15
May

Thursday – Gas Preview & Oil Review

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In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Stocks We Care About Today - WH misses numbers, largely based on taxes.
  4. Odds & Ends

Holdings Watch: Wiki tab is updated.

  • (MMR) - Bought the August $40 calls for $1.95.
  • (HAL) - Bought the June $50 calls for $1.30.
  • (PQ) - Sold the PQ May $20 Calls (PQED) for $1.85, up 76% since entry on 4/7. I still hold two sets of July calls here.
  • (WH) - Bought the common for $8. See below for earnings. 

Commodity Watch:

  • Natural Gas traded up $0.18 to close at $11.60 yesterday in the wake of the I-Hub return to service delay announcement. This morning gas is trading flattish.
  • Once A Bull, Always A Bull Watch or Same Story (or lack thereof), Different Commodity Watch:

``We have less supply going into the equation now, with supplies going from well-above average to slightly below, it raises other questions,'' said Flynn. ``Everything is working the bulls' way right now. All systems are bullish.'' Comment: What other questions? And going from up 5 Bcfgpd to up 4 Bcfgpd is not what I'd call "slightly below" with regard to supplies

The Gas Storage Preview:

  • My Number 95 to 100 Bcf injection.
  • Weather: it was quite a bit cooler than year ago levels. Power generation was down a little over 1% versus the year ago period as well.
  • Imports: down 2.5 Bcfgpd relative to year ago levels,
  • Exports: best estimate is that they are up 1 Bcfgpd vs last year,
  • Production: probably about 4 Bcfgpd above year ago levels
  • Year Ago: 89 Bcf Injection
  • 5 Yt Avg: 79 Bcf Injection
  • Street Consensus: 89 Bcf injection. 

ZComment: Shorts remain at record levels and traders remain focused on LNG shipments (the lack thereof) entering the U.S. Could fall a dollar from current levels and still maintain its uptrend and then you're at the door of hurricane season and hype or not, it can drive those shorts into cover mode.

 

Crude Oil traded off $1.58 to close the day at $124.22 yesterday after the EIA reported an unanticipated build in distillate inventories.  This morning crude is trading up slightly on the following:

  • Nigeria Watch: Nine crew members off a Chevron supply boat have been abducted and are being held for ransom by MEND (Movement for the Emancipation of the Nigerian Delta) (see the Dictionary tab at upper left if you ever have a question about one of the acronyms on this site). I guess MEND is no longer considering approaches made by Obama and Carter regarding a return to the peace table.

exp-vs-act-050908.jpg

The Inventory Review (back in long form by popular demand).

CRUDE OIL - Smaller than expected build as imports retreated from last week's near record high levels and refinery utilization ticked up.

Refinery Utilization / Crude Inputs ... Starting To Rally. Note in the second chart below that crude input demanded by refineries is already 1 mm bopd higher than it was just 6 weeks ago and that if utilization moves back towards normal levels, demand is likely to rise by another 1 million bopd in the next two months.

util-vs-inputs-050908.jpg

Crude Imports Trending Higher With The Time of the Year. Imports backed off this week but the seasonal surge is on and, as OPEC repeats on a daily basis, there is no shortage of crude going to the States.

crude-imports-050908.jpg

crude-stocks-050908.jpg

GASOLINE - Unexpected but meaningless drop as inventories remain high.

gasoline-production-050908.jpg

 

gasoline-demand-050908.jpg

 

gasoline-price-051208.jpg

 

gasoline-stocks-050908.jpg

DISTILLATES - Exporting More Than Ever, Traders are already eying next winter (see second graph)

distillate-stocks-050908.jpg

 

Stocks We Care About Today

Oil Service Multiple Update: Just a quick update as I become increasingly service focused. The sector remains cheap and the growth remains superior to the broad market. We're seeing pricing power come back to certain areas as activity heats up in conventional and non-conventional oil and gas plays ($125 oil kind of has that effect). I'm long a HAL and NBR at present as a way to play the U.S. onshore (potentially North American) rebound and I'll be expanding this list in the near future.

oih-multiple-051408.jpg

WH Reported A Miss

1Q08 Numbers

  • EPS of $0.08 vs $0.16 expected, vs $0.21 a year ago, largely  due to an increased tax rate.
    • gross profit margin declined from 25.6% in 4Q07 to 24.4% in 1Q08 due to higher raw materials costs - this may throw the investment community for a bit of a loop as it had looked to be rising earlier in the year. 
    • Operating margins however increased from the 4Q level of 17.7% to 19.1% despite a ramp in marketing related expenses and operating profit of $25 mm came in $2 million above published estimates,
    • Finally, the tax rate went from 15 to 25% between the two quarters
  • Revenues of $131 mm vs $120 mm expected. This was up 31.6% year over year due to:
    • a 12.6% YoY rise in tonnage delivered to 95,024 tonnes
    • higher average selling prices
    • sold more non-American Petroleum Institute products (pipe they sell into the Chinese market), up 90% YoY in terms of revenues and 75% in terms of volumes. This was also higher than 4Q levels and this was planned as this is the higher margin side of the business
    • API rated products (stuff they sell into the U.S.) fell 10% YoY. They are planning to set up a U.S. sales desk soon.
  • Balance Sheet: strong cash balance, positive working capital and little debt to speak of. Accounts receivable growth did not outstrip sales growth which can be a warning bell/red flag with these kinds of operations. 
  • No guidance given in the PR, prior revenue guidance was revenues of $600 to $700 million and EPS of $0.78 to $0.92. The Street is at $0.88.

Conference call at 9 EST. I'm sure they will be asked on the call about the recent earth quake and its impact on sales.

 

Odds & Ends

Analyst Watch: (CVX) upped to Buy at UBS, price target increased to $115 from $100, Citi initiates (EVEP) with a buy and $33.50 target (this is one of the yield plays I like for long term investment but do not yet own), UBS initiates on the offshore drillers with Buys on (RIG - $201 price target), (DO - $160), (NE -$81), (RDC - $53 (and a contrarian move there I might add), (ESV - $85), and (PDE) at neutral. Lehman ups price targets on several mid cap E&Ps including (CRK) and ups steel producer (MT) fro $85 to $105, 

 

 

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

  1. 1
    zman Says:

    WH bricked. PR actually has $0.15 in one paragraph but $0.08 on the bottom of the income statement. Expectations were $0.16. Most of the hit is income tax rate related but the shares are likely to get shelled at the open, maybe as much as a dollar.

    Conference call in 30 minutes.

  2. 2
    Sambone Says:

    Last trade at 7.75 at 8:36

  3. 3
    Sambone Says:

    5:42 am EST

    ICE Brent Crude Up $1, Follows Distillates

    By Nick Heath
    Of DOW JONES NEWSWIRES

    LONDON — ICE Brent crude futures climbed more than a dollar in early London trade Thursday, spurred by rising distillate prices and as investors looked to take advantage of Wednesday’s pullbacks.

    Both Nymex heating oil and ICE gasoil futures traded higher despite Wednesday’s U.S. inventory data revealing U.S. distillate stocks rose more than expected last week. Strong global demand for distillates has helped propel crude to new records in recent weeks.

    At 0925 GMT, the front-month June Brent contract on London’s ICE futures exchange was up $1.03 at $122.89 a barrel ahead of its expiry Thursday.

    The front-month June light, sweet, crude contract on the New York Mercantile Exchange was trading 92 cents higher at $125.14 a barrel.

    The ICE’s gasoil contract for June delivery was up $10 at $1,205.75 a metric ton, while Nymex gasoline for June delivery was up 134 points at 319.38 cents a gallon.

    —By Nick Heath; Dow Jones Newswires

  4. 4
    kyleandy Says:

    z tried to get on IOC call but can’t. are u able to?

  5. 5
    reefguy Says:

    ioc have to phone in- on now

  6. 6
    zman Says:

    Ky, I did not try, I’m getting on the WH call.

  7. 7
    reefguy Says:

    dst from 10′ of matrix porosity, will drill 600′ additional section, log and test.

  8. 8
    reefguy Says:

    ioc 612-332-0228

  9. 9
    reefguy Says:

    elk structure said to be 9900 acres 1700′ of proven? gas column.

  10. 10
    kyleandy Says:

    reef – thks any comments on what they’re saying wud be appreciated

  11. 11
    zman Says:

    WH call is a translated call so this will take awhile.

    They had guided $110 to 130 mm revenues for the quarter, they did over $131 revenues
    had guided $14 and 17 mm us dollar, they did net income 15.8 mm usd.

    Seeing increasing demand, increase capacity… more to follow.

  12. 12
    reefguy Says:

    Antelope 1 believed to be 1600′ high to Elk 1, Wayne Andrews: Seismic looks like it is interpretive, they missed on this test, explain it be limitations of 2 D on migration of complex structures.

  13. 13
    reefguy Says:

    Third part carbonate sedimentologists say it looks like reef LOL

  14. 14
    redjack Says:

    Petrobras corners deep-sea rig market. Petrobras (PBR) has leased about 80% of the world’s 21 deepest-drilling offshore rigs, forcing other producers including ExxonMobil (XOM) and BP (BP) to pay more for the remaining units. “The oil majors have their backs against the wall as Petrobras has aggressively locked up significant rig capacity,” said Omar Nokta, head of maritime research at Dahlman Rose. CEO Jose Sergio Gabrielli says Petrobras began signing multiyear drilling leases as far back as 2004 after it foresaw a shortage of deepwater vessels. “We moved some of our contracts from $70,000 a day to $250,000 a day, which seemed like a very large increase back then, but now, of course, drilling rigs are $600,000 and $700,000 a day.”

  15. 15
    reefguy Says:

    ioc-where is strategic partner? Phil says
    3rd party enginners are reviewing

  16. 16
    zman Says:

    Norway cutting its 2008 oil and gas production estimates. Again.

    WH – they don’t see that they missed the quarter, the $0.16 was from one analyst who was asleep at the wheel on his numbers relative to their guidance. Nice.

  17. 17
    reefguy Says:

    phil- we can handle two or three rigs.

  18. 18
    reefguy Says:

    ioc bid 28.07/29.25 ask?

  19. 19
    reefguy Says:

    Antelope is the big one lol

  20. 20
    zman Says:

    Oppenheimer analyst called it a great quarter,

    management said they will be able to meet previously stated guidance, see post above.

  21. 21
    zman Says:

    I’m definitely not panic selling out of WH.

    Reef- yes, it always seems to the next big thing over the horizon with IOC.

  22. 22
    kyleandy Says:

    Reef – IOC this is certainly a positive sounding call. he’s used “excited “a lot

  23. 23
    kyleandy Says:

    reef- i’m torn between your skepticism and his excitement!!! just made a quick trade in and out so i really appreciate the phone number!!

  24. 24
    zman Says:

    WH Q&A: Are drilling schedules being affected in China due to price caps? Don’t see a decrease in drilling activity, no.

    I’m going to hang on to my shares. They will be in the U.S. next week attending oil and gas conferences, probably at the UBS O&G conf.

  25. 25
    reefguy Says:

    I am skeptical because of the size of my position(and well in the money) Wayne Andrews asked a question that plays to the investor crediblity issue. He asked what third parties could coorobarate your results? Answer was Hal and Blue both under confidentiality agreements, but the government people have been a party to it all! I am skeptical from a geological, operational and management view. What would I do? Shoot a 3d. Get a Large energy company take a working interest and operate it. As IOC I would keep a substatiantial non-op interest and ride the technical, operational and supply chain skills of those in the business.

  26. 26
    Sambone Says:

    Crude Market Creaking After Record Highs

    By DAVID BIRD
    A DOW JONES NEWSWIRES COLUMN

    NEW YORK — U.S. oil refiners are shaking the rust and cobwebs from facilities, a move that usually would ignite a rally in the crude oil market.

    But with higher crude oil runs, of course, comes increased output of gasoline and other products, for which demand remains sluggish.

    The conflicting signals throw up clear road signs heading into the summer driving season: Two-way traffic ahead.

    That applies both to the potential for a choppy market after a surge to a record near $127 a barrel and also to the importance that the global market’s vital two-way traffic — import and exports — will have on setting the near-term trend.

    In frenzied trading in the past week, Nymex front-month June delivery crude oil futures ricocheted in a $6.44-a-barrel trading range, from a low of $120.54 to a high of $126.98. But at Wednesday’s settlement the price difference was just 0.6%, or 69 cents, from a week ago. Crude settled at $124.22, down $1.58 a barrel on the day.

    While no one’s declaring a top to the market or an end to the fierce rally, signs of trepidation and potential weakness are creeping in.

    June crude’s premium to July narrowed to just 11 cents a barrel at Wednesday’s settlement, one-third of its size just a week ago, and down from 72 cents on May 1. Last Friday, June dipped 4 cents below July, evidence that near-term supplies are more than ample and don’t justify a pricey premium.

    The front-month premium to the fourth month fell to 32 cents at the settlement, just one-fourth of its size a week ago. A month ago, the spread was $2.04 and two months ago, it was $3.69 a barrel.

    Crude came under pressure Wednesday after the Energy Information Administration reported stocks of distillate fuel (diesel and heating oil) rose by more than twice the expected level. EIA said distillate stocks gained 1.4 million barrels, while a rise of around 600,000 barrels was expected in the week ended May 9.

    Global Needs Drive Distillate
    Global demand for distillates has pushed heating oil futures prices (which trade as a proxy for diesel) to record highs. June-delivery heating oil set a record intraday high of $3.7228 a gallon on Wednesday, before settling down 2.2%, or 8.11 cents lower, at $3.6178 a gallon.

    Total distillate inventories are in the lower half of their average range for this time of year, but ultra-low sulfur diesel inventories are 5.8% above a year ago.

    ULSD output jumped 6% on the week the highest level since Jan. 4 and the second-highest on record. Still, about half of the rise came in the isolated West Coast market.

    Output rose as crude inputs to refineries increased by 405,000 barrels a day, or 2.8%, to 15.054 million barrels a day in the last week. That’s the highest operating rate since Jan. 4, but still more than 500,000 barrels a day below the five-year average for this time of year and the lowest for this week since 1999, EIA data show.

    Distillate exports to ravenous European, Asian and South American markets may be behind a 0.8% year over rise in demand over the past four weeks.

    But the market will be keeping an eye on the operations of the huge Hovensa refinery in St. Croix, U.S. Virgin Islands, where a crude unit is down for maintenance. The joint refining venture of Hess Corp. (HES) and Venezuela’s state oil company supplied more than 22% of U.S. ULSD imports last May and about 8% of total gasoline and blending component imports, EIA data show.

    The ebb and flow of imports and exports echoed through the crude market, as EIA reported crude imports fell 6.5%, or 695,000 barrels a day, to 9.933 million barrels, the lowest level in a month. The combination of the higher runs and lower imports allowed crude stocks to gain by just 176,000 barrels a day, compared with expectations of a rise of 1.8 million barrels.

    Still, stocks at Cushing, Okla. — the delivery point for Nymex crude futures — rose 200,000 barrels in the week to the highest level since last Aug. 31.

    Unless refiners kick runs up higher, an inevitable rebound in imports may put further pressure on inventories, and prices, analyst said.

    Sluggish Gasoline Demand
    Gasoline is normally the engine of the market at this time of year, but demand in the past four weeks is lagging the year-earlier level by 0.2% amid record high prices, EIA data show. EIA gives implied demand levels by measuring movements of stocks from primary storage, rather than actual consumption. MasterCard’s SpendingPulse report said Tuesday that by its measurement of gasoline sales, demand in the latest week was 7% below a year earlier.

    Despite a counter-seasonal drop in inventories of 1.7 million barrels — the first in this week since 2004 — gasoline stocks are 5.9% above a year ago, and in the middle of their five-year range.

    Meantime, the market is puzzling out the impact of news that Iran has some 25 million barrels of heavy oil in floating storage aboard tankers and can’t find buyers. Big overhangs of oil — even less desirable grades — aren’t usually conducive to continued market rallies.

    Iranian officials have teased that they may cut output due to trouble finding buyers, but have also ruled out such a move.

    The issue adds a new dimension to President George W. Bush’s visit to Saudi Arabia on Friday. As part of Middle East trip, including Israel and Egypt, Bush said he will again press the Saudis on the need to lift output to ease the burden of record high prices.

    Saudi-led OPEC has said oil markets are well-supplied, implying that Bush’s call may again go unheeded as it did in January, on a similar trip. The EIA estimates the Saudis actually cut output in April by 100,000 barrels a day from the first-quarter level of 9.1 million barrels a day.

    —By David Bird, Dow Jones Newswires

  27. 27
    zman Says:

    Reef- re IOC, agreed, why not farm out a piece to an experience, moneyed player here. If it is big enough to warrant an LNG liquefaction plant there should be money enough to go around…these guys seems to love teetering financially.

  28. 28
    kyleandy Says:

    z IOC said they were in ongoing talks w/others and i believe he said that some of the third party people looking at all the recent data represented possibe partners, so maybe reef’s wish will happen

  29. 29
    Nicky Says:

    Morning all. Crude – ending diagonal still looks the most likely count with or without a new high. Unleaded’s new high is maybe an omen.
    Last nights low at 123.54 takes on a bit more relevance and I think a move below would be the first hint of a top being in. If new highs then 129 ish or 130.50.
    I see no new news. Aside from the UBS upping their estimates – a big yawn as we have already exceeded them!

  30. 30
    Nicky Says:

    Forgotten to mention we have options expiry today so expect huge volatility.

  31. 31
    Nicky Says:

    Did anyone see Donald Trump on CNBC this morning. Basically said that someone with a business mind ie Wilbur Ross who was co-hosting should tell OPEC we will not put up with them hiking prices like this and that the big oil companies should be taxed into ‘oblivion’! Ripe coming from someone who openly admitted to buying a house in Palm Beach for 40mil two years ago and just selling it for 100mil! Boone Pickens was on later and said Donald should stick to real estate and telling OPEC what to do was not an option!

  32. 32
    Sambone Says:

    Go T!

  33. 33
    zman Says:

    Trump has jumped the shark, I mean, he’s literally lost his mind. Ripe indeed.

  34. 34
    Dman Says:

    I feel embarrassed for Bush, going begging again to the Saudis. Then I think, wait a minute, he doesn’t seem capable of embarassment, why should I feel it on his behalf? But really, since when did begging get listed in “Negotiating tactics 101”? Oh right, it’s listed under “really really stupid, self-defeating tactics”.

    Z – regarding RIG & the jackups. I got the impression from the call transcript that RIG was simply saying they don’t have as much visibility there & it was the analysts who were presuming weakness. Analysts zeroed in on it but management declined to speculate one way or the other. I would think the energy strips imply the jackup future won’t be as weak as they presumed.

  35. 35
    zman Says:

    Dman – agree that Wall Street overplayed the presumed negativity

    93 Bcf, pretty much in line.

  36. 36
    zman Says:

    natural gas not liking the number early

  37. 37
    Dman Says:

    Boone has been right in his latest trade (long oil & gas, he tells us). Nice to see he’s back in the money. How exactly did Donald make his money. As Letterman might say ” …aw, who cares?”

  38. 38
    zman Says:

    CNBC saying it was greater than expectations….I’m sorry but 93 vs 89 Bcf is not greater than expectations, that’s rounding error. 1st off, its a survey, not a tally of actual gas in storage, secondly, the 89 is the average of 20 analysts who like me, do some pretty quick math and come up with a number. I’ve been there and the more scientific you try to get with the number the more your headache will grow.

  39. 39
    zman Says:

    WH getting wood shedded for 155. I’m holding, may add next week. Nothing has changed with the fundamental picture here and they made their quarter but the Opco seems to have had only half the shares in his model. Checking on that now.

  40. 40
    Dman Says:

    Z – I just noticed your NG “exports” line near the top of the post. Is that to Mexico?

  41. 41
    zman Says:

    Almost entirely, but some does loop back up into Canada as well. As near as I can tell, exports to Mexico continues to spiral higher and we are up about 1 Bcfgpd relative to year ago send out. Mexico built power generation and other gas consuming facilities right across the border in the early 2000s from California, Arizona and that demand continues to grow.

  42. 42
    Dman Says:

    #38. If the reaction had been different, no doubt they would have “explained it” as due to an “in line” number.

  43. 43
    zman Says:

    Anybody with an Opco broker. I would very much like to see the first call note or comments on the WH call. The company did not brick that quarter, the analyst bricked that quarter.

  44. 44
    VTZ Says:

    Gas has no business neing above 8 right now in my mind although that’s not saying that I think it will trade down to there.

  45. 45
    zman Says:

    V – I tend to agree. More importantly, the number 3 gas producer in the U.S. agrees with you too, at least, that’s where CHK is willing to hedge their production. Over 70% hedged for 2008 does not speak well to gas going to some kind of BTU parity with oil as the gas bulls keep squawking.

  46. 46
    scoop006 Says:

    Re#37 Donald’s father Fred staked him $80 million to start.
    Qoute from his book Art of the Deal
    “I borrow alot of money from the Japenese and pay them back very little”

  47. 47
    Dman Says:

    Z – with all this hedging going on, how much of the current price has actually reached the end user of NG?

  48. 48
    zman Says:

    Dman – it takes quite some time to flow and this amount of time varies from municipality to municipality. So far I would say very little has reached the residential consumer with commercial and industrial players seeing a good amount of the increase.

  49. 49
    zman Says:

    I plan to take the hit on the COP calls before the close.

    CNBC talking about SU being the greatest call ever made by a guest on Squawk on the Street. Stock up to nearly $130.

  50. 50
    Nicky Says:

    Scoop re #37 – what a nice start! However even then he nearly went bankrupt!

  51. 51
    zman Says:

    ZTRADE: Added DO June $140 calls for $3.50 with the stock up $4 on a positive broker call on the deepwater group. I’ll probably sell the $150 calls I have if this rallies further.

  52. 52
    zman Says:

    I may take out some of my HK if it fails to break $27 on this rally.

  53. 53
    uop Says:

    zman:

    I was reviewing my energy holdings:
    like to be in:
    oil/gas stuff
    coal
    solar,

    wonder which 10 might be the best to have ??

    I have:
    in EP: HK, CHK, EOG
    in Oilsrv: DO
    in Majors: PBR
    in Ref.: VLO, FTO
    in coal: BTU
    in Solar: none
    in Shipping: none

    NG: UNG puts
    OIL: USO puts,

    with your view of the energy sector:
    is there a good one missing ?
    is there a bad one contained in this?

    Txs for help.

  54. 54
    Popeye Says:

    DRYS still running.

  55. 55
    bill Says:

    if you like deep ocean rigs and bulkers drys has both

    i think it rises into earnings then sells off

    earnings out next week

    im out of drys for now but q2,q3 will be good

  56. 56
    kyleandy Says:

    z WH at 7 looking tempting to double up what are your feelings?

  57. 57
    Sambone Says:

    Good stuff for viewing later

    http://www.abc.net.au/science/crude/

  58. 58
    zman Says:

    Uop – I own most of that list as well. The one glaring omission from both our lists is solar/alternative energy and though I think I missed the early boat, those names will likely keep going up for some time…just that you have to selective as there is a glut of PV coming, maybe 2009. One area I note you don’t have that I do is service exposure to N. American nat gas ramp. I like NBR there for that.

  59. 59
    tomdavis12 Says:

    Z Many large blocks traded on CHK yesterday and today. Any thoughts?

  60. 60
    Sambone Says:

    Uncle Phil

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

  61. 61
    zman Says:

    Bill – I missed that one like a dope. Any thoughts on tankers, FRO had been rebounding last I checked.

    Should have taken that FLR on the big dip yesterday, onward and upward now.

    Go X Go

    Kyleandy, I’m giving it more time to fall.

  62. 62
    Brian Smith Says:

    I’m looking at my broker’s option screen for RIG. Looking at writing some Jan09 puts. Due to past mergers, there is a plethera of symbols for each strike price. IS VOI is correct prefix for call/put options on the current company?
    I’d appreciate any help from a wise soul.

  63. 63
    kyleandy Says:

    z -WH i couldn’t resist AT 7

  64. 64
    zman Says:

    Tom – I had not noticed that but I’d say that funds late to the party are now positioning in the cheapest big cap around. Interesting to see the gassy stocks ignoring natural gas’ little pull back today. The trend is still easily up as I was saying in the post. CHK would still be cheap to the group $10 higher than here and that’s on current estimates which are going to be going up soon. Analysts will start the marking to market process in mid June, taking 2Q and 3Q numbers up based on natural gas prices. The 2Q current street estimate for nat gas is $8.50 … um, that’s going to be flying up to closer to $10 unless prices fall drastically and soon.

  65. 65
    zman Says:

    Brian – will check and get back to with a link to the Option notes there.

  66. 66
    zman Says:

    Brian – this should have what you’re looking for but if not I’ll do some more digging.

    http://www.optionsclearing.com/market/infomemos/2007/nov/23859.pdf

  67. 67
    zman Says:

    ZTRADE: Sold my June $140 calls for $5.20, up 33%. I’ll reposition later on an energy red day but am raising a little cash right now.

  68. 68
    zman Says:

    PBR moving above price following 1Q call.

  69. 69
    zman Says:

    crude well off its highs now (wild expiration related trading) which should help the broad market and as long as it does not sink several points it may actually help the stocks to rally.

  70. 70
    zman Says:

    ZTRADE: Sold HK $25 calls for 2.55, up 96%. Still holding the June $30s and will add more exposure if it pulls back a little.

  71. 71
    antrimshale74 Says:

    Energy stocks really selling off hard.

  72. 72
    zman Says:

    Antrim – yes, nat gas down all day and oil reversed from up $2.50 to down $0.50 in the last 2 hours.

  73. 73
    zman Says:

    ZTRADE: Out NBR $37.50 June calls for $3, up 111% to 2 purchases made mid April. I’ll buy it back lower. I still hold the $40 calls.

  74. 74
    zman Says:

    ZTRADE: Out COP May $90 Calls for $0.21, down 72%.

  75. 75
    zman Says:

    Oil down $2, NG down $0.34

  76. 76
    zman Says:

    Kyleanday, nice bottom fish so far on the WH.

  77. 77
    Brian Smith Says:

    Zman — many thanks for the help with the RIG option symbols

  78. 78
    VTZ Says:

    Z – Do you have an opinion on coalbed methane companies with sustained high NG prices?

  79. 79
    Sambone Says:

    12:33 pm EST

    Nymex Crude Trading Lower

    DOW JONES NEWSWIRES

    [Dow Jones] Nymex crude is trading lower, after rising more than $2 earlier in the session. A jumble of factors, including fears that Congress aims to reduce speculation on commodities and the expiration of options for June crude, are playing a role, says Peter Donovan with Vantage Trading. June crude trades at $122.85, down $1.37. (brian.baskin@dowjones.com)

  80. 80
    Sambone Says:

    US SENATE APPROVES A BILL CLOSING THE SO-CALLED “ENRON LOOP-HOLE”
    – The “Enron loop-hole” exempts most OTC energy trades and trading on electronic energy commodity markets from the requirements of the Commodity Futures Modernization Act of 2000.

  81. 81
    zman Says:

    V – as long as they don’t have water handling issues I think they are good candidates for MLP spinouts. I’m fond of PXD which bought the old Evergreen Resources in the Raton basin. Can’t get the stock to fall though.

    Bidding some SLB as I try to diversify my service holdings but I’m not being very aggressive about it.

  82. 82
    Sambone Says:

    By Ian Talley
    Of DOW JONES NEWSWIRES

    WASHINGTON (Dow Jones)–The U.S. Senate passed a bill Thursday that includes a
    measure giving federal regulators greater oversight of energy markets, closing
    the so-called ‘Enron Loophole.’
    Lawmakers have been pushing stronger regulation in response to volatile energy
    markets and record high prices, laying much blame on speculation, particularly
    in electronic markets, where a large portion of energy contracts trade without
    federal oversight.
    The provision to fix oversight of the markets has been approved as part of the
    Farm Bill, which will now go to the President to be signed into law. The
    legislation attacks the law that allowed the manipulative trading that led to
    the failure of the energy giant Enron Corp. (ENE).
    Lawmakers warned they will be pushing for additional legislation for even more
    stringent regulation, however.
    Sen. Dianne Feinstein, D-Calif., one of the chief proponents of the provision,
    said it puts all significant energy trades on electronic platforms within the
    regulatory confines of the Commodity Futures Trading Commission and will impose
    limits on the size of traders’ positions to prevent excessive speculation.
    “We’re putting the cop back on the beat, and it’s long overdue,” Sen. Carl
    Levin, D-Mich., said as the Senate voted on the bill.
    “This legislation puts real teeth back in the CFTC, but there’s more work that
    could be done,” said Sen. Maria Cantwell, D-Wash., a chief cosponsor. “We need
    to give more authority to CFTC … so we have no more dark markets.”
    Sen. Charles Schumer, D-N.Y., said he also believed there needed to be more
    investigation and regulation of the energy markets.
    Political momentum for tighter regulation has gained weight in the past year
    as oil prices hit record highs and several multi-billion dollar hedge funds
    have collapsed on wrong-way bets in the energy markets, including Amaranth
    Advisors LLC, which authorities accused of attempting to manipulate the natural
    gas markets.
    The provision also requires traders to maintain audit trails by supplying
    reports on any large trades to the CFTC, imposes record-keeping requirements,
    and forces electronic exchanges to monitor trading behavior and prevent
    manipulation.
    Under the measure, the CFTC will consider trading volumes and whether the
    contracts are being used to establish a price reference for other contracts.
    The language is largely similar to recommendations made by the CFTC in a review
    of what extra regulation the agency thought was necessary.
    The Enron Loophole bill doesn’t yet give authority to regulators for oversight
    of foreign trading on U.S. terminals, which would allow even more insight into
    the Intercontinental Exchange’s (ICE) operations and trading. Senators said
    they would specifically seek to legislate new powers to cover that oversight
    perhaps as early as next week.
    The measure is just one of a raft of new regulations and proposed oversight
    that Congress and authorities are initiating to combat inappropriate
    speculation.
    -By Ian Talley, Dow Jones Newswires, 202-862-9285, ian.talley@dowjones.com

  83. 83
    zman Says:

    I would like know what business congress has in fiddling with the free markets.

  84. 84
    zman Says:

    …will impose limits on the size of traders’ positions to prevent excessive speculation.
    “We’re putting the cop back on the beat, and it’s long overdue,” Sen. Carl
    Levin, D-Mich., said as the Senate voted on the bill

    next they’ll be setting the price of gasoline.

  85. 85
    Jason Says:

    Hi Z – Many of those sales you made earlier today were right before the big drop. Did you see some kind of signal or was it just good timing?

  86. 86
    antrimshale74 Says:

    So NCOC presented at the Merrill Lynch Metals and Mining Conference on Tuesday and the stock is up 40%. This is a very small, perhaps poorly run coal miner based in Knoxville, TN. As they say, a rising tide lifts all ships.

  87. 87
    zman Says:

    Jason – just watching crude get frustrated by Feinstein. Figured they woodshed oil on expiration day with our congress going all communist on us.

    Anybody see the reason for the move in BTU today?

  88. 88
    Jason Says:

    Another quick one, Z. With oil off sharply, shouldn’t the refiners be showing more strength today?

  89. 89
    ram Says:

    ZMAN – Quite the downdraft in the ZTtrades. Thoughts if you missed the move down. Still sell or wait?

  90. 90
    Sambone Says:

    87 – Some guy put a buy on them that I never heard of. I think it has to do with China. 400 Hydros in trouble, so they will have to buy more coal is my read.

  91. 91
    zman Says:

    Jason – they typically lag by a day to as much as a week. I would expect them to move a little more quickly to the upside these days as so many analysts and fund managers are trying to bottom fish the group. One other consideration on today’s action might be that gasoline is off more % wise than oil and while HO is off somewhat less its gas that rules the majority of the typically cracked barrel (3-2-1 crack equaling 3 barrels of oil to yield 2 barrels of gasoline and one barrel of distillate)

  92. 92
    elijahwc Says:

    Re # 83. Gotta love the farm bill. The guys running the printing press down in the fields and prairies get to keep their crop subsidy and now Congress is going to help them with their cost of goods sold.

  93. 93
    zman Says:

    Ram – I’m fairly wary for the near term regarding a meddling government and plan to buy much of what I sold back lower. I just did not want to hold through the valley.

    Sam – thanks, I’m looking at ACI and wondering why it did not move and that explains it, different end markets directly but if China is a step up, and it may be, then the drybulks benefit and all the coals via higher coal prices. Took a little ACI off the record.

    Eli – no kidding. Somehow Congress has taken notice of the fact that gasoline prices are up 20% YoY but missed the fact that I seem to be paying about 50% more for a load of grocieries. Unreal.

  94. 94
    zman Says:

    Ram – did that answer suffice, I have been raising cash of late anyway. Note how quickly the offshore rigs recovery …

  95. 95
    Jason Says:

    Thanks for the help on the refiner question, Z. Keep up the good work…love your site.

  96. 96
    Sambone Says:

    Z – Tell you what, the “crowd” sure gets spooked easy. That might mean a top, just not sure.

  97. 97
    zman Says:

    ZTRADE: Added SLB $110 June calls for $1.45. This may be a bit of a stretch for the stock but its part of my plan to add service names as conditions for them improve.

  98. 98
    Sambone Says:

    PORT HARCOURT, Nigeria (AP)–Red Cross officials say about 100 people died
    when a ruptured pipeline caught fire in Nigeria.
    Disaster coordinator Suleman Maikubi said in addition to the dead, around 20
    people were injured and taken to a hospital for treatment.
    Road construction machinery pierced a pipe carrying refined fuel through a
    village on the outskirts of the main city of Lagos, Maikubi said, sparking the
    fire Thursday.
    He said flames from the blaze spread through nearby homes and a school.

    (END) Dow Jones Newswires
    05-15-08 1330ET

  99. 99
    zman Says:

    Sam, not hard to imagine how it happens when you see how the distribution system works over there. Unbelievable.

    http://www.foxnews.com/images/229144/0_63_101006_nigeria2.jpg

  100. 100
    Denise Says:

    Good afternoon-
    Mr K calling today-The Donald Trump top in oil
    “Donald Trump waxed enthusiastically about oil on “Squawk Box today,” saying that real estate is not the business to get into as a young man — now it is energy”
    And yes Doug is way long Dug

    Also my Gann voodoo man put a short on USO yesterday

  101. 101
    zman Says:

    No you tell us, lol.

  102. 102
    Denise Says:

    Sorry-did not want to rain on the site’s parade

  103. 103
    ellwodo Says:

    XCO – Shareholder meeting this morning was reassuring. Executives seem genuinely enthusiastic. Chairman said that based on his 30 years in business he had never been more confident about compny’s prospects of doubling in next 12 to 24 months. Unlikely to do much for my May calls, but I’ve added Jan 09 $25 leaps as part of my “core” holdings.

  104. 104
    zman Says:

    Denise – just kidding.

    ZTRADE: Entered FTO June 22.50 calls (FTOFX) (on the mid for $3.90) as per recent refining segment comments on the site.

  105. 105
    Denise Says:

    Actually been out of pocket-

    Another observation by Jay Shartisis option guru (used to write for Cramer and I think he still does weekly piece for WSJ) UNG awfully lopsided on the call side and looks ready to come down contrarialy(sp?)
    bearish
    He is also in the down USO camp from observing the options

  106. 106
    zman Says:

    Elwo – thanks, they don’t have any presentation materials from the day available, was there anything new?

  107. 107
    zman Says:

    Crude off less than a buck going into NYMEX close, thumbing nose at congress. No wonder they don’t let me write headlines.

  108. 108
    Sambone Says:

    Hmmm, down 13 cents for the day. Not bad

  109. 109
    Nicky Says:

    Wow what a day. As you thumbing at Congress or more likely options expiration skewed. CNBC actually calling it the Donald Trump in oil too but then they are saying it was off a buck fifty at the close so shows how much they know!
    It definitely looked like a reversal to me today. It actually could have just been ii down or part of ii down and we are now in iii up although the retracements in RBOB distillates and Brent were very small for a wave ii no doubt caused by the power outage at ICE. Alternatively we may have seen i down and this is ii up. A break of todays highs or lows will give us the answer! If the top is not in then the market has to stay above 110.29.

  110. 110
    Denise Says:

    There is a must read article by Neils Jensen about Commodity and Food prices in John Maudlin’s “outside the box” letter this week

    “OGEC” the new OPEC -organization of grain exporting countries

    Sent it to Z will forward if anyone wants it-free every week but do not have a link I can post
    sknitch@earthlink.net

  111. 111
    zman Says:

    Denise, thanks for the piece you sent, was just skimming down it. Makes me want to buy DE.

  112. 112
    Denise Says:

    Might add CAT to that list

  113. 113
    ellwodo Says:

    XCO – I think the hard data had been given out before. They are still buying Haynesville leases, will be going to board today to increase capital budget for it just as they did in March for Marcelus. Estimated potential reserves of 2 to 5 TCF for Haynesville, 6 to 10 for Marcellus and another 1 to 2 for Huron. They said if the same metrics driving their peer’s share prices were applied to them they’d be a $50 stock. They hired an HR director in Nov, he’s already added 150 people (current total workforce around 700). T Boone was there for the subsequent board meeting, but he didn’t give me any investment tips. More “feel” than facts, but I liked what I hard.

  114. 114
    zman Says:

    There was a $5 swing on crude today to close flat. Your tax dollars at work.

    It’ll make for some nice bottom fish trades from earlier.

  115. 115
    Sambone Says:

    2:44 pm EST May 15, 2008

    CHARTING MONEY

    Bearing The Thought Of Lower Crude Oil

    By STEPHEN COX ,CMT
    A DOW JONES NEWSWIRES COLUMN

    NEW YORK — A move of Nymex crude oil to targets above $135 a barrel obviously amounts, given the powerful long-term uptrend, to the proverbial drop in the bucket.

    I’ve satisfied myself, based solely on chart work, that crude oil near $250 a barrel in the next decade is a reasonable consideration, if not an accurate projection.

    As usual, however, first things first.

    This column not quite a week-and-a-half ago, when June crude was trading near $119 a barrel, suggested that the contract might not be set up for a corrective sell-off before $127.31 resistance was tested. Whether or not you take crude’s all-time high, $126.98 recorded Tuesday, to be a tolerable hit on the formal $127.31 level may depend on how charitable you’re feeling to chartists. And who shall blame you?

    I guess in any case, now that the contract is trading near $121.60, the current low for the three-day sell-off being $120.75, that consensus opinion holds that a correction is in place. I believe that crude oil futures, once they decisively take out $127.31 resistance, will be pointed up to initial long-term targets above $135. Of course, whether that belief is correct may depend on how deep the current correction will be.

    If the correction is once more extended below $121.11 then it will quickly run into a potential bottom at $120.90. And if that support doesn’t do the trick for the bulls, then traders can reasonably look for a dip to the $118.51-$115.57 support band, which would include potential bottoms at $117.53 and at $115.57. Moreover, long-term charts imply that decisive trading below $117.25 might touch off a move down to $108.76, a move that obviously would considerably delay a revisit of $127-area resistance.

    Click to see chart.

    http://www.dowjoneswebservices.com/chart/view/1119

    But, as usual, traders, whether bull or bear, should keep in mind that corrections in a powerful uptrend such as crude is moving in, tend to be relatively shallow. In this case, a strong rally from the $120.90-$120.50 support band, if it took out $121.69 resistance, might point nearby crude back up to $126.68 initially.

    —By Stephen Cox, Dow Jones Newswires;

    (Stephen Cox, a chartered market technician, is chief technician for Dow Jones Newswires.)

  116. 116
    Sambone Says:

    Z – Your gonna love this one.

    http://levin.senate.gov/newsroom/release.cfm?id=297513

  117. 117
    Denise Says:

    Sam-shots across the bow
    I bet more to come

  118. 118
    Nicky Says:

    Well a 76% correction of the move down from todays high to low would come in at 125.44 which coincidentally is the area from which the market fell apart. A 61.8% correction is 124.47. If this is a wave ii up then quite likely to hit the upper targets when everyone believes the rally is back on.

    It seems to me that far too many people do not believe that a decent correction is possible in the energy market ie the sentiment is far too bullish. Well take a look at gold and silver where they thought the same thing!

  119. 119
    zman Says:

    Nicky and Denise. Agreed and agreed.

  120. 120
    Nicky Says:

    Also say we get to 135 on this run and I agree its not out of the question – is it worth hanging on for another few bucks of upside when there is now a far greater chance of a fall.
    To me all the guys who continue to ramp are probably offloading – they will ramp it just enough now to get themselves out whilst the man in the street believes we have seen the correction today and he now just has to get long for the next shot to the moon and $200.

  121. 121
    Sambone Says:

    3:18 pm EST

    Crude Down Slightly In Rocky Technical Trading

    By BRIAN BASKIN
    Of DOW JONES NEWSWIRES

    HOUSTON — Crude oil futures closed lower for the third time in four sessions, in a wild day marked by the expiration of June crude options and the passage of a bill by the U.S. Senate paving the way for greater regulation of energy markets.

    Light, sweet crude for June delivery settled 10 cents, or 0.1%, lower at $124.12 a barrel on the New York Mercantile Exchange. Futures swung wildly between the intraday high of $126.64 and a low of $120.75 a barrel.

    June Brent crude on the ICE futures exchange closed down 61 cents at $121.25 a barrel. ICE shut down Thursday morning after losing power, resuming shortly before the close of U.S. trading.

    Nymex futures sank as the Senate passed a bill giving the Commodity Futures Trading Commission new powers to regulate electronic trading in energy markets. The bill is designed to require electronic traders to maintain an audit trail, allow the CFTC to monitor for market manipulation and increase penalties, and limit speculation.

    “This legislation puts real teeth back in the CFTC, but there’s more work that could be done,” said Sen. Maria Cantwell, D-Wash. “We need to give more authority to CFTC…so we have no more dark markets.”

    The fear in the markets is that such rules would scare off speculators and others who have played a role in oil’s rise. But the bill passed Thursday is unlikely to have that effect, said Rachel Ziemba, an analyst with the RGE Monitor, a financial research web site.

    “This seems to be a very symbolic decision,” she said. “What could be more significant is if there are other trading regulatory changes…I’m not sure there’s a political consensus to have more sweeping changes.”

    Others attributed oil’s sudden fall and equally dramatic rise in the final minutes of trading to the expiry of options to buy June crude at the end of the session, an event often preceded by large price swings. Significant open interest centered around $125 and $120 a barrel, so when futures fell below the former, traders attempted to push prices below the latter, said Mike Zarembski, senior commodity analyst at brokerage optionsXpress Inc. in Chicago.

    “A lot of players were trying to work their way above and below the strike price,” he said. “Technically, the market is looking for a selloff.”

    Although a similar correction at the end of April had traders and analysts anticipating an even more dramatic slide to come, few were willing to make that call Thursday. Heating oil futures, which pulled all energy futures higher with massive gains this month, saw narrower losses than oil or gasoline on Thursday, indicating that the market for distillates remains strong. June heating oil settled 46 points higher at $3.6224 a gallon.

    Heating oil demand typically peaks in winter, causing focus to shift in energy markets to gasoline. This year, gasoline demand is down in the U.S., while demand for diesel, a distillate, is up in Europe, Asia and South America, outstripping local supply. The once-isolated U.S. market is now being pressured to supply the world, said Andrew Reed, an oil market analyst with Energy Security Analysis Inc.

    “If you look at the U.S. in an isolated way, the market should be weakening, but because of what’s going on in Europe and South America, it’s a real bull market, and you can see it in U.S. prices,” Reed said. “(Distillates) are going to stay strong right through the summer.”

    Front-month June reformulated gasoline blendstock, or RBOB, settled 1.46 cents, or 0.5%, lower at $3.1658 a gallon.

    (Ian Talley in Washington contributed to this article)

    –By Brian Baskin, Dow Jones Newswires

  122. 122
    zman Says:

    Nicky got any technical thoughts on the broad market, I’ve got a wildz trade (or 2) in my back pocket but I’d like to here you thoughts on S&P and Dow resistance levels.

  123. 123
    Sambone Says:

    Z – Here’s my Tech on the broad market

    “The market does what it does cause magical pixie fairies wave their wands and shouted meka-leka-hi meka hiney ho.”

  124. 124
    zman Says:

    mocking Z is not permitted. unless you bought WH. then mock away. but only for today.

    NBR breaking out finally.

    SLB going green from -$3 at lunch

    deepwater drillers going ballistic

  125. 125
    Garyinhou Says:

    What a wild and wacky day. I’m going to Vito’s to watch the Astros and down a few cold ones.

  126. 126
    apbd Says:

    Sam:
    Tell that to Congress. They’ll believe anything in an election year. lol
    apbd

  127. 127
    zman Says:

    Gary = lucky dog.

  128. 128
    Sambone Says:

    A – Hey, B52 Ben and Hank already know this. In regards to Congress, They are the fairies.

  129. 129
    apbd Says:

    Z:
    Great call on DO.
    apbd

  130. 130
    Garyinhou Says:

    Yes sir, blood alcohol futures going green..

  131. 131
    Sambone Says:

    Z – Hey I bght WH yesterday

  132. 132
    Sambone Says:

    Tini time

  133. 133
    zman Says:

    Sam – well that’s different. Agree re Congress.

  134. 134
    zman Says:

    Have a great evening guys and gals, the gas charts will be out later

  135. 135
    Nicky Says:

    Z – Dow is lagging the rest of the market so be on guard! Broader market chopping nicely higher. I think I said yesterday we would retest 12900 or lower and then work higher. Well its working out…One new high above 13,133 should do it. A move below 12,781, maybe 12,821 spells trouble…
    SPX, support at 1406, again expect a move higher before this is done. Resistance at 1430… a move below 1384, maybe 1396 spells trouble…
    Volume as been awful on this move up.

  136. 136
    zman Says:

    you did say 12,900 and it bounced like clockwork. I think we are approaching “sell for summer” time given the volume, given the run, given the continuous rotation in leadership … tech, finance, energy, tech, energy, tech, homes…. that kind of action drives people nuts.

  137. 137
    regale Says:

    Sambone: Re #123, you’ve been watching too many PeeWee’s Playhouse reruns. Better that, though, than watching Donald Trump this morning at 4:00 a.m. left coast time. That’ll teach me not to be an insomniac.

  138. 138
    zman Says:

    Scoop sent video of Cramer on RIG and NOV, favorable opinion from him on both over the increased activity out of PBR. Should not be much of a surprise but he’s taking it from the recent upgrade and a Bloomberg story along the same lines saying the negativity in RIG was overdone. Thanks Scoop. I may be getting into NOV soon as it looks to be in front of the same trends as the deepwater drillers, lots of $ chasing too little capacity.

  139. 139
    ram Says:

    NOV, NOV, NOV.

  140. 140
    zman Says:

    from scoop – Cramer on RIG and NOV:

    http://link.brightcove.com/services/link/bcpid1078966384/bclid1137812485/bctid1554907013

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