29
Apr

Tuesday Morning – Oil Backs Off

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Getting ready for a red screen on the open. Likely to make a run at FTO calls (see VLO's earnings below) and may add more (CHK) as well (see WIOWIO section addendum below).

In Today's Post:

  1. Holdings Watch - sold a little NFX and HK call positions.
  2. Commodity Watch
  3. Why I Own What I Own Watch (WIOWIO) (Part II) - (NFX), (DVN), (CLR), (TSO) -addendum for (HK) and (CHK)
  4. Stocks We Care About Today Watch - (FTI), (VLO) 
  5. Crack Spread Update
  6. Odds & Ends

Holdings Watch: Took a little off the table yesterday.

  • NFX - Out June $60 Calls for $6.80, up 139% Continuing to hold the May $65 calls.
  • HK - Out June $22.50 calls for $3.40, up 165%. Continuing to hold the June $25 and $30 calls as earnings approach next week. 

Commodity Watch:

  • Crude Oil increased $0.23 to $118.75 as strikes choked back supplies of light sweet crude. This morning oil is trading off $1.50 to $2 on a stronger dollar and the return on the Forties pipeline, which carries roughly half of the U.K.'s oil output, to service.
  • U.K. Strike Ends. Forties system connected fields will begin to gradually ramp back up to their usual 700,000 bopd over the next several days.
  • Nigeria Watch 1: (XOM) confirms it has shut in "nearly all" of its 770,000 bopd produced in the country. That equates to roughly 1.1% of world wide crude production but a much higher percentage of the lighter crudes. (XOM) said this morning that it has reopened talks with striking workers after 6 days of no progress.

 

  • Nigeria Watch: MEND has given its 2008 terror campaign the name Operation Cyclone, no doubt after listening to hours of hurricane laden hype on CNBC. They vowed to continue a campaign to attack every oil and gas pipeline in the nation
  • Natural Gas: June natural gas jumped $0.23 to close at a record $11.33.  It's possible traders are waiting to bail on this heated commodity until they see LNG imports creep back up. This morning gas is trading off $0.22.
  • Imports were 9.7 Bcfgpd, in line with the prior week and down 1.9 Bcfgpd from year ago levels.
    • LNG continues to flat line at 0.7 Bcfgpd, down 2.6 Bcfgpd from year ago levels.
    • Volumes from Canada were 9.0 Bcfgpd, up 0.7 Bcfgpd from last year.

Why I Own What I Own Watch (Part II)...This is the second part of a piece I run every two weeks or so. Just the quick color on the names.

  • (NFX) - Stellar earnings last week, starting to get respect now:
    • Analyst estimates need to drift north from current levels of $9.18 to a number closer to $10.25 in my estimation. 2009 will likely rise as well from current levels of $10.58.
    • Near term catalyst in their Mancos Shale play drilling results in next few weeks..
    • ...And in their Bakken Shale oil tests "coming soon",
    • ...And a little longer term (mid to late July spud so probably no date until the 3Q08 conference call) from their first dual lateral Woodford Shale test which could result in F&D costs falling to ~ $1 / Mcfe. The Holy Grail here was breaking through $2 which they seem to be doing on a routine basis now.
    • Click here to read the recent note with wrap notes on NFX.
  • (DVN) - High performance, resource play rich E&P.
    • holding for earnings
    • holding for results on their high profile Chuck well which will be a company mover when announced whether successful or not. The last Lower Tertiary deep water discovery moved the stock ---- and if we get success I will likely punt into strength. A miss and I will play the over-reaction with calls at the bottom.
  • (CLR) - Oily mid-cap E&P name with a high production growth profile
    • Holding for earnings which should be very strong given their propensity to beat volume guidance and their relatively light hedge position.
    • Bakken program likely to yield test data on the call.
    • Valuation is not excessively cheap at 9.1x 2009 CFPS but those estimates are likely to be continue rising.
  • (TSO) - Attempt to bottom fish the ailing independent refining sector.
    • Holding for earnings.
    • Holding for improvement in crack spreads but this recent jump in crude has resulted in another disconnection between crude and products which remain fairly well stored.
    • Gasoline demand and utilization are key here and if we don't see a response this week in gasoline storage (a bigger than expected draw) or a good sector response to (VLO)'s earnings I will punt and re-evaluate.

Addendum To Yesterday's "Why I Own Section"

  • (HK) - progress at the third Taylor sand well, the Knighton 14 appears stalled according to state of Louisiana records. Could be a dry hole. The other two wells continue to be listed as "flowing back".
  • (CHK) - they have a number of wells in the same area as their 2.7 MMcfgpd IP horizontal test in Caddo Parish in the Haynesville shale. At least 4 wells are in various stages of testing or are awaiting completion paperwork (the state is waiting on CHK to send it in which is pretty much the last step before they announce the well's rate) so I'm guessing they will have plenty of Haynesville highlights on Thursday night's 1Q08 press release. I'll be adding more CHK between now and then. 

Stocks We Care About Today Watch:

(FTI) Reports Strong 1Q08 Results; Guidance Inched Up But Just To Consensus

  • Reported EPS of $0.69 (excluding items) vs Street estimate of $0.62,
  • Reported sales of $1.3 B vs $1.234 B expected,
  • Backlog for energy related systems climbed $1.2 billion to $4.6 billion during the quarter which sounds like a big number until you look at last quarter's in bound back log of $2.0 billion. 
  • Subsea orders remain very strong (up 47% YoY),
  • 2008 EPS Guidance Increased: Goes to a range of $2.80 to $2.90 from $2.75 to $2.85 ... this may not be a crowd pleaser as the Street is already at the top of the new range at $2.90 (range of $2.80 to $2.98).
  • Conference cal: 9am EST.

VLO Reports Higher Than Expected 1Q08 Result

  • Reported EPS of $0.36 (ex item) vs consensus of $0.29, highlighting what has been a terrible quarter for the independent refiners as 1Q07 saw earnings of $1.77 from continuing operations.
  • Reported sales of $27.95 vs consensus of $18.2 B. (How does an analyst brick a forecast by $10 billion?)
  • Most Bullish Quote Watch: "more recently, gasoline margins have shown moderate improvement as inventories have fallen and demand has increased as it normally does this time of year"
  • Best Quote For (FTO) Watch: "concerning refinery inputs , differentials continue to be wide for the hear and sour feedstocks that we can process, susch as Maya crude oil, what averaged $20 per barrel under WTI in April" Here's a graph of that:

heavy-spread-042808.jpg

  • Conference call at  11 am EST.

 

Crack Spread Update: Should I Stay Up or Should I Fall Now? 

crack-spread-042508.jpg

Refiner Multiple Update: Relatively Cheap & Low (No) Expectations = Maybe I'll Bite. I'm long a little, pathetic, withering piece of (TSO) and have opted to take a "wait and see how the group reacts to VLO's earnings report today" approach. If you note the red circle below you can see how far estimates have fallen for 2008 just in the last five weeks which is about when analysts started truing up the first quarter for actual results marking down the second quarter in earnest. Note the column to the left with the green circle showing the multiples of 2008 expected earnings marching steadily higher despite the drop in the stocks. That is unimpressive to say the least as earnings power is being deflating faster than the share prices. Also note the relative lack of decline in (FTO) which I may nibble on today given the wide spreads in WTI versus heavier crudes which is to their advantage.

refiner-multiple-042808aaa.jpg

Odds & Ends

Analyst Watch: (SUN) cut to hold by Soleil, Lehman takes more price targets up on the remaining E&Ps it did not revise higher yesterday. 

 

 

97 Responses to “Tuesday Morning – Oil Backs Off”

  1. 1
    zman Says:

    FTI conference call in 10 minutes, I don’t own it but want to get their feel for upcoming subsea work flow.

  2. 2
    Sambone Says:

    7:43 am EST

    Crude Lower As UK Grangemouth Strike Ends

    By Angela Henshall
    Of DOW JONES NEWSWIRES

    LONDON — Crude oil futures traded lower in London Tuesday as oil workers at the U.K.’s Grangemouth refinery returned to work following a two-day strike, signaling the eventual restart of the 700,000 barrel-a-day North Sea Forties Pipeline System.

    “The Grangemouth strike has come to an end and some people have seen this as a bearish sign putting the market under pressure,” said Glen Ward, broker at ODL Securities. “But the fact that it may take a week or more for the oil flow to reach full capacity (has) kept any correction underpinned.”

    Traders used the conclusion of the strike as an excuse to book profits, although the dispute between the Unite union and Ineos PLC the refinery-operator hasn’t yet been settled.

    At 1140 GMT, the front-month June Brent contract on London’s ICE futures exchange was down $1.08 at $115.66 a barrel.

    The front-month light, sweet June contract on the New York Mercantile Exchange was trading $1.06 lower at $117.69 a barrel.

    The ICE’s gasoil contract for May delivery was up $7.75 at $109.150 a metric ton, while Nymex gasoline for May delivery was down 207 points at 301.00 cents a gallon.

    Market participants were mixed on whether Nymex crude’s failure to break the key $120 a barrel resistance for two days in a row means the bull run is drawing to a close, with some anticipating just a small correction.

    “The short-term trend is currently sideways but the medium- and long-term trends remain bullish. The moving averages of all periods remain bullish,” said Ward at ODL.

    However, Olivier Jakob analyst at Petromatrix expects crude to face difficulties moving higher if the U.S. dollar and crude oil products don’t offer support, adding that Nymex crude must break $120 a barrel to maintain upward momentum.

    Ongoing labor action in Nigeria remains a major bullish factor for the market following ExxonMobil’S (XOM) decision to declare force majeure on its oil shipments late Monday after as much as 800,000 barrels a day of output was halted over the weekend due to a strike by oil workers. Companies invoke the force majeure clause in their delivery contracts when they are unable to meet obligations due to events out of their control.

    Further attacks to oil-production facilities in the south of the country are expected to compound the problem. The Movement for the Emancipation of the Niger Delta, the rebel group that lays claim to many of the attacks on oil infrastructure in Nigeria, has recently promised to step up its attacks on oil companies, and supply explosives to local communities.

    Local Nigerian government elections in Warri, Delta State, pose further risk to production, said PFC Energy analyst David Kirsch, because competing groups have vowed to attack hydrocarbon targets if not elected. “Similar threats in past elections resulted in massive community unrest and production disruptions,” he said.

    Meanwhile in Europe continued strike action is beginning to disrupt petroleum operations at the port of Marseille, with 25 tankers waiting to access the port.

    Increased volatility is expected across the energy complex Wednesday with the weekly U.S. inventories data at 1430 GMT, expiry of May products contracts plus the key, interest rate-setting meeting by the U.S. Federal Reserve. The dollar gained ground against the euro Tuesday ahead of the meeting, adding downward pressure to crude oil prices.

    “Overall, the combination of rising fuel stocks, the recovering dollar and potentially resolved industrial disputes could put some pressure on crude futures in the near term,” said Sucden Research analyst Andrey Kryuchenkov although any possible correction in oil prices is unlikely to be sustained for long, with prices being well supported by tight fundamentals, solid fund and speculator interest, geopolitical concerns and dollar weakness, he added.

    —By Angela Henshall, Dow Jones Newswires

  3. 3
    zman Says:

    oil down 2.60; nat gas down 30 cents

  4. 4
    zman Says:

    FTI: subsea long term trend: more complex, including subsea processing (liquids separation) …they are winning most of these processing contracts.

    75+ deep water rig additions over the next 4 yrs makes them very happy.

    Brazil supporting this growth trend in deepwater.

  5. 5
    zman Says:

    Scoop – the all sectors portion of the 1Q08 calendar is updated.

    FTI going into Q&A …nothing earth shaking so far, just solid growth outlook.

  6. 6
    zman Says:

    EIA reporting sharply lower demand for crude in February which along with the restart of the Forties pipeline and the stronger dollar (up about 0.5% today on the dollar index and vs the Euro) has oil off a little over $2.

  7. 7
    zman Says:

    ZTRADE: Bought CHK May $55 calls (CHKEK) for $1.25 for earnings on Thursday afternoon.

  8. 8
    zman Says:

    Market not feeling warm and fuzzy about the VLO earnings. May go ahead and take a little FTO call position.

  9. 9
    js1 Says:

    holy smokes if you wanted a dip in OII you got one now

  10. 10
    zman Says:

    JS1 – yep, red day in the group + FTI guidance probably weighing a little there although volume is very light as of yet. Thanks for pointing it out as I am interested.

  11. 11
    uop Says:

    zman:

    GS upgraded the integrated oil sector, CVX a buy they say.

  12. 12
    reefguy Says:

    CWEI- was down 10%

  13. 13
    zman Says:

    Uop – saw that, thanks. That story hits under TSO as well but I can’t get the text. VLO still falling, call in an hour.

    APA just added themselves to the list of E&Ps announcing on Thursday which is odd since they usually announce this stuff weeks in advance. They picked about the busiest day of earnings so far to announce on which is also odd and annoying.

  14. 14
    ram Says:

    ZMAN – APA 145’s for earnings?

  15. 15
    zman Says:

    Ram – I was think about those in the Junes or the $140s in the Mays. $145 might be asking a lot and you could have good news and but be sabotaged by oil going back to $110 which would be crappy for the Mays.

    Thinking about buying some HK back below $24.

  16. 16
    tater Says:

    Good morning all. APA – Possible red flag? In your experience, don’t companies tend to attempt to get lost in the shuffle when they have a reason to do so? Any thoughts in relation to your experience with APA?

  17. 17
    Garyinhou Says:

    Morning, excellent drop back to $41/42 in CLR. I’ve needed an oppty to get options further out..

  18. 18
    uop Says:

    zman;

    oil sell off and all E&P sells off too ?

    Agree: this provides a chance to get back into some of those which you are highlighted.

  19. 19
    zman Says:

    Tater – I agree that they do this by either jumping into the busiest day of the season or by reporting late on a Friday, even seen a Saturday or two. Not these guys …they can’t hope to get missed. 20+ analysts covering just on the equity side. That’s why I thought it was odd. I’m wondering if they were waiting to see if they had results on something high profile to include in the quarter so they waited on the date, then rushed to get in a release date before it leaks (just thinking out loud).

    Gary – whopping beat down there and in other names that have been outperforming. I may double up but will wait for tomorrow’s oil numbers.

  20. 20
    tater Says:

    Thanks, I’ve had times where I’ve ignored out-of-ordinary behavior and gotten tagged hard for it, so I appreciate you thinking about that.

  21. 21
    tater Says:

    Any love for SLB today seeing as you are the god of all calls pertaining to SLB?

  22. 22
    zman Says:

    Tater – Speaking of getting tagged – energy across the board continues to slide lower. Everything looking unloved today…I’m content to be pretty patient in here before adding. CLR might be the exception as that slapping pretty harsh.

  23. 23
    uop Says:

    zman:

    now we got a drop in oil and NG but of course all others go down too:

    HK, CLR,DVN, etc

    One can see the interrelationships,

    AGRI big drop:

    money is leaving commodities.

    I hope and expect that the FED still has some brains and does not lower further interest rates.
    The market might just anticipate this.

    That would help the $ also.

  24. 24
    zman Says:

    Technicals in Oil Service land appear more in charge than oil and gas prices. OIH looks to me like it could easily lose another 2 to 3% in the near term.

    NG now down $0.44 in the first day of the June contract.

    Uop – Every time oil and gas are off a little they say money is leaving the commodities. If that is so why isn’t the DJIA surging ahead. We’re down 2% on oil and almost 4% on NG…that’s profit taking in my book. The stocks are down worse…they’re up more YTD than oil.

    VLO calling starting

  25. 25
    Garyinhou Says:

    Re: CLR, seems they tend to reach back to their earlier lows (or highs as case may be) intra-day. I usually pick at over a 2-3 day span. Mindful of the numbers which could accentuate short term ove and provide more oppty (or not). I’m long term with them just trying to take advantage of short term rocket-itus.

  26. 26
    zman Says:

    ZTRADE: HK May $22.50 calls added for $1.95

  27. 27
    uop Says:

    zman:

    VLO
    1. Stock buyback…still have $3.8 billion in repurchase authority, bought back $500 million in quarter.
    2. Maya sour crude is a $23 discount to WTI. Mars sour crude $10 discount to WTI.
    3. April crack spread has doubled over March.
    4. Diesel crack spread is $30/barrel vs $6/barrel for gas.
    5. Divesting Aruba refinery in Q 2. Selling two other refineries.

    Does this speak for VLO ?
    I believ VLO will bottom at 50.5$.

  28. 28
    zman Says:

    I’m listening to VLO now. I think it may get a small, relatively non-playable, bounce here. Not very exciting so far. The light-heavy spread data from the pr is welcome news but they aren’t really lighting my fire now…this could be one that drifts slowly higher into summer if we can get WTI off these levels.

  29. 29
    zman Says:

    Interest relative strength in the PQ

  30. 30
    zman Says:

    ZTRADE: EOG – Took a starter position in June $140 calls for $3.90 for earnings Thursday.

  31. 31
    tater Says:

    VLO – So do they want people to buy their stock? I think my dog could give a better call than that.

  32. 32
    zman Says:

    Re VLO. Zzzzzz

    Gassy stocks and OIH back at LOD as crude does the same. Where’s Nicky, this is her kind of day.

  33. 33
    Nicky Says:

    Morning Z – I am here! Not much to add to yesterdays comments really….wti needs to take out 114.25 before I can say we any sort of confidence that this wave is done.

  34. 34
    Nicky Says:

    Euro needs to break through 1.5511 – 1.5528 level convincingly…
    gold and silver are perched on a knife’s edge….
    only worry to me is everyone now seems to be forecasting this move out of commodities and a $ rally …

  35. 35
    zman Says:

    Hey Nicky – Did you hear the Goldman comment/note about the dislocation between crude and the dollar. In a nutshell they are saying in a note this morning that if the dollar comes under pressure that relationship between it and oil may no longer be valid.

    Real baby and bathwater day around here, they are shooting everything in the head.

  36. 36
    VTZ Says:

    You weren’t joking when your first line said get ready for a red screen…. uuughhh

  37. 37
    Sambone Says:

    12:16 pm EST

    Nymex Crude Down On Returning Supply, Dollar

    By Brian Baskin
    Of DOW JONES NEWSWIRES

    HOUSTON — Crude-oil futures traded lower Tuesday on the expected return of shut-in North Sea production and the strengthening dollar.

    Light, sweet crude for June delivery traded $2.42, or 2%, lower at $116.33 a barrel on the New York Mercantile Exchange. June Brent crude on the ICE futures exchange traded $2.38 lower at $114.36 a barrel.

    Oil futures are trading at their lowest level since Friday as workers return to a refinery in Grangemouth, Scotland, after a two-day strike. The refinery shutdown deprived the 700,000-barrel-a-day Forties oil pipeline system of power and steam, cutting off about 40% of the U.K.’s oil production. BP PLC (BP) expects to restore normal output in several days. The outage, along with production cuts in Nigeria, sent oil futures to an all-time intraday record high of $119.93 in early trading Monday.

    With North Sea production returning to normal, traders have turned their attention back to the dollar, which has strengthened in four of the last five sessions against the euro. The euro was recently valued at $1.5560, compared with $1.5640 late Monday.

    The Federal Reserve is expected to announce Wednesday a small cut to its benchmark interest rate, but many see a pause in reductions after that. Investors have piled into commodities as a hedge against the weakening dollar, and are equally likely to exit oil and other markets should the dollar continue to strengthen, said Mike Zarembski, senior commodity analyst at brokerage optionsXpress Inc. in Chicago.

    “The market is trying to anticipate if the Fed may be done lowering interest rates for the time being, it’s really hurting commodities markets in general,” Zarembski said, adding that Wednesday’s cut is less important to oil prices than any indications the Fed might give to its future course of action on interest rates.

    Oil output problems in Nigeria, however, persist. Exxon Mobil Corp. (XOM) has suspended all oil output in the country due to a strike, while militant attacks have cut Royal Dutch Shell PLC’s (RDSB.LN) production.

    “Nigeria is clearly the key problem facing the energy markets right now, and has the potential to re-ignite the price advance if supply glitches drag on for much longer,” wrote Ed Meir, an analyst with MF Global.

    Front-month May reformulated gasoline blendstock, or RBOB, futures recently traded at $2.9740 a gallon, down 5.67 cents, or 1.9%. May heating oil futures recently traded down 3.22 cents, or 1%, at $3.2666 a gallon.

    —By Brian Baskin, Dow Jones Newswires

  38. 38
    Denise Says:

    Good Morning,
    Nicky it is funny you mention everyone playing the down crude trade…
    Was just thinking of that myself-lightening up on my DUG trade
    seems too crowded but sometimes the crowd gets(makes) it right

  39. 39
    uop Says:

    Nicky:

    cause and effect: in recent days EU countries have reduced their growth projections considerably, THAT lower growth will have the ECB reconsider and possibly lower interest rate over there,
    combine this with $ money flow out of oil etc and into $ stocks and you have the EURO drop, BUT, I believe I myself and a few others hope that Bernancke will not drop interest rate any further. That will be the key event. IMO.

  40. 40
    Nicky Says:

    Z – the worry for the broader market I think is that this rally has almost been totally limited to energy stocks…

  41. 41
    zman Says:

    Yes, pretty ugly. Crude keeps breaking through round number support and tumbling for the next round number. Dollar expectation may be putting pressure but so far dollar is up a whopping 0.15% on the day. Yawn. Forties coming back on is the answer. XOM production in Nigeria is not yet resolved so I don’t see crude falling out of bed plus the boys at MEND are sure to be plotting something. OPEC production also dipped this month from last according to petrologistcs so again, supportive.

    So everyone thinks its 25 bips tomorrow and a statement to the effect that they are done for awhile.

  42. 42
    zman Says:

    NFX down below where they reported. Given the events on the call and the degree to which numbers still need to come up there that confirms the Hot Money is running for the exits without regard for value. Volume is relatively light but specialists will step back on days like today and let these kind of guys bail. Will wait for more of this before adding back to my position here.

  43. 43
    Nicky Says:

    Z – I have said many times on here over the last few weeks the Euro/$ move was almost done. It played out perfectly with a spike to just over 1.60. The dollar short trade was overcrowded and there is no way that Europe cannot be affected by a US recession, and they are being hurt by the euro at these levels. I hope I flagged the move that I expected that is currently playing out in metals…
    If Bernanke doesnt’ even cut by 0.25 tomorrow I think you could see a rout in the commodity market…if he cuts by 0.25 the response may be slightly more muted as it may be a case of sell the rumor and buy the fact for commodities. But after a short term bounce commodites should roll over again.

  44. 44
    Denise Says:

    My ace T/A lady did a column today that said pot reminds her of Qualcom in the bubble days and she feels like she is watching the Food Channel everytime she turns on CNBC-more confirmation to Nicky’s statement

  45. 45
    zman Says:

    Nicky – how low do you think the dollar goes?

    Denise – too true. I have CNBC on the in the background to keep tabs on what the rest of the market is doing. However, when they talk energy its clear they have little depth there. There’s no talk of valuation, or discounting of price decks in the stocks, it’s just an assumed strict correlation between the stocks and oil. Very mickey mouse.

  46. 46
    Nicky Says:

    Broader market – if spx can hold support in the 1375 – 1386 region then expect another run at 1400 level and maybe 1413 – 1416.

  47. 47
    ram Says:

    What if the FED cuts by .50?

  48. 48
    Nicky Says:

    Z – not sure on what timescale you are talking. Above I am talking about the $ bouncing, not falling which is what I expected to see. If you are talking very short term then we may see a pullback. Long term I think the $ will go a lot lower….

  49. 49
    Nicky Says:

    Wow Ram – $ will tank and commodities will fly – again! Not sure about the broader market – it may not like it at all once it sinks in.

    I really don’t expect to see 0.50 at all though. I think the surprise if any will be no cut….

  50. 50
    zman Says:

    Nicky – apologies was thinking euro, wrote dollar. Euro hit 1.60, now 1.56. How low does euro go near term (next 30 days or so) and 3 months out. I could see 1.54 soon. I was just pointing out that CNBC was attributing some of the move to today’s move in the dollar which so far is negligible.

    On crude, 800,000 bopd or so off from Mexico is a bigger deal than the dollar. Especially that type of crude. It’s not hype but actual volumes that are down. Forties is coming back up but the situation is not resolved their either.

    Denise, can you send Nicky a copy of Matt’s latest piece. If you’ve never read it, the updated piece is pretty scary. It might even make you think that $80 to $100 oil is not as ridiculous as some think it is.

  51. 51
    Sambone Says:

    My read, Fed cuts 25, tells us that they will stop and watch. US$ rallies because the “Crowd” thinks that now B52 Ben will start fighting inflation. Market goes up. The Crowd is exiting the Commodities patch today because of that. Commodities will go down, but the long term trend is up. I will be buying on dips. The overall market wants any excuse to go back in. As the bubbleheads on CNBS don’t look at fundies. IMO

  52. 52
    Nicky Says:

    Ram – fwiw and just to be totally confusing I can see a count in both metals and energy which would allow for the market to take off again (ie a .50% cut in rates). In metals it would basically be that we are now at the end of an abc correction which is perfectly feasable. The bearish scenario says we break sharply lower in a 3rd wave. For wti I would say this is just a wave ii with iii up to come of v.

  53. 53
    zman Says:

    For those people wishing for an end to cuts So That the stock market can go back up they were obviously in school or selling ice cream during 1994, the single most head fakey, false start market in history. One-half step forward, one-half step back as the Fed raised rates time and time. I was still learning the ropes and helping to trade small cap growth portfolios laden with tech….oh how unfun that was.

    At the end of the day, energy stocks are still inexpensive compared to historic norms and posting well above average unit volume growth. If the Fed is going on a inflation cost containment mission (which I think it needs to) then names that need liquidity and have weak balance sheets will suffer. Just my opinion as an energy guy who has sniffed around in other corners of the market many years ago.

    Sambone – agree completely. I think Ben just wants to let things settle for a bit.

    Precious metals and other metals are a little different than oil so when people lump them into the mix for commodities its not a 1 to 1 relationship. All the gold that’s ever been mined is still around in one form or another. Not true with the black gold variety.

    Wow CNBC found someone who actually knows less about natural gas than the last talking head.

  54. 54
    ram Says:

    Thank you Nicky.

  55. 55
    Nicky Says:

    Z- re # 50. Euro I expect to see return to the 1.45 area but over a period of several months.

    Totally agree re CNBC’s comments regarding $ today – the euro is actually up against the $ today so as usual they are talking BS.

    $80 oil is likely to be a good target once the top is in.

    Samborne – totally agree too with your comments regarding commodities and your thoughts on the market reaction tomorrow.. This move down is only a correction, even if it turns out to be steeper than some expect. The upside is not done in either metals or energy and the downside is not done in the $.

  56. 56
    Sambone Says:

    N – This is what has me spooked about the overall market.

    http://www2.standardandpoors.com/spf/pdf/index/CS_HomePrice_Release_042952.pdf

  57. 57
    zman Says:

    Thanks Nicky re dollar level forecast. I’m writing it down.

    I’ll eat a hat, live on the internet, if oil front month NYMEX touches $80 this year.

    Regarding the refiners. VLO getting that small bounce I was musing about but I’m not ready to play yet, especially in front of numbers tomorrow. It looks like utilization is finally rallying to make summer grade gasoline. Last week we saw inputs and utilzation up but not a big jump in gasoline production. That probably flows through to the numbers tomorrow. So unless gasoline demand really rallies I think you could get a build in gasoline (draw currently expected). On oil, last week saw a surge in imports that shielded the crude inventory levels from a draw as those refiners ramped up. Imports are volatile from week to week and we could see them fall back enough to actually cause a draw. Not a huge degree of confidence in this but it could happen. This would give you up oil and down gasoline and there you have my justification for waiting a little longer to play the refiners.

  58. 58
    scoop006 Says:

    Z Re EOG and Thur. earnings. You think June $140 offer better value than May $130. The premiums are about the same

  59. 59
    Nicky Says:

    Can we choose the hat Z? What was with this scary piece then?

  60. 60
    zman Says:

    Scoop – just me shying away from Mays right now. Also, gives me a little longer if the market suddenly pulls back on oil.

  61. 61
    Sambone Says:

    12:35 pm EST

    Oil Slips Below $115 As Traders Book Profits

    DOW JONES NEWSWIRES
    From Market Talk:
    [Dow Jones] Nymex crude oil sheds nearly $4 to slip below $115/bbl as investors book profits off Monday’s rally toward $120/bbl, says Eric Wittenauer of Wachovia Securities. Investors are consolidating positions ahead of the Federal Reserve’s interest rate decision this afternoon — the market expects a small rate cut — and an expected crude build in Wednesday’s US inventory data, he says. Weakness in the gasoline and natural gas market is also pressuring crude prices. Adds that a settlement price below $115/bbl and then $114/bbl could pave the way for further losses. June crude -$3.70 at $105.05/bbl. (hyunyoung.lee@dowjones.com)

  62. 62
    zman Says:

    It’s a peak oil update Piece from Matt Simmons showing major field declines around the globe. Makes a case for much higher oil prices in the near, medium, and long term. And no, I already have the hat.

  63. 63
    zman Says:

    Sam – what is funny about 61 is that everyone had suddenly become uber bullish on oil going beyond $120 in recent days.

  64. 64
    scoop006 Says:

    Z Re #60 I understood that but why then buy CHK May $55 & not June. Just trying to get a handle on evaluating values

  65. 65
    Sambone Says:

    Z – Don’t they always? Suddenly they are bullish, and the next wink they are bearish. Kinda reminds me of Uncle Phil. LOL

  66. 66
    Denise Says:

    Sorry-was gone for awhile-if anyone would like a copy of Matt Simon’s latest slide show(think it was 4/8 talk)
    email me and i will send
    sknitch@earthlink.net

  67. 67
    zman Says:

    Scoop – that goes to comfortability re CHK and their call.

  68. 68
    bill Says:

    investment idea in the tanker segment:

    Rams is the ticker symbol for Aries a product tanker company.

    Company had q4 problems and suspended their dividend and the stock cratered.

    The stock has hired Merril Lynch to explore strategic options. Analyst think the company is worth 10 to 11.

    On, May 13th, I expect the company to announce a resumption of their dividend which will provide an opportunity for a short term bounce.

    Beyond that, it’s the “explore strategic options” that is interesting.

    Use limits as the stock is thinly traded. I think prices in the 5’s are attractive.

    As an aside, Im also following z recomendations into chk. Murphy oil also reports this week and i have covered calls there.

  69. 69
    zman Says:

    Thanks Bill, will have a look. By the way re MUR, what happened to their earnings estimates, sharp down revision, more than I would have thought would be due to the refining side. Any thoughts? I noticed it but I did not track it down yet.

  70. 70
    zman Says:

    Re CHK: I think they are sitting on some pretty good well results. I found 4 wells last night drilled into the Haynesville with data they are sitting on for the conference call, maybe not all good, can’t tell, but taken with Aubrey’s earlier statements there should be some gems in that group alone.

  71. 71
    zman Says:

    Anybody see a note out on TSO, been counter the group and VLO all day.

  72. 72
    bill Says:

    on mur

    im seeing 1.93 est vs .58 last year

    http://finance.yahoo.com/q/ae?s=MUR

    I might have missed something, i didnt see a sharp down revision

  73. 73
    zman Says:

    Bill – my bad, was MRO, not MUR

  74. 74
    Hoss Says:

    Z Rumor is Pickens to offer ~$40 a share for TSO.

    It was a JAGfn note from Schwab.

  75. 75
    zman Says:

    Thanks Hoss.

  76. 76
    Bob Says:

    Z re 71.

    Last Night on Fast Money Najarian pointed out unusual call volume (16,000 contracts). Today 6,400 May 30’s so far. the stock moved up $1 immediately after market yesterday with his comments.

    Note WNR up 4%; TSO up 3%, ALJ up 1% May be dead cat bounce

  77. 77
    antrimshale74 Says:

    John Najarian mentioned last night yesterday’s huge volume on the TSO May, June, etc. 30 strike. Volume there is quite large today, as well.

  78. 78
    reefguy Says:

    74- What you drinking?

  79. 79
    kyleandy Says:

    reef—suprising day for IOC to show a little life

  80. 80
    reefguy Says:

    ioc- against a sea of red…

  81. 81
    uop Says:

    zman:

    did you buy HK today ?

  82. 82
    Sambone Says:

    3:21 pm EST

    Crude Drops On Stronger Dollar, Returning Output

    By BRIAN BASKIN
    Of DOW JONES NEWSWIRES

    HOUSTON — Crude oil futures closed near a two-week low Tuesday in a general exodus from commodities fueled by the strengthening dollar.

    Light, sweet crude for June delivery closed down $3.12, or 2.6%, at $115.63 a barrel on the New York Mercantile Exchange, in the biggest single-day drop since March 31. June Brent crude on the ICE futures exchange closed down $3.34 at $113.40 a barrel. Oil is also now off 3.6% from the record $119.93 a barrel set Monday.

    Energy contracts across the board saw some of the steepest losses in a month as the dollar strengthened against the euro for the fourth time in five sessions. Reformulated gasoline blendstock, or RBOB, futures were hit hardest Tuesday, closing at the lowest level since April 16 just two sessions after hitting an all-time high.

    Front-month May reformulated gasoline blendstock, or RBOB, settled at $2.9392, down 9.15 cents, or 3%. May heating oil settled 5.23 cents, or 1.6%, lower at $3.2465 a gallon.

    The dollar is seen strengthening further over the coming weeks, as many in the market now believe the Federal Reserve will take a break from cutting its benchmark interest rate after making an expected quarter-point reduction Wednesday. Investors have poured into commodities as insulation against the weakening dollar, which has been hit hard by aggressive Fed rate cuts over the last few months. The euro was trading at around $1.5541 Tuesday afternoon, a level not seen since April 3.

    A rate cut Wednesday would temporarily weaken the dollar, “which may lend support to commodities like oil, but it may only be a short-term reaction,” said Tom Bentz, a broker and analyst at BNP Paribas Commodity Futures in New York. “There’s a growing belief that interest rate cuts are nearing an end for a while. An (oil price) correction is certainly needed in the short term.”

    Both RBOB and crude oil shed gains accumulated over the previous two sessions on production outages in the North Sea and Nigeria. The combined loss of more than 2 million barrels a day of production was the biggest blow to global supplies since Hurricane Katrina and Hurricane Rita devastated the Gulf of Mexico’s energy infrastructure. Both regions affected last week provide high-quality oil, which can produce more gasoline per barrel.

    “RBOB should have been most affected in the run-up on (BP’s North Sea Forties pipeline system) and Nigeria,” said Peter Donovan, vice president at Vantage Trading. “Now that those situations are improving somewhat…RBOB has the most to give back.”

    BP PLC (BP) said Tuesday that it could restore full production to its 700,000 barrel-a-day Forties pipeline system in the North Sea over the next few days. The pipeline was shut down overnight Saturday in anticipation of a two-day strike at the Scottish refinery that provides power and steam to the system. The strike concluded Tuesday morning, and the refinery is restarting as planned.

    A separate strike in Nigeria forced Exxon Mobil Corp. (XOM) to halt its energy operations in the country starting on Friday, and the company had shut-in 800,000 barrels a day of production by Monday. Militant attacks last week cut Royal Dutch Shell PLC’s (RDSB.LN) production by at least 170,000 barrels a day.

    Neither company’s situation has improved in Nigeria, but traders remain optimistic that the Exxon strike will be as short-lived as other recent labor actions. Traders also permanently factor some shut-in production in Nigeria and other unstable exporting countries into the price of oil, in what is known as the “risk premium.”

    —By Brian Baskin, Dow Jones Newswires

  83. 83
    antrimshale74 Says:

    DNE getting whacked. GST shooting higher.

  84. 84
    kyleandy Says:

    trying to buy more DNE at 1.30 looks like i missed it.

  85. 85
    zman Says:

    Uop – yes, see #26.

    Energy sectors closing on LOD

  86. 86
    Nicky Says:

    Z – if his Matt Simmonds article is so bullish on oil I am not sure why you say this: ‘It might even make you think that $80 to $100 oil is not as ridiculous as some think it is.’ Or do you mean that those of us who think 80 – 100 is high may not think so when we read his article ie those levels are not so crazy after all? Just trying to understand….

  87. 87
    Sambone Says:

    N – #2

  88. 88
    reefguy Says:

    ioc- 4500 shares bid near high of day into close

  89. 89
    zman Says:

    Nicky, the latter. It’s worth a read.

  90. 90
    Sambone Says:

    Tini time!

  91. 91
    zman Says:

    DNE getting no respect along with all the conventional only E&Ps and especially the smaller $ price names. Unreal decline there.

  92. 92
    zman Says:

    Bloody mary time

  93. 93
    scoop006 Says:

    Just once, I would like to have an up trading day equal to today’s down day.
    Must learn when to take profits.

  94. 94
    VTZ Says:

    Won’t ever happen scoop because you can’t manufacture up and down days like the big boys.

  95. 95
    Wyoming Says:

    Z,

    Any comments about BTU? Have not talked too much about the coals. Thanks.

  96. 96
    T-Tupp Says:

    z- does any of the major e&p’s besides chk have exposure to the bakken shale?

  97. 97
    zman Says:

    Wyoming – will respond in tomorrow post re BTU

    Tupp – EOG is known to be drilling some monster wells on the east side of the play.

    CLR is there but smaller by far than EOG, HES and MRO are on the western side. NFX is in and WLL…

    Just checking in, back in a bit

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