24
Sep

Warren Wednesday + EIA Preview

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Will they or won't they? That's the question on all trader's minds today and until they, being Congress, act on the bailout. Warren Buffet decided he didn't need to wait any longer in taking a piece of Goldman and this will provide some holiday-like boost to the markets early in the session but as Ben and Paulson continue to argue for a deal, the markets will quickly focus on just how out of step some of their elected representatives are with the enormity of the current crisis. Everything else is secondary today however the E&P companies are taking the rare step of reporting news items again...something I think we will see more of if they start to get the sense that broader market issues will stop overshadowing such news long enough for people to notice. See the Stocks We Care About Today section below for more on that.

In Today's Post:

  1. Holdings Watch - added CHK calls
  2. Commodity Watch
  3. Oil Inventory Preview
  4. Stocks We Care About Today
  5. Odds & Ends

Holdings Watch: The Wiki Holdings and ZEB Performance Tabs are updated.

  • (CHK) - Two purchases of CHK $42.50 October calls (CHKJT) for an average entry cost of $2.43. The buys come after listening to the capital budget conference call and viewing the deceleration as the beginning of a wave of similar press releases. See yesterday's early post on the CHK news on the ZEB Reports tab.

Commodity Watch:

Crude Oil fell $2.76 to close at $106.71 yesterday on a stronger dollar which was in turn prompted by "no bailout soon" fears. This drop is less than half Monday's short squeeze inspired rally and not of great consequence in my book. My sense is that a Washington deal will get done once enough congressman and senators have had camera time to espouse both their disapproval of Wall Street. That and for them to have gotten what they wanted. No time to demand pork better than when free market system hangs in the balance.  This morning oil is trading up  a little over $2 and I would expect it to trade in conjunction with broad market until the deadlock over the bailout is broken (see caveat in the EIA inventory preview below).

 

  • Nigeria Watch: The Nigerian government has vowed to continue to take the fight to the rebels and conducted air strikes on two non-MEND encampments yesterday. MEND said it would continue to honor the 2 day old ceasefire (apparently they are contempt to let their fellow rebel groups get whacked).
  • OPEC Watch: This is more of a watch of what they are doing as opposed to what they are saying. This comes from two tanker tracking firms.
    • Oil Movements: said recent shipment estimates from 11 OPEC members revealed "a record level for this time of the year" for exports from the Middle East going east of Suez. He expects shipments to be 24.79 million barrels a day in the four weeks to Oct. 4, up 240,000 barrels a day.   "So far we have not seen any indication of slowdown in China or India,
    • Petrologistics: sees OPEC production falling in the month of September, hitting 32.6 mm bopd from an upwardly adjusted figure of 33.4 million bopd. The 800,000 bopd slice in production comes primarily from Saudi Arabia and Iran.
    • Taken together these two statements point to continued demand for oil from Asia which have been rumored to be slowing and a willingness on the part of OPEC to follow through on recent statements about getting back to production quota levels from recent over-production.
  • MMS Gulf of Mexico Watch:
    • Crude: 67% shuttered
    • Natural Gas: 62% shuttered

 

Natural Gas rallied $0.27 to close at $7.93 on the Chesapeake news. My sense is that the Chesapeake news (capex curtailment as well as the shuttering of some non-economic production) will provide a near term floor for natural gas. However, other E&Ps will need to follow suit publicly. I think this happens but that we can expect limited upside other than very short term spikiness.  Given the large short position in NYMEX natural gas (its been growing pretty much all year), there is the potential for a squeeze here but not to the degree we saw in oil on Monday and therefore long plays on the commodity via either the futures or (UNG) will need to be nimble. This morning gas is trading above $8.

 

Oil Inventory Preview - (estimates from the Reuters survey)

 

ZComment: Another Gustav/Ike skewed report. Expect to see slightly higher demand for crude in this report as more refiners came back on line over the last week. Could lead to another bigger than expected draw on crude however as oil production was slow to recover during the reporting period. The numbers will again be fast and loose and while I won't say they will take a back seat to the action on the Hill they will need to depart from expectations significantly on the product side to break the tie crude currently has to the broad market and the fate of the economy.

Stocks We Care About Today:

Chesapeake News Reaction: (I know I'm harping on this but I like words like "catalyst" and "pivotal" and I really think that's what the (CHK) news represents. Again, not for a big run in the stock or natural gas but more for establishing a level of stability where natural gas fundamentals can once again take center stage).

  • Goldman ~ "Given Chesapeake's outsized growth at the expense of large cash deficits before asset sales, we believe these reductions show discipline, ad as such weakness in the stock could create a buying opportunity." I think that's pretty much what I said in yesterday's note. 
  • Calyon ~ "As the nation's largest producer of natural gas, (CHK) is likely trying to encourage others to follow suit". Don't know if I really agree with this statement. I think others will do the same but CHK would probably be happy to see its competitors produce gas at a loss for a time.

Marcellus Leasing Metrics. Interesting tidbit on leases in the Marcellus and the inability of smaller players to get financing even for a long reserve life.

(HP) Says To Get Hurt By Softness If Drilling Slows Down. Sounds obvious but I guess they have to point it. (HP) says they have 45% exposure to the rig spot market in 2009, specifically citing (CHK)'s comments yesterday. (HP) went on to say that what Chesapeake has done might be a good indicator of things to come. They said they see spot prices and rig margins per day falling as soon as the fourth quarter and carrying into 2009.

(EOG) Reiterates 3Q Guidance, Ups 2008 Range:

  • They bumped their 2008 ranged from 15% YoY to 15 to 15.5% due to better than expected Rockies production which is more than offsetting some 50 MMcfgpd of production shut in by storms along the Gulf Coast. 
  • This does not necessarily mean a boost to the bottom line is in the making as those Rockies realizations will be lower than the Gulf Coast ones would have been...probably something close to a wash there.

(CLR) Completes One TFS Well and Three More Middle Bakkens

  • The Omar 1-1H flows 1,126 bopd (7 day test) from the Three Forks Sanish in Williams County. That's a nice well and goes to credibility of the TFS as a second play here to the Middle Bakken.  
  • Three middle Bakken wells in the northern part of their acreage (2 wells in Divide County and 1 in Burke). IPs here were 476, 394, and 198 which probably wouldn't impress people in the core of the play but this is far from the core.
  • This is the very north west corner of the state along the border with Canada and in an almost undrilled and certainly unproven part of the play. See the ND GIS Map Survey and zoom in on the upper most, northwest three counties to see what I mean. 
  • Here's a North Dakota county map of the state so you can see just how far off the beaten track these wells are.
  • They're running 10 rigs now with 6 focused on the TFS (which underlies the middle Bakken) and are in the process of completing 3 more TFS wells now.
  • CLR continues to be the biggest acreage holder in the Bakken play.
  • CLR speaks at the Herold's conference today regarding gas shales and I'll try to get notes from that a little later.

 

Odds & Ends

Analyst Watch: UBS initiated on (PCX) with a buy rating and $67 target.Credit Suisse initiates (NOV) with a $104 target.

110 Responses to “Warren Wednesday + EIA Preview”

  1. 1
    Sambone Says:

    By Nick Heath
    Of DOW JONES NEWSWIRES

    LONDON (Dow Jones)–Crude oil futures climbed more than $2 in European trade
    Wednesday as traders opted to play it safe ahead of weekly government data that
    is expected to show U.S. crude and products inventories fell again last week
    due to hurricane-related shut-ins.
    Prices took some additional support from reports that the Organization of
    Petroleum Exporting Countries is expected to pump less crude in September,
    although persistent unease over the state of global economic health – and
    associated crude oil demand – was not alleviated by the slow progress through
    Congress of a $700 billion U.S. financial rescue package aimed at damping the
    recent turmoil in financial markets.
    With movements in the U.S. dollar also expected to continue exerting an
    influence over crude prices, analysts suggested that further volatility in the
    crude markets could be expected in coming sessions.
    “The next few days will be very ‘whippy’,” said Edward Meir, analyst at MF
    Global in New York. “There simply are too many balls in the air to allow
    participants to get a clear sense as to which direction the next $20 (a barrel)
    will take.”
    At 1140 GMT the front-month November Brent contract on London’s ICE futures
    exchange was up $2.49 at $105.57 a barrel.
    The front-month November light, sweet, crude contract on the New York
    Mercantile Exchange was trading $2.53 higher at $109.14 a barrel.
    The ICE’s gasoil contract for October delivery was up $18.75 at $988 a metric
    ton, while Nymex gasoline for October delivery was up 412 points at 263.62
    cents a gallon.
    The latest weekly U.S. Department of Energy inventory data due 1435 GMT
    Wednesday are set to reflect the impact of Gulf of Mexico platform evacuations
    and coastal refinery closures that preceded hurricanes Ike and Gustav, and from
    which a number are still in the process of returning.
    “We can expect another material drop in utilization rates for (today’s)
    report, as well as another purge in products stocks,” said Stephen Schork,
    editor of The Schork Report.
    Of the 13 analysts surveyed by Dow Jones Newswires, most expect crude stocks
    fell in the week ending Sept. 19, although predictions range from a build of 3
    million barrels to a draw of 6.5 million barrels. Almost all of the 13 see
    gasoline and distillate stocks falling, while the outlook for refinery
    utilization is varied, and is expected to have inched 0.7 percentage points
    higher to 78.1% of capacity on average.
    Amid the data, analysts will also be eyeing implied demand. Expectations
    persist that a slowing economy will continue to weigh on consumption in the
    U.S., and beyond. Amid growing financial market tensions and fear that the
    euro-zone economy is entering a recession, German business confidence
    deteriorated in September to its lowest level in well over three years, a
    survey from the German Ifo Institute showed Wednesday.
    “The global picture on the demand side is weak and I don’t see it getting
    stronger anytime soon,” said Serge Laureau, commodities strategist at Saxo Bank
    in Copenhagen.
    OPEC is expected to pump around 800,000 barrels a day of crude oil less in
    September after producing at higher-than-usual levels in August, tanker tracker
    Petrologistics said Wednesday.
    Output from OPEC’s 13 members is projected to average 32.6 million barrels a
    day in September, down from a revised 33.4 million barrels a day in August.
    However, the “small print” was worth reading said Olivier Jakob, managing
    director of Swiss consultancy Petromatrix.
    “Petrologistics is indicating a drop of 800,000 barrels a day from August but
    only after having revised up August 900,000 barrels a day versus July. Hence,
    we are basically at the same levels (as July).”
    Along with all other financial markets, the crude market is eyeing the
    progress of the $700 billion U.S. financial rescue plan after Treasury
    Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke faced a
    grilling on its proposals from the Senate Banking Committee Tuesday, feeding
    fears that the plan could be delayed. Analysts said the implications of the
    package’s progress on crude and commodities remain to be seen.
    “On the one hand, further wrangling could generate more weakness in the equity
    markets and lead to an unhinging in commodity prices, just as was the case last
    week,” MF Global’s Meir said. “On the other hand, the delay could weaken the
    dollar and send sidelined money towards hard-asset inflation hedges, like
    commodities.” The U.S. dollar offered little direction for crude Wednesday, the
    greenback mixed against major currencies.
    -By Nick Heath; Dow Jones Newswires (Nina Koeppen in Frankfurt and Oliver Klaus in Dubai contributed to this item)

    Dow Jones Newswires
    09-24-08 0803ET

  2. 2
    antrimshale74 Says:

    So we used to talk about country risk meaning places like Equatorial Guinea and Nigeria. Now the USA has severe country risk. Between this financial debacle and the various other messes in which we are entwined, I think the next president will have very little leverage or credibility on the world stage.

  3. 3
    Dman Says:

    Hi Z,

    1. OPEC: hmmm… so much for the alleged full storage causing China to slow crude imports.

    2. MEND: I’m sure their statements make sense to someone, but I haven’t cracked the code yet. Seems to me they are at war more-or-less constantly, variability in their press releases notwithstanding.

    3. Iran watch:
    http://www.salon.com/wires/ap/world/2008/09/24/D93D3O180_eu_nuclear_iran/index.html

    4. Is it possible to estimate the impact on production of a drop in the rig count by 400?

  4. 4
    Dman Says:

    Oops, forgot #5:

    5. Z, regarding the free market being at risk: I don’t doubt that somthing has to be done & there is only one player that can do it, but I wouldn’t characterize it as saving the free market. Looks like that’s already toast, to be replaced by… ??? First they ban shorts, what next? Legislate that the market can only go up?

  5. 5
    Fiveanddimer Says:

    test

  6. 6
    tater Says:

    Is FTO open yet? Any news?

  7. 7
    Bleemus Says:

    NYSE reporting errors on stocks starting with A-L, don’t believe anything you see right now.

  8. 8
    tater Says:

    Thanks

  9. 9
    zman Says:

    Dman – re #3 Scary

    re #4 – Not really. In the most general sense you could come up with some math on it but it would be flawed. The rigs are going to not just fall in numbers but also transition to higher return plays. Just too many variables.

  10. 10
    zman Says:

    Re CLR – too bad they don’t hold a CC to talk about what their TFS well in the north means/tells them about the rest of their acreage. They are the biggest of the Bakken lease holders.

  11. 11
    Sambone Says:

    By Gregory Meyer
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Crude oil futures rose Wednesday as traders anticipated
    drawdowns in U.S. oil stockpiles and eyed the demand implications of a $700
    billion financial bailout plan under consideration in Washington.
    Light, sweet crude for November delivery was recently up $2.44, or 2.3%, at
    $109.05 a barrel on the New York Mercantile Exchange. Brent crude on the ICE
    Futures exchange rose $2.33 to $105.41 a barrel.
    Crude gained as traders awaited weekly data expected to show drawdowns in U.S.
    petroleum inventories following hurricanes Gustav and Ike earlier this month.
    Analysts polled by Dow Jones Newswires foresee the data, for the week ended
    Sept. 19, showing crude stocks fell 1.9 million barrels, gasoline stocks fell
    3.7 million barrels and stocks of distillates, which include diesel and heating
    oil, fell by 1.3 million barrels. The data are due out at 10:35 a.m. EDT.
    Analysts see the rate of refinery use picking up by 0.7 percentage point to
    78.1% of capacity, which would be the first increase since August as refineries
    restart after the hurricanes, which could lend support to prices, analysts
    said.
    Traders are also closely watching the fate of the proposed U.S. financial
    rescue plan as it’s debated in Congress. “The market is not sure what’s going
    to happen,” said Rick Mueller, director of oil markets at Energy Security
    Analysis Inc. in Wakefield, Mass. “The possibility that it could help to reduce
    some of the threat to a global financial meltdown is likely to support demand
    expectations and provide a little boost for prices.”
    Front-month October reformulated gasoline blendstock, or RBOB, climbed 5.50
    cents, or 2.1%, to $2.6500 a gallon. October heating oil rose 7.18 cents, or
    2.4%, to $3.0681 a gallon.

    -By Gregory Meyer, Dow Jones Newswires

    Dow Jones Newswires
    09-24-08 0948ET

  12. 12
    Dman Says:

    Z – #3 evidently ho-hum as far as the market is concerned. More realistically, the market simply doesn’t believe any action will be taken and perhaps accepts that Iran will ultimately go nuclear.

    Which reminds me: one point that is never mentioned (& it puzzles me why not) is that Iran is, in reality, already WMD capable. They possess plenty of low-grade enriched uranium and they possess medium-range missiles that they could load it into. Sure it’s only a dirty-bomb but it would create devastating panic & they could do it tomorrow. I don’t think they would do it, on account of the retaliation would be much worse. But it is never mentioned for some reason.

    On the rigs, what I am wondering is: with the new horizontal drilling giving much more NG per rig, is the NBR business model in long-term danger?

  13. 13
    zman Says:

    I just think the market is much more concerned about the bailout than more news from Iran.

    The Warren futures rally sure fizzled fast.

  14. 14
    zman Says:

    RE NBR – I don’t think the business model is in danger. I think they are in for some rate softness. At the end of the day, the drilling stocks do well as rig counts rise and vv.

  15. 15
    Dman Says:

    Z – I forgot: only one idea at a time for the market brain cell 🙂

  16. 16
    zman Says:

    2nd day of reaction to the slowdown at GMXR and now to insider sales. Just looks like someone is looking at them.

  17. 17
    Sambone Says:

    ABUJA, Sept 24 (Reuters) – Nigerian Oil Minister Odein
    Ajumogobia said recent militant attacks on oil facilities had
    not significantly hit output and that the country was currently
    producing around 2 million barrels per day.
    “Some of the facilities attacked were not producing, so it
    had not affected our production significantly … As to our
    current oil production, it’s about 2 million bpd,” Ajumogobia
    told Reuters on Wednesday in the capital Abuja.
    Militants in the oil-producing Niger Delta declared a
    temporary ceasefire on Sunday after a week of attacks on oil
    platforms, pipelines, flow stations and gas plants in the
    heartland of Africa’s biggest oil and gas industry.
    The six-day campaign forced Royal Dutch Shell RDSA.L, the
    company worst hit, to warn it may not be able to meet
    contractual obligations on some shipments of crude from Nigeria.
    Ajumogobia said at an OPEC meeting in Vienna earlier this
    month, shortly before the militant attacks, that Nigeria was
    pumping 2.2 million bpd and that one million bpd were shut in.
    That output figure was slightly above the OPEC member’s
    target output and also higher than analysts’ assessments that
    Nigeria pumped 1.96 million bpd in August.
    (Reporting by Felix Onuah; Writing by Nick Tattersall, editing
    by Anthony Barker)

    Wed Sep 24 14:18:52 2008 -GMT

  18. 18
    Dman Says:

    CHK is sitting about one pixel above the 3-month downtrend line. When the bailout smoke clears and the senators have all caved in, I’d expect it to react to the recent news.

  19. 19
    zman Says:

    Re Nigerian production. So, 10% additional production is not a big deal in that guy’s eyes. Mmmmph.

    Dman – they thoughts exactly.

    CLR up 8%. May get another shot at an entry if the oil #s disappoint. Did not get enough the other day for my liking.

    Saw an analyst on CNBC early this morning saying the bailout was good for the dollar. She explained the rest of the world looks terrible (which we know) but that the $700 billion would not necessarily be inflationary as they would not spend it all at once. I kind of thought the currency not only reflects the inflation outlook but also the stability of the balance sheet of the country in question. Guess I’m mistaken.

  20. 20
    rlogan1301 Says:

    R: #18 – like how it is looking with all of the uncertainty out in the market…

  21. 21
    zman Says:

    Oil #s in 2 minutes. That’s a little rare of late but then note the greening of the broad market and you have the explanation.

  22. 22
    zman Says:

    crude: dn 1.5
    gasoline: down 5.9
    distillate: down 4.2

    those are big draws on the products side. Utilization was shockingly low at 66.7 which explains the smaller than expected crude draw.

    oil up $2.50 just prior to report

  23. 23
    Pete Says:

    Z,
    I would have thought that letting the off-shore drilling ban expire would’ve moved RIG more than it has, what is your take on it?

  24. 24
    zman Says:

    Distillate demand remains flat with prior week and elevated for this time of year.

    Gasoline demand eased a little further, down to last year but in line with seasonal trend.

    Crude imports remained low at 8.5 mm bopd

    Bottom line, total demand pretty weak but skewed by storms.

    Production came in as expected, light by about 800,000 bopd to pre storm levels.

  25. 25
    zman Says:

    Pete – I saw the headline and I would have thought so as well were it not for the current bills which limit the new areas for offshore drilling to 50 miles for some areas and beyond 100 miles offshore for all areas. A lot of leases in the eastern gulf are deepwater at less than 50 miles. Also the smaller targets lose their royalty forgiveness on their first barrels increment of barrels produced. So I guess while its good the ban expired the coming legislation takes the teeth out of that fact.

  26. 26
    Pete Says:

    Right, thanks

  27. 27
    zman Says:

    Pete – second thought. As it pertains to RIG, they are already pretty tied up for drilling now through 2010 and are adding longer contracts off the US and in int’l markets. NE has more exposure.

  28. 28
    zman Says:

    and by exposure I mean upside in the event there was an increase in drilling that needed rigs now as their fleet is not as fully contracted as RIG’s or, I believe, DO’s.

  29. 29
    sane Says:

    API

    Crude down 91K
    Gasoline down 2.1M
    Distillates down 1.7M

  30. 30
    Sambone Says:

    NEW YORK, Sept 24 (Reuters) – U.S. refined fuel stockpiles
    fell by more than expected last week as refinery utilization
    dropped to the lowest on record in the wake of Hurricane Ike,
    according to a U.S. government report on Wednesday.
    Crude stocks, meanwhile, dipped by less than expected
    thanks to the lower demand from refineries.

    HIGHLIGHTS FROM EIA REPORT (In million barrels):
    – Crude -1.5 (forecast -2.0)
    – Distillate -4.2 (forecast -1.5)
    – Gasoline -5.9 (forecast -4.0)

    Click here for the EIA status report nEIA000467
    Click here for the API status report nAPI000032

    ANALYST COMMENTS
    JIM RITTERBUSCH, PRESIDENT, RITTERBUSCH & ASSOCIATES, GALENA,
    ILLINOIS:
    “Main feature in the report in our view was the huge cut in
    refinery activity of almost 11 percent of capacity that dropped
    activity a full 20 percent below levels that existed at the end
    of August.
    “Obviously, last week’s limited refinery restart process
    didn’t show up in the numbers and this contributed to much
    lower product stock levels than we had anticipated. Crude
    stocks also fell below our ideas but the 1.5 million barrel
    draw in crude supply is somewhat at odds with the plunge in
    refinery activity.
    “The market’s tepid response to the figures thus far
    suggests a likely sharp reversal in these figures next week.
    Overall, main impact may fall on the gas cracks that are
    showing some firming following the data release.”

    TOM BENTZ, ANALYST, BNP PARIBAS COMMODITY FUTURES INC, NEW
    YORK:
    “The US refinery utilization is down 10.7 percent, but it
    seems the numbers are delayed. Since last week alot of
    refineries have started to return after the hurricanes.”

    Wed Sep 24 14:52:18 2008 -GMT

  31. 31
    zman Says:

    Thanks Sane – that crude number confirms the hit to refinery utilization. I was thinking the refiners were going to be back up more than they were as was the Street. Shork was right that they were down. Its a little odd on one hand as the pr’s coming out seemed to indicate more capacity back on line but just because they are back up does not mean they are taking crude in and putting product out the door. Next week we should see that.

    Oil up $1.20 as traders mull the numbers and return to watching testimony shortly. I think that is the weakest weekly demand YoY that I have yet seen for total products (will put that graph in tonight’s post) and maybe for gasoline as well.

    Note NG down now. Like I was saying, I don’t see a breakout but more of a return to stability.

  32. 32
    sane Says:

    I think a lot of these guys forget that a refinery doesn’t just come back on with a flick of a switch.

    “Crude stocks also fell below our ideas but the 1.5 million barrel draw in crude supply is somewhat at odds with the plunge in refinery activity.”

    I guess he forgot to look at the drop in imports and shut in production.

  33. 33
    Bleemus Says:

    U.S. refinery utilization at lowest rate on record, according to EIA – Reuters

    Reuters reports that U.S. refinery utilization fell 10.7 percentage points to 66.7 percent of capacity for the week ended Sept. 19, 2008, the lowest level ever recorded as refineries shut down ahead of Hurricane Ike, according to the EIA. That was lower than the 69.8 percent reached in 2005 after Hurricanes Katrina and Rita shuttered plants along the U.S. Gulf Coast.

  34. 34
    md Says:

    19290 total reduction in inventory would seem pretty bullish to me. They’re got to be shortages at the pump.
    SPR withdrwal of 1.4 Million.

    What do you attribute the drop in demand to. It’s 1000 barrels less than 2 weeks ago.

  35. 35
    zman Says:

    md – what 1,000 barrels are you referring to?

  36. 36
    zman Says:

    Oh total products? If you are referring to demand its gasoline coming off seasonally and also with the surge in pump prices.

  37. 37
    md Says:

    Sept 5 19784 Total Product supplied PD 1 week avg. vs.
    Sept.19 18784

    (Sept.12 19049)

  38. 38
    zman Says:

    I don’t see the report as particularly bullish or bearish. I see pent up demand for crude as refiners come back on line this week and next which will take barrels but imports and production should be on the rise too.

    Vs 2 weeks ago I don’t if that’s gasoline or not, we have a little rise in the supply of it. I don’t find a heck of a lot of use in the total products number, at least not as much in looking at all of them on a demand, supply and inventories basis. Low inventories can support higher prices in a low demand environment better than strong demand can in a high inventory environment. This is another record low for gasoline stocks and a continuation of the recent decline in distillates which is putting it low to where it should be going into winter. This should be a pretty good report for refiners but they seem to be taking a small breather today, only up a percent of two or three.

  39. 39
    zman Says:

    Odd separatist move in NFX today, down 2% with most others up slightly and with no recent run up to be selling. This looks to me more like more fund selling pre quarter end. Volumes look light however and I don’t see in blocks.

  40. 40
    Fiveanddimer Says:

    Jim Grant’s recent piece in the NY Times about the fate of the dollar is worth reading.
    http://www.nytimes.com/2008/09/24/opinion/24grant.html

  41. 41
    rlogan1301 Says:

    i get the impression that there is alot of fund selling happening and that they are doing it in light order.

  42. 42
    Fiveanddimer Says:

    Z — I’ve tried to post a link to Jim Grant’s recent piece in the NY Times concerning the dollar, but your system seems to ignore my post. Is it me?

  43. 43
    zman Says:

    Five – there it is in 40. Sometimes the comment spam block does not like links… I think it is biased against some publishers. If you ever comment here and don’t see it pop up just yell at me.

  44. 44
    Fiveanddimer Says:

    For anyone interested, the name of Grant’s op-ed piece is “The Buck Stopped Then.” If you Google that title, you’ll get the link. I think it’s a good summary of the corner into which our Government and the Fed have painted the dollar.

  45. 45
    Fiveanddimer Says:

    Z — thanks.

  46. 46
    zman Says:

    Thanks for that read Five. Jim’s a smart guy. His conclusion left me wanting to know what he thought will happen to the $ but it was pretty up in the air…which parallels this market nicely.

  47. 47
    zman Says:

    I love it when the congressman asking questions of Ben says “we’re being asked to walk away from all the principals we live by and while we understand the magnitude of the financial crisis we face today…” and at that point Ben looked up like “somebody shoot me”

  48. 48
    md Says:

    CLR- How much of an issue is bringing bakken product to market

  49. 49
    zman Says:

    md – there will be a bottleneck there during the 4Q in some parts of the basin. They can and do truck volumes out of the basin now. Pipelines will get built, timing and capacity I am not sure about yet as last I saw this has not yet been spelled out. So most of the oil will get to market, albeit at lower margins (trucking is expensive) until the infrastructure is built out.

  50. 50
    zman Says:

    Oil tipping into red. Continuing to hold my few positions but if it gets ugly I will peel out of those DUG calls. Had planned to hold them a little longer into tomorrow.

  51. 51
    rlogan1301 Says:

    still liking chk oct42.5 calls?

  52. 52
    zman Says:

    Still holding them, not buying more right now.

  53. 53
    Sambone Says:

    Somebody please explain this to me.

    12:03 (Dow Jones) IBM joins list of stocks that can’t be shorted, prompting
    some questioning from analysts and industry watchers. “IBM’s a real
    head-scratcher,” Bill King, chief market strategist at M. Ramsey King
    Securities, tells MarketBeat. “They’re not on the radar at all for this.
    There’s no problem as far as we know with IBM as far as financing or short
    interest or people pounding that.” IBM spokesman tells blog IBM qualifies
    because one of its subsidiaries meets the definition of a bank, savings
    association or registered broker/dealer. Nevertheless, blog notes just 1.1% of
    IBM’s float was being shorted as of Sept. 10. IBM up 1.2% at $116.84. (SMR)

  54. 54
    Sambone Says:

    IBADAN, Nigeria (Dow Jones)–A local branch of the National Union of Petroleum
    and Natural Gas Workers, or NUPENG, in Nigeria said Wednesday that about
    700,000 barrels of oil a day produced by Chevron Nigeria Ltd., a local unit of
    U.S. oil major Chevron Corp. (CVX), could be shut-in if the union launched a
    strike over labor issues.
    Bernard Ugbi, NUPENG’s assistant general secretary in the southern oil city of
    Warri, said Chevron has been given until Oct. 1 to resolve issues on union
    contractors working at all CNL locations in the country, and “a strike will
    begin if Chevron fails to settle the contract dispute by that date.
    “The impact of the strike will be great, there will be a loss of 700,000
    barrels a day produced by Chevron,” Ugbi told Dow Jones.
    He said NUPENG opposed the employment of its members as contractors, adding
    the 3,000-5,000 contracted staff were doing the same work as Chevron staff that
    qualified for pensions and other benefits, adding “we want the same for the
    contract workers.
    “We have tabled our grievances before the Chevron management,” Ugbi told Dow
    Jones Newswires. “As at now, there is no word from Chevron.”
    Ugbi said NUPENG at the national level will join a strike launched by the
    Warri chapter of the union.
    “We are expecting an invitation from Chevron to discuss the issues,” but
    NUPENG will begin a strike if the issues remained unresolved by Oct. 1, he
    said.
    A Chevron spokesman in Nigeria contacted by Dow Jones declined to comment.

    -By Obafemi Oredein, Dow Jones Newswires

    Dow Jones Newswires
    09-24-08 1209ET

  55. 55
    zman Says:

    Sam – has GE joined the list yet?

    Thanks for the headsup on the union, those guys usually talk it out without a strike unlike the Brazilian unions who walk, then talk.

  56. 56
    Sambone Says:

    Yes, but that was expected.

  57. 57
    zman Says:

    True

    Ok, NFX down 5%, anybody see a comment on it?

  58. 58
    sting Says:

    Can’t get any DUG option quotes on Ameritrade or Fidelity. They say itis a data feed problem from the floor. Anyone else having trouble?

  59. 59
    tomdavis12 Says:

    Z: If you assume crude stays above $95 it seems to me the sweet spot for your sectors is offshore drillers. RIG, DO & NE. Based on cash flow, risk, outlook YAHDA YAHDA. I also think something has to be in place from shotgun Hank. Stability for more than two days in a row will help. Do you somewhat agree?

  60. 60
    zman Says:

    Norway’s oil fund apparently took a bath bottom fishing Lehman stock in the last days it was around. Good idea for a country to be day trading when they are having trouble investing enough to keep production from declining.

  61. 61
    zman Says:

    Sting – I was but they seem to be pricing now but with exaggerated spreads.

    Tom – yep, I do. We need some stability in both prices and markets before I get all go-go about the stocks again.

  62. 62
    zman Says:

    Oil approaching LOD, down a buck. Heating oil still up. Stocks like watching paint dry.

  63. 63
    zman Says:

    Imports were also lower than during Katrina, this was one of the lowest weeks for imports in the last 10 years. Kind of interesting since we have not heard much about the LOOP having lingering problems receiving crude.

  64. 64
    tater Says:

    Just getting up to snuff on the board. What I got from the discussion about refiners is that the numbers this morning were bullish but there is trepidation about next week numbers not being so good (for refiners) because there will be “catch-up” getting done.
    I am a bit confused as I would think that “refiners” doesn’t really exist and you have to look at individual companies to get a good read on their own particularized situation. Have time to dumb it down for me?

  65. 65
    Dman Says:

    TSO thinking about making a run for it

  66. 66
    Alhambra Says:

    Tater, could you please comment on the charts for RIG (evening star?), PBR and OXY? Thanks.

  67. 67
    zman Says:

    When I say refiners I mean the independent refiners in the U.S., the ones who pretty much just take in crude and send out products (gasoline, heating, asphalt etc). When I say the numbers were generally good for them all I’m saying is that cracks should rally, on average, given the numbers relative to expectations. Crude’s number was below (bearish for crude) while both products saw much bigger than expected draws. So far oil is off a little as is gasoline while the biggest surprise in terms of numbers (distillates) is up on the day. As far as the individual situations go, that is true. This is why I’m long TSO and would consider FTO. They have no Gulf exposure in terms of refining capacity so you know they are not one of the ones without power sitting idle but that they are taking advantage of the elevated prices as inventories continue to slide. So they have higher throughput than say VLO as a percent of their total capacity. FTO is a little different and I’m not in but that’s mostly an issue of the options not trading that well and me not feeling like owning the common just yet. They are going to have a good 3Q and I’m waiting to buy in closer to the date. They also are not enjoying the fatter spreads we saw over the summer between the heavy crudes (which they process more of than most refiners) and the lighter, more expensive crudes.

  68. 68
    tater Says:

    Thank you. Hand holding much appreciated. Clears up a couple things that I have no clue about.

  69. 69
    tater Says:

    Alhambra, I will get on that now. I will let you know when I am done. I have roofers over today and for some reason they need to ask me questions. Like I know roofing? I thought that was why I called you?

  70. 70
    zman Says:

    Tater – no problem. It was a oversimplification on my part and needed clarification on my part. I used to have to give a thumbs up or thumbs down for them relative to the numbers for the quick trade on the old radio show and its a bad habit.

    NG down 31 cents now…that’s probably enough. CHK falling with an eye on gas. Hmmmm. Analysts may have liked the cuts by them but are not exactly pounding the table on NG or CHK. May buy a little more soon but hard to get excited about much given the overall tenor of the market.

  71. 71
    mahout Says:

    Z,

    Did you hear Ben when he responded to why is it so much ($700 B) you are asking for? He said the assets they will be in the market buying and trying to help create a fair market value for total over $14 TRILLION.

    $700B doesn’t seem like a lot compared to the enormous pool of ABS’s, CDO’s, CLO’s, and CDS’s they will be targeting.
    These structured collateralized instruments layered into tranches are very difficult to value anyway.

    My view: If they don’t do it right, almost every stock on the stock page will head down in a serious plunge.

    Personally, I view this situation with cosiderable alarm and have suspended what little buying I was doing and have concentrated on raising cash.

  72. 72
    zman Says:

    Mahout – I too am pretty concerned. Worst hits I’ve taken while trading have come from getting macked by seemingly extraneous, broad market issues. I try to keep at least half an eye on this stuff usually and now a whole eye.

    Note that the refiners are edging higher as the loss in crude outpaces the losses in products on a percentage basis. TSO keeps having trouble with this 18.75 to 19 level.

  73. 73
    Jason Says:

    A little off subject – I have some SDS (S&P Ultrashort) as a hedge against long positions. The SPX is almost even, yet SDS is down nearly 6%. Wondering if anyone has any insight.

  74. 74
    Fred Says:

    Z – Quote from axelrod608, on Seekingalpha, that sums it up: “Pouring more money into the US financial sector at this point is like pouring more liquor into the punchbowl after half the guests have already passed out. It makes no economic sense. No logical sense. No political sense. But it would preserve the jobs of thousands of idiot financiers who created this mess.”

  75. 75
    zman Says:

    Fred – if the market seizes which is the real fear a lot more people get hurt than just bankers.

  76. 76
    zman Says:

    Jason – one second on your last.

  77. 77
    Fred Says:

    Z – Yeah, if we believe but how many times can they cry WMD(wolf) or we need $700B by Friday? Give me a break!

  78. 78
    zman Says:

    the T-bill hit 0% last week. Note return, no borrowing power. No borrowing power and the machine shuts down. Not going to argue whether that is good or bad though, lol.

    TSO playing with 19 plus now. Not getting too excited until it takes out the recent high at 19.60 for a close.

  79. 79
    zman Says:

    Jason – that’s odd, you’d think you’d be flat too but its not a perfect hedge. They do use derivatives in the fund which could be burning the return relative to the underlying. That’s just a guess but it seems likely they have one component burning them (you) and I would bet its a swap or something similar that has big leverage. Depending on the time frame and management style, they could also be more heavily weighted to some financials which sharply reverse in the last few days. Again, just guessing.

  80. 80
    zman Says:

    Paulson is getting ticked off in testimony after a congressman called it a bailout for a Wall Street party that the common citizen was not invited to.

  81. 81
    antrimshale74 Says:

    Passing the Paulson proposal is a no-brainer times 50,000. It won’t be perfect, but doing nothing would be catastrophic. Will my Congressman be volunteering at the bread lines if he opposes this? I called the doofus today and he doesn’t have an opinion!! What the heck is that all about? This proposal has been out there for five days.

  82. 82
    Jason Says:

    Thanks for 79, Z. It’s depressing when your hedge malfunctions.

  83. 83
    Fiveanddimer Says:

    Regarding the bailout, I have a difficult time believing Bernanke and Paulson. These are the two that repeatedly told us over the past year that the problems in the banking system were under control and contained. As recently as a week ago, Paulson told Congress that he thought everything would be OK. Now suddently the problem is so bad that Congress should pass bailout legislation without even taking the time to dutifully analyze the problem. Sounds alot like the bums rush we got on the Patriot Act. So my problem with the bailout is basically this: whom should be believe, the people that either didn’t see this coming through incompetence (or who saw it coming but consistently lied about the gravity of the situation), or someone like a Ron Paul, who has been warning about this delimma for years and who calls the bailout unamerican and an atrocity?

  84. 84
    zman Says:

    Here ya on that Jason. Watching my DUG do the same, at least when I look at a day like today. If I had to say thums up or down on the energy stocks today, I would say mixed at best. DIG and DUG not perfect opposites and that big slug of XOM in the DUG short portfolio runs counter to the group moves too much for me. So it only helps against mega red days.

  85. 85
    Sambone Says:

    By Ian Talley
    Of DOW JONES NEWSWIRES

    WASHINGTON (Dow Jones)–“Big chunks” of U.S. Gulf Coast refining capacity
    currently offline following hurricane strikes in the energy-rich region are
    expected to be back online by the weekend, a senior government energy official
    said Wednesday.
    The Department of Energy said around six refineries in the Port Arthur, and
    Texas City, Texas areas representing around 1.7 million barrels a day of
    refining capacity remain offline.
    “According to the charts we look at, by this weekend we’ll start to get big
    chunks of refining back online,” Kevin Kolevar, the Assistant Secretary for
    Electricity Delivery and Energy Reliability told Dow Jones Newswires on the
    sidelines of a conference here.
    The refineries are owned by ExxonMobil (XOM), Total (TOT), Motiva and Valero
    Energy Corp. (VLO). Motiva’s refinery is a joint venture owned by Royald Dutch
    Shell (RDSA.LN) and Saudi Aramco.
    Kolevar said production and refining capacity was returning to service in the
    expected time frame.
    “Most of the refineries in the Houston and Texas City areas are in restart
    mode right now,” he said. He added that while most of the Corpus Christi, Texas
    and Louisiana refineries were back online, the Port Arthur, Texas, plants “are
    going to take longer coming back because of the high winds of the storm.”
    Kolevar said offshore production was starting to ramp up as well.
    “It takes a long time to repopulate those rigs, to make sure that everything
    is not damaged and capable of operating normally,” he said.
    Around 65% of natural gas and 76% of crude oil remains shut in in the region.
    Crude oil inputs to refineries fell 13%, or 1.7 million barrels to 11.5
    million, in the week following the second hurricane strike on the Gulf Coast
    this month, the lowest crude oil input level since March 21, 1986, according to
    Energy Information Administration data.
    Nationwide, refineries processed at 66.7% of total capacity in the week ending
    Sept. 19. Prior to the hurricanes, refineries were processing 15.3 million
    barrels a day of crude, and operating at 88.7% of capacity.
    Crude input into the Gulf Coast refineries plunged 36%, or nearly 2 million
    barrels a day to 3.5 million barrels a day, the lowest level on EIA records.

    -By Ian Talley, Dow Jones Newswires

    Dow Jones Newswires
    09-24-08 1415ET

  86. 86
    Fred Says:

    Five – agreed it’s more a credibility thing then the money; reminds me of spendthrift children.

  87. 87
    tater Says:

    Alhambra, got that done.

  88. 88
    zman Says:

    Tater – thanks from me too on that.

  89. 89
    Sambone Says:

    I guess everybody saw that DUG is paying out $1.80393 on Sept. 30. Went Ex today.

  90. 90
    Alhambra Says:

    Thanks

  91. 91
    zman Says:

    Thanks Sam.

  92. 92
    tater Says:

    Two books that everybody should read, though I have to say it will seriously make your stomach turn:

    Financial Armageddon – Panzner

    Empire of Debt – Nonner and Wiggin

  93. 93
    zman Says:

    I would add Freakonomics to that. It will make you question all the relationships you think you understand.

  94. 94
    Nicky Says:

    Afternoon all. 1183 needs to hold on the spx or selling could acclerate. Presuming it does hold then a low should be in place by no later than tomorrow morning and we then rally into the 30th.

    I am sure the bailout will get done in some shape or form. That said it ain’t gonna work. Why on earth would any trust these guys to get it right when they didn’t even see it coming!

    This will give the market a temporary fix in the run up to the elections. Rick Santelli said earlier that some broker friend of his had had the richest person in NY State on the phone saying they better do this bailout or else. This does nothing for the man in the street but it preserves the remaining wealth of the wealthy who stand to get absolutely wiped out if the stock market crashes. Imagine the lobbying that must be going on!

    But from what I can see the markets have to be allowed to work freely – in the end the result is always the same even if the intervention just delays it. ie we are just delaying falling into the abyss.

  95. 95
    zman Says:

    Afternoon Nicky, thanks for the levels.

  96. 96
    Fred Says:

    Nicky – yikes, now the fed is in the business of propping up the stock market.

  97. 97
    Sambone Says:

    My Bible;

    “The Intelligent Investor” Benjamin Graham

  98. 98
    sane Says:

    “I believe that banking institutions are more dangerous to our liberties than standing armies.”
    – Thomas Jefferson.

  99. 99
    john11 Says:

    Jason re 73 ..SDS ex dividend today.

  100. 100
    Fiveanddimer Says:

    Nicky — I reluctantly agree, the bailout deal will get done. The president will be on the tube tonight to support passage of the bailout bill. The american sheeple and the Congress will go along.

  101. 101
    Jason Says:

    Re 99 – Thanks, john11. Would that help or hurt a Dec call option holder?

  102. 102
    Nicky Says:

    The next run up in the market (2C) I believe could be the short of the century – time for a rally is getting shorter and shorter – end of October/early November – target area is 12000 – 12500. When its done the target area on the downside is below 8000.

    CNBC breaking news of the working proposal of the bailout – phew that was close – again!

  103. 103
    zman Says:

    Wow, 100 point rally in lat five minutes…what’s with that?

  104. 104
    Nicky Says:

    Bailout news….

  105. 105
    sting Says:

    Zman….re:50….how in the world can we close DUG positions at these bid/ask spreads and make a buck? This is ridiculous.

  106. 106
    zman Says:

    Sting – spreads should contract after today. Market there has been weird all day, presumably due to going x-div.

  107. 107
    Dman Says:

    Hard-hitting article on the bailout by Oil Drum contributor “Jerome a Paris” (who is a Paris based energy investment banker):

    http://europe.theoildrum.com/node/4563#more

    Summary: the real purpose of the bailout is to recapitalize the Fed without actually admitting that the Fed is almost broke. Doing do via debt is an attempt to reduce the inflationary impact versus the traditional central bank approach of just printing money.

  108. 108
    mahout Says:

    Five and all,

    Marking to market which means marking to the price of someone else’s desperate sales of a small amount of these toxic instruments is a nightmare for the banks.
    It is driving them to the wall. I believe this protocol needs to be adjusted to reality. These prices do not necessarily represent the true value of these instruments, especially on a longer term view. If I were King, I would allow banks to write these instruments down only 1% a month or maybe 1/2 % a month as long as current fire-sale prices continue to trade lower than their book value. This would give the banks time to shore up their balance sheets by reducing loans and other means.
    It would give them a chance to work their way out of a deadly situation.

  109. 109
    tater Says:

    mahout, the man who would be King. (If you capitalize it, does it make you a deity as well)?
    I like your idea in the practical sense, but Kings don’t have to be practical. They can just get’r done. How about at least a couple of “off with their heads” to please to shivering masses?

    I am suddenly worried as it has occurred to me that after reading the calamity books that I listed previously, I had concluded that the solution for me personally was to just go very short when the time comes. Nicky alluded to this earlier as well. But now, duh, “they’ will make it illegal to short.

    Can’t just hole up with my gold, because “they” made it illegal to own gold just a couple decades ago. Whoops!

    Maybe I’ll just start making beer in my basement. Always going to be a market for that.

  110. 110
    mahout Says:

    Dear Tater,

    Thank you for calling it to my attention.
    That was a slip of the pen. It should be lower case, that is: king. But I really wouldn’t want to be king, too many public appearances, and official duties such as knighting people and sailing on royal yachts and other tiresome stuff. I would just rather be in the local pool hall (free of smoke now) with my cronies where we have a lot of fun trying to whup each other. The “Off with their heads!” part does seem intriging though.
    But I have decided to be a man of mercy so I wouldn’t be any good at that either. I like your idea of making beer in your basement. I would like to help you by suggesting a good brand name for it but for the life of me I cannot think of anything better than “Tater Beer”. It would be a huge success if we can get an IPO going.

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