20
Jan

Obama Tuesday

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Congratulations to Barack Obama as he becomes the 44th President of the United States today. Good luck, you are going to need it. 

Sentiment Watch: February crude expires today so look for extreme volatility, especially to the downside with Russia/Ukraine making nice and Israel suddenly pulling out of Gaza. I'd expect the market to catch an inagural feel good into the close and I may buy some oil leveraged names into expected energy weakness shortly after the open for a quick trade. For the most part, the near term future does not look bright in energy land and analysts are running for cover, downgrading whole sectors and talking about how things will be better in 2010. Sounds like much of the rest of the market speak I see these days and means that  the fits and starts we've seen of late will have trouble getting real footing until we see the impact of production cuts show up in the numbers and the economy starts to thaw. 

Sign of the Times Watch: (COP) could lay off about 1,300 people this year under a planned 4%cent reduction in its worldwide work force. The company cited lower commodity prices and the crippled credit market for the cutback plan. "We are positioning ourselves in the business environment to live within our means in order to maintain financial strength," CEO Jim Mulva said in a company release. "We are doing this by reducing our cost structure, addressing our balance sheet and continuing to manage the company through prudent capital discipline." ZComment: It certainly doesn't sound like they are gearing up for an acquisition spree. (XOM) on the other hand may do so and you'll note that as of yet, they have not warned on the quarter.

The Week Ahead (all times EST)

  • Wrap - link back to the wrap
  • Tuesday - Inauguration, expect light volume trading, no economic releases
  • Wednesday - home builder's index
  • Thursday - Oil inventory report - 11:00, initial jobless claims, housing starts (forecast 600K).
  • Friday - Natural gas inventory report - 10:30, no other U.S. economic data release planned.

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Crack Spread Update
  4. Stuff We Care About Today - SU, PBR, XOM/HES
  5. Odds & Ends

Holdings Watch: The wiki tab is updated and as you can see the holdings are rather sparsely populated at present.

Commodity Watch:

Crude oil is set to open down $2.75 at just under $34 this morning after falling 10% last week. The March contract, which becomes the front month tomorrow and the expectation now is that this will quickly sell off in the face of current weak demand.

  • T Boone Watch: TBP claims Russia will join OPEC soon and that their membership "will not be favorable to the United States." No evidence was given for the assertion but in the past has balked at such a joining.
  • MEND Watch: As promised, MEND is back in the mix with fresh attacks in NIgeria, this time targeting a tanker and a tug at the Bonny loading terminal. No impact on prices just yet as no one cares about supply conditions right now but the group is stepping up their activities and it bears watching. 
  • India Grows 6% in 2008; expects same 2009. Its not exactly a lot of oil at about 2.68 mm bopd  (only about 3% of global demand by 2007 standards) but you can bet China's demand will be up again as well and they now consumer almost 10% of grobal consumption.
  • Libya Talking Oil Production Nationalization. Because this has worked out oh so well for other OPEC members, Libya is thinking about either nationalizing oil production or drastically reducing foreigners profit sharing percentages.  Current production here is about 1.7 mm bopd and the country wants to double production by 2012. Good luck on attracting foreign experience and capital to that end.

Natural gas is trading off 15 to 20 cents this morning with oil weakness and despite colder than expected weather last week (see below). Gas fell 14% last week and will likely remain weak until we start to see more indications that production is slowing, either in the weekly figures (hard to tell given the economy) and in the monthly figures (probably not for another 2 to 3 months). Rig count falling helps but not as much as actual gas data would.

  • Russia Turns The Gas Back. Ukraine signed a 10 year gas supply contract over the weekend; look for this to pressure oil prices in Europe and indirectly oil and natural gas prices in the U.S.
  • Weather Watch:

    • Last Week Was Colder Than Expected. Heating Degree Days jumped to 258 last week, higher than the already cold 243 in the original forecast. This bodes pretty strongly for a seasonal high on injections, somewhere close to 160 plus Bcf withdrawal this week.
    • This Week Warms Back Up. Forecast calls for HDDs of  215, just below normal but well off last year's 263 which yielded a whale of a withdrawal of 240 Bcf.

Crack Spread Update: Cracks improved in all regions last week. The big questions would be why and is this sustainable. The answers would be a) increased maintenance or the announcment of maintenance (as it really has not shown up in either the production volumes of gasoline and distillates or in the official utilization numbers which remain low but flat) to explain the why question and b) a resounding "probably not" to answer the question of is it sustainable. Distillate inventories remain bloated while diesel demand appears to be doing a swan dive and I think conditions in this market are best summed up by the words of a transportation analyst friend of mine from last Friday:

  • Airfreight volumes are off 40%, or more, year-over year.
  • Truck freight is off 30%-plus year-over-year.  
  • Rail volumes and West-coast port traffic are down approximately 20%.  
  • Most people have no idea how bad things are getting out there.  Business conditions and unemployment are
    set to get much worse over the next 3 months.

 

Refiner Multiple - The trade on the Street in energy right now is said to be "get long the refiners" and with oil prices likely to play about in the $30s for the next several weeks I think that may work enough to present a good head fake opportunity. With that in mind, I could see going long a stronger name like (VLO), (TSO), or (SUN) (all cheap and estimates not falling as fast as they have been) or a smaller but well run name like (FTO) while playing puts in a name like WNR (leveraged, low margin, questionable leadership calls etc) on any further strength. I would also point out that if the idea has some staying power in the sense that fund manager actually buy into and start moving the names higher, VLO will start to close the multiple gap between itself and the other names rather quickly. The rising tide that lifts all boats, including the little boats will be subject to periods of profit taking allowing the put idea on WNR to work.

Rally Since Beginning of December Has Been Impressive.

 

Stuff We Care About Today

PBR To MIss 2008/9 Production Targets.

  • 2008 production of 1.86 mm bopd, up 3.5% from 2007 levels, but short of the2.0 mm bopd target
  • 2009 target of 2.2 mm bopd unlikely to be achieved.
  • Both misses caused by development project delays

(XOM) Hits Big Oil In Santos Basin off Brazil

  • Azulao prospect, deepwater (about 6,000 feet) and sub-salt. Thought to contain 10 billion barrels plus,
  • This is in Block BM-S-22 on the southern flank of the Sugar Loaf superstructure,
  • Further drilling of back to back wells to take place now closer to the crest of the structure to test theory that this is bigger, being a continuous light oil reservoir from the the discovery well all the way to the high point on Sugar loaf.
  • XOM operates with a 40% interest, HES has 40% and PBR the remaining 20%. This would be most impactful to Hess.

 

SU Reports 2008 Results; Guides For 2009

  • Volumes of 279,400 BOEpd vs 290,700 last year (in line with recent guidance)
  • 4Q08 EPS of $0.46 (ex items) vs $0.42 Street Consensus (both figures are C$)
  • Cash operating costs of $41.30 per barrel up from $27.90 YoY due to planned maintenance and a fire
  • Guidance:
    • Volumes of 300,000 bopd and 210 Mcfepd or 335,000 BOEpd, up 26% from FY08 levels.They have 350,000 bopd of design capacity in place. 
    • Realizations of WTI less C$ 4.50 to 5.50.
    • Cash costs of $33 to $38 per barrel. Good that they don't expect the 4Q's elevate levels to become the new norm.
  • Hedges: 18% of expected 2009 and 2010 production hedged at $60 (so not much).
  • Nutshell: At least the analysts got the mark to market adjustments correct for quarter end so (SU) didn't miss. They have put expansion plans on hold as previously indicated when they slashed their 2009 capital budget from $6 to $3 billion.
  • Conference Call:  9:30 EST available here.

Odds & Ends

Analyst Watch: JPM cuts Energy to Underweight, FBR cuts Canadian names with (TLM), (PCZ) and (NXY) falling to Neutral and (SU) and (CNQ) going to Underperform. Citi resumes coverage on (POT) with a Hold and (AGU) with a Sell. Argus cuts (COP) to Hold.

75 Responses to “Obama Tuesday”

  1. 1
    Sambone Says:

    By Lananh Nguyen
    Of DOW JONES NEWSWIRES

    LONDON (Dow Jones)–Crude oil futures were broadly lower in London Tuesday,
    beset by pessimism over the slowing global economy.
    “The focus is very much centered on the economic and financial woes around the
    globe,” said Hamza Hamza, a fund manager at Sucden Financial in London.
    Slowing demand, weak economic indicators and tepid technical charts –
    continued to weigh on prices in the absence of any bullish catalysts, Hamza
    said.
    At 1219 GMT, the front-month March Brent contract on London’s ICE futures
    exchange was down $0.32 at $44.18 a barrel, paring earlier losses.
    The front-month February contract on the New York Mercantile Exchange was
    trading $2.11 lower at $34.40 a barrel against Friday’s settlement and ahead of
    its expiry later Tuesday. The more actively traded March contract was down
    $2.14 at $40.43 a barrel, also versus Friday.
    The ICE’s gasoil contract for February delivery was up $1.75 at $439.25 a
    metric ton, while Nymex gasoline for February delivery was down 644 points at
    110.28 cents a gallon.
    Crude futures declined as market participants continued to fret over the
    implications of a deepening global economic slowdown.
    “I’m very bearish oil,” said Philip Moufarrige, a crude oil broker at ICAP in
    London. “The news coming out of London financial institutions and the scale of
    losses…portends greater pain in the months to come.”
    Moufarrige expected crude oil prices to trade below $40 a barrel in the next
    two months, and said a dip down to $25 a barrel was possible.
    With little fresh news emerging from the oil market, participants looked ahead
    to the inauguration of U.S. president-elect Barack Obama later Tuesday for its
    effect on broader financial markets.
    “Today all eyes will definitely be on Obama’s inauguration and all that
    optimistic sentiment could boost the U.S. currency and in turn extend the
    pressure on crude,” said Marius Paun, a broker at ODL Securities in London.
    Against a backdrop of negative sentiment, prices came under pressure from
    three major factors – “a stronger dollar, expiry on Nymex (February crude) and
    easing geopolitical concerns,” said Andrey Kryuchenkov, vice-president of
    commodities at VTB Capital in London.
    The resumption of Russian gas flows to the European Union via Ukraine also
    deflated some of the geopolitical risk premium from prices evidenced in recent
    days. The Russia-Ukraine dispute, combined with violence in Gaza, were
    supportive of prices last week.
    Meanwhile, the contango structure of ICE Brent crude – a situation where
    near-term futures contracts are cheaper than contracts further into the future
    – continued to point to weakness in the short term, said Dennis Gartman, editor
    of the Gartman Letter.
    “Until such time as the contango narrows (further) and the obvious downward
    sloping trend line…is broken through to the upside, we have no choice but to
    err upon the side of bearishness,” Gartman said.
    -By Lananh Nguyen, Dow Jones Newswires

    Dow Jones Newswires
    01-20-09 0726ET

  2. 2
    zman Says:

    Dollar has been breaking out again of late which is not helping crude. Up 1.7% and shooting for the recent highs. As much as things stink in the U.S., they stink more abroad apparently as the dollar is indicating.

  3. 3
    calvo Says:

    Good morning Z — given the steep contango, which do you reckon is the better strategy to buy into USO? Use of the contract-expiration volatility today and buy the dips, or wait for the March contract to collapse in the coming days?

  4. 4
    zman Says:

    Calvo – good question, tough call. Seems a coin toss or worse that March follows the same pattern as the last few months, at least initially. There will be no data to guide so “further gloom” headlines will dominate oil price action. The safer choice is to wait until late week, see the next round of data and buy in if we get a decline in Cushing inventories or a small import number. If you miss the unlikely bounce you still have all your chips, if you play today and we do bounce tomorrow you still have not missed much as there is just about 0 chance of a V-bottom with today being the trough on price. I’m thinking about playing around in SU as it is set to get slammed at the open due to their quarter but I’ll be treading very lightly this week as reason is not in the building at the moment.

  5. 5
    BirdsofpreyRcool Says:

    good morning. I am seeing more and more street commentary that $33.83 oil (its lowest point since Jan 2004) is not sustainable. Assuming OPEC cuts start to take effect in the 2nd half of 2009, more and more strategists are talking about an oil price rebound to $60-65/bbl.

    Oil prices are down due mainly to economic weakness. Many have compared this to what happened in 1983, when prices tumbled, then stayed low for the next 20 years. In order to buy into this scenario, you have to ignore the supply side of the oil price equation. We had a lot of new supply coming on from major fields ramping up in the 80s (e.g. The North Sea and Mexico). This time, we have only demand weakened, but no additional non-OPEC supply to keep prices down once supply and demand are in balance.

    Bottom line: I think oil prices will rebound smartly at some point, sooner than later. This is not a repeat of 1980’s oil price action. More and more people are starting to realize and talk about this.

  6. 6
    calvo Says:

    ..thanks, Z – sounds very reasonable. Looks like a panic day: only gold+silver are green in the commodity universe (despite the dollar rising so strongly!)

  7. 7
    zman Says:

    BOP – I saw the GS piece regarding #5 on that you sent, thanks. I think the rebound will have start soon but will be hobbled at first by tanker storage reversal as the contango unwinds and then by the surplus capacity available from OPEC which will likely result in early quota cheating. I agree we are at unsustainably low levels.

  8. 8
    zman Says:

    Listening to the SU call now. Nothing surprising from the pr so far.

    Oil has gone flat on the day and even slightly green from down $2 plus. Talk about volatility.

  9. 9
    zman Says:

    SU Q&A

    Cash cost ?: hard to predict how low the costs can get, suppliers of service are getting easier to deal with, first time in 6 years they’ve (SU) has had any leverage on them.

    They see several refinery closures in the U.S. in the next several years.

    SU off 10% now.

  10. 10
    BirdsofpreyRcool Says:

    Credit market opened weaker than Friday’s close, following weaker markets overseas. But, not a lot of trading going on. Investment grade debt continues to outperform junk bonds. We took 2 steps forward in IG and 1 step back. In HY, we took a half-step forward and 1 step back as the market continues to worry about a deteriorating economy.

    IG 219 bps (want to see this around 175)

    HY 76 (want to see this around 88)

  11. 11
    BirdsofpreyRcool Says:

    IG 222 now. moving wider with the weakness in stocks.

  12. 12
    zman Says:

    RIG still approaching mid $40s target.

    As bad as energy looks this morning the XLF chart looks to be in free fall. Hard to see a market rally without that trading sideways at least.

  13. 13
    Sambone Says:

    By Jacob Gronholt-Pedersen and Alessandro Torello
    Of DOW JONES NEWSWIRES

    MOSCOW/BRUSSELS (Dow Jones)–Russian gas supplies via Ukraine reached the
    European Union Tuesday for the first in almost two weeks, marking the end to a
    dispute that had left most of Eastern Europe without supplies during a spell of
    bitterly cold winter weather.
    Russia’s state-controlled gas firm OAO Gazprom (GAZP.RS) said it had fully
    resumed export volumes of 348.8 million cubic meters to European consumers via
    Ukraine’s pipeline system.
    Ukrainian officials had previously said it would take at least 36 hours for
    supplies to reach Europe after the reopening of the pipeline system, but within
    only five hours the first gas reached Slovakia.
    “Today we can finally welcome the resumption of gas supplies to Europe,”
    European Commission President Jose Manuel Barroso said Tuesday. “Our monitors
    on the ground report that gas is flowing normally,” he said.
    Russia stopped gas supplies to Ukraine on New Year’s Day following a dispute
    over price and payments for natural gas.
    A week later, Moscow halted supplies to Europe accusing Ukraine of stealing
    the transit gas destined for Europe.
    The restart of European supplies comes after Russian Prime Minister Vladimir
    Putin and his Ukrainian counterpart, Yulia Tymoshenko, reached a preliminary
    agreement Saturday. Monday, the two premiers oversaw the signing of a 10-year
    supply and transit contract between Gazprom and Naftogaz in Moscow.
    Gazprom’s deputy chairman, Alexander Medvedev, Tuesday reassured Europe that
    there is no risk of Russian gas supplies being frozen to Europe in the future.
    “A similar shutoff of Russian gas to Europe will never happen again, if
    Ukraine will be in compliance with the contract signed,” Medvedev said.
    Ukraine, Russia and the European Union had on Jan. 12 already signed an
    agreement to deploy international monitors to oversee gas flows and resume gas
    transit, but nothing happened at the time, raising questions about the two
    countries’ credibility.
    “That was the first time ever in my life when I saw agreements that were
    systematically not implemented, it’s really incredible,” Barroso said Tuesday.
    The commission had been preparing legal action in case this deal fell through
    as well, he said.
    The halt in supplies has lead to widespread criticism from E.U. countries,
    prompting many of them to call for Europe to diversify its energy supply routes
    away from Russia.
    The E.U. depends on Russia for almost a quarter of its gas needs. Around 80%
    of that gas flows via Ukraine’s pipeline system.
    Under the deal signed Monday between Gazprom and Naftogaz, all intermediaries
    including RosUkrEnergo – a trading company owned on a joint basis by Gazprom
    and two Ukrainian businessmen – will be eliminated.
    Gazprom will supply Ukraine with 40 billion cubic meters of gas this year at a
    20% discount to European prices, which, according to Gazprom’s Medvedev, will
    average $280 per 1,000 cubic meters this year. Starting in 2010, Ukraine will
    pay full price.
    In return for the discount, Gazprom will pay $1.7 for the transportation of
    1,000 cubic meters per 100 kilometers – the same as last year’s level. The
    transportation fee will also go to market price starting next year.
    Company Web site: http://www.gazprom.ru
    -By Jacob Gronholt-Pedersen, Dow Jones Newswires

    Dow Jones Newswires
    01-20-09 0946ET

  14. 14
    zman Says:

    SU call ok, not a lot to say, will trade with oil post call. I don’t see any analysts coming out and pounding the table on the name today.

  15. 15
    Dman Says:

    Z – SU off 13% but no actual surprises?

  16. 16
    zman Says:

    No surprises on the call vs the press release today. They’re slowing down expansion plans with the weak economy and some people may not like that but given their debt load and long term thinking its the right move. Cash costs are trending slightly better than expected (these guys benefit from a lower natural gas price by the way). They were downgraded this morning by FBR in what looked like an industry piece and not based on their numbers. This along with the market set the tone for the day. I may buy a little later today if it gets worse or tomorrow if March opens big time red. Feeling pretty patient right now.

  17. 17
    zman Says:

    Gotta say that job cuts and slashed spending at COP are probably an opportunity for cash rich XOM. Market seems to think so too with COP off 5% and XOM off less than 1%.

    Tater – the WNR is going limp this morning with the rest of the refiners as cracks reverse a big piece of last week’s run. I still think the move for the little guys is just a headfake.

  18. 18
    zman Says:

    BOP – does the trading desk have any thoughts on an inauguration rally later in the day?

  19. 19
    BirdsofpreyRcool Says:

    z – trading desk unusually quiet so far this morning. I’ll check.

  20. 20
    elduque Says:

    BDI from Fri -9 872
    TED 1.00

  21. 21
    BirdsofpreyRcool Says:

    z – low conviction on the Trading Desk this morning… but, here’s what they think: seeing a high right around here, will sell off to see a low around lunch, then watch trends after that. Could end day higher than lunch, could end lower… they don’t have a “feel” for what happens after 12:30 est.

  22. 22
    zman Says:

    Thanks BOP, saw a stat earlier than I think said 75% down days on inauguration day but that’s a pretty small sample size.

  23. 23
    BirdsofpreyRcool Says:

    z – interesting stat. goes along with “buy on rumor, sell on fact.”

  24. 24
    BirdsofpreyRcool Says:

    Another stat for you: the SPX is off to its 2nd worst start as analysts cut profit estimates by a record 83%. The SPX is down 5.9% in the first 11 trading days of 2009… 2nd only to last year’s 6.5% drop.

    Perhaps it can’t get any worse.

  25. 25
    zman Says:

    XOM green.

    WLL on the tape with 09 guidance and 08 reserves. Guide of 9% growth is not surprising. They are seeing a little better differentials in the Bakken after a bad (wide) 4Q. Could bode poorly for CLR numbers for the 4Q.

    On reserves, the market is valuing WLL at $1.71 per Mcfe or $10.27 per BOE. That’s pretty low by historic standards. These guys are oily (75% of reserves) so they will probably be getting a heavier discount from the market since oil, in general, is more costly to produce than natural gas. But on that same $/ Reserves basis the market is valuing CHK at $1.82 per Mcfe.

  26. 26
    zman Says:

    Feb oil up 67 cents, March now positive, up 42 cents. Could be just noise, could be too many people playing what has happened in the last few months, have gotten short, and now someone is trying to start a squeeze.

  27. 27
    BirdsofpreyRcool Says:

    IG 220 off the wide of 223 today

  28. 28
    Dman Says:

    Further to my comment last week on weekly MACD signals in energy names. I also found this signal in other commodities (DBA for ag, DBB for base metals), which makes sense since commodities do tend to trade as a complex.

    Today via Minyanville is an article by Jeff Saut (Raymond James strategist) looking at the (weekly) MACD indicator of the Reuters/CRB Index (Commodity Research Bureau Index) all the way back to 1970. The MACD reading is around -16 & the divergence is crossing over about now. The previous lowest reading was -4.7 back in 1974.

  29. 29
    zman Says:

    Vanishing yield trick. SJT announces December cash distribution of 4 cents per unit, down from 15 cents in November. December gas in the Rockies gave them a net price of $3.15 per Mcf. That leaves little for holders after lease operating and capital expenditures and production taxes. Good property these guys have, extremely long lived Rockies gassy assets but at these prices it becomes a non-starter. Price takes care of price. If prices do not rise soon the royalty trusts will not continue to invest at the same pace and production will begin to decline more rapidly. Looking at SJT in particular, with a trailing twelve months dividend (12 months of distributions) of $3.07 and a last month distribution of 4 cents, its hard to see how the shares have not just fallen out of bed since the yield showing is 12% and the current forward yield is probably closer to 3%.

  30. 30
    Nicky Says:

    Good morning all.

    EW count is playing out folks. We got the lower low ….now we need to see this bounce stick. Unfortunately I can still see a couple of alternatives for the count.

    Didn’t we have a huge rally a few months ago when the front month expired as the shorts were forced to cover?

    Broader market – its just too depressing that on such an historic day the market cannot stage a rally – or can it? Lower lows are possible (Watch 820spx and 8000 Dow as if they go we could see a big move to the downside), but conversely this market also looks poised to launch to the upside. Finely balanced here…

    Broader market –

  31. 31
    Sambone Says:

    By Steve Gelsi

    Shares of ConocoPhillips (COP) helped set a bearish tone for petroleum shares
    Tuesday as the major oil producing and refining company signaled tougher
    economic conditions tied to lower oil prices for the foreseeable future.
    The Amex Oil Index was recently down 2.5% to 917. The Amex Natural Gas Index
    subtracted 1.9% to 359. The Philadelphia Oil Service Index fell 1.8% to 118.
    Energy stocks were lower with the broad market and crude-oil prices as the
    financial sector signaled more trouble in the economy.
    Crude prices dropped $1.72 to $34.79 as investors kept an eye on the midday
    U.S. presidential inauguration of Barack Obama.
    ConocoPhillips shares fell 4% to $47.50 after the Houston company set plans to
    lay off 1,300 workers and cut capital spending by $1.8 billion, to $12.5
    billion.
    Standard & Poor’s Ratings Services said its ratings and outlook on
    ConocoPhillips weren’t affected following Friday’s interim release, which
    included $33 billion in non-cash, after-tax write-downs for the falling value
    of existing reserves and operations.
    “The chief catalysts behind these impairments are the sharp fall in commodity
    prices and the decline in Lukoil’s share price over the past several quarters,”
    S&P said, referencing ConocoPhillips’ 20% ownership stake in Lukoil Holdings
    (LUKOY). “Despite an expected increase in adjusted debt-to-capital measures at
    year end, we currently expect cash flow-based measures to remain in line with
    expectations for the ‘A’ rating.”
    Energy research firm Tudor Pickering & Holt said the moves by ConocoPhillips
    suggest the oil and gas industry is conceding that the lower price environment
    may not go away any time soon.
    -By Steve Gelsi
    Dow Jones Newswires
    01-20-09 1039ET

  32. 32
    zman Says:

    Nicky – yes, I recall the quick, non-sticking rally a couple of months back. Getting more tempted to play at least a quick bounce in the group today.

    Anyone else notice HK looks like they are in a different industry today? Lot of pent up news there I think. CHK is also back into the way too cheap zone. Where are the curtailment announcements? Several basins are not economic given these prices:

    http://intelligencepress.com/features/intcx/gas/
    (especially in the mid-con and Rockies)

  33. 33
    VTZ Says:

    Re: SU, I think it’s down for two reasons. First, I think the cash cost going forward was expected to be lower due to nat gas prices. Second, it’s down 8.5% of the TSX due to trading yesterday and currency.

  34. 34
    cargocult Says:

    This from Bloomberg this morning from Nouriel Roubini.

    Oil prices will trade between $30 and $40 a barrel all year, Roubini predicted.

    “I see commodities falling overall another 15-20 percent,” Roubini said. “This outlook for commodity prices is beneficial for oil importers, it’s going to imply that economic recovery might occur faster, but from the point of view of oil exporters, this will be very negative.”

    Oil has tumbled 77 percent from its July high of $147.27 as the global economy sinks into recession, straining the budgets of crude exporters. Saudi Arabia, Oman and Dubai, the second- largest sheikdom in the United Arab Emirates, have said they will post budget deficits this year.

    Crude oil for February delivery fell to $32.70, down 10.4 percent from last week’s close and the lowest since Dec. 19, on the New York Mercantile Exchange today. The contract traded at $33.37 a barrel at 10:45 a.m. London time.

  35. 35
    zman Says:

    V – agreed, but it also sounded on the call like there is room to improve that cash cost in 2009 and that they don’t want to go beyond the $33 per barrel low mark just yet. If they do, some analysts will jump the gun.

  36. 36
    zman Says:

    Nouriel Roubini (born on March 29, 1959 in Istanbul, Turkey), is a professor of economics at the Stern School of Business, New York University,[1] and chairman of RGE Monitor, an economic consultancy for financial analysis. He has been nicknamed “Dr. Doom” because his economic predictions have been noticeably more pessimistic than most economists.

  37. 37
    tater Says:

    Those WNR options can trade like a dog, I think I need to play somewhere more liquid.
    Been off doing some index trades, goofy things like EEM. I figure that Wall St paid a few dollars to have the man elected. It only makes sense for some of them to push a few billion toward getting a rally going in the next few days.
    So yes, that would be me with the cuts all over my hands.

  38. 38
    zman Says:

    Very nice recovery off the lows for E&P, especially in names like GMXR and GDP. HK is green by a dime. Interesting.

    Oil all over the place, up $1.60 on Feb but out months down pretty hard except for March which is up a quarter.

    Overall feels like an Obama bounce coming.

  39. 39
    zman Says:

    HES enjoying their moment in the sun with that Exxon well listed in the post.

    Oil up $2.64 as Aretha Franklin sings; Dow off 138; SU down 14%.

  40. 40
    zman Says:

    ZTRADE: $10KP

    (4) February HK $17.50 Calls (HKBW) added for $1.85 with the stock flat on the day at $17.50.

  41. 41
    BirdsofpreyRcool Says:

    The Lunch-Low… right on schedule. Could go either way from here.

  42. 42
    BirdsofpreyRcool Says:

    Trading Desk thinks we drift up a bit from the lunch-low, but it will be an “ugly drift”…. lots of back and forth.

  43. 43
    zman Says:

    Oil – front month up 1.70, everything else lower, by as much as 2.50 in the 6 months out.

  44. 44
    Nicky Says:

    Z so the steep spread between front and back months coming in.

    Wow that man can deliver a speech.

    FWIW I think Roubini will be wrong about oil trading between 30 and 40 all year. In fact he is likely to be wrong by the end of today!

  45. 45
    zman Says:

    VLO up, all else red, volumes pretty light.

  46. 46
    kyleandy Says:

    z — thks for that mention of SJT I shorted it and so far so good.

  47. 47
    zman Says:

    Kyle – I think that’s a smart short. It’s not an MLP where they may or may not have to cut the distribution given their hedges or the amount they hold back from distributing, this thing is a essentially a REIT and should be a pretty good pass through vehicle for Rockies gas prices, which are the worst in the U.S. due to over supply and inadequate takeaway capacity. I am simply amazed it remains at these levels and I look forward to a time when I can buy it in the low teens.

  48. 48
    mahout Says:

    Nicky #44,

    I agree Roubini will be wrong on this one. Anyone who prescribes a narrow 10 point range for Cl for a whole year just hasn’t been paying attention to reality.
    Roubini was wrong when he said HF liquidations would cause the N.Y. Stock Exchange to halt trading in 2008. His expertise is much more on macro than on micro IMO. I think a more reasonable price range on Cl for 2009 might be from 24 to 75, a range of 51 points. How would you pick the range for 2009 (if you just had to)?

  49. 49
    choices Says:

    BOP- a little late but thanks for the comments on JNK on Friday-I’ve been away from the computer but read your comments re Barclays and the ownership issue. I guess the real question is who owns the assets-if the fund is a legal entity, than I guess that would be the answer and if Barclays would go under, asset management would be transferred similar to Lehman’s BK.

    Thanks again.

    Best,

    Tom

  50. 50
    choices Says:

    Z-not good news at all for SJT-I have PBT which is in similar situation-sold off seriously as the distribution has been cut but at this point, all I can do is wait for oil recovery, if and when.

  51. 51
    Sambone Says:

    Hmm, has anybody been paying attention to the banks today?

  52. 52
    Nicky Says:

    Hi Mahout – agree re Roubini although I do have a lot of time for the man on his general economic outlook.

    I like your range for oil although I think the $60 area may cap the upside in the near term. And once any rally has played out in the broader/energy market and the broader market rolls over I think we could test $20 or lower for oil.

  53. 53
    zman Says:

    you mean XLF down 10% today, yep.

  54. 54
    BirdsofpreyRcool Says:

    choices – exactly. Barclay’s is only the manager, they don’t own the assets. You can have a change in manager and not skip a beat in the assets.

  55. 55
    zman Says:

    SU down 17%

    Oil off $1.75 on the March contract
    off 3 to 3.75 in the first 6 months after that.

    Dollar strength not helping crude.

  56. 56
    mahout Says:

    Nicky #52,

    All i can say is wow!
    20 or lower! That’s a shocker.
    I admit i was reaching with that 75, but i figured that it might get that high just as the year 2009 ends. Probably wishful thinking but i’ll let it stand.
    Agree, on general economic outlook Roubini should not be overlooked.
    Appreciate your thoughts on the possible range for Cl in 2009. Thanks.

  57. 57
    Nicky Says:

    Broader market – decline is starting to look like an ending diagonal – could pop out of here anytime. Wish it would get on with it! Lets see some good American patriotism – if the guys can’t find some hope today I don’t know when they will.

  58. 58
    kyleandy Says:

    z — where did u find latest info about SJT ? not on their web site

  59. 59
    zman Says:

    Kyle – just came across the tape as a news item.

    http://biz.yahoo.com/bw/090120/20090120005131.html?.v=1

  60. 60
    zman Says:

    Market definitely greeting Obama with a big “so now what?” moment. DJIA off 3%, S&P off 4%.

    RIG approaching target range of $40 to $44 pretty rapidly now.

  61. 61
    BirdsofpreyRcool Says:

    i’d say Mr. Market just got hit upside the head with the Ugly Stick.

    of course, dropping through 820 on the SPX didn’t help.

    stupid financials.

  62. 62
    md Says:

    BOP
    Are the credit shorts reacting yet

  63. 63
    BirdsofpreyRcool Says:

    md – seeing credit fade with stocks… but credit has not fallen nearly as much as the stock mrkt for YTD. Not a lot of volume today (almost none, to be more precise). So, not making too much of it.

    Problem is, if the stock mrkt continues to act like Chicken Little, the Credit Bears will leave their warm caves for a full-on assault. They wanted to wait a few more weeks, but the stock market is laying out some very attractive Bear Bait.

  64. 64
    zman Says:

    SU off 20%

  65. 65
    zman Says:

    Looks like S&P entering support zone from November and then 2002.

  66. 66
    BirdsofpreyRcool Says:

    The High Yield index is taking it on the chin today, down over a point. Still trading higher than the underlying bonds (which is positive)… but back to…

    HY 75 -1 1/4 points

  67. 67
    choices Says:

    re #66,JNK off 3.08% with fairly high volume for this ETF.

  68. 68
    BirdsofpreyRcool Says:

    JNK – the underlying NAV is $30.50 as of close Friday. Seeing a few cash bonds quoted wider with the market. But, not off 3%.

  69. 69
    zman Says:

    Financials as per XLF off 16% now. Ouch.

    IBM after the close.

  70. 70
    choices Says:

    This was UGGGGLLLY-if financials do not find a bottom somewhere in here, than the market may well break Nov lows in a couple of days. Crude has to give some life to the petro stks as well as it has been a couple of months since my portfolio screen has been this red.

  71. 71
    zman Says:

    Yep, we are within another day like today of piercing November lows and the 2002 lows. Very ugly. This market is good for the occasional hit and run trade only, perhaps until we get the majority of the S&P 500 earnings out of the way.

    IBM saying some not altogether bad things on the tape. Looks like a beat on the quarterly numbers (3.28 vs 3.03 expected), 2009 guide of $9.20 with the Street at $8.77

  72. 72
    zman Says:

    IBM up $3 post close

  73. 73
    choices Says:

    Citigroup just announced cutting dividends to one cent a share.

  74. 74
    zman Says:

    …down from 16 cents per share. Stock was ticking up on the IBM news, backing now.

  75. 75
    BirdsofpreyRcool Says:

    IBM – not a disaster! And guiding 2009 earnings above current expectations. Hopefully, investors will see this and realize that it is not the end of civilization as we know it.

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