22
Oct

Wednesday – EIA Oil Inventory + NFX Pre Call

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Sentiment Watch: Back to panic mode. Oil is falling to fresh lows this morning as the dollar jumps over Britain's announcement that yes, they too are probably in recession.

In Today's Post:

  1. Holdings Watch - additions to the 10KP and general portfolio
  2. Commodity Watch
  3. Oil Inventory Preview
  4. Stuff We Care About Today
  5. Odds & Ends

Holdings Watch: The Holdings Wiki tab is updated.

  • Added HK December $20 calls (HKLD) for average $1.88 with the stock up $0.80 at $15.80. See the Tuesday post for comments.
  • 10KP Trade HK December $17.50 calls (3) (HKLW) for $3.10.

 

Commodity Watch:

Crude fell $2.21 to close at $72.18 yesterday as OPEC cut mania gave way to another round of broad market induced selling of everything but the dollar. OPEC members are talking cuts of between 0.5 and 2.5 mm bopd. The former would get a yawn and I see the later as extremely unlikely. Today's inventory report may play a small part in helping OPEC to determine the size of their cut. Another big imports number and weak refinery demand could auger for a number bigger than the much talked about 1 mm bopd cut figure. This morning December crude (which became the front month today) is trading off another $3.

  • Russia Watch: Strategic Price Manipulation Reserve. Russia is considering building a stockpile of reserves like the U.S.'s SPR but with the intention of using it to influence global oil prices.

Natural gas drifted a dime yesterday to close at $6.84. This morning gas is trading another 5 to 10 cents, once again trying to buck crude's fall.

Oil Inventory Preview

ZComment: Numbers probably hold more bearish potential given market's perception that the slowdown has not really hit the States yet. Watching gasoline demand for signs of life as prices fall below $3 per gallon country-wide. With that said, the what may normally be perceived as bearish could in fact be bearish as it comes two days before the OPEC meeting. 33 analysts polled by Bloomberger all see a 1 mm bopd plus production cut out of the Cartel so bearish builds may make the decision to cut a little easier. 

Stuff We Care About Today

HK Wrap - Thoughts are on the report tab under HK Notes

NFX 3Q08 Beats Street, Reigns In Capital Spending

  • The 3Q Numbers:
    • Production of 61.4 Bcfe vs guidance of 58.9 to 64.3 Bcfe (which did not include 2 Bcfe of hurricane related deferred production). Production was 73% gas.
    • Revenue of $680 vs $610mm expected
    • EPS of $1.02 (ex items) vs $1.10 expected (I don't care much about earnings with E&Ps so long as cash costs are in line (they were) and the CFPS number isn't too shabby (it wasn't))
    • CFPS of $3.00 vs $2.86 expected
    • LOE per Mcfe of $0.94, this remains well under control
    • Cash costs = (LOE+production taxes+G&A) = $2.51 per Mcfe
    • Field margin = Revenue - Cash costs = $6.61 per Mcfe


  • Guidance: 
    • Remainder of 2008 inched up slightly to get to 25% YoY growth...nobody will care about that unless they subsequently miss the range which is unlikely.
    • 2009 volume guidance now at 8 top 13%.
    • Capex coming down in 2009. This is probably the most important part of the press release. They are matching their capex to their anticipated cash flow of $1.65 billion. This is a pretty stiff 20% reduction from the prior budget.
      • this is important from a "we get it, you don't want us to spend a lot while prices stink" perspective and
      • in that $1.65 Billion equates to 2009 CFPS of $12.50 (no accident this a nice round number)...the Street is at $13.45 for 2009 so #s will be trimmed but not excessively.

 

  • Operations Update: I'll just hit the highest of the high points prior to the call.
    • Woodford Shale:
      • Completing first dual lateral (no results yet), about to drill first super length lateral (8 to 10,000 foot)
      • Costs continue to come down as all efforts move to pad drilling
      • 12 rigs now going to 15 in 2009
    • Williston Basin:
      • Disclosed another couple of nice Bakken discoveries close to 600 Bopd IP's.
      • They hold 160,000 net acres here and plan to run 3 rigs in 2009.
    • Deepwater Discovery: 35% interest in an apparent gas discovery at Dalmatian, way out in DeSoto Canyon. They expect to develop the find via a subsea tieback so it's not world beater status but they down have leases in 9 offset blocks where they have mapped 5 additional targets.

 

  • Conference Call: 4:30pm EST. This is a little odd for them to wait all day but given this market maybe they want to try and focus listener attention on something besides a sea of red.

 

Odds & Ends

Analyst Watch: (STP) cut to hold at Collins Steward, (PCX) cut to Underperform at FBR, Lehman Barclays started (SWN) at Outperform.

104 Responses to “Wednesday – EIA Oil Inventory + NFX Pre Call”

  1. 1
    bill Says:

    when ng numbers are released on thursday is that for data thru last friday?

    How quickly does higher (than normal) hdd affect ng injection numbers

    here is latest map– cooler than normal for half the country

    http://www.accuweather.com/maps-temperature.asp?partner=accuweather&traveler=0&site=us_&large=0&fday=1&type=temp

  2. 2
    bill Says:

    hk down 10 % pre market jeez!

  3. 3
    bill Says:

    and a minor insult ng prices are up and ung is down lol

  4. 4
    Sambone Says:

    7:31 am EST

    Crude Falls On USD, Equities; Skeptical On OPEC

    By Lananh Nguyen
    Of DOW JONES NEWSWIRES

    LONDON — Crude oil futures fell below $70 a barrel in London Wednesday, depressed by a broad U.S. dollar rebound and sharply lower equity markets.

    Fears over slackening global oil demand also weighed on market sentiment, overshadowing expectations for a potential production cut by the Organization of the Petroleum Exporting Countries when it meets Friday in Vienna.

    “The dollar is strong and stock markets are weak — [the selloff] could have more in it yet,” said a broker based in London.

    At 1120 GMT, the front-month December Brent contract on London’s ICE futures exchange was down $2.24 at $67.48 a barrel.

    The front-month December contract on the New York Mercantile Exchange was trading $2.74 lower at $69.44 a barrel.

    The ICE’s gasoil contract for November delivery was down $15 at $673.50 a metric ton, while Nymex gasoline for November delivery was down 623 points at 162.96 cents a gallon.

    Crude oil prices pared gains from earlier in the week as the U.S. currency bounced while stock markets declined.

    “The dollar is strong, which weakens oil, and commodities are still tracking the stock market,” the broker said.

    Market sentiment also took a hit from comments Tuesday by Bank of England Governor Mervyn King, who said “it now seem likely the U.K. is entering a recession” and it will take a “long, slow haul” to bring economic growth back to more normal conditions.

    Meanwhile, the bullish influence of potential OPEC production cuts dissipated as participants grew skeptical a rollback could shore up prices.

    “There is a lot of crude and demand is drying up,” a broker in London said.

    Many analysts and market participants expect the producer bloc to rein in production by 1 million barrels a day or more. But some questioned the effectiveness of a cut at a time of slowing growth in industrialized countries and unprecedented financial market turbulence.

    “I don’t think OPEC will change the current trend [lower]; they will try their best, though,” another broker in London said.

    OPEC’s member countries were unlikely to adhere strictly to any cuts, and would probably opt to produce over their quotas and gain revenue as prices swing lower, a broker said.

    “OPEC…are up against it here, they will cheat at these prices,” the broker said.

    Looking ahead, participants were awaiting the U.S. Department of Energy’s inventory snapshot due at 1435 GMT. A Dow Jones Newswires survey of analysts expected stocks to rise across the board — they forecast a 2.4 million barrel rise for crude, a 2.8 million barrel gain in gasoline and a 100,000 barrel rise in distillates.

    —By Lananh Nguyen, Dow Jones Newswires

  5. 5
    Sambone Says:

    US OIL INVENTORIES SURVEY: Oil Build Expected

    DOW JONES NEWSWIRES

    NEW YORK — U.S. crude oil stocks are forecasted to increase in data due Wednesday from the Department of Energy, according to a Dow Jones Newswires survey of analysts.

    The data, put out by the department’s Energy Information Administration unit and covering the week ended Oct. 17, are due at 10:35 a.m. EDT Wednesday.

    Crude oil inventories are expected to rise 2.4 million barrels, according to the mean of 15 analysts’ forecasts. All but one expect a gain, with estimates ranging from a drawdown of 1.2 million barrels to a build of 4.7 million barrels.

    Gasoline inventories are seen growing by 2.8 million barrels, according to the analysts’ average. Every analyst surveyed expects an increase, with predicted gains ranging between 1.5 million and 6.9 million barrels.

    Stocks of distillates, which include heating oil and diesel fuel, are expected to rise by 100,000 barrels. Six analysts see a decline, eight a gain and one no change, with estimates ranging from a draw of 1 million barrels to a build of 1 million barrels.

    Refinery use is seen rising 0.9 percentage points to 83.1% of capacity. Utilization is seen beginning to level off after several weeks of larger gains, as the Gulf Coast completes its recovery from two late-summer hurricanes. Utilization stood at 87.1% at this time last year, but refiners have cut runs in response to declining demand.

    “This week’s report should reflect the “tail end” of the effects from last month’s supply disruptions related to Hurricanes Gustav and Ike,” said Jim Ritterbusch, president of the trading advisory firm Ritterbusch & Associates in Galena, Ill.

    Analysts’ Estimates
    Analyst Crude Gasoline Distillates Refining
    Alaron Trading +3 +2 +1 +1
    BNP Paribas +2.5 +1.5 +0.5 +1
    Cameron Hanover +3.75 +3.75 -0.85 +0.75
    Citi Futures +2.5 +1.5 -1 unch
    Excel Futures +4.7 +6.9 -0.7 +0.7
    GA Global Markets +1.5 +2 -0.5 unch
    IAF Advisors +2.5 +3 +0.5 +0.8
    JPMorgan +1.6 +2.5 +0.3 n/a
    MF Global-Fitzpatrick +2.9 +2 +0.45 +1
    MF Global-Lebow +3 +3.2 +0.7 +1
    Newedge +1.3 +4.1 -0.5 +2
    Ritterbusch & Assoc -1.2 +2 unch +1.5
    Societe Generale +4 +2.7 -0.5 +0.5
    Summit Energy +0.85 +2.4 +0.9 +0.1
    Tradition Energy +2.8 +3 +1 +1.8

    Average Estimate +2.4 +2.8 +0.1 +0.9
    Figures in millions of barrels, except for refining use, which is reported in percentage points. Figures are rounded to two decimal places in table, one decimal place in averages and story. For analysts providing forecasts in a range, the average of the upper and lower ends of the range is used.

    —By Brian Baskin, Dow Jones Newswires

  6. 6
    Nicky Says:

    Morning all. Markets look absolutely yuk again this morning.
    Oil has support in the 68.25 region, 66, 63 and then huge support at the 55 region. It seems to me inconceivable that OPEC won’t cut but the reaction to the cut is less than certain.
    Broader market. Still looks to me like some sort of large triangle playing out support on the Dow at 8750, 8500, SPX support at 925, 910, 900.

  7. 7
    zman Says:

    Re NG – yes, that’s last week’s data.

    Arodeen – ? from last night. I know of but do not know McDepp or Wulf and I don’t have an opinion on them as I’ve only read one or two of their pieces and have no understanding of their mcdepp indicator.

    Nicky – good word yuk. OPEC has been talking about defending price more and more down here. The OPEC basket of oil prices they care about trades about $5 below WTI at $64 as of yesterday. With that in mind they gotta know 1 mm bopd won’t come close to stemming the slide. Iran is yelling 2.5 mm bopd but I don’t see that, probably 1.5 mm now and another 0.5 to 1.0 at the December meeting with another meeting called in between if prices keep falling.

  8. 8
    bill Says:

    so this weeks cold weather is (in) next weeks ng number…. not this week

  9. 9
    bill Says:

    well…silver lining is ng has been climbing even though crude is falling and trying to crack 7

  10. 10
    bill Says:

    nov up 6 and dec up 3 so must be short covering as the shorts roll forward

  11. 11
    zman Says:

    I show HDDs for last week (reflected in this week’s storage number) of 52 which are the highest (coldest) of the heating season so far (in the Monday post) and a projection for HDDs this week to increase to 79 which will again be the highest of the season so far and reflected in next week’s storage number.

  12. 12
    zman Says:

    Regarding the open and opening indications. Market back to complete group think/brain lock. Everything, good or bad gets tossed for 5 to 10% at the open without regard for fundamentals or news. My calls are mostly December or later with a couple of Novembers in there and it’s October 22 so while I’d like to see them march immediately higher just from a purely wallet perspective I’m buying long enough out to give me some breathing room.

  13. 13
    zman Says:

    Dow down 380, oil off $4.20, nat gas flat.

    Group off 7 to 8% on average.

    PBR trading like its going out of business.

    If we get bearish oil numbers its probably good for prices as OPEC will have a freer hand (as if they need one) to cut more. At least, that should be the perception out there.

  14. 14
    BossmanG Says:

    Z, any reason to add?

  15. 15
    zman Says:

    Bossman – Not me, not yet. Market has no reason.

  16. 16
    reefguy Says:

    exxi bucking the crowd

  17. 17
    bill Says:

    z thanks for 11

    where can i find hdd data

  18. 18
    zman Says:

    …and maybe we turn on a dime at lunch, still little reason. Energy in general is a lot cheaper than the market. Forward earnings/cash flow estimates have come down substantially and the groups are still trading at or below historic lows.

    Nice call EXXI – Reef. Should have gone with my gut when Schiller was speaking at IPAA. Sounds better than a dice roll now at Blackbeard and they are not a one trick pony even though the stock trades like it.

    Bill – HDD data comes from the CPC. I used natural gas population weighted degree data which is their attempt to match up what type of heating units consumers use to heat their homes. You can see oil-fired and electric in the choices as well but it all comes out of the weekly, pop-weighted link under this.

    http://www.cpc.noaa.gov/products/analysis_monitoring/cdus/degree_days/

    The special outlook link takes you to the current week’s forecast.

  19. 19
    zman Says:

    Boss – but if I were to add it would be in the stuff I’m long now. Especially the EOG. I might add NFX before the close and I could use a little more HK.

  20. 20
    BossmanG Says:

    thanks….still pondering…

  21. 21
    zman Says:

    Jivey – you’re welcome!

    Boss – take your time, don’t think you are missing much by crawling as opposed to running into the mine field.

  22. 22
    zman Says:

    HK thinking about inching up, really, 3 Tcfe potential announced yesterday hardly in the stock.

  23. 23
    zman Says:

    crude: up 3.2 (that’s a little high)
    gasoline: up 2.7 (in line)
    distillate: up 2.2 (that’s well above estimates)

    oil down about $4 before and after

  24. 24
    zman Says:

    Refineries continue to make more production, utilization up another couple of % to 84.8%. For being so evil they sure are giving a gift to the American driver right now.

    Crude imports stayed very big at 10.4 mm bopd…again, the big number gives OPEC the “we told you so and here it is” argument.

  25. 25
    Nicky Says:

    Z – as energy has been sell, sell, sell despite the OPEC meeting then how about it turns out to be sell the rumor and buy the fact?

  26. 26
    douglas51 Says:

    Would the proposed Russia, Iran and others new natural gas cartel with price fixing be bullish for natural gas prices?

  27. 27
    antrimshale74 Says:

    How can distillate estimates continue to be so off? Are the estimates missing the boat on airline fuel reductions?

  28. 28
    zman Says:

    Nicky – oil seems to be focused on the dollar more squarely now (five year high against the pound today?!) but thinking you may be right. OPEC often uses a sledgehammer to make adjustments when it sees a real problem unlike the Fed.

  29. 29
    zman Says:

    Douglas – ostensibly yes. But I don’t think they get it done (they have tried several times) and if they do the reaction in the U.S., after the initial short lived spike would be muted as the U.S. has all the gas it needs at present and, at higher prices and only slightly growing demand, for the foreseeable future.

    Antrim – analysts use last week as a guide for this weeks numbers and then try to adjust for a few factors. Its about as accurate as the jobs numbers at times and we are still shoulder season meaning demand is uncertain. Their estimates should firm up as heating season really kicks off.

  30. 30
    zman Says:

    HK – liking the price action there. Again, another later day recover sends that name up first.

  31. 31
    zman Says:

    Heating oil liking something about the numbers, not sure what exactly as they were high to estimates and pretty ho hum on demand. Anyway, think that is pushing natural gas up a dime now.

  32. 32
    BirdsofpreyRcool Says:

    In just one day, the FEAR factor has shifted from the credit freeze (which, in spite of lower LIBOR and TED spread levels, has not thawed), to Global Recession.

    The little bit of sunshine we saw in the credit indices yesterday has retreated behind the cloud of the stock market.

    It’s all about the economy, jobs, and the election now. And those are not very uplifting topics.

    IG 196 (but not sure this matters anymore)

  33. 33
    zman Says:

    FYI – gasoline demand is responding to lower prices with nearly 9.1 mm bopd being back above the 5 year average for this week of the year. Still off 3% from year ago but prices are still up, we are in a recession and yada, yada, yada, the American driver is not changing their long term driving habits as much as reporters would have you believe.

  34. 34
    Nicky Says:

    Z – I remember when I threw that $ target at 90 – 92 out there a few weeks ago everyone thought I was nuts!

  35. 35
    zman Says:

    Bird – I agree with 32. I’d like to have annual estimates and historical data for S&P 500 earnings. Seems that we have discounted a pretty steep drop since the peak last year.

  36. 36
    zman Says:

    Nicky – congrats.

  37. 37
    zman Says:

    At these prices, a lot of Canadian oil sands production should be just about sub-economic.

    Nicky – so since it blew through $90 by $23 now would you say its time for a bounce?

  38. 38
    BirdsofpreyRcool Says:

    z – frankly, SPX 850 seems to be in the cards. i think we hit that some time between now and next April. could be some great rallies between now and then, but i don’t think they will be sustainable.

    lotta wood to chop. housing prices still headed south and a new feeling of “wealth redistribution” taking hold in the U.S. tough to see a sustainable rally in the fact of that uncertainty.

    that said, i think “energy” (E&P) is one of the few place were people can still make money. so, not as totally gloomy as i sound, fwiw.

  39. 39
    Nicky Says:

    Z – we are nowhere near that target on $ yet and I still think it will be amazing if we get there even if its what the charts are calling for! (90 – 92 was $ target and not oil btw).

    FWIW I thought oil would stop at 85 area so I was well wrong! I think they step in and buy it at 63…..

  40. 40
    Nicky Says:

    Should the 50 – 55 area be taken out then I see absolutely no chance of the bull market returning in oil for the foreseeable future.

  41. 41
    zman Says:

    Nicky – thanks, yep, I thought you meant oil.

  42. 42
    Nicky Says:

    Commodities seem absolutely ripe for a bounce to me – gold being absolutely hammered – wouldn’t be surprised to see a spike lower with that this week and then up.

  43. 43
    zman Says:

    Re 40. Mexico / Canada / Western U.S. / Gomex / Norway / Venezuela collapse so fast at $50 it will make your head spin.

  44. 44
    Nicky Says:

    I was very bearish the broader market but find I am absolutely sick to death of seeing these huge falls every day – I want to feel better! I want a rally! This is just too depressing for words. Anyone else feel the same?

  45. 45
    Nicky Says:

    If broader market is playing out as a triangle then we need to see lows hold today/tomorrow and stage a rally into middle of November. We need to take out the 9400 Dow area on the upside. Then as we approach the middle of November we are likely to embark on the final leg down of the first leg of the bear market into the middle of December which should retest the lows at least. Then we rally into the Spring…

    If triangle doesn’t work out here – then we are already in wave v down…..

  46. 46
    ram Says:

    Hello Nicky. Were you looking for a major turn in the fiancial markets between now and next week?

  47. 47
    ram Says:

    Thanks Nicky.

  48. 48
    Nicky Says:

    Ram see #45. Want to see the 8500 area hold in the Dow…

  49. 49
    zman Says:

    Nicky – I know a lot of people do. You should have been at lunch with me at IPAA a couple of weeks back, that Monday was the lowest of the lows to date in the energy sector. The hedge fund managers were were beyond grief and into utter despair. I had picked a few numbers off my laptop and was updating the table, coal down 10%, XNG down 9% etc and these guys were beyond ticked off and into “nothing matters” land. Usually when I start thinking that way things turn although a good rule of thumb when it happens is to trade less and don’t trade angry.

  50. 50
    zman Says:

    Conoco saying Canadian drilling program to be less aggressive in 2009. Price take care of price.

  51. 51
    zman Says:

    By the way, you may not get a small reward for good earnings and comments like HAL but you can be assured of a beating if you miss, ala BHI missing this morning and now down 17%.

  52. 52
    sane Says:

    API

    Crude UP 2.8M
    Gasoline UP 2.1M
    Distillates UP 293K

  53. 53
    cargocult Says:

    Market news is like a restaurant menu. When there is bad news on the menu traders have no problem going from one item to the next. A sweet little taste of financial relief one minute and then some worry about a recession to wash it down. Anyone want to share a bite of bad weather to lift the price of gas? No I’m still feeling some upset from weak crack spreads. Don’t worry, we plan on a serving a special of capitulation some time next week if the delivery guy can get a good price on it.

  54. 54
    zman Says:

    Thanks Sane.

    Cargo – I’d laugh but you’re not wrong.

  55. 55
    VTZ Says:

    The US dollar has no business being where it is. I was one of the ones calling you crazy and I still think you are crazy if you believe in any USD strength fundamentally.

  56. 56
    Nicky Says:

    VTZ – I couldn’t agree with you more. And for that reason I still maintain this is no more than a bear market rally for the USD. I just called it as I saw it in the charts to be honest. If the USD gets to 92 then the Euro will be at 1.15. Seems absolutely unreal compared to 6 weeks ago!

  57. 57
    VTZ Says:

    It’s all just a game…

  58. 58
    VTZ Says:

    I just can’t believe I fall for it every time because I say to myself “there’s no way those retards at the bank are stupid enough to bid the dollar up so high”… then after I get hosed I realize that yeah they are that retarded and they are just distributing dollars to people for too much.

    Then the next time something like this happens I fall for it again.

  59. 59
    zman Says:

    CNBC talking dollar right now. Guest point out the timing on the dollar rally is very unfortunate since we want to inflate our way out of debt. I’d add that a weak dollar makes U.S. exports more attractive too and that this strength could end up lengthening the downturn.

  60. 60
    tater Says:

    VTZ- saw this on a board, can’t remember which one, but the author called himself Brewful. Seems fairly well thought out:

    brewtul
    Oct 11 09:44 PM
    In the later stage of credit bubbles all assets inflate massively. That includes stocks, bonds, real
    estate, and finally commodities. Gold rides up this inflationary wave. Then the credit bubble pops and all assets
    begin to deflate. Initially panicked investors seeking to perserve wealth flee into cash and short term treasuries.
    That causes the reserve currency of the world to rise. That is where we are now in the credit/debt cycle. Gold
    gets sold like everything else as there is a “dash for cash”. The next phase is when the central banks respond by
    trying to reinflate by putting the printing presses in overdrive. That strategy doesn’t work. In no credit bubble in
    history has that strategy worked, yet it doesn’t stop the bankers from trying. At that point the value of the currency
    is destroyed and the last paper assets, cash and short term treasuries lose their ability to store value. Then the
    flight into gold ensues. That is how it has happened in every asset bubble in history. Make no mistake – when the
    flight into treasuries ends the dollar will crater and lose its status as the reserve currency of the world.

  61. 61
    tomdavis12 Says:

    The general view among global economists,
    and almost everyone else with at least an
    elementary education, is that the US dollar is
    overvalued, and must decline. Any country that
    runs a current account deficit for 17 years in a
    row, with the most recent decade averaging
    over 5% of the GDP, needs to either drastically
    devalue or slam on the economic brakes to cut
    imports – or both. Economic theory also
    argues that a weakening economy will lead to a
    declining currency, as capital will tend to flow
    offshore when the prospects for domestic
    growth are low. As the US is heading into a
    recession and its current account deficit is sky
    high, it would seem very likely that the dollar
    would drop.

    However, it is strengthening sharply and this
    has happened before. In the last 30 years, two
    times before, major economies have gone into
    severe recessions while their currencies
    responded by rallying for years and doubling in

    value too. The US dollar rallied from about

    1.70 Deutschemarks to over 3.45 marks
    between January 1980 and February 1985.
    During that period the US suffered two
    recessions and saw its current account deficit
    deteriorate significantly. The Japanese yen
    strengthened from about 160 to the dollar at
    the end of March 1990 to 80 in March 1995,
    while the equity market collapsed and their
    economy deteriorated. In both cases, powerful
    capital inflows strengthened the currencies
    even though the countries were wracked by
    recession. The driving force behind these
    inflows was a pullback of American and
    Japanese banks from international lending
    forced upon them by the recessions. Today,
    shrinking capital bases have forced US banks
    to scale back, which means that foreigners
    must buy dollars to repay loans. Deflation
    means a strong currency.

    These are some comments from a commodity manager that is up 8% YTD. They are mostly currencies. This gives you some fundamental thoughts on why the US$ can go higher

  62. 62
    BossmanG Says:

    tomdavis, may I ask which commodity manager that is from?

  63. 63
    VTZ Says:

    Ok, well the foundation of the US is increasingly on less and less. Just because your “capital base” is decreasing (because the “value” wasn’t there in the first place or was destroyed) doesn’t mean that the dollars you have left are worth more…

  64. 64
    VTZ Says:

    tater, that guy echoes my thoughts exactly… I’m just laughing that people are foolish enough to buy the dollar now to run it up and up on nothing…

    I go back to my flaming bag of shit example that I used a while ago.

    If I have a bag of shit and someone assigned a value of 10 dollars to it and said I could take a loan against my bag of crap, I would certainly take the 10 dollars.

    Now when people realized that my bag isn’t worth 10 dollars and its worth pennies it doesn’t mean that those pennies are worth more. They are worth the same as when you paid 10 dollars, but the “value” (your capital base) was destroyed.

  65. 65
    VTZ Says:

    Now I have to pay back that guy, but I don’t have the 10 dollars because I bought doodads from another country (who is actually producing something). Who is more screwed? The person taking my 10 dollars and spends it in their country or me?

  66. 66
    rlogan1301 Says:

    in your analogy VTZ..who would be the person opening the door and stompping on the flaming bag of shit? hehe.

  67. 67
    VTZ Says:

    bankers…

  68. 68
    rlogan1301 Says:

    in regards to 60 and 61..how would one short the $? is there a etf?

  69. 69
    tater Says:

    VTZ-
    Have to remember that being right and being rich are two different things. Being right can get you very poor in a hurry.

  70. 70
    mahout Says:

    Nicky #44,

    I sympathize.
    Strangely enough, I have gotten over being depressed about these shocking drops. Having gone to cash with all I’m going to(I believe the unsold ones will eventually have to come back),these factors in my thinking are what builds me up now:

    1.Markets never go in one direction forever.

    2.Credit, including all forms such as short term corporate, intermediate corporate (lines of credit), bank to bank, mortgages and even Corporate Bonds will unfreeze. I base this upon the enormous power of the FED and the Treasury to lean on banks to get their part done, and the enormous power to inject liquidity into the economy.

    3.We will have to go through a painful period of deleveraging across the board which means lower earnings for just about every business. I don’t believe the stock market has fully priced this in yet, so more down to come.

    4.I see FANTASTIC bargains in the process of developing in the stock market and we haven’t hit bottom yet.
    Sam is right. Mr. Market is going to let us have some juicy plums for picking in the energy patch and also elsewhere.

  71. 71
    zman Says:

    Roger that Tater.

    Stocks treading water, back to open levels as the Dow “recovers” to down only 225 on the day.

  72. 72
    PackMan Says:

    tater 60. sounds like Joe Biden talking. sounds like he knows what he’s talking about but he probably doesn’t. Doesn’t present any facts or data; just a lot of “this is the way it always works” stuff.

  73. 73
    Nicky Says:

    Oil off over 5 bucks now. Funds still liquidating? Last one out turn the light off!

  74. 74
    antrimshale74 Says:

    XLE in a free fall right now.

  75. 75
    tomdavis12 Says:

    Re 62 FX Concepts

  76. 76
    zman Says:

    Been watching, thanks for the currency thoughts all. Going to lunch. Make market rally while I’m out.

  77. 77
    Nicky Says:

    broader market – if we are going to see a halt to this slide then potential support areas on spx are 899, 891,886

  78. 78
    Nicky Says:

    Opec president saying market is oversupplied and some tankers can’t find buyers…

  79. 79
    antrimshale74 Says:

    That is a really bad sign.

  80. 80
    Nicky Says:

    Its almost hard to believe the broader market gets no comfort from lower energy prices.

  81. 81
    antrimshale74 Says:

    Nicky, I’m thinking that the main driver here is panic into perceived assets. Apparently, it seems, that the entire world wants to buy US T-bills because everything else everywhere is a mess. This, plus the obviously massive worldwide economic contraction, is pounding all commodity prices into the ground. This will destroy developing economies, as well as the resource-rich countries like Australia and Canada, thus further weakening the world economy. Finally, the strong dollar is going to really put the hurt to all US companies operating overseas and pretty much destroy exports. What we really need to see as a sign of faith that better times are ahead is a weakening dollar and a strengthening of commodities, especially copper. In short, I think the commodity sell off further panics the markets, although I am sure my neighbors will appreciate cheap gasoline.

  82. 82
    antrimshale74 Says:

    I meant to say “perceived safe assets”.

  83. 83
    VTZ Says:

    Like financials… right?

  84. 84
    zman Says:

    Oil closed down 5.40 (down 7.4%) at $66.80. Products off a little less.

    NG pretty much shrugged off the move closing down less than 1% (UNG down 2%)

  85. 85
    rlogan1301 Says:

    getting ugly…fcx down 17%…never seen it go under 27…amazing.

  86. 86
    zman Says:

    Proof positive fundamentals still out the window is the seemingly good debt paydown going on at CHK (on plan as per promises), good hedges in place which appear to be safe, 92% gas production profile with gas flat today unlike oil and still the stock gets clocked for 9%.

  87. 87
    Nicky Says:

    CNBC calling for $50 oil – must be due to turn. I remember only a few weeks back they were saying $200…..

  88. 88
    cargocult Says:

    How does this oil price decline affect the refiners?

  89. 89
    zman Says:

    A very slight positive as products are off almost as much on a percentage basis. Those names with a concentration on heavy oil like VLO and FTO see a little of their margin advantage erode here as the spread between light and heavy crudes contracts.

  90. 90
    VTZ Says:

    …and Suncor feels the squeeze from the L/H differential as well.

  91. 91
    ram Says:

    Unless we get an abrupt move up, the 8500 level will not hold. Nicky, what was your alternative scenario?

  92. 92
    Nicky Says:

    Very low volume on that move down. Ram give me a few minutes.

  93. 93
    zman Says:

    HK one of the better performances on the day, down only 7%

  94. 94
    ram Says:

    Well we got that move up.

  95. 95
    reefguy Says:

    XB1- $1.56/gal +tax .50 + .50 to make and ship gives us $2.56 at pump in ten days.

  96. 96
    Nicky Says:

    My God what a last half hour. Its left behind a very bullish reversal candle on the spx charts….volume really picked up on the move up too.
    Ram the alternative count says we are already in v down – maybe I am in denial but just don’t see it right now to be honest.

  97. 97
    zman Says:

    NFX call starting. No operations update. Focusing on budget, debt, and the ability to shift between projects…sign of the times. Can’t remember the last time they did not bother to go over the operations.

  98. 98
    zman Says:

    NFX call theme: Cash is King

    Live within cash flow.

    Flexibility to react to commodity or credit markets

    Can make further cuts to capex in 2009

    Budget breakdown:
    #1 Woodford shale. 12 rigs now, goes to 14 by mid 2009, then hold. See 38% growth here in 2009
    #2 Monument Butte Oil. 5 rig program planned. >50% IRR at $75 oil
    #3 Williston Basin oil. Increase capital and rig program. 3 rigs (2 of those come from former gas rigs in the Rockies)
    #4 Deepwater Gomex – most of the projects they currently have under
    In 2009 they see drilling 2 deepwater exploration wells. They were going to drill 4 to 5 wells but the rest are
    #5 International expenditures all go to development (no exploration), see deve bringing production up 15%

    What’s out: Suspending deep gas in Monument Butte. Acreage is primarily HBP so no long term loss.

    JPM is lead bank of 18 banks.

    Exit 08 with 750 to 800 mm available on revolver.

    First bit of debt comes due 2011.

    Hedges: Gas 65% of 2009 at good prices, 13 separate counterparties and no knockouts.

    Oil hedges at $130 for swaps and collars at $107 floors. No problem counterparties.

    Budget 2009: $1.55
    $750 mid con
    $300 rockies – biggest piece is Monument, then Williston (Bakken)
    $225 gomex – 70% for the 5 ongoing development projects.
    $180 onshore gulf coast
    $90 other

  99. 99
    zman Says:

    NFX Q&A

    Rig count not falling yet so not seeing day rates fall yet… you have to think this changes soon.

    Pad drilling savings.

    The flat production question: probably in the $600 to $700 million range.

    Equipment and service tightness:
    Things are still relatively tight, again back to the rig count. So no slack yet on pipe or rigs or people. Maybe a little in the midcon but really not loosening up yet. So steel demand remains high and yet we have moves like X falling from 190 in May to 35 today.

  100. 100
    zman Says:

    3 analysts asked questions on the Q&A. That’s got to be an all time low for them.

  101. 101
    mimster90 Says:

    I just have to be 101.

    Isn’t tomorrow the liquidation of Washington Mutual?

  102. 102
    zman Says:

    Dunno mim, anyone?

    As far as I know, tomorrow is the day that so far this quarter the most energy companies will report results and interest, if it can be judged by the NFX call, will be pretty low. In other words, earnings are unlikely to help the stocks but they can definitely hurt. Unless they are coupled with catalytic news. Without catalytic news, like HK all the way back to Tuesday, stocks in the play are hit or miss for solid but not spectacular news to matter. I do think NFX comments on the deepwater exploration program may spell further trouble for NE, RIG, DO and the likes as that part of E&P budgets dries up and blows away.

  103. 103
    bill Says:

    I just took a stake in HNR

    Risk: Chavez country risk, & oil price

    Opportunitues:

    -Trades at 7.25
    -No debt cash 4 bucks per share
    -expanding drilling from 1 to 3 rigs
    -More dividends from subsidiary(petrodata) to corp for 2008 results will add to cash
    -company buying shares, i expect them to keep buying
    -insider buying
    -drilling new well in louisianna– worth 7 bucks per share if they hit oil, results any day now
    – 2 intl opportunities
    -company thinks stock is worth 50++

    earnings out 11/4 and some of this (good news) will be discussed methinks

  104. 104
    bill Says:

    hk is just killing me..ng prices arrrrggg

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