04
Nov

Tuesday Morning – More Earnings

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Good morning. For you U.S. folks, don't forget to vote.

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Crack Spread Update - Ugly
  4. Earnings Watch - EOG, APC, PQ
  5. Stuff We Care About Today - DVN deals with CVX
  6. Odds & Ends

Holdings Watch - Wiki tab is updated.

     

  • Bought (5) EOG November $85 Calls (EOGKQ) for $2.15 with the stock off $5.80 on a weak day for the group. Earnings tomorrow. I expect them to reign in their capital budget forecast for 2009 based on where gas prices are now which will bring growth down to the lower end of their longer term growth range of 13 to 15%. Should be able to talk about some more big Bakken wells, their first Haynesville horizontal, and maybe some talk of the new oil shale plays.

 

Commodity Watch

Crude oil fell $3.90 to $63.91 yesterday. Demand fears (renewed I guess) was said to blame but a small rally in the dollar helped along with a bit more profit taking. I think OPEC will step in before their December meeting to again cut production quotas. This morning crude is up slightly.

  • Saudi's Cut Production: From Upstream ~ "Saudi Arabia, the world's biggest oil exporter, has reduced exports by around 900,000 barrels per day from a peak in August, one source said." ZComment: Iran, UAE, and Qatar have also confirmed they are cutting back production. Upstream is generally a credible source and the early fears and the cause behind the drop in crude prices after the last OPEC meeting was that the Cartel would not act quickly to make the cuts it promised to, and definitely not by the Nov 1 deadline. Well, here ya go.

Natural gas inched $0.05 higher to close at $6.84 despite the drop in crude, a warm forecast for the week, another EIA report showing August production was pretty healthy, and a fattened gas directed rig count at the end of last week. Go figure that all of this is already discounted in the extremely weak gas prices we are seeing, especially in some of the more prolific fields that have been driving the recent growth. This morning gas is trading up a dime.

 

Crack Spread Update: Uglier than Ugly. Somethings gotta give here. Guys, go on holiday, perform all the maintenance you can. Margins stink far worse than down 3 to 5% gasoline consumption would indicate. Pretty hard to get excited about the group at this point but these stocks usually are discount an economic recovery first and have actually been showing signs of renewed vigor. I'll keep watching but the early stage of a recovery is very difficult to play via options unless you are extremely nimble, buying into either extreme weakness and waiting for a green day or two or buying into strength and getting a broad market rally for support. I've included several graphs so you can see just how poor margins are at present.

Earnings Watch:

EOG Reports Strong 3Q08 Numbers, Guides As Expected. 

  • The 3Q Numbers:
    • Revenue: $3.2B mm vs $1.738 B expected. This would have exceeded estimates without a large mark to market hedge gain.
    • EPS: $2.34 excluding the big MTM gain vs $2.23 expected.
    • CFPS of $4.55 vs $4.88 expected. Estimates for cash flow were all over the place ranging from $4.12 to $5.49.
    • Production: In line with target. 82% natural gas but liquids continue to inch higher, mostly due to the Bakken.
  • Operations update: 3 nice wells announced in the Bakken, (2 of them north of 3,000 bopd), nice well in the Barnett, and the first rates announced out of Horn River, British Columbia. Very nice rates there. No update on oil shale projects will leave analysts wanting more.
  • Guidance:
    • 2008: on target for 15% goal.
    • 2009: 10 to 14% with the upper end focused on higher gas prices and the lower focused on the possibility that gas will be $7 next year and therefore includes an expectation that they slow drilling. This is in line with past estimates although 10% may be seen as a little low ball compared to past thoughts.
  • Balance Sheet: 10% net debt to cap, down from 12% last quarter. Nice and they remain on target to be net debt free (cash above their long term debt) sometime in late next year or early 2010, also, depending on commodity prices.
  • Conference Call: Tuesday, 9 am EST

APC Crushes 3Q Numbers

  • Revenue of $6.149 B vs $3.8 B
  • EPS of $1.62 vs $1.48
  • CFPS of $7.52 vs $4.17, I'd note that they just barely outspent cash flow in the third quarter.
  • Production: averaged 552,000 BOEpd for the third quarter, hit 600,000 boepd for first time during the quarter.
  • Lease operating expense: a very solid $0.89 per Mcfe.
  • Guidance: 4Q only, as expected
  • Financial:Pretty solid.
    • bought back $600mm stock,
    • retired $350 mm in debt.
    • cash balance of just under $2 B
    1. $1.3 B bank revolver completely undrawn
    • Net debt to total cap now at 35% (they show 41% but don't count their hefty cash balance)
  • Conference Call: Today, 10am EST. I probably won't listen live as I've got EOG and PQ to consider but plan to circle back later in the day.

PQ - Stormy Weather Impacted Quarter. We knew they'd take a production hit for the Gulf storms and  it did result in flat production. Low prices also triggered a small ceiling test writedown of their reserves. If you have questions about that please ask in the comments section but for now let me say it's no big deal. In a nutshell, the quarter was ok and the Street will give them a pass for being in the way of the hurricanes. Cost control is another issue and they need to give investors some sense of when it will be reigned in.

  • Revenue of $77 mm vs $88 MM
  • EPS of $0.32 vs $0.34
  • CFPS of $1.34 vs $1.10
  • Production: 87.4 MMcfepd, about flat with 3Q07 due to Gomex storms ... this is deferred, not lost volumes. Without the storm impact, volumes would have been up 14% YoY.
  • LOE/ Mcfe: $1.41 which is extremely high for them and partially due to lower volumes (the denominator in that equation) caused by Gustav and Ike. Still, they mentioned raw materials inflation being a contributor as well so hopefully on the call they will talk about reductions in pricing pressures going forward.
  • Guidance:
    • Production: up 11 to 17% sequentially
    • LOE guide is too high for the fourth quarter ($1.60 to $1.70) with $0.23 coming from more storm costs).
  • Financials: 36% debt to cap.
  • Operations Update: a couple more nice wells announced in the Woodford including one big IP at 12+ MMcfepd. The key here is they continue to see upward movement in the completion rates of new wells. Continued progress in their Buda oil program and a 30% increase in the exit rate of their Fayetteville Shale production (still small at 6 mm/d) vs 2Q08 levels.
  • Conference Call: Today, 9:30 am EST

Stuff We Care About Today:

DVN Chevron Swap Assets For Stock. Probably a net positive for DVN as they get cash and producing assets for CVX stock which should translate into putting a higher multiple on those assets.

FSLR On A Rampage. I said the other day when they reported earnings and confirmed that their principal method of getting paid (government subsidized buying) was not in jeopardy in any of their major or developing markets, that this was a big deal. The stock has flown up and is beginning to drag the group (as tracked by the TAN ETF) up with it.  I will not fall in love with these prices but will lock in gains soon.

Reporting For Wednesday: PXD, XTO, RIG, DVN, SUN, KWK

Odds & Ends

Analyst Watch: (AGU) and (TRA) upped to Buy at Citi, (DRYS) target cut from $48 to $35 at Cantor but maintained Buy rating.

136 Responses to “Tuesday Morning – More Earnings”

  1. 1
    zman Says:

    FSLR called to open at $170…that’s just sick.

  2. 2
    Sambone Says:

    By Nick Heath
    Of DOW JONES NEWSWIRES

    LONDON (Dow Jones)–Crude oil edged higher in Europe Tuesday, driven by
    stronger regional equity markets, but expectations of weakening demand linked
    to a slowdown in global economies still kept a handle on prices.
    ICE Brent crude fell back below $60 a barrel to a new 20-month low at one
    stage, with traders still reacting to Monday’s raft of bearish U.S., European
    and Chinese manufacturing data, analysts said.
    “There’s obviously great concern on the global growth outlook. The real
    economy has definitely not bottomed out yet,” said Walter de Wet, head of
    commodity research at Standard Bank in Johannesburg.
    Equity markets are expected to remain an intermittent influence on crude
    prices, particularly in the run up to the announcement of the winner of
    Tuesday’s U.S. Presidential election, analysts said.
    “We feel that despite some occasional disconnects between oil and equity price
    movements, any large swings in the stock market will continue to have an impact
    in the oil markets,” said Marius Paun, energy broker at ODL Securities in
    London. “All eyes will surely be on the U.S. presidential elections, as a quick
    reaction in equities cannot be ruled out that could easily spill over into
    oil.”
    At 1221 GMT, the front-month December Brent contract on London’s ICE futures
    exchange was up 27 cents at $60.75 a barrel, having earlier fallen to $58.38 a
    barrel, its lowest since Feb. 21, 2007.
    The front-month December light, sweet, crude contract on the New York
    Mercantile Exchange was trading 62 cents higher at $64.53 a barrel, up from an
    intraday low at $62.25 a barrel.
    The ICE’s gasoil contract for November delivery was down $6 at $639.00 a
    metric ton, while Nymex gasoline for December delivery was up 175 points at 138
    cents a gallon.
    Crude buyers continue to wait for confirmation of Saudi Arabia’s response to
    the Organization of Petroleum Exporting Countries’ recently announced 1.5
    million barrels a day production cut.
    Industry analysts say while Saudi Arabia, Iran, Kuwait and the United Arab
    Emirates will probably shoulder the bulk of the supply cuts, Iran, Kuwait and
    the U.A.E have already been reported taking steps to adhere to the reduction.
    “This is causing some apprehension, as it indicates that the Saudis do not
    seem to be rolling back supply with the same degree of urgency that others
    have,” said Edward Meir, analyst at MF Global in New York.
    Some industry sources in Europe said Saudi was unlikely to contact its
    European buyers on volume cuts until December official selling prices are out,
    expected later this week.
    Meanwhile, lagging oil products prices have raised the specter of refiners
    reducing their runs to avoid making a loss on the products they sell. It’s a
    development that, should it emerge, would further erode demand for crude.
    Nymex gasoline refining margins, or crack spreads, were seen at around -$6 a
    barrel according to industry sources Tuesday, implying a negative return for
    producing gasoline.
    An official from the French CGT union said late Monday that French oil major
    Total SA (TOT) may pare back its gasoline production capacity in Europe amid
    what it sees as an “irreversible” decline in demand from the U.S. Staff at
    Total’s European refineries are being asked to reflect on how best to adapt,
    the union official said.
    “(At these levels) refiners will not produce anything other than the basic
    minimum gasoline output,” said Jim Rintoul, analyst at London-based trade
    advisory TheOilTrader.com. “During the 1990s, refineries were closing because
    margins were so poor. We might now see another cycle of cost cutting in the
    refinery sector.”

    -By Nick Heath, Dow Jones Newswires (Angela Henshall in London and Kai-Pin Yee in Singapore contributed to this
    item)

    Dow Jones Newswires
    11-04-08 0740ET

  3. 3
    Sambone Says:

    New ETF’s

    3x BEAR FUNDS
    BGZ      3x large cap
    TZA      3x small cap                 
    ERX      3x emerging market bear
    FAX      3x financial market bear

    3x BULL FUNDS
    BGU     3x large cap bull
    TNA      3x small cap bull
    ERX      3x energy bull
    FAS      3x financial bull

  4. 4
    zman Says:

    Thanks Sam, good to have ya back.

    ERX eh? Cool beans.

  5. 5
    BirdsofpreyRcool Says:

    Chrysler on the tape this morning, saying that the “worst of the storm is over.”

    Wonder if they are talking about the weather?

    Anyway, corporate credit (CDS) clearly better this morning.

    Let’s call it IG 191 (-8 from close) to start.

  6. 6
    john11 Says:

    Any thoughts re PQ earnings and operations release?

  7. 7
    zman Says:

    Thanks Bird

    On EOG CC

    No change in their core philosophies so far. Will let you guys know.

  8. 8
    john11 Says:

    oops just noticed above..sorry

  9. 9
    zman Says:

    John – my thoughts are in the post.

  10. 10
    zman Says:

    EOG CC:

    Plan not to grow N. American gas below $8. In short, will not grow gas if gas is price too low.

    Do see good growth in liquids

    Don’t see themselves doing M&A or large acreage positions

    Drilling inventory of 15 years, so no hurry to add new prospects

    If there is a moderate or cold winter they will pursue the higher growth path (14%).

    Already seeing some decrease in some service costs

  11. 11
    zman Says:

    EOG CC #2

    70 MMcfgpd curtailed in Rockies due to low price in October.

    80 MMcfgpd curtailed accidentally in Trinidad due to mechanical problem.

    Still going to hit their 2008 15% target

  12. 12
    zman Says:

    Oil up as Saudi (doesn’t) deliver, lol. Real battle between falling demand and falling supply now to dictate price.

  13. 13
    BirdsofpreyRcool Says:

    IG 193 (wider)… direction counts more than levels (because levels are still amazingly, stupidly, scary wide in credit)

  14. 14
    BirdsofpreyRcool Says:

    Those EOG calls gonna pay off nicely…

  15. 15
    zman Says:

    EOG CC #3.

    At $55 oil, they see 100% IRR on their Core acreage Bakken wells, 30% on the non-core acreage wells.

    Pilot CO2 trial results due mid 2009 to see if they can increase 10% recovery factor.

    BC Horn River – believe their 3 wells are the best completed there to date.

    North Barnett oil – slow ramp first quarter late 1Q09. Looking for 250 bopd per well here. This is the first rate given. May be low to some people’s expectations but EOG has never said it would be quick to build.

    Haynesville – 150,000 acres, not yet fracced on first well.

  16. 16
    zman Says:

    EOG CC #4

    Said they “may surprise some people with regard to international results in 2009 (N. Sea, Trinidad, China)”

  17. 17
    BirdsofpreyRcool Says:

    EOG balance sheet management sounds just about perfect for this environment. Not too conservative, but debt level and maturities very appropriate and manageable. Like the undrawn $1B revolver too. Good liquidity backstop.

  18. 18
    zman Says:

    EOG CC#5

    Estimated debt to cash flow on $75/$7 deck, EOG could pay off its debt entirely within 3 months. Wow. That’s stronger/faster than I said in the post because I really didn’t think they’d get that aggressive. They say this is the Street’s current amalgamated view of what they could do and not what they will do but they are presenting it and not refuting it. Wow.

  19. 19
    zman Says:

    EOG CC #6

    Gas Macro Thoughts From Mark Papa:

    Thinks supply with only grow 0.6 Bcfgpd in 2009. That’s like slamming on the brakes from 100 MPH. He’ll need to back that comment up in the Q&A.

  20. 20
    zman Says:

    EOG Q&A #1

    Gas Macro from Papa:

    Canada down 0.9 Bcfgpd
    Gulf of Mex down 0.5
    Barnett up 0.2 (that’s just way low to current Street thinking)
    Rockies up 0.3 (limited by Rexx)
    LNG up 0.4
    Rig Count (200 to 400 drop overall)
    EOG has moved 3 rigs out of the Barnett, seeing others doing same.

  21. 21
    zman Says:

    EOG Q&A #2

    Talking about not doing M&A but see lots of farm in opportunities next year. Maybe doing a lot of this 2009. Don’t see getting into any competitive bidding war for properties.

    The tone of the call is perfect for this environment. If I were not already long I’d be adding here.

  22. 22
    zman Says:

    EOG Q&A #3

    Bakken capacity. “Subsumed” by all the success.

    Trucking half of their volumes now (which is costly). By mid year they see getting the pipeline capacity in place to alleviate the trucking differential. Nice. Also building a rich gas pipeline to take away the gas they are stripping. Being built by EOG.

  23. 23
    BirdsofpreyRcool Says:

    z – i’ve been hopping between calls… did EOG say anything about communication between 3 forks and middle bakken?

  24. 24
    zman Says:

    Not that I heard but I did grab a cup of coffee for a minute…I don’t think so.

  25. 25
    Sambone Says:

    Correction #3

    ERY = 1000® EnergyDirexion Energy Bear 3x Shares ERY Index -300%

    NOT ERX!!!!!

    http://www.ibtimes.com/prnews/20081103/direxion-launches-eight-new-leveraged-etfs.htm

  26. 26
    zman Says:

    EOG Q&A #4

    BEXP, CLR, WLL probably get a boost off this EOG call.

    I think analysts will get off this call, maybe mid call and pound table here.

    Thanks for the correction Sam

  27. 27
    zman Says:

    EOG Q&A #5

    Costs coming down: 5% decline so far in Rigs and other areas plus fuel costs down.

    Three Forks Sanish – don’t see too much prospectivity in the Parshall/Austin. Outside of that area they think it is highly prospective. I recall them saying last quarter the TFS was prospective only on a spotty basis. This is a different, more bullish tone. 2/3 of their acreage is outside Parshall area.

  28. 28
    BirdsofpreyRcool Says:

    don’t forget about the little call option in the Bakken… KOG

  29. 29
    zman Says:

    ZTRADE: $10KP TRADE

    Sold the (2 of the 5) EOG $85 November calls for $3.50, up 63%. Still holding the November $75 calls here. See comments in the post and comment area for reasoning here after a very good quarter, I’m just locking in a rapid rise in the most sensitive call position.

  30. 30
    Sambone Says:

    By Gregory Meyer
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Crude oil futures rebounded more than $2 a barrel
    Tuesday on signs recent cuts from the Organization of Petroleum Exporting
    Countries are taking hold.
    Light, sweet crude for December delivery was recently up $2.52, or 3.9%, at
    $66.43 a barrel on the New York Mercantile Exchange. Brent crude on the ICE
    Futures exchange rose $2.38 to $62.86 a barrel.
    In September, OPEC members committed to comply with output quotas, effectively
    taking barrels off the global oil market. Amid a sharp decline in crude prices,
    the cartel in late October agreed to further trim output by 1.5 million barrels
    a day, effective Nov. 1.
    The effects of the first decision began to materialize last month, a Dow Jones
    Newswires survey showed. OPEC’s daily production fell by 90,000 barrels a day
    from September to 32.050 million barrels a day. Output by the group’s 12
    members with production quotas fell more dramatically, with countries pumping
    150,000 barrels a day, or 0.5%, less at 29.800 million barrels a day, according
    to the survey, which is based on input from oil traders, analysts and industry
    sources.
    “It seems OPEC members are adhering to their cuts,” said Timothy Jennings,
    president of brokerage Vantage Trading in New York. “That provides as a basis”
    for the move higher.
    Traders also pointed to a Reuters report that top OPEC exporter Saudi Arabia
    has already significantly cut crude supplies to some customers. One source
    cited by the news service estimated Saudi Arabia’s exports at about 900,000
    barrels a day lower than August levels.
    In Asia, oil refiners and a major global oil company told Dow Jones Newswires
    Tuesday that they haven’t yet received formal notice from Saudi Arabia on term
    supply allocations to the region.
    Crude also followed Asian and European stock markets higher, as equities have
    become a key indicator of economic sentiment for oil traders concerned about
    the strength of global demand. In the U.S., stocks opened higher as the
    presidential election was underway.
    Besides digesting election results, the market on Wednesday will also take in
    a fresh set of weekly data on U.S. oil stockpiles, supply and demand. In the
    week ended Oct. 31, analysts polled by Dow Jones Newswires predict inventories
    of crude rose by 1.2 million barrels, gasoline fell by 500,000 barrels, and
    distillates, which include diesel and heating oil, rose by 1 million barrels.
    The poll forecast the rate of refinery use rose by 0.4 percentage point to
    85.7% of capacity.
    On the Nymex, oil products futures were stronger than crude. Front-month
    December reformulated gasoline blendstock, or RBOB, rose 7.30 cents, or 5.4% to
    $1.4355 a gallon. December heating oil rose 11.12 cents, or 5.6%, to $2.0940 a
    gallon.

    -By Gregory Meyer, Dow Jones Newswires

    Dow Jones Newswires
    11-04-08 0939ET

  31. 31
    zman Says:

    Thanks Bird, I won’t. Note the TFS comment in 27.

  32. 32
    BirdsofpreyRcool Says:

    #31. yep. thanks. caught it!

  33. 33
    zman Says:

    Bird – I’ve never been a big fan of BEXP but I think they are in the right place at the right time for the Bakken at is cresting $8. CLR obviously too and I am a fan of those guys.

    FSLR at 171. Zoiks.

    HK putting on a little rebound here a little better than the group.

    GMXR – missed the dip, too busy, stupid miss there.

  34. 34
    zman Says:

    more GMXR – may add that anyway with any cooling today, nasty spreads so you don’t want to pay up.

  35. 35
    zman Says:

    EOG Q&A #5

    Haynesville – split pretty even between Tx and La. Frac results on next Q call. 2nd well drilling now.

    LNG thoughts: See it up 0.4 Bcfgpd and there is no capacity to take more into Asia at this time. Think lowest price anyone will get for their LNG will be to take it to the U.S.

  36. 36
    zman Says:

    CNBC as always ahead of the game talking about Solar stocks up today due to a perceived Obama victory.

  37. 37
    Dman Says:

    Z – “more into Asia” from where? Not quite getting this comment.

  38. 38
    zman Says:

    He’s saying that new liquefaction coming on globally cannot be shipped to Asia as Asia is maxed out on regas capacity.

    Half listening to the APC call now.

  39. 39
    Garyinhou Says:

    Morning Z.. #27 implication for CLR regarding Parshall etc.. assuming positive but not sure

  40. 40
    zman Says:

    Gary – yep, CLR not a big player in the Parshall, but the biggest holder of Bakken area so the implication is confirming what CLR and WLL are saying outside partial, dual zone potential from the m. Bakken and TFS.

  41. 41
    zman Says:

    Tater – FSLR when you get a chance please?

  42. 42
    Coug1984 Says:

    Good moring Z — Are you looking to enter RIG before the call tomorrow?

  43. 43
    zman Says:

    ZTRADE:

    Sold the FSLR November $125 Call (QHBKE) for $51, up 325% since entry on 10/24. I continue to hold the January $210 Calls in the $10KP.

  44. 44
    zman Says:

    Morning Coug – I may take DO or NE or RIG pre that call. Probably DO but it will be a small position.

  45. 45
    zman Says:

    Natural gas up 33 cents to 7.17 on the back of up 4.5% oil which is turn up on the Saudi comments and a falling dollar. December UNG calls now down about 30%, still holding. Chart on gas looks constructive to me.

  46. 46
    zman Says:

    I’ll tell ya, its not often that I get to sell a call for $51. Glad to own the $10KP January $210 calls on FSLR today as they are finally back above water but I will be quick to take profits if this mo-mo dies in a “buy the poll, sell the election” event.

  47. 47
    Coug1984 Says:

    Z- Thanks for #44. Congrats on the FSLR trade. Very nice.

  48. 48
    zman Says:

    Wow, number 1 performer in the large cap E&P group today: CHK.

  49. 49
    1520sbroad Says:

    #48 – spoke to a couple of friends of mine that work in the convertibles space. They said they are seeing the forced selling by hedge funds drying up in their space. (They are jumping up and down about how cheap everything is convertibles wise.) This may be beginning to carryover into equities like CHK that were on the forced sale list for quite a while.

  50. 50
    zman Says:

    Thanks 1520, good thought, that.

  51. 51
    BirdsofpreyRcool Says:

    IG 187

  52. 52
    zman Says:

    ZTRADE: $10KP Trade

    Sold the EOG $75 Novembers Calls (EOGKO) for $12, up 100% since entry on 10/17. I continue to hold the half position in the Nov $85 Calls here.

  53. 53
    tater Says:

    FSLR –
    DId some research on the TA resistance areas that I have on the 60 min chart at the link (probably the last page). If you look at the orange lines, they did prove to be temp areas of resistance. The stuff I read-up on says that if one area is broken, the next area will act as a big magnet for price. Apparently true in this case. Personally, I tend to think that you are totally dialed in on this stock and you just need to what you think is right.
    TA – I don’t see anything to dispute what I saw when I made the chart, 180 still looks like an area of resistance.

  54. 54
    Dman Says:

    SD staging a breakout of sorts

  55. 55
    bill Says:

    ng up 43 cents with the 1 yr strip up about 40 cents

    very bullish for ng companies

  56. 56
    zman Says:

    Dman – see that, moving with the other stuff but better since it has been so beaten down. Earnings later this week. Still holding my almost dead Nov 17.50 calls.

    Bill – people really listening to Mark Papa at EOG. His call that supply will be flat next year is a big change from popular thinking. Glad that Aubrey has already reported so he can’t say that the Barnett is going to grow more than 0.3 Bcfgpd through him alone next year.

  57. 57
    Sambone Says:

    The following is a press release from Standard & Poor’s:

    PARIS (Standard & Poor’s) Nov. 4, 2008–Upward rating momentum for Russia and
    its oil and gas industry has come to an abrupt end with the dramatic drop in
    oil prices and major turmoil in the global financial markets. Still, our
    ratings and outlooks on the majority of Russian oil and gas companies remain
    unchanged, said Standard & Poor’s Ratings Services in a report published
    today, titled “Russian Government Initiatives Mitigate Liquidity Pressures In
    Emerging-Market Oil & Gas Industry.”
    “We expect the various liquidity measures taken by the Russian government
    and initiatives to reduce the tax burden on the oil industry to have a
    stabilizing effect, particularly as liquidity and cash flows in fourth-quarter
    2008 will be significantly impacted by lower oil prices and the export tax
    lag,” said Standard & Poor’s credit analyst Karl Nietvelt.
    These measures, combined with our use of conservative oil price
    assumptions when analyzing oil and gas companies, means that the impact on the
    ratings in the sector in Russia, Kazakhstan, and South Africa is likely to be
    limited.

  58. 58
    Sambone Says:

    By Jim Jelter

    Energy stocks moved higher in early trade Tuesday, pulled up by a big rally in
    crude-oil prices and stellar gains by some of the biggest names in the
    oil-services sector.
    The Amex Oil Index was recently ahead 5.5% at 987 points, turning around
    Monday’s modest retreat.
    Underpinning the gains was a $4.17 leap in crude-oil futures to $68.10 a
    barrel on the New York Mercantile Exchange, which traders were pegging to a
    weaker U.S. dollar as Americans troop to the polls to elect a new president.
    Anadarko Petroleum Corp. (APC) was leading percentage gainers, up nearly 9% at
    $36.08 a share.
    Anadarko reported after Monday’s closing bell a third-quarter net profit of
    $2.17 billion, or $4.62 a share, up from $481 million, or $1.03 a share, in the
    year-ago period. The company said that excluding one-time items, the profit was
    $1.62 a share, far outpacing the $1.48 analysts polled by Thomson Reuters had
    expected. Higher energy prices were the main ingredient in the report, pushing
    revenue to $6.15 billion from $3 billion last year.
    Other big gainers in the oil group included Royal Dutch Shell (RDSA) and
    ConocoPhillips (COP), both up about 6.6%, while refiner Valero Energy Corp.
    (VLO) was showing a 6.7% gain.
    The Amex Natural Gas Index was up 6% at 450 points, led by Southwestern Energy
    Co.’s (SWN) 12% leap to $38.15 a share.
    But the biggest sector gains were seen Tuesday on the Philadelphia Oil
    Services Index, which was sporting a 7.4% advance to 159 points. All of the
    index’s 15 components were solidly in the green Tuesday, led by 12% gains for
    Weatherford International Ltd. (WFT), National Oilwell Varco Inc. (NOV) and
    Rowan Companies (RDC).
    -By Jim Jelter

    Dow Jones Newswires
    11-04-08 1120ET

  59. 59
    zman Says:

    Thanks for that story Sam.

    Care to give your market reaction thoughts on the following, inquiring minds and all?

    Obama win with Senate at >=60 Dem, at under 60 dem.
    McCain in both cases too. Thanks.

  60. 60
    Pete Says:

    Z,

    Are you still holding the SWNKH ?

  61. 61
    zman Says:

    Re SWNKE, yep, up 40% from negative this morning, that one I played the wrong option on for earnings and am getting a bit lucky right now. Probably should have played same or higher strike December calls.

  62. 62
    zman Says:

    sorry, should have typed SWNKH in last comment.

  63. 63
    tater Says:

    Any thoughts about volume today?

  64. 64
    zman Says:

    Re Volume – pretty tepid.

  65. 65
    zman Says:

    Fair warning, the HK Nov $15 calls are on the table for a half position sale above the market.

  66. 66
    tater Says:

    Bothering me. So much happy happy joy joy action on TV, I’m beginning to feel like we are about to get the Mr Hyde treatment soon. Maybe I’m just getting conditioned into having that kind of attitude.

  67. 67
    zman Says:

    FYI, the $10KP is about 50% cash after that last sale and I may go to 70% before the end of the day. Not fearful of missing some kind of election rally but don’t want to be caught up in hard profit taking session…rather have the firepower to take advantage of that event.

  68. 68
    zman Says:

    Tater, we’re in sync then as I typed 67 before I saw your 66.

    Bird – how’s the credit market hanging?

  69. 69
    Popeye Says:

    Z, still holding the HK 17.50’s?

  70. 70
    ram Says:

    ZMAN – Still thinking about losing the November XOM’s soon?

  71. 71
    zman Says:

    Yes Popeye, 3 December $17.50 HK calls held in the $10KP.

  72. 72
    zman Says:

    Ram – yep, they are starting to play catchup to the other Majors today and look nice on a chart (to my layman’s eye at least). Just a little concerned that there may be an acceptance speech with their name on it. Silly, I know and were it the common and not an option I wouldn’t be concerned at all.

    If the market going up today is a validation of an Obama victory, is oil up 9% the same? Hmmm. I’ve always thought that putting more burden on the oil companies will result in less, not more, capital expended towards exploration and development, which translates into higher, not lower prices.

  73. 73
    zman Says:

    I’m part of the offer on those HK November $15 calls so if any wants to come take them off my hands so I can go to lunch that would be great, lol.

  74. 74
    Popeye Says:

    BTW I paid 2.46 for diesel at the marine fuel dock (no road taxes) yesterday.

  75. 75
    zman Says:

    Dollar down 2.2%
    Oil up 9%
    NG up 6%

    Thanks for the color Pop. Someone asked me the other day why it is so much more expensive than gasoline and I said environmental requirements and taxes. What does diesel go for at a regular station in your area?

  76. 76
    ram Says:

    How much do you want for them?

  77. 77
    Dman Says:

    Volume on USO looking to be heavy

  78. 78
    zman Says:

    I’m offering at $5.

    Good day to be a refiner, oil may be up 9.5% but mogas is up 12.5%, heat up 9.6%

    UNG hanging with NG up 6%

  79. 79
    Sambone Says:

    #59 – Smart folks I deal with are shorting today. I’m neutral. Why? Because this economy is still going down. Earnings are falling. On and on. I don’t think we are at the bottom. I think that this will be a “Stock traders” market for the next year or so. You get a 20% or even a 10% return, take it. I like MER preferred F right here at $17.22 with a yield of 10.50%. Callable at $25. Let’s say it’s called in 5 years, that’s a 20% total return per year. MER is being bght by BAC, so I think it’s alright. Stock pickers market.

  80. 80
    zman Says:

    Thanks Sam, appreciate the input/insight.

  81. 81
    zman Says:

    TAN up another 15%. Shoulda,woulda,coulda…still may.

  82. 82
    Popeye Says:

    2.67 is the lowest price in the LA (CA) area. 2.85 is probably av.

  83. 83
    Sambone Says:

    By Gregory Meyer
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Crude oil futures shot above $71 a barrel Tuesday as the
    dollar lost value against the euro and signs emerged that recent cuts from the
    Organization of Petroleum Exporting Countries are taking hold.
    Light, sweet crude for December delivery was recently up $6.97, or 10.9%, at
    $70.88 a barrel on the New York Mercantile Exchange, after climbing as high as
    $71.09, the highest since Oct. 22.
    Brent crude on the ICE Futures exchange rose $6.47 to $66.95 a barrel.
    Oil traded steadily higher as the dollar weakened against the euro, requiring
    more of the U.S. currency to buy a barrel of the dollar-denominated commodity.
    The euro was recently $1.3027, from $1.2645 late Monday.
    “You’re just seeing the dollar give back a lot of its gains in last couple
    sessions. That’s leading a lot of commodities higher,” said Raymond Carbone,
    president of brokerage Paramount Options in New York.
    In September, OPEC members committed to comply with output quotas, effectively
    taking barrels off the global oil market. Amid a sharp decline in crude prices,
    the cartel in late October agreed to further trim output by 1.5 million barrels
    a day, effective Nov. 1.
    The effects of the first decision began to materialize last month, a Dow Jones
    Newswires survey showed. OPEC’s daily production in October fell by 90,000
    barrels a day from September, to 32.050 million barrels a day. Output by the
    group’s 12 members with production quotas fell more dramatically, with
    countries pumping 150,000 barrels a day, or 0.5%, less at 29.800 million
    barrels a day, according to the survey, which is based on input from oil
    traders, analysts and industry sources.
    OPEC member Algeria trimmed oil production by 71,000 barrels a day starting in
    November, the APS news agency reported Tuesday.
    “It seems OPEC members are adhering to their cuts,” said Timothy Jennings,
    president of brokerage Vantage Trading in New York. “That provides as a basis”
    for the move higher.
    Crude also followed stock markets higher, as equities have become a key
    indicator of economic sentiment for oil traders concerned about the strength of
    global demand. In the U.S., the Dow Jones Industrial Average was recently up
    more than 270 points.
    The oil market Wednesday will take in a fresh set of weekly data on U.S. oil
    stockpiles, supply and demand. In the week ended Oct. 31, analysts polled by
    Dow Jones Newswires predict inventories of crude rose by 1.2 million barrels,
    gasoline fell by 500,000 barrels, and distillates, which include diesel and
    heating oil, rose by 1 million barrels.
    The poll forecast the rate of refinery use rose by 0.4 percentage point to
    85.7% of capacity.
    Refined oil products led the market. Front-month December heating oil was up
    21.42 cents, or 10.8%, to $2.1970 a gallon on forecasts of cold weather in the
    U.S. Northeast and Midwest over the next two weeks.
    Front-month December reformulated gasoline blendstock, or RBOB, rose 19.66
    cents, or 14.4% to $1.5591 a gallon.

    -By Gregory Meyer, Dow Jones Newswires; 201-938-4377; greg.meyer@dowjones.com

    Click here to go to Dow Jones NewsPlus, a web front page of today’s most
    important business and market news, analysis and commentary:
    http://www.djnewsplus.com/al?rnd=qYsyrujoKFsPavOl5yfDKQ%3D%3D. You can use this
    link on the day this article is published and the following day.

    Dow Jones Newswires
    11-04-08 1224ET

  84. 84
    zman Says:

    Investors less than wowed by PQ results. Not going to add any calls there for now.

  85. 85
    zman Says:

    Sam or anyone, do you see the estimates yet for the EIA numbers tomorrow?

  86. 86
    tater Says:

    Dman #77,
    Interested to get your thoughts on that.

  87. 87
    Sambone Says:

    Nothing yet. Usally I see it closer to the close.

  88. 88
    Sambone Says:

    By David Bird
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–The U.S. Department of Energy said Tuesday it doesn’t
    expect to issue any more crude oil loans from the Strategic Petroleum Reserve
    to refiners affected by hurricanes Gustav and Ike.
    DOE loaned refiners 5.389 million barrels of crude oil from the emergency
    stockpile beginning on Sept. 8. The last delivery of SPR crude was made on Oct.
    14.
    Refineries have essentially brought all units back on line that were shut down
    by the hurricanes. Crude oil processing at refineries fell to as low as 11.5
    million barrels a day in the week of Sept. 19, the lowest level since Jan. 11,
    1985, and a drop of nearly 3.8 million barrels a day, or about 25% from
    pre-storm levels at the end of August. Gulf Coast refiners bore the brunt of
    the lower operations, but some Midwest refiners had to slow operations due to
    pipelines outages.
    Refiners are scheduled to repay the oil loans by shipping crude to the
    reserve, plus an unspecified additional amount of crude as a premium payment,
    between January and May 2009.
    When refiners received the loans after the hurricanes disrupted U.S. Gulf
    Coast oil production and some pipeline flows, crude oil prices were above $100
    a barrel.
    Nymex crude oil futures for delivery between January and May 2009 now are
    trading near $70-$72 a barrel. That means that refiners receive an implied
    profit by receiving higher-valued oil from the SPR and returning oil at a lower
    cost, if the price trend continues.
    “When a refiner enters into an emergency-exchange contract, they accept the
    risk of paying back the oil regardless of the subsequent market conditions,”
    said Healy Baumgardner, a spokeswoman for DOE. “The government is made whole by
    the return of the barrels and compensated by the premium barrels regardless of
    the price.”
    DOE decided to offer the loans, rather than offer SPR crude for sale, to speed
    the process, she said. A sale would have required a presidential declaration of
    a severe supply interruption and a competitive sale process which would take 13
    days. DOE offered for sale 30 million barrels of crude and eventually sold 11
    million barrels in a coordinated global drawdown and sale of oil with the
    International Energy Agency in the aftermath of Hurricane Katrina in September
    2005.
    SPR currently holds 701.8 million barrels of crude in underground salt caverns
    along the U.S. Gulf Coast.

    -By David Bird, Dow Jones Newswires
    Dow Jones Newswires
    11-04-08 1229ET

  89. 89
    Sambone Says:

    NEW YORK, Nov 4 (Reuters) – Despite sharply higher futures
    benchmarks, spot gasoline values in the U.S. Gulf Coast firmed
    on Tuesday in very active dealings amid scheduling on the
    Colonial Pipeline, traders said on Tuesday.
    “This is an acknowledgment of value and a recognition that
    demand has not contracted to the apocalyptic levels that prices
    much lower than here imply,” said Mike Fitzpatrick, analyst at
    MF Global.
    Gulf distillates were at the top of their recent range.
    Colonial told shippers in a notice that it allocated cycle
    64 on the main distillate line north of Collins, Mississippi,
    as shipping demand exceeds line capacity.
    In refinery news, Marathon has shut a 52,000 barrel per day
    crude unit at its 76,000 bpd refinery in Texas City, Texas
    after a small pump fire on Monday night.
    Valero said it shut a 55,000-bpd fluid catalytic cracker at
    its refinery in Paulsboro, New Jersey for a few days of
    unplanned repairs late last week.
    In the New York Harbor, heating oil offers fell for a
    second day running. Demand for heating oil in the key Northeast
    market is expected to be about 25 percent above normal this
    week as temperatures rise, putting a damper on heating demand.
    U.S. crude futures rose $7, or nearly 11 percent, jumping
    above $70 a barrel, on signals OPEC members were cutting output
    in line with the group’s recent decision, the weaker dollar and
    stronger equities markets offsetting concerns about demand.
    Gasoline and heating oil futures also surged after Monday’s
    steep declines.
    U.S. GULF COAST
    Trade was very active with diesels and conventional
    gasoline all scheduling on the Colonial Pipeline.
    Despite a rising benchmark, Gulf Coast conventional M4
    gasoline for cycle 62 gained half a cent to trade at 6.25 cents
    under the the December RBOB screen as demand has not fallen as
    low as originally thought.
    Cycle 62 61-grade ultra low sulfur diesel was seen trading
    at 0.50 and 0.60 cents under the December heating oil screen,
    at the high end of recent ranges.

    NEW YORK HARBOR
    Prompt heating oil added to Monday’s steep loss, with
    offers falling to 2.00 cents under the sharply higher December
    futures, down from 1.75 to 1.50 cents under on Monday.
    Weighing on the fuel is the fact that a lot of barrels are
    coming from the Gulf Coast and warmer temperatures in the
    Northeast are putting a damper on heating demand.
    “A lot is coming up the pipe,” a distillates trader said.
    ULSD diesel was offered half a cent lower at December
    futures plus 7.50 cents and ditto low sulfur at 2.50 cents over
    the December. Jet fuel was again unchanged at 10 cents over.
    M4 conventional unleaded was traded for barrels by Nov. 6th
    at 6 cents over the sharply higher December print, up from 4.50
    to 5.00 cents over midday Monday, traders said.
    F4 RBOB gasoline held a 3.5-cent gain from late Monday at 8
    cents over December futures for prompt barrels.

    MIDWEST
    Chicago ultra-low sulfur diesel inched up half a penny,
    trading at 2.50 cents over the December heating oil futures.
    “It’s a late harvest,” said one Midwest broker, noting that
    soybeans are still being harvested in Missouri, during the time
    of year when harvest is stronger in the northern Midwestern
    states.
    In Group Three, the grade traded at 1.75 cents over
    futures, down 0.75 cent from Monday’s levels.
    Gasoline differentials in Group Three slipped another
    quarter cent, trading at 0.75 cent under the December RBOB
    benchmark.
    In Chicago, gasoline was pegged at 0.50/1 cent over the
    board, down about 0.75 cent from Monday.
    (Reporting by Haitham Haddadin, Janet McGurty, and Rebekah
    Kebede)

    Tue Nov 4 17:58:05 2008

  90. 90
    Dman Says:

    tater, I think the heavy USO volume represents a thunderclap of recognition that (as Z has been saying for a while) OPEC mean business at this point.

    Looking at the chart, it can hardly be read as the blow-off of a bullish move, since it only just started! So I don’t see how it can mean anything other than oil is going up.

    Up 12% in a day seems a bit steep & I sold some DXO up 20% from buying it yesterday. I may be regretting that sale by tomorrow but if there is a half-decent correction I’ll buy it back. That was my first trade with one of these levered ETFs and it’s an interesting complement to the option approach.

    I suppose, given the large move today, a good question would be “how far can it go?”. It wouldn’t surprise me if we see a large trading range with a bullish bias, so it may not really get very far but we might have fun getting there.

    I’m intrigued by the 3x ETFs (mentioned by Sam in #3) as a way to play an oil move, but I’ll have to study up on the underlying ERX. Anyone have any comment on it?

  91. 91
    zman Says:

    Thanks Dman.

    Nicky will be on in a bit with levels.

  92. 92
    Pete Says:

    Dman ,

    It is ERY for the energy ETF

  93. 93
    tater Says:

    Thanks for your thoughts Dman. Made a similar play and am also looking to re-enter. Walked over to vote and all I could think about was going longer oil (black stuff) and short big oil companies. I know that’s not what everybody is thinking here, but I cannot get over the “big bad oil companies” attitude that has to come to the fore here very soon. But then again, who knows what goes on behind closed doors.

  94. 94
    zman Says:

    ZTRADE: $10KP TRADE.

    Buying (10) TAN December $15 Calls (TANLC) with TAN at $13.60, up 13% today. (5) filled so far at $1.50 and I’ll probably stay at that level. This is the solar stock ETF and it is a thin trader so I have been reluctant to pay over the mid.

  95. 95
    zman Says:

    Tater – Oh don’t necessarily disagree with your thoughts in 93. Will likely flush the last of my big oil Novembers XOM this afternoon into what I think will be a rally into the close. Going to hold the Decembers into the morning at least. They are cheap but that stock will likely see some weak hands selling in the coming days.

    Got the other (5) TAN at $1.50 just now.

  96. 96
    tater Says:

    I started slowly into DUG. Noticed a couple other writers voicing agreement. Don’t know if that’s good or bad.

  97. 97
    Dman Says:

    Pete,

    as best I can make out from the press release (http://biz.yahoo.com/iw/081103/0448689.html), ERX is the 3x bullish ETF and ERY is the 3x bearish ETF, whilst the underlying is the “Russell 1000 Energy Index”, which I hadn’t heard of before, so any views on it would be useful.

  98. 98
    Pete Says:

    Dman

    I must of had it wrong was going off re:25 by Sambone

  99. 99
    zman Says:

    ZTRADE: $10KP TRADE

    Added (5) NE December $40 Calls (NELH) for 1.28 avg cost. This is a play on RIG earnings tomorrow. Kind of a back handed way to play it but NE is cheap and can perform well given DO’s prior comments and RIG’s comments tomorrow, especially its comments on the Jackup market.

  100. 100
    srp Says:

    Per 76, diesel is more expensive because there is a global market for diesel vs. gasoline. Meaning its the fundability and the fact that other countries are willing to pay the freight to incentivize US refiners to produce diesel and send it abroad. Diesel demand is down more than gasoline, so clearly it is not US demand. Although the taxes are slightly higher too.

  101. 101
    zman Says:

    SRP – didn’t the change to ULS requirements result in more expensive diesel in the US relative pre Oct. 2006 levels (think I have the date right)?

  102. 102
    BirdsofpreyRcool Says:

    comments from the credit desk: accounts are shorting credit… not covering in this “rally.” Perception is that mrkt will be down tomorrow.

    From where I sit, it’s a tough call. Can see the mrkt heading either way tomorrow. That said, what ever direction it takes, can’t imagine the move will be small. I would expect to see a large move in the VIX… just not sure what direction. When in doubt, stay flat.

  103. 103
    TEXWS6 Says:

    re #100:

    Also think about US demand associated with the rig count. Some of our rigs consume 100gals/hr. That doesn’t even take into account 22pumps on location for a Haynesville frac job, TONS of demand!

  104. 104
    srp Says:

    it only cost about 4-5 cents a gallon to make ULSD (15ppm) versus the prior ULS (500ppm). It really is global demand for power generation driving US prices. Let’s put it this way, in 2007 the US exported 270 thousand barrels a day and in August we exported 850 mbpd.

  105. 105
    zman Says:

    Thanks for setting me straight SRP. Hear on the export demand and I also here VLO saying on their call that demand from Europe remains quite robust and they see increased demand for diesel from Latin America. Any thoughts there.

  106. 106
    kyleandy Says:

    z any thoughts on PXD as a pre-earnings play today

  107. 107
    srp Says:

    My only thought is it’s too bad refiners make less than 30% distillate and 50-55% gasoline by nature. That being said, if global slowdown means less distillate, then refiners would suffer as the gasoline margin in the Gulf and Midwest is basically zero.

  108. 108
    zman Says:

    Thanks srp

    Kyle – I like them, probably should play, watching this little pull back in the market/group for an entry. PXD has been very busy last few quarters, should have lots to talk about. One hitch is debt load but that’s probably already reflected in the stock.

  109. 109
    ultyguy Says:

    ZMAN – thanks for the EOG trade yesterday. Got in at $2.15 and got out at $5.00 this morning.

  110. 110
    zman Says:

    Hey, don’t thank me, thank Papa & Co. for being the conservative guys that they are.

  111. 111
    zman Says:

    Market looks asleep, volume still low in energy land. Actually a little red on the screen now with many names having given back 2/3 of their run today. Should be a pretty interesting last half hour.

  112. 112
    benbobby Says:

    Zman,any info re:inventory report tomorrow?tks

  113. 113
    zman Says:

    BB – I have not yet seen the survey results for what the Street is expecting. Sometimes gets delayed if the reporters are excited about something else.

  114. 114
    BirdsofpreyRcool Says:

    interesting comment from another PM… he trades across a lot of different commodities and notes that he is seeing a worrying indicator today. “Over the last 10 months, whenever the uraniums join the rally party, the commodity run is nearing a climax. And the uranium sector is running today.”

    Worth noting.

  115. 115
    BirdsofpreyRcool Says:

    credit continues to rally, tho.

    IG 185

  116. 116
    zman Says:

    Hear ya on that Bird, rising tide lifts all boats, eventually even the crappy ones.

  117. 117
    Sambone Says:

    Nymex Crude Rises Above $71/Bbl

    By Gregory Meyer
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures shot above $71 a barrel Tuesday as the dollar lost value against the euro and signs emerged that recent cuts from the Organization of Petroleum Exporting Countries are taking hold.

    Light, sweet crude for December delivery was recently up $6.97, or 10.9%, at $70.88 a barrel on the New York Mercantile Exchange, after climbing as high as $71.09, the highest since Oct. 22.

    Brent crude on the ICE Futures exchange rose $6.47 to $66.95 a barrel.

    Oil traded steadily higher as the dollar weakened against the euro, requiring more of the U.S. currency to buy a barrel of the dollar-denominated commodity. The euro was recently $1.3027, from $1.2645 late Monday.

    “You’re just seeing the dollar give back a lot of its gains in last couple sessions. That’s leading a lot of commodities higher,” said Raymond Carbone, president of brokerage Paramount Options in New York.

    In September, OPEC members committed to comply with output quotas, effectively taking barrels off the global oil market. Amid a sharp decline in crude prices, the cartel in late October agreed to further trim output by 1.5 million barrels a day, effective Nov. 1.

    The effects of the first decision began to materialize last month, a Dow Jones Newswires survey showed. OPEC’s daily production in October fell by 90,000 barrels a day from September, to 32.050 million barrels a day. Output by the group’s 12 members with production quotas fell more dramatically, with countries pumping 150,000 barrels a day, or 0.5%, less at 29.800 million barrels a day, according to the survey, which is based on input from oil traders, analysts and industry sources.

    OPEC member Algeria trimmed oil production by 71,000 barrels a day starting in November, the APS news agency reported Tuesday.

    “It seems OPEC members are adhering to their cuts,” said Timothy Jennings, president of brokerage Vantage Trading in New York. “That provides as a basis’ for the move higher.

    Crude also followed stock markets higher, as equities have become a key indicator of economic sentiment for oil traders concerned about the strength of global demand. In the U.S., the Dow Jones Industrial Average was recently up more than 270 points.

    The oil market Wednesday will take in a fresh set of weekly data on U.S. oil stockpiles, supply and demand. In the week ended Oct. 31, analysts polled by Dow Jones Newswires predict inventories of crude rose by 1.2 million barrels, gasoline fell by 500,000 barrels, and distillates, which include diesel and heating oil, rose by 1 million barrels.

    The poll forecast the rate of refinery use rose by 0.4 percentage point to 85.7% of capacity.

    Refined oil products led the market. Front-month December heating oil was up 21.42 cents, or 10.8%, to $2.1970 a gallon on forecasts of cold weather in the U.S. Northeast and Midwest over the next two weeks.

    Front-month December reformulated gasoline blendstock, or RBOB, rose 19.66 cents, or 14.4% to $1.5591 a gallon.

    —By Gregory Meyer, Dow Jones Newswires

  118. 118
    BirdsofpreyRcool Says:

    z – i hate to be the voice of worry on this board. frankly, it’s not like me. But, what i am hearing in the media about the credit crisis thawing is just not ringing true. I agree with sambone… it’s gonna be a long, slow, slog. With lots of ups and downs. Don’t think we’ve see the low on the indices yet. I look forward to being an optimist again, someday.

  119. 119
    zman Says:

    Bird – Do I sound bullish? Wow, not my intention. Comments about raising cash, taking profits, etc…not exactly bullish. Think I wrote earlier this could be a “buy the polls, sell the election event”…I have been thinking we rally into the close but I’m not that good with the short term stuff. I know that we have had a pretty good run of late and that the energy names could settle out for a bit.

  120. 120
    BirdsofpreyRcool Says:

    z – you’re right. you’ve been great about taking profits. just keep up the great leadership and continue to show that money can be made in any type of market. that is the sign of a really great investor.

  121. 121
    antrimshale74 Says:

    VIX has been heading back up this afternoon. That’s a bit ominous.

  122. 122
    zman Says:

    Did not get my PXD. Think I will hold off.

  123. 123
    ram Says:

    CHK is approaching HOD.

  124. 124
    tater Says:

    Thanks for your thoughts on the late rally, I got lucky on timing for in and out of DUG. Heading back down again.

  125. 125
    zman Says:

    I see it Ram, group starting to get a late run, was looking to punt those HK $15s but it went from outperforming to vastly underperforming the group. They report later this week and I’d bet that with a fare market tomorrow we could get another chance to trade out of the November calls prior to the close tomorrow.

  126. 126
    srp Says:

    I don’t have Bloomberg for tomorrow’s stats, but PIRA (a consulting fund that i would rate as A+) has slight build in crude, slight pull in gasoline, 1.2mmbl build in distillate. Take it as another guesstimate

  127. 127
    kyleandy Says:

    looks like i’m not going to get PXD either. strange drop in HK after being strong all day

  128. 128
    Popeye Says:

    HK is approaching LOD.

  129. 129
    Sambone Says:

    By Gregory Meyer
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Oil futures sprang to a two-week high Tuesday, with
    buyers spurred by signs recent cuts from the Organization of Petroleum
    Exporting Countries are taking hold.
    Light, sweet crude for December delivery settled at $70.53 a barrel, up $6.62
    or 10.4%, marking the first close above $70 since Oct. 21. Brent crude on the
    ICE Futures exchange closed up $6.00 at $66.48 a barrel. Brent settlement
    prices weren’t immediately available.
    With world oil demand growth expected to slow if not reverse next year,
    analysts are wary of calling a bottom in a market that’s still down by more
    than half from record highs of last July. Facing a slump in oil revenues, OPEC
    has attempted to address the price slide and the prospect of mounting oil
    stockpiles by curtailing output. The cartel in September agreed to honor
    existing quotas, and late in October further resolved to trim output by 1.5
    million barrels a day, effective Nov. 1.
    A Dow Jones Newswires survey showed output by OPEC’s 12 members with
    production quotas fell by 150,000 barrels a day, or 0.5%, in October from the
    month before.
    Reflecting the group’s more recent decision, OPEC member Algeria trimmed oil
    production by 71,000 barrels a day starting in November, the APS news agency
    reported Tuesday. Venezuelan state oil company Petroleos de Venezuela SA has
    notified clients of the country’s move to cut output by 129,000 barrels a day
    in light of OPEC’s recent decision, the company and the oil ministry said in a
    joint statement Tuesday.
    Venezuelan Oil Minister Rafael Ramirez also noted in a release that Venezuela
    will demand an additional cut of at least 1 million barrels a day “on Dec. 17
    or sooner,” referring to the date of OPEC’s next scheduled production meeting.
    Reuters reported that top OPEC exporter Saudi Arabia has already significantly
    cut crude supplies to some customers. One source cited by the news service
    estimated Saudi Arabia’s exports at about 900,000 barrels a day lower than
    August levels.
    “The market treats OPEC production cuts with great skepticism,” said Andy
    Lebow, senior vice president for energy at brokerage MF Global Ltd. in New
    York. “It seemed today there was a little less skepticism.”
    A turnaround in the dollar’s fortunes also fueled the oil markets. After three
    straight days higher against the euro, the greenback declined, requiring more
    of the U.S. currency to buy a barrel of the dollar-denominated commodity. The
    euro was recently $1.2942, from $1.2645 late Monday.
    “You’re just seeing the dollar give back a lot of its gains in the last couple
    sessions. That’s leading a lot of commodities higher,” said Raymond Carbone,
    president of brokerage Paramount Options in New York.
    Crude oil has also moved in concert with stock markets in recent weeks as
    traders try to discern the outlook for the economy and oil demand. In the U.S.,
    the Dow Jones Industrial Average was recently up more than 200 points.
    The oil market Wednesday will take in a fresh set of weekly data on U.S. oil
    stockpiles, supply and demand. In the week ended Oct. 31, analysts polled by
    Dow Jones Newswires predict inventories of crude rose by 1.2 million barrels,
    gasoline fell by 500,000 barrels, and distillates, which include diesel and
    heating oil, rose by 1 million barrels.
    The poll forecast the rate of refinery use rose by 0.4 percentage point to
    85.7% of capacity.
    Front-month December reformulated gasoline blendstock, or RBOB, rose 17.02
    cents, or 12.5%, to settle at $1.5327 a gallon. December heating oil rose 17.88
    cents, or 9%, to $2.1616 a gallon.

    -By Gregory Meyer, Dow Jones Newswires

    Dow Jones Newswires
    11-04-08 1520ET

  130. 130
    ram Says:

    ZMAN – Are you looking at November XOM’s again?

  131. 131
    zman Says:

    Thanks SRP and Sam.

    Re HK, think when it started falling it fell through round number 18 in a low volume day, that can lead to gapping down…not too concerned (famous last words) as if the market isn’t lock limit down tomorrow they probably catch a bid into the close pre numbers.

    SRP – still no mention in anything you see regarding M&A on the corporate scale in the refining segment?

  132. 132
    zman Says:

    Strong moves up into the close for most things.

    Go Vote!

  133. 133
    srp Says:

    Not sure who wants to double down on refining given the uncertainty of 2009 demand and possible decline in distillate crack. That being said, I think all the announced reductions in ’09-’11 capex means late 2010, 2011 are setting up to be years like ’04-’06 were. I haven’t even heard the rumor of anything, much less the news.

  134. 134
    zman Says:

    Ram – I decided to hold the XOM’s.

    SRP – hear ya on that. I wonder if people will starting to calculate replacement value plus inventories less debt and say, wow, these are cheap. I would bet the group begins to discount a recovery in the U.S. economy 6 months before it shows up in the GDP numbers. That’s a guess but in the past the group has started to move back up well before the last of the nasty looking demand numbers are posted.

  135. 135
    Dman Says:

    Latest trades from Intrade.com

    Obama 92

    McCain 8

  136. 136
    zman Says:

    Ugly numbers for PXD. Storm related misses, but also weaker than anticipated growth as the company reigns in spending.

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