11
Jul

Finally Friday Watch

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Housekeeping Watch: I will be out of pocket from the open for about 2 hours as we shoot high res 3D over my future intern.  Keep the energy sectors strong for me as I'm not setting stops even on my July calls. 

Friday Thoughts Watch: August crude set a pre market high of $145.98 on no new news but a continuation of yesterday's Iran, Nigeria, Brazil items, all of which are fear based and have taken nothing from the supply side as of yet. How the broad market can hold 11,000 in the face of $150 crude is a mystery to me. Yesterday was the first good day in a week for the energy complex (unless you count the refiners) and Cramer even sounded the all clear on the gassy stocks in much ado about nothing fashion. Clearly guys like him and the hot money crowd are taking their investment cues more from price action than from fundamentals and clearly there is more of that kind of money in the energy groups, especially E&P, in this down 15% ytd broad market environment.  I'm not Cramer bashing as I think he's a smart guy, and while he trades a bit bi-polar from time to time, he does have an underlying thesis which is more than I can say for much of the fast money out there that simply thinks "oil up good, oil down bad" when looking at the group.    Otherwise, there's not a lot of E&P, service name or other energy news I care about out this morning. My sense is that with Freddie and Fannie calling in sick, the market will get woodshedded and investors will turn to our corner of the world as one of the few that is truly working (and cheap!) this year. Back in a two hours.

In Today's Post:

  1. Holdings Watch
  2. Commodities Watch with Natural Gas Storage Slideshow
  3. Odds & Ends 

Holdings Watch:

  • (CHK) - Added CHK $60 July Calls CHKGL for average of $2.20.
  • (EOG) - Entered EOG August $120 Calls (EOGHD) for $5.20 with the stock just under $114 and up 2.5% on the CLR Bakken news yesterday.
  • (HAL) - Entering HAL August $50 Calls (HALHJ) for $1.73 average cost

The Wiki Holdings and ZEB Performance tabs are updated through 7/10. Note the sea of red ink at present on the Performance tab. This happens whenever you get the kind of downdraft we've had over the last five trading days and while it is not pretty I don't jump ship on the group without a better fundamental driver and in fact I've been adding into weakness. In the case of some of the July positions this will simply not have time to work out. Next week I plan to round out the positions I want to be holding for the first half of earnings season including more big cap E&P and big cap Oil service names. 

 

Commodity Watch:

Natural gas initially sagged following an inline gas storage report today before surging ahead with a mid to late date rally in crude. By the end of the day, August contract gas had edged up $0.29 to close at $12.30. The EIA reported an injection into storage of 90 Bcf, spot on with my estimate and 2 short of the Street Consensus number according to Bloomberg. The delta to the Street is rounding error. As I said in comments in Thursday's post and on the site following the number, next week's report should show a significantly smaller injection and that that might be the cause of a rally in gas prices, or at least a bounce, going into Monday once the CDD final tallies are released for the current week. This morning gas is trading up a dime plus, most likely due to the rally in crude. 

  • Gazprom Negotiating For Rights To All Of Libya's Export Capacity. Gazprom is Russia's largest natural gas producer and produces one-fifth of all natural gas in the U.S. They are seeking a deal to control all exported oil and LNG from Libya.  Other deals with oil states are rumored to be in the works. Given that Russia often shuts off gas access to whole countries during the dead of winter to reinforce its negotiating position, this cornering the market action has positive implications for global natural gas prices. Just something to watch for now. 

A Quick Look At Yesterday's Gas Storage Report  

gas-table-070408-a.jpg

Potential Injection Season Rebuild Scenarios: The average and minimum scenarios with the 1 Bcfgpd of extra supply would likely yield prices in the low to mid teens this Fall. Unless imports dramatically improve this summer (unlikely) and the expectation of a hot summer is wrong then you can forget about the max cases. 

gas-table-070408-b.jpg

gas-graphs-070408.jpg

Crude Oil rallied early on seemingly heightened U.S./Iran tensions, an approaching oil workers strike in Brazil, and the end to a short lived cease fire in Nigeria. However late in the day, the crude market found footing for a hard to explain $5.60 rally to end the day at $141.65. This morning crude is trading sharply higher, up $4 to $5 which again seems hard to explain as little new happened over night that I see. 

  •  Brazilian Oil Worker Strike: This was reported yesterday after the close but now I have numbers. We're looking at a five day strike starting next week in the Campos Basin that could affect 80% of Brazil's daily production of 1.8 mm barrels.
  • Nigeria Watch: Gunman kidnap a pair of foreign workers. 

Odds & Ends

Analyst Watch: Wachovia takes (APC), (BRY), (CRZO) ratings up to outperform. Otherwise pretty quiet on the analyst front...I would expect them to step up more numbers, ratings, and price targets on E&P and some service names next week. 

 

146 Responses to “Finally Friday Watch”

  1. 1
    scoop006 Says:

    Drudge Report has posted a report saying Israeli warplanes are practicing in Iraqi airspace and are landing on US airbases which are only a five minute flight to Bushehr, Iran.

  2. 2
    Sambone Says:

    8:51 am EST

    Nymex Crude Tops $146/Bbl

    From MARKET TALK:

    [Dow Jones] Nymex crude oil tops $146/bbl in its second day of sharp gains. After closing Thursday up $5.60 at $141.65, the benchmark futures contract keeps finding support — from a weaker dollar, saber rattling over Iran’s nuclear program and ongoing tensions in Nigeria. “The magnitude of yesterday’s late session rally above the $140 level would appear to indicate a bull market still very much alive and capable of posting new record highs in relatively short order,” writes analyst Jim Ritterbusch. Nymex Aug crude +$4 at $145.65/bbl, after making a new all-time intraday high of $145.98.

    –greg.meyer@dowjones.com

    Reported Earlier:
    LONDON — Nymex crude oil shot to record highs Friday in London as participants bought futures to cover short positions — or bets that prices would fall.

    Prices were also buoyed by strong technical support.

    “I think we will rally very sharply (today)…as there are a lot of speculators who are short,” said Pierre Andurand, managing partner and chief investment officer of BlueGold Capital Management, a commodity hedge fund in London.

    At 1105 GMT, the front-month August contract on the New York Mercantile Exchange was trading $3.63 higher at $145.28 a barrel after earlier hitting a record high at $145.98 a barrel.

    The front-month August Brent contract on London’s ICE futures exchange was up $3.77 at $145.80 a barrel.

    The ICE’s gasoil contract for August delivery was up $55.75 at $1,329.50 a metric ton, while Nymex gasoline for August delivery was up 643 points at 357.52 cents a gallon.

    —By Lananh Nguyen, Dow Jones Newswires

  3. 3
    Sambone Says:

    N – I’m not a TA guy, but got a feeling today might be the day for blood on the floor.

  4. 4
    zman Says:

    Sam – agreed. Are the DJIA futures below 11,000 yet? I’m checking out in a few so if you or someone else would not mind occasionally posting, oil, gas, the big stocks we follow, and the indexes it would give me something to do in the waiting room. thanks in advance.

  5. 5
    Sambone Says:

    Can do, Z man. Dow futures down, but not below 11,000 YET!

  6. 6
    tater Says:

    Finally got the requested XLE chart done (I was too busy buying up the financials like they tell me to do on TV). I doubt it will reveal much.

    The RIG chart was confusing the heck out of me, but I think I may have figured that one out (it always looks so simple once it’s done though). No comments, picture tells the story.

    SLB has re-entered a trading range, and the HK 60 min chart has a couple of updates. Good luck today

    HK SLB RIG XLE

    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2933882

  7. 7
    texana Says:

    thx tater would like to see it base & regain 10,20 &50dma as confirm…..xle

  8. 8
    Sambone Says:

    Limiting Speculators Will Not Cut Oil Prices

    By CRAIG PIRRONG
    Of THE WALL STREET JOURNAL

    Commodity price shocks, like those currently rocking the oil market, inevitably lead to witch hunts. And speculators are typically among the first to be hunted down.

    Many in Congress — including Sen. Joseph Lieberman (D., Conn.) and Rep. Bart Stupak (D., Mich.) — assert that oil market trading by financial institutions and investment funds has added as much to $70 per barrel to the price of oil. These charges are echoed by myriad others, including financier George Soros and Fox News personality Bill O’Reilly.

    Mr. Lieberman wants to ban any pension fund or financial institution with more than $500 million in assets from participating in the futures markets. He also proposes limiting investment banks’ positions in futures-like swap contracts traded in the over-the-counter market.

    Mr. Stupak, for his part, has introduced “The Prevent Unfair Manipulation of Prices Act.” He reportedly accused Goldman Sachs and Morgan Stanley of manipulating the markets — though he disclaimed knowledge of evidence of illegal behavior, and subsequently complained that he was misquoted.

    But the wild assertions about speculation and manipulation are defective, and completely unsupported by reliable evidence. The proposals by Messrs. Stupak and Lieberman, not to mention others ricocheting around Capitol Hill, would not reduce prices. They would harm consumers and producers.

    First, consider the charge that commodity prices are being “manipulated.” There are of course certain well-known forms of market manipulation — notably the “corner” or “squeeze.” Here a trader buys more futures contracts than there is commodity to deliver, and forces those that have sold to him — but who cannot deliver — to buy back their contacts at an exorbitant price. None of this has been observed in the oil markets in recent months. Even more to the point, manipulations of this sort typically have short-lived effects on prices. They cannot account for the extended run of high oil prices.

    What about the impact of speculation more generally? The assertion here is that noncommercial market participants have increased their positions in these markets both absolutely, and as a fraction of the total number of contracts outstanding; that these speculators are buyers on net; that this speculative buying has increased by about as much as the increase in Chinese oil demand over the past five years; and therefore, that speculators have driven up demand for oil, and its price.

    This argument represents a complete misunderstanding of futures markets.

    For the most part, speculators do not demand physical oil the way thirsty Chinese refiners do. There is no evidence that speculators are accumulating large and rising inventories of physical oil. But to cause prices to be above their competitive level, speculators would have to take physical oil off the market — the way that governments have done in the past with agricultural products, amassing mountains of grain and cheese to prop up their prices.

    What some speculators do instead is trade futures contracts that entitle them to take delivery of physical oil at a future date (say next August) at a price negotiated in the marketplace. But they almost never exercise the right to take delivery when the contract matures.

    A speculator who anticipates rising prices buys a futures contract at the prevailing market price. If he is right, and the futures price rises, he can sell the contract at the higher price before contract maturity and pocket a profit; if he is wrong, and prices fall, he sells the contract at a loss. Buyers and sellers of these futures contracts almost never take delivery of the oil to implement their trading strategies.

    Restricting these speculators won’t reduce the price of oil — but they are likely to make consumers and investors worse off. Futures and swap markets facilitate the efficient management of price risks, and speculators are an important part of that process. For instance, a producer of oil may want to lock in the price at which he sells his oil in the coming months in order to hedge against fluctuations in its price. He can do so by selling a futures contract at the prevailing market price. Similarly, an airline can protect itself against price increases next summer by buying today a futures contract that locks in a purchase price for next July.

    Producers and consumers who want to “hedge” in this fashion cannot wave a magic wand to make the price risks they face disappear. The oil producer has to find somebody to sell to, and the airline must find somebody to buy from — and that somebody is often a speculator. Restricting speculation would increase the costs that producers, consumers (such as airlines), and marketers (such as heating-oil dealers) pay to manage their price risks by reducing the number of traders able to absorb the risks they want to shed.

    These higher risk management costs would result in higher prices at the pump or the airline ticket counter for consumers, and less investment in new productive capacity — which would keep prices high into the future.

    Participation in these oil markets by pension funds and other investors (a la Mr. Lieberman) is also not a problem. By adding commodity futures to their portfolios, i.e., by diversifying, these investors can reduce their risks without sacrificing returns, and without impacting physical inventories (or prices). Consumers are the ultimate winners when risks are borne as efficiently as possible in these markets.

    The unprecedented run-up in oil prices is painful for consumers around the world. But the focus on speculation is misguided, and represents a convenient distraction from an understanding of the real, underlying causes of high oil prices — most notably continuing demand growth in the face of stagnant production, supply disruptions and the weakening dollar.

    More restrictions and regulations of energy markets, in the vain belief that such actions will bring price relief, are counterproductive. They will make the energy markets less efficient, rather than more so.

  9. 9
    Hoss Says:

    Morning all.

    At this moment, the House Committee on Agriculture is concluding the third day of a three day review on legislation amending the Commodity Exchange Act. At the very least, it may provide some background noise to your trading day.

    Click on “Video Connection to Hearing Room”

    http://agriculture.house.gov/hearings/audio.html

  10. 10
    ram Says:

    Early panic in financials. Where’s Ben?

  11. 11
    Hoss Says:

    Sam, along those lines…

    At this moment, the House Committee on Agriculture is concluding the third day of a three day review on legislation amending the Commodity Exchange Act. At the very least, it may provide some background noise to your trading day.

    Click on “Video Connection to Hearing Room”

    http://agriculture.house.gov/hearings/audio.html

  12. 12
    Sambone Says:

    Crude – 146.51 up 4.84
    Ngas -12.40 up .10
    CHK – 64.33 up 2.75
    HK – 47.87 up .74
    Dow – 11074 down 152
    S&P – 1237 down 16

  13. 13
    Sambone Says:

    ram – Answer, printing dollars

  14. 14
    Dman Says:

    It almost looks like panic-buying of energy names while the rest of the market gets spanked.

  15. 15
    VTZ Says:

    I think this is people buying because they know crude at 150 is inevitable.

    NG looks like it might be playing catchup next week?

  16. 16
    tater Says:

    Just remember what crude did when it got to $100 for the first time. It took 4 months to get through the round number shock. The “inevitability” of the $150 price is exactly what makes it such a likely candidate for a sell-off, if only temporary.

  17. 17
    Sambone Says:

    A diffrent view.

    These are the personal views of Peter Morici, a professor at the University of
    Maryland School of Business and former Chief Economist at the U.S.
    International Trade Commission:

    Today, the Air Transportation Association is holding a press conference to
    make the case that Congress should ease rising oil and jet fuel prices by
    curtailing speculation in crude oil futures.
    While speculation can push up prices temporarily, it is not lion’s share of
    the problem.
    Speculators do not hold possession of the oil when they close out their
    positions. They are not hoarding oil, as speculators do precious metals; hence
    the consequences of their actions are one time, not cumulative.
    The more fundamental problem is that oil demand continues to grow, not in the
    United States, but in Asia where prices are regulated and imports subsidized by
    governments, and production is declining in non-Middle East locations. With
    demand so inelastic in the short run – naturally, by the fixed nature of energy
    using assets and furthered by price controls in Asia – prices are rising
    dramatically.
    The airlines premised their business plans when they exited bankruptcy on oil
    prices going down. The airlines would be in trouble at $80 a barrel.
    The real problem is that creditors do not ever expect a price for oil that
    will make the airlines solvent. Hence, the airlines will have increasing
    difficulty borrowing and raising new capital. Unless the government steps in,
    some airlines will fail.
    In addition, the airlines have demoralized workforces, thanks to the payouts
    executives took in bankruptcy and reduced benefits for ordinary employees, and
    the traveling public will only fly by necessity or at a discount. Flying coach
    these days is so distasteful that either a passenger must either be forced to
    by business need or chooses to because it is cheaper than driving. Driving is
    tough for airlines to compete with.

    The author can be reached at pmorici@rhsmith.umd.edu

    Dow Jones Newswires
    07-11-08 1016ET- – 10 16 AM EDT 07-11-08

  18. 18
    VTZ Says:

    That’s true but we’ve already just sold off and people were saying the end of energy pre-emptively. I agree it might not just fly through 150 though.

  19. 19
    Sambone Says:

    Crude – 146.82 up 5.18
    Ngas -12.32 up .02
    CHK – 64.89 up 3.27
    HK – 48.57up 1.37
    Dow – 11040 down 187
    S&P – 12367 down 16

  20. 20
    jazzkool Says:

    Z, or anyone holding July CHKs and HKs;are you going to hold them until at least mid week next week, or do you take losses, especially on CHK, or try and roll them into August when they are up big time today?

    Thanks,
    Jazz

  21. 21
    jd Says:

    Zach, let us know how you are doing! JD

  22. 22
    jsaun14 Says:

    I flipped the July HK’s earlier this am.

    Energy is obviously the best place to be, but the broad skiddishness made me decide to cut losses and bet on my Aug’s and Sept’s.

  23. 23
    Popeye Says:

    Z is shooting his intern, back in a few.

  24. 24
    Bleemus Says:

    CRK Comstock: Leveraged towards the Haynesville; co’s ests may be too conservative; raising ests – Keybanc (82.42 )

    Keybanc is raising their Q2 EPS ests on CRK to $1.44 from $1.24 (consensus $1.17) and FY08 to $4.75 from $3.61 (consensus $4.76). Firm says they came away from the meetings incrementally encouraged that the Haynesville Shale play is as good as advertised. Firm believes CRK has successfully transitioned itself to a pure onshore resource play, with a high degree of leverage to the Haynesville Shale play. Their impression, following their meetings with mgmt is that their estimate of resource potential will more than likely end up being very conservative; utilizing other involved co’s metrics, their estimate would translate into 2.3-4.4 Tcfe of resource potential for CRK. Firm says they are conservatively increasing their production growth estimate for 2009 from 20% to 25%. Firm has an estimated break up value for co of $105

  25. 25
    irished Says:

    sold my HK jul for nice small profit in am. sold 1/2 CHK at 50% loss and wait and see on rest. it has a chance for increase next week. sold 1/2 just to reduce exposure.

  26. 26
    jazzkool Says:

    Thanks, jsaun14 and Irished. I’m still nonplussed at to what to do. I have big losses on CHK July 65s and 70s, and have a push on the July HK 45s and 50s. Looked at the rolling the July 50s HKs into August but they are trading at 3.00, which I think is expensive.

    Reaction?

    Jazz

  27. 27
    Wyoming Says:

    Jazzkool,

    I put in a limit sale of the CHK and HK July’s. I am on vacation so my rules are a little different than if I was at home …. or work….

    They went out the door and I still hold some longer term in both @ higher strikes. Both in the red @ current.

  28. 28
    BeWater Says:

    jazz, not sure if this is helpful to you but i closed my remaining july position this morning (HK) on the pop to luckily get out flat. I am no longer holding any julys, be that calls, puts, energy patch, or otherwise.

    Of course i hold aug, sept in various positions including HK and CHK.

    I do not consider myself qualified to give any advice but i’ll tell you what i did.

  29. 29
    Sambone Says:

    Crude – 145.07up 3.33
    Ngas -12.16 down .13
    CHK – 63.85 up 2.30
    HK – 48.57up 1.37
    Dow – 10991 down 229
    S&P – 1228 down 25

  30. 30
    Nicky Says:

    Morning all. Phew what a morning!
    Okay I had an uptrend line for crude oil at 145.17 which when it just failed caused an acceleration to this sell off. support is at 144.45. Whoops too late.

  31. 31
    Nicky Says:

    SPX finally made it down into the 1220 – 30 support zone. Problem right now is the sell off is coming on higher volume so until we see a contraction all bounces are going to fail.

  32. 32
    Nicky Says:

    Oil has support at 141.60, resistance at 144.60.

  33. 33
    Sambone Says:

    Crude – 143.71 up 2.01
    Ngas -12.09 down .19
    CHK – 63.75 up 2.18
    HK – 47.14 down .02
    Dow – 11012 down 216
    S&P – 1232 down 21

  34. 34
    Sambone Says:

    N – Got a feeling (Only a feeling) that this MAY be a “Black Friday” today. We’ll see towards the close (After 3:30 pm).

  35. 35
    Nicky Says:

    Sam – I wouldnt disagree. Right now feels like anything could happen to me. How are the energy stocks behaving? Cramer said this morning watch for them to support the market from midday onwards.

  36. 36
    Fiveanddimer Says:

    I could only hope that Cramer is correct about the energy stocks supporting the broad market. My fear is that the opposite will take place. But this won’t be a true “black Friday,” even though it will be painful enough. There is still a black day waiting for us somewhere out there, but I have no idea when.

  37. 37
    zman Says:

    Thanks for the updates Sam.

    Re CHK, still holding my July calls as per plan from a few days ago re July calls to be sold on Monday unless we melt. They could go at anytime but that is what I’m thinking as I’m back in the shop for 5 minutes now.

    HK – same, may take a little off it looks to weaken.

    Jazz – understand that I don’t try to win with every position. That would be nice but so would a car that runs on ground rainbows.

  38. 38
    Nicky Says:

    If we have more of a bearish trend in place with oil then look for 145.60 to cap any rally. Above there and I think we are back off to the races.

  39. 39
    Sambone Says:

    N – Once again my feeling watching this at lunchtime, is that unless something happens in the oil patch, then the “Crowd” will exit the patch along with everything else. I don’t see energy supporting today. Too much background noise.

  40. 40
    zman Says:

    Petrobras union workers say strike to start Monday and talks only to start after the strike does. 10 minutes ago.

  41. 41
    zman Says:

    Wow, refiners getting buried somewhere out back of the woodshed today. Will have to take a look at asset valuations over the weekend as multiples of P/E don’t matter much right now as who knows what the future E is going to look like.

  42. 42
    zman Says:

    Thanks JD, just saw 19, future intern is a healthy boy.

  43. 43
    zman Says:

    Group really starting to soften now as the Dow toys with 11,000 again.

  44. 44
    Fred Says:

    Z – Congratulations, I’ve been selling some VLO as it drops cause I am @ $20 but TSO hurts.

  45. 45
    ram Says:

    Z – Congratulations.

  46. 46
    zman Says:

    Fred – I’m still not touching that group.

    Re July calls, waiting on a bounce, my thought is its pretty unlikely we close the broad at current levels but eight bounce off 11,000 or, and I think may be possible we have a capitulation into the close. Will the lose the CHK july $70s for an 80% + loss in that event and hold the 65s into the weekend. May take the 60s off the table as well. I plan to hold the HK higher strike July’s through the weekend unless the afternoon just gets annihilated, then I will punt as Monday’s open would likly kill them and everything July outright.

    Thanks Ram.

  47. 47
    scoop006 Says:

    Z, Just realized meaning of future intern . Congratulations to you Mrs.Z & little Ms. Z.Did you pick a name yet?

  48. 48
    zman Says:

    I’m going for SpudZ but I bet I don’t win that one.

  49. 49
    Sambone Says:

    How bout “LZ” (Little Z)

  50. 50
    Brian08 Says:

    I think ZBlast would be a good one…

  51. 51
    Sambone Says:

    Lunch is over

  52. 52
    zman Says:

    Sam – agreed, and crude just put on a quick re rally, briefly back above 145. XLE getting a little boost.

  53. 53
    VTZ Says:

    This market has no clue what it wants.

  54. 54
    zman Says:

    BRY putting on a nice little move on that upgrade, plan to hold that through the quarter to see if they expand the Haynesville/Bossier shale E. Tx position.

    Group greening with the DJIA moving back above 11,000…going to be an interesting close.

  55. 55
    Brian08 Says:

    5 Star Fund Manager on CNBC hilighting PBR, HK, NFX as “Gen Y plays” (plays for the long term) which is nice to see the last 2 getting mentioned…

  56. 56
    sane Says:

    Congrats Z

  57. 57
    Nicky Says:

    Z – how exciting is that to see the next little Z. Congrats. I am sure whilst we are all whiling away Friday afternoon’s for the next few months we can come up with a great name!!!!

    Oil – the move up off the earlier 143 looks very corrective right now and made it to the 50% retracement level at the 145 region.

    Broader market – looks very wedgie like. And I can see a completed 5 wave ending diagonal triangle. Its a really difficult market to call though. If this is the case we should see a rapid move up to the 1257 level and a move above 1235 would give us a better clue. Dow levels are 11270 bolstered by a move above 11047.
    Wrong if we print below today’s lows obviously.

  58. 58
    Brian08 Says:

    Our E&P names seem to be going green here…

  59. 59
    zman Says:

    Thanks Sane,

    Thanks Nicky, you have been spot all over the broad market call, much obliged.

  60. 60
    Nicky Says:

    John Kilduff on CNBC earlier saying we were at the beginning of the end for oil. He said he could see a spike to 150 area and then down. Nearly fell of my chair to hear him bearish.

  61. 61
    Nicky Says:

    Margins being increased in the energy market from Monday evening.

  62. 62
    Nicky Says:

    A thought re no. 61. This is obviously being done in the hope of curbing the long speculation in the market. However, say the speculators are now switched to the short side. Could it cause a pop?

  63. 63
    zman Says:

    JK bearish? Is Flynn bearish or bullish now. Just trying to line up which side of the fence to be on.

    I’d be happier with lower oil prices, I think we need the balance of lower oil with the economy teetering like it is. My group is a bunch of price takers and mostly gassy and the fundamentals of the gas market are pretty solid despite another dip today (down 32 at 11.98). But if the economy goes and ahead and starts to put up the numbers like it feels that it will then energy stocks will from time to time rotate into becoming a source of funds for margin calls, credit card and mortgage and car payments as the redemptions hit the mutual funds and cheap just won’t matter. I’d rather not see that all too often. Besides, most of my names are gassy and like I said, gas, though influenced by oil prices has a different set of drivers. Plus I’d like to start buying some refiner’s common stock for the long term and for that oil needs to retrench.

  64. 64
    zman Says:

    Nicky, is it NYMEX margins being upped or ICE or both? The last time this happened was a few weeks back and I don’t recall that things got killed.

    Wow , even service names trying to green now.

  65. 65
    Nicky Says:

    PF –
    Buy August crude at 14000 – stop 13800.

    Sell August RBOB at 35500 – stop 36000.

    Buy August heating oil at 40000 – stop 39700.

    Buy August natural gas at 1140 – stop 1120.

    Looks like he has switched back to the long side.

    Fannie had been down 50% this session alone. Now only down 10%. Amazing what we can all be thankful for!

  66. 66
    Nicky Says:

    Did not hear Z with regards Nymex or Ice.

  67. 67
    Nicky Says:

    Kilduff playing down the Israel threat – saying it is a huge over reaction. (Cynically I find myself thinking he must be short…)
    That said he says Israel does not have the capabilities without the US and the US have made it clear they are not onboard and does not trust the Intelligence.

  68. 68
    Brian08 Says:

    Nicky I’m willing to bet a Benji that he is…Good radar…

  69. 69
    Nicky Says:

    Oil now at the 61.8% retracement level. The Bulls will want to see an area close to 146 hold into the close I would say.

  70. 70
    zman Says:

    He must be short. Israel has the capability to go that alone, only question is do they provoke the response. I think it will not happen soon but they could do it on their own, they have in the past.

  71. 71
    Nicky Says:

    He has taken the complete opposite side to this view for months Z. I lose count of the times I have seen him say don’t underestimate this blah blah blah!

  72. 72
    zman Says:

    I don’t blame Kilduff for that kind of conduct. It makes him a short and a toolbag but if that’s his game, so be it. But I do blame CNBC and their unwillingness to call a short a short when he’s so obviously switching views to talk his book. I try to put all sides of the issues under the crude oil piece in the commodity watch each morning. Some are bullish, some are bearish. But anything less is self deception or in his case self interested manipulation and I really detest that.

  73. 73
    Brian08 Says:

    Couldn’t agree more Z…Like the disclaimers Cramer puts on the bottom of his screen when he’s doing his show and the disclosures they have for fund managers who come on and talk about stocks…Why should it be any different for Kildork?

  74. 74
    scoop006 Says:

    Z, Re#70 Do not think Israel initiates a first strike. Price of doing it would be too high.

  75. 75
    Nicky Says:

    had a feeling we were building up for some volatility into the close for oil. drops 1.60 in seconds and recovering some…

  76. 76
    zman Says:

    My thoughts exactly Scoop. Those Shahab missiles are about as accurate as a buzzbomb, so while they might hit Tel Aviv it could be a military base or it could be a school. Pretty risky backlash for an uncertain outcome in my book. But I also know people who live in that city and some of them would be all for it. Anyway, I don’t think they do it and it’s probably a few bucks, maybe even 10 in the price of oil. Iran on the other hand is unlikely to shut of shipments as they 1) can’t afford to for any meaningful length of time and 2) would be upsetting their neighbors greatly.

  77. 77
    zman Says:

    ZTRADE: Sold 1/3 of July $45 Calls (HKGI) for $4, up 105%.

  78. 78
    ram Says:

    I can only imagine that a country where adjoining or nearby countries detest your existence, it’s defense or offense militarily must be greater than it’s neighbors or no one can sleep at night. Shame on JK for saying otherwise.

  79. 79
    zman Says:

    ZTRADE: Sold 1/3 of July $60 CHK Calls (CHKGL), also for $4 for a 41% gain. Continuing to hold the $65 and $70 strike calls here, the common and positions in August.

    Should have added that I still hold the HK August and September calls as well.

  80. 80
    Nicky Says:

    OMG – Kilduff now saying the close looks super bullish! He obviously got long on that dip!

  81. 81
    zman Says:

    NG closing below yesterday’s low. If I were a chart guy I’d say that’s not particularly good especially given that it ran counter to oil. Pretty odd move in my book and think we get a bounce next week.

    Must be nice to be able to create your entries!

  82. 82
    Nicky Says:

    Z – nat gas bounce was textbook chart wise! The 12.680 level had been very important to break on the downside so it was the obvious place for a retest which we got this morning. Likely we stage another rally back to that area should oil make a final assault higher.

  83. 83
    Sambone Says:

    Uncle Phil/Mr. Right

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

  84. 84
    ram Says:

    ZMAN – You still have the HK JULY 50’s, correct?

  85. 85
    zman Says:

    Yes, down 41% on those right now

  86. 86
    Nicky Says:

    Cramer moving the markets without a doubt imo. As he started talking the Freddie/Fannie situation it moved up

  87. 87
    ram Says:

    Quite the stampede in the CHK JULY 65 and 70 calls.

  88. 88
    Sambone Says:

    Ahhh, now all is well! GSE’s, FRE and FNM can now borrow at the discount window. Benny B52 Bernanke

  89. 89
    BossmanG Says:

    Ram, is that a buying or selling stampede?

  90. 90
    zman Says:

    Got some emails so let me clarify re July CHK’s. I don’t expect to get even to the $70 July calls. I’m just milking them and holding out for another pop in the group early next week. I don’t play the “getting back to even game” with options as no one in the world cares what I paid for an option and neither should I with respect to the sell decision. I will try to maximize my profits over the whole portfolio and in each name and I’ll ride it until I think it has topped and then punt below, at, or above the water line.

  91. 91
    ram Says:

    I’d like to borrow from the same window as well.

  92. 92
    Sambone Says:

    Hmmmm, Is the Fed going to sacrifice itself?

  93. 93
    reefguy Says:

    z almost out of NFX july 70’s for a big dime

  94. 94
    ram Says:

    I hope buying.

  95. 95
    Dman Says:

    All the expert analysis I’ve read on the Israeli capability concludes that whilst they can certainly bomb Iran, they don’t have the ability to do more than partially damage the nuclear sites, and even then it is questionable what they could achieve. The Iranians, of course, remember the strike on Osirak in 1980 and have been sure not to leave their facilities sitting vulnerable on the surface.

    The US on the other hand can sustain an air attack almost indefinitely and could certainly damage the known targets and keep hitting them until they are judged to be kaput.

    Also in practice the Israelis would need to use US controlled airspace, so there is simply no scenario in which the US is not involved.

    As for the oil impact, the recent whipsaw from “peace breaking out” back to “it’s on again” gave a glimpse of the Iran premium and $10 to $20 seems to be the current ball-park.

    All the attempts to limit speculators seem, well, comical when you consider who is currently helping the speculators with all the sabre rattling:

    (a) The Bush admin
    (d) Democrats competing to “annihilate” Iran
    (b) Iran
    (c) Israel
    (d) Russia
    (d) MEND

    It’s a pretty impressive list really … it seems like a whole lotta people just can’t help pushing oil higher.

  96. 96
    Sambone Says:

    Well, I was wrong (#34). Once again Benny bails out the market with taxpayers $.

  97. 97
    zman Says:

    Reef – yep, that one is going to be a scud for me, will hold through monday for possible news (doubt it but ya never know) and sell for a nickel if possible. The September $65s are moving a little and I will add Augusts prior to their call.

  98. 98
    zman Says:

    Well said D, don’t forget the Brazil unions and the terrorists in Mex who will probably plague Pemex again later this summer.

    Blurb out earlier that UK production is falling faster than once thought, that’s the North Sea folks.

    Sam – yes, Ben writes the checks and my future interns pay the tab. Thanks a lot Bennie.

  99. 99
    sane Says:

    Sam,

    Re 96, The guys a dolt.

  100. 100
    Dman Says:

    Oh yeah, something went wrong with my listing in #95. Seemed to get stuck on (d).

    While I was worrying about Iran the market hit the roof…

    Helicopter drops of cash from the Fed !!

  101. 101
    Nicky Says:

    Just gone outside and can’t understand why money is’nt falling from the sky above my house!

  102. 102
    zman Says:

    SLB crested $100, green in much of the OIH, SLB reports next Friday and before it’s 1Q report they were in the $90 to $95 region so not much progress and their view of the world should be positive and much more solidified than it was on the last call. Going to wait closer to today’s broad market close or Monday before adding there and in HAL and NBR.

  103. 103
    Nicky Says:

    Fed now declining to comment on whether discount window is open to GSES. Looks like the good work is about to be undone rally wise

  104. 104
    Fiveanddimer Says:

    Another helicopter drop from Commander Bernanke. Another case of “moral hazard” at its worst.

  105. 105
    Sambone Says:

    I wonder if TMA (Thornburg Mtg) can now go to the discount window. Tell ya what, since Mtg companies can now go to the discount window, along with investment banks, I think I have the perfect idea. Zman forms a Mtg company, we put all our old Enron and Worldcom stock certificates into a pool and call them, let’s see “The Freedom fund” and then go and borrow at the discount window for 12 months. Works for me, how bout you?

  106. 106
    Nicky Says:

    Dow needs to make a new high on the day before it trades under 11090 otherwise we have only 3 waves up and are going to see new lows.

  107. 107
    Sambone Says:

    Window-Reuters
    DOW JONES NEWSWIRES

    Federal Reserve Chairman Ben Bernanke told Freddie Mac Chief Executive Richard
    Syron that Freddie and Fannie Mae are eligible to use the Fed’s discount
    window, Reuters reported, citing a source with knowledge of the conversation.
    Bernanke told Syron in their phone conversation that he intended to allow the
    two government-sponsored mortgage giants to use the option, the source said.
    Web site: http://www.reuters.com

    Dow Jones Newswires
    07-11-08 1500ET

  108. 108
    Dman Says:

    Cramer now saying FNM and FRE “.. could be bought here for a trade”

    Yeesh, well, I’ll leave that to him.

    Market seems confused. Sam, I wouldn’t say the close is a done deal just yet…

  109. 109
    zman Says:

    movie time:

    “we’re on an express elevator to hell, goin’ down!”

  110. 110
    Dman Says:

    Z – the Brits are in a serious hole with the North Sea decline. The need to get Boone over there building wind turbines like crazy.

  111. 111
    Bleemus Says:

    Aliens!

  112. 112
    Sambone Says:

    Perfect head and shoulders on FRE on todays minute chart.

  113. 113
    zman Says:

    Spoke too soon re SLB and service in general. Man that was a fast fall back. Will buy more Monday.

    Bleemus wins the Friday prize, seemed appropriate quote for the market’s tone.

    Amazing resilience in the CHK today

  114. 114
    Sambone Says:

    By Gregory Meyer
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–The price of crude oil, gasoline and heating oil futures
    rumbled to new intraday records Friday before surrendering some gains as
    traders pocketed profits.
    Light, sweet crude for August delivery set an intraday record of $147.27 a
    barrel before settling at $145.08, up $3.43, or 2.4%, on the New York
    Mercantile Exchange.
    Brent crude on the ICE futures exchange settled up $2.46 at $144.49 a barrel,
    after touching a record intraday price of $147.50.
    Nymex crude has risen 51% in 2008 and doubled from a year ago. After steep
    drops early this week, it paused Wednesday before surging the last two days.
    Friday’s close remained 21 cents off crude’s all-time settlement high of
    $145.29.
    Oil’s surge has stung broad sections of the economy, from airlines to
    automakers. It’s also pummeled demand in the more industrialized nations, with
    the International Energy Agency projecting consumption will fall by 500,000
    barrels a day this year among the world’s richest nations. But growth in
    emerging economies is expected to add to a net increase in world oil demand
    this year, the agency says.
    “The message from this week is we are not yet at the point where the economic
    contraction has begun to impact energy prices,” said Walter Zimmermann, an
    analyst at brokerage ICAP/United Energy in Jersey City, N.J.
    Friday’s gains, coming on the back of a $5.60 jump Thursday, were fueled by
    threats of supply disruptions. Offshore platform employees of Brazilian oil
    giant Petroleo Brasileiro (PBR), or Petrobras, negotiated with the company as a
    Monday strike deadline loomed. The Campos Basin where they work makes up more
    than 80% of Petrobras’ Brazilian oil production, pumping 1.6 million barrels of
    oil equivalent, or BOE, in June.
    Missile tests this week by Iran, the second-largest producing nation in the
    Organization of Petroleum Exporting Countries, also helped set off the two-day
    rally. Both Israel and the Pentagon denied a Jerusalem Post article saying that
    Israeli warplanes are practicing in Iraqi air space as preparation for a
    potential strike on Iran, according to reports by Bloomberg News and CNBC.
    The article was “the catalyst that got this market rallying,” said Peter Van
    Cleve, president of brokerage T.W. Energy Consulting in Kansas City, Mo. The
    market then “sold off on that denial.”
    Crude’s rise accompanied a day of losses on Wall Street, with the Dow Jones
    Industrial Average down more than 200 points as of the 2:30 p.m. EDT close of
    the Nymex pit session. The dollar fell to an 11-week low against the euro amid
    talk the U.S. government may come to the aid of ailing mortgage companies
    Fannie Mae (FNM) and Freddie Mac (FRE).
    That lured – or pushed – buyers into crude, said Sung Won Sohn, an economics
    professor at California State University.
    “Financial investors are clearly coming in. There’s no question we’re seeing
    … switching going on from financial stocks such as Fannie, Freddie and Lehman
    to oil,” he said.
    In the longer term, however, economic weakness may bleed into the oil market.
    “It’s hard to see how an unraveling of the U.S. economy would be bullish for
    energy prices,” said Zimmermann. “I don’t just see that cause-effect
    relationship.”
    Front-month August reformulated gasoline blendstock, or RBOB, settled 5.23
    cents, or 1.5%, higher at $3.5632 a gallon. August heating oil settled up 3.92
    cents, or 1%, at $4.0766 a gallon. Both products made fresh intraday records
    earlier in the day.

    -By Gregory Meyer, Dow Jones Newswires; greg.meyer@dowjones.com
    (Brian Baskin in New Yorok contributed to this article)

    Dow Jones Newswires
    07-11-08 1529ET

  115. 115
    occam Says:

    re 110 – They have been building wind turbines like crazy. One report I saw indicated that they are getting about half the power from them that was projected when the projects were approved.

  116. 116
    Bleemus Says:

    Free Slurpees at 7-11 today!

    http://www.slurpee.com/

  117. 117
    Dman Says:

    Speaking of Boone, Doug Kass has apparently been advocating that he be appointed “energy czar” with “broad powers”. Don’t know what that would mean, maybe a wind turbine in every yard and a CNG car in the drive…

  118. 118
    Dman Says:

    Z – PQ not too shabby either: 17% in 2 days

  119. 119
    zman Says:

    D – have you seen T Boone’s commercials during the nightly news, pretty impressive, beats all the “talk” out of other billionaires about carbon credits.

  120. 120
    zman Says:

    D – yep, been watching it rally, only have the common there now but likely to add some calls going into the 2Q unless it is at 30 by then. They gave away the goods on production news already and on ops so it may be a boring call.

  121. 121
    scoop006 Says:

    #119 Those commercials are GREAT. Only wish Obama would listen

  122. 122
    Dman Says:

    Z # 119 – yes, I know some folks think he is only doing it for his various businesses (eg CLNE for CNG and his new wind ventures) but I tend to think he is passionate about energy and is seriously worried about what will happen if no one does anything (and no one else *is* doing much!).

  123. 123
    Sambone Says:

    #119 – Nobodies gonna listen. Head in the sand. Sad

  124. 124
    Bleemus Says:

    Big thunderstorms heading this way. I am going to shut down for the weekend. Thanks for a great week and all have a happy and safe weekend!

  125. 125
    tater Says:

    Sam, what’s the ticker symbol for currency debasement? I can’t seem to remember it.

  126. 126
    Sambone Says:

    Currency debasement?

  127. 127
    scoop006 Says:

    Dman #122 I’m with you

  128. 128
    zman Says:

    CHK has some very similar spots running here as the Fayetteville shale is only 30 minutes away. Those 2 should get together on a special commission for the president and I agree with Cramer completely that it is amazing that no candidate say “what about natural gas”

  129. 129
    Dman Says:

    The flashy service names (OII FTI NOV CLB) greening up. HAL & SLB trying their best.

  130. 130
    occam Says:

    15:45 EST Friday, Jul 11, 2008
    Print this article Email this article
    space Advertisement
    space

    Hide advertisement

    CALGARY (Dow Jones)–Imperial Oil Ltd. (IMO) raised its purchase price for benchmark 40-degree gravity light crude oil at Edmonton by C$58 a cubic meter to C$953 a cubic meter, effective Friday.

    In terms of barrels, the company is now offering C$151.53 a barrel, up from C$ 142.31. The new purchase price indicates an export price delivered toChicago of about US$151.76 a barrel after considering transportation and import charges and foreign exchange rates.

    Actual export prices are confidential but are believed to be closely related to the posted levels.

    Imperial Oil is an integrated oil and gas company.

    -Tara Zachariah, Dow Jones Newswires;

  131. 131
    Sambone Says:

    T – ask me Monday, Big Tini time, D@*$, I need it!

  132. 132
    ddaley Says:

    Just noticed about the services. Many of them have pulled bacck to a 6 month uptrend line. Might be safe when they bounce off of it.

  133. 133
    zman Says:

    Beer Thirty!!! I’ll have the wrap out in the morning.

  134. 134
    tater Says:

    bad joke. have a good weekend

  135. 135
    arodeen Says:

    Any thoughts on a wild trade next week around the SLB July 100’s?

  136. 136
    Dman Says:

    T – maybe there’s a currency debasement ETF.

    I think the weekend has arrived …

  137. 137
    Popeye Says:

    Good weekend all.

  138. 138
    Fiveanddimer Says:

    Tater, not a bad joke at all. I’d say the ticker to remember in the case of currency debasement is GLD. Or better yet, own the real stuff. You know, the stuff that hurts when you drop it on your foot.

  139. 139
    Fred Says:

    PQ upto $28 in after hours.

  140. 140
    texana Says:

    congrats to u & ur wife, super z

  141. 141
    crysball Says:

    Z,
    Lots of interesting new information posted on Jim Kingsdale’s website this. Worth a read.

    His ‘down to earth assessment of natural gas is pretty compelling from a logic standpoiint.

    “NATURAL GAS

    The btu ratio of gas to oil is 1-to-6 while the price ratio is now over 1-to-11. It is likely that the price ratio will move more in line with the btu value relationship over the next couple of years. Gas is obviously preferable to oil on a greenhouse-gas emitting basis so could reasonably sell at a premium to its btu value. Demand for natural gas has been strong in Europe, Asia, and North America.

    A strong driver of North American natural gas prices is the fact that much higher prices in Europe and Asia are limiting LNG supplies to North America. New unconventional gas fields in the U.S. and Canada are being exploited with new horizontal drilling techniques, which has caused domestic gas production to increase 5% y/y. But production gains are limited by both pipeline and drill rig shortages in some places and the fact that these new fields also experience very rapid depletion rates.

    Natural gas demand is likely to strengthen as electric utilities stop adding coal capacity and add more solar and wind, which require gas boosters when nature is not cooperating. The supply/demand dynamics of the oil market and the gas market are quite different and substitution potential of one for the other is limited. Nonetheless on a global basis, and to a lesser extent in N. America, natural gas is starting to be substituted for gasoline as automotive fuel. Fleet substitutions for busses and some trucks are more feasible in N. America. America might even see a conversion of cars to CNG from gasoline, a common phenomenon on other continents, particularly Australia and Africa. “

  142. 142
    zman Says:

    crysball – thanks. thoughts will be on the weekly wrap

  143. 143
    crysball Says:

    13 New CHK Rigs for Haynesville Shale

    http://www.shreveporttimes.com/apps/pbcs

    Thirteen drilling rigs are on order to tackle exploration of the Haynesville Shale in northwest Louisiana and east Texas. Nomac Drilling LLC, a subsidiary of Chesapeake Energy Corp., the leading company in development of the natural gas reserve, has completed the order.

    A news release Friday from Chesapeake does not specify how many rigs will go to each state. Delivery will begin in late fall and continue through early summer 2009.

    The order includes four National Oilwell Varco 1,000-horsepower and nine Letourneau Technologies 1,500-horsepower rigs. Rig fabrication will be done in Houston, where both companies have their headquarters.

    All rigs will be able to drill to more than 17,000 feet deep to meet Chesapeake Energy’s requirements to develop the shale area. Nomac’s regional office in Marshall, Texas, will direct the new rigs and other Nomac rigs moving into the Haynesville Shale area. The rigs will require four crews of five people for around-the-clock operations.

  144. 144
    crysball Says:

    Z, On Thursday you mentioned the recent CLR well in the TFS Stratigraphy:

    “Taking the wells down into a range between the middle Bakken and the TFS can be accomplished for low dollars. They would then frac the horizontal lateral up into the middle Bakken and down into the TFS attempting to drain both zones with a single well bore. Suddenly your F&D costs are dropping severely.”

    Could you elaborate (and perhaps elicit Wyoming’s comments):
    1:Are you suggesting this was done with a single lateral tapping both zones in a single completion, or, will this be accomplished in a staged completion?
    2:Is the the TFS defined, i.e. does it lay congruent with the the Middle Bakken ove the entire Middle Bakken?

  145. 145
    VAL Says:

    ZMAN Says:
    __________________

    Hello Zman, new user here :>)

    Did you have a chance to look at the refiners valuations?
    TIA

  146. 146
    zman Says:

    Welcome VAL. Will address for the Tuesday post.

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