15
Apr

Tuesday Morning – Soaring Commodities

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In Today's Post:

  1. Commodity Watch
  2. Holdings Watch - Added a little (PBR), will be selling more April calls soon.
  3. Why I'm In What I'm In Watch - a new periodic reminder piece of what got those option holdings onto the holdings page.
  4. Stocks We Care About Today Watch - (PBR), (XTO), (BP) and big cap energy
  5. Crack Spread Update - Slight improvement seen as gasoline is starting to perform
  6. Odds & Ends

 

Commodity Watch:

  • Crude Oil: up $1.62 to $111.76 yesterday, as word of a pipeline leak in the States and minor sabotage in Nigeria fueled speculation that more of each was to come as the U.S. approaches the Summer Driving Season. RBOB hit another high as well. This morning oil is trading up $1.25 to $1.50 well into record territory above $113. 
  • China is a blackhole of hydrocarbon demand watch: China said today March diesel imports rose 49% YoY. This comes a week after China indicated it imported record levels of crude in March.
  • Mexico Export Watch: 3 Gulf side ports were shut due to poor weather on Sunday and were still closed early this morning. A fourth port, on the West Coast was shut Monday. Mexico is the third largest importer of crude to the U.S. and logistically we can generally make up a day or even two of weather related shut-ins but this appears to be going on longer than that so look for a return to small crude imports, not in this week's but next week's EIA report. This week I expect crude imports to surge significantly resulting in a return to crude storage builds 
  • Natural Gas rallied $0.15 to close at $10.05 yesterday helped by cold weather and strong crude prices. I still gas prices falling into the mid $8s this Spring but I'm not going to fight the tape simply because the (UNG) trade has not gone my way. With yesterday's upward revision to heating degree days for last week the potential for another late season withdrawal has reared its head and any injection is likely to be on the smallish side, ruining one of the two easy comps on the horizon. Gas is unlikely to significantly melt down given the current forecast and may in fact tread higher with oil. This morning gas is trading up $0.10 to 0.15. 
  • Imports: Running 2.2 Bcfgpd Below Year Ago Levels. LNG inched up to 0.8 Bcfgpd, the first rise in recent memory but is still down 2.5 Bcfgpd from last year's levels. Canadian volumes stayed essentially the same at 8.6 Bcfgpd, 0.3 Bcfgpd higher than year ago levels.

Holdings Watch: ZEB Options and ZEB Holdings Wiki tabs are updated. Look for more selling of the remaining April calls soon.

CALLS: 

  • (PBR) - Entered the May $130 calls (PMJEF) for $3.00 as the stock rallied on rumors of the Carioca discovery's size.

PUTS: No trades yesterday

Why I'm In What I'm In Watch: 

E&P - Estimates still rising, in many of the names I traffic the potential for upside to unit volume growth is better than even for the current year.  Note that when I say I'm holding for earnings I may punt just prior to release date if the stock discounts more than what good news can, in my opinion, support. This may get a little repetitive but I plan to keep this Watch as a ongoing formalized weekly segment for those of you who like to skim and don't have time to scour the posts. The following table includes many of the E&P companies we traffic in on the site fairly commonly or use as comps.

ep-pcf-041408.jpg

  • CHK (May calls)
    • holding for earnings release May 1,
    • think they'll have more detail on the oil shale plays announced in March,
    • stock remains cheap at 4.5x 2009 CFPS,
    • it has upside potential to near term production volume estimates,
    • technically strong, 
  • PQ (May calls)
    • holding for earnings on May 6
    • Woodford - showing strong results in the play for being a new comer.
    • Carthage, -keeping on keeping on in the lower Cotton Valley targets but also exposure to the Haynesville Shale
    • Fayetteville Shale - look for them to be well ahead on well counts for 2008 here in this non-operated play.
    • dirt cheap: trades at 3.9x 2009E CFPS
  • HK (3 strikes in the May calls, June calls)
    • holding for earnings (release date not yet announced)
    • results on 3 horizontal Taylor Sand wells could drive the stock into the mid 20s if they are similar to the "game changer" mid-teens MMcfepd wells like the previous test at Elm Grove Field,
    • could see results from a Gray Sand offset at Terryville Field that could help prove up the gray sand play a little more and provide some nice rate,
    • Fayetteville Shale - sounds like from them and others the play is maturing to the north where they have a strong acreage position.
  • NFX (June calls)
    • holding for earnings April 24th.
    • I think there is upside surprise potential from their Rockies oil play,
    • and potential for more details on the Mancos shale play,
    • more good news re Woodford Shale play extended laterals, IP's over 6 mm/d, costs coming down.
  • APC (April calls but need to roll longer)
    • Cheapest large cap independent with high degree of debt leverage
    • Outstanding management - this is one I trade from time to time
  • EOG (May calls)
    • Holding for earnings.
    • Have been in and out since they announced multiple new shale plays, looking to hear more about the Barnett Shale oil play on the conference call,
    • Big exposure to the Bakken should drive the stock higher as fund managers seek more play exposure

Oil Service -  

  • HAL (April calls (not for long), May calls)
    • play on a re-acceleration of North American natural gas drilling activity,
    • continued acceleration of developing Middle East business
    • stock remains cheap among the large cap stalwart oil service names at 13x 2009E EPS, low to SLB at 16x and much of the rest of the OIH names, despite a 20% EPS growth expectation. 
  • NBR (May calls)
    • ditto the gas drilling play above
    • cheap at 9.4x 2009E EPS, again with 20% expected EPS growth 2008/09 and 16% growth 2009/10.
    • the onshore drilling group has been out of favor for quite some time now due to over capacity which yielded falling day rates and spare rigs in the U.S. and declining drilling activity in Canada. While it is difficult to call a turn to more favored sector status on the part of the analyst community it does appear to be slowly moving that way as E&P's up their capital budgets, especially where it pertains to rig intensive resource plays like the shales.

Majors -

  • (COP) - In Aprils and will roll out to May very soon.
    • This is the cheapest of the Majors, already pre-announced refining (downstream) weakness for the quarter.
    • Good exposure to natural gas gives them upside potential on earnings  

Refiners - Not in ... contemplating, see below 

 

Stocks We Care About Today:

PBR's Massive Carioca Discovery?! - The head of Brazil's National Petroleum Agency commented to Reuters yesterday that PBR's latest big deep water discovery, Carioca, could contain reserves of 33 billion barrels which would make it  the third largest oil field in the world and the largest oil discovery in 30 years. If this is recoverable and not OOIP  (original oil in place) reserves you're looking at a find 5 to 6 times the size of PBR's Tupi discovery announced November 2007 which at the time sent shares of Petrobras soaring. (PBR) has not commented yet on the find which is not uncommon for them. There will be lots of speculation until the company can delineate the discovery but here's what we know now:

  • Petrobras drilled one well last year and is drilling a confirmation well now. The find is located in Block BM-S-9 in the Santos basin, west of Tupi, it's deepwater, sub-salt, and is very well covered in 2D and 3D Veritas seismic.
  • (PBR) has 45%, BG Group has 30%, and (REP) has 25%, 
  • Reserve adds for PBR would be significant (this excludes the smaller but still massive Tupi):

pbr-carioca-041408.jpg

(XTO) Buys (LINE)'s Marcellus Shale Acreage. $600 million for proved reserves of 197 Bcfe of reserves or ~ $2.80 / Mcfe (after backing out infrastructure value) and at that price it is a good deal for both companies. The purchase includes 152,000 acres in the Marcellus shale XTO estimates the potential resource here could ultimately reach 2 to 4 Tcfe.

 

(BP) Stake Acquired By Chinese Sovereign Fund. Less than 1% acquired but this is a first for BP and the second Major (the first was TOT) to see Chinese state controlled share buying. Expect to see more of this buying in big, liquid oil names, which gives China a currency hedge vs the falling dollar. Nice prop for the stocks too.

Crack Spread Update: Starting to come around seasonally.

crack-spread-041108.jpg

Refining Industry Thoughts For The Near Term: 

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 retreat in oil prices. Two weeks ago it did not.

2) Gasoline Demand Is Lower Than Last Year. 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. I'd point out also that though we are off last year's levels demand is still well ahead of the five year average.

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) Cracks Improving Seasonally. 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. The improvement in great is related to the recent steep downward trajectory of gasoline stocks ... if the refiners can management to stay out of service for a few more weeks they may completely the surplus in stocks to the five year average. 

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 AND no one expects anything good out of VLO/TSO/SUN/FTO/WNR/ALJ/HOC in their 1Q earnings.

 

Odds & Ends

Analyst Watch: (MEE) upped to overweight at JPM, most deep and shallow water drillers cut to hold from buy with (ESV) and (RIG) cut from hold to Sell at Deutsche. Rockies gas player (BBG) cut to equal-weight while (PVA) initiated at over-weight at Lehman. Broadpoint takes (FSLR) target from $270 to $315.

85 Responses to “Tuesday Morning – Soaring Commodities”

  1. 1
    Sambone Says:

    6:59 am EST

    Crude Up Over $1 To New Record Highs

    By Nick Heath
    Of DOW JONES NEWSWIRES

    LONDON — Crude oil futures climbed by more than a dollar to fresh record highs in London Tuesday, supported by technical buying, supply concerns and a U.S. dollar continuing to languish against most major currencies.

    Crude futures lured renewed buying interest after previous record highs were broken in overnight trade, and as traders anticipated further advances on the back of fragility in the U.S. dollar.

    “Overall, crude prices remain well supported in the short run with the persistent weakness in the U.S. dollar, strong fund interest, various supply disruptions and strong demand for distillate fuels from Asia and Europe,” said Andrey Kryuchenkov, analyst at Sucden Research in London.

    At 1040 GMT, the front-month May Brent contract on London’s ICE futures exchange was up $1.06 at $110.90 a barrel, just below a new record high of $110.91 a barrel.

    The front-month May light, sweet, crude contract on the New York Mercantile Exchange was trading 88 cents higher at $112.64 a barrel, near its new peak of $112.80 a barrel.

    The ICE’s gasoil contract for May delivery was up $12.75 at $1,030.50 a metric ton, while Nymex gasoline for May delivery was up 110 points at 283.28 cents a gallon.

    —By Nick Heath, Dow Jones Newswires

  2. 2
    Nicky Says:

    Morning all – Z I know you are a perma bull on oil but even you must be struggling to justify oil at these levels surely? The $ argument went out of the window two days ago (ie it is flat to lower over the last two days) and oil is going it alone….

  3. 3
    isleworth Says:

    “Why I’m In What I’m In Watch” – Awesome addition to your repetoire Z!!!!!

  4. 4
    zman Says:

    Morning Nicky – I’m not a bull or a bear, I just call it like I see it. Sometimes I’m wrong as in Nat gas right now but I would not call myself a bear there either.

    I’ve been saying mid 90s from time to time but I don’t say it everyday. I did say a little more recently that oil is headed to $115 to $120 near terms, I don’t have to justify it, just profit by it. But I think we soften later in the summer…not back to 50, 60, or 70 but 85 is possible. Perma bull? ouch, lol.

    Isle – glad you like it.

    Looks like a very strong opening on tap for the group…fair warning again on those April HAL calls.

    Should be looking at XTO this am as that is a very good deal for them.

  5. 5
    zman Says:

    Oil up $2, Natural gas following it up like a loyal dog, up $0.20.

  6. 6
    uop Says:

    Zman:

    GM

    Great summary on ” Why …”

    RIG cut from hold to sell?? Fast Money was hot recommending RIG.

    Najarian is too HOT-Headed for me.

  7. 7
    uop Says:

    Zman:

    while the uSA imports a lot of oil,
    is the USA importing NG ?

    NG following oil prices is strange if there is little or no importation.

  8. 8
    zman Says:

    Morning U

    Re RIG and ESV to sell sounds like a little bit of sour grapes. The guy was at hold for the recent run…to go to sell used to be more rare but the wirehouses need the trades so there you go. The stocks are not excessively valued and the long term prospects continue to inch higher, otherwise, Brazil wouldn’t be doing deals like $4.1 B for 3 deepwater rigs to Seadrill. Rating should really not be “Sell” but “Phone In Trades Before We Get Canned”

    Re Najarian – he’s a smart guy…pony tail sometimes just a bit too tight I think.

  9. 9
    zman Says:

    Uop – that would be LNG – liquefied natural gas – that I talk about in the gas section – currently we’re importing a lot less than usual this time of year due to high demand in Europe/ Asia / Japan. Which makes me think a landed U.S. price of $10 plus consistently is needed to get more of it to come here. And why I’m still mulling puts on (LNG) the company, which is adding (unnecessarily) to U.S. regassification plant capacity.

    They trade together at times when prices are moving quickly…right now fundamentals don’t really matter for gas as the focus is on YoY storage and weather .

  10. 10
    zman Says:

    ZTRADE: Half out HAL April $23.50 calls (HALDV) for $2.34, up 113%

  11. 11
    zman Says:

    PBR off a little as the company is saying further delineation is necessary. Well no kidding. 1 well cannot possibly determine a field size of 1 billion + reliably let alone 33 billion. I may fill out my position is the late entrants can drive it down today. PBR should be putting forth a drilling schedule for evaluating the discover in the next few days.

  12. 12
    Jason Says:

    Hi Z – No chance to join you on your PBR move yesterday. Are you looking to add a new position here on a pullback?

  13. 13
    zman Says:

    Jason – yes. I’d like to see it pull back $4 or $5 bucks and trade sideways for a few hours. Lot of hot money that knows three things about the name: the ticker, big oil discovery, and that they bought it. They can flood in and out and don’t like to see things like a cautious statement from the company. Don’t know if it falls that far or not. Those calls I have on the May 130s are back down to $3.40 and I’m looking to add better than yesterday’s $3 if possible.

  14. 14
    uop Says:

    Zman:

    how did you get PBR may130 for 3$ ?

    I tried too but never got it.

  15. 15
    zman Says:

    Ram – if you are around, COP running hard.

    Uop – I set a bid of $3 and left for lunch. The zlbast was sent when I came back and saw it as done. Man’s gotta eat, still like it and will adds as per #13.

  16. 16
    zman Says:

    ZTRADE: Sold HK May $25 for $0.75, up 36%. This one was still out of the money after a pretty good run up and I decided to pull it off the table. Still holding the May $20s, May 22.50s and June 22.50 calls

  17. 17
    uop Says:

    Zman:
    I have
    Hk may25, june20 and june 22.5.

    any comment ?

  18. 18
    zman Says:

    Wow TLM (stock picking up, huge call volume in the April $20s which I still have),

    EOG – new high this morning and acting well despite a pullback by the big caps.

    Profit taking setting in on the E&Ps and service.

    Refiners continue to look weak.

    Uop – I just took the May 25s out because a pull back would squash them more than the others. I like the stock but the run has been really good. I think it goes higher and now that this high has been set I would like add June or May $25s on a profit taking day. But for now, I just felt they had done their job for me. The near money calls I’m holding as they are close to trading dollar for dollar with the common.

  19. 19
    scoop006 Says:

    Z #18 last paragraph: Thanks for the explanation it’s a great lesson as to know when to sell. I followed your lead and made 50% in 11 days.

  20. 20
    zman Says:

    Wow – LNG, the company, new lows.

    Anybody have text on the Deutsche downgrade of the offshore drillers today? I’m a bit surprised people are listening, maybe this is just the recent profits coming out but would really like to see what the bloke said.

  21. 21
    scoop006 Says:

    healthy volume in NBR May $35c’s

  22. 22
    zman Says:

    Ok, I read the Deutsche analysts summary: its a valuation call and anti-thematic – he says the deepwater theme is solid but overvaluing the shares of the companies. He raised his price target on RIG while cutting his numbers slightly in 2008. That price target went UP to $120 from $108 so the guy is completely OUT OF TOUCH. When a stock is at $150 and your hold rated target is at $108 that sting at the back of your neck is pride messing you. So you go to a sell and try to make a name for yourself by calling a sector top. I think he fails with that one and I’m going to take a little DO for a trade .

  23. 23
    Sambone Says:

    Z – I’ll be picking up DAG today when it starts trading. I’ll be swapping out my DBA for it (up 55%). This is a new ETN which is 2 times the upside on Corn, Wheat, Sugar, and Soybeans.

  24. 24
    zman Says:

    Sambone: “so you like Dags?”, lol.

    PQ at all time high, taking a hard look at $20. Cheap, cheap, cheap…I’ll add a little more next time the group cools a bit.

    NFX at all time high

    EOG ditto

    PBR not giving me the dip I want.

  25. 25
    Sambone Says:

    9:44 am EST

    Crude At New Record High On Dollar, Supply Threats

    By Brian Baskin
    Of DOW JONES NEWSWIRES

    HOUSTON — Crude oil futures are trading higher after hitting a record on the weak dollar and disrupted oil exports from Mexico.

    Light, sweet crude for May delivery traded $1.75, or 1.6%, higher at $113.51 a barrel on the New York Mercantile Exchange, after trading as high as $113.93. Brent crude on the ICE futures exchange traded $2.07, or 1.9%, higher at $111.91 a barrel, after setting a new high of $112.08.

    Oil remained close to the record reached overnight, as currency traders and other investors continued to use commodities as a hedge against inflation. Although the dollar did not hit a record low against the euro, the combined weight of a series of smaller threats to world oil supplies also provided support for the market, analysts said. Bad weather forced Mexico to shut down its oil ports Monday, while a fire at a Nigerian oil installation caused a small dip in production over the weekend.

    “This market has become extremely oversensitive to any kind of news that would impact supply,” said Nauman Barakat, senior vice president at Macquarie Futures USA in New York. “The market is looking for excuses to go higher, and (Mexico’s port closure) is as good an excuse as any other to push the market higher.”

    With the May contract set to expire Thursday, there could also be momentum by investors with open interest at $115 or $120 to reach those prices, Barakat said.

    At $1.5811 per euro, the dollar is trading near the record low of $1.5914 set April 10, but strengthened a bit Tuesday morning after the Labor Department released U.S. inflation data for March, showing a smaller-than-average core inflation rate.

    “The energy markets seem to be completely wrapped up in the dollar’s near-term prospects,” wrote Ed Meir, an analyst with MF Global.

    Heating oil futures are providing an extra boost to the entire energy complex, as buyers in Asia and Europe are sending prices higher long after demand has peaked in the U.S., traditionally the product’s core market. May heating oil hit a record April 10, and edged higher again Tuesday morning. Reformulated gasoline blendstock, or RBOB, futures hit a record Tuesday.

    Front-month May RBOB recently traded up 4.51 cents, or 1.6%, at $2.8669 a gallon, after setting a new all-time high of $2.8715 earlier in the day. May heating oil traded 5.71 cents, or 1.8%, higher at $3.2600 a gallon. The record high for heating oil is $3.3204, set April 10.

    —By Brian Baskin, Dow Jones Newswires;

  26. 26
    Sambone Says:

    I hate Pikeys! Want a Dag.

  27. 27
    zman Says:

    ZTRADE: DO May $135 Calls (DOEG) for $3.40 for a quickish trade after a broker downgrade.

  28. 28
    zman Says:

    The Deutsche is a Pikey to be calling DO, RIG etc a Dag.

    TSO chart breaking down on the weekly, the daily has been broken. Looks like support around $24.

  29. 29
    Nicky Says:

    Sorry Z didnt’ mean to offend with the perma bull statement! Just I know you have been behind the demand/supply argument (quite rightly long term I believe).

    I just cannot see any current justification for oil at 114 or even 100. The market has chosen to concentrate on a weak $ rather than what a weak dollar is a sign of which is a weak economy and therefore weakening demand. In fact relatively it has way over performed compared to a sinking $. When the sentiment changes this bubble will pop very fast. In terms of time – realistically we could be at 120 by tomorrow so I very much doubt it is later this summer before we see it softening ie that is months away. By that you are saying we are going to hold at these levels or higher I guess.

  30. 30
    isleworth Says:

    Z- what about REP instead of PBR?

  31. 31
    zman Says:

    PBR going green.

    Nicky – hey, if you’re offended by me telling people you speak Pikey I’m definitely not offended by the perma bull slap, no matter how loosely true it is, LOL. I agree, the dollar argument is there but pretty weak and doesn’t account for the move in crude. My argument, and maybe this doesn’t come across as well as I intend is that my hunting ground, the E&P stocks, don’t need $100 oil to continue to appreciate. In fact, $100+ oil brings in more non-energy knowledgeable money to the sector and when oil dips things get sloppy. That leads to those successive sessions of all red and all green 3-5% moves that drive me crazy. Like each barrel of oil is different, so too are all the stocks. They all have different stories, leverages to oil and natural gas, prospects, managements etc, so I would welcome a bit lower oil so that some of these Fast Money types wouldn’t muddle the soup. But I will profit off them all the same.

  32. 32
    Sambone Says:

    “so I would welcome a bit lower oil so that some of these Fast Money types wouldn’t muddle the soup. But I will profit off them all the same”.

    “Mr. Market” Ben Graham

  33. 33
    zman Says:

    Isle – REP had a bigger run and it has a bid by China on its Latin American assets but I’m about as familiar with their ops as I am GOOG. Big company, good reputation and I know vaguely how they work but I don’t feel I’m a value add there. I’d do it for a trade, sure, but it already ran harder than the operator who has almost double the slice of this new pie.

    Nicky – keep sending those pieces to CNBC on Efferson. She’s calling the Mexico weather supply concerns (I guess so is Dow Jones). That is ridiculous and temporary.

  34. 34
    zman Says:

    Wow, that sounds like a compliment Sam.

  35. 35
    Nicky Says:

    I hadn’t heard you say I spoke Pikey!!! But it is what it is!
    You have woken me up now – I am in the mood for a spot of Efferbashing! I haven’t got CNBC on but will now turn it on and get my blood boiling….my only hope is that if oil hits 120 she will explode along with the bubble!!

  36. 36
    zman Says:

    Nicky – actually it must have been Sam who said that. This will get you started on Efferson. She was pointing out the big July call volume on crude in the $140s so oil must be going …

  37. 37
    Sambone Says:

    Uncle Phil

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

  38. 38
    zman Says:

    Uop – just for example: oil up 1.56%, ng up 1.67% trading in lockstep.

    group seeing some strong profit taking on Dow and S&P turning red. Thinking more PQ but will wait to see if it holds even for the day.

    CLR unreal, up another 3% , EOG up strong…probably another brokerage firm talking about the Bakken play today. WLL also running

  39. 39
    Nicky Says:

    Broader market – lower lows look necessary – 12180 area really needs to hold on the Dow or we could be back to a more serious downdraft. If that area can hold then I see another bounce setting up.
    $ seems to be playing out as an ever tightening triangle – there is even a chance now it could break to the upside. If so this could mark the end of the move for crude in wave v and the metals in wave 2.

  40. 40
    Nicky Says:

    If one was to put up a graph showing the a graph that shows the mormalised trade weighted dollar index against the
    normalised oil price covering the period 1995 to date you will see that last week’s IEA comments that the dollar explains most of the oil price rise and that speculators are not significant is total BS.

  41. 41
    Nicky Says:

    sorry that should say normalised trade…

  42. 42
    uop Says:

    Zman;

    I am rolling my UNG puts closer to ATM,

    the question is: should I stay in May PUTS or go to June ?
    what do you think about the crazy development of price of NG for May or June ?

  43. 43
    ellwodo Says:

    Why no exposure to XCO? With it being big in both Marcellus and Haynesville it would seem like it has nothing but good news ahead of it. [Disclosure: I’m in the May and June 25s]

  44. 44
    T-Tupp Says:

    wow WNR at 11& change

  45. 45
    zman Says:

    Uop – I think warmer weather will soften NG prices. I think LNG volumes saw their first uptick in many week’s last week and that they will rise albeit slowly and not to the levels seen last year and that this too will soften prices.

    Elwodo – can’t kiss all the girls. It’s cheap but I don’t know them like I know most of the names I frequent. It has run hard and I don’t want to chase. CHK is bigger in both those plays.

    Hey T – yep, sometimes the best trade to make is to stay away. Ugly group right now…may enter soon although it won’t be that name.

  46. 46
    zman Says:

    CLR = unstoppable

    ATN looking very strong, not going to chase.

    Group will rebound hard if the market can get back into the green. Still have a few Aprils to dispose of.

  47. 47
    Dman Says:

    Hi Z,

    speaking of CHK, currently you are lighter in it than in HK. Should anything be read into that in a short-term sense?

  48. 48
    uop Says:

    Zman:
    rolled to UNG PUTS may49,

    the charts show that UNG might have reached a previous top and might not go further, though oil does not show a resistance as UNG does.

  49. 49
    Dman Says:

    Cup-and-handle-thingy alert for OII on the daily chart

  50. 50
    uop Says:

    Dman:
    I am not a chart person: what does your #49 mean >

  51. 51
    Nicky Says:

    re # 40. I was sent a chart by JR making these comments which backs up what I have been saying about the $ trade for weeks now. Obviously I am not the only cynic!
    I guess at the end of the day it all now will depend on whether you believe the US is decoupled from the rest of the globe or whether the weakness here is going to spill over into China, India etc.

  52. 52
    el_vogel Says:

    z do you still do the wednesday oil inventory commentary with phil davis on that online financial channel? I forgot the name…

  53. 53
    zman Says:

    Dman – re CHK vs HK … yes, HK, as a smaller company should move on its list of catalysts more on % basis than CHK. Nothing in there about which I think is better. Just where I am now and I’m likely to add to CHK soon.

  54. 54
    zman Says:

    El – we put the radio show on hold for awhile.

    Nicky – I agree with you on the dollar trade.

  55. 55
    zman Says:

    OII: agreed re cup and handle…may take a little here.

  56. 56
    zman Says:

    FWIW, I think we have a good shot at getting a bigger than expected build in crude supplies tomorrow. This has not mattered to oil of late but, well, there you have it.

  57. 57
    zman Says:

    PBR going green,

    OII running a bit, not chasing

    PQ – bidding a little July position but tough to get.

  58. 58
    Dman Says:

    UOP re. #49

    It’s just another voodoo pattern with a dorky name that surprisingly often predicts a bullish move.

    http://www.investopedia.com/terms/c/cupandhandle.asp

  59. 59
    zman Says:

    DO climbing out of the hole now. Estimates came down slightly here today over higher than expected unscheduled downtime and a
    $6.2 mm contract dispute. Wooopeee. The analyst goes on to site increasing rig demand and another rig contract extension penned at 420K per day versus the expectation of 375K. So the analyst is talking about $6.2 mm when this single contract will add revenue of 2 years x 365 days x 45,000 per day = $32.85 mm. Talking about missing the forest for the trees. He also sees a big pickup in demand for rigs in the Middle East starting in June.

  60. 60
    uop Says:

    Zman:

    so, is DO a buy, what month??
    it is expensive.

  61. 61
    zman Says:

    Man, everybody must be doing their taxes today.

    Group recovered nicely with the market.

    Uop – that sounds way to much like a recommendation which I don’t do. As per ZTRADE above in #27: “DO May $135 Calls (DOEG) for $3.40 for a quickish trade after a broker downgrade.”

  62. 62
    uop Says:

    Zman;
    sorry, no buy/sell/hold,

    did you buy ?

  63. 63
    Dman Says:

    OII & FTI putting on a display. FTI has failed at the $65 level several times in the last year, so there could be some fireworks, especially with expiration this week. Or it could just get pinned there.

    NOV could be next to move out: it’s been resting for a week after a recent move.

  64. 64
    zman Says:

    Uop – yes. That was the ZTRADE in #27 above. The stock was down about $3.20-3.40 at the time. I think the guy at Deutsche has the deepwater group all wrong and has been wrong on the leader RIG all along. Just a trade for now, may or may not build but will hold for a little bit of time. Stock could easily make that 135 strike.

    I tried and missed OII a buck lower than here. Not chasing although it looks to go higher.

  65. 65
    Dman Says:

    UOP re. #62: in the time I’ve been on the site I’ve *never* seen a Ztrade where Z was selling naked calls (taking an uncovered short position in the calls). So I assume that a call trade is a long call trade.

  66. 66
    Sambone Says:

    Off subject – somebodies betting big on WFC going down when they announce tommorow. Somebody has bought over 15,000 April 27.5 puts today.

  67. 67
    Dman Says:

    Z – I actually think DO is a better idea here than OII/FTI given the valuations …but I’m long both of the latter so I can’t avoid focussing on ’em 🙂

    In the scheme of things (i.e. how these stocks trade), DO hasn’t really gotten away yet so I might still get long if I can get over my aversion to mussels …

  68. 68
    Dman Says:

    Sam – I’m not brave enough to short the financials here, but I can’t imagine why anyone would still be long at this stage when there’s a whole energy sector to choose from…

  69. 69
    Dman Says:

    Z – you said earlier that if the broad market could green up the energy setor could roar. Looks like that’s playing out…

  70. 70
    zman Says:

    Dman – thanks, yes when I say entering calls I mean buying calls. No naked call sales here.

    I pledge that the revised FAQ will be up an running before the end of April with more about my trading style, nomenclature etc.

    Dman – ah, but OII gives you hurricane exposure in a good way, DO gives it to you in a sort of bad way.

  71. 71
    zman Says:

    Dman – Si. Sorry distracted, righting the checks to the Feds. ug

  72. 72
    texana Says:

    out hk early probably, but rollin to wll &clr for long term potential for us oil greater than gas

  73. 73
    Dman Says:

    Z – #70 Yep, I clean forgot about hurricanes for a minute there. What actually happens to the likes of DO/RIG if one of their rigs (that they are leasing out, if that is the correct term) gets hit? Does the client get out of the contract? Can DO/RIG insure the actual rigs?

  74. 74
    zman Says:

    they’ve got biz interuption insurance, not perfect b/c the comp gets your job but also good for the group b/c dw rates would increase if several rigs were taken out.

    back in 30 minutes…keep em up for me, especially the big cap E&P ,,,go EOG go.

  75. 75
    Dman Says:

    Wow – Z steps out out at 2.34 PM EDT. Market tanks at 2.39 PM.

    Just sayin’ …

  76. 76
    aaatest Says:

    What is mkt doing now. oih. Xng?

  77. 77
    Sambone Says:

    3:23 pm EST

    Nymex Crude Shoots To Record On Supply Trigger

    By GREGORY MEYER
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil, heating oil and gasoline futures surged to new records Tuesday in a spate of buying set off by supply headaches.

    Light, sweet crude for May delivery settled up $2.03, or 1.8%, at $113.79 a barrel on the New York Mercantile Exchange, marking its second all-time high in two days.

    May Brent crude on the ICE futures exchange, which expired Tuesday, closed $1.42 higher at $111.26 a barrel. The more actively traded June Brent crude contract closed at $111.47 a barrel, up $1.89. Brent settlement prices weren’t immediately available.

    Nymex crude broke price records early on word Mexico had shut its three oil exporting ports in the Gulf of Mexico on Sunday and Monday. At about 1.2 million barrels a day, Mexico is the third largest crude exporter to the U.S. Two of the three ports had reopened Tuesday, the transportation ministry said.

    Buyers also found inspiration in global demand: China imported 1.66 million tons of diesel between January and March, the General Administration of Customs reported Tuesday, a seven-fold increase from the 230,000 tons imported in the same period last year.

    Nymex crude is up 19% in 2008 and 79% from a year ago. Its strength has lured investment funds seeking a hedge against inflation and the falling dollar.

    Inflation-fearing investors may have found impetus to add oil positions after the Labor Department reported the producer-price index rose 1.1% in March, after a 0.3% increase in February. Analysts had expected a 0.6% increase. The broad index includes the prices of food and energy, and hints a similar trend when consumer prices are released Wednesday.

    “It’s kind of a game where inflation uncertainty is high enough that oil prices can be affected by it,” said Adam Robinson, energy research analyst at Lehman Brothers in New York. “People buy commodities as a hedge against that inflation risk, thereby pushing up commodity prices. Round and round we go.”

    The market could take its next cue from a weekly U.S. oil inventory report due out Wednesday. Analysts surveyed by Dow Jones Newswires on average expect that in the week ended April 11, the data will show U.S. crude stockpiles rose 1.7 million barrels, gasoline stockpiles declined 1.7 million barrels and distillate stockpiles fell 1.5 million barrels. The data are collected by the Energy Information Administration.

    The Organization of Petroleum Exporting Countries said Tuesday the U.S. was likely already in recession, but left its forecast of oil demand growth unchanged for 2008 as emerging economies keep growing. The group sees the world’s thirst for oil growing by 1.2 million barrels a day this year, to almost 87 million barrels a day.

    Crude rose in spite of a dollar that rebounded on the day, increasing oil’s relative price for consumers with other currencies. The euro was recently $1.5787, from $1.5811 late Monday.

    “The ability of the crude futures to advance into record high territory today in the face of a strengthening of the US dollar provides a bullish pricing portent in our view,” said Jim Ritterbusch, president of energy trading advisory firm Ritterbusch and Associates in Galena, Ill. “But we also feel that this apparent decoupling from the dollar is not likely to be sustained and that a renewed weakening in the dollar will act as a bullish price driver going forward.”

    Front-month May reformulated gasoline blendstock, or RBOB, settled 5.92 cents, or 2.1%, higher at $2.8810 a gallon. May heating oil rose 7.10 cents, or 2.2%, to $3.2739 a gallon. Both are record-high settlement prices.

    —By Gregory Meyer, Dow Jones Newswires

  78. 78
    Sambone Says:

    OIH = down .32 cents to 193.15

  79. 79
    Sambone Says:

    XNG = up 8.25 to 655.93

  80. 80
    Sambone Says:

    DOW up 50, S&P up 5+

  81. 81
    zman Says:

    Ok, back in. Thanks for the update Sam

    WOW – CLR
    LNG, the company, getting crushed.

  82. 82
    zman Says:

    Beer thirty! Nice day in the energy patch.

  83. 83
    zman Says:

    Nice timing on OII Dman!

  84. 84
    Jay Reynolds Says:

    Leasehold bonus in Caddo/Red River Parish cresting $5,500 ac. May be some “agreements” re not encroaching in other co’s prospective leaseholds, “restraint of trade” sabers being rattled by prospective lessors.

    Lots of Red (Halliburton Jumpsuits) in the area at every luch spot just about, Shreveport at 4am, play closing in on my location, hopefully, lots of iron on the road.

    JR

  85. 85
    zman Says:

    JR – good luck and may you get top $. Thanks for the color…It’s a modern day gas rush.

    Just watched Addison Armstrong on Fast Money say natural gas supply was weak so that the fundamentals are behind higher gas prices but that he was worried about gas’ inability to breach $10.30 for a third time. What a crock. You don’t have a supply problem if production is up 4.1 Bcfgpd vs LNG imports down 2 Bcfgpd and Canada up slightly. You just don’t…talk about a perma bull. Very close to taking May near the money UNG puts.

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