27
Aug

Watchful Wednesday

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Sentiment Watch: The Street is bored, half MIA, awaiting the long weekend and not taking chances. In the line of not taking chances, note that the best performers in yesterday's sea of green were the highest short interest names on the list, (GDP) and (GMXR).

A few words about trading around hurricane driven markets: 1) things can turn on a dime so look for increased volatility in the commodity and in the stocks every three hours when the NHC updates its outlook, 2) the pullback is swifter than the climb, meaning we may see five days of up oil and a 1 day drop equivalent to those five days if the storm turns the wrong way or duds out and 3) storm related sentiment is not a cure all for what ails the group and the commodities so unless we see dozens of platforms disabled and Gulf Coast refineries flooded capturing profits will be my key objective (which means some selling soon) with smaller positions by either Friday or Tuesday

Tropics Watch: Gustav stuck on Haiti, now a tropical storm but expected to begin heading towards the Gulf of Mexico later to day and to strengthen to a Cat 3 or stronger storm.

Made Me Laugh Watch: Middle Eastern Investors Eying Rescue Of Hummer.

In Today's Post

  1. Holdings Watch
  2. Commodity Watch - with EIA oil inventory preview
  3. Stocks We Care About Today
  4. Odds & Ends

Holdings Watch - The Holdings Wiki Tab is updated.

  • COP - Added the COP $85 September Calls (COPIQ) for $1.80. This is another way to bulk up my refining holdings where I think we will see improving profitability this fall. Note that they sold off their remaining service stations (600 stations for $800mm) after the close yesterday which is generally a low margin headache of a business.

 

  • HAL - Re-entered HAL calls. $47.50 September calls (HALIW) for $0.75 with the stock up about twenty cents on the day and underperforming the Oil Service group yet again.

Commodity Watch:

Crude Oil ended up $1.16 at $116.27 overcoming a bout of dollar strength/Euro weakness as Hurricane Gustav stared down the Gulf of Mexico. This morning crude is trading up nearly $2 as the dollar takes a dip.

  • China Watch: Year-to-date sales of new automobiles in China grew 15.8 percent compared to the same time last year. July however was disappointing with sales only growing 6.8% and the government has increased sales taxes on larger vehicles from 20 to 40% while reducing taxes on smaller cars. It will be interesting to see if September figures show a bounce back following the Olympics.

 

  • Where In The Gulf of Mexico Does Production Come From? In a nutshell, the Central Planning Area (see map below the talbe) which accounted for 10% of U.S. gas production and 22% of U.S. domestic oil production as of year end 2007. Note I use 8 month old figures as they are fairly solid versus more recent data. The data in the table comes from the MMS and EIA and aside for knowing where the path of a hurricane really matters relative to production is  also good for man chat around the barbecue over the long weekend.

 

The Gulf of Mexico Planning Areas:

 

  • From Russia With Not So Much Love Watch: U.S., NATO, and the EU condemned Russia recognition of two Georgian breakaway states on Tuesday.  Russia countered with:
    • Kremlin chief Medvedev saying he did not want a new Cold War with the West but was not scared of one and
    • "The ball is in the Europeans' court. If they want a worsening in relations, they will get it of course,"
    • 2008 translation of Cruschev's "We will bury you" but with the very real thret of a frost bitten, energy starved Europe.

EIA Oil Inventory Preview (estimates from the Dow Jones survey)

ZComment: I still think gasoline inventories will be the key driver of crude prices with this week's report but that the report itself will likely take a back seat to Gustav. I would also point out that the distinct possibility exists for a contraction in crude supplies as imports fall away from last week's record levels which were a function of a logistical "catch up following Edouard.

Natural gas too got a Gustav rally, climbing $0.45 to close at $8.28. This morning gas is trading up another $0.45 into the upper $8's

  • Imports fell by 0.8 Bcfgpd from the prior week. Imports were off 3.6 Bcfgpd from year ago levels
    • Canadian volumes shipped to the U.S. fell back to 8.6 Bcfgpd, down 0.6 Bcfgpd from last week and down 1.3 Bcfgpd from year ago levels.
    • LNG volumes fell to their lowest levels since April at 0.6 Bcfgpd, just barely keeping the pilot light on at the 5 U.S. import sites. This is down 0.2 Bcfgpd from last week and 2.3 Bcfgpd from year ago levels.
  • My read on Thursday's inventory report: 70 Bcf injection, still well above average for this time of year but better than last weeks 88 B's and keeps storage on track for a 3.3 to 3.4 Tcf peak level in late October.

Stocks We Care About Today

CRR Continues To Hit New 2 Year Highs. I continue to watch and do nothing and will get involved on the next pull back. You can't drill up all those shale wells with just sand. Well, you can but it would not be wise. Ceramics will increase peak production and ultimate recovery in the shales as I do not expect a major slow down in these plays anytime soon.

Coal Watch: Prices have come off their highs due to:

  1. reduced pre Olympic demand for coal in China...that will revert to normal now,
  2. the general fall in commodity prices but especially due to falling natural gas prices, and
  3. lower electiricity generation in the states

Coal Multiple: Note that the group is no exceedingly cheap on 2009 numbers having digested first half gains. Just a heads up that I'll be looking to get back long the group this fall.

 

Odds & Ends

Analyst Watch: Wall Street took the day off today.

 

131 Responses to “Watchful Wednesday”

  1. 1
    isleworth Says:

    NOAA Lab says Gustav on track to hit Louisiana early Monday as Category 4 hurricane

  2. 2
    Nicky Says:

    Morning all. I remember hearing post Katrina how much work had been done to improve the oil facilities in the GOM in the event of a hurricane. Anyone know whether this is the case and if so is any damage likely to be minimal?
    Slightly ridiculous to see gold following oil up – I hadn’t realized that the gold market was a hurricane related event! Silver looking much weaker however relatively..

  3. 3
    zman Says:

    I probably need to up exposure to refiners, Isle. Cat 4 storm surge into the coastal could crimp product supply / demand balances. If you look at a Monthly chart of TSO (who is not on the Gulf Coast) such an event could result in them going full bore on through put in a higher crack environment.

  4. 4
    zman Says:

    Nicky – I have heard the same from all the big operators …will do some snooping on the MMS site to see if there is anything concrete on the improvements.

  5. 5
    tomdavis12 Says:

    Z: CSFB downgraded some price targets for companies in your sweet spot. Sending report to you directly. Wolff always gets very edgy when he thinks the industry starts to out spend their free cash flow by 130% and up. Concerned about access to capital. Has not been bullish over last four years.

  6. 6
    zman Says:

    Thanks Tom. Wow, if you have not been bullish as an E&P analyst in the last 4 years, when would you be, lol? His bankers must love him. I’m glad to see the numbers come down, just another step in the healing process as current targets are out of joint with current levels.

  7. 7
    Dman Says:

    Nicky, I would think gold might be reacting to the Russia v. US thing that is gaining steam. Since it is obvious that no-one can force the Russians out, why embarrass yoursef by ineffectually demanding that Russia should do this, do that? Yet Bush is doing just that and Condi finally gets to use her Russia know-how (she was a Russia specialist academically, if I recall). Unfortunately, with all of that background she is merely echoing Bush. This would only be embarassing except the Russians are now getting pretty annoyed & making progressively more pointed threats, eg. against Poland. Gold tends to react to that sort of thing, so maybe that’s part of it today.

  8. 8
    bill Says:

    from tudor pickering– demand down 4.4 %!

    DOE preview ($116/bbl) – 10:35EDT. Gustav matters more than inventories this week. That said, hoping for some normalcy following last week’s large crude build/mogas draw. Consensus looking for crude oil build of +1.1mmbbls, mogas draw of 2.5mmbbls and distillate build of 0.6mmbbls.

    · Ugly demand data ($116/bbl) – Jun’08 U.S. monthly petroleum demand data released. One word…awful. Gasoline demand -4.4% y/y and total petroleum demand -5.6% y/y (1.2mmbpd). Price matters! June retail gasoline prices near peak levels $4.10/gal (compared to most recent $3.70/gal). No surprise that U.S. demand is weak but magnitude is huge. Hope recent decline in oil/product prices helps restore some lost demand…quickly. Also, have we mentioned China needs to keep consuming post-Olympics?

  9. 9
    Sambone Says:

    By Brian Baskin
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Crude oil futures rose Wednesday as Tropical Storm
    Gustav appeared on track for a direct hit to the Gulf Coast’s oil
    infrastructure.
    Light, sweet crude for October delivery traded $3.08, or 2.6%, higher at
    $119.35 a barrel on the New York Mercantile Exchange. Brent crude on the ICE
    futures exchange $2.28 higher at $116.91 a barrel.
    Tropical Storm Gustav, now near Haiti, is on track to sweep through the main
    oil producing region of the Gulf of Mexico. The National Hurricane Center
    predicts that Gustav will reach the central U.S. Gulf as a hurricane late
    Sunday or early Monday. The storm is then likely to slam into the Louisiana
    coast as a Category 4 hurricane, Morris Bender, a government forecaster, said
    Wednesday.
    Offshore rigs and platforms sustained severe damage from Category 5 hurricanes
    in 2004 and 2005, but have weathered weaker storms with little or no long-term
    damage. Even a moderate storm can disrupt energy markets, however, as producers
    evacuate personnel and shut down production. A slow-moving hurricane could halt
    up to a quarter of U.S. oil production for a week or more.
    Gustav has the potential to wreak further havoc when it makes landfall by
    halting oil and fuel shipping and damaging refineries. Gasoline futures shot up
    Wednesday in anticipation of the storm knocking out fuel production.
    “This storm appears to be heading straight to the heart of the production
    region,” said Addison Armstrong, with Tradition Energy. “Prices will not
    retreat.”
    Front-month September reformulated gasoline blendstock, or RBOB, recently
    traded up 12.67 cents, or 4.3%, at $3.0964 a gallon. September heating oil
    traded 8.78 cents, or 2.7%, higher at $3.2977 a gallon.
    Gustav is providing the market with a temporary respite from concerns over
    falling U.S. oil demand. Although oil prices rose in the last two trading
    sessions, futures still trade 20% below the all-time intraday high of $147.27 a
    barrel, set July 11. Oil may have further to fall, as problems in the U.S.
    economy appear to be spreading to Europe and Asia, where oil consumption has so
    far proven more resilient.
    “If the weekend passes with minimal damage, the selling in crude could
    resume,” wrote Edward Meir, with MF Global.
    Traders not focused on Gustav are waiting for the release of U.S. oil and
    product inventory data by the Energy Information Administration, expected at
    10:35 a.m. EDT. Analysts surveyed by Dow Jones Newswires gave an average
    forecast of a 1 million barrel increase in oil inventories, a 2.5 million
    barrel drop in gasoline stocks and a 600,000 barrel rise in distillate
    inventories.
    Gasoline inventories have plunged in recent weeks, reducing the cushion
    available should Gustav damage Gulf Coast refineries.

    -By Brian Baskin, Dow Jones Newswires
    Dow Jones Newswires
    08-27-08 0927ET

  10. 10
    zman Says:

    Bill – what site do you use for tanker rates, my site, the first one on the transports tab under tankers is giving some crazy numbers of late for VLCC Japan.

  11. 11
    Sambone Says:

    IEA Sees Potential Easing Of Oil Market Fundamentals

    Dow Jones Newswires

    STAVANGER, Norway — International Energy Agency executive director Nobuo Tanaka said Wednesday he sees “a potential easing in (oil market) fundamentals’ in the second half of 2008 and into 2009.

    Speaking at the Offshore Northern Seas conference in Stavanger, Tanaka said that while oil prices have fallen back to around $115 a barrel now from a peak of near $150 a barrel earlier in 2008, “there are plenty of risks to supply,” which could drive prices back up again.

    The IEA is the Organization for Economic Cooperation and Development’s energy watchdog.

    “There is the potential for stronger-than-expected non-OECD growth,” he said. “That could derail and otherwise short-term comfortable picture in 2009,” Tanaka said.

    “Oil prices are not likely to drop significantly any time soon,” he said.

    Company Web site: http://www.iea.org

    —By Elizabeth Cowley, Dow Jones New

  12. 12
    Nicky Says:

    Dman – yes probably right re gold although it is moving step by step with oil. Also there was a hawkish statement out of ECB member Axel Weber – Mr. Weber said that “the discussion about declining rates in Europe is premature” and that rate hikes may be needed “if the economic outlook brightens somewhat again towarads the end of the year and next year.” He also said that he believes that the ECB’s current rate is “still more on the accommodative side than being neutral.”

  13. 13
    Dman Says:

    NOV getting with the program today after sitting it out yesterday.

  14. 14
    zman Says:

    WILDZTRADE: Added TSO $20 September Calls (TSOID) for $0.30. Out of harms way but could benefit from storm mania and storm hype.

  15. 15
    ddaley Says:

    HK playing with its 50 SMA at 37

  16. 16
    jsaun14 Says:

    Z –

    Will you add color on why refiners become plays during storm watch?

  17. 17
    Dman Says:

    Addendum to #13. Actually NOV is still below yesterday’s high, but the chart is looking pretty good short term.

  18. 18
    zman Says:

    JS- Re Refiners: If capacity is taken off line by power disruptions and flooding it reduces product supply AND crude demand. So prices for things like gasoline can go up while crude prices fall. I added TSO as they are not there but would likely benefit, at least temporarily from higher margins, as they get to maintain throughput. Already hold small positions in VLO and COP. The refiners are one of the few industries where you can have a problem, (explosion, fire, flood) and have the stocks go up.

  19. 19
    ddaley Says:

    Today’s pivot for HK is 35.24, and

    R3 37.96
    R2 36.98
    R1 36.22
    which is to say that 38 would be a good daytrade target.

  20. 20
    Dman Says:

    Comparing short interest now vs. Z’s post yesterday for a few stocks:

    Short interest as % of float:
    Today Yesterday
    GMXR 21.3 22.5
    CLR 9.9 13.5
    PQ 10.1 10.5
    KWK 10.3 10.1

    (Todays’ numbers from shortsqueeze.com.
    Yesterday’s numbers are just my eyeballing of Z’s graph)

    Looks like some covering in CLR, a tiny bit in GMXR & PQ nothing to speak of in KWK. I don’t know if the numbers are updated intraday or not.

  21. 21
    Dman Says:

    oops…formatting not so good. How about this …

    Today Yesterday
    GMXR 21.3 22.5
    CLR 9.9 13.5
    PQ 10.1 10.5
    KWK 10.3 10.1

  22. 22
    Dman Says:

    Hmm.. no improvement. Well, hope it makes sense

  23. 23
    isleworth Says:

    Z – this must be great opportunity for E&P co hedging – likely keeping prices sane.

  24. 24
    Bleemus Says:

    10:08ET Storm may shut 85 pct of USG platforms-forecaster [ RTR http://tinyurl.com/6d4khz ]

  25. 25
    zman Says:

    Dman – I don’t know of a service that updates short interest daily.

    Isle – yes, its a nice opportunity for that and the 12 month strip looks a lot more agreeable now.

    Bleemus – yep, you can see what they are getting at when you look at the lease block map in the post.

  26. 26
    Sambone Says:

    In case anybody wants the map about of the platforms in the GOM.

    http://www.gomr.mms.gov/homepg/lsesale/Visual1.pdf

  27. 27
    Sambone Says:

    HOUSTON, Aug 27 (Reuters) – Major oil companies on
    Wednesday started evacuating crews from operations in the U.S.
    Gulf of Mexico ahead of Gustav, a helicopter executive said.
    “Starting today, we’re taking out non-essentials for most
    of the major oil companies,” said Jim Shugart, executive vice
    president/sales for ERA Helicopters.
    (Reporting by Bruce Nichols)

    Wed Aug 27 14:14:00 2008 -GMT-

  28. 28
    Sambone Says:

    HOUSTON (Dow Jones)–Royal Dutch Shell PLC (RDSA) will begin the evacuation of
    300 nonessential workers Wednesday from production and drilling operations in
    the Gulf of Mexico, the company said. Shell is removing the workers ahead of
    Tropical Storm Gustav, which has weakened but is expected to become a hurricane
    again and enter the Gulf this weekend.
    So far, Shell reports that the evacuations have not impacted production.
    Forecasters predict that Gustav could become a major storm and threat the U.S.
    Gulf Coast’s energy infrastructure.

    -By Susan Daker, Dow Jones Newswires

    Dow Jones Newswires
    08-27-08 1018ET

  29. 29
    Sambone Says:

    Bullish #’s

  30. 30
    zman Says:

    Inventories
    crude: down 0.1 mm barrels – people (not me) though would see build
    gas: down 1.2 mm barrels (smaller draw)
    dist: unchanged (though build here too)

    refinery inputs were pretty big

    gasoline demand still holding 9.4 mm bpd.

  31. 31
    zman Says:

    Data shows gasoline demand down about 2% from last year.

    The smallish draw on crude is imports getting back to something closer to normal and higher inputs to refineries (gasoline production went up, distillate down) – seems a little odd but its govt data so what are you gonna do?

    Not sure the market is reacting positively to this or more just saying, “ok, that’s out of the way… back to Gustav”

    Sam, thanks for that map of the platforms and pipes. I should have put that in with the lease block map this morning.

  32. 32
    zman Says:

    Daily chart on TSO now very interesting to my laymen’s TA eye.

  33. 33
    zman Says:

    ZTRADE: Out FRO September $50 puts for $0.55, down 63%. Trade not working and I must be missing something as the downgrades since their call have had no effect. This may be Gustav/Energy hype related and I may position again in puts higher but it has broken trend and I see no sense fighting it.

  34. 34
    sane Says:

    API

    Crude Down 3.5M
    Gasoline Down 2.1M
    Distillates UP 729K

  35. 35
    1520sbroad Says:

    #32 – tso chart does look interesting. I don’t know much TZ wise but the big option premiums are pretty telling. VLO too.

    In a general market sense the low, low volumes make me a bit nervous. As we grind toward the long weekend i think we may see alot of phone in positioning.

  36. 36
    1520sbroad Says:

    TA wise that is.

  37. 37
    Nicky Says:

    Gustav’s track shifted slightly to the East…
    Is the oil market open on Monday anyone?

  38. 38
    zman Says:

    Not much change on the Gustav front, still weak, still expected to strengthen at 11 EST.

    NG has paired half of the day’s gains which admittedly are pretty high given the possibility that Gustav does not re strengthen into a Cat 3 or greater storm.

    Agree re volumes Isle, I think oil and the stocks would be up less were this to be happening next week. People will covet their quick profits.

  39. 39
    1520sbroad Says:

    nymex open outcry closed monday. electronic nymex is open monday.

  40. 40
    Nicky Says:

    Z – re 31. I don’t think the inventory data was particularly bullish – this rise imo is purely a Gustav event. Market needed a catalyst to move it one way or the other. If this was to move east into the Panhandle it could be a big non event for oil. Not saying it will of course but I look at it two ways really – if they run it up big on the back of Gustav then there is only one outcome once it has passed which is down. And if they can’t run it up ahead of Gustav it shows how weak the market is anyway!

  41. 41
    Sambone Says:

    DJ Russia Taking Precautions Vs NATO Ships – Putin Spokesman

    This can’t be good.

  42. 42
    Nicky Says:

    Thanks 1520 – does that mean the oil traders don’t need to run it up Friday if they can still trade Monday I wonder.

  43. 43
    Nicky Says:

    Broader market has a minor cycle low due anytime between today and Friday. Support at 1265 resistance at 1275 – 1280.

  44. 44
    zman Says:

    Nicky – run it Friday, sell it Monday if Gustav a dud.

    I didn’t think the numbers were particularly bullish or bearish either as per 30 and 31.

  45. 45
    zman Says:

    Hey Nicky, I was thinking partly of you when I wrote this this morning.

    A few words about trading around hurricane driven markets: 1) things can turn on a dime so look for increased volatility in the commodity and in the stocks every three hours when the NHC updates its outlook, 2) the pullback is swifter than the climb, meaning we may see five days of up oil and a 1 day drop equivalent to those five days if the storm turns the wrong way or duds out and 3) storm related sentiment is not a cure all for what ails the group and the commodities so unless we see dozens of platforms disabled and Gulf Coast refineries flooded capturing profits will be my key objective (which means some selling soon) with smaller positions by either Friday or Tuesday

  46. 46
    1520sbroad Says:

    #42 – this will likely be an interesting test as in 2005(katrina, wilma, rita) i think open outcry was still the “preferred” method. Now lots of traders/specs/commericals use electronic and pit trading. This type of event(Gustav) in theory should produce less volatility now because of the presence of the electronic market. the better question might still be can the big boys get to a computer at the jersey shore or the hamptons.

  47. 47
    zman Says:

    I’ll probably take some DUG calls tomorrow or Friday for a trade unless Gustav really starts to bulk up. It is a compact storm with potential to spin quick but may also cut only a narrow swath and as such may not live up to the CNBC pump fest.

  48. 48
    Nicky Says:

    Z re 45 – yes saw it and agree totally. Charts point to a big fall when this comes to an end too!

  49. 49
    tomdavis12 Says:

    Z: HAL still the red-headed step child. Is there any name to be used with your ceramics comment this morning?

  50. 50
    zman Says:

    I think we get more buying of crude and a re strengthening of natural gas tomorrow and Friday if Gustav behaves as previously forecast. Monday/Tuesday will be “put up or shut up” days for the storm. No damage and commodity and stock prices retreat.

    Tom – yes, CRR.

  51. 51
    bill Says:

    z-tanker rates

    aug,sept,oct are the worst months

    the rate tab you have is right

    here is a clipping from tradewinds on tanker rates

    The Persian Gulf VLCC market continued to improve very slowly on Wednesday, with at least eight ships booked away from the region.

    MOL’s 312,000–dwt Atlantic Liberty (built 1996) managed Worldscale (WS) 77.5 into Korea from SK on 9 September, up WS2.5 from Tuesday’s high. This is still only worth $26,100 per day, hovering around break-even levels following booming earnings for most of this year.

    Single-hulls were up as well, at least WS5 to WS65.

    Cepsa was busy in West Africa, booking two suezmaxes to Spain at WS160, including the 159,000–dwt General Maritime-owned Genmar Horn (built 1999), loading on 2 September. This is up from WS140 on Tuesday as strong demand over the last week finally has a positive effect.

    Mediterranean aframaxes were quieter after a busy and better few days. The 105,000–dwt Jag Leela (built 1999), owned by Great Eastern, was reported at WS190 from Libya to the Med, booked by OMV off 27 August, below the average rate of WS200 this week.

    you have this link on your web site already — good newsletter

    http://www.brs-paris.com/index.php?page=news&type_news=tanker&page_news=1&numero_news=586

    and then you can check actula daily spots at

    http://www.jgoship.no/tankers/

    its showing vlcc at ws 65 to 70 which is about 20 k per day

    brs newsletter says vlcc rates fell from 180 k to 11 k recently!! Thats what i call volitility

  52. 52
    Sambone Says:

    I guess everybody saw where Gustav was downgraded to a “TS”.

  53. 53
    zman Says:

    Sam – yep, last night at 2. And in the top of the post too. Brings a tear to me eye that you don’t read my stuff.

  54. 54
    zman Says:

    Thanks much Bill. I was thinking of reworking that page.

  55. 55
    VTZ Says:

    I read it Z! 7:15 MST each morning like clockwork, haha.

  56. 56
    Sambone Says:

    It’s all about you, Z, It’s all about you!

  57. 57
    Dman Says:

    FDIC may borrow money from Treasury: report

    http://biz.yahoo.com/rb/080827/fdic_treasury.html

    Quote:

    “I would not rule out the possibility that at some point we may need to tap into (short-term) lines of credit with the Treasury for working capital, not to cover our losses,”

    -FDIC Chairman Sheila Bair

    I love the “not to cover our losses” bit. Riiight. Of *course* not! How could we ever have thought such a thing?

  58. 58
    zman Says:

    There you are V. I know I’m remiss in sending my questions but when I went over them they were all individual company cost metrics. I think its a great piece and would like to put as a post and archive on a white paper page.

  59. 59
    zman Says:

    Dman – notice the language can be interpreted that they have losses and this just would not cover them, OR that they don’t have losses, lol.

  60. 60
    zman Says:

    Nicky – got any resistance levels on crude right now you like for a turn? I think we get strong before weaker so am thinking it will be north of $120.

  61. 61
    apbd Says:

    Sam: What are you saying? Did we have a reading assignment? lol
    apbd

  62. 62
    gaamblor Says:

    Z, yesterday i asked about the declining west coast crack you said

    “G – yep, crude imports soared for the w. coast more on a per barrel and % basis than in the other regions.”

    did you mean the cost or volume of imports soared? if its the volume that should be good for the crack spread

  63. 63
    VTZ Says:

    Z- I have lots of the metrics that I could use with sources. Send me all your original questions and I’ll fill in as many as possible and for the others I’ll use a relative comparison of the benefits and disadvantages.

  64. 64
    zman Says:

    G – yes, that makes no sense. I went back and saw what I was talking about or trying to talk about.

    Imports were near record highs last week. GULF COAST imports were the bulk of the import increase. West coast imports were off from the prior week. So I looked at the data right but flubbed the answer. The dip in WC imports would have ostensibly hurt cracks if indeed that was the case. Apologies for that.

    V – will send tomorrow during day.

  65. 65
    VTZ Says:

    Ok, I fully intended to review it because I wrote it all at once and was getting tired by the end.

  66. 66
    ddaley Says:

    HAL is at 2 month resistence, with lots of overhead supply.

  67. 67
    zman Says:

    DD – right, think same goes for SLB. Group has run out of steam without stronger storm news and a rebound in the dollar from this am.

  68. 68
    zman Says:

    Sam – re 56, of course it is, I used to work on the Street ya know! WE’RE all like that, lol.

  69. 69
    VTZ Says:

    Dman Re 57 – That quote is hilarious… can someone remind me why the dollar is rallying?

  70. 70
    Sambone Says:

    Forecaster
    NEW YORK (Dow Jones)–Nearly 85% of energy facilities in the U.S. Gulf of
    Mexico will be shut in and damage is likely as Gustav, currently a tropical
    storm, cuts a path from the Carribean to the Gulf Coast as a powerful
    hurricane, a prominent weather forecaster predicted Wednesday.
    “Based on projected track, size and strength of Gustav over the Gulf, the
    entirety of the Gulf energy production region remains ‘under the gun,’ and I
    expect somewhere near 85% of the Gulf energy infrastructure will be shut in
    along with a significant increase in damage potential,” said Jim Rouiller, a
    senior energy meteorologist with weather forecasting firm Planalytics.
    Rouiller has been credited with predicting the course and destructive nature
    of Hurricane Katrina. Three years ago this Friday, Katrina wreaked havoc on
    offshore crude oil and natural gas production as well as refinery operations,
    sending prices skyrocketing.

    -By Anna Raff, Dow Jones Newswires

    Dow Jones Newswires
    08-27-08 0938ET

  71. 71
    zman Says:

    Nicky- here are some links to MMS docs on hurricane preparedness in the Gulf. Just looked about a bit and can’t really find anything quantifying what has been done to improve survivability but I think this is where you would find it if you are interested.

    http://www.gomr.mms.gov/homepg/whatsnew/hurricane/index.html

  72. 72
    zman Says:

    Sambone – weather question for you.

    When you look at this link and click animate is that counter rotating spin north of Gustav and Haiti the anti-cyclone?

    http://tropics.hamweather.com/2008/atlantic/gustav/clir/loop.html

  73. 73
    kyleandy Says:

    z – didn;t u say PQ had some hurricane exposure<??

  74. 74
    zman Says:

    Kyle – I don’t recall typing that but it does, in the shallow water. The trick is to get the storm to take out the other guy’s platforms, not yours. NFX got whacked by ’05 season and the stock was held down for over a year while they grew their onshore and got the offshore unclustered.

    Names that could take a beating include SGY, CPE, MMR, NFX, all of the large cap E&Ps, especially DVN and APC but honestly I don’t think a Cat 3 is going to do much damage. Cat 4 or 5 on the other hand and they will have a problem. Of course, you would not know about the damage until end of next week at earliest as there will be no one on the platforms to tell you the extent of the damage.

  75. 75
    Sambone Says:

    #72, Hmmmm, I’m not seeing any spin at the moment, either way. Looks to me likes it’s stalled. Use these next time to get a better look at invests, etc.

    main link: http://www.ssd.noaa.gov/PS/TROP/trop-atl.html

    Two on Gustav

    Rainbow – http://www.ssd.noaa.gov/PS/TROP/trop-atl.html

    Visible – http://www.ssd.noaa.gov/goes/flt/t1/loop-vis.html

  76. 76
    Sambone Says:

    1:37 (Dow Jones) MarketBeat says analysts are skeptical an energy rally
    ignited by Gustav will be sustained, unless the storm devastates the Gulf Coast
    in a way similar to Katrina in 2005. “We would have to wipe out a lot of
    refinery capability for this to sustain a rally,” says Scott Magnuson,
    commodity trading advisor at MF Global. “Now, markets are nervous, so it’s a
    reason to buy, but if there’s not much damage to the refineries, it’ll
    immediately be discounted and then we’ll probably fall back into a band of $115
    to $120 in oil.” (SMR)
    (http://blogs.wsj.com/marketbeat/2008/08/27/waiting-for-gustav/)

  77. 77
    Fred Says:

    Z – Sam posted this a while back and it does mention PQ along with hurricanes.

    http://www.marketwatch.com/news/story/hurricanes-sort-out-oils-winners/story.aspx?guid=%7B7F95766D%2DCFD8%2D4A80%2D8595%2DB4275ED0B001%7D&dist=msr_5

  78. 78
    zman Says:

    Thanks Fred, note they said OII in that article.

  79. 79
    Sambone Says:

    DOW JONES NEWSWIRES

    Tropical Storm Gustav is pulling away from Haiti Wednesday on a course that
    could take it between Jamaica and southeast Cuba Thursday, reports the National
    Hurricane Center. Just before 2 p.m. EDT, Gustav was centered 140 miles west of
    Port-au-Prince and moving west at 5 miles an hour. The storm is expected to
    turn somewhat to the north. The NHC says Gustav could regain hurricane strength
    in the next day or two. The center also warns of rains as heavy as 12 inches –
    even more in isolated places – in Haiti, the Dominican Republic, Jamaica,
    Cayman Islands and eastern Cuba.
    NHC Advisory:
    http://www.nhc.noaa.gov/text/refresh/MIATCPAT2+shtml/271731.shtml

  80. 80
    zman Says:

    Sam – where is Invest 95’s track going?

  81. 81
    Sambone Says:

    Maybe they will take it serious this time, eh?

    By Kathy Finn
    NEW ORLEANS, Aug 27 (Reuters) – Three years after Hurricane
    Katrina slammed into the Louisiana coast, New Orleans residents
    on Wednesday again confronted the prospect of an evacuation as
    Tropical Storm Gustav loomed.
    Not since Katrina struck on Aug. 29, 2005, have residents
    faced a forced departure from their homes and businesses as
    many still struggle to rebuild their lives in a city famed for
    its jazz clubs and Mardi Gras festival.
    Storm levees broke under the onslaught of Katrina, flooding
    80 percent of New Orleans and killing almost 1,500 people in
    the city and along the Gulf of Mexico coast. The hurricane
    caused $125 billion in wind and flood damage.
    With Tropical Storm Gustav swirling near Cuba and likely to
    enter the Gulf of Mexico as a hurricane this weekend, Louisiana
    Gov. Bobby Jindal said an evacuation could begin as early as
    Friday — three years to the day after Katrina inundated New
    Orleans.
    Jindal said he had activated the state’s catastrophic
    action team and could declare a state of emergency as early as
    Thursday. He also put the Louisiana National Guard on alert.
    “We all need to be prepared and ready to respond, from the
    citizen level and at every level of government,” Jindal said.
    Jindal, elected as governor in October 2007, is hoping to
    avoid heavy criticism that fell on his predecessor, Kathleen
    Blanco, for not reacting quickly enough after Katrina.
    Federal agencies and the New Orleans city government also
    faced the wrath of residents over their response to the
    disaster, while President George W. Bush was criticized for his
    role, including his initial decision to view the devastated
    city only from the air.
    After Katrina, chaos broke out in New Orleans as stranded
    flood victims waited days for help. Many residents who fled the
    hurricane have not returned.
    On Wednesday, Gustav drifted away from Haiti and the
    Dominican Republic after killing 16 people. Forecasters warned
    the storm may still become a dangerous hurricane in the Gulf of
    Mexico, with their models showing it most likely on track to
    hit anywhere from the Florida panhandle to Texas.
    Jindal said if the threat continues, his state could make
    700 buses available for assisted evacuations, which could begin
    on Friday for people who need help due to medical or other
    conditions.
    He advised other residents of the southern parishes to
    review their own emergency plans and be prepared to evacuate if
    an order is given.
    The state’s Office of Emergency Preparedness held a
    conference call on Wednesday afternoon with the presidents of
    all area parishes and emergency personnel to review current
    conditions and disaster plans.
    The Louisiana SPCA announced it would shut down its shelter
    and begin evacuating the animals to other shelters.
    (Editing by Chris Baltimore and John O’Callaghan)

    Wed Aug 27 17:47:46 2008 -GMT

  82. 82
    Bleemus Says:

    Invest 95 spaghetti track…

    http://skeetobiteweather.com/picservice.asp?t=m&m=95&a=2

  83. 83
    Sambone Says:

    #80 – 95L is either going East coast but more likly a fish storm.

  84. 84
    zman Says:

    Thanks Bleem and Sam. 4 out of 5 tracks on that one aimed at Florida. Hmmm.

  85. 85
    isleworth Says:

    NHC beeline for NO in 2PM update

  86. 86
    zman Says:

    That stinks for them. Been down there during a caine. Waited too long and to get out, flights got canceled. My advice, leave early.

  87. 87
    Sambone Says:

    Z – 95L – I think more and likly a fish storm. Hign coming into NC, so that should block it, and move it to the mid atlantic.

    http://moe.met.fsu.edu/cgi-bin/cmctc2.cgi?time=2008082700&field=Sea+Level+Pressure&hour=Animation

    Click “FWD” on right

  88. 88
    isleworth Says:

    How will CHK make out basedon current track Z?

  89. 89
    Sambone Says:

    If “Gus” does hit NO, I wonder if “W” will do a flyby on the way back from the convention?

  90. 90
    zman Says:

    CHK would benefit from higher gas prices, at least they would be higher than here temporarily. They’re all onshore and doubt any of their stuff would be affected. Maybe heavy rain slowing some completions but that’s probably about it.

  91. 91
    Sambone Says:

    DOW JONES NEWSWIRES

    The U.S. Navy’s Central Command said ships from Bahrain, the U.K. and the U.S.
    are engaged in naval exercises in the central and southern Persian Gulf aimed
    at improving the security of the allies’ forces in the region.
    In a statement released Wednesday, British Royal Navy Commodore Peter Hudson
    said the maneuvers will help sharpen skills for locating and tracking vessels
    thought to pose a threat. Allied teams will also board the vessel and practice
    procedures for handing it over to the U.S. Coast Guard. The five-day operation
    began Sunday.
    Press release at http://www.cusnc.navy.mil/articles/2008/107.html

  92. 92
    zman Says:

    Crude closes up $2, gas up 20 cents in last minute rally. I bet we see $120ish tomorrow as Gus restrengthens. I do plan to sell down positions by Friday since I think we see the second half of the “buy the rumor sell the reality” trade early next week. I’ll leave enough on board to matter if the storm turns out to be more than just wind and rain.

  93. 93
    zman Says:

    AP on Gustov effects. Quote in there from Phil.
    http://ap.google.com/article/ALeqM5i5TtajgUpSm7KY5jf-lCJGHBB-tAD92QPED00

  94. 94
    Sambone Says:

    Hmmm, model only BUT 95L. Next name is “Hanna”. May not be to cool for East coast Florida.

    http://www.ecmwf.int/products/forecasts/d/animate/catalog/products/forecasts/medium/deterministic/msl_uv850_z500%21Wind%20850%20and%20mslp%2172%21North%20America%21pop%21od%21oper%21public_plots%212005101800%21%21%21step/

  95. 95
    zman Says:

    Not surprised to see the refiners up today as per earlier comments. But to see FTO and TSO, two of the ones that would not have a chance of being affected by Gus both up 12%, well wow. HOC, WNR, and ANR up strong too. I have a mind to take puts on WNR if gus is a dud and it breaks into double digits.

  96. 96
    zman Says:

    Latest Gus tracks – They are definitely thinking NOLA.

    http://tropics.hamweather.com/2008/atlantic/gustav/trackmap_zoom1.html

    http://tropics.hamweather.com/2008/atlantic/gustav/modelsmap_zoom1.html

    The second one is the spaghetti tracks and the left most of those would be bad news for the refining sector (but probably good news for their stocks)

  97. 97
    Sambone Says:

    By Brian Baskin
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Crude oil futures settled higher as Tropical Storm
    Gustav remained on track to enter the Gulf of Mexico, potentially as a major
    hurricane.
    Light, sweet crude for October delivery settled $1.88, or 1.6%, higher at
    $118.15 a barrel on the New York Mercantile Exchange. Brent crude on the ICE
    futures exchange settled $1.59 higher at $116.22 a barrel.
    Futures rose for the third session in a row, and are up more than $3.50 since
    Friday, as Tropical Storm Gustav continues to plod toward the Gulf of Mexico.
    The storm, which passed over Haiti on Wednesday, is on course to enter U.S.
    waters Sunday, potentially as a Category 3 or 4 hurricane. Landfall is expected
    along the Louisiana coast Monday, according to the National Hurricane Center.
    A moderate hurricane in the central Gulf of Mexico could shut down up to 1.3
    million barrels a day of oil production for days. In 2005, stronger Category 5
    storms knocked out significant production for months. The Gulf Coast is also
    home to about 50% of U.S. refining capacity, which is vulnerable to hurricane
    winds and flooding.
    The prospect of a severe refining disruption sent gasoline futures soaring,
    which helped to prop up oil prices. Gasoline inventories, a crucial cushion
    when hurricanes force refinery shutdowns, sit just below the five-year average,
    following several weeks of large stock draws.
    Front-month September reformulated gasoline blendstock, or RBOB, settled 9.75
    cents, or 3.3%, higher at $3.0672 a gallon. September heating oil settled 5.18
    cents, or 1.6%, higher at $3.2617 a gallon.
    “If this storm does what it looks like it could do, this could only be the
    beginning,” said Tom Bentz, a broker and analyst with BNP Paribas. “It’s pretty
    much all speculation at this point.”
    Others were more skeptical, noting that some forecasts send Gustav on a
    northeast course into Florida, well away from major energy infrastructure.
    “I think the market is overestimating the impact,” said Kyle Cooper, director
    of research at IAF Advisors in Houston.
    Cooper believes Gustav is the only factor keeping oil prices in positive
    territory, as the outlook for world demand continues to weaken. Oil prices are
    off about 20% since July 11 on fears that the U.S. economy is in for a
    protracted slowdown, which could in time affect European and Asian demand.
    Weekly oil and product inventory data did little to validate or dispel
    concerns about U.S. demand. Oil inventories fell by almost 200,000 barrels in
    the week ended Aug. 22, according to the U.S. Energy Information
    Administration, where analysts had forecasted a 1 million barrel gain. Gasoline
    inventories fell by 1.18 million barrels, less than the 2.5 million barrel
    expected draw, and distillate stocks were flat. Gasoline demand is down 1.5% in
    the month ended Aug. 22, from a year earlier.
    Analysts said the data, which normally dominates trading each Wednesday, was
    overshadowed by Gustav.

    -By Brian Baskin, Dow Jones Newswires

    Dow Jones Newswires
    08-27-08 1524ET

  98. 98
    ram Says:

    GUS looks like it will take out prime tobacco growing and storage before it leaves Cuba. Prices could go up on primo cigars.

  99. 99
    zman Says:

    Ram – sugar and coffee too. Sugar turned up earlier but not much.

  100. 100
    tater Says:

    Just a thought on that FRO trade. I had the luck to time it out a bit more fortunately, so I guess I am more optimistic about going back into the fire, but it really looks to me like a Head and Shoulders trade gone bad. Price breaks above the down trendline, everybody rushes to cover their shorts, more price spike up into resistance. That’s where we are now (or almost, 61 is top of gap).
    Just thinking out loud.

  101. 101
    zman Says:

    Thanks Tater. I just wanted to let it run without me it, plan to go back, also wanted to verify that I was not off on my thesis that the environment is worsening for them.

  102. 102
    tater Says:

    Makes sense. I’m just playing around today. I don’t have much conviction about anything. I was working on some refiner charts but pulled the bonehead move that everybody’s heard about but never actually did themselves, deleted about 30 charts accidentally. Makes me feel like taking a couple days off for some mailbox baseball in the Hamptons. (Do they even have mailboxes?)

  103. 103
    crysball Says:

    New neihgbors for Nicky:

    Russia’s Rich Leaving for London

    Wednesday, August 27, 2008 9:02 AM

    Russia’s mega-wealthy industrialists are leaving Moscow for London.

    Among them are famous Russians Viktor Vekselberg, Mikhail Fridman, and Leonid Blavatnik, who collectively control a fortune worth more than $40 billion, according to the most recent Forbes magazine list of billionaires.

    According to The Telegraph, “Russia is the last source of new money” for London.

    Vekselberg, Fridman, and Blavatnik are the three oligarchs behind AAR, a consortium that owns 50 percent of TNK-BP, an oil joint venture with the British corporate giant BP.

    Between 1998 to 2004, more than $100 billion flowed from Russia, according to Forbes magazine. A significant percentage of that is now being spent in the boutiques and estate agents of London, thought to be home to more than 300,000 Russians.

    The Russian investments are also helping the London real estate market avoid a collapse. The Russian expatriates have been investing in high-end properties in neighborhoods like Chelsea.

    Where’s all their money coming from? Gas and oil wealth are not the only sources of money for the nouveau rich from Russia. There are also monied people from the banking, retail, and even food sectors of the Russian economy.

    And analysts do not expect the flow of funds to decline anytime soon. Rather, they see Russian firms increasing their presence in the U.K., and adding to the listing of their firms on the London stock exchange.

    Right now, there are some 100 Russian firms listed on the FTSE index. Three of the companies are in the FTSE 100 Index.

    “Russians have been in London for some time because it’s close to Moscow, and it’s very international, and you have seen them active in the property market,” says Steven O’Sullivan, head of research at Deutsche Bank.

    “London is an attractive market to them.”

    © 2008 Newsmax. All rights reserved

  104. 104
    Sambone Says:

    Tini time!

  105. 105
    zman Says:

    Natural gas inventories seen up 84 Bcf tomorrow. Big number for this time of year. I think it will be slightly smaller but it won’t matter this week while everyone is watching Gustav.

    Another all green close. I feel spoiled. Bid some $65 OII calls but not going to fill. Beer thirty.

  106. 106
    zman Says:

    Dooch, you around?

  107. 107
    md Says:

    Did some quick numbers. In 2005 Sept/Oct/Nov/Dec. supply dropped from July 50 BCFpD to 45/45/48/49 BCFPD.

    AGA news release Freeport LNG seeking to obtain export license.
    China importing 30% more LNG YOY

  108. 108
    zman Says:

    Gustav weakened slightly in the 5 pm update. Still forecast restrengthening but the tone is a little less certain.

  109. 109
    crysball Says:

    Concerning Freeport and exporting LNG

    don’t recall if it was Z or Richard Deffeyes ……….but due to the Oil Window geology of China it is ‘VERY POOR’ in Natural Gas, and will be looking heavily to LNG.

    Also, from a risk management standpoint,……..an LNG ship or terminal is a terrorist dream………. a small plane [not an airliner] loaded with C4 could create an immense amount of devastation……and small aircraft are much easier to acquire than an airliner in post-911.

    Particularly concerning is the LNG facility in Everett, Mass which currently requires LNG Tankers to sail through Boston Harbor……very close to downtown Boston on their way in to unload.

  110. 110
    zman Says:

    Crysball – is that why COP gave up on their Sichuan basin tight gas play inherited with the Burlington acquisition?

    On the LNG, have to admit safety record on those ships is perfect. I once read that one going off at Everett could take out a big chunk of Boston like a small nuke going off.

  111. 111
    md Says:

    How about starting the $10K or $100K portfolio for Sept.

  112. 112
    Bleemus Says:

    I worked on Boston Harbor many years ago and an LNG ship coming in was a big deal.

  113. 113
    crysball Says:

    Z,
    Don’t know the specifics of why COP abandoned the Sichuan Basin Tight Gas Play.

    Do know Texaco has delivered to Coal Rich China at least 8 mine mouth Coal Gassification plants which will be used to provide Hydrogen/Methane for fertilizer manufacture (more plants are on order qauntity unknown). ……To the dismay of all concerned, China piped the byproduct [CO2] up the smokestack…..instead of using it as a CO2 flood injection for enhanced oil recovery.

    LNG Tankers and terminals represent a serious National Security Risk issue which is insoluble………whether it’s a small plane or a small boat [AKA the USS Cole], a surface to surface missile fired from shore, or some combination thereof……it is only a matter of time. before some determined terror cell takes one out…and it won’t matter where in the world it occurs it will require every nation to reassess the risk/benefits of LNG….all IMHO.

  114. 114
    crysball Says:

    To illustrate the problem of LNG Tanker National Security Risk look at the picture on page 79 of ‘Beyond Oil’ l by Kenneth Deffeyes, and imagine a coordinated attack using a small explosive laded boat(s) , and a small explosive laden airplane in Boston harbor.

    The same could be said for the Strait of Hormuz, or the Malaca Sraits.

    We live in a dangerous world.

  115. 115
    bill Says:

    If we are afraid little people nothing will ever get done

    I live in Boston and the local politicians (demoncrats) are classic not in my back yard.

    Ted Kennedy raised a stink when they wanted to put a wind farm off the cape

    the lng industry gave up on a port but they paid off politicians to allow an offshore unloading scheme and then piping it in

  116. 116
    zman Says:

    Crys – no doubt it is a danger, think the first problem will be off Nigeria as they have decided to stop flaring the Bcfgpd they do now and export it. Great big L N G letters for MEND to target with rocket.

    md – I was thinking 10 or 20K port mid September.

  117. 117
    zman Says:

    Gustav moving W south W, still weak, only expected to regain Cat 1 by Friday, so slower to redevelop yet again. May hit Jam and if so would be even slower.

  118. 118
    crysball Says:

    As of 5AM Gustav GOM track now shifted approx 150 miles to the left [deeper in the Central Planning Area]….and likely coastal impact Tues. AM…however Saffer/Simpson intensity rated at the bottom of a CAT4 [115mph sustained winds/138mph gusts].

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