27
Aug

Thursday – Natural Gas Preview & Oil Inventories Review

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I will be out of the office at the beginning of trading today but plan to be back just in time for the gas storage number at 10:30 EST.

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Preview
  4. EIA Oil Inventory Review
  5. Odds & Ends

 

Holdings Watch:

  • $10KP II:
    • $6,000
    • 38% Cash

Yesterday's Trades: None

 

Commodity Watch:

Crude oil fell $0.62 to close at $71.43 yesterday after the EIA released some fairly positive inventory and demand data (see more on that below) but a small dollar rally and a directionless equity left crude trading sideways following the report. This morning crude is trading off slightly ahead of the expected downward GDP revision.

Natural gas inched up $0.03 to close at $2.91 yesterday. This morning gas is trading off 6 cents ahead of today's economic data and the storage number. We should get the supply data for June either tomorrow or Monday.

Natural Gas Preview

  • My number: 45 to 50 Bcf Injection
    • History:
      • Last Week: 52 Bcf
      • Last Year:100 Bcf
      • 5 Year Average: 66 Bcf
    • Weather: 79 CDDs vs only 55 a year ago and 65 normal for this week of the year.
    • Imports: Essentially unchanged from the prior week and year ago week giving us a good view of how much out of balance the local market is.
    • So why the smaller injection with the same number of aggregate degree days? Because the heat was more concentrated in the northeast and Mid Atlantic than in the previous week and this is where we have been seeing persistently high injections.
  • Street Consensus: 52 Bcf

EIA Oil Inventory Review


ZComment: First, a chart. Then, a lot more charts. But this first chart points to, wait for it, higher demand. This is Total Product Supplied which includes everything from gasoline to propane. To be sure, demand is still weak and the move may get hit later this year but when you add up all the piece of crude demand you are left with something that looks strangely like a U-shaped recovery.

CRUDE OIL - Imports were anomalously low last week leading to a big decline in inventories. That number was reversed out, as expected, this week but inventories didn't really pop. We should start to see crude inventories fall for another 4 to 8 weeks before they start to plump up again as refiners further curtail capacity in front of Fall maintenance season.

Utilization and inputs:  Utilization inched up 0.1% week to week but remains soft. Refining throughput continues to run 500,000+ bopd light to last year which is a good thing as it prevents and even more massive build up in end product inventories. Note to refiners: take long maintenance turns. This will depress crude prices initially but allow some inventory to burn off (so to speak) which will be supportive of margins even if crude prices remain elevated over the medium term.


 

 



 

GASOLINE:

 

 

 

DISTILLATES:



 

Other Interesting Charts:

 

 

 

Odds & Ends

Analyst Watch:

  • ANR started at Overweight with a $50 target at Barclays

 

 

85 Responses to “Thursday – Natural Gas Preview & Oil Inventories Review”

  1. 1
    bill Says:

    ng down 15 cents.

    looks like ep stocks will open 1 % lower

    yuck

    Hk quiet for the last few months, insiders sold early june around 25

  2. 2
    BirdsofpreyRcool Says:

    Just checking in…. good reading from Cross-Asset Class guy. Lays the Bear Arguments out there.

    http://www.capmarkets.com/ViewFile.asp?ID1=122722&ID2=347693937&ssid=1&directory=6571&bm=0&filename=08.27.09_The_BEARS_are_getting_Hungry_and_Impatient.pdf

  3. 3
    RMD Says:

    New Haven, Con. Foxwood Casino choking on $2.3b debt, about $1b too much, with default on $700mm Mon. probable. M. Thomas, tribe Chmn., said, “Regardless of what may happen, I have made it clear that we will not accept Wall Street mandates for cuts to tribal government orthe incentive. Ayone who puts the interests of consultants, bankers and bond holders ahead of our tribal community will have to answer to me.” (AP)

  4. 4
    cargocult Says:

    BOP-Maybe we can talk about hedging strategies if a big correction is coming. Nicky sure seems to think so.

  5. 5
    BirdsofpreyRcool Says:

    cargocult — think of it as “insurance.” How much would you pay to protect your downside? If it doesn’t get used, great! The rest of your stuff went up. If it does, well, there ya go, you were ready.

    That is why puts on the SPX have been so popular lately. That is probably the most liquid form of insurance.

    So, take what you are willing to pay for protection, and buy a few puts. It will help you sleep better at night. If they expire worthless, that’s OK, you were covered in the case of a hurricane.

  6. 6
    1520sbroad Says:

    #5 – BOP – i agree completely. Puts = insurance. Another way to look at that concept is covered calls. If you like what you own and want to own it long term – sell calls against your position. Pick your strike, take in the premium and wait.

  7. 7
    cargocult Says:

    I sleep at night no matter what. It’s what I can’t do during the day that I don’t like.

    Basically I am a buy and hold investor in volatile investment environment. That’s why I like options. I know and have limited my downside at the beginning of the trade. But a lot of what I own is dividend related so I am reluctant to trade in and out.

  8. 8
    BirdsofpreyRcool Says:

    cargocult and 1520s — thanks.

    I’m riding this through with long-term holdings, some income-producing securities, some recently-raised cash, and NO LEVERAGE. The last is key, of course.

    Gotta run. Just checking in. Thanks for your comments!

  9. 9
    zman Says:

    Natural gas: 54 Bcf

  10. 10
    zman Says:

    Gas down 18 cents to 2.74 just after the report.

    Gas is now 18.8% over last year and 18.1 from the five year. Both are reductions in the surplus from last week. Gas is very oversold at this point. Next data point is supply data, due out either tomorrow or Monday.

  11. 11
    1520sbroad Says:

    Z – what happened to the rest of strip pricing after the report? I don’t look at the strip daily and was surprised to see pricing in early 2010 is still above $5 (at least as of yesterday)

  12. 12
    zman Says:

    The strip is down less, about 13 cents with January and beyond above $5 and advancing higher the further out you go. By next November gas is back over $6.

  13. 13
    zman Says:

    Volume so far on the NG conract is very light, about 7K contracts vs 90 K last Thursday. It expires today so we may see a pickup in covering later on.

  14. 14
    Jerome Blank Says:

    Even though KOG is down a bit more percentage wise than KWK or CHK frr example, the chart is holding up really well, still a bit low on avg vol

  15. 15
    zman Says:

    Just put my bid in on KOG sub market

  16. 16
    Jerome Blank Says:

    Hi Zman regarding KOG, is this usual vol for KOG on a report day

  17. 17
    zman Says:

    They’re small so usual volume can be a wide range. It doesn’t look out of the ordinary.

    I was mistaken in my attribution of those SLB comments on a coming price to their CEO. It was actually the head of N. American ops for SLB. Upon a little more reading I can see their view. Longer laterals, more stages are eating up capacity despite the lower rig count. I don’t get the sense they meant big price hikes but a flattening has occurred and now it could tick up.

  18. 18
    VTZ Says:

    http://www.nationalpost.com/1929040.bin
    Puts some numbers in perspective… was in the National Post here.

  19. 19
    rseidman Says:

    Z: I have a small position in NFX.
    Question: Is it worthy of adding to, in your opinion?

  20. 20
    zman Says:

    RS – I’m holding mine for now. Stock is cheap see comments on it earlier in the weak. I’d think less downside risk than the higher multiple names and they have god hedges and some catalysts on the horizon but probably nothing too close at hand (before 3Q). I had been thinking to replace add common in my SEP when I make my contribution for last year.

  21. 21
    RMD Says:

    UGEG : update from old owner. Very cagey mgt, abble in this and that, shareholder results never seem to result in big payday.
    history: sold uranium at top when everyone wanted it, got big cash (around $80mm or 44/share), gave selves optins and bonuses. Holders yelled sopaid one time dividend of $0.10 with stock buyback which never bot any stock.
    Did condos in coal bed methane area, all presold, made $$ and left.
    Bot mt. near Crested Butte for molybudumen, Phelps Dodge had spent $$huge developing yrs ago, but he gave up when realized this is a 10 yr. project.
    Father ran co. before, accused of running co. about the same way.
    This is just one former owner’s recollection fwiw.

  22. 22
    Jerome Blank Says:

    Hi Zman, any thoughts on a local company here in PA, NGAS, its a Marcellus shale play, stock is near my support level, I’ve been watching it

  23. 23
    choices Says:

    Efficient Market Theory in action heh: AIG up another 23% today to $46.50, was trading around $13.50 on Aug 4. Shorts may be having a religious experience.

  24. 24
    zman Says:

    Thanks RMD

    Jerome – sorry no, saw them present awhile back, came away with no clear opinion. Will put on the list to take a quick a look at but I don’t know them and have never played them.

  25. 25
    kyleandy Says:

    nat gas now on CNBC

  26. 26
    zman Says:

    Kyle – watching that now. First guy is using bad logic, don’t use it because price is so volatile.

  27. 27
    zman Says:

    first guy making second wrong point of using gas tied to transportation will tie it to oil. well, that would make it LESS volatile so that defeats his first.

    Both guests are wrong on it not working for individual cars because of infrastructure. They act like we can’t build nat gas stations for cars…that’s just dumb. It is already happening and accelerating.

  28. 28
    zman Says:

    CLNE breaking out on stimulus news

  29. 29
    Nicky Says:

    Morning all.

    Indices seem to still be in wave iv pullback (although it is starting to look a little long relatively). I think it should go lower towards 1013, 1006 and even 1000 before the final move up to the 1040 area.

    Oil has support at 69.50, 68 and 67.50.

  30. 30
    Nicky Says:

    For heavens sake where has this news about a second stimulus come from. How the heck are we gonna pay for this?? That nothwithstanding why the hell would we need a second stimulus if the first one has worked so well and we are out of recession anyway – if of course you believe that.

  31. 31
    Nicky Says:

    Truly these guys have learned nothing. The lunatics are in charge of the asylum it would appear when they are attempting to inflate this economy by creating yet another asset bubble ie lets do it all over again! It would appear that Joe Public at this stage does not believe them as they continue to save rather than spend.

  32. 32
    zman Says:

    Bill – interesting story regarding fire sale pricing on drybulks under the DSX ticker.

  33. 33
    1520sbroad Says:

    GMXR greenish – pretty much everybody else firmly red? Anyone seen anything interesting on them?

  34. 34
    zman Says:

    1520 – I see nothing on them today. WLL moving up a bit on credit suisse. Lack of news, stocks just drift. Historically we have seen a bit of a pick up in news next week and the week after.

  35. 35
    choices Says:

    Z-re#27-FSYS is in transport sector of Nat Gas infrastructure-fairly strong in weak market. I own a very small piece but will add on weakness.

  36. 36
    kyleandy Says:

    WLL seems to be king of oil patch today

  37. 37
    zman Says:

    Choices, will add that one to my watch list

    Kyle – yep, upgrade on a boring day. That stock is cheap relative to its other Bakken brethren and I sold out after a pretty good run but I suspect it will be in the mid to high 50s if oil sustains 70 through 3Q. Big, big wells they are drilling.

  38. 38
    zman Says:

    Latest HK presentation from 8/11, I go back and listen to them again sometimes just to see if I missed anything. Strong hedges out through 2011. Haynesville and EFS economics remain strong probably around $3.50 … but not down here. They use collars in their hedges though so the floors in the $5 and $6 range protect you while the ceilings at $9 and $10 in 2010 and 2011 give you upside when prices rise.

  39. 39
    cargocult Says:

    Z- where is the story on DSX?

  40. 40
    zman Says:

    Drybulk story

    http://www.guardian.co.uk/business/feedarticle/8673824

  41. 41
    zman Says:

    I understand PXD has spud their 2nd EFS well in an undisclosed county. I woule be they have results by 3Q release on that one and given the lower pressure, quicker and therefore cheaper to drill nature of the EFS relative to the Haynesville we could see something pre their Oct ober quarterly release.

  42. 42
    VTZ Says:

    Nicky – I agree with you fully re 29, 30, 31 although I don’t expect any stop to the stimulus.

    I believe that now that Helicopter Ben is confirmed they will continue stimulus, QE and low interest rates for a long time. There will likely be an expansion of bailouts as there’s no way to stop now. As soon as the economy falls off again (ie as soon as they stop injecting ridiculous sums of money), then they will implement new programs.

    Make no mistakes that health care reform will happen and cost much more than they say.

  43. 43
    VTZ Says:

    Turning points and indications of things to come:
    -auto bailout/cash for clunkers (extending bailouts to industry rather than just financials)
    -announcement of extending the period of QE (continuation of debt monetization)
    -second stimulus/health care reform (willingness to continue taking on new debt as a way of fixing the problem of old debt)
    -Ben re-appointment (appointing the facilitator for it all)

  44. 44
    zman Says:

    V – no near term end to QE should send dollar lower. Also, some countries like NZ look like they are going to front run the U.S.’ future rate hikes which also should be bad for the dollar.

  45. 45
    zman Says:

    Stocks off lows but not by much as crude tests 71 from below. Its a strong get stronger kind of day for WLL, otherwise most names just treading water coming up off lows. Reviewing notes and transcripts on HK. Call me a believer but the stock should move higher in the near term as the (in)digestion phase following the deal should be about done. Going to need a move in NG to make it stick most likely.

  46. 46
    Nicky Says:

    VTZ – re 42 and 43 – its seriously frightening. I can see why when it all comes home to roost the dow is going to be easily sub 5000.

    Z – re the USD. Near term count argues strongly for a bounce although I agree with you on fundamentals totally. Maybe the USD rallies as equities correct as the risk trade gets put back on short term. It is the only thing I can think of.

  47. 47
    Nicky Says:

    v looks to be underway for equities and oil.

  48. 48
    zman Says:

    Crude reversed gains, slightly green.

  49. 49
    cargocult Says:

    Nicky,
    What is the best way to hedge for what you see coming?

  50. 50
    zman Says:

    NG off lows. Down 14 cents now. At some point they will rush to cover. Not sure when they point is obviously but the trade is pretty played out.

  51. 51
    Nicky Says:

    Z – re 50 – looks like that point may be now. Often see a reversal when a contract expires.

  52. 52
    zman Says:

    Nicky – maybe so, would be fine with me. Now down 3 to 5 cents. The strip is doing a little better, off 2 to 3 cents

  53. 53
    VTZ Says:

    NFX making a nice comeback along with other names.

  54. 54
    Nicky Says:

    Cargocult – very good question! I think Z is probably a lot better qualified to answer that than me to be honest.

    Ram and I did discuss it some months ago. There are some funds where you can outright short the market.

    As you will know I am inherently bearish and getting more so by the day with everything that is going on. Because by nature I am bearish I have to work on not calling the top too soon! Yes I think we are about to get a steep correction but I am not yet convinced that it won’t be followed by a move much higher before the rug is finally pulled. So I don’t want anyone to miss out on some big upside potential by shorting this market too soon.

    Very short term we are clearly in v up. Careful of a truncation here as iii was so strong and I don’t know how much this has left to give. The cycle to the upside is now very extended. We could just spike up or we could end up with an ending diagonal which painfully plays out over the next few days and takes us into the 1040’s. 1070 is not out of the question as there is a gap there.

  55. 55
    tater Says:

    Oh, you conservatives. It’s so cute how you use that logic thing. I used to try that myself, but I wised up.

    “The Party seeks power entirely for its own sake. We are not interested in the good of others; we are interested solely in power. Not wealth or luxury or long life or happiness: only power, pure power. What pure power means you will understand presently. We are different from all the oligarchies of the past, in that we know what we are doing. All the others, even those who resembled ourselves, were cowards and hypocrites. The German Nazis and the Russian Communists came very close to us in their methods, but they never had the courage to recognize their own motives. They pretended, perhaps they even believed, that they had seized power unwillingly and for a limited time, and that just round the corner there lay a paradise where human beings would be free and equal. We are not like that. We know that no one ever seizes power with the intention of relinquishing it. Power is not a means; it is an end. One does not establish a dictatorship in order to safeguard a revolution; one makes the revolution in order to establish the dictatorship. The object of persecution is persecution. The object of torture is torture. The object of power is power.”

  56. 56
    zman Says:

    Crude up a buck, impressive mid day turn there. It turns out its not the end of the world as we know it. Maybe some people are noticing the rising trend off the bottom in total product supplied. Or, oh yeah, it was just profit taking off $75 mark which they hit to the penny.

    Waiting for the stocks to take notice.

  57. 57
    tater Says:

    OK,
    something a little more productive? KOG line in the sand could be around that 1.21 level. Fall below that and there might be trouble so keep an eye on that level.

  58. 58
    Nicky Says:

    Big move down in dollar, up euro.

  59. 59
    elijahwc Says:

    #42 – re: health care reform

    Maybe, but not this year. There is new information as Team Obama contemplates the ridge on the Waterloo horizon and it is Ted Kennedy. He was the magical #60 in the Senate vote count. The State of Mass requires that replacement Senators be elected not appointed and 2010 is the next date. Perversely, the Blue Dogs are breathing a sigh of relief as this gives them cover (e.g. “not enough votes to pass it” vs. “I have to explain myself to my voters”).

  60. 60
    zman Says:

    Cramer about to rant about natural gas as a transport fuel

  61. 61
    elijahwc Says:

    Z – WPRT – Nat Gas Engines. Truck engines with Cummins.

  62. 62
    zman Says:

    Cramer gives a pump to UPL, CLNE, amazing to see people just buy because he mentions a ticker. SWN is a cheaper lifter but whatever.

  63. 63
    zman Says:

    Eli – yeah, its on my list. Saw their stuff at the CLNE booth when I went to the Haynesville Expo last fall.

  64. 64
    zman Says:

    HK just bounced off the 200 day from above.

  65. 65
    zman Says:

    NG September goes off the boards at 2.8

    NG October takes over tomorrow at 3.20

    November at 4.20
    December 5.05

  66. 66
    Gtinvest Says:

    Z I don’t understand. I show Hk 200ma at 20.43?

  67. 67
    zman Says:

    I’m using an 200 ema that shows 20.90 on my screen. SMA is probably a bit lower.

  68. 68
    Jerome Blank Says:

    I have the simple std 200 MA on HK at 20.31

  69. 69
    zman Says:

    Did the dollar tank after that auction?

  70. 70
    zman Says:

    $100 mm suit filed for non-payment of taxes on a bunch of E&Ps.

    Companies named in the Terrebonne Parish lawsuits include: Apache.; Badger Oil; Brammer Engineering; BTA Oil Producers; Castex Energy; Chaparral Energy; Cimarex Energy; Desco Oil; Dimension Energy; Energy Properties; Energy XXI Gulf Coast; ExPert Oil & Gas; Forest Oil; Helis Oil & Gas; Hilcorp Energy; LLOG Exploration; Maritech Resources; Meridian Resources & Exploration; Merit Energy; Palace Operating; PetroQuest Energy; Petsec Energy; Phoenix Exploration; Rapiere Resources; Renaissance Petroleum; Stone Energy; Tellus Operating Group; Texas Petroleum Investment; and Wagner Oil.

  71. 71
    Nicky Says:

    USD suddenly fell off a cliff about an hour and a half after the auction.

  72. 72
    zman Says:

    Thanks Nicky. The dollar is just about the only thing I don’t get live. Anyone have a web source for live dollar action?

  73. 73
    choices Says:

    Some days a little sunshine comes into one’s life heh-I just received an e-mail from Lagos, Nigeria that they are ready to credit $25 mil USD to my account, all they need is my contact details heh.

    (I hope no one minds this OT)-I have been unable to block these frequent messages b/c they use different senders each time.

  74. 74
    kiaora Says:

    Z…This is a streaming site: http://www.netdania.com/Products/live-streaming-currency-rates-foreign-exchange/real-time-quotes/QuoteList.aspx

  75. 75
    1520sbroad Says:

    anyone have a good recommendation on best way to buy gold bullion? web sites? coin shops? mint certificates?

  76. 76
    zman Says:

    Thanks K, am checking that out.

  77. 77
    RMD Says:

    1520 gold. Stack’s in NYC used to be excellent, don’t know now; used to quote on phone good for a while, many payment options inc. cash, ship or pick up, etc. Same way on selling. I should note that back then my Dad had done biz with them.

  78. 78
    1520sbroad Says:

    RMD – thanks. a new asset class for me.

  79. 79
    elijahwc Says:

    z-72 Finviz.com click on Forex tab, hover mouse over the relationship you want in order to get a five minute chart. Click to expand. This is a great site that all your subs should use. I keep a dedicated monitor always open to the news screen. Mucho good stuff.

    RMD….you can’t do any fishing behind a laptop.

  80. 80
    choices Says:

    http://stockcharts.com/h-sc/ui?s=$BDI&p=D&yr=1&mn=0&dy=0&id=p45331191449&a=154681854&listNum=39&listNum=39

    http://stockcharts.com/h-sc/ui?s=$SSEC&p=D&yr=1&mn=0&dy=0&id=p34896083269&a=169079550&listNum=16&listNum=16

    These two charts do not provide good news.

  81. 81
    kiaora Says:

    elijahwc……Great site..Thanks

  82. 82
    RMD Says:

    Went pressure fishing yesterday, took summer minister with friends coming for fish for dinner. Flounder and small blues…very fresh. (Had hambergers as a fallback position.)

  83. 83
    bill Says:

    on 32

    Yes , some very good buys. Nm just bot 4 capes for about 60 m. Last year at this time Economoo of cardiff sold 10 capes to drys for 130 m. He is ceo at drys major conflict.

    the sector went up today on earnings announcement from cosco china

    I like NM in the sector and dsx

  84. 84
    zman Says:

    Eli – thanks, good site.

    Bill – hear ya DSX, watching, waiting. Last time the big boy on the Street at Dahlman upgraded the group they all took a header.

  85. 85
    shimano reels Spinning rear drag Says:

    shimano reels Spinning rear drag

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