Trepidation Tuesday

Asia and Europe bounced overnight. The U.S. markets and the dollar are called higher this morning after Asia and Europe found solid footing overnight. Oil and natural are looking higher as well. The gains are all stemming from the fact that the Nikkei did not fall for a sixth straight day.

I’ll be very cautious about buying the rally as few recoveries are V-shaped. I’ve taken profits in several names over the last few days including doubles in APC, PTR, and XOM and healthy profits in BP and will probably fence sit today. Exceptions to the fence sitting include that TK put which still bothers me and HES (short) and PBR (long) where I still haven’t found good entry points.

The decline in the broader markets began the evening of February 26th. I find that a numerical review, no matter how simple, is helpful in gaining a little perspective amidst all the carnage. Here’s a quick review of the the damage wrought by the Asian Flu and subprime one-two punch.


Oil: More pricing shenanigans with oil closing down$1.57 to $60.07. Crude hit $59.60 but was saved by the bell and traders who managed in the nick of time to trade the “crude falls below $60″ headline for “crude skids with market jitter, holds above $60″. If you’re a bear or drive a car you should thank them. I’d rather have high $50s, low $60s oil as we head to the next OPEC meeting March 15 so that OPEC has no reason to sabre rattle about further production cuts.

Early Read on Crude Inventories (these are broad ranges but I’ll have the “over/under” point estimates in tomorrow’s post):

    • Crude: up 1.5 to 2.5 mm bls. I’d bet on the lower end of the range as the Houston Ship Channel was shut for an unspecified amount of time last week.
    • Gasoline: 1.3 to 1.6 mm barrels. Probably the most important number in the report and I really don’t have a better handle on this
    • Distillate: 1.8 (Fimat of course - why be accurate when you can be a bullish estimate bagger) to 3.2 mm barrels. This could still easily be larger.

Odds & Ends

La Nina Watch: There’s nothing new in this story in terms of La Nina’s development but it’s worth taking a look just for the really cool image of the earth (cool meaning I like the picture, not that the earth is cool) as seen by the Jason altimetric satellite which measures sea level height. The author says that it’s unclear weather or not a La Nina is forming and in the picture green (normal sea temperatures) dominate the globe from my purely laymen’s perspective.

Taxman Watch: A leaked draft report of the Canadian House of Commons Natural Resources Committee suggested that a tax break implimented to spur investment in the oil sands be revoked. The tax break is estimated to be woth C$1.4 billion (US$1.19 billion) annually to investors ~ from Upstream. The government already takes roughly 41%. Let me get this straight. You’re sitting on top the world’s largest recoverable hydrocarbon deposit but it’s only marginally economic as is so you think now is the time to dis-incentivize investment? I only thought that kind of logic was applied in the States.

Opec Watch: The Organization of Petroleum Exporting Countries (OPEC)’s weekly average crude oil prices rose to $57.50 U.S. dollars per barrel, up $3.03 from the previous week and the highest so far this year, the cartel’s secretariat said on Monday. That’s a weekly average and this week’s activity will bring it down a little but again, I want it to stay up over the next two weeks to give ministers no reason for further action. At present, OPEC appears to be concerned about tightness (if you can believe that) in the second half of the year.

Nigerian Rebel Watch: Nigeria is deploying more gunboats (of the government variety) to patrol the delta before the upcoming presidential elections and in the wake a large Shell oil pipeline leak over the weekend. Comment: What have they been waiting for?

Putin Watch #1: An expert on Russian intelligence was critically injured in a shooting in front of his suburban Washington home, authorities said. The shooting of Paul Joyal, 53, came days after he accused the Russian government of involvement in the poisoning of former KGB agent Alexander Litvinenko. The FBI was assisting in the investigation. -AP.

Putin Watch #2. In a bit of unrelated news: In Moscow, Ivan Safronov, 51, was an ex-colonel and journalist for Kommersant who had irritated the Russian FSB security service with his frequent exposes. He was reported dead yesterday after apparently falling from a fourth floor window of his apartment block on Friday. - UK Telegraph

Comment: Due to lack of demand I am retiring the Putin Watch segments.

Analyst Watch: Jefferies started FST at buy and SM at hold. Morgan Stanley took E from under to overwieght. CSX started at underweight at Prudential (the coals rails have become interesting of late).

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