29
Sep

Piecemeal Monday

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Emergency Economic Stabilization Act of 2008: The draft legislation would authorize $250 billion immediately, with another $100 billion upon presidential certification. A further $350 billion would also be available subject to congressional approval. A vote from at least the House is expected later today. This is exactly the kind of piecemeal passage that Paulson warned against as being not enough to send an overwhelming message to the markets. And futures are sharply lower on the news. Perhaps Ben will try to stimulate with a 50 basis point cut now.  I continue to be glad to hold the (DUG) calls but everything else is going to suffer at the open. 

 

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Stuff We Care About Today - Drybulks, not yet.
  4. Odds & Ends

Holdings Watch: No sales were made last week and the Wiki Tab is updated.

Commodity Watch:

Crude oil rose 4% last week to close at $106.89. This morning crude is falling $6 with a jump in the dollar as the bailout plan is scaled back and a number of banks in Europe fail.

  • Canada May Export Less Oil Sand Sourced Oil. Alberta has said it is considering limiting exports to countries that sign the same green initiatives Canada is willing to sign.
  • Shell Notes Refining Capacity Along Gulf Coast On The Rise: Shell says it is running at 1 mm bpd out of a gulf coast capacity of 1.2 mm bpd as of this morning. Other refiners have reported coming back onstream in the last week as well.

Natural Gas fell 3% last week to close at $7.63 on the November contract. The 12 month strip, a more effective gauge of sentiment and producer's near term profits closed at $8.125. Gas looks like its "basing" out.  This morning gas is trading off a dime.

  • Weather Watch: 
    • Last week: 29 CDD (about normal but well below last year) and 16 HDDs (well below normal for the weak).
    • This week's forecast: nothing to write home about on the demand front although it should turn cooler than normal (just not a lot) for the eastern half of the U.S.
  • Tropics Watch: Not much in the way of production impacting tropical activity although the possibility exists that an area of "disturbed weather" southwest of Florida could develop. Hurricane season looks to be over well ahead of schedule. Its actually too early to say but in the past this early lull in activity has usually signaled  quick end to the threat for the Gulf of Mexico. 

Gas Directed Rig Count - Gas rig counts counts look to rolling over in the fact of lower prices. We will continue to watch closely as this will be supportive of gas prices. Well permit activity is also down in a number of regions.

Stuff We Care About Today Watch

(CLNE) Adds CNG Fueling Stations at Atlanta and OKC Airports. See the press release here.

 

Dry Bulks Continue To Sink.

  • The prospect of  a global recession and a slowing Asia has hit the group extremely hard.
  • High flying names like (DRYS) are off nearly two-thirds from Spring 2008 peaks.
  • Day rates continue to fall rapidly and to new recent lows. Rates for all three major dry bulk classes (Capesize, Panamax and Handy/Supramax are at levels not seen since the end of 2006.
  • Panamax rates have actually fallen below the smaller Handy class and Capital Link Shipping is reporting Pana cargoes in the Atlantic have "completely dried up" while in Asia, China continues to draw down its stock piles of ore. They point to a need for higher quality Brazilian ore in China at some point (once China runs low) but the timing of that shift remains uncertain.
  • The tightening of credit is making it harder to get new ships built which may be a good thing since over capacity has been a worry for some time now.
  • (EXM) warned last week that "banks were no longer lending to fund trade, and cargoes were being left stranded on docks even though the demand for goods is there"
  • While the group looks cheap I won't bit until the market stabilizes as groups like this are going to be extremely volatile (the average stock fell about 15% last week). 

 

Odds & Ends

Analyst Watch: Goldman cuts (COP) to Neutral, raises (MRO) to Buy. (WGO) and (THO) cut to Underperform at Baird (come now, who is buying these things?!...and why buy a new one when the used market has seen itself savagely devalued).

 

 

148 Responses to “Piecemeal Monday”

  1. 1
    Sambone Says:

    Wow, what a ride!

  2. 2
    Dman Says:

    Todd Harrison was saying last week that his biggest concern was the unanimity in market watchers that passage of the plan would lead to a rally, or at least stabilization. His question was “what of it doesn’t?” and suggested that such a failure would perhaps finally lead to capitulation with the VIX (I think that was the one he mentioned) far exceeding the 40 reading from last week.

    Personally I think the $700B is only part of the medicine required. The rate cut Z suggests is certainly another necessity. What’s he waiting for?

  3. 3
    Dman Says:

    Just realized my last sentence could be read as “what is Z waiting for?” but of course I meant Ben.

  4. 4
    zman Says:

    Maybe a fun ride if you’re not on it.

    Knew what you meant D. If it were up to me I’d have quit his job by now.

  5. 5
    zman Says:

    Merrill starts CHK at Buy with a $58 price target. Pretty smart to go ahead an initiate on a valuation doesn’t matter, get it while it gets thrown out the window day.

  6. 6
    zman Says:

    Irritating not to be able to get quotes on the DUG calls 10 minutes into the session. DUG up 9%.

  7. 7
    Sambone Says:

    By Gregory Meyer
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Crude oil futures lost more than $5 a barrel Monday as
    the U.S.’s agreement on a historic financial bailout failed to stem fears
    demand growth will sputter along with the economy.
    Light, sweet crude for November delivery was recently down $5.52, or 5.2%, at
    $101.37 a barrel on the New York Mercantile Exchange. Brent crude on the ICE
    Futures exchange fell $4.81 to $98.73 a barrel.
    Oil fell even as the White House and congressional leaders agreed on a
    $700-billion deal to buy mortgage assets in order to ease the crisis seizing
    credit markets. Whatever the plan’s merits, oil traders didn’t see it
    forestalling an economic slowdown that could retard growth in oil consumption.
    “This is some serious carnage in the price of oil,” said Peter Donovan, vice
    president at Vantage Trading on the Nymex floor. “It doesn’t make 100% sense,
    because standard thinking last week was that if the deal does go through, the
    price of oil goes up.”
    “Certainly, the oil market is a good indicator of perceived prospects for the
    overall economy, and clearly it’s not too optimistic here this Monday,” Donovan
    said.
    Oil markets have seesawed this month as focus shifts between pressure on
    supply – in the form of hurricanes, an output cut from the Organization of
    Petroleum Exporting Countries and unrest in Nigeria – and predictions of
    flagging demand growth.
    The dollar’s movements against rival currencies have also fed into the market,
    with a stronger greenback tending to soften dollar-denominated commodities’
    attraction as a currency hedge. On Monday, the euro was at $1.4381, losing
    ground from $1.4614 late Friday on the U.S. bailout plan’s progress.
    On Monday, demand growth concerns were paramount.
    “Despite the risk of a weaker U.S. dollar boosting prices, we believe a
    deteriorating economic and financial environment will drive global oil demand
    growth lower and pressure oil prices downward into 2009,” Deutsche Bank
    analysts wrote Monday. The German bank revised its crude price outlook to
    $92.50 a barrel next year, from $120.
    Iran’s OPEC governor said Monday he expected crude demand to react
    “positively” from the U.S. bailout plan.
    “If they are going to inject $700 billion in the U.S. financial sector then it
    will be a factor in increasing demand. Then the demand performance could be
    better than expected,” Mohammad Ali Khatibi told Dow Jones Newswires in a
    telephone interview.
    Front-month October reformulated gasoline blendstock, or RBOB, fell 15.36
    cents, or 5.8% to $2.5115 a gallon. October heating oil fell 13.63 cents, or
    4.6%, to $2.8586 a gallon.

    -By Gregory Meyer, Dow Jones Newswires Dow Jones Newswires
    09-29-08 0938ET

  8. 8
    zman Says:

    If you caught the Paulson interview on ABC over the weekend you saw his main focus. Sitting behind his desk, a quad screen bloomberg. Main chart looked like the S&P 500. You know he and Ben pay attention to the perception of what they do via the indexes. So, given the S&P’s chart reaction to the news of the current form of the bailout, I would think that he and Ben are talking rate cut to boost the market right now. I’m not sure it will help but with oil and other commodities off and the IEA saying they see oil easing in the next few months due to a weak global economy I think inflation should be further from their minds which is really the only thing keeping a rate cut at bay. Just thinking out loud. DUG up 10%.

  9. 9
    zman Says:

    CHK and many others now below where they began the year.

  10. 10
    tater Says:

    Did I hear that right just now on CNBC? They are going to prop up foreign banks? There you go, that’s the connection to the dollar (and why it’s not toileting). (Yet).

  11. 11
    rlogan1301 Says:

    rate cut has to happen..markets in no way like the installment plan approach

  12. 12
    zman Says:

    So you hire smart, brainiac guys to run the fed and the treasury but when they tell you its time to act decisively, you listen to voters who have no idea what the problem is or how to fix it, only that Wall Street is evil and doesn’t deserve anything but the pillory. Of course the market hates the installment plan approach. Paulson said it won’t work but Congress doesn’t buy it and would rather quote the number of nays to yeahs they are getting on their phone banks. Very sad. DUG up 12%.

  13. 13
    antrimshale74 Says:

    We should at least call our representatives this morning and express our opinion in favor of the plan. I did so about thirty minutes ago.

  14. 14
    zman Says:

    Way to go Antrim!

    CHK down 11%, HK in the teens now, CLR down 12%. These are the only E&P calls I’m long now. Unreal. Full on panic in the group.

  15. 15
    zman Says:

    drybulks getting crushed for 10 to 15%. I’d say people aren’t buying a recovery based on the current bailout plan, lol.

  16. 16
    Dman Says:

    Z – #12 the problem is how does Congress evaluate the brainiac credibility? The can’t judge the issue themselves, so all they can do is evaluate the brainiacs track record. That’s where the trouble starts: Paulson saying everything is fine for 18 months and out of nowhere he starts talking the apocalypse. As for Ben, enough said in your #4. So Congress has no idea if they are being scammed or not and they decide to hurry-up slowly. Actually, I saw an article describing the behind-the-scenes there and basically is is terror and panic. Terror that it might really be the apocalype and panic at being blamed for blowing $700B. They could easily end up with both: they blow the $700B and the market still collapses.

    Who knows, if it gets really nasty they may even decide they have to stay at work instead of the scheduled break. Nah, just kididng.

  17. 17
    tomdavis12 Says:

    Z: Thoughts from the crystal ball. If the western world does not end as we know it, where will money go? Say the VIX @ 40 is close to capitulation. With EOG raising money with their bond offering, safe to say our space is worried about commercial paper being issued. NBR did not do well when rigs were being added, not likely to be the best when we come back out. So do you think companies with the least leverage are the likely beneficiaries? I’m not looking for a bottom call, maybe just where the least risk is going forward.

  18. 18
    zman Says:

    I hear ya D. But when they come to you and say now is the time to panic, maybe you should listen. Or maybe that nobody in his right mind would come with that kind of request if it were not that serious. Or maybe if they turn on their Bloombergs. Just sent my senators same thoughts. DUG up 13% now.

  19. 19
    zman Says:

    Tom – I’ve been thinking about that all weekend. Thoughts still a little jumbled right now. Will have some comments by sector in the Tuesday post.

    Solar = ouch, coal = ouch.

    Fair warning, I’m going to sell my DUG calls around here as they are not that great a hedge (too much XOM).

  20. 20
    mahout Says:

    Z #14,

    Unreal is the right word. We had better have that rate cut now. The whole market seems like it’s on the verge of runaway panic to me with banks failing in England.
    If we can get thru this, what great bargains we will find in numerous excellent names that are dropping big digits this morning such as CHK. After all, do they have an enormous reservoir of wealth in the HS or don’t they? They do. It’s a fact! Do they have terrific cash flow? Yes, they do! Will that enable them to get any financing they need? I believe it certainly will.
    Frankly, it’s all I can do to keep from buying it heavy below $40. But, not in this dangerous market!

    I have to go out for a while. I hope there will still be a market when I get back to the PC. Be careful everybody.

  21. 21
    tater Says:

    Z, isn’t one of your senators Ron Paul? Wish I had one like that. Don’t think he’s in the camp of thinking that the answer to too much leverage in the system is to create more leverage. Sorry, but I very respectfully disagree with you guys.

  22. 22
    zman Says:

    ZTRADE: Out DUG October $40 calls for $4.30, up 79%.

  23. 23
    zman Says:

    Agreed Mahout.

  24. 24
    zman Says:

    Tater – he’s a congressman next door. Interesting guy, agree with a lot of what he says and you are right, he hates the idea of a “bailout”. But he also believes in no Fed and I think no Treasury and since we have the system we have, its pretty hard to get from reality to his ideals without scrapping the current financial system. So unless you put everything in some sort on currency that won’t be impacted by a complete collapse of the markets I’m not sure how to survive his “solution”.

  25. 25
    Garyinhou Says:

    Yep – R. Paul be representin Galveston from his home base in Surfside TX. Believes in no fed inc tax, hard currency, no fed, no war on drugs, dropping out of u.n., dropping out of nato, basing all u.s. military on u.s. soil, is against patriot act, against no child left behind..

    Basically he is the insane uncle (and former ob/gyn) who you occassionally agree with until you realize he is crazy.

    He is against entitlements for his own district for ike help… so he is consistent

  26. 26
    zman Says:

    Gary – Thanks for the laugh. Let me repeat, I like the guy and I’m no fan of the U.N. and I do appreciate consistency.

    But I also see a period where everyone lives by a camp fire with canned beans gripping a shot gun during the transition phase of his plan.

  27. 27
    Fiveanddimer Says:

    Re 21. Tater, once again I find myself agreeing with you. If we hadn’t had all this Fed-created leverage in the financial system to begin with, we would not be talking about a $700 billion bailout. Not that we have painted ourselves into a corner, maybe we had to have some kind of bailout. But it does smack of a drug addict getting another fix. Hardly the solution to the problem.

  28. 28
    zman Says:

    So what do you guys think will be the reaction if the bill does not pass the Rouse later? Saw a rep on CNBC earlier saying he was voting against the very flawed bill. Since we are down on the look of the new plan maybe if it gets killed we pop, lol?

    Normally I would be all over something like a down 10% move in CHK but today I wait. This market will bid its time until the vote.

    Tater and Five. By the way, know that my opinion on this stuff is no better and maybe not as good as anyone else’s and I’m happy to have you disagree with me. I’m used to it being married and all.

  29. 29
    JSS Says:

    For any on this board who actually have mutual fund-based accounts for IRAs or otherwise, if you have accounts that are somewhat balanced/diversified as to international/domestic growth-type funds, which are probably down 20-25% for the year what are you doing? My fund manager says stay cool and dont convert to cash. Would appreciate all opinions.

  30. 30
    bill Says:

    drybulk industry needs credit and will credit be there?

    The crash in rates means older bulkers will get scrapped, tanker conversions wont happen, and all those orders will not be financed and delivered.

    2 main drivers in bulk trade..iron ore and coal.

    Steel mills are slowing down cutting demand therefore affecting rates.

    Tops has 6 new ships to finance and funding wont be there so tops holders should hope the 6 dollar deal goes thru

  31. 31
    Fiveanddimer Says:

    Z — personally, I’m very conflicted about this bailout. In theory, I’m very much against it. In practice, if may be the best short-term action to stablize the markets. But ultimately, piling leverage and credit on top of leverage and credit will be death for the dollar. If and when that happens, the US becomes a third world country. That’s why I think everyone should have some gold buried in the backyard, or where ever. I hope we’ll never need it, but at this point I’m not optimistic.

  32. 32
    Sambone Says:

    By Gregory Meyer
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Crude oil futures fell below the symbolic $100 level
    Monday as the tentative agreement in the U.S. on a historic financial bailout
    failed to stem fears demand growth will sputter along with the economy.
    Light, sweet crude for November delivery was recently down $6.68, or 6.3%, at
    $100.21 a barrel on the New York Mercantile Exchange, after dropping as low as
    $99.80. Brent crude on the ICE Futures exchange fell $5.91 to $97.63 a barrel.
    Oil fell after the White House and congressional leaders agreed on a
    $700-billion deal to buy mortgage assets in order to ease the crisis seizing
    credit markets. A vote on the deal is expected in the House Monday. Whatever
    the plan’s merits, oil traders didn’t see it forestalling an economic slowdown
    that could retard growth in oil consumption.
    Last week, crude oil was buoyed by talks on the bailout package. After U.S.
    leaders worked out a deal over the weekend, Monday’s down move is a “classic
    ‘sell the news’ reaction,” Citi Futures Perspective energy analyst Tim Evans
    said in a note.
    “And we don’t really see this as having all that much impact on petroleum
    demand,” Evans added. “It may improve the worst-case scenario to some degree,
    but it will not spark an immediate change in consumer demand for gasoline or
    other fuels.”
    Traders were still surprised by the magnitude of Monday’s selloff.
    “This is some serious carnage in the price of oil,” said Peter Donovan, vice
    president at Vantage Trading on the Nymex floor. “It doesn’t make 100% sense,
    because standard thinking last week was that if the deal does go through, the
    price of oil goes up.”
    “Certainly, the oil market is a good indicator of perceived prospects for the
    overall economy, and clearly it’s not too optimistic here this Monday,” Donovan
    said.
    Oil markets have seesawed this month as focus shifts between pressure on
    supply – in the form of hurricanes, an output cut from the Organization of
    Petroleum Exporting Countries and unrest in Nigeria – and predictions of
    flagging demand growth.
    The dollar’s movements against rival currencies have also fed into the market,
    with a stronger greenback tending to soften dollar-denominated commodities’
    attraction as a currency hedge. On Monday, the euro was at $1.4449, losing
    ground from $1.4614 late Friday on the U.S. bailout plan’s progress.
    On Monday, demand growth concerns were paramount.
    “Despite the risk of a weaker U.S. dollar boosting prices, we believe a
    deteriorating economic and financial environment will drive global oil demand
    growth lower and pressure oil prices downward into 2009,” Deutsche Bank
    analysts wrote Monday. The German bank revised its crude price outlook to
    $92.50 a barrel next year, from $120.
    Iran’s OPEC governor said Monday he expected crude demand to react
    “positively” from the U.S. bailout plan.
    “If they are going to inject $700 billion in the U.S. financial sector then it
    will be a factor in increasing demand. Then the demand performance could be
    better than expected,” Mohammad Ali Khatibi told Dow Jones Newswires in a
    telephone interview.
    Front-month October reformulated gasoline blendstock, or RBOB, fell 16.88
    cents, or 6.3%, to $2.4963 a gallon. October heating oil fell 15.44 cents, or
    5.2%, to $2.8405 a gallon. Both contracts expire Tuesday.

    -By Gregory Meyer, Dow Jones Newswires
    Dow Jones Newswires
    09-29-08 1043ET

  33. 33
    Popeye Says:

    What was that line in the sand (support) we needed to hold on the S&P?

  34. 34
    Fiveanddimer Says:

    FWIW, the House is scheduled to vote on the bailout bill at 1PM ET.

  35. 35
    antrimshale74 Says:

    I recall Nicky saying 1183. Unfortunately we are on the wrong side of that now.

  36. 36
    zman Says:

    JSS – that’s what I’m doing in my regular accounts and I have heard from a couple of money managers that that is what they are advising clients. Sit tight and hold on.

    Popeye – was it one of Nicky’s lines?

    Thanks Five.

  37. 37
    tater Says:

    One of the things that I appreciate on this site more than anything is the open discourse. (Except for the time we murdered Nicky on her correct buy the banks call. Holy cow did she get rung up!).

  38. 38
    zman Says:

    It could be worse I guess, I’ve got a friend in energy research at Wachovia. I’m guess its hello pink slip.

  39. 39
    Fiveanddimer Says:

    Re 38: the investment banking and retail brokerage side of Wachovia was not involved in this merger. I heard that they will be spun off as a separate entity. These operations are very profitable and had nothing to do with the banking operations at Wachovia.

  40. 40
    arodeen Says:

    JSS – I’m cashing out and going to the blackjack tables. At least the odds there are well documented at about -0.5%.

  41. 41
    zman Says:

    Thanks Five. Any idea about Lehman’s research group?

  42. 42
    JSS Says:

    arodeen, i’m in agreement with you there!

  43. 43
    zman Says:

    Wow – the grandstanding in the House (see CPSAN) is unprecedented.

  44. 44
    tater Says:

    Anybody still see lines at the pump anywhere?

  45. 45
    zman Says:

    Meet me in November at the Shale Expo and I’ll buy drinks and not just at the BlackJack table.

  46. 46
    Bleemus Says:

    Atlanta area still has lines at pump.

  47. 47
    rlogan1301 Says:

    don’t have access to cspan…what is happening?

  48. 48
    tater Says:

    thanks Bleemus. Thinking about gambling in refiners for a quicky

  49. 49
    rlogan1301 Says:

    ah got it on cnn.com…

  50. 50
    zman Says:

    Re CSPAN – lots of opposition, urging people not to vote today but today or to vote against. What I’ve been watching everyone says its not perfect but about 50/50 for against.

    Oil down $7.40, at $99.50.

  51. 51
    zman Says:

    Tater – cracks going to be coming off a little on the most recent numbers (today) as gasoline is down a little more than oil. Should see the oil numbers come up a little (demand) this week as facilities come back up which may support crude though I doubt it…that’s up to the dollar more than anything else and the near term direction on the dollar appears up.

  52. 52
    tater Says:

    Just a TA trade. Thinking that the momentum swung (swinged?) too far too fast just today. Looking to get in/out fast on a bullish slant. TSO down 15% on average volume? Risk/reward looks compelling. Purely gambling though.

  53. 53
    tater Says:

    Trigger is what happens on this next leg down at 15.79. If it holds might be worthwhile. If not…

  54. 54
    Pete Says:

    Z, What about CLR common at this level?

  55. 55
    zman Says:

    Tater – yep, TSO looked great Thursday, terrible Friday and today. Nothing to do with fundamentals, just selling anything that’s been up of late in the group. Here ya on timing…may add some more and then out all.

  56. 56
    zman Says:

    Pete – I am mulling it. Don’t see a need to rush. Valuations out the window, especially on assets that may encompass a much larger aerial extent than previously thought for their TFS acreage in the Bakken.

  57. 57
    BirdsofpreyRcool Says:

    there is a video on you tube that is making the rounds today. it gets kinda political at the end, but regardless of who you are backing for prez, at least people should know the facts behind the housing mess. it moves fast, so you may have to hit pause to catch all the reference material. but, well worth the 5 minutes to watch.

    http://www.youtube.com/watch?v=H5tZc8oH–o

    it’s not just the Dems. the SEC approved the request of 5 i-banks, back in 2004 to increase their leverage ratios from 12 to 40x. that is FORTY TIMES. the 5 banks were: GS, MS, LEH, BS, and ML.

    bottom line: it is not DEregulation that got us here. but bad regulation and the non-enforcement of existing rules.

  58. 58
    zman Says:

    HAL on the tape saying Hurricane Ike will drop earnings by 4 cents for the 3Q.

    http://biz.yahoo.com/ap/080929/halliburton_outlook.html?.v=1

  59. 59
    zman Says:

    Thanks Bird, can’t watch it now, maybe bandwidth but I can’t get it to play.

  60. 60
    BirdsofpreyRcool Says:

    z – i just got it to work… but, it’s very very slow right now. as i said, it’s making the rounds today. i got it from an institutional investor friend of mine this morning. people would probably rather watch you tube than the mrkt today.

  61. 61
    rlogan1301 Says:

    vote about to happen..pelosi made sure to get her digs in…

  62. 62
    zman Says:

    BOP re 60. No doubt.

    I’m going to watch the vote, and do a couple of trades based on what looks like the outcome. I would assume we get a small bounce in the broad market if it looks like this passes and that the market will tank further if it does not pass.

  63. 63
    rlogan1301 Says:

    it is going to be close…

  64. 64
    zman Says:

    Reuters reporting Canadian energy stocks headed towards their biggest 1 day decline in 7 years. There’s a quote in there that to take 7% out of the energy stocks (taking them to an 8 month low) is more than a little bit ridiculous.

  65. 65
    rlogan1301 Says:

    interesting comments by the senator of Alabama

  66. 66
    rlogan1301 Says:

    thought he was against it, but just said that he is voting yes for it.

  67. 67
    antrimshale74 Says:

    The Congressman from Alabama made a good speech and got an ovation from the chamber.

  68. 68
    BirdsofpreyRcool Says:

    wow. The SEC just widened the investigation of Fannie and Freddie they began on Sept 26th.

    Just began on Sept 26th? Where were they all this time??

  69. 69
    zman Says:

    Markets just treading water waiting on the House vote which will be late now.

    Am looking at a couple of plays on the vote:

    including SLB which is down 9% now ($8) and has their bi-ennial meeting tomorrow. Stock is cheap, no reason to think they can say anything promising enough to break the slump in the shares even medium term without the group but they should put forward a pretty positive long term growth picture. There could be a storm related reduction to earnings (like HAL) today but I’d say that’s already factored in. These guys are still a go to name in service and have been catching upgrades and reiterations of buys all the way from $105 to the current $78. If people come back to the group at all, it will be via the bigger names first.

    CLR is another one I’m thinking about although the spreads are less tasteful. Down 16% on the day vs oil off less than half that. Yes, they are unhedged. Yes the move, on top of the recent fall is out of whack with reality.

    SUN – cracks doing well on the eastern seasboard, HO holding up very well. YoY their 3Q should be up. Off 10% today. Sort of interesting.

  70. 70
    rlogan1301 Says:

    sorry..meant congressman…the one from ohio sounds like tom brokaw

  71. 71
    zman Says:

    Putting RIG on that list in 69 too.

  72. 72
    zman Says:

    ZTRADE: Added RIG $120 Octobers calls for $2.90 with the stock down about 8% at $112.30. I’ll add more if the House approves the Emergency Spending Act as well as a couple of other names listed in comment 69 on today’s post.

  73. 73
    zman Says:

    Looks to be passing but its a slow count. Question remains whether market rallies on this.

    3 minutes in:
    108 for
    75 against
    250 not voted

  74. 74
    BirdsofpreyRcool Says:

    the mrkt will rally if it passes. question is, how long will the rally hold… a day, a week, a month? guess it depends on the employement outlook as housing prices are about 10% or so from bottoming. so, almost there.

  75. 75
    rlogan1301 Says:

    narrowing…with 8 mins left.

  76. 76
    Sambone Says:

    LAGOS (AFP)–Nigerian authorities rounded up some 300 suspects after the main
    armed group in the Niger Delta oil hub declared a ceasefire following a week’s
    worth of attacks, the military said Monday.
    The operation followed intelligence reports that the militants were on a
    membership recruitment drive.
    Army spokesman Lieutenant-Colonel Musa Sagir said half of those picked up were
    still being held by the police or have appeared before the courts, while the
    rest were freed due to lack of incriminating evidence, he said.
    “From conservative estimates, around 300 suspects have been arrested,” Sagir,
    spokesman of a special task force comprising the military and police deployed
    to the region in southern Nigeria, told AFP.
    “As a result of the past weeks’ crisis, the militants admitted that they had
    lost some men, and it was because of the losses they encountered that they went
    into the communities to try and beef up their numbers.”
    Last Sunday, seven days after it launched an offensive in which it claimed six
    attacks on facilities run by multinational oil firms, the Movement for the
    Emancipation of the Niger Delta said it was calling a unilateral ceasefire
    until further notice.
    MEND had declared war on the oil industry in what it said was a response to an
    attack by the Nigerian army on its positions, and vowed to reduce Nigeria’s oil
    exports to “zero.”
    The group contends that the oil wealth of Nigeria – now Africa’s second
    largest petroleum exporter after recently falling behind Angola – doesn’t
    sufficiently benefit the local population.
    MEND hasn’t commented on the arrests.
    Militant attacks in the south of Nigeria have cut the country’s oil output by
    more than a quarter since the group emerged in 2006.
    Production is between 1.8 and 2 million barrels a day against 2.6 million
    barrels two years ago.
    Authorities cited in the local media said recent attacks didn’t have much
    impact on output levels.

    Dow Jones Newswires
    09-29-08 1244ET

  77. 77
    rlogan1301 Says:

    only 10 votes separate..with 7mins to go

  78. 78
    rlogan1301 Says:

    markets already reacting that this won’t get passed.

  79. 79
    zman Says:

    BOP – I’d guess quick but modest rally then who knows.

    Market showing lower with Nays ahead now.

  80. 80
    zman Says:

    RL – I think market just watching the vote and buying or selling as the numbers shift. Given the sell down as we went into Nay territory I’d say Bird is right on a rally of some kind if we get passed, even though this is not the bill the market wants.

  81. 81
    rlogan1301 Says:

    its like a dog race….

  82. 82
    BirdsofpreyRcool Says:

    i can pretty much tell how the vote is going by watching UYG. it’s all over the place…

  83. 83
    rlogan1301 Says:

    “and the yeahs extend their lead!”

  84. 84
    rlogan1301 Says:

    “but the nahs aren’t giving up!”

  85. 85
    zman Says:

    ZTRADE: Bought CLR $35 October calls for $3.70 (was bid, now mid) with the stock off 17% on the day. Unhedged, oily name on a down market, down oil, down group day.

  86. 86
    tomdavis12 Says:

    Z: VIX moving higher.

  87. 87
    zman Says:

    Wow – market down 483 in a flash, bill looking to fail.

  88. 88
    zman Says:

    It failed. Market 580.

  89. 89
    rlogan1301 Says:

    didn’t pass.

  90. 90
    BirdsofpreyRcool Says:

    yikes

  91. 91
    zman Says:

    When do curbs come in?

  92. 92
    zman Says:

    John McCain just lost his lunch.

  93. 93
    Sambone Says:

    Oil trading halted

  94. 94
    BirdsofpreyRcool Says:

    you think it’s bad here? just wait until asian mrkts open…

  95. 95
    zman Says:

    Reopened, trying to rally now. Wonder why dollar is not doing better.

    BOP – maybe time for puts on PTR,SNP,CEO?

  96. 96
    Bleemus Says:

    Dow circuit breakers kick in at -1200 unless it’s after 2:30pm. Then you need -2400 to halt market for day http://www.nyse.com/press/circuit_breakers.html

  97. 97
    BirdsofpreyRcool Says:

    or just buy EEV

  98. 98
    zman Says:

    Man, they just ripped those CLR spreads wide open. You could drive a VLCC through there.

  99. 99
    rlogan1301 Says:

    i like how these guys just stand around now….i hope they know that their retirements just went down the crapper.

  100. 100
    BirdsofpreyRcool Says:

    i think they get a fat pension, in cash, from taxpayers. so, no need to worry!

  101. 101
    BirdsofpreyRcool Says:

    brazil mrkt halted… down over 10%

  102. 102
    zman Says:

    Retirement with full benefits with 10 years of service or at 62:

    http://www.senate.gov/reference/resources/pdf/RL30631.pdf

  103. 103
    zman Says:

    BOP – yep, PBR down 15% not helping. That’s what happens when you find 4 more billion barrels of oil.

  104. 104
    rlogan1301 Says:

    so what happens next? any thoughts to the what happens the remainder of the week?

  105. 105
    zman Says:

    CNBC saying the House members can change their votes. I did not remember that.

  106. 106
    BirdsofpreyRcool Says:

    well… pretty much the leaders of all the countries in the entire world are going to be on the phone (or on TV), calling for American heads. The pressure on Washington should be enough to pass the bill this week.

    maybe I’m wrong. but this has market repercussions that go way beyond our shores.

  107. 107
    Garyinhou Says:

    Hopefully they will come up with a new bill that is more fiscally responsible and relies more on the affected businesses than us poor little taxpayers. CNBC squawking heads seem we should legislate via stock market reaction.. Heck, lets just become 100% socialists and call it a day.

  108. 108
    Sambone Says:

    Where is JP Morgan when you need him? Oh that’s right he died in 1913.

  109. 109
    zman Says:

    Pimco guy on CNBC saying rate cut may be more likely now. Gasparino saying house leaders saying they will try again.

  110. 110
    Sambone Says:

    By Gregory Meyer
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Losses in crude oil futures deepened Monday as a
    historic financial bailout was defeated in the U.S. House of Representatives.
    Light, sweet crude for November delivery was recently down $8.67, or 8.1%, at
    $98.22 a barrel on the New York Mercantile Exchange, after dropping as low as
    $96.83. Brent crude on the ICE Futures exchange fell $7.99 to $95.55 a barrel.
    Trading had resumed after a five-minute halt, which was triggered when
    benchmark Nymex gasoline futures fell 25 cents. Daily price fluctuation limits
    were reset as trading resumed.
    Front-month October reformulated gasoline blendstock, or RBOB, fell 23.51
    cents, or 8.8%, to $2.4300 a gallon. October heating oil fell 18.27 cents, or
    6.1%, to $2.8122 a gallon. Both contracts expire Tuesday.
    Already under pressure, crude fell further as it became apparent that the $700
    billion deal wouldn’t progress past the House. Crude held steady after it was
    confirmed that the House voted 205-228 against the plan. The money would have
    been used to buy mortgage assets in order to ease the crises seizing credit
    markets. The Dow Jones Industrial Average plunged.
    The defeat came despite House leaders holding open the vote for well beyond
    the 15-minute time limit as supporters were unable to convince enough members
    of either party to switch their votes against the proposal.
    “The whole economic outlook is uncertain on this credit issue,” said Tony
    Rosado, an oil broker at GA Global Markets in New York.
    Whatever the plan’s merits, oil traders didn’t see it forestalling an economic
    slowdown that could retard growth in oil consumption.
    “We don’t really see this as having all that much impact on petroleum demand,”
    Citi Futures Perspective energy analyst Tim Evans said in a note. “It may
    improve the worst-case scenario to some degree, but it will not spark an
    immediate change in consumer demand for gasoline or other fuels.”
    Traders were still surprised by the magnitude of Monday’s selloff.
    “This is some serious carnage in the price of oil,” said Peter Donovan, vice
    president at Vantage Trading on the Nymex floor.
    “Certainly, the oil market is a good indicator of perceived prospects for the
    overall economy, and clearly it’s not too optimistic here this Monday,” Donovan
    said.
    Oil markets have seesawed this month as focus shifts between pressure on
    supply – in the form of hurricanes, an output cut from the Organization of
    Petroleum Exporting Countries and unrest in Nigeria – and predictions of
    flagging demand growth.

    -By Gregory Meyer, Dow Jones Newswires Dow Jones Newswires
    09-29-08 1423ET

  111. 111
    zman Says:

    Sam – going to be a very interesting close today. Gasparino saying House is watching the market tank and thinking hmmmm. It is hard to believe the country is governed this way.

  112. 112
    Sambone Says:

    WB looks like it may open soon

  113. 113
    Sambone Says:

    Z – They all have government pensions. “What, me worry”?

  114. 114
    douglas51 Says:

    Isn’t there anything in the energy market worth buying here?

  115. 115
    Sambone Says:

    WB down to 1.29

  116. 116
    zman Says:

    Douglas – I would argue plenty but the market won’t here it, not now, not with the quarter ending tomorrow. If you mean equities and not options its easier as long as you can stomach another 10 to 15% of downside before we return to a sideways motion. Right now its all chart driven, both the stocks and to a somewhat lessor extent the commodities (oil down $11+ now). Natural gas down about half the % of oil now.

  117. 117
    zman Says:

    20 to 30% down moves in coal today. Just unreal.

  118. 118
    zman Says:

    We’re getting moves that usually take weeks or months in the energy groups in 1 day.

    XOI down 10%
    XNG down 11.5%
    OIH down 12.5%
    average refiner off 14% despite the fact that cracks are recovering today.

  119. 119
    zman Says:

    MMS Watch:

    From the operators’ reports, it is estimated that approximately 48.0 % of the oil production in the Gulf is shut-in. As of June 2008, estimated oil production from the Gulf of Mexico is 1.3 million barrels of oil per day. It is also estimated that approximately 47.4 % of the natural gas production in the Gulf is shut-in. As of June 2008, estimated natural gas production from the Gulf of Mexico was 7.0 billion cubic feet of gas per day.

  120. 120
    douglas51 Says:

    Seems like coal would be a good long term buy.

  121. 121
    BirdsofpreyRcool Says:

    getting a comment off the JPMo CDS trading desk that bears repeating… this comes from the thoughts at the highest level of institutional trading:

    What’s scary right now is that the mkt does not beleive that Congrss does not pass some form of this bill.. It just seems unthinkable to the mrkt that Congress doesn’t sign something eventually. It is sad that the DOW may be down another 2,000 points before we prove that these’s no way around it… Congressmen have been pointing out that constituents have been against this bailout bill for Wall Street. It’s ironic that this bill is just as much for Main Street. Then again, after LEH few things should surprise us any more. Congress has the bazooka this time; problem is that they were pointing it backwards.

  122. 122
    reefguy Says:

    sold exxi at 60% loss

  123. 123
    zman Says:

    Agreed Douglas re Coal but with profits in the sector over the last 2 years and funds short of cash, cheap can get cheaper. Still for a long term hold, I like BTU for heat and WLT for met coal. Both getting crushed today.

  124. 124
    douglas51 Says:

    I really appreciate your thoughts.

  125. 125
    arodeen Says:

    Any thoughts on longer term options here? Thinking like CHK Jan09 calls somewhere 30-35. I have to think some rationalization (or fundamentalization, if that was a word) will come to the market in Q4.

  126. 126
    zman Says:

    My real thoughts are Napa this weekend, IPAA on Monday, and a fresh start to the quarter next week.

  127. 127
    zman Says:

    Aro – I’m always thinking about although right now things kind of expensive to me and the long options really don’t off much protection if things keep falling this way. Agreed that some fundamentalization (nice word) should occur soon however I’d like to see the market give us a little side ways action before embarking on those. Not saying I wouldn’t but CHK was cheap at $45 and the Jans would not have saved me then either. At $32!!!!, I can’t believe it’s there, it is super cheap. They have their first analyst day mid next month which will be interesting in the current market because good news seems to be bad in that they are then perceived to be producing too much gas. I am thinking of buying more of the stock however and then writing more calls against the position. For the straight long call I think I prefer going with the closer dated (say November) or just waiting for the knife to bounce off the hard deck.

  128. 128
    zman Says:

    RIG and CHK hit 52 week lows today. In CHK’s case, their hedges are going to result in a massive mark to market gain reversal for them…not that it matters but people balked at them when they took a non cash hedge loss so those same people should be wowed by the gain, lol.

  129. 129
    tomdavis12 Says:

    Z: VIX @ 46.77. Isn’t alltime high in this neighborhood.

  130. 130
    ram Says:

    I was in NAPA this weekend. I hope you have a good time and a designated driver.

  131. 131
    tomdavis12 Says:

    Z: Stock market is making real estate look like a good investment.

  132. 132
    Sambone Says:

    By Gregory Meyer
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Crude oil futures plummeted more than $10 a barrel
    Monday after the U.S. House voted down a $700 billion plan to rescue financial
    markets.
    Light, sweet crude for November delivery settled down $10.52, or 9.8%, at
    $96.37 a barrel on the New York Mercantile Exchange. Brent crude on the ICE
    futures exchange closed $96.7 lower at $93.87 a barrel. Brent settlement prices
    weren’t immediately available.
    The Nymex contract’s decline was the biggest in dollar terms since Jan. 17,
    1991, when oil fell $10.56 in response to the release of strategic U.S. crude
    stockpiles during the first Persian Gulf war. Crude last settled lower Sept.
    16.
    Prices fell steeply across the oil market. Nymex officials halted trading for
    five minutes after the front-month Nymex gasoline contract fell 25 cents,
    tripping price fluctuation limits. Front-month October reformulated gasoline
    blendstock, or RBOB, settled 26.81 cents, or 10.1%, lower at $2.3970 a gallon.
    October heating oil fell 23.45 cents, or 7.8%, to close at $2.7604 a gallon.
    The market was under pressure as traders worried a faltering economy will
    pinch world demand, extending weakness already seen in big consuming nations.
    Crude fell further as it became apparent that the U.S. government’s $700
    billion deal to bail out the economy wouldn’t progress past the House, which
    voted 205-228 against the plan. The money would have been used to buy mortgage
    assets in order to ease the crises seizing credit markets.
    “A lot of people are very, very concerned this will lead to some sort of
    financial meltdown and demand will fall even more as businesses go under,” said
    Peter Beutel, president of Cameron Hanover, an energy risk management firm in
    New Canaan, Conn.
    Even if the plan eventually passes, oil market observers don’t see it
    forestalling an economic slowdown that could retard growth in oil consumption.
    “We don’t really see this as having all that much impact on petroleum demand,”
    Citi Futures Perspective energy analyst Tim Evans said in a note. “It may
    improve the worst-case scenario to some degree, but it will not spark an
    immediate change in consumer demand for gasoline or other fuels.”
    Traders were still surprised by the magnitude of Monday’s selloff.
    “This is some serious carnage in the price of oil,” said Peter Donovan, vice
    president at Vantage Trading on the Nymex floor. “Certainly, the oil market is
    a good indicator of perceived prospects for the overall economy, and clearly
    it’s not too optimistic here this Monday,” Donovan said.
    Oil markets have seesawed this month as focus shifts between pressure on
    supply – in the form of hurricanes, an output cut from the Organization of
    Petroleum Exporting Countries and unrest in Nigeria – and predictions of
    flagging demand growth.

    -By Gregory Meyer, Dow Jones Newswires
    Dow Jones Newswires
    09-29-08 1516ET

  133. 133
    BossmanG Says:

    VIX going nuts

  134. 134
    zman Says:

    Not particularly big volumes but these are some seriously big moves and we appear to be closing near the lows. Ugh. Guess I sold my DUG calls a little early.

    Got that covered, thanks Ram.

  135. 135
    zman Says:

    At least the CLR bounced, “only” ending off 14%

  136. 136
    tater Says:

    I call BS on this whole “crash”. There is absolutely no volume to any of this. Look at CLR. 2.2 million right now. Average. Hard day today, but this is in no way jump out the window stuff. I haven’t had a position open for more than 3 days since a year ago July. I am selling naked puts on this drop in oil and will gladly keep whatever gets put to me.

  137. 137
    Sambone Says:

    Tini time

  138. 138
    zman Says:

    Tater – agreed. But I also think we get a rate cut soon deliberately to help unfreeze credit market.

  139. 139
    apbd Says:

    Where’s Kate Smith when you need her?
    apbd

  140. 140
    tater Says:

    Fully agreed. I am beat. Thanks to everybody who participated today. It’s not easy going this stuff alone.

  141. 141
    Dman Says:

    Tater – heavy volume in NOV SLB NBR

    VXO hit 54 but tends to hit 70 in a capitulation.

  142. 142
    tater Says:

    Dman,
    Yes. I spoke prematurely. I will say that RIG, SLB, NOV and a few others are fund proxies for trading oil. Oil crushed and so are they. I can’t know everything, but I do believe that I am happy at the moment to accumulate some of what I consider to be superior companies.

  143. 143
    tater Says:

    Dman,
    I was on the phone while I wrote that last one, sounds like a lot of bravado out of me. Not intended that way, just saying that I think some, or even most of this, is over done. What are you thinking?

  144. 144
    Bleemus Says:

    APC Anadarko updates production outlook following Gulf storms (44.86 -7.87)

    Co announced that nearly all of its operated deepwater Gulf of Mexico platforms and Gulf Coast properties are operational, including Independence Hub, which quickly restored production to pre-storm levels of ~900 mln cubic feet of natural gas per day following Hurricane Ike. Co says, “by the end of this week, all of our operated deepwater facilities will be operational. We expect total sales volumes for Q3 to be at or near 51 mln BOE, which was the low end of our guidance, even though almost 5 mln BOE (barrels of oil equivalent) were shut in during the quarter as a result of the severe storms including Hurricanes Gustav and Ike. While all of APC’s operated facilities will be capable of producing by week’s end, the timely repairs to third-party downstream infrastructure could significantly affect Q4 sales volumes, as some production remains shut in or curtailed. Given the uncertainty surrounding the timing of these infrastructure repairs that will enable the company to resume full production, APC expects its Q4 2008 sales volumes to be in the range of 49-55 mln BOE.

    Briefing.com

  145. 145
    occam Says:

    Any comment on this? (Apologies if posted earlier.)

    http://atimes.com/atimes/Global_Economy/JI19Dj02.html

  146. 146
    zman Says:

    Occam – will read and put response in Tuesday post. Thanks.

  147. 147
    Jay Reynolds Says:

    Bad day in MudVille… Actually my darker thought was that a pullback in oil demand will mask declines in production so that the Price Signals we need to change our ways are delayed. Then, as demand picks up we get a huge shock from the supply side.

  148. 148
    Wyoming Says:

    JR,

    Here is one better. Oil / Gas price drops, followed by decrease in revenue for E&P plus service sector. Service sector slashes experienced head count. E&P’s merge and reduce staff accordingly.

    No fear yet, already got one headhunter email today.

    BTW – I describe the SLB model. I reduced my operation by 75% in Spring 1999 only to look for anyone to come back by the summer. By then the economy is swinging and not too many people want an oilfield job.

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