15
Jan

Thursday – Natural Gas Preview and Oil Inventory Review

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Sentiment Watch: Party like its 2008 (the B-side track). Market is sham-ugly. Oil and gas stocks continue to be incredibly volatile outperforming on the up days and down days alike. Down days showing a little less volume to them which is some small consolation. I'm just dabbling here and there for now as the market has again lost all sense of conviction and much of its sense of rational trading (news and fundamentals started to matter here and there about two weeks ago but that appears to be fading now unless its bad news you have in mind).

 

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Preview
  4. EIA Oil Inventory Review
  5. Stuff We Care About Today - NFX, SD
  6. Odds & Ends

 

Holdings Watch: The Wiki tab is updated.

  • SWN - SWN Jan $30 Calls (SWNAF) for $0.35 for a quick trade on a bounce in natural gas in the next couple of days. Bought with the stock at 27.70, off 6% with the rest of the market in the red today and after some pretty dismal oil numbers. Gas briefly dipped below $5 and looks like it may bounce after bad days yesterday and today and in spite of pervasive and colder than expected weather.

Commodity Watch

Crude oil fell $0.50 to close at $37.28 after trading as low as $35.52 on a weak set of EIA storage numbers (see EIA Inventory slides below) . This morning crude is trading off $0.50 to $1.00 with more weak economic news.

  • Brent Watch: Anyone notice North Sea crude of late? $46.70.  I have rarely seen a time when the two benchmarks are so far apart. Some of this strength in Brent is attributable to higher heating oil demand  in Europe due to Russia and part is due to WTI being depressed by Cushing stock levels. When a destocking there occurs (Feb/March) we will likely see the two oils track more closely again. 
  • OPEC Watch: OPEC sees demand off 180,000 bopd in 2009, down 30,000 bopd from its prior estimate. This is the lightest retracement of demand seen with the EIA forecasting demand will fall by 810,000 bopd this year.
  • IEA Watch: Preparing to cut their global oil demand forecast again on Friday.

Natural gas fell sharply for a second day and closed below $5 at $4.97 for the first time since September of 2006. This morning gas is trading flat.

Natural Gas Preview

  • My number: 105 to 120 Bcf 
    • Gas Stats For The Week:
      • 5 year average of 88 Bcf withdrawal
      • Year ago withdrawal of 91 Bcf withdrawal (when we had 152 HDDs)
    • Weather: HDDs came in at 209, the 3rd highest (read coldest) reading of the season to date.  Back in December and before the holidays we saw:
      • a 200 HDD reading yield a 116 Bcf withdrawal,
      • a 215 HDD reading yield a 144 Bcf withdrawal,
      • and a 222 HDD reading which also yielded a 144 Bcf pull from storage
    • Imports: Imports are running down 1.8 Bcfgpd from year ago levels, majority of the decline from Canada,
    • Gomex Production: Production from the Gulf is back up to 85% of full capacity or 6.3 Bcfgpd, this is slightly below the 7.9 Bcfgpd the Gulf produced in January 2008,
    • U.S. Production Up An Estimated 3.3 Bcfgpd Year over Year. Holding the rest of U.S. production flat from October levels (probably pretty close) and increasing the Gulf by the 2.1 Bcfgpd it has recovered since October levels that yields U.S. lower 48 production of 54.3 Bcfgpd which is up 3.3 Bcfgpd from January 2008 levels.
    • Demand is the wildcard. Both industrial and electrical demand are off.
      • Industrial is pretty obvious and impossible to quantify. Anyone who tells you they've got it pinned is selling something. I'd hazard a guess at down 1.5 to 2.5 Bcfpgd (from Chemicals and Steel alone)
      • Elecricity: total generation is down however there is anecdotal evidence that gas is stealing share from coal as coal prices were the one fuel to close the year in the green and remain lofty compared to their counterparts on a historical basis. So generation is down and generation from natural gas may or may not be down.
  • Street Consensus: 104 bcf
  • Forecast: 243 HDDs for this week (next week's storage number) and looking at the temps that have been recorded it appears likely the final HDD tally will be bigger when its final value is released on Monday.

Storage: Where Are We Now? Full for this time of year. However, in the past, we've been full and marched higher all winter. The difference is year over year production growth AND a weak economy. My sense is that both will take care of themselves by mid year. Maybe the economy takes a little longer but gas will look balanced by mid year (somebody hold me to that).

 

EIA Oil Inventory Review

ZComment: Not a lot for bulls to get excited about in the report. Crude was the only positive and that was imports and not demand related. And at Cushing, another record high was achieved which will likely result in further pressure on prices into the February contract expiration on Jan. 20th. I'm starting to think I should be on the short side of the recent rally in refiners as they are not adjusting output quickly enough to match slackening demand.

CRUDE OIL - The only thing better than expected in yesterday's report but inventories still remain swollen as refining demand remains sub par.

Utilization and inputs: Inputs to refineries are running down 2.8% or 500,000 bopd; this is not exactly my definition of "falling off a cliff".

 

 

 

GASOLINE - Disappointing demand levels.

 

Imports. One other small positive in yesterday's report, gasoline is not flooding into the U.S. and there is evidence that foreign producers have cut back on runs to stave off a glut from weak demand.

Demand Is Price Sensitive ...If Prices Move Up. Apparently low prices in this weak economy do not inspire drivers to fill up and drive more. But the last couple of ticks up in price have been met with immediate contractions in demand. If this keeps up soon, gasoline stocks will build rapidly without further curtailment in refiner utilization. This in turn will lead to lower crude prices if there is no further reduction in crude supply.

 

 

 

DISTILLATES - It appears refiners are continuing to make distillate because that’s where the margins have been. They are simply making too much. Exports must be worse than they thought. Heating oil only goes so far when the trucks stop moving.

 

Demand Was Low. Not record low mind you but on the border of it. Looking at the chart you can see that demand was running on the high side of the historic range despite the fact that the economy was slowing. That was export demand. Which now seems to be all dried up. Maybe this is a blip. It does not feel like one however.

Distillate Stocks Are Bloated. Stocks are well above average and when you break it down, its the clean stuff the U.S. now has too much of, the stuff that you put in a truck and drive it around is 19% above year ago levels.

 

Stuff We Care About Today

NFX Trims 09 capital budget; Resets Growth Goal. Quick gleanings:

  • 4Q Production: 2008 production was 236 Bcfe which is in the range of 235 to 238 Bcfe given on the last call.
  • 2009 Production: Says now looking for 6 to 10% production growth (250 to 260 Bcfe), down from an earlier estimate 8 to 13% projection (255 to 267 Bcfe).
  • Operations Brief:
    • Woodford seen growing 30% in 2009 with a 12 rig program (down from 14 as of last notice)
    • Rockies seen going after oil almost exclusively which is pretty wise given the weak Rockies gas price realizations that will likely be pervasive this year.
    • Deepwater program. Development plans unchanged, exploration goes from 5 wells to 2.
  • Hedges:
    • 70% hedged at $8 on gas
    • 50% of oil hedged at $129
    • 50% of oil with collars with floors at $107
  • Balance Sheet: Net debt to cap still fairly low at (was 23% as of 3Q), but they increased their bank borrowings from $285mm to $514 mm.
  • Capital Spending To Equal Capex. One last comment would be they are reiterating their commitment to live within cash flow (in 2009 it seems since they did not in the 4Q).
    • They put the capex at $1.45 billion (assumes $50 oil/ $6 gas) and assuming that is minimum cash flow that comes to $10.96 per share.
    • The Street is at CFPS of $10.87.

SD Announces Convert Offering, Potential Asset Sales, Potentially Upped Guidance.

  • $225 million of 8.5% convertible perpetual preferred stock. Given their debt load I'd expect this to act as a drag on the stock
  • $500 mm planned sale of midstream asset, potentially closing in 2Q09. The market has been very "wait and see" on these deals.
  • Guidance for 2009 of 115 to 120 Bcfe (if the sale comes to fruition) up from a prior guidance of 110 Bcfe. They are upping the guidance by just under the $200 mm deal to $700 mm.
  • Hedges:
    • 2009: nearly 70% hedged just north of $8 (unchanged from prior)
    • 2010 increased to position to what will probably be 50 to 60% of production at $7.71.
  • In a nutshell: Mixed bag here. I own the stock and I'll hold for now. I don't understand the reason to up the guidance given where prices are in lieu of simply taking the proceeds and hacking away at the debt. I guess the conference call at 9 EST will explain it better than the press release did.

 

Odds & Ends

Analyst Watch: zip, nada, nothing.

95 Responses to “Thursday – Natural Gas Preview and Oil Inventory Review”

  1. 1
    Sambone Says:

    By Nick Heath
    Of DOW JONES NEWSWIRES
    LONDON (Dow Jones)–Crude oil futures shrugged off ongoing demand concerns and
    another set of bearish U.S. oil inventory data to move higher Thursday, with
    market participants reporting ongoing geopolitical events as the only
    discernible source of support.
    Despite worries that struggling global economies will crimp oil demand –
    kindled by further weakness across Asian and European equity markets Thursday –
    crude prices reversed earlier moves lower with geopolitics and trading linked
    to expiry of the ICE Brent February contract helping pushing Brent prices
    higher.
    The rises in Nymex light, sweet crude prices were more modest, however, as
    brimming crude stocks at Cushing, Okla, the physical delivery point for Nymex
    futures, continued to weigh on prices. The U.S. Energy Information
    Administration reported Wednesday that stockpiles at Cushing hit a record 33
    million barrels in the week ended Jan. 9.
    The European Central Bank cut interest rates by an expected 50 basis points
    Thursday in attempt to assist the region navigate tougher economic conditions,
    but the announcement had little immediate impact on crude prices.
    At 1256 GMT, the front-month February Brent contract on London’s ICE futures
    exchange was up $1.62 at $46.70 a barrel, down from an intraday high of $47.20
    a barrel.
    The front-month February light, sweet, crude contract on the New York
    Mercantile Exchange was trading 4 cents higher at $37.32 a barrel. The more
    active March contract, which becomes the front-month contract next week, was up
    64 cents at $44.83 a barrel.
    The ICE’s gasoil contract for February delivery was up $17.75 at $475.25 a
    metric ton, while Nymex gasoline for February delivery was up 176 points at
    118.53 cents a gallon.
    A failure to resolve the burgeoning gas dispute between Russia and Ukraine –
    which has resulted in a halt of Russian gas flows to Europe – remained a source
    of support for crude, particularly Brent and European traded oil products
    Thursday. Meanwhile, news of Israeli shelling of several hospitals, a U.N.
    compound and a building housing several international media groups in Gaza
    Thursday triggered widespread criticism, refreshing some jitters over the
    potential oil market impact of heightened tensions in the Middle East.
    Despite the advances, market participants remain wary of weak economic
    readings, which risk thwarting any significant moves higher. U.S. weekly
    jobless data due 1330GMT Thursday are expected to be closely watched.
    “The market is still dominated by risk aversion and uncertainty over near-term
    demand, with market participants constantly depressing spot prices,” said
    Andrey Kryuchenkov at VTBCapital in London. “General sentiment remains negative
    and with more negative data expected this month, including disappointing
    earnings results, we see little upside potential for crude unless there is a
    supply side shock or more geopolitical tension.”
    Predictions that crude demand has slowed alongside shrinking global economic
    activity were endorsed by the Organization of Petroleum Exporting Countries
    Thursday. It made additional downward revisions to forecast global oil demand
    in 2009 and hinted it may still have to cut even more production if economic
    activity and crude prices continue to stumble. The group last month agreed to
    a 2.2 million barrel-a-day output cut beginning Jan. 1. OPEC shaved about
    30,000 barrels a day off its 2009 world crude demand forecast from its previous
    report, pegging total consumption at 85.66 million barrels a day, down 180,000
    barrels a day, or less than 1%, from 2008.
    -By Nick Heath, Dow Jones Newswires (Spencer Swartz in London contributed to this item.)

    Dow Jones Newswires
    01-15-09 0835ET

  2. 2
    Sambone Says:

    Hmmmm, I wonder if Exxon will bid?

    NYT
    DOW JONES NEWSWIRES

    Venezuela is quietly courting Western oil companies amid falling oil prices,
    the New York Times reported Wednesday, citing energy executives and industry
    consultants.
    The bidding process, which will close in June, moved “into high gear” this
    month, with authorities expected to review bids to recover oil from new areas
    around the Orinoco Belt in southern Venezuela, the newspaper reported on its
    Web site.
    Some of the companies asked to bid include Chevron Corp. (CVX), Royal Dutch
    Shell PLC (RDSA) and France’s Total S.A. it said.
    Under bidding rules, financing for any new projects is borne by foreign companies, according to the newspaper.
    There is an estimated 235 billion barrels of recoverable oil, requiring more than $20 billion in investment to produce a combined 1.2 million barrels a day, the newspaper said.
    Nineteen companies paid $2 million each last month – twice what it costs
    elsewhere – for data on areas open for exploration in the country, the
    newspaper reported.
    Venezuela’s energy minister Rafael Ramirez, who also is president of state-run Petroleos de Venezuela S.A., didn’t respond to requests for an interview, the
    newspaper said. Chevron Corp. spokesman
    Scott Walker said the company doesn’t elaborate on bidding beyond that decisions are based on economics and other factors, it said.

    Dow Jones Newswires
    01-14-09 2240ET

  3. 3
    Sambone Says:

    KIEV (AFP)–Russia and Ukraine will hold talks Saturday in Moscow in a bid to
    resolve their gas dispute that has left European countries without supplies,
    the Ukrainian government said Thursday.
    “Ukraine’s Prime Minister Yulia Tymoshenko and Russia’s Prime Minister
    Vladimir Putin had a telephone conversation at midnight, and decided to hold
    talks of the two governments in Moscow on Saturday,” the government’s news
    service said, according to the Interfax news agency.
    Russia cut off supplies to Ukraine on New Year’s Day following a dispute over
    late payments and a failure to agree on a price for 2009.
    It shut off all supplies a week later, accusing Ukraine of stealing gas bound
    for Europe, a charge Kiev has denied.
    An E.U.-brokered agreement on resuming gas deliveries to Europe collapsed
    Tuesday with both sides blaming the other for the failure.

    Dow Jones Newswires
    01-14-09 1935ET

  4. 4
    zman Says:

    Re 2. I saw that. “get out of our country you capitalist dogs … oh wait, don’t go, we need your help”. XOM won’t be back with Hugo in charge. If CVX does they deserve what happens.

    FSLR on the tape with a 5MW deal in Abu Dhabi.

  5. 5
    zman Says:

    SD call starting pretty much now:

    http://web.servicebureau.net/conf/meta?i=1113036301&c=2343&m=was&u=/w_ccbn.xsl&date_ticker=SD

  6. 6
    Nicky Says:

    Morning all.

    Z I was coming on to ask you about the difference between WTI and Brent crude – but see you have addressed it in your comments this morning. I have never seen anything like it – quite incredible.

  7. 7
    zman Says:

    For those of you who normally skip reading the post and jump to the chat I encourage you to take a look at the distillate section today for the pix only. Very disturbing trend of too much production and falling demand. I’m getting closer to shorting the refiners and am not certain waiting for the 4Q calls is still the right move.

  8. 8
    zman Says:

    Nicky – it seems like ten buck is a bit much to given Putin all the credit. That chart link I put in comparing the two goes back so far its hard to see the divergence. Here is another, better one:

    http://charts.barchart.com/chart.asp?sym=CLG9&data=A&date=011509&den=LOW&divd=n&evnt=ADV&grid=Y&jav=ADV&size=B&sky=N&sly=N&vol=Y&late=Y&ch1=011&arga=&argb=&argc=&ov1=&argd=&arge=&argf=&ch2=&argg=&argh=&argi=&ov2=&argj=&argk=&argl=&comp1=scg9&code=BSTKIC&org=stk

  9. 9
    zman Says:

    SD Q&A starting.

    Drilling program ?: Drilling going as expected. Further south wells in Warwick Thrust are as good or better than main part of Pinon field, have not yet increased EUR.

    Ability to find 100% sweet wells is proving difficult. Still finding some with 15% CO2 in the sweet areas.

    No thoughts on increasing size of currently under construction CO2 plant.

    No results yet on Big Canyon well (high profile).

    The new capex program will allow for growth with higher co2 wells in 2010. That makes more sense. Planning ahead to meet when the Century Phase I plant opening capacity is available. Production should ramp more sharply in 2010 than the 15% or so growth of 2009.

  10. 10
    zman Says:

    SD Q&A #2

    Tremendous interest in their deep rights and the cotton valley (shallow) rights in E. Texas. Have not yet decided if they will sell or go after the Haynesville/Bossier shale themselves.

  11. 11
    elduque Says:

    BDI -12 908
    TED unch .98

  12. 12
    Sambone Says:

    By Brian Baskin
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Crude futures traded lower Thursday, as the lack of
    storage at the contract’s delivery point continued to push prices lower in the
    U.S. even as the oil market stabilized overseas.
    Light, sweet crude for February delivery traded $1.15, or 3.1%, lower at
    $36.13 a barrel on the New York Mercantile Exchange. Brent crude on the ICE
    futures exchange traded 90 cents higher at $45.98 a barrel.
    Storage terminals are approaching full capacity in the U.S., particularly at
    Cushing, the Nymex contract’s delivery point. With nowhere to put next month’s
    oil, the February futures contract is falling in value, exceeding the decline
    in outer-month futures and moving in the opposite direction as international
    benchmarks. February crude now trades at a $7.83 discount to March, and nearly
    a $10 discount to Brent.
    February crude expires on Jan. 22. When a similar storage crunch developed
    ahead of the January contract’s expiration, front-month futures fell sharply,
    expiring near a five-year low below $34 a barrel.
    The market appears to expect the cycle to be broken in April or May, as the
    spreads between Nymex contracts approach less-excessive levels around then. The
    narrowing reflects the belief that reduced production by the Organization of
    Petroleum Exporting Countries will eventually result in inventory drawdowns
    this spring, wrote analysts with Barclays Capital.
    “While demand conditions remain extremely poor, the cuts OPEC has made …
    should prove large enough to offset,” the analysts wrote.
    Refined products are holding up better than crude, as heating oil futures in
    particular are supported by cold weather in the U.S. Northeast, the fuel’s
    biggest market. Russia has still not restarted deliveries of natural gas to
    Europe via Ukraine, which will increase demand for oil-based fuels the longer
    the standoff continues.
    Products are likely to be dragged lower if February crude plunges ahead of
    expiration, however.
    “We are still not ruling out a renewed (oil) price decline toward the $32
    area,” said Jim Ritterbusch, president of the trading advisory firm Ritterbusch
    & Associates. “Such a decline would … provide a significant downward drag on
    the products markets.”
    Front-month February reformulated gasoline blendstock, or RBOB, recently
    traded down 1.27 cents, or 1.1%, at $1.1550 a gallon. February heating oil
    traded 74 points, or 0.5%, higher at $1.4705 a gallon.

    -By Brian Baskin, Dow Jones Newswires

    Dow Jones Newswires
    01-15-09 0945ET

  13. 13
    zman Says:

    RIG closing in on target

    Oil trading with the market and looking to test yesterday’s low again. Getting ready to buy SU again…if oil holds.

    Had to miss the tail of the SD call, stock not reacting well at all, down 8%. I will await replay availability in a couple of hours. This is now a single digit midget. Some SDMs are there because they are like biotechs with the phase 1 drug in the pipeline but no real assets. Some SDMs have been beaten down to their but are worth a lot more in a normal financial market. SD falls into the later category. Real company meets hard times with too much debt on the books for peoples liking.

  14. 14
    zman Says:

    If you believe the broad market reverse and goes green today, the FSLR $140s are probably a good bet for a double.

  15. 15
    1520sbroad Says:

    CANROY update – from Penn West – PWE –
    Co said it anticipates 2009 capital expenditures will total between C$600 mln and C$825 mln dollars. Petroleum industry costs have not yet declined to the same extent as commodity prices, thus they intend to limit our near-term capital expenditures until supply and service costs are more reflective of current commodity pricing. Co anticipates spending between C$250 mln and C$325 mln in the first half of 2009, a reduction of approximately 50 percent from first half 2008 capital expenditures.

    Sounds familiar…

    They also cut the monthly payout from 34 cents CAN to 23 cents CAN. Going forward yield is still 20%+

  16. 16
    zman Says:

    Dow headed for 8,000; S&P looking at that 820 level now. Ugly.

  17. 17
    Sambone Says:

    Off subject –
    I wonder how long Congress will take to give/lend more $ to BAC before they find out that part of the loan/gift will be going to MER brokers as a bonus? I think we should start a pool on when Ken Lewis will be given the boot. My guess is mid February.

  18. 18
    Nicky Says:

    Broader market looks to be in close to a low in wave 3, then a bounce wave 4 before a final lower low in wave 5. Bounce for wave 4 is likely to take us to between 8200 and 8300.

  19. 19
    zman Says:

    Agreed Sam. Treasury and Congress seem to be stabbing around in the dark until they find something that supports the stock market. The only thing getting stabbed for sure is the tax payer.

  20. 20
    zman Says:

    Thanks Nicky.

    Gas number in 4 minutes. Stocks selling off into it as usual. Its getting to be a tradeable 30 minute event pre numbers.

  21. 21
    zman Says:

    94 Bcf, too small.

  22. 22
    zman Says:

    Gas down 20 cents to 4.77, trying to hold the $4.75, next stop probably $4.50. Not a thing to get bullish about. We are by now means at record storage for this time of year. That honor goes to 2007 when storage was 213 Bcf higher for the same week but the difference is demand and supply have diverged since then. Very tough to see how gas is going to get out of the heating season much above $5 let alone $6 now. People are going to be 1) in shock and 2) in search of those names with big % of production hedged, and 3) wanting to see more rigs cut (and horizontal drilling rigs at that, not just gas rigs).

    Next Thursday should provide a bounce in gas prices but it will likely be muted and short lived. Between now and then the hedged names will likely start to outperform. The Street has largely ignored hedges in its sell off but the chatter is now starting to focus on who is hedged and who isn’t.

  23. 23
    cargocult Says:

    I do not understand why the US continues to IMPORT NG when we are awash with the stuff and Europe/japan are willing to pay more for it. Why aren’t we exporting it?

  24. 24
    zman Says:

    Cargo – Good question. We have not been awash for very long. Simple answer of why we don’t export more is it takes time to reverse things and it is unpopular. The U.S. do send a pittance to Japan each month and Congress has raised questions about whether or not they should OUTLAW the practice. For years gas production grew or contracted by 1 to 2% per year as did demand. In the last couple of years, the shales and tight gas sand plays brought oodles of gas to market (high decline rate mind you) that helped to offset a growing decline rate in the U.S. for conventional sources (now thought to average about 38% per year). So drilling these well gets you flush production and drilling more of them gets you production growth. But this growth is in the form of 80% decline rates (1st year) so drill less and suddenly, you have less production. So that’s the U.S. story and price is about to take care of the growth there. As far as Canada goes, they have been sending less and less gas south of the border as production declines and higher domestic demand take away available volumes. There was a big building spree in the late 90’s to get more capacity from the Western Canadian Sedimentary Basin (the WCSB) which is where the majority of Canada’s big reserves have been found traditionally to the U.S. midwest, and also some gas from off the east coast (Maritimes pipe). Some the pipes are being converted to transport oil from the sands plays and that will help bring down imports as well.

    In a nutshell, there is too much gas in storage and demand stinks due to the economy. This too will change. At some point, maybe mid 2009, there will be lower imports and lower production and gas traders will start to ponder lower levels of storage in 2010.

  25. 25
    zman Says:

    FSLR only green other than that little ALJ asphalt refiner.

  26. 26
    zman Says:

    Nicky, do you think $32 or $30 is the low for crude?

    Bored now, may go for jog.

  27. 27
    nifkin Says:

    ( DJ ) 01/15 11:02AM *DJ Israel Agrees To Egyptian Gaza Truce Plan – Egypt Official

    do we trust egypt officials??

  28. 28
    Sambone Says:

    By Christine Buurma
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Natural gas futures slid Thursday after the U.S. Energy
    Information Administration reported a draw from storage that fell short of
    analysts’ and traders’ expectations.
    Natural gas for February delivery on the New York Mercantile Exchange was
    trading 15.8 cents, or 3.18%, lower at $4.812 a million British thermal units,
    reaching a fresh two-and-a-half-year low of $4.742/MMBtu after the EIA reported
    a withdrawal from storage of 94 billion cubic feet. Futures were about 1.8%
    below where they were trading ahead of the data release.
    Analysts and traders in a Dow Jones Newswires survey had predicted a 102 bcf
    draw. The five-year average withdrawal for this time of year is 88 bcf,
    according to the EIA. In the same week last year, 91 bcf of gas were pulled
    from storage.
    The latest withdrawal brings the total amount of gas in storage to 2.736
    trillion cubic feet, 3.1% above the five-year average and 1% above last year’s
    level.
    Traders could begin to make bargain buys as prices near historic lows, said
    Allen Rather, an independent energy analyst in Victoria, Tex.
    “The market internals are way oversold,” Rather said. “Once we broke the $5.20
    level, we haven’t had any bounce or signs of capitulation.”
    Although the National Weather Service was predicting below-normal temperatures
    in the U.S. Midwest and Northeast over the next two weeks, weak economic data
    was outweighing the forecasts. Gas demand has waned as financial downturn
    prompts industrial consumers to cut back.
    “The 94 bcf net withdrawal from last week was a third consecutive report
    featuring withdrawals below expectations, reinforcing the idea that the
    supply/demand balance in the market has weakened,” wrote Tim Evans, an energy
    analyst with Citi Futures Perspective in New York, in a note to clients. “Still
    rising supply and weak industrial demand are the most likely culprits.”

    -By Christine Buurma, Dow Jones Newswires
    Dow Jones Newswires
    01-15-09 1104ET

  29. 29
    zman Says:

    Well, at least I got the FSLR right on the day. Didn’t do the trade but the idea worked. Ugh. Still think it can go a lot higher if the market will actually head towards green.

  30. 30
    MMarkkk Says:

    Quick addition to Z’s reply to cargo:

    It also takes time and money. About 4 years minimum just for construction of the export plant and a few Billion bucks. There are some options to convert some of the import facilities to export facilities but this will only export LNG we import. Sounds goofy, eh’? But gasification of US produced gas takes a liquifaction plant. One being talked about up in BC Canada. I’ll believe that one when I see it. Money of that size is just too hard to get these days.

    Ugly market; time to go back on vacation!

  31. 31
    zman Says:

    Thanks Mark, good addendum. Any thoughts on whether the Majors are any closer to buying mode.

  32. 32
    zman Says:

    Oil just cracked $35.

    Rhetoric about more cuts from OPEC should start any hour now.

  33. 33
    Sambone Says:

    By Brian Baskin
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Crude futures fell sharply Thursday as weak demand
    continued to force oil into storage, pushing up against capacity in some areas.
    Light, sweet crude for February delivery traded $2.88, or 7.7%, lower at
    $34.40 a barrel on the New York Mercantile Exchange, after falling as low as
    $33.70. Futures are at their lowest point since Dec. 19, when the front-month
    contract reached $32.40 a barrel. Brent crude on the ICE futures exchange
    traded $1.28 lower at $43.80 a barrel.
    Front-month oil prices are being pressured by the lack of available storage at
    the contract’s delivery point in Cushing, Okla. Inventories are still thought
    to be rising, as demand weakens faster than the Organization of Petroleum
    Exporting Countries cuts production.
    February crude expires on Jan. 22, increasing the pressure to sell futures now
    in order to avoid taking delivery where there is little free storage. The
    market is likely to continue to be pushed lower by the situation at Cushing
    until refiners in the U.S. Midwest increase runs, or producers reduce output
    even further.
    “It’s going to be difficult over the short term to have storage levels come
    off substantially,” said Harry Tchilinguirian, senior oil analyst with BNP
    Paribas.
    The February contract is increasingly isolated from the rest of the oil
    market, however. Brent trades near a $10 premium, and oil available in the
    physical market also trades at a large premium.
    Front-month February reformulated gasoline blendstock, or RBOB, recently
    traded down 5.28 cents, or 4.5%, at $1.1149 a gallon. February heating oil
    traded down 2.58 cents, or 1.8%, at $1.4373 a gallon.

    -By Brian Baskin, Dow Jones Newswires
    Dow Jones Newswires
    01-15-09 1220ET

  34. 34
    Nicky Says:

    Gut wrenching spike down underway for oil. Typical wave 5 action, currently in 3 of 5, expect a bounce for 4, and then a final leg down for 5. Wouldn’t be surprised to see that coincide with the expiry of the Feb contract next Tuesday.

  35. 35
    zman Says:

    Nicky – agreed re expiry on 1/20. Oil seems to pause at the whole numbers and run lower in between them.

  36. 36
    tater Says:

    Hey Nicky,
    Again, great call. Little bit confused by your note #34. Which exactly do you think coincides with the expiry? (The final leg 5?) I get confused with the time frames. I thought you were saying yesterday that 4 up is the run to 60. Thanks.

  37. 37
    zman Says:

    KOG – someone doing a little shopping, 100K shares in 1 minute.

  38. 38
    elduque Says:

    New positive presentation by CHK yesterday. What gives with today’s price action?

  39. 39
    zman Says:

    El-d. Natural gas and the market, many off in 5 to 15% today. No one cares about growth for the moment or hedges.

  40. 40
    Nicky Says:

    Sorry Tater. I agree its confusing and I make it even more so.

    #34 is the smaller degree waves. The big picture is that we are in wave 5 of 3 down and once it bottoms ($30 region) we should see a bounce for wave IV (60 area I mentioned yesterday before the final leg down for wave V.

    Now breaking down 5. We are now actually in 5 of 5 and within that we are in 3 which maybe close to completion and then we should see a small wave 4 bounce before the final wave down to complete 5 of 5.

    So now just concentrate on this smaller timeframe of waves which I think are getting close to completion. Once done we can look at possible targets for the rally.

  41. 41
    BirdsofpreyRcool Says:

    Good afternoon. Sorry to miss posting morning comments, but not much new going on in credit land. Consider that to be “Good News” as lately we have seen a lot of corporate issuance get done — at wider than expected spreads, but done nonetheless.

    In spite of the dismal spectacle of the stock market (and especially the energy kids), the bond market is holding in there. Even though stories about bankruptcies continue to roll in (Smurfit-Stone, Charter Communications, and Spansion being the latest names on that list) credit continues to trend OK. The IG opened around 220 bps this morning and is now trading around 224, so outperforming equities. Volumes in the indices and secondary markets rather quiet today.

    Our benchmark KSU 13 due 13 is offered at 104.5. Continuing to move up from it’s debut in mid-December at 88.4

    JNK ETF is trading close to it’s $30.60 NAV, which indicates that there has been some profit-taking in this ETF. However, with a 14.5% incidated yield, it is still an attractive way to play the rebound in corporate credit.

    One major fly in our relatively happy-talk commentary, tho… the Credit Bears (yes, they are real… no, i am not making them up… and no, i am not a conspiracy theorist) have been at bay since mid-December. They covered their shorts back then and have since been biding their time, waiting to return and wreak havoc in the credit market. They have been eyeing the SPX 850 level as the signal to get back to work.

    So, if we can’t get the SPX back over 850 in a week or so, the credit Bear Raids will start to roam again. Expect to see them strike out at the finacial sector first, pressing their bets in the difficult to follow CDS market. If successful, I expect we will make new lows in the stock indices, before it’s all over.

  42. 42
    tater Says:

    Nicky, Thank you very much! I am trying to use the crude updates that you give to verify/learn EW. Helps so much to hear you present like #40. I can’t tell you how much it helps.

  43. 43
    zman Says:

    Nicky – any chance you’d put some EW on NG?

  44. 44
    zman Says:

    Crude down $4

  45. 45
    zman Says:

    Its 24 in Little Rock with light snow, going to 10 tonight. Record on this date is 5. Normal is 30 low. Expect to see a big rebound in withdrawals next week as the producing region contributes.

  46. 46
    Nicky Says:

    Glad to help T. If you look at the move down from the 38 area this morning you can now count 5 clear waves down. It can continue to subdivide but if it moves above 35.50 then likely we are seeing the small wave 4 correction.

    A move above the 40 region would say the whole down move was finished for now and the bigger correction is playing out.

  47. 47
    Pete Says:

    Saw this comment on the web today “Aubrey McClendon has purchased the two houses next to his ($1.5MM each) to doze to make room for a formal garden.” Okies are not pleased

  48. 48
    choices Says:

    Nicky, I am the last one to be discussing EW because my eyes start rolling when we get into the sub-waves but I read some commentary from various sources that when a wave sub-divides, as you indicated in #46, it indicates that the overall move is very strong. Do you have an opinion because it obviously has importance as to where this move down will slow or turn.

    Thanks very much for your input-it helps in understanding the overall context.

    Tom

  49. 49
    BirdsofpreyRcool Says:

    z – do you really jog in 24-degree weather?

  50. 50
    zman Says:

    Pete – Now’s not the time to see that…not after the $75 mm working interest bonus. Wonder as to the veracity of that.

    BOP – elliptical with CNBC attached.

  51. 51
    zman Says:

    Seeing quite a bit of bottom fishing in E&P again. My sense is, tread lightly through next week, then buy in lower, doing only small trades on mid day or end of day weakness until both oil and gas find a new bottom.

  52. 52
    Pete Says:

    No it is not confirmed yet but was given by a trader with F@#@ CHK on the last of his statement

  53. 53
    BirdsofpreyRcool Says:

    IG 220

    we seem to be having some sort of stock mrkt rally, pulling bonds along with it… is it just b/c we held 820? or, is there something else going on…

  54. 54
    sportlock Says:

    Z,

    Here is another take on the NG number. A few weeks ago things were not that out of whack on weather/SD balance but have really gotten out of hand since. Sometimes there appears to be “make-up” periods for the EIA and we mignt be in one them. Could this be possible?

    Thanks

    Bill

  55. 55
    mnt Says:

    CHK 15 Jan calls look quite cheap for a quick gamble bid .25 ask .30

  56. 56
    zman Says:

    Re 52. I never made money chewing on sour grapes. The asset value there is beyond the trader’s understanding.

    Bill – it is possible yes. Lots of chemical and steel curtailment announcements over the holidays. Electricity demand has been flagging as well.

    I also suspect that production increased during this period in the Gulf and that frac spreads are low enough to leave gas “wetter” inflating the stream in the producing region. This can lead to some pretty large swings (a couple of Bcfpd possible).

    One thing is certain, no season high withdrawal next week and gas will be $4.50.

    That FSLR trade of the day from earlier is up 107%. No, I did not pull the trigger.

  57. 57
    BirdsofpreyRcool Says:

    ok…. guess BAC getting additional $15b in TARP $$ is lifting all boats here….

  58. 58
    BirdsofpreyRcool Says:

    IG 218 rallying with the BAC news

  59. 59
    zman Says:

    MNT – It’s been a bad week, the thing is due a bounce, even if oil and gas don’t. I took my WildZ shot of the month at SWN for a nice scud as of this morning. I will say that on days like this (and you really are looking at just today and tomorrow on an option like this) strength or relative strength begets more of the same so if something is up it will go up more on a market rally and what is weaker (like CHK today and some others) will get left behind. Not trying to talk you out of it, just thinking best to be nimble and go with strength. The flipside to that is buying at the end of the day for a perceived morning pop. In that case, the worse % mover on the day can often be the best rally name the next morning.

  60. 60
    BirdsofpreyRcool Says:

    IG 217 tightening pretty rapidly… guess someone was short.

  61. 61
    zman Says:

    Majors green, some E&P, one or two service names with decent rally in the broad market underway.

    OIH going positive: Could be a good quick play there on HAL which has had a big tumble and has tight option spreads. Also, a name like RIG can fly in here.

  62. 62
    mnt Says:

    Z – Thanks for the thoughts, I realise that it is nothing more than a crap shoot. But with all the negativity around and the fact that the gas number is behind us, makes me wonder whether we are in for a bit of upside.

  63. 63
    zman Says:

    MNT – re the gas number behind us. I agree, lot of negativity. This is from tonight’s gas piece, first draft (I did not go jogging)

    If we had come in triple digits, at least 110 I would have thought we would see that mild rally into next week’s number. Now, I think that still happens, probably on Tuesday (Monday is a equity market holiday) but that fear takes over sometime Wednesday unless the HDD number is some crazy 275+ beasty and then gas should move back over $5.25. Otherwise, traders sell into the number thinking “fool me three times, shame on me…”

    Looking at the rest of the withdrawal season, traders are going to do the straight-line math with the time remaining and think, “I really need to sell”. So unless the weather stays very cold and the withdrawals snap back into something like Jan/Feb levels from these November looking numbers that’s their game plan.

    Right now there are 12 weeks left in the season. To get to last year’s storage trough we need to see withdrawals average 125 Bcf. At first glance that would seem to be a tall order. Want to get to the 5 year average? Try 116 Bcf. Again, pretty tough. But then recall that we are seeing a much colder January than originally forecast and that February is still supposed (— update with Bastardi) to be bitterly cold. Taking a look at the Residential demand in the cold years shows we can get there, if we get that sustained cold.

  64. 64
    zman Says:

    Green market.

  65. 65
    zman Says:

    MNT – nearly a double on those calls of yours.

  66. 66
    Sambone Says:

    Off subject

    http://www.thebailoutgame.us/

  67. 67
    BirdsofpreyRcool Says:

    IG 215 now. good to see this rally along with stocks.

  68. 68
    choices Says:

    This rally is GREEN. Gold stks are moving up strongly as well.

  69. 69
    Jay Reynolds Says:

    Nicky –

    I just wanted to say thanks very much. Your prognostications and (as yet) arcane references have sent me to the books, determined to understand what is afoot! Love getting my mind around something new.

    JR

  70. 70
    pearl1301 Says:

    jan17.50 hk calls..are you holding through tomorrow? those things were dead weight this am..now back to .25

  71. 71
    Sambone Says:

    By Raul Gallegos
    Of DOW JONES NEWSWIRES

    CARACAS (Dow Jones)–Venezuela’s state-owned energy company is struggling to
    pay its bills as cash flow dries up due to rock-bottom oil prices.
    Petroleos de Venezuela SA has fallen several months behind on payments to oil
    service companies and other suppliers that keep its oil business running, a
    source of concern for many in the industry.
    Oil company executives say PdVSA, as Venezuela’s flagship firm is known,
    stopped paying service firms in August and the debt to all suppliers may have
    risen by as much as $3 billion. As of September, bills owed to suppliers stood
    at $7.86 billion, a 39% jump from the same nine-month period in 2007, according
    to PdVSA figures.
    French oil services company Schlumberger Ltd. (SLB) and U.S. firm Halliburton
    Co. (HAL) are now owed a combined $800 million to $1 billion by some estimates.
    Officials at both companies declined to comment on the matter.
    “We’re having a hard time, just as many other firms in a similar position
    around the world,” Eudomario Carruyo, a PdVSA board member and head of finance
    told Dow Jones Newswires in an interview. “Our revenues just got cut in half.”
    Carruyo would not confirm the amounts owed to top suppliers. “The amounts are
    important, but they’re manageable,” he added.
    The price for Venezuela’s basket of crude and products has lost more than $100
    since reaching record levels last summer, to $37.62 a barrel, less than half of
    last year’s average.
    The outlook for world oil prices and other commodities looks grim for the
    medium term. The global economy is slowing sharply, and the U.S., Venezuela’s
    top oil customer, is expected to suffer the roughest tumble in decades.
    Under the circumstances, PdVSA is pondering its financial strategy for the
    coming year, Carruyo said. As an initial step, the company plans to renew a
    $1.16 billion credit line with a group of banks led by BNP Paribas (BNPQY) for
    “a similar amount.” Other financing options are also on the table.
    But foreign companies are already signaling concern. Regional executives for
    both Halliburton and Schlumberger have visited Venezuela over the past month to
    discuss pending bills.
    In some instances, service firms have stopped taking on new oil well service
    offers and are mainly working on those fields with standing contract
    agreements.
    In a recent meeting with service companies, a PdVSA board member asked them to
    cut down on their charges by 40%, according one executive with knowledge of the
    meeting. The proposal did not sit well with those firms.
    “This is worse than the oil strike,” an oil executive said, recalling a
    three-month oil industry strike that began in December 2002. “At least back
    then we were getting paid.”
    Members of the Venezuelan Petroleum Chamber are now planning an emergency
    meeting with PdVSA to discuss a way out.
    Amid the troubles, President Hugo Chavez has vowed to subordinate all state
    priorities to fund popular social spending programs. Indeed, PdVSA has
    sacrificed needed oil investment over the past few years to finance
    entitlements for the poor.
    “You can bring the oil price down to zero, but the revolution will go on,”
    Chavez said during his yearly address to congress Tuesday, a message that has
    become his mantra of late.
    Already the leftist leader signaled to fellow members of the Organization of
    Petroleum Exporting Countries, OPEC, that Venezuela will support any output
    cuts needed to push up oil prices. Chavez, long a champion of strengthening the
    oil cartel, has long relied on OPEC muscle to foster high crude prices.

    -By Raul Gallegos; Dow Jones Newswires

    Dow Jones Newswires
    01-15-09 1418ET

  72. 72
    zman Says:

    Pearl – yep, I am but will likely sell early in the day … depends on the tone.

  73. 73
    Popeye Says:

    Waxman promises quick action on climate

    Jan 15 11:18 AM US/Eastern
    By H. JOSEF HEBERT
    Associated Press Writer

    WASHINGTON (AP) – The chairman of a key House committee says he wants to pass a climate change bill before Memorial Day.

  74. 74
    zman Says:

    MNT – your trade was a triple at its peak. Nice.

  75. 75
    zman Says:

    Pop – Waxman, my anti-candidate for that spot. Unless we erect a wall into the stratosphere, those on the opposite side of the planet will benefit as they won’t be on board with “the plan”.

  76. 76
    zman Says:

    Another trade thought with tight spreads is COP which is down today vs up 1%+ moves in XOM and CVX. The cause for the down move is noise or the move in natural gas. If market goes solid green that one generally will play fast catch up. The Jan $50s are trading $0.20 x $0.21 so nice penny spread for you gunslingers.

  77. 77
    mnt Says:

    Z – I have been taking a lead from the advice in the “Market Wizards” books and trading very small in the last few weeks until I get some form of improvement in my performance. As for the CHK trade I got in okay but I havent got out yet 😉 My biggest problem recently has been round tripping my option trades so I am with you when you say you are going to be trading shorter time frames. Let’s see what the market can do in the last half hour.

  78. 78
    zman Says:

    Market has very tenuous hold on gains.

  79. 79
    Sambone Says:

    100 Billion to BAC? Tell me it aint true!

  80. 80
    BirdsofpreyRcool Says:

    IG 218 backing down a bit with the mrkt. amazing swings today.

  81. 81
    nifkin Says:

    hearing small plane down in Hudson river?

  82. 82
    BirdsofpreyRcool Says:

    Sambone – BAC = reading $100-200Bs to back MER + money from the TARP.

    wow.

  83. 83
    Sambone Says:

    BAC is only worth 50 Billion. I bet old Ken Lewis is gone and I bet ya that Hank “Bazooka” Paulson will be the new CEO. Wow!

  84. 84
    BirdsofpreyRcool Says:

    sell-off corresponded to article about Democrat proposing measure to limit “credit card abuses” again. The old bill died in the Senate. The consumer finance kids sold off…

  85. 85
    BirdsofpreyRcool Says:

    A US Airways plane crashed into NY’s Hudson River

  86. 86
    zman Says:

    Hope they are ok but they don’t call it US Scare for nothing. Stock sold off hard, could be the airline play I’ve been looking for re low oil. Still think that is probably CAL but it could be.

  87. 87
    ram Says:

    It seems like BAC is telling the world they have much more liabilities than assets. I’m the slow type, but isn’t that bad?

  88. 88
    BirdsofpreyRcool Says:

    pilot hit a flock of geese…

  89. 89
    zman Says:

    That is why I try to shoot them.

  90. 90
    BirdsofpreyRcool Says:

    makes sense to me

  91. 91
    zman Says:

    that, and they are tasty.

  92. 92
    ram Says:

    At least it was not a flock of seagulls. That would have been very messy/bad.

  93. 93
    BirdsofpreyRcool Says:

    169 people on board. sounds like everyone is ok. geese a little banged up, th.

  94. 94
    BirdsofpreyRcool Says:

    re 91 – you should always eat what you kill. That is why I always thought it was a good idea for analysts to buy the stocks they recommended. But, (that paragon of virtue) Eliot Spitzer didn’t see it that way.

  95. 95
    zman Says:

    Gas storage post up

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