14
Apr

Monday Morning – Financials Weigh On Market Early

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No more (GE)-type broad market spoilers please. Great week last week save Friday which I could have stood to miss out on. Right now the energy sectors are fairly quiet (calm before the earnings storm) but later this week we get the first energy patch earnings (see table below) with the first big name, (SLB), reporting early Friday morning. I plan to kill off the remaining April calls early in the week saving the (UNG) puts for as long as possible 

Commodity Watch:

  • Crude Oil: jumped 4% last week to close at $110.25. Higher demand from China easily offset the impact of a late week IEA demand forecast reduction. This morning crude is trading up $0.70 to $1.00 on  further weakness in the greenback. 
  • Saudi Watch: Over the weekend, King Abdullah said that he has ordered some new oil discoveries left untapped to preserve the future wealth of the Kingdom. On Friday, Saudi Arabia acknowledged that it has trimmed production from 9.2 mm bopd in March to 9.0 mm bopd at present. 
  • Nigeria Watch: 5,000 bopd shut in reported at a Shell pumping station after "militant youth's" stormed the facility and shut it down. Nigeria is estimated to be producing about 2.1 mm bopd at present, and is slowly but surely approaching 1 mm bopd of shut in capacity.
  • Natural Gas hit $10.31 after another in line storage withdrawal was reported before a little profit taking set in to leave the May contract up 6% on the week at $9.90. Gas was driven higher largely by an increase in the named tropical storm count and by continue heating load in the northeast. This morning gas is trading up about a dime due to higher oil and the colder weather.
  • Weather Watch:
    • Last weeks HDD's came in at 115, much higher than the original forecast of 86 which will likely produce a flattish storage number this Thursday.
    • This week's HDD forecast from the Climate Prediction Center is 82 which would definitely auger for an injection into storage but the CPC one week forecast model has been so unreliable this year I'm not holding my breath (13 of the last 15 weeks have seen sharply colder revisions).
  • LNG Watch: So far it's been a dismal year for LNG imports. Last Friday the new Sabine Pass LNG regassification facility received its first cargo. Sabine Pass and 2 other facilities are set to double U.S. regas capacity before year end, to what purpose it is unclear since U.S. capacity of nearly 6 Bcfgpd has never been close to being reached. 

Earnings Calendar Watch: The full 1Q calendar is updated on the calendar tab. To my knowledge, these are the only energy sector names reporting this week. 

cal-1q08-week-1.jpg

Stocks We Care About Today Watch:

Oil Service Companies. Mexico continues to dole out drilling and other service contracts in a bid to flatten its dwindling production curve. (SLB), (HAL), (BHI) all walked away with contracts for work in the Gomex over the weekend.  

Chenierre Energy (LNG). Operator of Sabine Pass terminal mentioned above may get a little pop after having been halved since the Fall. I'll be standing by with puts as I'm not of a buyer of the whole "if you build it they will send it" philosophy that seems to surround this ambitious, debt burdened company (market cap of $760mm, enterprise value of nearly $3.3 billion. 

Odds & Ends

Analyst Watch: (PCX) (last year's Peabody Coal spinout) price target upped from $59 to $86 by FBR, land driller (PDS) price target raised from C$19 to C$26 at Scotia.

115 Responses to “Monday Morning – Financials Weigh On Market Early”

  1. 1
    Sambone Says:

    6:31 am EST

    Crude Steady, Awaiting Stimulus

    Dow Jones Newswires
    From Market Talk
    0928 GMT [Dow Jones] Crude oil holds steady just below Friday’s closes, the market is lacking any fresh developments to steer prices. “It has been pretty much sideways so far. There’s no real news out there, it’s a very quiet start to the week,” a trader says. Dollar is mixed against most major currencies Monday following weekend G7 summit, although is expected to remain key directional input for crude prices this week. Nymex May crude -28c at $109.86/bbl, ICE May Brent -41c at $108.34/bbl. (NHE)

  2. 2
    zman Says:

    Morning Sam – they’re calling retail sales an upside surprise…wonder how that happened. Of course, getting excited over 0.1% ex autos is kind of hard to do.

  3. 3
    Sambone Says:

    8:00 am EST

    OPEC Official: Oil Price Rally May Come Under Pressure

    Dow Jones Newswires

    WASHINGTON — Diverging trends within global oil markets may start to play out during coming months, which could undermine oil prices, according to a senior official from the Organization of Petroleum Exporting Countries said Saturday.

    “Over the last few months, fundamentals and financial market developments have been moving the oil market in opposite directions. How long this duality can continue is a key question facing the oil market in the coming months,” said Mohammad Alipour-Jeddi, head of OPEC’s petroleum market analysis department.

    The remarks were contained in a speech to be delivered Saturday to the International Monetary Fund’s International Monetary and Financial Committee.

    Concerns about a mismatch between strong demand and struggling supply “did not materialize,” and indeed the sharp spike in oil prices over the last six months is more attributable to the decline of the U.S. dollar and adjustments in investment portfolios to hedge against inflation risks, the official said.

    The global oil market remains well-supplied, while demand could soften if the global economy slows, Alipour-Jeddi said in the statement.

    Supply from non-OPEC countries plus OPEC natural gas liquids and non-conventional oil could top 1.4 million barrels a day in 2008, which is above the expected demand growth of 1.2 million barrels a day this year, Alipour-Jeddi said. Demand could be slower, depending on how fast the global economy slows, he said.

    “This would result in a demand for OPEC crude that is lower than current OPEC production of 32.1 million barrels a day,” he said.

    Non-OPEC oil supply in the first quarter expanded less than had been expected, but the pace appears to have picked up since, he said. Scheduled refinery maintenance in the second quarter is expected to be around 500,000 barrels a day, compared with refinery outages totaling 1.5 million barrels a day last year, and ethanol production is set to increase by 150,000 barrels a day, he said.

    “These developments indicate that product markets this year should be less supportive of crude oil prices than in previous years,” Alipour-Jeddi said.

    Crude oil inventories remain above the five-year average, leaving the market with sufficient crude stocks ahead of the spring season, although prices have continued to rise, he said.

    Much could depend on the direction the U.S. dollar takes.

    The weaker greenback makes oil cheaper in other currencies and also pushes investors to hedge against inflation and the dollar decline by switching directly to assets such as oil, gold and other commodities, Alipour-Jeddi said.

    “The flow of investment funds between oil and financial assets has exposed the oil market to volatility in non-oil asset prices,” he said.

    —By Matthew Cowley, Dow Jones Newswires

  4. 4
    Sambone Says:

    Z – GS reporting eanrings are going to get worst. I don’t agree with the retail sales number. Down here in the south nobodies buying nuthin.

    http://www.bloomberg.com/apps/news?pid=20601087&sid=abVJmlzaDPMg&refer=home

  5. 5
    kaman Says:

    Morning Z- …was afraid I’d wake up to surging oil price based on that cracked pipeline in Tennessee.

  6. 6
    kaman Says:

    ….said with heavy sarcasm….K

  7. 7
    Sambone Says:

    April 14 (Bloomberg) — Retail sales in the U.S. rose in March, reflecting increases in receipts at service stations as gasoline prices jumped.

  8. 8
    coco Says:

    HK Petrohawk Energy target raised to $35 at BMO Capital (21.55 )
    BMO Capital raised their tgt on HK to $35 from $28 to incorporate not only the increased recovery ests behind the emerging Haynesville Shale play, but also to better reflect the co’s operating expertise in drilling unconventional natural gas wells. Over the last five weeks or so the capital mkts have witnessed the unveiling of a host of unconventional resource plays, the sum of which could easily hold 10s of Tcf in reserve potential. During the course of this trading period, the firm observed “right place, right time” fortune enjoyed by many smaller-cap names, the thought being that leaseholds proximate to growing core areas should be ascribed a higher valuation in light of the land grab underway. They contend, however, that investors should begin placing greater emphasis on those independents that have the capabilities — both technical and financial — to fully exploit the reserve potential and drive per share value.

  9. 9
    reefguy Says:

    z- pq not filled friday @1.60

  10. 10
    zman Says:

    Coco – than ks very much, did not see that one, agree with their hypothesis that its time to separate wheat from chaff on the resource plays.

    K – figured that was sarcastic.

    Reef – there’s still time, I’m still building there into earnings.

  11. 11
    zman Says:

    SLB weak to start the weak is acting as a drag on service and HAL. They had a good run last week and I think SLB says stronger things on the call this Friday.

  12. 12
    zman Says:

    Nat gas trading in the red as crude sheds most of its gains. Stocks don’t appear to have noticed the deterioration in either one.

    EOG pushing for an all time high today after Friday’s add.

    HK at 22.10 and rising
    PQ getting a bounced
    CHK rally on

    in the Haynesville pop arena: everything is green again but the bigger movers are starting to lag a bit: GDP up tiny. XCO is the exception and I will not get a pullback there as it just keeps going up …still very cheap

  13. 13
    Sambone Says:

    9:43 am EST

    Nymex Crude Rises On Supply Woes, Dollar

    By Gregory Meyer
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures were lifted higher Monday on supply interruptions and the dollar’s decline against the euro.

    Light, sweet crude for May delivery was recently up 57 cents, or 0.5%, at $110.71 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange rose 18 cents to $108.93 a barrel.

    Royal Dutch Shell PLC (RDSA)’s Capline pipeline, which conveys crude from the Gulf of Mexico to the Midwest, remained shut down Monday after a leak was discovered near Obion, Tenn. The 650-mile-long system has a capacity of 1.2 million barrels a day.

    Adding to supply concerns, Eni SpA (E), Italy’s biggest energy company by revenue, said Monday that sabotage over the weekend caused a fire at oil plants in the Nigerian location of Beniboye, causing a total output loss of about 5,000 barrels a day.

    The dollar also slid against the euro despite stronger-than-expected U.S. retail and food sales data released Monday. The euro was recently at $1.5841 from $1.5826 late Friday.

    “The dollar’s weakness and the Capline problem certainly pushed crude up overnight,” said Tom Bentz, a broker and analyst at BNP Paribas Commodity Futures in New York.

    Traders said they’ll be focusing on whether crude will be able to return to its all-time intraday high of $112.21 a barrel, reached last Wednesday.

    “The conventional thinking has been if we take out $112.20, we are going higher,” said Michael Korn, president of Skokie Energy Corp., a brokerage in Princeton, N.J.

    The market is also expected to take direction from a slew of U.S. economic releases this week, including data on U.S. business inventories Monday, the producer-price index Tuesday and, on Wednesday, the consumer-price index, housing starts and oil inventories.

    “Virtually all of these releases are expected to have a significant impact on the U.S. dollar,” said Jim Ritterbusch, president of Galena, Ill.-based oil trading advisory service Ritterbusch and Associates, in a note. “To the extent that we will be looking for surprises to fall toward the negative side, a run at record lows in the dollar against the euro is likely and could spur another push to record highs in the oil futures.”

    Signaling that supply from the Organization of Petroleum Exporting Countries is likely to remain steady through the summer, the producer group’s president told Dow Jones Newswires in an interview that he will not be attending an oil producer-consumer meeting in Rome later this month, nixing the possibility that OPEC might call an extraordinary meeting there to consider whether they should take action amid dramatic developments in the global oil market.

    Chakib Khelil, the OPEC president and Algeria’s oil minister, said, “Why would you produce if there’s not going to be demand? And it reinforces the decision we have made not to meet until September.”

    Front-month May reformulated gasoline blendstock, or RBOB, fell 29 points, or 0.1% to $2.8044 a gallon. May heating oil fell 48 points, or 0.2%, to $3.1927 a gallon.

    —By Gregory Meyer, Dow Jones Newswires

  14. 14
    zman Says:

    Companies approved to bid on exploration in Iraq: Notice the lack of Addax Petroleum (AXC.TO) that has been drilling in the Kurdish zone with great success for a couple of years now – see reports page) … politics. Also notice APC is the only US large cap indie E&P on the list.

    The 35 companies shortlisted are:

    * Marathon Oil
    * BG International
    * Mitsubushi Corporation
    * BHP Billiton
    * Nexen
    * BP
    * Nippon Oil
    * Chevron
    * Occidental Petroleum
    * China National Offshore Oil Corporation
    * Oil & Natural Gas Corporation
    * China National Petroleum Corporation
    * Petronas
    * ConocoPhillips
    * Pertamina
    * Edison International
    * Premier
    * Eni
    * Repsol YPF
    * ExxonMobil
    * Shell
    * Hess
    * Sinochem
    * Inpex
    * Sinopec
    * Japex
    * StatoilHydro
    * Gazprom Neft
    * Total
    * Kogas
    * Wintershall BASF
    * Lukoil
    * Woodside
    * Maersk
    * Anadarko

  15. 15
    Sambone Says:

    Positive article on VLO in Barron’s this weekend.

  16. 16
    zman Says:

    Sam – cheap, best run, and a seasonal trade on crack spreads?

  17. 17
    Sambone Says:

    NEW YORK, April 13 (Reuters) – Shares of Valero Energy Corp
    VLO, a big U.S. oil refiner hurt by thinner profit margins,
    could rise as summer driving season fuels demand for gasoline
    and diesel fuel, Barron’s reported in its latest issue.
    Like other refiners, Valero has been squeezed by the rising
    costs of crude oil even as gasoline demand was falling and as
    Congress promotes ethanol. The spread between raw material
    costs and finished-product prices have narrowed from $40 a
    barrel last summer to $7.43 at the end of March.
    Valero shares have fallen on the weaker margins and amid
    falling profit forecasts, but Barron’s said refining spreads
    should widen, and remain higher at about $10 a barrel. If
    gasoline demand snaps back, as it usually does in the summer,
    then prices and margins should rise.
    The stock meanwhile is very cheap relative to the value of
    its 17 refineries, in a country where no new plants have not
    been built in decades, the paper said. Valero CEO Bill Klesse
    recently observed the company’s break-up value exceeded its
    enterprise value.
    (Reporting by Joseph A. Giannone, editing by Maureen Bavdek)
    ((joseph.giannone@reuters.com; +1 646 223 6184; Reuters
    Messaging: joseph.giannone.reuters.com@reuters.net ))

    Sun Apr 13 19:18:22 2008 -GMT- pnac (nN13262331) = 1 19:18

  18. 18
    zman Says:

    thanks Sam

  19. 19
    Popeye Says:

    More HK

    http://www.fool.com/investing/value/2008/04/09/the-oil-patch-is-percolating.aspx

  20. 20
    Nicky Says:

    Morning all. I believe we are finally in the final leg up for the energy sector (for now at any rate!). Paulson and Bernanke I believe stated they have no plans to purchase $ and prop up the currency so as could only be expected the $ continues to slide and oil continues to run up.
    Looking for a final run up to take out the previous highs – could finish anywhere between 115 – 118 I think. Should happen pretty quickly….

  21. 21
    zman Says:

    Thanks Popeye. HK doing well … spoke with a O&G lawyer over the weekend who watches the reports in the Fayetteville and he’s seeing a lot of them…this jives with the play moving north. Good for them, and good for PQ.

    PQ is rebounding nicely as well….that should be a great conference call as they will be able to talk about great rates in the Woodford Shale, more wells than expected in the Fayetteville, and also plans in the Haynesville.

  22. 22
    zman Says:

    Morning Nicky. Agreed on the quick run, I think I said last week we get a test of 115 for sure and probably round number test of $120 very soon. No way OPEC adds without defense of the dollar by the treasury.

  23. 23
    zman Says:

    HAL continues to break out now. Fair warning on the Aprils…coming off the table soon.

  24. 24
    uop Says:

    Zman:

    any coal play in sight?

    oil: you say as S is dropping more because no defense by Treasury, oil must go up more,

    hope it does not drag NG up also but it will, glad I have May UNGs

  25. 25
    uop Says:

    Zman:
    what is timeframe for HK, CHK, PQ possible events ?

  26. 26
    zman Says:

    Uop – I feel like I completely missed the coals…probably higher than here by year end but they’ve had such a run I’m waiting on a pullback and watching. I liked BTU a lot at 48 two weeks ago, now at 62 its probably priced in just about anything they say on the 1Q call.

    Oil – near term higher but then should see strength moderate.

    CHK – earnings May 1 with operations update…more color on the oil shales, more color on Haynesville shales, possibly more,

    PQ – see 21 – that’s all for their conference call. Cheap stock, not a lot of debt, good operator so its a bit perplexing what keeps them down…could be worry over exploration success in gulf coast but more likely just a little overlooked as they are pretty small co.

    HK – 3 horizontal Elm Grove wells down by 1Q call..no earnings date yet. Could be any day but they may save them for the call. Big rate (teens) could send stock mid $20s.

  27. 27
    scoop006 Says:

    What’s up with RIG&DO

  28. 28
    zman Says:

    RIG through $150 which is a breakout to all time higs, DO, ATW moving up to new recent highs too; thinking about taking some OII calls.

    OIH needs to break 195 on this run

  29. 29
    zman Says:

    Scoop – saw your question after I typed 28 for some reason…I don’t see any news…looks technical, could be a broker comment but I don’t see it. Could also be the PBR $4 billion deal with driller Seadrill.

  30. 30
    redjack Says:

    PBR breakout

  31. 31
    Bob Says:

    PBR rumor of large oil discovery denied by PBR

  32. 32
    zman Says:

    Thanks for the headsup RJ, had not looked at the international oils for an hour or so…these guys are announcing 2 or 3 big items per week these days. New FPSO for new field, big drilling contracts today, agreement with PEMEX etc… don’t know what kicked off the move in the last hour though.

  33. 33
    redjack Says:

    “IO DE JANEIRO, April 14 (Reuters) – Head of Brazil’s National Petroleum Agency (ANP) said on Monday an offshore find by state oil company Petrobras (PETR4.SA: Quote, Profile, Research)(PBR.N: Quote, Profile, Research) known as Carioca may contain 33 billion barrels of oil equivalent.

    Haroldo Lima told reporters the find would be five times larger than last year’s giant subsalt Tupi discovery. He would not say whether the reserve estimate was recoverable or in-place. Petrobras last year put Tupi’s recoverable reserves at between 5 billion and 8 billion barrels of oil equivalent, most of it light oil. (Reporting by Rodrigo Gaier, writing by Andrei Khalip)

  34. 34
    zman Says:

    PBR massive front month near the money call volume.

  35. 35
    Jay Reynolds Says:

    Bakken Area The New Saudi Arabia?

    http://www.rigzone.com/news/article.asp?a_id=60085

  36. 36
    zman Says:

    OK, bigger than Tupi!!!???, how many wells they have down? Hmmmm. May take a piece to play the hysteria…like the company anyway and at $111 oil I’m surprised it wasn’t in the 130s anyway (see APA’s rise and they don’t have discoveries of this caliber)

    Jay – we were chatting about that on Friday ; helped drive to CLR to a record, EOG and MRO big there. Think EOG goes higher on it, very nice wells they’ve been drilling of late up there.

  37. 37
    redjack Says:

    Z…re PBR…I was deep in the money, but still a nice pop…I think I will just exercise the April calls…

  38. 38
    zman Says:

    I’ve got a lunch meeting, out for about an hour. Keep the group up for me. Going to low bid a little PBR on my way out (May $130 calls).

  39. 39
    Dman Says:

    Hi Z,

    OII does look interesting here. Who’s going to clean all the mussels off DO & RIG while they’re going thru the roof? (If you’ll pardon a weird mixture of metaphor & recent history).

    The PQ conference call you mentioned: is this the next earnings call or the Burkenroad conference on Apr. 25 or …???

  40. 40
    coco Says:

    Pemex’s three largest GOM export terminal’s are now closed due to weather. Cayo Arcas, Dos Boca Port and Pajaritos terminal have all been shut down since mid day yesterday.

  41. 41
    coco Says:

    i didnt read thru all the commentary but all the offshore guys are higher this morning on the SDRL.NO contract signing… sorry if a repeat

  42. 42
    Bob Says:

    HESS up $7.00

  43. 43
    Sambone Says:

    11:35 am EST

    RBOB Gasoline Climbs To Record

    By Gregory Meyer
    Of DOW JONES NEWSWIRES

    NEW YORK — Benchmark gasoline futures on the New York Mercantile Exchange cleared a new record high Monday as suppliers shift inventories to summer grades and crude oil prices soared.

    Front-month May reformulated gasoline blendstock, or RBOB, was recently up 2.02 cents, or 0.7% to $2.8275 a gallon, after reaching a new all-time intraday high of $2.8417.

    RBOB gasoline, which settled at an all-time high of $2.8073 a gallon Friday, began trading in October 2005 and took over as the benchmark gasoline contract last year. Unleaded gasoline futures, which no longer trade on the Nymex, reached a record intraday high of $2.92 on Aug. 31, 2005, in the wake of Hurricane Katrina.

    Gasoline’s latest move up comes as the U.S. summer driving season approaches and gasoline refiners switch to summer-grade fuel specifications from winter grade. While U.S. gasoline demand is expected to be about 35,000 barrels a day lower this summer than last summer, it should still be higher than in winter, the Energy Information Administration projects.

    “We are getting close to the deadline where all the refiners have got to have summer grade gasoline,” said Nauman Barakat, senior vice president at Macquarie Futures USA in New York. He said that by April 20, summer grade gasoline will be required in areas that mandate it.

    Gasoline also got a boost from a leak on Royal Dutch Shell PLC (RDSA)’s Capline pipeline, which conveys crude from the Gulf of Mexico to the Midwest. The 650-mile-long system has a capacity of 1.2 million barrels a day. The line remained shut down early Monday after a leak was discovered near Obion, Tenn., and the pipeline was shut down over the weekend. Shell said it restarted shipments Monday and expects to resume full operations in a few days.

    Crude oil futures were also higher Monday, lifted by the Capline and other supply interruptions as well as the dollar’s decline against the euro.

    Eni SpA (E), Italy’s biggest energy company by revenue, said Monday that sabotage over the weekend caused a fire at oil plants in the Nigerian location of Beniboye, causing a total output loss of about 5,000 barrels a day.

    The dollar also slid against the euro despite stronger-than-expected U.S. retail and food sales data released Monday. The euro was recently at $1.5841 from $1.5826 late Friday.

    “The dollar’s weakness and the Capline problem certainly pushed crude up overnight,” said Tom Bentz, a broker and analyst at BNP Paribas Commodity Futures in New York.

    Light, sweet crude for May delivery was recently up $1.12, or 1%, at $111.26 a barrel on the Nymex. Brent crude on the ICE futures exchange rose 75 cents to $109.50 a barrel. Front-month May heating oil was down 26 points, or 0.1%, to $3.1949 a gallon.

    —By Gregory Meyer, Dow Jones Newswires

  44. 44
    Sambone Says:

    Uncle Phil

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

  45. 45
    zman Says:

    ZTRADE: Entered PBR $130 May calls for $3 (PMJEF)

  46. 46
    zman Says:

    Thanks for the headsup there this am RJ and Bob, making a nice little bit of coin.

  47. 47
    seymoujs Says:

    zman, did the order go through at $3 for PMJEF?

  48. 48
    zman Says:

    PQ – I was thinking the earnings call but it could be sooner.

    Sey – yes, but only a whopping 4 contracts.

  49. 49
    zman Says:

    VLO – so much for the barron’s article…up a dime now.

  50. 50
    zman Says:

    CVX facing $16 billion judgement from ecuador.

  51. 51
    zman Says:

    PBR has a 45% interest in Carioca, REP has a quarter, Britsh Gas has the rest.

  52. 52
    zman Says:

    PQ and HK at new all time highs.

    PQ still trades at less than 4x 2009 E CFPS which is very cheap for a low debt, low cost, high growth E&P.

  53. 53
    uop Says:

    Zman:

    all my HK, PQ,CHK COP are green,

    UNG and USO puts are still in the dump,

    when is the reversal ?

  54. 54
    zman Says:

    Uop – right, nice change from GE Friday.

  55. 55
    Sambone Says:

    By Jessica Resnick-Ault
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–A key pipeline that carries crude-oil to the landlocked
    Midwest restarted Monday after a three-day shutdown, a warning shot of possible
    disruptions to come.
    Royal Dutch Shell PLC (RDSA) said Monday it reopened the Capline crude-oil
    route following a leak discovered Friday that led to a suspension of shipments
    over the weekend. While no refineries served by Capline, which runs from
    Louisiana to an oil hub in Illinois, reported major disruptions to their
    operations, the shutdown underscored the Midwest’s continued vulnerability to
    events that could lead to price spikes.
    The problem at Capline comes at an inopportune time for refiners, which are
    gearing up to boost gasoline output ahead of the summer driving season and
    depend on reliable crude supplies to keep their operations smooth.Depending
    upon the particular pipeline’s delivery schedule, a shutdown lasting four or
    more days can often lead to run cuts at refineries.
    Benchmark gasoline futures soared to an intraday record high of $2.8417 a
    gallon on the New York Mercantile Exchange following the news of the pipeline
    outage. Recently, reformulated-gasoline blendstock for May delivery was trading
    77 points higher at $2.8150.
    Crude-oil futures also perked up, with May crude recently trading 66 cents
    higher at $110.80 a barrel. Midwestern retail gasoline prices have climbed,
    with retail gasoline prices in Illinois up 11 cents in the past month to $3.88
    a gallon, according to the AAA. The price is up 64.3 cents from year-ago
    levels.
    The region held 65.1 million barrels in crude-oil stockpiles as of April 4,
    according to the latest data from the federal Energy Information
    Administration. The region’s inventories have fallen from 74 million barrels a
    year ago.
    Crude inventories there have declined for the past three weeks as refineries
    in the Midwest have returned from planned and unplanned maintenance.
    The relatively wide 40-inch diameter Capline pipeline system runs from St.
    James, La., to Patoka, Ill., where a hub serves many Midwestern refineries. The
    system has a capacity of 1.2 million barrels a day and is more than 650 miles
    long.
    The pipeline is a critical supply line to the Midwest, serving large
    refineries in Whiting, Ind., Catlettsburg, Ky, and Wood River, Ill.
    Metropolitan areas, including Chicago, depend upon these refineries for their
    gasoline and diesel supply, as was seen last year when a fire and other
    unexpected problems led to the shutdown of BP PLC’s (BP) Whiting, Ind.,
    refinery. Closure of the 410,000 barrel-a-day plant, which is also served by
    the Capline pipeline, sent gasoline prices up in the area, and contributed to
    record earnings for refiners who serve the region.
    Shell said earlier Monday that it is investigating the cause of the leak,
    which was discovered near Obion, Tenn., and spilled 10 gallons of oil before it
    was contained, a spokeswoman said.
    The company is ramping the pipeline up to full operations, and expects to
    return to normal rates in a few days, according to a press release issued
    Monday.

    -By Jessica Resnick-Ault, Dow Jones Newswires

  56. 56
    Nicky Says:

    I should have added to my earlier post that wti crude needs to take out last weeks highs of 112.20 to confirm wave v in play. Anything below there and we are still in the wave iv trading range.

  57. 57
    Nicky Says:

    So the pipeline is up and running Sam and they ramp crude into the close. Speculators what speculators???

  58. 58
    elijahwc Says:

    Stumbled across this. Who aside from ATN & ATLS are involved in the Marcellus Shale?

    “Making a 52-week high on Friday was Atlas American (ATLS), an oil and gas driller in New York, Ohio and Pennsylvania.

    Friday morning, FBR analyst Amir Arif raised his rating on the stock to outperform from market perform and his price target to $81 from $67 a share. This is an interesting call given that Atlas has been breaking out for some time now; however, it is cheaper now than back in December.

    The real catalyst here for Atlas is the fact that earlier in the month Pennsylvania said that it would end a government moratorium on drilling for natural gas and oil in state forests. This move will allow Atlas to drill in the prized Marcellus Shale, which is about 8,000 feet underground.”

  59. 59
    zman Says:

    Nicky – yep, but heh, 5,000 more bopd offline in Nigeria so it makes sense that oil is at 111.80, right?

    On PBR: best I can tell, it looks like the new find might extend to another recent find (Pao de Acucar – Sugar Loaf) and that the government is saying combined this could be the biggest oil field ever found. You’re probably 3 years from first production at Tupi (maybe 100,000 bopd going to a million in 10 years). This is supposedly 5x as big and in deeper water and subsalt which is tricky/expensive but I’d bet on 5 or 6 years to IP and much larger volumes eventually. I think stock gaps higher tomorrow … unless some analyst says, “I don’t buy it, this is pure speculative nonsense” which they could say since PBR is not ready to confirm size here and it looks to me like only one well has been drilled. Another is drilling now and they do have good coverage of 3D from Veritas but still, subsalt so hard to see …the claim of 33 billion sounds premature to me…but its is almost certainly a major discovery given the territory.

  60. 60
    Sambone Says:

    1:30 pm EST

    RBOB Gasoline Climbs To Record

    By Gregory Meyer
    Of DOW JONES NEWSWIRES

    NEW YORK — Benchmark gasoline futures on the New York Mercantile Exchange cleared a new record high Monday as suppliers shift inventories to summer grades and crude oil prices soared.

    Front-month May reformulated gasoline blendstock, or RBOB, was recently up 2.02 cents, or 0.7% to $2.8275 a gallon, after reaching a new all-time intraday high of $2.8417.

    RBOB gasoline, which settled at an all-time high of $2.8073 a gallon Friday, began trading in October 2005 and took over as the benchmark gasoline contract last year. Unleaded gasoline futures, which no longer trade on the Nymex, reached a record intraday high of $2.92 on Aug. 31, 2005, in the wake of Hurricane Katrina.

    Gasoline’s latest move up comes as the U.S. summer driving season approaches and gasoline refiners switch to summer-grade fuel specifications from winter grade. While U.S. gasoline demand is expected to be about 35,000 barrels a day lower this summer than last summer, it should still be higher than in winter, the Energy Information Administration projects.

    “We are getting close to the deadline where all the refiners have got to have summer grade gasoline,” said Nauman Barakat, senior vice president at Macquarie Futures USA in New York. He said that by April 20, summer grade gasoline will be required in areas that mandate it.

    Gasoline also got a boost from a leak on Royal Dutch Shell PLC (RDSA)’s Capline pipeline, which conveys crude from the Gulf of Mexico to the Midwest. The 650-mile-long system has a capacity of 1.2 million barrels a day. The line remained shut down early Monday after a leak was discovered near Obion, Tenn., and the pipeline was shut down over the weekend. Shell said it restarted shipments Monday and expects to resume full operations in a few days.

    Crude oil futures were also higher Monday, lifted by the Capline and other supply interruptions as well as the dollar’s decline against the euro.

    Eni SpA (E), Italy’s biggest energy company by revenue, said Monday that sabotage over the weekend caused a fire at oil plants in the Nigerian location of Beniboye, causing a total output loss of about 5,000 barrels a day.

    The dollar also slid against the euro despite stronger-than-expected U.S. retail and food sales data released Monday. The euro was recently at $1.5841 from $1.5826 late Friday.

    “The dollar’s weakness and the Capline problem certainly pushed crude up overnight,” said Tom Bentz, a broker and analyst at BNP Paribas Commodity Futures in New York.

    Light, sweet crude for May delivery was recently up $1.12, or 1%, at $111.26 a barrel on the Nymex. Brent crude on the ICE futures exchange rose 75 cents to $109.50 a barrel. Front-month May heating oil was down 26 points, or 0.1%, to $3.1949 a gallon.

    —By Gregory Meyer, Dow Jones Newswires

  61. 61
    zman Says:

    CHK has 1.6 million acres Marcellus, XCO is big, there are quite a few here. ATN interesting but more expensive than I like, interesting financial model though.

  62. 62
    el_vogel Says:

    i was going to mention earlier but I haven’t had time to research it myself…did anyone see something on Drudge or somewhere about a massive oil discovery in the US? Could that possibly be behind the PBR rally? My apologies for not fact-checking in advance, but I’m at a client site right now…

  63. 63
    zman Says:

    Eli – have a list around here somewhere you want me to post.

    PBR up on its own discovery. People could be confusing the Bakken assessment with the PBR find at Carioca.

  64. 64
    zman Says:

    more Marcellus: RRC, COG, LINE, REXX.

    Sam – when does GS report?

  65. 65
    Dman Says:

    Don’t wanna be alarmist for holders of puts but if UNG were a stock I’d be saying it seems to be assembling a bullish triangle-thingy on a daily chart.

    Naturally, fundamentals do trump voodoo (eventually). And no doubt there are other animals that can be seen in the cloudscape that is UNG. It’s not the most perfect bullish triangle-thingy out there, by any means.

    OII acts amazingly sluggish relative to the group. It seems to be snared by the middle BB line, but at least it’s least *trying* to escape in an upwards direction..

  66. 66
    zman Says:

    Here ya Dman, I’m thinking May puts there but will wait for the weather to normalize a bit. At this point I expect scuds in the 44 and 45 strike puts.

  67. 67
    Nicky Says:

    It has to be said that the natural gas chart also looks pretty bullish right now….it looks to be following the rest of the complex.

  68. 68
    antrimshale74 Says:

    It is my undertanding that NFG has a fairly significant position in the Marcellus as well.

  69. 69
    zman Says:

    NFX – this would be a closing high, very strong.

    NG was up to the basis point with oil today.

  70. 70
    zman Says:

    Should get a bounce in crude imports and therefore a build in crude supply this Wednesday….you’d think that would soften oil away from 112 but this is one heck of a bullish market here. Guys like Phil Flynn are wondering why they switched teams, lol.

  71. 71
    Nicky Says:

    I notice that distillates really was not joining the party today. It is quite likely that one part of the complex will fail to make new highs…

  72. 72
    uop Says:

    Zman:
    would you take profits on some of HK, PQ, CHK ?

  73. 73
    Sambone Says:

    GS = June 12th

  74. 74
    zman Says:

    I have been, all those April’s are gone.

    Sam – any big financials this week that could give us another GE like shock?

  75. 75
    Nicky Says:

    re #70 – what makes me laugh Z is that even when he was bullish he missed being in on most of the move up! now he’s bearish and fighting the tape….
    that said eventually they will turn this market and I think it will be a big move -no doubt citing fundamental reasons which nobody has cared less about for months now.
    IMO could happen anytime in the next 5 trading days – but likely to coincide with expiry I would think.

  76. 76
    zman Says:

    Nicky – really hard to pick a top here. Lots of rebels scattered around the globe (Nigeria, Iraq, Mexico) who will work one day a month to get oil where people want it.

  77. 77
    Sambone Says:

    GS last reported March 18th along with LEH. If you remember that’s when B52 Ben cut rates and the market went up 420 points.

  78. 78
    zman Says:

    Right, anybody else with that kind of market swing reporting this week?

  79. 79
    Nicky Says:

    Z – there are some huge earnings this week: tomorrow Intel, Washington Mutual

    Wednesday: JP Morgan, Wells Fargo

  80. 80
    Nicky Says:

    Z – charts will help you pick the top. We are getting close…

  81. 81
    Nicky Says:

    Thursday : AMD, Google, Capital One, Bank of New York…

  82. 82
    zman Says:

    Nicky – out of those, only INTC is believed to have upside potential if what I read earlier is correct. Anyone else, we get the 2 solars on Thursday but they are small, and no one expects much out of SLB except favorable out quarter comments.

    Lotta charts at the bottom of the sea …

    Thanks for the list, was thinking Capital One and you listed it. Aren’t they having trouble with car loans now and this quarter could hammer that home?

  83. 83
    Nicky Says:

    Wednesday also IBM and Coca Cola

  84. 84
    Nicky Says:

    I read that Intel may disappoint actually….who knows!

  85. 85
    isleworth Says:

    Z- you are still holding May HK, CHK and PQ, correct?

  86. 86
    Nicky Says:

    Ebay on Wednesday too.

  87. 87
    Nicky Says:

    1322 is important support for spx.

  88. 88
    zman Says:

    Thanks, I was really thinking of capital one.

    Isle – yes + June HK. Nobody talks much about NFX but I’m back in that name too and I think they could have an upside surprise on oil volumes and more good news in the Woodford.

    You can always check the Wiki page for current holdings, usually up to date within a few minutes of the ZTRADE going across your tape.

  89. 89
    zman Says:

    So glad I’m not yet back in the indie refiners. Keeping looking at my toes and thinking I like them more than I like those stocks. I may change my mind pre earnings, maybe as early as Wednesday, but they just keep drifting lower week after week.

  90. 90
    Nicky Says:

    Maybe re charts. But if you were basing this rally on fundamentals you wouldn’t be long energy either!
    Everything is close to a turn, ie US Dollar, Euro, Gold, Silver and many of the AG commodities. I am not saying it is the end of the bull market in commodities just they are due a breather and all look to be about to do their last thrust either up or down!

  91. 91
    zman Says:

    Bet you a dollar the dollar goes lower, lol.

  92. 92
    zman Says:

    NFX rally, rally, rally. E&P Valuations in tomorrow’s post. Not dirt cheap here but it’s one I think has upside volume potential in 2008.

  93. 93
    Nicky Says:

    The $ will go lower Z. We need to see wave v down. Could go as low as 70.50. Then a bounce which could last several months – a year. Then a lot more downside. Maybe into the 40’s…..

  94. 94
    zman Says:

    Any potential market movers reporting tonight or in the morning. We’ve got PPI coming but that should be known to be bad. Trying to time an April HAL exit.

    Nicky – ok, thought you were saying we were near a turn in the $ as per #90

  95. 95
    zman Says:

    Starting a new weekly (or so) watch called something like “Why I’m In What I’m In Watch” tomorrow. Will be done at least once a week for current holdings. Short and sweet for those of you who like to skim, not scour the post.

  96. 96
    uop Says:

    Zman:

    you have “cold: feet going out to JUNE with UNG puts ???

  97. 97
    uop Says:

    Zman:

    there is some ALKYLATE story out there ???

    Lyondell ??

  98. 98
    zman Says:

    saw short supply re akylate story from Canada press from the 11th.

    here’s one from today:

    http://ap.google.com/article/ALeqM5i5TtajgUpSm7KY5jf-lCJGHBB-tAD901QIKO1

  99. 99
    zman Says:

    Uop – I’m thinking you know a lot more about akylate than I do. How hard is it to make summer gas on the left coast without enough of it? Any substitute?

  100. 100
    zman Says:

    NFX in full breakout mode.

  101. 101
    Sambone Says:

    N – Wow, 40’s? Man, I was only looking at the 50’s. Watching BAC on Monday or perhaps Sunday LOL. These bankers can really hide these level 2’s and level 3’s. Hearing about problems at STI, who announce next Tuesday. If true that means it has moved into the mid tier banks.

  102. 102
    zman Says:

    96: are going to June with UNG puts? I’m not doing anything with it now except holding some worthless Aprils. I don’t have a problem admitting when an idea isn’t working, even when it should and I won’t add more until I feel the momentum (and that’s what we’re up against here) turning the other way. Fundamentally I know it should be lower. But the trade isn’t working. I’d rather let THEM run it up to $12 and then try again, than add here because the time is almost up on my Aprils.

  103. 103
    Sambone Says:

    3:41 pm EST

    Nymex Crude Settles At Record After Pipe Glitch

    By GREGORY MEYER
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures cruised to a new record settlement high Monday, holding fast to gains made on supply disruptions over the weekend.

    Light, sweet crude for May delivery settled up $1.62, or 1.5%, at $111.76 a barrel on the New York Mercantile Exchange. The Nymex contract hit $111.99 during the trading session, below its all-time intraday high, made April 9, of $112.21.

    Brent crude on the ICE futures exchange rose $1.09 to settle at a record $109.84 a barrel after earlier making a new all-time intraday high of $110.01 a barrel.

    Nymex crude has risen $15.78, or 16.4%, in 2008. Its latest leg up was spurred by the market’s reaction to a temporary pipeline shutdown in the U.S.’s midsection.

    Royal Dutch Shell PLC (RDSA) said that a leak discovered Friday on the Capline crude-oil pipeline led to a suspension of shipments along the system over the weekend. The line, with a capacity of 1.2 million barrels a day, connects Louisiana to an oil hub in Illinois.

    Shell said Monday it had reopened the route, and expects to return to normal operating rates in a few days. Ten gallons of oil spilled before the leak was contained, a Shell spokeswoman said.

    While the leak’s impact appeared fleeting, it was enough to add momentum to an oil market that made fresh records last week. The dollar’s weakness early on also stirred buying in crude, a dollar-denominated commodity, as the greenback’s decline makes oil relatively affordable for buyers using other currencies.

    “The Capline pipeline appears to be back online, the dollar has actually turned stronger against the euro in the afternoon, but crude just seems to have a mind of its own right now,” said Addison Armstong, an analyst at Tradition Energy, a brokerage in Stamford, Conn.

    Adding to supply concerns, Eni SpA (E), Italy’s biggest energy company by revenue, said Monday that sabotage over the weekend caused a fire at oil plants in the Nigerian location of Beniboye, causing a total output loss of about 5,000 barrels a day.

    Last week, oil prices shot to new records after weekly data from the U.S. Energy Information Administration showed U.S. crude, gasoline and distillate stockpiles posting unexpected declines. A new installment of the data, for the week ended April 11, is due out at 10:30 a.m. EDT Wednesday.

    Analysts surveyed by Dow Jones Newswires on average predict the data will show that last week crude stockpiles rose by 1.4 million barrels, gasoline stockpiles fell by 1.5 million barrels and stocks of distillates, which include heating oil and diesel fuel, fell by 1.4 million barrels.

    Refinery use increased by 0.8 percentage point to 83.8% of capacity, according to the average forecast.

    The EIA’s reports haven’t generated consistent reactions in the market. After data released two Wednesdays ago showed crude stockpiles rose by 7.3 million barrels in the week ended March 28, front-month Nymex crude jumped $3.85 a barrel in one day.

    “I certainly expect to see inventories continue to build,” said Stephen Schork, Villanova, Pa.-based editor of the energy markets newsletter the Schork Report.

    But the oil market has spiraled higher since the start of the year, he noted, even though U.S. crude inventories have climbed about 9% over the same period.

    “A build this Wednesday, for me and the market, means nothing,” Schork said.

    Front-month May reformulated gasoline blendstock, or RBOB, settled at a record high $2.8218 a gallon, up 1.45 cents, or 0.5%. May heating oil climbed 54 points, or 0.2%, to settle at $3.2029 a gallon.

    —By Gregory Meyer, Dow Jones Newswires

  104. 104
    uop Says:

    Alkylation is done for gaoline component and detergent,
    I assume they are concerned about gasoline.
    It is NOT done a lot but by a few companies because it uses a dangerous/difficult process: sulfuric acid or hydrofluoric acid, extremely difficult engineering and a lot of security issues,

  105. 105
    isleworth Says:

    Merrill says Petrobras Carioca potential is significant, Petrobras may be much larger co in next 5-10 years

  106. 106
    zman Says:

    Thanks for the lesson Uop. Sounds like it’s not a big piece of total gasoline production capacity then that would be affected by a shortage.

    Isle – thanks, sounds like a price target upgrade, or potential a slew of them in the morning.

  107. 107
    kaman Says:

    Oh my heavens…10 gal.s of oil leaked from this tiny pipeline crack, and NYMEX oil settled over $111 ?!! You can’t make this stuff up.

  108. 108
    zman Says:

    K = How much is 10 gallons of oil worth? About $25 bucks? How about 20 mm bopd by $1.75 per barrel = $35 mm per day in the U.S. alone. Zoiks!

  109. 109
    Nicky Says:

    Z re # 94 – I am obviously not being too clear. I am looking for a turn very soon but not before we see lower lows first. There is support at 71.40, 71.25, 70.60 and 69.73. I think it most likely that we see a low between 71.25 and 70.60 (again most likely a spike down) but the lower level is not out of the question.
    Sam re # 101 – 40’s, 50’s ? – will there be anyone left who cares by the time we get down there??

  110. 110
    zman Says:

    Nicky – no, I’m just a little slow witted today.

  111. 111
    Jay Reynolds Says:

    Selling 1,000 UNG @ mkt, buy 1,000 HAL @ mkt, sell 1,000 USO @ $92 Limit.

    Hope this works : ) Very much enjoy the site.

    JR

  112. 112
    zman Says:

    Thanks JR, very much appreciate the well specific comments over the weekend.

  113. 113
    zman Says:

    Crude trading over $112 this evening

  114. 114
    scoop006 Says:

    Z- As you know TSO hit it’s 52 week low@$26 today.Will a build in imports this Wed. be a catalyst for price escalation and realistically could you fathom a price/ratio sub 6. I entered TSO & VLO May calls last week and am -50%so I’m just attempting to coordinate a sound stratergy to exit these positions.Many Thanks.

  115. 115
    zman Says:

    Scoop – Mixed bag response.

    1) we should see a build in crude imports this week… you’d think that the swing back to a build in crude inventories that this will almost certainly drive would yield a drop in oil prices. Two weeks ago it did not.

    2) Mastercard says gasoline demand was off 6.8% last week…the 12th straight week of lower demand and the longest stretch of YoY weekly down demand since 1991. (Note EIA figures show it off more like 2% but whatever, it’s off), that would seem to auger for a smaller decline in gasoline withdrawals post the Spring Break mini pop in demand. So gasoline prices should come in.

    3) West Coast and Pacific Northwest Cracks were UP last week. No really, UP! Not sure if anyone knows or care about that but I was talking about a pinch on the west coast a week or two ago and it is occurring to a slight extent. That’s TSO’s backyard so good for them.

    4) I have not yet re-entered the group but came close until I saw last week’s EIA numbers and held off. This last bit of down trade for the group has stemmed from perceived re-destruction of crack spreads post last Wednesday’s numbers…even the brainchildren on Fast Money said crack spreads are toxic right now. Hmmm, the PacNW 5-3-1-1 is at $20.45 as of last Friday while the West Coast 3-2-1 is at $23.74… not as good as last spring but moving in the right direction and less toxic than Wachovia paper.

    5)Refiners generally move with oil prices, not product prices. So if oil moves up and energy stocks move up the refiners move up even though high oil is bad for them. But right now, everything hinges on gasoline prices. They are moving in the right direction for you AND no one expects anything good out of VLO/TSO/SUN/FTO/WNR/ALJ/HOC in their 1Q earnings.

    Apologies for being wordy and over talking your case but I’m filling in thought process as I go and for new subscribers who may not have seen many of my rants on the subject. I’m still very close to dipping a toe but I’d like to see another week of low 80% utilization. If they start going back to work I think the stocks fall.

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