Week. Demand fell only 60,000 bpd as it continues to hover just above the 9 mm bpd mark even as the highest prices of the year filtered their way down to the pump. Prices are now 31% higher than year ago levels which on a year over year basis is down from the mid 30%s of recent weeks ... but all the consumer knows is that this is the most they have paid for gasoline this year and it is March, not June. High prices are suppressing but not yet sinking demand.

gasoline-demand-031408.jpg

 

Gasoline Stocks:  In a nutshell: Still Plenty On Hand. It will take a resumption of demand growth and more maintenance or another significant facility disruption to materially improve crack spreads given this overhang. 

 gasoline-stocks-031408.jpg

Stocks We Care About On Further Weakness Sometime Next Week:

Service names fell 6.25% yesterday. Other than two positions in (OII) I have been away from this group that can't seem to catch a break for more than a few weeks at a time since it peaked last Fall. Once the dust settles next week or the week after I'll be taking good hard looks at (SLB), (HAL), (ESV), and (CLB). 

(BTU) fell 9% yesterday. Despite the fact that coal futures look like this due to tight global supplies, the coal stocks have been under considerable pressure of late. Revenues are on the rise (higher volumes and prices ) and production costs are falling due to efficiency improvements so I'm looking for a bounce as soon as crude and the markets stabilize a bit. Why crude?  Even though coal futures do not track well with oil, energy stocks do. As such, many analysts recently downgraded the coals, some even raising estimates and targets while doing so saying the stocks had gotten ahead of themselves. With BTU off 20% in three weeks and back to September 2007 levels that's probably almost enough to get analysts touting the group again, especially with summer coal demand approaching which should support prices. A little further weakness and I'll take some for a quick trade; more significant weakness and I'll play it for 1Q earnings.

 coal-multiple-032008.jpg

 

Holdings Watch:

CALLS:

  • Out (CHK) March $45 calls for $0.90, down 53%.
  • Out (DSX) March $25 calls for $0.30, down 93%.

 

Odds & Ends

Analyst Watch: Lehman takes up price targets modestly on a number of E&Ps including (CHK), (SD), (HK) as it boosts its 2008 commodity price forecasts.

 

81 Responses to “Thursday – Oil Retreats Below The $100 Mark”

  1. 1
    Sambone Says:

    9:01 am EST

    Nymex Crude Down $3, Dollar, Demand Woes Weigh

    By Nick Heath
    Of DOW JONES NEWSWIRES

    LONDON — Nymex light, sweet crude oil futures fell more than $3 to below $100 a barrel in London Thursday, as a further recovery in the dollar and renewed concerns over the health of the U.S. economy prompted investors to liquidate crude and other commodity positions.

    Following a week of volatile trade and steep price declines, analysts suggested Thursday that a turning point in investor sentiment is underway, one that could herald a stronger focus on fundamentals.

    “Severe seesaw price action over the past several days reflects investors questioning the logic that commodity prices should rise every time the macroeconomic picture in the U.S. worsens (and the dollar weakens),” said Adam Robinson, analyst at Lehman Brothers in New York.

    At 1245 GMT, the front-month May Brent contract on London’s ICE futures exchange was down $2 at $98.72 a barrel.

    The front-month May light, sweet, crude contract on the New York Mercantile Exchange was trading $2.82 lower at $99.72 a barrel.

    The ICE’s gasoil contract for April delivery was down $28 at $929 a metric ton, while Nymex gasoline for April delivery was down 344 points at 252.59 cents a gallon.

    “Commodity players seem to be coming round to the notion that the deterioration in the U.S. macro picture cannot be ignored on the pretext that commodities are a “weak dollar play” or an “inflation hedge’, and thus immune from downward pressure,” said Edward Meir, analyst at MF Global in New York.

    Signs that crude oil demand in the U.S. will suffer as a result of slowing economic growth there gained traction Wednesday and remained a source of downbards pressure on oil prices Thursday.

    While Wednesday’s U.S Department of Energy inventory data was seen as bullish for crude prices — oil stockpiles rose less than expected and gasoline inventories unexpectedly slid — an implied 3.2% reduction in implied U.S. fuel demand appeared to have captured the attention of the market.

    “This time the bears seem to have some evidence of demand destruction to support their argument,” said Michael Davies, head of research at Sucden in London.

    But with the recent weakening of the dollar widely cited as having spurred crude to record highs this week, some suggested its mild recovery against other currencies Thursday has played a stronger role in crude’s pullback than fundamentals.

    “Fundamentals have been weak for a while — last week’s DOE stats were negative and market ignored it — yesterday stats were more supportive and the market also totally ignored it,” said Olivier Jakob of Petromatrix.

    “So it’s not about fundamentals — right now it’s purely liquidation and that’s why you see it across the commodity board. The fundamentals weren’t good on the way up — now it’s on the way down everybody can come up with 100 reasons why it is going down.”

    Nymex crude prices have undergone a rapid descent since setting a record high of $111.80 a barrel Wednesday, and further sell offs are envisaged as speculators withdraw from crude and commodities in general.

    “Although the exact trigger for this week’s speculative liquidation is far from clear, we continue to believe that the commodity markets remain vulnerable to these speculative sell-offs in the near term,” said analysts at Goldman Sachs.

    The combination of low economic growth in the U.S. and high oil price inflation will have its strongest impact on oil demand in the first half of the year, they said, and reiterated their prediction that West Texas Intermediate crude will retreat to near $90 a barrel by spring.

    —By Nick Heath, Dow Jones Newswires

  2. 2
    reefguy Says:

    z- By my screen my absence was very expensive šŸ™

  3. 3
    zman Says:

    Yesterday was unreal and today looks like more of the same. Take no prisoners in Energy Patch right now. I think they start to sort it out next week. At least I’m still short NG.

  4. 4
    zman Says:

    Oil down 3.30 to 99.20,

    NG down 0.31 to 8.72. UNG called 42.40 x 42.50.

  5. 5
    Sambone Says:

    I’ll probably be a buyer today.

  6. 6
    zman Says:

    I might be late in the day or I might wait to see if they continue to flush the group on Monday.

    Oil into the $98s now.

  7. 7
    Sambone Says:

    Ya know I thought about the oil patch last night and I believe that oil will hit 150 by 2010. That’s why I’ll buy now and not worry about the short term. I’ve seen the crowd come and go in this patch since 03, so let them flee.

  8. 8
    zman Says:

    Every analyst available to comment to the press is out there saying I told you so and declaring oil dead. Bottom fishing in oil starting as it reclaims $100.

    Sam – its brutal when the fast money comes out and it stinks that its happening at the end of option expiration but I have little doubt that this is not the end. From a fundamental standpoint, this pullback is not impacting the producers.

  9. 9
    zman Says:

    order imbalance causing trading delays in APA, EOG, and SWN.

  10. 10
    zman Says:

    Took some APA March $105 calls which I’m loath to announce as a ZTRADE or ZBLAST but enough is enough and I smell a bounce.

  11. 11
    Denise Says:

    Good morning
    I could never resist a sale
    I am doing some buying-pbr,cop,chk,apa,
    look at fwlt

  12. 12
    Sambone Says:

    9:40 am EST

    Nymex Crude Extends Losses On Stronger Dollar

    BY BRIAN BASKIN
    Of DOW JONES NEWSWIRES

    HOUSTON — Crude oil futures are trading lower Thursday, as the strengthening dollar prompted investors to extend the previous day’s commodities selloff.

    Light, sweet crude for May delivery traded $3.24 lower, or 3.2%, at $99.30 a barrel on the New York Mercantile Exchange. The May contract is trading for the first time as the front month. Brent crude on the ICE futures exchange traded $2.44 lower at $98.30 a barrel.

    April crude settled $4.94 lower on Wednesday, in the contract’s final day of trading. The May contract also declined $5.96, or 5.5%. The dollar firmed overnight against the euro, supported by speculators exiting from commodities positions, and the strengthening U.S. currency in turn only convinced more investors to get out of oil.

    Futures are receiving little support from supply and demand fundamentals, either. U.S. equities dropped Wednesday, as strong earnings from several large brokerages failed to erase concerns about the financial sector raised by the buyout of Bear Stearns Cos. (BSC) earlier in the week. The Department of Energy also released data Wednesday showing a small build in oil inventories, which on the Gulf Coast have reached a five-month high.

    The “combination of weak market fundamentals and likely negative economic news flow will likely heighten the risk of speculative sell-offs,” wrote analysts with Goldman Sachs (GS).

    The question facing traders is how much lower crude has to go, especially since past dips were instantly erased by bargain hunters jumping into the market, said Michael Zorn, president of Skokie Energy, a Princeton, N.J.-based brokerage.

    “Right now the first order of business for the market is seeking a level of support, I don’t know if it’s here,” he said. “We haven’t been down here for a while.”

    Jim Ritterbusch, president of a trading advisory firm, sees support at $98.50 a barrel — but he cautioned that price movements will become increasingly unpredictable if the rally is truly fizzling.

    “The market has moved into a new phase in which volatility will be the order of the day with daily price swings of $3-$4 .. becoming increasingly common,” he wrote.

    Front-month April reformulated gasoline blendstock, or RBOB, recently traded down 3.58 cents, or 1.4%, at $2.5245 a gallon. April heating oil traded 6.27 cents, or 2.1%, lower at $2.9540 a gallon.

    —By Brian Baskin, Dow Jones Newswires

  13. 13
    Denise Says:

    Also bp-has 5.5% yield!

  14. 14
    zman Says:

    Sane – any thoughts on the truckers, last time I checked with you the group was still on your avoid list?

    ZTRADES: Out UNG March $43 puts for average $0.55, down 55%

    Out UNG April UNG $45 puts for $3.30, up 33%.

  15. 15
    zman Says:

    Refiners trying to run again, favorable broker comments and gasoline not having nearly as bad a day as oil. I’m not playing there yet although it could get that small bounce referenced in the post…after that I’m short.

    Hear ya on a sale denise, wife’s the same way with shoes. Got a double in my APA this morning but I can’t claim it if I don’t send out the blast.

  16. 16
    Denise Says:

    My fingers could not move fast enough

  17. 17
    Denise Says:

    I think the Hedge fund selling/buying of baskets really whips the holdings around-creates angst and opportunity

  18. 18
    uop Says:

    z:

    NG moving down, resistance at 8 ? mabe selling UNG ????

    oil: ???, tough to see a resistance

  19. 19
    uop Says:

    Z;

    my UNG puts at 46 are ready to sell ??

  20. 20
    zman Says:

    uop – took most of my UNG puts off the table in #14.

    oil – agreed tough, looks like somebody wants it to stay trip digits as there have been several efforts to get it back over the market. Probably see some geo-political craziness next week and if it truly tumbles (to say $95), bet you OPEC takes 500,000 bopd of the market.

  21. 21
    zman Says:

    Took a little SU for the same reason expressed in #10 – just too far, too fast down action, much worse than the commodity and in this name, it never got credit for the move over $100, in my opinion anyway.

  22. 22
    uop Says:

    z; do you see further fall in NG jutifying to keep UNG april 45 and 46 or roll ?

  23. 23
    reefguy Says:

    NG inventories down 85

  24. 24
    zman Says:

    uop – I think they fall further but the commodities felt bouncy and I can play it again next week or so I bailed.

  25. 25
    zman Says:

    thanks Reef. that may give gas a little reprieve.

  26. 26
    zman Says:

    Note to subscribers: I’m doing a few small day trades today b/c frankly I think the move down in the group is overdone. Take care in doing so. Though rules vary from broker to broker, 3 day trades in a 5 day period can get you labeled a pattern day trader at some firms. This is no big deal for anyone meeting the firm’s minimum margin requirement for your brokerage. However, if you don’t meet this requirement, this can get your account frozen until you talk with your firm and promise not to do it again. Annoying and like I said, it varies from firm to firm but something to be mindful of. That and that daytrading is not my normal game and extremely risky

  27. 27
    md Says:

    An interesting observation. TY accumulated HDD is a drop lower than LY YET
    TY accumulated draw is 2145 for the season LY 1925. A reduction of 220 TCF. This would seem to indicate a lower supply or higher demand likely in electricity. Do these numbers agree with yours and is there any significance.

  28. 28
    md Says:

    Sorry Reduction should read Increase of 220

  29. 29
    zman Says:

    out of that APA dt, $0.80 to $2.95, last you’ll hear of it.

    md – Supply is higher, not lower. The increase draw down is attributable to periods of colder than normal and or periods of normal weather. Over the last 10 years, a normal winter has become something of a rarity. Looking at electricity, yes that too played a part, the numbers I watch from Edison Electric Institute have generally shown a 1 to 2% increase relative to last year. When we enter the shoulder, the pace of injections should be faster than last year. Supply is probably up 2 Bcfgpd YoY, (4 Bcfgpd higher production, 2 Bcfgpd lower imports)

  30. 30
    zman Says:

    The rumors of oils demise are, it seems, premature. $101.40 and climbing.

  31. 31
    zman Says:

    ZTRADE: Added HK April $17.50 calls for $0.80. Still hold a good sized position in the April $20s as well. The stock is off with the group despite the improving fundamentals and pending well news (next week or two) on a couple of horizontal tests that could propel further increases in production guidance and the stock northwards.

  32. 32
    scoop006 Says:

    Z RE #29 APA. Congrats, my kind of trade although I did not participate sitting with Aprils

  33. 33
    zman Says:

    out of the SU for a double this morning. Looks like pinning action is setting in.

  34. 34
    md Says:

    The accumulated Gas HDD is showing lower TY than LY so the draws should be less not more.

  35. 35
    zman Says:

    scoop – you know I’m not the best day trader so it must not be that hard today, lol. getting back a little on the whacking I took the last two days.

    md – ah, not necessarily. If you look at HDDs in different months, they have what I call different energy intensity values. While a HDD is an HDD is an HDD for scientific measurement purposes, you will get different sized draws in December with 500 Hdds than you will in February with 500 Hdds. I used to test this in a former life with the monthly residential and commercial consumption data from the EIA.

  36. 36
    zman Says:

    See this link for why I’m saying supply is up.

    http://zmansenergybrain.com/2008/03/06/thursday-night-gas-review-plus-some-gas-supply-thoughts/

  37. 37
    zman Says:

    ZTRADE: Out $115 APA March calls for $0.05, a 95% loss.

  38. 38
    Sambone Says:

    Uncle Phil

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

  39. 39
    zman Says:

    Done with day trades today, pinning action definitely setting in.

    Re uncle Phil…yes, he’s positively gloating, having declared a top in oil in December at 97 I can see why, LOL.

  40. 40
    Sambone Says:

    Are US Oil Fundamentals Back With A Thud?

    By DAVID BIRD
    A DOW JONES NEWSWIRES COLUMN

    NEW YORK — With the whiplash intensity of a roller-coaster ride, Nymex oil futures fell sharply Wednesday, leaving a dizzied market to ponder whether bearish fundamentals are reasserting themselves.

    In a frenzied run, to a record near $112 a barrel this week, the market this month has set aside worries over bloated pre-season gasoline stocks amid weak demand.

    Ironically, Wednesday’s sell-off came as latest U.S. market data shows refiners are reacting to poor fundamentals, a situation would could quickly spur a rebound in prices.

    Position-squaring related to the April crude expiration may have muddied the signals from Wednesday’s decline, but it’s worth noting that the May contract fell by $1 more than April on its last trading day.

    Nymex April crude oil futures expired at the settlement down $4.94 a barrel, or 4.5%, at $104.48 a barrel. That capped a wild run this week which saw the contract set an intraday record of $111.80 a barrel, before ending $4.53 a barrel lower on Monday. That was followed by a 3.5% recovery Tuesday, before being pushed below $103 a barrel Wednesday.

    Most of the action, though, was in new-front month contract May, which shed nearly $6 a barrel to settle at $102.54.

    The forward market took a pounding, too, Wednesday. Just the front five contracts (four if April is excluded) settled above $100 a barrel, compared with all 75 listed contracts through December 2016 on Tuesday.

    U.S. crude oil stocks rose by just 133,000 barrels in the week ended March 14, the Energy Information Administration said, compared with an average of forecasts calling for a rise of around 2.1 million barrels.

    In the past 10 weeks, crude stocks have gained by 10.2%, or 28.9 million barrels, to 311.759 million barrels, the middle of the average range for this time of year and 3.7% below a year ago.

    Refiners Cut Runs
    Refiners cut crude oil processing in the latest week by 1.3%, or 195,000 barrels a day, to 14.427 million barrels a day, a 13-month low. So far in March, runs are averaging 14.525 million barrels a day, about 285,000 barrels a day less than the 14.81 million barrels a day that EIA projects for the full month.

    Crude oil imports were slashed by 10.2%, or 1.08 million barrels a day in the week, to 9.468 million barrels a day, in response to lower runs either due to planned and unplanned outages or reductions spurred by weak margins.

    Current crude oil inventories cover 21.6 days of refinery demand at current rates, nearly one day higher than the five-year average, EIA data show.

    With lower crude runs, gasoline output fell 352,000 barrels a day, or 3.9%, in the week 8.678 million barrels a day. That’s the lowest level in nearly 11 months, dating to April 20, 2007.

    Although peak gasoline-demand season is two months away, the week-to-week gasoline output drop was the type usually seen at the end of the season. The drop was the most in any week since Sept. 29, 2006.

    Gasoline stocks fell by 1.5%, or 3.447 million barrels in the week — the first decline since Nov. 2, 2007 — but are still near their highest levels for this time of year since 1993. At 232.5 million barrels, stocks are sufficient to cover 25.6 days of current gasoline demand. That’s 9.7% above the five-year average level of cover, which is 23.4 days.

    Despite high stocks and sluggish demand, record high crude prices are keeping retail regular gasoline prices near their highest-ever levels. The national average price of regular gasoline is $3.279 a gallon, just 0.6 cent below the record set Sunday, AAA Fuel Gauge Report said Wednesday. The price is 72.3c above a year ago.

    Gasoline demand in the latest four weeks dipped 0.1% from a year ago, to 9.08 million barrels a day, EIA said. While that decline might not seem large, it is the first drop in four-week gasoline demand since Oct. 19, 2007.

    Demand Lags Year-Ago Level
    Total oil demand in the latest four weeks was down 3.2% from a year ago, at 20.259 million barrels a day, the weakest level for any four-week period since Jan. 26, 2007, EIA data show.

    Nymex gasoline futures prices fell 9.97 cents a gallon, or 3.7%, to $2.5603 a gallon Wednesday, after wild up/down swings of more than 6% in the previous two days.

    Nymex heating oil futures settled 12.12c, or 3.9%, lower Wednesday, at $3.0167 a gallon.

    Thursday marks the first day of spring, usually the end of the heating oil season, but stocks are fairly tight, leaving price exposure to continued cold weather.

    Distillate stocks (heating oil/diesel) fell 2.91 million barrels, or 2.5%, in the latest week to 113.49 million barrels. That’s the lowest level for any week since June 24, 2005, and also the lowest for this time of year since 2005.

    In the Mid-Atlantic states, where the most heating oil is consumed, stocks dropped 10.3%, or 2.347 million barrels, to 20.404 million barrels, the lowest since June 17, 2005, and also the lowest in March of 2005. Distillate stocks are “in the lower half of the average range for this time of year,” and are 6.7% below a year ago, EIA said.

    Lower refinery runs cut distillate output by 2%, or 80,000 barrels a day, in the latest week, to 3.811 million barrels a day, the lowest since April 21, 2006.

    Heating oil futures trade as a proxy for diesel fuel, which is trading at a record high of $4.025 a gallon nationwide, according to AAA, 46.7% above a year ago.

    EIA said in a separate report that 2007-08 heating season is likely to be the costliest ever, with residential heating oil prices averaging 36% above a year ago.

    “With the spring equinox arriving (Thursday), heating fuels consumers may finally look forward to better weather before long, and along with it, some respite from record prices,” EIA said. “However, heating needs particularly in the Northeast, can persist through April, keeping pressure on markets for a bit longer.”

    Global Fundamentals Supportive
    Analysts at Barclays Capital in London said Wednesday they have marked their crude oil prices to market, and now expect U.S. benchmark West Texas Intermediate crude oil to average $100.80 a barrel this year, up from the earlier estimates of $97.70/bbl.

    While U.S. fundamentals may look sloppy, the global outlook is more supportive for prices, they said.

    “Even a full-blooded move down should bottom somewhere in the mid-$90s at worst, short of something significant visibly, suddenly and unexpectedly breaking within the current global supply and demand dynamics,” they said. “We still see global oil demand growth as robust and likely to exceed the rate of 2007, and we still see non-OPEC supply as disappointing dramatically relative to general expectations.”

    The chief executive of Mexico’s state oil company, Petroleos Mexicanos (Pemex) said Tuesday the nation’s proven hydrocarbon reserves fell 5.1% last year to 14.7 billion barrels of oil equivalent. Pemex replaced proven reserves at 50% rate last year, up from 41% in 2006, but well below the 100% target rate.

    —By David Bird, Dow Jones Newswires;

  41. 41
    zman Says:

    Should have had RIG / DO in the service co’s I’m looking at owning post holiday. This little dip in oil does nothing to affect their business yet they’ve taken a sizable whacking.

  42. 42
    Denise Says:

    Z-Cramer posted an interesting column on dividends this am (how important in this environment)
    He also mentions EPD and that he thinks the reason there has been endless selling-some hedge fund borrowed in repo mkt and bought for yield differential-they are now unwinding
    Makes me think EVEP might be the same
    I am buying both this am(well more of EVEP)
    Your opinion-seems like it could be opportunity

  43. 43
    zman Says:

    D – That sounds very plausible. Like I said, thought I was missing something here as the fundamentals appear sound. May take a little for the kid’s account … didn’t take V šŸ™

  44. 44
    uop Says:

    EVEP has bad chart nand very low trading volume.
    Good luck

  45. 45
    zman Says:

    Weekly EVEP chart looks like good support here, massive volume in most recent week and the move seems to be close to done. Other TA thoughts on this appreciated.

  46. 46
    QUARRYMAN Says:

    Z.

    I looked at your projected earnings chart of the coal cos.

    WLT looks pretty good, huh?

    Q.

  47. 47
    zman Says:

    uop – re EVEP, I agree the daily looks ugly, may need to watch and let it settle but to me $20-22 kind of looks like the low. Distribution here is safe at least through 2008; long reserve life, low cost production, nice hedges through 2010 with majority of production in costless collars with floors above $8. Their distribution growth may slow if they are not able to continue to make cheap acquisitions but the with a yield now north of 10% I think its interesting for a certain kind of account.

    Q – RE WLT looks that way, yes. Kind of depends upon your thoughts in housing and financial (don’t know how big those are relative to coal there)

  48. 48
    Denise Says:

    EPD -looks just as good-steady volume
    Cramer would not make a public post on his site unless he knew something
    I bought EPD also

  49. 49
    ram Says:

    CHK is acting relatively well compared to the others. APR 45’s?

  50. 50
    zman Says:

    EPD is a midstream energy company. Not my bag baby but good luck! I try to stick to the guys who find it, not move it but that’s just b/c I’m a complete neophyte when it comes to what makes transmission companies tick.

  51. 51
    Denise Says:

    -Cramer has also been touting BP as a good buy because of the div and new CEO who is going to sell assets- look at the correction it’s made
    Z-will you take a look and your opinion when you have time?
    Yield is %.5%
    I am buying

  52. 52
    Denise Says:

    Whoops 5.5%

  53. 53
    zman Says:

    Ram – I’m going to let the 3 day weekend’s TMV go by the wayside before making further purchases but I like the name a lot as you know. Only reason I took more HK was that news could be any day now to two weeks out.

    D – will take a look at BP from a 10,000 view over the weekend (relative valuation and a little more). Pretty complex story, lots of moving pieces and I have a bad habit of buying them and losing money. My fault, not theirs. You gotta like a company that PRs its bought back shares on a daily basis. There are some fellas who subscribe who probably have a better opinion on it than I can offer, hopefully one of them will speak up.

  54. 54
    Denise Says:

    Thank you-would appreciate anyone’s
    input

  55. 55
    cadillac Says:

    CIT Halted From Trading Pending Statement, NYSE Says (Update1)

    By Erik Holm and Shannon D. Harrington

    March 20 (Bloomberg) — CIT Group Inc. was halted by the New York Stock Exchange after the shares slumped as much as 42 percent on concern the finance company may lose access to short- term funding.

    This should make the afternoon interesting!

  56. 56
    zman Says:

    Caddy – more fun and games in the financials.

  57. 57
    Sambone Says:

    C – Margin calls come in at 2 PM.

  58. 58
    zman Says:

    Wow, nat gas up $0.15 to $9.16 now.

  59. 59
    uop Says:

    z:

    is it getting cold again up north: UNG

  60. 60
    Dman Says:

    Just took some August 50s in NOV. Why doesn’t that thing have LEAPS??? They think it doesn’t have a future past August?

    Also bought back the top end of a spread in April OII calls. Coulda, shoulda, woulda taken the EOG at $105. Damn.

    Still, can’t anyone say that energy doesn’t let you in šŸ™‚

  61. 61
    zman Says:

    Hear ya D, I’m sitting out the day.

    Obama saying he would use the SPR as a weapon vs price.

    Also said he would crack down on “any competition lapse that resulted from big mergers”. Scary. Sounds like he might try to break up the Majors.

  62. 62
    zman Says:

    “massive rise seen in Nigerian pirate activity in recent weeks”

    http://news.yahoo.com/s/csm/20080320/wl_csm/opirates

  63. 63
    uop Says:

    Z;

    I believe I saw a comment about pinning: like to refresh

  64. 64
    Dman Says:

    Z, re 60: just a nibble, not jumping in all at once.

    Just noticed that FTI actually hit the $50 mark that I mentioned a few weeks back as a downside target. But that was more than $3 ago. Yeesh. Note to self: start day-trading or remember to place some absurd limit orders before the open..

  65. 65
    zman Says:

    this is pinning action.

    oil down less that a buck by the way…don’t call it a comeback!

    ng only up a nickle

  66. 66
    zman Says:

    D – I can’t do the day trade thing in general. Got lucky with a couple to day but ordinarily I get popped trying that game.

  67. 67
    zman Says:

    uop – were you looking for my def of pinning? if so it is on the definitions tab at upper left

  68. 68
    zman Says:

    ng back to the red zone and below $9; suppose I should have shorted more but early next week I’d think oil gets a bounce which will likely drag gas up a little, then I’ll be back in. Still think we got visit $8.

  69. 69
    Dman Says:

    Cramer thinks that the service names are being batted about by hedge funds, which I think is fairly clear. They are certainly helping to ensure that the charts look freakazoidal… but I’ve kinda decided to embrace the weirdness.

  70. 70
    zman Says:

    Majors starting to put on a move now but its mostly just related to up 215 on the dow.

    I’ll be looking back to service next week. The SLB / HAL spread has narrowed significantly. I’m seeing reports touting HAL due to its natural gas level but there has also been a string of estimate reductions there of late that I cannot explain. If service does decide to start improving I might even dip a toe in SLB. Wyoming will probably comment on that tonight, lol.

  71. 71
    zman Says:

    busy week on the economic news front next week.

    http://www.marketwatch.com/tools/marketsummary/calendars/economic.asp?x=0

  72. 72
    zman Says:

    APC to host investor conference on Tuesday

  73. 73
    apbd Says:

    I’m long many commodity ETF’s, GLD, etc. I just put tight stops on all of them. It looks like the herd is leaving them so I’m looking for protection. Who knows?
    apbd

  74. 74
    dmh Says:

    Denise and Z. RE EPD, EVEP. TPP, etc.

    I listened to Cramer’s video (see below). When he’s being serious and calm he can make a lot of sense. A day or so ago we wrote about why hedge funds would buy dividend stocks, he explains exactly why they have been doing this.

    Denise: I’ve owned EPD for a couple of years, it hasn’t done much except the dividend and an occasional covered call (not much premium)

    Agreed re EVEP, should be close to a buy (famous last words!)

    http://www.thestreet.com/_yahoo/video/cramermarketupdates/10408718.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA#10408718

  75. 75
    zman Says:

    A – you can either sell, go with enough puts to cover on the same ETF to hedge ut your risk or go with the 2x negative funds like a DUG if you want to try and make excess gains on the way down. I’d just add that everyone seems to be certain commodities are dead, I think that’s premature.

  76. 76
    jy Says:

    We hear a lot about “Resource plays”, long lived low volume capital intensive oil and gas extraction. But the US Gulf of Mexico w/its high rate of return and big production volumes per well is still alive and kicking.

    The last 2 Central GOMEX federal lease sales (Oct 2007 & March 2008)resulted in $6.508 Billion in high bids for tracts in the area offshore Louisiana. $3.677 Billion for high bids in yesterday’s sale #206 alone. This was the largest dollar volume in Offshore GOMEX history. This despite an increase in federal royalty (tax)to 18.75 percent from 16.67 percenton all oil and gas produced from the new leases.

    The top five (of 85 total) companies submitting the highest dollar amount of total bids for Sale 206:

    Company Number of Total Bids submitted
    Sum of Total Bids submitted

    Hess Corporation 42 $531,196,402
    Cobalt International Energy, L.P. 65 $450,798,265
    Chevron U.S.A. Inc. 79 $444,465,426
    ConocoPhillips Company 36 $422,953,500
    BP Exploration & Production Inc. 94 $417,299,744

  77. 77
    apbd Says:

    Thanks Z.
    Have a great Easter all.
    apbd

  78. 78
    uop Says:

    Happy Easter,

    txs for all help

  79. 79
    zman Says:

    Happy Easter Guys!

    Jy – Thanks. APC did well as well in the Miocene trend. Need to take a look at some of those high bid blocks in the central gulf (Green Canyon, in relation to prospects)

    Does anyone have one of those giant lease block maps of the GOMEX they could send me? I’m looking for one of the ones that color coded by operator with discoveries annotated. My last one is from Vastar (just a little out of date at this point). Free month on the site in it for you if you’ve can send what I’m looking for. Much appreciated.

  80. 80
    sane Says:

    Happy Easter all!

  81. 81
    texana Says:

    unwind begins, long $usd, short oil & comds. support for $wtic 99.05 then 87.75. t

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