Friday Morning Comments – Still Waiting For Someone To Blink

Friday Topics:

  1. Oil
  2. Natural gas inventory review
  3. The Stocks
  4. Odds & Ends

Oil En Fuego. Mahmoud and T Boone Make Strange Bedfellows. But They Both Dream of Higher Oil Prices. Oil closed up another $2-- yesterday to close at $66.03, a 6 month high. In the overnight market May crude is up $0.29 after surging as high as 66.75.

  • Hostage Watch: Tehran has sent London a note asking for "necessary guarantees that violations against Iranian waters would not be repeated." Britain is said to be preparing a response. A similar message and response resolved a 3 day hostage situation in 2004 when Iran seized 8 British troops. Comment: I think Iran has overplayed this, they know it and are looking for a way out. Britain should just say it will respect Iranian waters in the future. Short and sweet.
  • The UN expressed "grave concern" about the standoff and passed a watered down version of a statement essentially saying "shame on you Iran, play nice!"
  • The Government Accountability Office said yesterday we need to study peak oil and how to handle it. Nice timing with T. Boone on CNBC talking about it in the morning. The GAO said it is a serious issue that most studies show peak oil occuring between now and 40 years from now.
  • Here's An Open Invitation to Aramco (Saudi state oil company) to state your thoughts on Picken's assertion that you can't grow production. I saw you guys on the site yesterday and I know it frustrates you to hear a hedge manager talk down your reserves and productive capabilities.

Natural Gas Inventories Remain 21% Above The Five Year Average

  • Storage as of March 23, 2007: 1,511 Bcf (updated March 30, 2007).
  • Max storage for this week in history: 1,705 Bcf (2006). At present gas is at it’s 3rd highest level in history for this date.
  • We are now DOWN 11% (209 Bcf) relative to year ago storage levels. This is an improvement from a 17.6% YoY storage deficit just two weeks ago.
  • We remain 21% (267 Bcf) ABOVE the 5 year average.


The Energy Stocks Have Been On A Roll Since Mahmoud Nabbed His First Brit

  • XOI - up exactly 100 points (9%) in the last nine trading sessions (from 1,132 to 1,232). 1,242 remains the all time high for this index.
  • XNG - Having had a similar sized run the gassier XNG has actually bronken into record territory in the last few days.
  • OIH - 140 had served as resistance since the beginning of the year but a series of mergers and rumors of mergers begining with the (THE) acquisition in the jackup market and ending yesterday with the acquisition of (LSS) -drill pipe- has overcome profit warnings from (HAL) and (NBR) stemming from a slowing drilling environment. I have no positions in service at present but the OIH looks poised to break through 150 and then it becomes a whole different momo driven ball game. At 148 I'm watching the group more intently these days.

Odds & Ends

Analyst Watch: (NFX) upped to buy at Keybanc, (PXD) upped to buy at FBR

Texas Rigs Vs Permits.; A Strange Dichotomy. There’s a weird divergence between permits and rigs over the last 6 months or so.


Texas represents a little under half of the current U.S. rig count so it's a pretty good baromoter for acvity. It’s possible that the increasing use of multilateral horizontal drilling in Tx shales which takes longer to drill and complete is behind the permit vs rig split. If that’s the case then the drillers are fine although their labor costs are going to skyrocket. Too many kids want to go to college these days….not enough roughnecks to go around. I’m running some traps and will have more thoughts on this when everyone gets back from Springbreak
(EEE) continues to hit new lows. Got to wonder if it just goes away. They'll need to do another deal at some point to raise cash for all their grand plans or maybe they'll just license all the technology and become a patent holding company. This is another company that over promised and has never delivered the goods. Actually continually producing clean coal.

Nigeria Watch: Nigeria’s landmark elections will go ahead as scheduled next month despite the death on Thursday of a presidential candidate, a spokesman for the Independent National Electoral Commission (INEC) said. Adebayo Adefarati, 76, candidate of the small opposition party Alliance for Democracy (AD), died in the southwestern state of Ondo, private radio Ray Power FM reported. The station said Adefarati, who was diabetic, died in hospital. The good news is, Umaru Yar’Adua, known to be a reformer who has done good things in his state is still alive and still the likely winner of the April elections. It's funny that oil zoomed on the news of the death of Adefrarati and possible suspension of the elections but when Nigeria said elections would go forward, oil didn't pull back.

(NBR) to miss on lower than expected N. American drilling activity. That’s the second service company to warn in the last two weeks after (HAL)’s similar statement.

44 Responses to “Friday Morning Comments – Still Waiting For Someone To Blink”

  1. 1
    El Diablo Says:

    Peal oil-LOL. “The Government Accountability Office said yesterday we need to study peak oil and how to handle it….most studies will occur between now and 40 years from now.”

    Looks like we can be sure of one thing, ‘studies’ will peak in the next 40 years.

  2. 2
    zman Says:

    EL D – bahhahahaha. Thanks! It’s been changed.

    Nothing on the refinery front up or down I take it? I looked a little last night but didn’t see anything of size either way. Gasoline continues to jump up

  3. 3
    zman Says:

    TK – all time new high. I’ve got the small call position here.

    VLCC rates just ticked under $70kpd but the smaller suezmax vessel rates are flying up as well, now at $65kpd

  4. 4
    zman Says:

    SCU – concerted effort to chip away at the offer today and it’s not getting reloaded like it generally does when the stock broaches a buck.

  5. 5
    sane Says:

    Tanker rates up == cheating, oh wait at $66 I would cheat too.


  6. 6
    zman Says:

    If I sold as much oil as Iran and Mahmoud’s moral compass I’d go to Piccadilly Circus to nab a Brit every month or so.

  7. 7
    sane Says:

    Hey, Iran has managed to pick up $15M – $20M MORE a day by taking hostages. What a way to reward them.


  8. 8
    Attacking Mid Says:

    I’m proposing a new tradeable index: FIX

    It will be fashioned after VIX, but rather than measuring volatility, it will measure fear.

    Fundies are becoming a secondary driver for oil and other commodities. Fear, or lack thereof, is the primary driver. Heck, there’s a whole industry built on it – the mass media.

    Now, I need to come up with a TA solution to help me predict relative changes in fear.


  9. 9
    Attacking Mid Says:

    Perhaps a better one would be: FLIX

    Fear and Loathing Index

    Offshoots specific to certain market segments could be endless:

    Tech – NETFLIX
    Poultry – CHKFLIX
    Agriculture – CORNYFLIX

    I’m sure there is no end.


  10. 10
    zman Says:

    AM – Only if you share it. I’m going to look at build a refiner index over the weekend unless somebody knows of one.

    TSO – just took the 100 Apl puts at $4.40. (stock’s at $102). April gasoline down on expiry but Summer months flattish to down as well.

  11. 11
    zman Says:

    sorry, MAY 100s

  12. 12
    sane Says:


    To predict the relative changes you can always look at the volume doom and gloom predictions in the media, and add some weight to the predictions that reference commodities.

    Oh sorry that seems more like a FA analysis, which doesn’t matter in the market, especially what would be the mother of all speculator indexes.

    That would be a crazy index. It would probably look like a seismograph of 9 earthquake.


  13. 13
    sane Says:

    I like CORNYFLIX pre market, IFLIX at work, And NETFLIX after hours

    Ok that was lame 😛


  14. 14
    zman Says:

    HES starting to really roll lower here. John’s daily sale just hit the tape. He’s sold about 500,000 shares since I’ve been pointing it out weekly for the last several months.

  15. 15
    zman Says:

    XOI getting popped pretty hard all of a sudden, without a big down move in oil.

  16. 16
    zman Says:

    HOC down, WNR and VLO only up a dime from big ups earlier. TSO still up $0.93

  17. 17
    zman Says:

    HES VP and treasurer received and punched out of all of his stock grant today. Only 4500 shares but it would have been 15% of his holdings had he kept it.

  18. 18
    zman Says:

    TSO dropping like an anchor now.

  19. 19
    zman Says:

    XOI failure to breakout to new all time high looks to have been pretty important to the stocks. It’s up 9% in 9 days. You’d have to be nuts not to take profits built on a house of cards full of hostages that, when they go home, will collapse sending crude down $5 in a flash.

  20. 20
    zman Says:

    TSO just turned red. Things starting to make a little more sense. Alright, sorry for the minute by minute play by play but this has been ticking me off.

  21. 21
    Popeye Says:

    Zman please keep it up.

  22. 22
    zman Says:

    Just retooled the Cracks page with a home made index for independent refiners and a fresh look at crack spreads, now in a shiny new graph.

  23. 23
    El Diablo Says:

    I’ve fallend behind on refinery watch. Have some stuff, just haven’t gotten it up there. I quickly lose motivation in these ‘fear gripped’ times to add additional irrational fears to the mix.

  24. 24
    zman Says:

    EL D – know exactly what you mean. I generally go into my research foxhole when the fear mania takes over.

    What’s the point when you got T. Boone saying the reason for up oil over the last 2 weeks is 90% fundamental and 10% Iran when it’s obviously a load of fertilizer?

  25. 25
    sane Says:

    Yeah it was pure coincidence oil went through the roof the same time Iran started being crack heads.


  26. 26
    Attacking Mid Says:

    So what’s the concensus re: the 2PM “pump”? I could see a selloff today due to longs not wanting to hold for Monday when it’s possible the Iran Hostage Crisis (deja vu?) could subside.

    On the other hand, I’m usually wrong, so watch it shoot over $68!


  27. 27
    tom2oc Says:

    Hi Z, I’m riding the dark side of that POS chart COG from EOD yesterday. Thinking of doubling up here. What’s your gut feel on crude going into NYMEX close? Do you think there will be a closing pump by the crooks?


  28. 28
    tom2oc Says:

    Also, I’m told COG just announced a shares split. Have you seen this somewhere? Tx

  29. 29
    zman Says:

    Tom – I’d guess so. If nothing looks like it’s going to get resolved soon and anything can happen over the weekend (>50% of it bad) then sure, they could pump it up to close back over $66.03 (yesterday’s close).

    Of course I’m mostly betting this all gets resolved soon but a pump is a pump.

    FYI, the guys at COG are very smart…I surprise to see it being one of the harder hit names today.

  30. 30
    zman Says:

    re split: announced 2/26 as of close today. you’re probably getting some the lemmings who buy stocks just b/c they split to sell on nervousness. “buy the split announcement, sell the split” ???!!!

  31. 31
    tom2oc Says:

    Thanks Z. Well I’m not surprised on COG this is one hell of an ugly large bearish wedge out there. Seeing it closing right on the support of it yesterday on a down day when the others were up on HUGE volume was the short signal. Regardless how many splits they want to do to pump it up, this chart is TA ugly and that’s all I needed to know.

    Thanks and hopefully the crooks will have a hard time to pump USO up but you’re right could very well be, they’re in charge.

  32. 32
    tom2oc Says:

    Thanks for the info on the split. We’ll see how those dumb traders playing splits will do.

  33. 33
    zman Says:

    Funny, you said darkside and I though you meant long! Guess I am a bear after all. lol!

  34. 34
    zman Says:

    Tom – there’s your pump…not really lifting the oil stocks though.

  35. 35
    tom2oc Says:

    So far that pump was a flash in the pan.

    Dark side = short side.

  36. 36
    zman Says:

    Tom – while I’ve got you, what do you think of HES from TA?

  37. 37
    Popeye Says:

    BHI NA rig count down.

  38. 38
    tom2oc Says:

    Looks like a top my be finally in my friend. Possible 56 breakout negation going back to June. Very significant TA event. Need to check how the volume does EOD. Hopefully it will be at least as high as yesterday. How does the FA look?

  39. 39
    zman Says:

    FA looks like a chart of oil my friend!

    John Hess dumps shares daily, has been for a blue moon now.

    Popeye – thanks will look at rigs…

  40. 40
    zman Says:

    TK continues to drift up with the oils continuing (for the most part) to drift lower.

  41. 41
    tom2oc Says:

    Got out of COG for a nice profit. Not going to short oil against that Hitler guy in Iran who wants to balance his budget.

    Thanks for your help and have a good one!

  42. 42
    zman Says:

    Same to you with your help

  43. 43
    Citi Cards Says:

    I couldnt have said it better myself! Thanks a lot!!!

  44. 44
    texana Says:

    z nfx– doesn’t the much lower rocky mtn gas prices on stone acq hurt btm line on there profits q3 report 10-25 . ru long nfx hk lookin good huge push to get deals done while w still prez. like oil btr than gas ie clr,ard,dnr thx tex

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