20
Aug

Wednesday – Oil Inventory Preview + Oil Service Dance List

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Sentiment Watch: I'd say just a touch higher than negative today, fund managers are either on or thinking about vacations and are not feeling too gutsy. As Bleemus points out this morning however, the WSJ is citing increased oil company insider buying. Once again, one green day does not a trend make. I dipped another small toe into more Petrohawk  yesterday in advance of oil storage numbers and the possibility of a U-turn in Fay yesterday (more on that in a second).


Click here for more on Fay throughout the day. Note that the hangover for commodity prices from a hurricane iss often worse than the party and if Fay takes the current track across northern Florida and fails to re emerge in the Gulf of Mexico the rain and coolness it brings to the Southeastern U.S. will further depress natural gas demanded for electricity which will show up as an even bigger injection in next week's gas storage report.

 

In Today's Post:

  1. Holdings Watch: Still hoarding cash, added a little HK
  2. Commodity Watch - a rare green day yesterday, numbers in focus today
  3. Stocks We Care About Today - Oil Service Dance List bullets
  4. Odds & Ends

Holdings Watch: The Wiki holdings tab is updated.

  • HK - Added (HK) September $30 calls (HKIF) for $2.25. This brings my average cost to $2.68.

Commodity Watch:

Crude Oil advanced $1.66 to close at $114.53 on the back of minor Dollar softness and the potential for one last threat from Tropical Storm Fay. This morning a rebound in the dollar which erases yesterday's losses is being ignored in favor of Fay and oil prices are nearly $2 higher before the open.

  • BP Testing BTC Pipeline. Last minute checks before reactivation of this 1 mm bopd pipeline are underway. The closure of the pipe did not appear to be supportive of crude but I would expect its reopening to put minor pressure on prices.

The EIA Oil Inventory Review (estimates from the Bloomberg survey)

 

ZComment: Product inventories starting to get a little more notice although unexpected declines in inventories will not be seen as bullish without sustained demand. Drops in supply alone will not be adequate to spark a sustainable rally unless they are met with a price based response from consumers.

  • Crude number is the least important in traders minds this week. The 1.05 mm barrel build expected for last week is just a rounding error after the sustained drop in inventories we have seen.
  • Gasoline: demand has been running along at 9.4 mm bpd for the last 3 weeks; seasonally it should peak before labor day (Sept 1.) but falling prices may give it a little longer run at these levels. Another large draw on inventories here should get more notice this week. A 3 mm barrel draw would send stocks below the five year average.
  • Distillate: Last week saw an unexpected draw on inventories. Higher demand played a roll in that draw down so it will be interesting to see if a trend is developing there. Another distillate draw will get the attention of oil more than anything besides Fay today.

Demand Destruction Comments: These are the numbers, at least for the U.S., that you see quoted as down 2 to 4%, depending on the week, when people talk about demand destruction. I've just diced the data a few ways so you can see the impact of various components that go int "product supplied". Note the other the resid and other oils components are taking large hits this year. Resid is a heavier, bottom of the barrel product with falling demand. Other oils is a catch all component that includes natural gas liquids among other things. Looking at just the components that make up a majority of the supplied products pie gives a better picture of demand and while jet fuel is off not surprisingly a substantial amount, the gasoline and distillate components are off less than the headline number for "products supplied"

 

Natural Gas closed up 9 cents to $7.98 yesterday. This morning gas is tading The next several YoY storage comps are pretty tough for gas but this should already be factored into near term gas prices. Gas is trading back above $8 this morning with the move in oil. I continue to expect a bottom to form from current levels down to about $7 in the the near term

Stocks We Care About Today:

The Dance List: These are the names I like to disproportionately outperform in the event of stability of commodity prices and sentiment returning to something less bearish.  Here are the estimates for the oil service names I see falling into this category. The second part of the table shows performance since I first mentioned them. Right now I don't see the dance list as "in effect" since the qualifying conditions regarding sentiment and stability have obviously not be met but still, I like to keep track of things. The fundamentals on all of these names should be set to improve 2H08 and into 2009 and in the case of (RIG), 2010 numbers are a pretty safe bet to top $20 per share. After the table I've included some quick bullets on whats to like on each name...not quite an elevator pitch but worth keeping in mind.

Oil Service Dance List Quick Bullets

SLB - Leading oil service firm

  • This is a Wall Street must have so when the Street decides we all aren't going to drive around in water powered cars this will be a go to name.
  • Business continuing to improve, not going to belabor the point.

HAL - Another leading oil service firm, similar growth rate to SLB, habitually trades at a discount but this may be changing. I won't go into this one as I beat them to death talking about them.

 

RIG - premier deepwater driller. Trading at under 9x this year's earnings.

  • Estimates continue to rise in 2010 and 2011 and to a lesser extent for 2009 (estimates in 2008 and 2009 pretty locked in with long term contracts),
  • Demand from deepwater drilling off Brazil, Africa, Gulf of Mexico seen continuing to drive demand for rigs
  • This kind of says it all ~ from their 2Q08 call "the floater market continues to be supply-constrained and day rates are going up"..."We signed a number of excellent contracts since our last call with the Pathfinder at 600,000 and [750,000] a day for five years"
  • Beyond 2010 demand for high specification floater is even tighter than current levels.
  • The projects that you rent a rig for over half a million dollars a day for years at a time are not in danger of being canceled by the recent and brief swoon in prices.

NOV - they build rigs and rig equipment on and offshore.

  • Backlog for their Rig Technology segment stood at a record $10.8 billion due to a record level of orders of $2.216 billion received during the quarter.
  • Demand for their equipment is coming from all fronts - "floating rig packages, surging demand for land rigs, both domestically and overseas, and steady demand for jack up equipment"
  • Raw materials costs are an issue but they continue to keep margins up via outsourcing and small price pass alongs
  • They also sell drill pipe, high spec drill pipe and demand there is extremely strong with an easy ability to pass price increases along up until very recently. Drill pipe orders surged 85% from Q1 to Q2.
  • Business solid and gaining strength in down hole tools, pumps, valves, liners etc.

NBR, CRR, CLB in tomorrow's post.

Odds & Ends

Analyst Watch: Analysts are in hiding.

 

 

139 Responses to “Wednesday – Oil Inventory Preview + Oil Service Dance List”

  1. 1
    Sambone Says:

    By Angela Henshall
    Of DOW JONES NEWSWIRES

    LONDON (Dow Jones)–Crude oil futures traded higher in London Wednesday in
    anticipation of a draw in gasoline stocks, but market activity was largely
    muted as traders awaited U.S. weekly inventory data due at 1435 GMT.
    The recent market selloff has reinforced bearish sentiment but the potential
    for production cuts by some members of the Organization of Petroleum Exporting
    Countries could put a floor under losses, said Commerzbank analyst Eugen
    Weinberg in Frankfurt.
    At 1155 GMT, the front-month October Brent contract on London’s ICE futures
    exchange was up 95 cents at $114.20 a barrel.
    The front-month October contract on the New York Mercantile Exchange was
    trading 89 cents higher at $115.42 a barrel.
    The ICE’s gasoil contract for September delivery was up $14.00 at $102.400 a
    metric ton, while Nymex gasoline for September delivery was up 133 points at
    287.72 cents a gallon.
    A Dow Jones Newswires survey of analysts forecast the U.S. Energy Information
    Administration would report a build of 800,000 barrels a day for crude oil
    stocks, while gasoline inventories are seen falling 2.4 million barrels a day.
    Distillate inventories, which include heating oil and diesel fuel, are expected
    to rise by 500,000 barrels a day.
    Reaction to the data could be mixed as the market enters the autumn “shoulder”
    period, when demand drops off between the peak seasons, said Olivier Jakob,
    managing director of Swiss consultancy Petromatrix.
    “Storm activity and the movement on the dollar might dominate as a direction
    input while oil trades in a range rather than in a trend,” Jakob added.
    The peak of the hurricane season is September, so tropical storm activity will
    remain a key focus for the market over the next three weeks.
    Participants were also eyeing news that BP will restart its Baku-Tblisi-Ceyhan
    pipeline this weekend. The pipeline, which transports Azeri crude from
    Azerbaijan to Ceyhan in Turkey, was operating at around 850,000 barrels a day
    before it was shut down two weeks ago due to a fire.
    “If (the inventory data are) bearish then the return of the pipeline will add
    to downward pressure,” said Harry Tchilinguirian, an analyst at BNP Paribas in
    London.
    After several sessions of range bound trading, the short-term technical trend
    for crude oil futures remains sideways, said Glen Ward, a broker at ODL
    Securities in London.
    “Every day that prices remain in this trend will provide more power for the
    move when it breaks (out of the range),” Ward said.
    -By Angela Henshall, Dow Jones Newswires (Lananh Nguyen and Spencer Swartz in London contributed to this report.)

    Dow Jones Newswires
    08-20-08 0800ET

  2. 2
    zman Says:

    TROPICAL STORM FAY HAS TURNED SLOWLY NORTHWARD AFTER FINALLY
    REACHING THE EAST-CENTRAL FLORIDA COAST EARLY THIS MORNING.
    HOWEVER…THE CENTER REMAINS JUST INLAND ALONG THE COAST NORTH OF
    MELBOURNE FLORIDA AND MAY NOT EMERGE OVER THE ATLANTIC OCEAN UNTIL
    THIS AFTERNOON WHEN FAY IS EXPECTED TO MOVE NORTH OF THE CAPE
    CANAVERAL AREA. MOST OF THE GLOBAL MODELS ARE NOW INDICATING A
    TIGHTER TURN TO THE NORTHWEST AND THEN A SHARPER WESTWARD JOG
    ACROSS NORTH FLORIDA AFTER 36 HOURS AND INTO THE NORTHEASTERN GULF
    OF MEXICO BY 72 HOURS. THE GFDL AND HWRF MODELS ARE EXCEPTIONS TO
    THIS SCENARIO AND KEEP FAY MOVING NORTHWESTWARD ACROSS GEORGIA AND
    ALABAMA…BUT EVEN THOSE MODELS ARE NO LONGER TAKING FAY EAST OF
    80W LONGITUDE. THE OFFICIAL FORECAST TRACK IS A LITTLE TO THE
    SOUTH…OR LEFT…OF THE PREVIOUS FORECAST TRACK AND IS SIMILAR TO
    BUT SLOWER THAN THE MODEL CONSENSUS.

  3. 3
    Sambone Says:

    Energy-Stock Bull Is Primed To Resume Run

    By DAVID J. REYNOLDS
    Of THE WALL STREET JOURNAL

    Oil and gas insiders are betting big that the historic run-up in energy stocks isn’t over.

    Since energy stocks crested and retreated in early July, an unusually large number of directors, officers and large stakeholders have pumped money back into their own companies — a sign, analysts say, that the boom is primed to resume.

    New York Mercantile Exchange crude oil has sunk more than 20% since peaking above $147 a barrel in early July. A sector fund that tracks energy stocks in the S&P 500, State Street’s Energy Select Sector SPDR, is off 17% after enjoying a three-year run that doubled its price.

    Kelcy Warren, the chairman and chief executive of natural-gas pipeline operator Energy Transfer Partners LP, said he thinks the recent dip in energy stocks is overdone.

    “I’ve been amazed that the whole sector has been turned upside down,” he said. “Investors have thrown the baby out with the bath water.”

    In July, Mr. Warren bought $42.2 million in shares of Energy Transfer Equity LP, which owns the general partner of Energy Transfer Partners.

    Mr. Warren isn’t alone. Insiders at more energy companies are buying more stock since energy prices fell, according to data compiled by Form4Oracle, a Somerville, Mass., financial-research firm specializing in insider-trading data. Executives, directors and large stakeholders bought $10 million more stock than they sold over the last month, the data show.

    “This is the most buying we’ve seen in a long time,” says Form4Oracle analyst Alex Romayev. “As part of their compensation, directors and officers get stock and stock options. It’s only normal for them to diversify and sell their holdings. When insiders are buying more than they’re selling, it’s a very bullish sign.”

    Typically, Mr. Romayev said, insider sales greatly outnumber buys, so the trend is especially conspicuous. “It was a great example of insiders reacting to the valuations of energy stocks,” says Mr. Romayev, who owns shares of Chesapeake Energy Corp., an Oklahoma City-based natural-gas producer.

    Analyst Ben Silverman says the insider purchases are a sign energy prices could soon rebound. “What they’re trying to do is call a bottom,” says Mr. Silverman, research director at InsiderScore, which tracks and rates insider buying and selling. “Over the years, energy insiders have accurately made short-term calls.”

    At least four times in recent years insiders have timed a short-term bottom in energy stocks, Mr. Silverman says. “When prices come down, insiders buy aggressively.”

    Mr. Silverman says he has a long position in Southwestern Energy Co. , a holding company with units engaged in oil and gas exploration and production.

    Insiders at a number of energy-related companies have bought shares. At oilfield services provider Hercules Offshore Inc., four insiders, including Chief Executive John Rynd, bought $1.75 million in stock this month. Company stock is off nearly 50% since July highs. None of the insiders could be reached for comment.

    Robert Day, a director of deepwater driller McMoRan Exploration Co., spent $9.4 million three weeks ago to buy shares. Mr. Day couldn’t be reached for comment.

    Mr. Warren said that energy prices are bound to rise because the government has made poor choices in energy policy.

    In the meantime, he says, oil and natural gas will remain in high demand and many energy stocks are, at current levels, a good buy.

    “I don’t see what everyone’s missing in the energy sector,” Mr. Warren says. “There are some great bargains out there.”

  4. 4
    zman Says:

    Morning Sam, you’re fast with the stories this am. Any thoughts re the left hook they seem to be expecting for Fay?

  5. 5
    zman Says:

    Satellite on Fay shows it completely stalled on the east coast of central Florida on the last five hour graphic.

    http://tropics.hamweather.net/2008/atlantic/fay/clir/latest.html

  6. 6
    Sambone Says:

    Z – This puppy will either stall right where it is, or jig left and then back north behind the front over NC.

  7. 7
    Sambone Says:

    Check out 95L looks like at the end of the loop. Click “FWD” tab on right.

    http://moe.met.fsu.edu/cgi-bin/cmctc2.cgi?time=2008082000&field=Sea+Level+Pressure&hour=Animation

  8. 8
    zman Says:

    Thanks Sam, 95L looks like an east coast threat on fsu’s animation. To me the oil market is getting pretty excited over a pretty small possibility this morning, and bucking the dollar and in front of inventories which are pretty important this week.

  9. 9
    Sambone Says:

    My bad wrong number, it’s 94L. Yea, East coast. The sad thing is that the east coast hasn’t really been hit since Hugo which was almost twenty years ago. If a Cat 3 hits anywhere on the East coast, major, major damage will result. These beach houses have really been built up, stacked is a better word.

  10. 10
    Bleemus Says:

    I live about three miles from where Hugo came ashore in SC. Pictures of the damage are quite amazing.

  11. 11
    isleworth Says:

    Gartman goes positive on Energy this AM

  12. 12
    zman Says:

    Isle – good to hear, he’s a smart one.

  13. 13
    Sambone Says:

    No more Twinkies? Tell me it aint so!

    Union: Lenders delay Twinkie-maker’s reorg
    By DAVID TWIDDY 08.19.08, 4:33 PM ET

    KANSAS CITY, Mo. – The International Brotherhood of Teamsters says lenders are holding up a potential plan for helping Interstate Bakeries Corp. exit almost four years of bankruptcy protection, endangering thousands of jobs.

    In a news release, the Teamsters, who represent more than 9,500 Interstate Bakeries workers, singled out JPMorgan Chase (nyse: JPM – news – people ) Bank and hedge fund Monarch Alternative Capital for blocking the plan the union said it has negotiated with investor Ripplewood Holdings from moving forward.

    Interstate Bakeries’ current financing package is due to expire on Sept. 30, which could force the maker of Hostess Twinkies and Wonder Bread to liquidate itself.

    “Without a reorganization plan in place soon, the company could face severe consequences, and these same institutions will likely recover far less than under the Ripplewood proposal,” said Richard Volpe, director of the Teamster’s bakery conference.

    “We are holding out little hope that this proposal will be approved,” Volpe added. “These banks and hedge funds are once again going to disappoint all of the 23,000 employees of Interstate, just like they have disappointed the nation with the mortgage debacle.”

    JPMorgan spokesman Brian Marchiony and Monarch spokeswoman Lin-hua Wu declined to comment on the union’s claims.

    Maya Pogoda, a spokeswoman for the Kansas City-based company, said Interstate Bakeries was not involved in the negotiations between Ripplewood and the secured lenders.

    “We’re hopeful that the parties will reach agreement on concessions that would allow IBC to emerge from Chapter 11 (bankruptcy protection) as a stand-alone company,” Pogoda said.

    Interstate Bakeries filed for protection from creditors in September 2004. It developed a reorganization plan late last year but had to abandon it in March when the company was unable to gain workplace and welfare concessions from the Teamsters.

    During a bankruptcy court hearing on the plan, a Teamsters attorney said the union would prefer to see the company liquidated to accepting the concessions.

    Instead, Interstate Bakeries began negotiating with New York-based Ripplewood, which the Teamsters said had proposed a reorganization plan that included concessions it could accept.

    In April, Interstate Bakeries also negotiated a new financing package worth $250 million with JPMorgan, Monarch and three other lenders, due to expire Sept. 30.

    The company also said it would begin developing a plan to sell itself whole or in pieces if it ultimately couldn’t get a reorganization plan approved.

    Since then, the company has provided no update on negotiations and has continued to struggle with rising costs, losing a total of $81.2 million so far this year.

  14. 14
    Fred Says:

    Sam – Oh no, there goes my deep fried twinke’s.

  15. 15
    Sambone Says:

    By Gregory Meyer
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Crude oil futures tracked higher Wednesday ahead of the
    release of data expected to show mixed trends in U.S. oil inventories.
    Light, sweet crude for September delivery was recently up $1.55, or 1.4%, at
    $116.08 a barrel on the New York Mercantile Exchange. The September contract
    expires Wednesday. More active October Nymex crude rose $1.58 to $116.12 a
    barrel.
    October Brent crude on the ICE Futures exchange was up $1.59 to $114.84 a
    barrel.
    An expected drawdown in U.S. gasoline stockpiles was breathing some life into
    the market. Weekly U.S. oil inventory data due at 10:35 a.m. EDT are expected
    to show gasoline inventories fell by 2.4 million barrels last week, according
    to analysts surveyed by Dow Jones Newswires. That would mark the fourth
    straight weekly drawdown for gasoline stocks.
    “A gasoline stockdraw, though seasonally appropriate, would push the inventory
    level below the five-year average,” said Brad Samples, an analyst at Summit
    Energy in Louisville, Ky. “Given how soft demand is in this market, the market
    thinks that inventories ought to be performing better.”
    Analysts expect the data will show crude stockpiles rose by 800,000 barrels,
    and stocks of distillates, which include heating oil and diesel, climbed by
    500,000 barrels. Refinery use was expected to have climbed by 0.4 percentage
    point to 86.3% of capacity.
    The path of Tropical Storm Fay drew attention as the National Hurricane Center
    and other forecasters projected it could turn west to the Gulf of Mexico after
    blowing through Florida. In a morning alert, the center said most models show
    the storm will turn northwest and into the Gulf three days from now. It said
    the Fay’s chance of forming into a hurricane is “becoming smaller.” The Gulf
    region is home to a quarter of U.S. crude production and half its refining
    capacity.
    The market showed little reaction to news that the Baku-Tbilisi-Ceyhan crude
    pipeline, a key conduit for Caspian crude to global markets, is set to restart
    by this weekend after a fire knocked it out of service two weeks ago. The
    pipeline, which partly runs through the former Soviet republic of Georgia, was
    operating at around 850,000 barrels a day before the incident, a volume equal
    to about 1% of the world’s daily oil demand.
    Adding some buying sentiment to the market, investment bank and major energy
    trader Goldman Sachs said it sees benchmark West Texas Intermediate crude at
    $149 a barrel by year-end.
    Front-month September reformulated gasoline blendstock, or RBOB, rose 3.80
    cents, or 1.3% to $2.9019 a gallon. September heating oil climbed 4.74 cents,
    or 1.5%, to $3.1711 a gallon.

    -By Gregory Meyer, Dow Jones Newswires

    Dow Jones Newswires
    08-20-08 0943ET

  16. 16
    Sambone Says:

    Z – There’s your GS quote.

  17. 17
    zman Says:

    Sam – I guess when you are that big you can just say, “as I said before, the price is 149” and have no extra explanation. Like Valentine setting the price of pork bellies.

  18. 18
    zman Says:

    If we do get bullish product numbers today, I’d look for a pretty good sized surge in crude and even more so in the stocks….perhaps offsetting coming weakness when any Gulf side reentry potential for Fay fades away.

  19. 19
    kyleandy Says:

    z – good call on HK got out this morn but have plenty left

  20. 20
    zman Says:

    Wow, 2 days of bright green.

    Wow recovery in CLR, EOG, WLL … all the Bakken names. NFX should move as well. Waiting for oil numbers at this point. May take a little HK back of the table if #s prove not so bullish.

  21. 21
    Dman Says:

    Z – a good test for this nascent rally would be if the numbers are mixed or worse. Then we’ll see what it’s made of.

    I’m reminded again of why I couldn’t be an analyst for Goldman. It’s not good enough to say that oil will be around $150. Nope, it’s $149. Like to know what their error-bars are on that one. Oh right, they don’t do errors…

  22. 22
    Nicky Says:

    Morning all. GS are long so we know it was only a question of time before they made this call yet again. They will get a rally to sell into – still not sure if it is already underway or will be soon.

  23. 23
    zman Says:

    Really impressed with the Bakken list, if the numbers are bad (bearish) for oil these probably get cut in half on the days gains…just a thought for a day trade. CLR up about 20% in 2 days, WLL, EOG, BEPOX all seeing nice rallys. Nothing fundamental wrong, just know they will trade off sharp if oil resumes downward trajectory.

    There goes NFX, well at least I own the common.

  24. 24
    zman Says:

    Morning Nicky – Got a count on gasoline and distillates?

  25. 25
    Dman Says:

    Nicky – are you saying GS didn’t take any profits on their energy longs when they were upgrading oil service at the very top a month ago? What I’m asking, I guess, is how do we know they are long? Do they disclose this stuff?

  26. 26
    Dman Says:

    The numbers would have to be really bullish to pop the stocks after this morning rush. They’ve spent it already, surely (??)

  27. 27
    zman Says:

    Number in 5 minutes.

    Dman – after the fall we’ve had? In a light volume market?

    No, the move off the bottom, if you can really call it a bottom is very tentative. If the numbers are bullish and I care as per the post a lot more about products than oil itself we could see a rest of week move similar to today’s 5+% in the names per day.

  28. 28
    zman Says:

    Along those lines, while HAL is up, its not keeping pace well with the OIH or SLB. Expect that to change somewhat if oil goes on up but I would have to say that nat gas prices and the likelihood of big draws are hurting the stock, rightly or wrongly. They said over the weekend that business is not being hurt but people associate them with ng more than they do SLB.

  29. 29
    zman Says:

    If the numbers look cruddy I will punt the HK and revisit it on the bounce.

  30. 30
    zman Says:

    Huge build crude: 9.4 mm barrels, it was imports at a record 11 mm bopd.

    Large draw gasoline: down 6.2 mm barrels

  31. 31
    zman Says:

    Gasoline demand hovering at 9.4 mm bpd

    Crude got cut more than in half by the headline number but it was imports and we know imports are coming down. Going to take oil a little while to wade through the numbers. Once it picks a direction expect it to move sharply either way.

    I’m sitting on my trades for a bit.

  32. 32
    Fred Says:

    Z – refiners going green!

  33. 33
    zman Says:

    Good numbers for refiners by the way, VLO trying to poke through $35 again.

  34. 34
    bill Says:

    gas went to 7.97 from 8.10 then came right back on the data

    fun to watch the volitility

  35. 35
    bill Says:

    hk 32.70 to 31.10

    chk 49 to 47.50

    took advantage of the dip to buy more chk and pq

  36. 36
    sane Says:

    API

    Crude UP 12.4M
    Gasoline DOWN 2M
    Distillates UP 313K

  37. 37
    zman Says:

    bill, yep, that headline scared people on crude. but when you dive in you see gasoline production was actually rose last week and you still got a big drawdown and also the distillate build was smaller than expected.

    on crude, imports up 1.3 mm bopd account for most of the build vs last week adding 9.1 mm barrels on the week.

  38. 38
    zman Says:

    Thanks Sane, confirms it was a record week for imports.

  39. 39
    sane Says:

    Blending components took a large draw 3.6M barrels per EIA

  40. 40
    Sambone Says:

    Most Americans think that the worst of the fuel price spike is over. No, this is not a repeat from 2003, 2004, 2005, 2006, or 2007. Sambone, 2008

    Americans think worst of 2008 oil spike over: poll
    Wed Aug 20, 2008 8:31am EDT
    By Emily Kaiser

    WASHINGTON (Reuters) – Most Americans think that the worst of the fuel price spike that pushed gasoline above $4 per gallon has passed, but they have little hope that the housing market will stage a swift recovery, according to a Reuters/Zogby poll released on Wednesday.

    The economy has jumped to the top of voters’ concerns this election year, eclipsing the Iraq War, and that has put the housing bust and rising inflation squarely in the spotlight.

    The poll of 1,089 likely voters found that just under 13 percent thought gasoline prices would rise a lot between now and the end of the year. About one quarter thought prices would rise a little, while one in three thought they would drop a little and 18 percent said they would stay about the same.

    The survey was conducted August 14-16, when oil prices had come down some $30 from a July 11 peak above $147 per barrel, and the national average price for a gallon of gasoline fell back below the psychologically significant $4 mark.

    Pollster John Zogby said the swift rise in fuel prices earlier this year had fundamentally changed U.S. consumer behavior, and a pullback below $115 per barrel was not sufficient to alter that.

    “The lines are not forming to buy Hummers,” he said, referring to the big luxury trucks that are notorious for their poor fuel mileage.

    Mounting costs for necessities like food and gasoline have strained household budgets, leaving less money for spending on discretionary items. That has put a dent in the U.S. economy, which was already struggling to overcome the housing slump and financial market turmoil.

    Reuters

  41. 41
    zman Says:

    Ztrade: Sold the HK added yesterday for $3.10, up 38%, somewhat mixed numbers out of the EIA, will add it back if it falls but in this market it pays to be cautious.

  42. 42
    zman Says:

    Those were the HK $30 Sept calls taken yesterday for $2.25.

  43. 43
    zman Says:

    I see stories citing down truck sales that imply that people won’t buy SUV’s again (give me a break) and that by not adding at the same clip (but adding even 1 truck is adding) that gasoline demand will somehow fall. I find that just funny.

  44. 44
    Nicky Says:

    Dman re #25 – personally I don’t know if they are long or not but it just seems pretty obvious when they were calling 149 on an almost weekly basis and for a long time it went their way. Then the market turned and they continued to tout the same number only to an audience that was no longer listening! They have been very quiet now on the oil price for about a month but we were only commenting on here about a week ago that they would be out with this call again any day and here they are. I can’t see any reason why they would not be following their own calls and as they have never said anything but up then I am presuming they are still long and doubling or tripling up.

  45. 45
    zman Says:

    I’m just saying unless you drive your Hummer to the Prius dealer who hands you the keys to your green machine while putting your H2 in a crusher like some kind of guns for cash exchange program like you see in some cities, the net fleet of gas hogging vehicles does not go down.

    I agree with Nicky, they follow their own calls as the analysts are going to be using that number in their models from which they recommend buying the stocks.

    Oil still undecided on what to do about those numbers…at least not tanking…the stocks however remain green and this gives me a little more confidence that sentiment is turning my bullish way.

  46. 46
    zman Says:

    oil down 50 cents, gasoline and HO off too.

  47. 47
    zman Says:

    Oil down a buck, group start to show spots of red, big gains getting wiped out.

  48. 48
    Dman Says:

    Well, looking on the bright side, at least the stocks can now move in both directions. Been a while since that was true.

    Z- what is the meaning of the huge build/import number? Did the refineries all hit the buy button several weeks ago and that crude has now arrived en masse?

  49. 49
    zman Says:

    Energy Groups just appear to be looking for reasons to rally…good resilience in the face of down $1.50 crude.

  50. 50
    zman Says:

    Dman – Re imports, its more a function of delays two weeks ago due to Edouard and the system playing catch up.

  51. 51
    zman Says:

    CLR gave back all of today’s 10% early gain. Day traders dream market.

  52. 52
    Nicky Says:

    Oil – it appears to me that v down is now underway which is what we wanted to see! So we need to undercut the previous low. Again support is likely to come in around 110.

  53. 53
    zman Says:

    Sounds like the NHC is giving up on the Fay into the Gulf concept: From the 11 am est update.

    FAY HAS BEEN OVER LAND LONGER THAN ANTICIPATED AND IT HAS CONTINUED
    TO WEAKEN. THE SATELLITE PRESENTATION HAS DETERIORATED SIGNIFICANTLY
    SINCE YESTERDAY. HOWEVER…THERE ARE NUMEROUS RAINBANDS PRIMARILY
    OVER WATER AND THE OUTFLOW IS WELL DEFINED. THE INITIAL INTENSITY
    HAS BEEN SET TO 45 KNOTS BASED ON RECONNAISSANCE DATA AND THE SFMR.
    SOME HIGHER WIND GUSTS ARE PROBABLY OCCURRING OVER WATER ASSOCIATED
    WITH SOME RAINBANDS. ENVIRONMENTAL CONDITIONS ARE FAVORABLE FOR
    SOME STRENGTHENING IF THE CENTER MOVES OVER WATER AS EXPECTED. THE
    OFFICIAL FORECAST NO LONGER FORECASTS FAY TO BECOME A HURRICANE DUE
    TO THE CYCLONE’S INTERACTION WITH THE FLORIDA PENINSULA BUT ALLOWS
    SOME STRENGTHENING. ONLY THE HWRF INSISTS ON INTENSIFICATION BEFORE
    LANDFALL. A LITTLE DEVIATION OF THE TRACK TO THE LEFT WOULD KEEP
    THE CENTER OVER LAND AND INTENSIFICATION WILL NOT OCCUR.

    FAY HAS BEEN MOVING VERY SLOWLY TOWARD THE NORTH…ABOUT 3 KNOTS…
    WHILE EMBEDDED WITHIN VERY LIGHT STEERING CURRENTS. A MID-LEVEL
    RIDGE IS FORECAST TO DEVELOP NORTH OF FAY AND THIS PATTERN SHOULD
    STEER THE CYCLONE TOWARD THE WEST OR WEST-NORTHWEST. THIS OFFICIAL
    FORECAST KEEPS THE CENTER VERY NEAR THE EAST COAST OF NORTH FLORIDA
    FOR THE NEXT 24 HOURS AND THEN MOVES THE CYCLONE INLAND UNTIL IT
    BECOMES A REMNANT LOW. IN THE LONG RANGE…SOME GLOBAL MODELS TURN
    FAY WESTWARD ACROSS NORTH FLORIDA AND INTO THE NORTHEASTERN GULF OF
    MEXICO. THIS SCENARIO IS NOT LIKELY TO OCCUR BUT I WOULD NOT RULE
    OUT THE POSSIBILITY YET GIVEN THE GOOD PERFORMANCE OF THE GLOBAL
    MODELS.

  54. 54
    ddaley Says:

    CHK now supported by the 5 and 20 sma, as is the XLE

  55. 55
    zman Says:

    Group back to all green with strip off a little over $1. NG flat. I know I’m typing these little inane comments in often but 1) its slow around here and 2) and more importantly, I’m looking for a change in sentiment (stocks not necessary going down with commodity would be rare these days) so these are really notes to me for later.

  56. 56
    zman Says:

    ddaley – thanks was watching CHK underperf the group today post numbers, think it may be a bit squished (that’s a technical term) between the 20 sma for support and the 200 sma for resistance.

  57. 57
    zman Says:

    ZTRADE: Added Oct $140 RIG calls (RIGJH) for $3.00 (bought on the mid with the stock up about 60 cents on the day. See post for reasoning but I basically talked myself into it last night and think they will be one of the ones to really run (very cheap, earnings keep going up, largely immune to short term commodity price flux) when the sentiment turns more positive on the group.

  58. 58
    reefguy Says:

    BB? MMR and EXXI up

  59. 59
    zman Says:

    Could be. I’m not watch the lease sale but I guess it could be bidding on an adjacent block, just a thought.

  60. 60
    ddaley Says:

    Z,
    For CHK, not to make too fine a point, but my chart suggests the 200 is JUST under its current 47.3?

  61. 61
    zman Says:

    DD – I’m roaming and I didn’t zoom in so maybe I saw it wrong. My 200 EMA shows 51 for CHK. No matter, TA still more important than fundies here or it would be much higher. Hope you are correct.

  62. 62
    occam Says:

    Z- Your take on DO?

  63. 63
    ddaley Says:

    Z,
    200 SMA!!

  64. 64
    ram Says:

    200 DMA for CHK is around 51.4.

  65. 65
    zman Says:

    Occam – DO and NE are cheap as well right now. I took RIG because I think they are little better positioned in the deepwater and will get a bigger bounce and I’m playing options. If I were looking at the stock, I might take a harder look at DO due to the dayrate sensitive dividend. Nice to get paid while you wait and nicer still to participate in the upside these guys are all seeing and will very likely continue to see in near, medium, and long term.

  66. 66
    ram Says:

    Oh, SMA. Is this what tech traders or computer trades use?

  67. 67
    zman Says:

    It looks to me like the CHK 200 SMA at 47.30 to 47.40, which would put it right above current level. So a resounding close above here, say 48 would I guess make this moot.

  68. 68
    tomdavis12 Says:

    Z: Any thoughts about US$ fundamentally or technically. I see reports from Lehman and CSFB that are now US$ bullish. The gist is that even if our economy is weak Britain, Eur and Japan will be even weaker. A strong US$ has gotten in the way for our special sectors. R U concerned?

  69. 69
    zman Says:

    Ram – simple people like me use SMA, lol. I don’t know if I can stand an all green day with oil down slightly. How long has it been since we’ve seen 2 green days in a row on the groups?

  70. 70
    md Says:

    GMXR UP $5 . Anything new

  71. 71
    gaamblor Says:

    If Gasoline, and Crude move down by the same % does the crack spread stay the same?

  72. 72
    zman Says:

    Tom – always concerned but I think the dollar rally is more than represented in the dip in oil of late. I know some will argue that’s not the case but I respectfully disagree and don’t think over time, the dollar is the key determinant of pricing. Do I see a huge rally in the dollar from here? Not really. At least not soon. If the Fed tightens, which would strengthen the dollar, you get a crushed economy. Does Bernanke do that and hand the election to the democrats? Don’t know but I kind of doubt it. Inflation is everywhere but it has been for some time. Now seeing in PPI more outside of food and energy but a lot of that is just filter down of energy flowing in. Saw a comment yesterday that this PPI increase permanent. I’d say that’s reaching and but that it has further impetus to the upside before lower prices for transportation filter down to reduce it. This type of inflation is simply not fightable via Fed tightening and I think the Fed knows that. So they are not really in a rock and a hard place but a rock and black hole, meaning, tighten now, crush the economy and still not control inflation. Not with 1 or 2 or 3 hundred basis points . It will take multiple rounds of tightening to get a grip on inflation and the next admin will be in office before it has an impact on prices but the impact to the economy, at least in terms of perception will be ugly in November. At least that’s my quick read…I could be wrong.

  73. 73
    Fred Says:

    Z – Good article on RIG if you missed it:

    http://seekingalpha.com/article/91793-transocean-drilling-deep-for-profits

  74. 74
    zman Says:

    MD – No, people are just looking to get long the names again and its one of the cheap, nearly pure plays on a hot shale play. Came close to buying it earlier on the dip but my RIG trade fired first and I am being a little careful in believing all the green I am seeing. Oil could still slam lower into the close although it does not feel like it.

    Gaamblor – the gas crack would, the 3-2-1 crack spread would move in accordance with the price of crude, gasoline and heating oil. Right now gas cracks would be up with gasoline off half the move in crude and distillates (heating oil) almost flat.

    Fred – thanks much will have a read.

  75. 75
    zman Says:

    Calyon upgraded several oil service names, took NBR from Add to Buy

  76. 76
    zman Says:

    For the TA inclined, please have a look at the OIH and XNG…starting to look alive.

  77. 77
    1520sbroad Says:

    Z – i have been away from the computer during the day the past couple days but i did want to get back to you about that “write calls on friday of expiration one month forward and then buy it back on a swoon on monday idea”

    After some thought and looking back over notes i think what you are seeing is a combination of things. 1. Friday of expiration has an inherent bullish tilt to it in terms of folks rolling out options, (selling the about to expire and buying a new option one month forward.) A built in “net buy” for one month forward options. 2. The first monday of a new month has a slightly bearish tilt to it as there is not a “net buy” anymore. There can even be a net sell from options writers that were waiting for their options to expire worthless and then re-write them on monday. 3. Some institutions even have trouble writing new calls at all on the monday after expiration because they have to wait for the expiration transactions to post. 4. Options desks will seize the opportunity to square up on this monday too depending on where they stand after expiration.

    Your CHK trade from friday to monday will probably not be the last one of these you could pull off – particularly if we continue to see this type of volatility.

    GMXR at the money covered calls are still staggering. 7%+ for September 65s

  78. 78
    zman Says:

    Thanks much 1520! I did the CHK Friday-Monday for about 50 cents and I plan to be more disciplined about it on stocks I own each month, especially in this market as I doubt I’m in much danger of losing my stocks and if so fine. Should have done of SD and will likely do next go around.

  79. 79
    zman Says:

    Starting to get notifications of energy stocks crossing back above their 200 day sma, just got one on NBR.

  80. 80
    1520sbroad Says:

    i’ll be watching the friday monday idea too. i have never really looked that short before.

  81. 81
    Dman Says:

    Z – OIH has escaped its 2 week downtrend but is still within the major downtrend from early July. However, even if it just waffles for a few days it will cut across that trend & then some technical buying could kick in. Not that it will necessarily waffle: judging by NBR it could get there soonish.

  82. 82
    kiaora Says:

    Z–The TA on $XNG looks much better than OIH

  83. 83
    zman Says:

    Dman and K – thanks guys. Now, I’m not ready to declare an end to the prozac days just yet let alone a sea of energy love environment but this is an improvement and as someone said earlier, it means more with red oil.

  84. 84
    kyleandy Says:

    1520 – i sold some NFX puts last fri near close for 3.10 and w/ the stk down a little monday morn were trsding 2.70-2.90. i noticed because of z’s CHK trade to see if there was merit in his idea. i did not do for trade but his theory worked pretty good.

  85. 85
    1520sbroad Says:

    kyleandy – interesting – i’ll be watching to see what this looks like in a more neutral to positive energy equity environment.

    like i said i don’t usually go this short or even look to go this short but i will now.

  86. 86
    Bleemus Says:

    I spent the last few days buying UNG on dips and now selling Sep calls against it. Very comfortable position.

  87. 87
    zman Says:

    1520 – I’m not really much of a short game (time wise) player either however this market will make one adapt.

    Nice to see RIG up on the same day I buy in. Anyone on the TA side care to comment it would be welcome. Thanks.

  88. 88
    ram Says:

    Hopefully the analysts will appear with a stable energy sector and proclaim the obvious. Although the firms that reiterate a price target that is 50 to a 100% above current price and maintains a neutral rating always puzzles me.

  89. 89
    zman Says:

    Bleemus – re UNG and gas, the last 4 storage numbers have been better than expected or at worst in line and yet we’ve gotten sell offs. Tomorrow’s should be in the range of 70 to 80 Bcf which is SIZE for this time of year. Since they already assume the worst, maybe we get a small pop. Near term, I think we are overdue one but it will likely be muted by all this cold weather. No AC on for last few days and my wife was cold last night on a picnic. That just doesn’t happen in the South in mid August.

  90. 90
    zman Says:

    Ram – agreed, GS needs to get some stones if they are going to have targets that high on discounted cash flow analysis…or use a different metric and get with the program. Either way, saying CHK is neutral while saying it should be priced 100+% higher is just about one of the most gutless and worthless acts I’ve seen from the Street of late, not to cast stones but come on!

    You are starting to see various middle tier and bulge bracket firms reigning in their price targets which is the first step in the healing process. People know the 3Q estimates for oil are too high in the models given the sudden collapse so they think the numbers need to come down. Now the Street is accommodating them and they can comfortably buy the stocks AFTER the price target reductions.

  91. 91
    kyleandy Says:

    1520 – these were puts wasn’t short

  92. 92
    kyleandy Says:

    1529 = sorry didn’t see the comment about short as in time!!!!

  93. 93
    Sambone Says:

    Oil Falls On Huge Stockpile Gain

    By Gregory Meyer
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures sank more than $1 Wednesday after government data showed U.S. crude stockpiles swelled by nearly 10 million barrels last week.

    Light, sweet crude for September delivery was recently down $1.29, or 1.1%, at $113.24 a barrel on the New York Mercantile Exchange. The September contract expires Wednesday. More active October Nymex crude declined $1.26 to $113.28 a barrel. September Nymex crude was trading at $116.86 before the data release.

    October Brent crude on the ICE Futures exchange was down $1.09 to $112.16 a barrel.

    The U.S. Department of Energy reported domestic crude stockpiles rose by 9.4 million barrels in the week ended Aug. 15, more than 11 times the gain expected by analysts. It was the largest rise in barrel terms since March 2001 and percentage terms since April 2003.

    The gains came after crude imports to the Gulf Coast increased by about 1.8 million barrels a day, to 7.2 million barrels a day. Tim Evans, an energy analyst at Citi Futures Perspective, said Gulf imports bounced back after Tropical Storm Edouard had curbed imports in the prior week.

    The oil market found some support in a 6.2 million barrel decline in gasoline inventories, which was larger than the 2.4 million barrel draw analysts had expected. A 500,000-barrel gain in distillates stocks was on par with expectations.

    “There’s nothing supportive in that crude figure,” said Mike Zarembski, senior commodity analyst at brokerage OptionsXpress Inc. in Chicago. “The only figure that was really supportive was the gasoline figure.”

    The path of Tropical Storm Fay, now over Florida, remained on traders’ radar. The National Hurricane Center said a move to the Gulf of Mexico, home to a quarter of U.S. crude production and half its refining capacity, “is not likely to occur” but did not rule out the possibility. Separately, Jim Rouiller, senior energy meteorologist with the private forecasting firm Planalytics, said he doesn’t expect Fay to hit the Gulf or pose a credible threat to energy infrastructure.

    Emboldening some buyers earlier in the session, investment bank and major energy trader Goldman Sachs reiterated its view that benchmark West Texas Intermediate crude will be $149 a barrel by year-end.

    The market showed little reaction to news that the Baku-Tbilisi-Ceyhan crude pipeline, a key conduit for Caspian crude to global markets, is set to restart by this weekend after a fire knocked it out of service two weeks ago. The pipeline, which partly runs through the former Soviet republic of Georgia, was operating at around 850,000 barrels a day before the incident, a volume equal to about 1% of the world’s daily oil demand.

    Front-month September reformulated gasoline blendstock, or RBOB, fell 2.47 cents, or 0.9% to $2.8392 a gallon. September heating oil slid 2.19 cents, or 0.7%, to $3.1018 a gallon.

    —By Gregory Meyer, Dow Jones Newswires

  94. 94
    zman Says:

    Oil green.

  95. 95
    zman Says:

    RIG – $130 looking like a bit of a ceiling. Will likely add another lot if it breaks on through.

  96. 96
    zman Says:

    Huge amount of leverage on the HAL $50 calls, been watching the move from $0.20 to $0.33 today on a < $1 swing in the common. May add $50s or $47.50s to my $45 call position.

  97. 97
    zman Says:

    Rig breaking through $130 and running a bit now. Same going to happen to HAL I think.

  98. 98
    zman Says:

    NOV through its 20 day sma having just bounced off its 200 day. Will take some $80 calls here.

  99. 99
    zman Says:

    ZTRADE: Added NOV September $80 calls for $1.85 (part fill) as per comments in the post and on improving sentiment towards the group.

  100. 100
    Nicky Says:

    If the low is in for oil then it should absolutely take off to the upside here – no messing about! A move above 117.40 would be the first indication.
    That said I remain doubtful at this time and other possibilities are still on the table at this time. We could be still in a complex 4th wave or we could be in ii up of v down.

  101. 101
    reefguy Says:

    mmr-+10%, exxi +13%- BB?

  102. 102
    zman Says:

    Reef – I got no idea. Could be strong energy stocks + people thinking BB is good. I take you aren’t hearing anything?

  103. 103
    reefguy Says:

    I think they dlayed an announcement till after the La sale today. Anybody have access to those results?

  104. 104
    zman Says:

    Reef – you mean these?

    http://www.gomr.mms.gov/homepg/lsesale/207/sale_207.html

  105. 105
    zman Says:

    MMR only had one bid but it was the high bid, don’t see the block yet.

  106. 106
    tomdavis12 Says:

    Z: Thanks for your compelling workup on GMXR. It looks like you are not the only one thinking this partner can be best in show. PQ is quite a contrast. I can only come up with execution risk because of their quarterly miss. Is GMXR a more likely takeout candidate because of a very simple balance sheet. Do you feel the same about PQ? Is it just under loved for some other reason?

  107. 107
    zman Says:

    MMR bid on G32731, don’t have lease # map handy to tell you what block that is but I bet I know where it is

  108. 108
    crysball Says:

    EGY [Vaalco Energy] up 7.85% on about avg. volume.
    Bounced off 200 day SMA a few days ago and just crossed 50 day SMA today.

  109. 109
    zman Says:

    Tom – I think PQ may be taken out for different reasons. They barely mention their Haynesville potential. PQ is often slow to get up off the mat compared to its rivals. I don’t think they get knocked over one quarter so much as having had so little to say on the call or in the pr. I think they go higher, but tough to play options…although I will be writing calls against my stock on this one too.

  110. 110
    zman Says:

    Crys – nice to see small and large moving. I don’t recall how their 2Q went but I thought I remember it being positive. That’s a pretty interesting name.

  111. 111
    Sambone Says:

    By Brian Baskin and Dan Molinski
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Oil’s relationship with the dollar looks stronger than
    ever, but the two may be headed for a breakup that could give new headaches to
    investors already burned by the abrupt reversal in both markets.
    Hedge funds that bet on trends in oil prices and the dollar, as well as other
    markets,reported juicy returns of about 13% during the first six months of
    2008, according to the Chicago-based Hedge Fund Research. The investment
    vehicles, known as macro funds, “had positions that were primarily short the
    U.S. dollar and positive in terms of commodities,” said Ken Heinz, president of
    Hedge Fund Research.
    But their profits quickly dried up as oil prices turned south after peaking at
    $147.27 a barrel on July 11, and as the dollar began recoveringafter the euro
    hit a record high of $1.6040 four days later. Oil settled at $114.98 a barrel
    on the New York Mercantile Exchange Wednesday, while the euro was changing
    hands at $1.4739. Macro funds’ returns were a negative 5.5% in July. Through
    mid-August, their losses extended to about 9%, Heinz said.
    Even though the price of oil and the dollar’s exchange rate against the euro
    continue to move in sync, analysts say investors should be more wary about
    trusting the old rule of thumb regarding oil and the dollar. The outlook for
    each is diverging, with oil seen not having much further to fall, while less
    consensus exists around the dollar’s future.
    The uncertainty could spell trouble for those hedge funds still attempting to
    play the two markets against each other and makes the task of finding a direct
    correlation between the future paths of the two more challenging.
    “There is more to oil than the U.S. dollar and vice versa,” said energy
    analysts at Goldman Sachs in a research note.

    A Rocky Relationship

    Oil and the dollar have had an inverse relationship for the past few years –
    with crude prices climbing and the dollar falling – that wasn’t entirely based
    on wishful thinking by macro fund traders.
    Higher oil prices caused U.S. import costs to surge, hurting the economy and
    weighing on the currency. A weaker dollar also gave oil-producing nations less
    incentive to raise production levels in order to dampen oil prices because it
    eroded their returns from dollar-denominated oil.
    At the same time, the weaker dollar made buying oil much cheaper for investors
    in other currencies, partly fueling the massive inflows into energy markets in
    recent years.
    Take for instance June 5 and June 6, when oil jumped 13% and the dollar
    responded with its sharpest fall against the euro in months, giving up more
    than 2% during those two days and setting the U.S. currency up to fall to
    another all-time low against the single currency.
    But the oil price link to the dollar’s exchange rate is only one among a host
    of influences in these markets. Though moved by many things, the oil rally this
    decade has taken its cue principally from a perception that world demand is
    growing faster than new supplies. The dollar weakened as the U.S. economy was
    battered by problems in the housing market, with high energy costs only
    recently becoming a major factor.
    “If people trade it then they trade it,” said Harry Tchilinguirian, senior oil
    analyst with BNP Paribas in London. “That doesn’t mean there is a causal
    relationship.”
    When oil and the dollar track most closely, as they did earlier this year, the
    explanation is as much psychological as economic. A significant portion of the
    investment world piled onto two deceptively easy bets, that oil prices would
    rise and the dollar would weaken. The two trades fed off each other, as
    investors often used a rise in one as an excuse to send the other lower, and
    vice versa.
    Macro funds, which make up more than 15% of all hedge funds, pumped up the
    oil-dollar trade, and saw steep losses in July and August as a result. Not all
    hedge funds lost their shirts, however.
    Heinz, with Hedge Fund Research, noted that many speculative investors had
    slowly pared their bets against the dollar in the five months leading up to the
    currency’s impressive rally in August. Between March and August, the euro
    traded in a tight range between $1.53 and $1.60.
    Even those hedge funds still long on the euro when the dollar began to rally
    were able to quickly reverse their positions, said Daniel Goldman, chief
    executive of Chicago-based hedge fund Ketch Capital Management.
    “I know a lot of guys didn’t begin to sell euros until it was down around
    $1.53 or even $1.50,” Goldman said. He added, however, that when they did begin
    to sell, they sold big, which allowed them to recover much of their losses as
    the euro continued to trek lower.

    Two Paths

    Little in the outlook for the energy and currency markets would encourage
    macro funds to return to the oil-dollar trade now.
    “For the last two months there has been unwinding of that position, who would
    come back in to do that same play now?” said Michael Korn, president of Skokie
    Energy, a brokerage in Princeton, N.J. “It’s been played out.”
    The dollar, meanwhile, is continuing to look up. European and Asian economies
    are only now starting to suffer, just when perceptions are gathering that the
    U.S. economy may have bottomed, providing a firm foundation for the dollar. At
    the same time, global interest rate expectations – a key factor in currency
    markets – are beginning to work in the dollar’s favor.
    Although oil has dropped 22% from its July peak on weak U.S. demand, the
    long-term supply picture continues to provide support to prices. The U.S.
    Energy Information Administration cut its outlook for 2009 world oil demand
    growth by one-third last week, but still sees consumption increasing by 1
    million barrels.
    Some U.S. demand could also return at $100 oil, about the price where declines
    began to mount earlier this year. Others point to the increasingly high price
    needed just to maintain current production levels as evidence that oil does not
    have much further to fall. Producers need oil to trade at $85 a barrel or
    higher to maintain output, according to Credit Suisse.
    “At some point prices have to reflect underlying supply and demand
    fundamentals no matter what the dollar is doing against the euro,” said Nauman
    Barakat, senior vice president of global energy futures at Macquarie Futures
    USA.

    -By Dan Molinski; Dow Jones Newswires -By Brian Baskin; Dow Jones Newswires
    Dow Jones Newswires
    08-20-08 1511ET

  112. 112
    Wyoming Says:

    Anyone know why WH had over 480k volume with little price movement? One of those things that don’t require a wrench or hammer gets me confused …

  113. 113
    jsaun14 Says:

    EGY –

    Strong quarter…Great cash flow. Drill bit finally starting to turn.

  114. 114
    reefguy Says:

    Z- Western Gulf Sale is offshore Texas, no LA, no Blackbeard

  115. 115
    zman Says:

    yeah, just noticed that. That bid was Brazos a23

  116. 116
    tater Says:

    Wyoming,

    Just a quick look at the 3 yr trendline (daily chart) shows it is up against it. Looks like there are enough people willing to absorb the buying pressure with their inventory that’s ready to sell (overhead resistance).

    Some of these other oil gas names are going to run into the same problem. Rehearse your fire drill.

  117. 117
    zman Says:

    Wyoming – buyers AND sellers. supply meeting demand.

  118. 118
    tater Says:

    Sorry,
    Dec to now on the time frame for WH. Like I said, quick look

  119. 119
    Sambone Says:

    By Gregory Meyer
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Crude oil futures pushed higher Wednesday for a second
    day after the U.S. gasoline stockpiles dropped and traders dismissed a huge
    build in crude stocks as a one-off event.
    Light, sweet crude for September delivery settled 45 cents, or 0.4%, higher at
    $114.98 a barrel as it expired on the New York Mercantile Exchange. October
    Nymex crude, which becomes the front-month contract Thursday, settled at
    $115.56, up $1.02.
    Brent crude on the ICE futures exchange closed $1.28 higher at $114.53 a
    barrel. Brent settlement prices weren’t immediately available.
    The market bounced back from the lows that followed a government report
    showing U.S. crude stockpiles swelled a hefty 9.4 million barrels in the week
    ended Aug. 15, the largest weekly increase in seven years. A surge in imports
    to the Gulf Coast accounted for most of the rise, reflecting shipments blocked
    by Tropical Storm Edouard the prior week, analysts said.
    Traders discounted the jump and chose to focus on a 6.2 million-barrel decline
    in gasoline inventories, which was larger than the 2.4 million barrel draw
    analysts had expected. A 500,000-barrel gain in distillates stocks was on par
    with expectations.
    “The gasoline draw balances out the crude build,” said Michael Wittner, global
    head of oil research at Societe Generale in London. “And the (crude) stocks are
    what they are: if not for that storm, it wouldn’t be such an eye-popping number
    this week.”
    Lending early support to the crude market, Goldman Sachs reiterated its view
    that crude oil will reach $149 a barrel by year-end. The investment bank and
    leading energy trader expects slowing oil supply growth and rising demand in
    emerging economies to drive prices higher.
    Wednesday’s government data from the Energy Information Administration showed
    the U.S. consumed 20.2 million barrels of oil a day in the last four weeks,
    down 3% from the same time a year ago. With China’s industrial activity
    expected to pick up after the Summer Olympics end on Aug. 24, the pace of
    demand growth in the world’s No. 2 energy consumer has captured the market’s
    attention.
    “People continue to anticipate that after the Olympics we will see increased
    demand in many commodities,” said Edmund McNamara, a director on the commodity
    trading desk at Standard Chartered in New York.
    Crude has fallen more than $30 a barrel from its July peak, in part on
    increased supply from Saudi Arabia, the top exporter in the Organization of
    Petroleum Exporting Countries. In a separate report, the Energy Information
    Administration said the kingdom “may cut back on its recent increase in
    production, which could halt the most recent price decline.”
    The agency reiterated its view that crude prices may settle in a range of $120
    to $130 a barrel for the rest of the year, barring any new supply disruptions.
    Front-month September reformulated gasoline blendstock, or RBOB, settled up
    4.64 cents, or 1.6%, to $2.9103 a gallon. September heating oil settled up 3.98
    cents, or 1.3%, to $3.1635 a gallon.

    -By Gregory Meyer, Dow Jones Newswires Dow Jones Newswires
    08-20-08 1531ET

  120. 120
    tomdavis12 Says:

    Sam: Thks for your US$ – oil article. Very interesting.

  121. 121
    tater Says:

    Sambone,

    Guy I know talked to a guy he knows, blah, blah. Any specific love or hate for STD?

  122. 122
    reefguy Says:

    exxi- Maybe Cote de Mer news…

  123. 123
    reefguy Says:

    DVN- time to sell. They are planning a 925′ tall skyscraper in Oak City.

  124. 124
    Sambone Says:

    Warren Buffett and Bill Gates flew into northeastern Alberta, Canada, yesterday (Monday) for a “quiet” visit to a multi-billion dollar project that, in effect, extracts oil from rocks.

    The Calgary Herald reports on its website tonight (Tuesday) that Buffett and Gates were impressed by their tour of the Canadian Natural Resources CANADIAN NAT RES LTDCNQ
    82.18 4.73 +6.11% NYSE

  125. 125
    Sambone Says:

    STD – Banco Santander?

  126. 126
    Sambone Says:

    Tini time

  127. 127
    zman Says:

    Hear ya Reef – often not a great sign. Maybe they need the space to take in an acquisition, lol.

    Beerthirty! Nice to see 2 whole straight days of ups with close near the HOD for the OIH and XNG.

  128. 128
    Pete Says:

    Z, excellent let try for a Thursday repeat of today.

  129. 129
    VTZ Says:

    Sam – The CNQ project Buffett visited was the first phase of the Horizon oil sands project which I believe is due for startup by the end of 2008 and will be producing ~110,000 bbl/day (this is also going to be the start of the drain of nat gas from Canada due to new startups in Fort McMurray).

    CNRL’s facility is essentially the same as the Suncor facility and uses delayed coking. It is proven technology and they have gathered lots of people and expertise from Suncor. Future phases will expand the project significantly although cost increases are insane right now so they might be delayed from what is currently quoted on the website.

  130. 130
    tater Says:

    Sam,
    If you are still around, yes Banco Santander. Supposed to be a lot that does not meet the eye on this one. Thought you traded the banks, so I figured I’d get another opinion. No hurry, it needs a pop up before I’d try a play.

  131. 131
    VTZ Says:

    If Z asks me nicely and people are interested I could maybe write a knowledgeable article about oil sands mining/upgrading. I could maybe spend some time on a relatively simple version (compared to operation) that outlines everything.

  132. 132
    zman Says:

    V – pretty please.

  133. 133
    VTZ Says:

    No problem, but give me a bit so that I do it properly.

  134. 134
    zman Says:

    Seriously, thanks V.

  135. 135
    BossmanG Says:

    VTZ, that would be great.

  136. 136
    zman Says:

    FAY HAS MAINTAINED A WELL-DEFINED STRUCTURE ON SATELLITE AND RADAR
    DURING THE PAST SEVERAL HOURS. THERE ARE NUMEROUS RAINBANDS
    SPIRALING AROUND THE CENTER BUT THE CYCLONE LACKS AN INNER CORE.
    SURFACE AND RECONNAISSANCE DATA INDICATE THAT THE INITIAL INTENSITY
    REMAINS AT 45 KNOTS. ALTHOUGH UPPER-LEVEL WINDS ARE VERY FAVORABLE
    FOR STRENGTHENING…THE INTERACTION WITH LAND SHOULD ONLY ALLOW SOME
    SLIGHT STRENGTHENING…IF AT ALL.

    FAY HAS BEEN MEANDERING FOR THE PAST SEVERAL HOURS BUT IT BEGAN TO
    DRIFT NORTHWARD IN THE PAST HOUR OR SO. THE MID-LEVEL RIDGE
    DEVELOPING NORTH OF FAY IS ALREADY BLOCKING ITS NORTHWARD
    PROGRESSION AND FAY SHOULD SOON BEGIN TO MOVE VERY SLOWLY TOWARD
    THE NORTHWEST AND THE WEST-NORTHWEST. THE MOST SIGNIFICANT ISSUE
    REGARDING THE SLOW MOTION IS THAT FAY WILL LIKELY CONTINUE TO DUMP
    TORRENTIAL RAINS ALONG ITS PATH…AND WILL PROBABLY BE REMEMBERED
    AS A VERY WET STORM. THE TURN TO THE NORTHWEST AND WEST-NORTHWEST
    KEEPING FAY OVER LAND IS CONSISTENT WITH MOST OF THE GLOBAL MODELS
    AND TROPICAL CYCLONE TRACK GUIDANCE. ONLY THE ECMWF MODEL BRINGS
    FAY OVER THE WATERS OF THE NORTHERN GULF OF MEXICO.

  137. 137
    Fiveanddimer Says:

    You those interested in gold, here’s a link to a Seekingalpha article that attempts to explain why the price of gold is falling on the metals exchanges at the same time that it has become very difficult (at times impossible) to buy physical gold or silver. Even the US Mint has suspended sales of gold and silver ealges, because they can’t get bullion in quantity. Welcome to our Orwellian world!
    http://seekingalpha.com/article/91357-the-disconnect-between-supply-and-demand-in-gold-silver-markets

  138. 138
    mahout Says:

    Z,and all,

    Pardon me all, my joy is showing.

    After cascade extreme,
    my screen has gone green.
    Where have you been,
    long time no seen.

    Should have gone down
    if followed same patterning.
    But no, it went up!
    Blessed end to the battering.

    Sentiment says there is something anew.
    Maybe this downphase is over, whew!

    ‘Heart says it’s over.
    It’s no shake and bake!
    ‘Head says $10 bbl lower.
    Another head fake!

    Even if so.
    The end is in view.
    my fear has gone low,
    that portfolio falls into the loo.

  139. 139
    zman Says:

    Mahout = priceless.

    At the 11 est check on Fay. Starting to think it may have a shot at the gulf yet. From the NHC:

    FAY HAS PULLED UP STATIONARY WHILE CENTERED ONLY ABOUT 20 N MI OFF
    THE EAST COAST OF CENTRAL FLORIDA…AS SHOWN BY NWS WSR-88D
    RADAR DATA AND CONFIRMED BY AN AIR FORCE RECONNAISSANCE AIRCRAFT.
    DURING THE PAST SEVERAL HOURS THE RADAR PRESENTATION OF THE STORM
    HAS OCCASIONALLY LOOKED FAIRLY IMPRESSIVE…WITH CONVECTIVE BANDS
    WRAPPING AROUND WHAT ESSENTIALLY QUALIFIES AS AN EYE. WSR-88D
    VELOCITIES ALONG WITH FLIGHT-LEVEL AND SFMR DATA FROM THE
    RECONNAISSANCE AIRCRAFT SUPPORT AN INTENSITY OF 50 KT. THE MOST
    RECENT COUPLE OF AIRCRAFT FIXES INDICATE THAT THE CENTRAL PRESSURE
    HAS SETTLED FOR NOW AT 994 MB. ANOTHER AIRCRAFT WILL INVESTIGATE
    FAY IN A FEW HOURS.

    A MID-LEVEL RIDGE DEVELOPING TO THE NORTH OF FAY OVER THE
    MID-ATLANTIC STATES SHOULD GET FAY MOVING GENERALLY
    WEST-NORTHWESTWARD…ALTHOUGH SLOWLY…WITHIN THE NEXT SEVERAL
    HOURS. BETWEEN NOW AND LANDFALL ALONG THE EAST COAST OF
    FLORIDA…SINCE ATMOSPHERIC CONDITIONS ARE CONDUCIVE FOR
    STRENGTHENING…THERE IS A SHORT WINDOW OF OPPORTUNITY FOR SLIGHT
    INTENSIFICATION. ONCE FAY MOVES BACK OVER THE NORTHERN FLORIDA
    PENINSULA TOMORROW…GRADUAL WEAKENING SHOULD COMMENCE. A GENERAL
    WEST-NORTHWESTWARD TRACK ALONG THE SOUTHWESTERN PERIPHERY OF THE
    RIDGE IS THEN FORECAST BY NEARLY ALL OF THE MODELS FOR THE NEXT FEW
    DAYS. THE MODEL CONSENSUS HAS SAGGED A LITTLE TO THE SOUTH…AND
    SO HAS THE OFFICIAL TRACK. ALTHOUGH THE FORECAST POINTS LISTED
    BELOW DO NOT EXPLICITLY INDICATE IT…THE EXACT FORECAST TRACK HUGS
    THE GULF COAST OF THE FLORIDA BIG BEND AREA AT 36 TO 48 HOURS. IF
    FAY ENDS UP MOVING FARTHER SOUTH THAN FORECAST…AND SPENDS MORE
    TIME THAN FORECAST OVER THE NORTHEASTERN GULF…IT COULD BE AT
    TROPICAL STORM STRENGTH A COUPLE OF DAYS FROM NOW.
    IF…HOWEVER…IT MOVES NORTH OF THE OFFICIAL TRACK…IT COULD
    WEAKEN FASTER THAN INDICATED BELOW.

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