10
Apr

Thursday – Gas Preview & Oil Review

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In Today's Post:

  1. Holdings Watch - yesterday was another busy one...today look for more of the same April expiry selling
  2. Commodity Watch - Natural gas on tap for 15 Bcf storage withdrawal but Independence Hub leak probably outweighs anything but a surprise draw on stocks.
  3. Commodity Watch - Review of the crude oil numbers. Yesterday was all about the imports (which fell causing a surprise dip in crude inventories. Imports are likely to do an about face next week but for now, crude is running on technical strength, weak dollar fears, and generally bullish commodity environment
  4. Odds & Ends - Analyst Watch - Goldman upping HAL and I'll most probably go back in for a quick trade and for a position for 1Q results. 

 

Quote of the Week Watch: In response to mounting food riots: 

Protests may spread as falling supplies caused by crop failures and greater use of grains for biofuels stoke inflation globally, the United Nations Food and Agriculture Organization said today. ~ Bloomberg.

It's going to be a long hot, angry inflation beset summer. Good luck to you if you're in retail, airline, trucking, food production etc, etc, etc. 

Holdings Watch: Another busy day...made good progress on my "exit April positions soon" plan. I'll continue to remove more April positions today.

CALLS:

  • (HK) - Sold the last of the HK $17.50 April Calls (HKDW) for $4.80, up 500%. First batch was sold on 3/27 for $2.75. Still hold May and June calls here.
  • (CHK) - Sold the April $47.50 Calls (CHKDS) for $1.70, up 31%. Still holding the April 45s (but not for long) and the May $50s.
  • (NBR) - Sold the remaining April NBR $35 Calls (NBRDG) for $0.90, up 55%. First half was sold for $1.25 last week. Continuing to hold the May $35 calls.
  • (SU) -  Bought the April $110 calls (SUDB) for $0.85 for a fast, pretty risky trade. Sold half for $1.40, up 65%.
  • (PQ) - May $17.50 calls (PQEW) added for $2.00. Positioning for their 1Q call. Still holding the May $20 calls and I’m not expecting a big, quick pop here.

Commodity Watch:

Natural Gas zoomed in the early morning hours of yesterday on yet another cooling in the weather forecasts (I keep reminding myself that they stopped calling it "global warming" and switched to "global climate change" for a reason), an increase in expected tropical activity by Colorado State (they were very wrong the last 2 years), and the shuttering of nearly 1 Bcfgpd after a leak was coming from the export line of the Independence Hub (APC's biggest ever Gomex gas production facility). This induced short covering at any price and gas closed up $0.36 to $10.06. This morning gas is trading $0.15 to $0.20 higher on I-Hub fear follow through and prices have now broken the $10.21 level needed to sustain the down trend. In trader's minds the leak at I-Hub is the last straw.  

  • Independence Hub (I-Hub) Update: The leak is located in 85 feet of water in a flex joint and the partners estimate repairs will take 1 to 4 weeks. At the time of closure, the facility had been producing 0.9 Bcfgpd (almost 2% of total U.S. production) so we're looking at injections being short of where they would have been by about 7 Bcf per week potentially for the next 4 reports after today's report.
  • UNG Put Watch: I still hold the (UNG) natural gas ETF puts at $44 and $45 and at this point, they're pretty much toast. I will wait to see Monday's forecast and salvage what I can early next week. The thesis that increased domestic supply will prompt a faster than usual early rebuild season is becoming more widely published (I've seen several analysts talking about gas price nervousness) but those voices are easily outshouted by the shuttering of I-Hub and evidence of fast paced Spring season storage rebuild will be delayed by it and by colder that expected Spring weather, and flat lining LNG.

EIA Gas Storage Report Preview: 

  • My Number: 5 Bcf withdrawal, +/- 5 Bcf. This is paired against a build of 33 Bcf last year and an average build of 20 Bcf over the last 5 years.
  • Weather: It was colder last week than in the year ago period and colder than normal.
  • Imports are still running 2 Bcfgpd light to year ago levels (while gas production, has been running about 4 Bcfgpd higher). Next week if Independence is still off line that drops to 3 Bcfgpd YoY surplus.
  • Street Consensus: 15 Bcf.  I think only a surprise withdrawal or a much warmer revision to the forecast would have a dampening impact on natural gas prices at present 

Crude Oil: Crude shot the moon rising $2.37 to close at $110.87 after the EIA reported an unanticipated decline in crude inventories and bigger than expected drawdowns of gasoline and distillate stocks. The dip in crude stocks was entirely related to a dip in imports and that is very likely to reverse itself next Wednesday which in a vacuum would lead to a softening of crude prices but commodities are on a tear and just like last week's large build, oil prices may be set on "ignore near term bearish data". For what it's worth, the API published highly contradictory numbers but no one took notice. This morning crude is trading $0.50 to $1.50 higher based on further dollar weakness fears, technicals, and a generally swelling commodity market bullishness.

EIA Inventory Report Review:

In yesterday's post I wrote that we faced a double edged sword going into the oil inventory report with both edges likely to auger for higher crude prices.

  • The first edge of the blade was the potential for a dip in imports from last week's peak level high...if this fell off I said we could be in for a smaller than expected build. Imports did fall and crude inventories fell as well.
  • The other side of the argument was that gasoline demand would remain high enough due to the lingering Spring Break driving season to prompt a bigger than expected draw on gasoline stocks. Mission accomplished there too although gasoline prices were a contributing factor to higher crude but didn't in fact drag it higher.
  • Oil hit record levels following the report and it may continue to seek out big round number levels ($115 is likely and then the headline grabber $120 Oil!). However, next week's data is likely to include yet another swing in the imports pendulum (back towards higher levels) and I expect a large build in crude inventories next week as refiners, though slightly busier last week, aren't exactly burning the midnight oil (sorry, but really, they aren't).

What's The Point Z? Why track all the following charts? This is a question I occasionally get and I'll tell you its simply how I attempt to keep track of a pretty complicated picture. In a nutshell, I track all the charts to determine where I think prices are going and where I think the relationship between crude and products prices is headed. For a little while now, I've been tempted to dip a toe back into the refining segment but I've been staying away because the inventory overhang in gasoline has led to a disassociation between gasoline and crude prices as seen in the chart below: (click on the chart below if it's too wide for your screen).  Oil is black, heating oil is red, and gasoline is blue.

 

crude-vs-gas-vs-ho-040908.jpg

Normally, crude and products track each other pretty nicely (see left half of chart) but as demand for gasoline eased from last year's record levels (see demand chart in the gasoline section below) you can see a divergence form in early February. Only the lingering cold weather has allowed heating oil to somewhat offset the pain delivered to refiners by this widening crude-gasoline spread.  If the independent refiners can maintain their cartel-like stance on utilization for a few more weeks we may see a continuation in crack spread improvement with wholesale gasoline prices rising even in the event of an easing in crude prices. But for now the jury is still out and yesterday's report showed a slight bump in utilization. If I dip toe, it will be in either (VLO), (TSO), or (FTO) and it will be my little one.

So Where Do You Stand On Crude Prices Now? Right now I continue to think we will trade in $90+ environment for quite some time. Short term we may see a test of $115 and even $120 but that's likely not sustainable beyond a week long spike. A sub $100 environment is more healthy for trading the stocks as at these levels, they begin to all rise regardless of individual company characteristics which brings in even more "hot money" to the group which increases volatility as hot money doesn't get attached or know much beyond the ticker and that the company produces oil or gas. The problem with hot money is that bangs into and bangs out of positions with abandon so if financials are suddenly the trade, the rotation out of the sector can be quite ugly. 

The Storage Table:

exp-vs-act-040408aaa.jpg

CRUDE OIL: Unexpected Decline In Inventories. It was all about the imports and, to a lessor extent, slightly higher crude demanded by refiners.

Utilization still low but edged back up to 83%. This resulted in a modest increase in oil consumption as seen in the second graph below. Were the refining complex to increase throughput back to something approaching seasonally normal levels it would add 1 mm bopd of demand to the current equation. That's a net 7 mm barrel swing on a weekly basis that could easily be added to demand but it will take time (probably not until June). The refiners aren't losing money... they're just not making a lot but they will only be willing to stay off-line so long, after all, what good is a higher crack spread if you're not cracking anything? I suspect we're seeing the bottom for the refining group in terms of stock price action.

util-040408.jpg

Imports Extreme Volatility Continues:  Oil imports plunged nearly 1.4 mm bopd to 8.9 mm bopd last week. This alone would have caused a whopping shift of 9.6 mm barrels on the storage number. Next week you can almost certainly expect another bounce which will likely offset gradually ramping refiner throughput demand. 

crude-imports-040408.jpg

Crude Storage: Should see a bounce back next week with a more normal imports number. Whether this has any softening impact on crude is hard to say. That big spike 2 weeks ago resulted in a $5 up day.

crude-stocks-040408.jpg

 

Gasoline Demand Remained Elevated on Lingering Spring Break Demand. Demand ran down 2% versus the year ago week as higher and higher prices are causing, get this ... conservation on the part of motorists.

gasoline-demand-040408.jpg

Gasoline Stocks Remain Elevated But The Velocity of the Drop is What Is Moving Gasoline Prices (and oil) Higher. We've gone from being able to say "gasoline is at 15 year highs to gasoline is 8% above year ago levels. This is a psychological change not lost on traders. 

gasoline-stocks-040408aaa.jpg

The EIA's Chart May Actually Demonstrate The Shift A Little More Dramatically. 

gasoline-stocks-eia-version-040408.jpg

DISTILLATE: Normally distillate stocks would be becoming less important this time of year but prices of diesel and heating oil continue to rally and demand remains strong while production remains soft.

Storage Chart: Moving towards the lows.

dist-stocks-040408.jpg

Odds & Ends

Analyst Watch: Goldman ups (HAL) to buy, cuts (WFT) to neutral and reiterates (SLB) as top pick. Lehman cuts (LNG) to equal from over-weight (better late than never I guess). (PTR) cut to sell at Citi, 

Housekeeping Watch: I added a ZEB stocks tab at upper left on the site. I used to put this table at the bottom of the holdings tab (now relabeled options ) but I rarely updated because I rarely do a trade. Also from it, you can see why I don't often talk about the many penny stocks in the sector. I've been burned by single digit midgets more times than I care to count and there they are in all their lack of glory.  What's that saying? "Cheap for a reason?"

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

  1. 1
    Sambone Says:

    6:09 am EST

    Crude Up $1 As Dollar Falls

    By Nick Heath
    Of DOW JONES NEWSWIRES

    LONDON — ICE Brent crude futures reached new record highs in London Thursday, climbing more than $1 on further weakening in the U.S. dollar and supported by strong distillate prices.

    Prices advanced from their record closes Wednesday that followed U.S. government oil inventory data revealing surprise drops in U.S. crude, gasoline and distillate stockpiles.

    At 0949 GMT, the front-month May Brent contract on London’s ICE futures exchange was up $1.18 at $109.65 a barrel.

    The front-month May light, sweet, crude contract on the New York Mercantile Exchange was trading $1.07 higher at $111.94 a barrel.

    The ICE’s gasoil contract for April delivery was up $37.75 at a record $1,062.50 a metric ton, while Nymex gasoline for May delivery was up 299 points at 280.41 cents a gallon.

    —By Nick Heath; Dow Jones Newswires

  2. 2
    Sambone Says:

    C has WTI at $96 in 08, $88 in 09, and $75 in 10. FYI

  3. 3
    zman Says:

    Thanks, everyone is moving their 08 numbers up. Many of the smaller houses now at $100. Some are taking their 09 numbers into the $90s as well.

  4. 4
    zman Says:

    HAL probably gets a pretty good pump from the Goldman upgrade. Been waiting for a pullback since my exit and it just won’t come…will take a trade here in near the money April calls this morning and on any decent pullback, some May’s as well.

  5. 5
    texana Says:

    what is your take on sd move?

  6. 6
    zman Says:

    Texana – re SD have not tracked down much of anything to explain the jump. Just happy to hold the shares for the long term.

    was too cheap on HAL, waiting for the first flippers of the day to bring it in a bit now.

  7. 7
    reefguy Says:

    sd up another 1.50

  8. 8
    zman Says:

    ZTRADE: Out CHK April $45 Calls (CHKDI) for $4.40, up 120%. Just cleaning the out the Aprils on strength.

  9. 9
    zman Says:

    Note to new folks. This site is fully searchable. See the little box at upper left. Also, there a number of short to medium length write ups on the reports tab that give a good background on many of the common commented on names around here.

  10. 10
    zman Says:

    HAL now below opening level. May start to bounce soon. Very close to taking a day trade here.

  11. 11
    Sambone Says:

    9:22 am EST

    Nymex Crude Down After Nearing Record Overnight

    BY BRIAN BASKIN
    Of DOW JONES NEWSWIRES

    HOUSTON — Crude oil futures are trading slightly lower after approaching the day-old record high overnight on the weakening dollar.

    Light, sweet crude for May delivery traded 32 cents, or 0.3%, lower at $110.55 on the New York Mercantile Exchange. Brent crude on the ICE futures exchange traded 10 cents lower at $108.37 a barrel.

    Futures climbed as high as $112.20 in electronic trading overnight, just one cent below the record set Wednesday. The move came as the dollar hit a record low against the euro, its first since March 17 — which was also the date when the previous all-time high for crude was set. The euro recently traded at $1.5842, from a high of $1.5914.

    Crude was down slightly as pit trading opened, however, and some analysts did not foresee prices heading much higher before the current rally fizzled. Although oil has been influenced by the dollar and the surprise inventory draw, the worsening U.S. economic picture provided a counterweight, said Addison Armstrong, an analyst with Tradition Energy in Stamford, Conn.

    “With demand depressed and likely to fall further in line with the slowing U.S. economy, it is questionable just how long prices can remain at these lofty levels,” Armstrong said.

    Although weekly U.S. oil and product inventory data showed larger-than-expected draws across the board, the declines were a result of an extremely low refinery utilization rate and low crude imports, rather than any surge in demand. First-quarter U.S. gasoline consumption is down 0.6% from the year before, according to the U.S. Energy Information Administration.

    Others saw crude heading higher this week, however, with demand from the rest of the world making up for slower growth in the U.S. Unexpected strength in heating oil futures — which normally fade from view as temperatures rise — is providing some support in addition to the dollar, said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Ill. Strong demand from Europe and Asia, which has prompted some exports from the U.S., is helping keep heating oil relevant, he said.

    Both heating oil and reformulated gasoline blendstock, or RBOB, futures set new records Wednesday, in addition to Nymex and Brent crude.

    “New record highs in heating oil essentially keep this bull move alive and several more dollars to the upside in the crude futures should not be ruled out,” he said.

    Front-month May RBOB recently traded down 1.19 cents, or 0.4%, at $2.7623 a gallon. May heating oil traded 4.69 cents, or 1.5%, higher at $3.2814 a gallon. Heating oil set a record in electronic trading, at $3.3204 a gallon.

    —By Brian Baskin, Dow Jones Newswires

  12. 12
    Sambone Says:

    Saudi Won’t Dump Oil On Market

    Dow Jones Newswires

    PARIS — Oil Minister Ali Naimi said Thursday Saudi Arabia won’t put extra crude onto the market to take advantage of high prices as the Organization of Petroleum Exporting Countries’ data head warned its monthly oil market report due Tuesday would show weaker-than-expected demand.

    “I’m not going to dump oil into the market,” Naimi told reporters at a Petrostrategies oil summit in Paris.

    “If there are buyers, then we will sell him more oil,” Naimi said. “From my perspective, I believe the market is well supplied. Inventories are building…the world is producing more oil than is being consumed.”

    Saudi Arabia is OPEC’s largest producer.

    Oil in New York Wednesday hit a fresh record high of $112.21 a barrel, helped there by U.S. oil inventories data showing unexpected falls in crude and product stocks.

    Global oil demand is weakening, and OPEC’s customers aren’t asking for more crude, the group’s head of research, Hassan Qabazard, said on the sidelines of the same event.

    “We sell oil to customers who ask for it and there are no customers asking for it…why should we increase production? There has not been any increase in demand and in fact it’s falling,” Qabazard told reporters, adding that the data was contained in the 13-member producer group’s next monthly oil market report due Tuesday.

    He said inventories cover is adequate and remained above the five-year average.

    Nobuo Tanaka, the executive director of consuming nations’ energy watchdog the International Energy Agency, continued to sound the alarm over data transparency and investment.

    Speaking at the same conference as Naimi, he said current oil prices were too high and “a lack of (data) transparency aggravates volatility.”

    He reiterated the agency’s long-held view too little spare oil-producing capacity, insufficient inventories cover, subsidies, and a mismatch in refining capacity are among the factors behind such high oil prices.

    In its most recent monthly oil market report, the IEA said that world oil supply in February climbed to 87.5 million barrels a day, with demand in the first three months of this year averaging 88 million barrels a day. A new report from the IEA is due Friday.

    Earlier in Beijing, Qatari Oil Minister Abdullah bin Hamad Al Attiyah said OPEC is unable to influence current record high oil prices.

    “Inventories are at the highest level in five years,” he said. “OPEC always concentrates on physical oil, (and) not in (response to) a false market created by speculation…we feel very strongly that there is no shortage in supply in the market,” he said.

    —By Spencer Swartz, Dow Jones Newswires

  13. 13
    zman Says:

    ZTRADE: Entered April $42.50 calls for $1.10, with the stock at 42.80. This is a quick trade made after a Goldman upgrade and after the initial flippers had already jumped out. I’ll be pretty nimble to close this one, probably today or tomorrow. I also plan to add May calls for 1Q results.

  14. 14
    kaman Says:

    Z- Thats HAL Aprils?

  15. 15
    zman Says:

    yes, the HALDV

  16. 16
    zman Says:

    PQ creeping higher in a sea of red.

    SD and CLR too

    HAL starting to move but its just market related as the down approaches up 20 on the day.

    Heating oil up another 1% to another new record.

    NG storage in 5 minutes

  17. 17
    zman Says:

    14 Bcf – in line with expectations.

    Gas was up $0.15 at time of release

  18. 18
    tater Says:

    New guy, appreciate your site. Thinking about backspreading UNG for May, selling the 50 put and buying a couple of the 48 or 47 puts. Not looking for specific approval of my trade idea as much as wondering how you feel about 50 still being an approximate max number for UNG.

  19. 19
    zman Says:

    Anybody having trouble getting on the site today? Intermittent that is or I guess you could not respond.

    Tater – Welcome, I’m waiting for now as they may really run it now that we have the unknown of the Independence hub….nutty as it seems, gas could go to $11 in this go-go commodity environment.

  20. 20
    reefguy Says:

    Broadwater LNG project blocked by NY state. 1 BCFD transcanada/shell JV is second stopped in two weeks. BP NJ project ruled dead by Supreme Court

  21. 21
    uop Says:

    Z:

    a moment ago the site closed and I had to reload

  22. 22
    zman Says:

    thank Reef and Uop – have to step away for 20 minutes….keep green the screen for me.

  23. 23
    tater Says:

    Thanks and I am in the midwest and having no trouble with site

  24. 24
    Sambone Says:

    Working so far for me.

  25. 25
    uop Says:

    Zman:
    even though you say april UNG is toast, it just came back a little.

    what do you believe is the chance that NG will within the next 8 days come down from this ridiculous height somewhat ?
    t is not going to fall 5 $.

  26. 26
    zman Says:

    ok, I’m back.

    uop. probably closes under $10 but well above 9 during the period. If APC saying I-Hub is fixed that’ll take 50 cents out of it. ridiculous swings here but not uncommon for the season.

    Tater and Sam, thanks, they reconnected the string to the cups.

  27. 27
    Sambone Says:

    Uncle Phil

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

  28. 28
    zman Says:

    HAL trade up 40%, fair warning.

  29. 29
    zman Says:

    re 27: maybe I’m biased but I like my charts better than his wit any day, lol.

  30. 30
    Dman Says:

    Z – nice daytrade on the HAL. It sure looks like it wants to keep going up from here, but how about the argument that it’s already had its earnings run?

  31. 31
    zman Says:

    Morning Dman – that and the market are keeping in check and frankly I think GS was a little late to the party (we played it for the move in the 30s)

    Here’s what I’m thinking now:

    1) Goldman is gearing this upgrade for a bigger move on increasing N. American gas drilling activity and they just waited for a few more Capital budget increases than I did.

    2) For me its a just a quick trade (may kill it today) until it goes back and tests $40 and then I go long with Mays or Junes…that will take a big market down day which we don’t do as often of late…so you know its coming.

    3) Capex increase announcements for US E&P companies are coming out on a daily basis, and HAL will get a good sized chunk of those $.

    4) SLB has been overly beat up and they will have nice things to say on their quarter which is actually next week (April 18) and lots of folks know that and should rally it into the earnings release which will lift HAL as well.

  32. 32
    Nicky Says:

    Morning all. Hard to say the up move is done in energy. This may just be 4 down with 5 up to come which would get to Z’s 11500 area.

  33. 33
    uop Says:

    Zman:

    is there news about HK?

    my charts are showing now now a flat line for HK.

  34. 34
    zman Says:

    I see no news on HK today.

  35. 35
    zman Says:

    Tornado sirens going off so if I comeback as AAAtest that means no power and on blackberry.

  36. 36
    Sambone Says:

    HK – No news

    11:53 am EST

    Dollar Sends Nymex Crude Below $110/Bbl

    DOW JONES NEWSWIRES
    From Market Talk:
    [Dow Jones] Nymex crude continues on its mini roller coaster ride, trading below $110 a barrel minutes after approaching $111. The culprit this time appears to be the dollar, which is strengthening rapidly against the euro. Crude has bounced all day between $110 and $111, with brief forays below and above those numbers. May crude trades at $110.07, down 80 cents. (brian.baskin@dowjones.com)

  37. 37
    ram Says:

    Tornado sirens? GBWY&YF.

  38. 38
    zman Says:

    re 28, typo, that HAL trade isn’t up that much, only about 25% so far.

  39. 39
    scoop006 Says:

    APC May large straddle

  40. 40
    zman Says:

    market looks a little tire here, drifting higher but not a lot of conviction with the volume. Profit taking in energy but, again, volume looks light.

    Anybody got any broad mkt thoughts

  41. 41
    zman Says:

    HAL @ HOD

  42. 42
    Sambone Says:

    #40 – Go short

  43. 43
    Sambone Says:

    Oil To Fall No Lower Than $98.80/Bbl In Spring — Goldman

    Dow Jones Newswires

    NEW YORK — Commodity analysts at Goldman Sachs Group Inc. (GS) said that oil prices will decline less steeply this spring than they earlier believed, and now expect new highs will likely exceed $115 a barrel in the second half of the year.

    In a note to clients released Thursday, the analysts said they still expect a pullback this spring, but closer to $100 a barrel, “not $90 a barrel, as we previously thought.” Goldman has a large energy trading presence and is closely watched in the markets.

    Front-month light, sweet crude for May delivery was recently trading down $1.55, or 1.4%, at $109.32 a barrel on the New York Mercantile Exchange. It settled Wednesday at $110.87 a barrel, a record high.

    Last month, Goldman had seen oil prices dropping as the U.S. economy weakened and demand fell in response. Its analysts also expected liquidation from investment funds to pressure prices in the spring.

    Goldman now sees “higher lows and higher highs,” as prices for oil for delivery in later months continue to hover above $95 a barrel. Amid modest growth in inventories, the bank now sees prices falling no lower than $98.80 a barrel this spring. U.S. crude-oil stockpiles have risen for 11 of the last 13 weeks, according to the Energy Information Administration.

    Tighter market conditions later in 2008 “are likely to push prices higher again,” and in the second half of the year, prices could break through $115 a barrel, instead of an earlier prediction of $105 a barrel, the bank said.

    Goldman described oil’s most recent rally as “transient,” fueled by strong demand for diesel fuel used in power generation and a late-winter cold snap in Europe and North America.

    The bank argued that stocks of distillates, which include diesel fuel and heating oil, are in fact “at comfortable levels” outside of such key delivery points as Amsterdam-Rotterdam-Antwerp and New York Harbor.

    —By Gregory Meyer, Dow Jones Newswires

  44. 44
    dmh Says:

    Nicky: re your DJ wave count from yesterday

    When you said we are in 4 of 1 I took that to be impulsive. Agreed it is corrective.

    Re the major wave count. I think we could have ended an ABC down from the Oct highs in mid/late Jan, which would be Primary wave A as it was 3 waves only.

    Or Primary wave A ended in March with a 5 wave in the S&P and Nasdaq and a 5th wave failure in the Dow. The problem I have with the S&P last wave down into March is that it doesn’t subdivide into 5 waves, unless you can call it a diagonal triangle, and that doesn’t work as the 3rd wave in the shortest of the pattern.

    I also like your idea of a 4th wave triangle, which should resolve itself soon. A move above the Jan/Feb highs will eliminate that one and simplify the various counts

  45. 45
    scoop006 Says:

    #40 Still believe the BBB’s:Builders Bankers & Brokers are overvalued and will decline. Hopefully by 4/18

  46. 46
    T-Tupp Says:

    z what is a goldman top pick compared to a buy

  47. 47
    Sambone Says:

    T – They own it.

  48. 48
    zman Says:

    T: difference between a cutie and a hottie. The top pick is the one the brokers will push day after day, a buy gets lost in significance among all the other buys. At least that’s the way it used to be….they don’t call on me anymore.

  49. 49
    zman Says:

    just saw Sam’s #47 and that’s a better definition than mine.

  50. 50
    zman Says:

    oil profit taking looks to be waning, only down $0.60 now. We’re definitely in “buy the dips” land.

  51. 51
    REgards Says:

    Hi zee,
    Assuming energy levels remain where they are, what is the max up that you see for PQ by May Expiry (Reporting May 1st as you know)?
    Thanks.

  52. 52
    zman Says:

    Hey RE,

    Re PQ: It’s trading at just over 3x ’09 CFPS of $5.04. I think it could gain half a multiple in that short amount of time meaning $22. It probably should be trading closer to 4.5 to 5.0x ’09 CF given the growth rate and where its peers are, especially given the relatively light debt load.

  53. 53
    zman Says:

    oil in the green

  54. 54
    ram Says:

    ZMAN – Why do you think COP doesn’t run when oil is green and overall market is up almost a percent?

  55. 55
    zman Says:

    Ram – re COP, that’s not a fair question.

    1) Oil just went green and then went back into red.
    2) energy is almost uniformly down today
    3) XOM and CVX are down more on % basis
    4) COP has run from a low of $72-73 to over $80 in the last 3 weeks. It’s taking a little breather. Maybe it falls on off but it remains cheapest in the group.
    5) for a stock like COP or any other stock, 80% of the movement is going to be dictated by what it’s peers are doing. Right now its peers are off a little and so is it. In my opinion, this is just trading noise. That’s not to say it can’t go lower now but my point is that there’s no COP specific reason for them to be off…other than the fact that the group is off.

  56. 56
    ram Says:

    O.K.

  57. 57
    Nicky Says:

    Unless I am mistaken the energy complex has been up for 6 of the last 7 sessions and now for 5 consecutive sessions if it closes higher today.

  58. 58
    zman Says:

    wow natural gas up 2 cents

  59. 59
    Nicky Says:

    I am not seeing that Z …

  60. 60
    zman Says:

    Nicky: May natural gas is up 2.3 cents at 10.08 and is moving toward being red, the 12 month strip might be up 4 or 5 cents. It hit 10.31 earlier.

  61. 61
    Jay Reynolds Says:

    Mexico’s President Offers Diluted Oil Bill

    dimming hopes that his government will act decisively to stem sliding output.

    more

    http://www.rigzone.com/news/article.asp?a_id=59832

  62. 62
    zman Says:

    Jay – he just can’t get anything substantive past their isolationist congress.

  63. 63
    uop Says:

    Z:

    i believe you buy calls and puts,
    do you also sell calls and puts in order to reduce your cost position ?

  64. 64
    zman Says:

    Uop – rarely. I will from time to time write a covered call but I don’t due that to reduce costs. I know plenty who do and that’s fine, great for them, but my system seems to work for me and I’m more of an oil and gas analyst than an options trader. If it ain’t broke…

  65. 65
    scoop006 Says:

    Z- Other than the obvious risk any thoughts/feelings on APC April $65C?

  66. 66
    zman Says:

    That one is on the bubble. Could have sold yesterday at a profit, will take it off by Monday or Tuesday. No catalyst seen between no and expiry so its up to group action. The 70s I hold are toast and I will punt for $0.10 or $0.20 first green chance I get (I figure we’ll get some more green between now and then but I could be wrong)

  67. 67
    uop Says:

    Zman:

    another HK question:
    you like HK options May better than June ?

  68. 68
    zman Says:

    What’s interesting to watch is the group action between the time of Nymex close (now) and the end of the day on slightly red days (for the energy stocks) like this with a somewhat green market.

    With crude oil unlikely to move much between now and the close (so a sell off is pretty much out of the cards in the aftermarket) it interests me to see if the group can green up in the remain equity market time. This is important in gaging sentiment towards owning the group. If they strengthen I see it as a somewhat positive sign that the group isn’t just being seen right now as a source of funds for ploying into other sectors and that buy the dips is still on for the stocks and not just for the commodities where it is quite evidently still on. I watch a lot of stocks (three screens dedicated to that cause so I’m not trading in a vacuum. If you watch, IBM, GOOG, AAPL, and COP on the screen and COP is down and the others are not, well, that doesn’t really tell you anything. But if you have BP, XOM, TOT, CVX, MRO, MUR on a screen and all green except for COP, well, that’s different.

  69. 69
    zman Says:

    I have more Mays than June for the purposes of leverage. I hold the Junes too simply because I picked them off that day and if the stock moves like I want it too, the IV on those will pop them even more given their time value. Also, it gives me a little more patience with the tiny bits of profit taking we get from time to time. Its a feel thing and not a math thing…again, energy guy, not option pro.

  70. 70
    zman Says:

    Re 69: which is part of why its taking me so long to write my trading rules/parameters at Scoop’s request. There’s whole big FAQ revamp, followed by a site review in the works but I can’t get my minions to work my hours so we’re a little behind on it. I could probably get the new logo done myself but I figure you guys care more about the stocks than you do the color scheme around here.

  71. 71
    zman Says:

    Uop – did that answer your question?

  72. 72
    zman Says:

    Reef, Redjack, Isle and whoever else has a broker they can bug, have any of you seen anything in print today on SD. Still trying to sort that move out and its off a buck now. To me the thing looks a little price on TEV/EBITDA and P/CF but is probably cheap on NAV. Love to see some outside smart guy stuff on this one.

  73. 73
    zman Says:

    Natural gas sliding a bit in the after market. Traders may think this is all she wrote … or it may be just wishful thinking on my part. But its interesting to see that intraday reversal at 10.31 with it now down 5 cents on the day at 10.01.

  74. 74
    zman Says:

    Group definitely greening now that the focus has switched from profit taking in oil to bargain hunting in the group.

  75. 75
    uop Says:

    Z;

    yes,

    oil holding:

    good for VLO, XOM ???

  76. 76
    zman Says:

    Uop – probably better for XOM than for VLO if it holds up from a fundamental standpoint. However, I think people are going to start rotating into the refiners soon. See post on gasoline thoughts on that.

    Energy groups looking to run.

  77. 77
    zman Says:

    CNBC calling a 14 Bcf withdrawal slightly bigger than expected vs the 13 Bcf expected. That’s rounding error and no kind of supportive argument. Would somebody please start a campaign to get Sharon E promoted out of that job.

  78. 78
    kyleandy Says:

    z studying your nice chart yesterday on haynesville and have never heard u discuss GDP which it showed having the highest per cent exposure. also in looking at your doggy single digit stks, i figure if u liked them before they went down a bunch, maybe one of them is ripe to buy. wanna comment??

  79. 79
    ellwodo Says:

    SD – I don’t have any hard info, but for what it’s worth (probably not much) I like the “feel” of the activity in it. If you hypothesize (and that’s all it is) that there is good information not yet widely known, that would explain the run up yesterday. As holders that only know there has been a sudden run up sell today, someone is still buying.
    The price seems to keep trying to bob up like a cork. Volume is up over 50%. As I said, this is nothing more than a feel, possibly supported by their recent SEC fining improving some key employee paynents in case of change of control. I’m taking a flyer on the May calls. (I’m a newbie here, if you all prefer to not hear unsupported guesses, let me know and I’ll comply).

  80. 80
    zman Says:

    Good afternoon K,

    Re GDP – I used to model this one when it was a single digit company and I’ve been away for too long and have not done the work to get back up on it. It ran out of the gas so much I did not want to chase.

    On the little guys…I still think GST is interesting gets bought for their deep Bossier exposure. Storm Cat (SCU), what a great name, may actually become a real company some day in the Fayetteville. END has very strong management and a great technical team but BAD LUCK. Lots of BAD LUCK.

  81. 81
    el_vogel Says:

    Hi there Z,

    Loving the HK coverage! I’ve been long on them sometime, and it’s great to see them getting closer to the buyout they’ve been seeking for so long.

    Have you ever covered Kentucky nat gas company NGAS? I’d love to hear your perspective on them as a company; I’ve maintained an interest in them for almost as long as HK but they can’t quite seem to perform.

    Gracias!

  82. 82
    Sambone Says:

    3:19 pm EST

    Crude’s Rally Ends As Dollar, Heating Oil Weigh

    By BRIAN BASKIN
    Of DOW JONES NEWSWIRES

    HOUSTON — Crude oil futures ended lower Thursday in choppy trading that saw several rallies quashed by the strengthening dollar and weakening products markets.

    Light, sweet crude for May delivery settled 76 cents, or 0.7%, lower at $110.11 a barrel on the New York Mercantile Exchange. May Brent crude on the ICE futures exchange traded 32 cents lower at $108.15 a barrel.

    In electronic trading overnight, the May contract came within one cent of the record high of $112.21 set on Wednesday, only to fall back and spend most of the day in negative territory. Futures took early cues from the dollar, which had a rocky morning. The U.S. currency first hit a record low against the euro overnight, then strengthened as traders took profits. The euro was recently valued at $1.5758, compared with the low of $1.5914.

    “Middle distillates,” which include heating oil and European gasoil, at first pulled the entire energy complex higher, analysts said. This continued a trend from earlier in the week where strong demand from Europe and Asia kept the Nymex heating oil futures contract relevant long after temperatures have warmed in the U.S. Northeast, the fuel’s primary market.

    But gasoil and heating oil faded as the day wore on, making it more difficult for crude to rally, said Addison Armstrong, an analyst with Tradition Energy in Stamford, Conn.

    “I wouldn’t say it’s driving it down, but that plank of support is no longer there,” he said.

    Goldman Sachs Group Inc. (GS) analysts provided an additional mixed message for the market. The analysts see oil prices hitting $115 in the second half of the year, up from an earlier prediction of $105. But they also call for a pullback in prices this spring to $100 a barrel, though that too is up from an earlier forecast for a return to $90.

    Their report cited gasoil as a major factor behind the market’s recent moves, adding that a correction would come as the threat of cold snaps is replaced by summer driving demand.

    “We still expect the weakness in transportation-related demand to dominate this spring,” the analysts wrote. “This will create some near-term weakness in prices, particularly as the market focus shifts towards gasoline.”

    Front-month May reformulated gasoline blendstock, or RBOB, settled up 1.79 cents, or 0.7%, at $2.7921 a gallon. May heating oil settled 4.05 cents, or 1.3%, lower at $3.1940 a gallon.

    —By Brian Baskin, Dow Jones Newswires

  83. 83
    zman Says:

    Ell – thanks, I happen to agree re the feel of the activity. Keep commenting.

    I’m liking the action in HK here.

    K – I think there are reports on 3 of the 4 single digit midgets on the list on the reports page.

    HAL – I’m my daytrade there into the morning.

    Thanks El – Re NGAS – I never did, those guys are tiny … they look fairly valued despite beat down in the stock. Anything interesting about them?

  84. 84
    kyleandy Says:

    Z thks have u considered adding to any of them? i bot DNE and feel it should have a companion!! u have been so right (except for natural gas) can’t believe u can’t pick a cheap one!!

  85. 85
    Dman Says:

    Been away most of session.

    Z – thanx for details in 31.

    Re #69: Energy Brain definitely more important than Option Brain from risk management viewpoint. If the direction is right, any reasonable options strategy will avoid disaster.

    Gotta like the precision in Goldman’s $98.90 downside for oil.. If it gets to $98.70 does soemeone get fired at Goldman?

  86. 86
    zman Says:

    K: Not right now. Cheap and low dollar don’t have anything to do with each other you know. I know you know that but since you said it I thought I’d clip ya on it, lol.

    Re: DNE. That may take awhile to work. I like management. Management knows how to exploit hydrocarbons left behind by majors who were in a rush to leave the U.S. for the big game hunting grounds of places like Nigeria, Equitoria Guinea etc. Some of those guys are partnering with them in the Gulf Coast so we are talking some size targets. But the debt load there is like gravity for the shares. Debt service is not a problem but until they hit the Street over the head with a full year of EBITDA from their operations from gas production at recent levels I don’t see it boosting the shares.

    One of the things I do is follow smart people with strong careers. These guys move around from time to time and I like to see them start over and do it again. There are plenty of gold chain wearing promoters in this business so when you find guys who can find gas chances are they can repeat. This just takes time so stock, not options.

  87. 87
    zman Says:

    Dman – anytime, I’ll probably plug it into the lazy Friday post.

    Re Goldman, not if he can buy it there before they issue their SuperSpike $150 oil target. You know that they have it in the hopper for the day after oil hits their target. Being the world’s biggest hedge fund has its advantages I suppose.

  88. 88
    Sambone Says:

    D – If it goes to $98.70, no problems, the’re hedged, remember!

    Tini time!

  89. 89
    zman Says:

    Meant to buy OII today. Will look for it tomorrow.

    Oh how I totally flubbed the coal call form two weeks ago. BTU from 48 to 61. ugggg

    BeerThirty! Nice greening of the group action on the close.

  90. 90
    el_vogel Says:

    I haven’t done my homework on them in a long time, so I should probably do that first before posting on them. They’ve got a lot of pipeline assets, land, and natgas wells in the Appalachian Basin region. The strategy they stress is long-term value, but my opinion of them is that they languish due to some sort of failure to execute. I don’t know if that’s a harsh or unfair assessment, but that was the conclusion I came to while researching their presentations etc. during business school back in 06 (and that was for fun and not part of an assignment). Their stock correlates pretty highly with NG prices, which probably comes as a surprise to no one.

    In any case, it would be great to hear from you or anyone else who may have any kind of perspective on them. Again, I haven’t owned them or done anything with them in a long time (and it wasn’t profitable last time I did) but I’ve been meaning to ask you for a pretty long time and am only now getting around to it, now that i’m a bona fide member 🙂

  91. 91
    Nicky Says:

    Z re #59 – sorry had looked at it minutes earlier and it had been much higher.
    #73 – upside could be done as we made a slightly higher high today which is all we needed to do but still too soon to say for sure as it still may look for 10750 – 11000 – much will depend on rest of the complex as to whether we get one further push into next week I think.
    #77 – emailed CNBC complaining about her hysteria last week funnily enough! She sounds like she is on crack and is entirely unprofessional. Something about reporting on the energy complex seems to send these girls over the edge -Melissa Francis used to be the same till they took her off energy. What really gets me is that S EFFFFFerson is only animated when it is going up – she must be some sort of sicko if she gets a kick out of what these high prices must be doing to the consumer.

  92. 92
    Dman Says:

    Ironic that in #85 I messed up Goldman’s extra-precise target. It shoulda been $98.80, not $98.90. There you go, I’d be fired on my 1st day at Goldman for a dud keystroke.

    Funniest quote for the day: OPEC’s “We sell oil to customers who ask for it and there are no customers asking for it”

    Nice one.

  93. 93
    zman Says:

    Nicky – wow, poor Sharon. You really pulled out the claws on that one, lol. Have you checked out her blog on CNBC.com? There’s no place to comment.

    Dman – Yep, they’re not going to be raising production just to drop prices when the U.S. can’t/won’t defend the dollar.

  94. 94
    Nicky Says:

    Z – lol – #91 – that’s not how I put it in my email complaint! And no I have never seen her blog – surprise surprise about there being no place to comment! Although CNBC must get a continual barrage of abuse on every subject I would think.

  95. 95
    Jay Reynolds Says:

    Goodrich Petroleum on Haynesville, et al

    http://www.goodrichpetroleum.com/presentations/HowardWeil2008.pdf

    Otherwise: Female Anchors = Wimmen & Oil, Who’d a thunk it?

  96. 96
    zman Says:

    Thanks Jay. I would have thought of that.

  97. 97
    PackMan Says:

    So, what did yesterday’s vaunted and totally BS Hurricane Report actually say ?

    Maybe I missed it, but I can’t recall seeing anything other than it was supposed to come out yesterday.

  98. 98
    PackMan Says:

    70 degrees today in North east.

    Isn’t that supposed to tank NG / UNG ?

  99. 99
    zman Says:

    P- they upped the forecast by 1 huricane:

    http://www.sciencedaily.com/releases/2008/04/080409133718.htm

  100. 100
    zman Says:

    P – re 98, yeah, one would think so.

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