Vote Count Watch: My sincerest thanks to 20 of you! For the rest I'll try to win you over and for you fence sitters the voting button is here. Sorry about the PSA, I'll move on.
Watch Out for Putin Watch: Vlad and I have something in common and it's not just our love of the New England Patriots or bling. He also thought the House's cutely named NOPEC Bill allowing the U.S. government to sue OPEC was irretrievably naive and he added that it's a violation of international law. Note to Congress: You do not want this guy siding with OPEC. In the past he has turned down repeated invitations to join the Cartel. The only thing worse for the U.S. than Canada joining would be Russia.
Oil Inventory Report Review: Was That A Bullish Report? CNBC ran the caption "Don't get mad, get rich trading energy". And then they went on to say how the numbers were uber bullish yada, yada, yada. Gasoline prices shot lower just after the numbers, went as high as 3 cents to the plus side shortly after them and during CNBC's "groundbreaking report from the floor of the NYMEX" ...and closed off a penny. Big whoop. However, this chart looks tired to me. Were it not for import delays (because there are so many tankers chasing the highest prices in the U.S. and thus clogging the Gulf Coast's offloading capacity) the build in gasoline would have been twice what it was!
- Crude Oil - up 2,o million barrels. Who cares. We've got a ton and still it probably goes higher in price short term as the refiners consume it and certain unnamed pipeline operators have more technical difficulties in delivering it.
- Gasoline: Up 1.5 million barrels, higher than the expected 800,000 barrels. Yesterday I argued that the late week drop in consensus expectations for the gasoline build (they cut expectations in half from Monday afternoon to Wednesday morning) meant traders were getting short and were trying to bring expectations down to create a bearish number. More probably, they were not getting short but had taken profits and were trying to create a "dip buying event".
- Utilization & Production Are Both Finally on the Mend.
- Utilization rose to 91.1%, it's highest level since the beginning of the year, though it's still at the low end of the historic range for this time of year and only slightly besting the post Katrina wasteland of May 2006.
- Production trended higher with utilization which , as you can see from the second chart below isn't always the case.
- Gasoline Imports were off slightly this past week. Imports fell from the prior week by 233,000 bpd. If they had remained at the prior week's level this would have added 1.6 million barrels to storage (0.233 mm X 7 days). Put another way it would have more than doubled yesterday's stock build!
SCOOP WATCH - LATE ADDITION: Here's a benefit of reading the EIA's nightly situation report. It sometimes contains gems not covered in their report for which they've had a week to prepare (this week they quoted Shakespeare but left out the following):
Tankers Delivering Gasoline to U.S. Gulf Coast Facing 2-3 Day Delays. The tanker backlog is attributed to seasonal gasoline stockbuilding before the summer driving season and to more than 16 tankers that were diverted to the U.S. Gulf Coast from the New York Harbor in the past few weeks to take advantage of higher prices in the Midwest. Comment: I was just saying how cracks were on fire in the Gulf Coast and Midwest and here we have evidence that there's a ton of gasoline on the way...it's just trying to find the most profitable way of getting into the U.S. market.
I wrote the following headline before finding out about the tanker delays. It's late and I'm not reposting it but I guess say "glitch in the system" still applies.
- Demand ticked up slightly and is running 2.6% ahead of last year at this time.
- Gasoline Stocks Are Pulling Out Their Recent Nose Dive.
Vader Watch: ``Inventories are growing but we are still in big trouble with gasoline supplies,'' a vice president of risk management at Alaron Trading Corp. in Chicago, said yesterday. ``Supplies should be much higher going onto the Memorial Day weekend.'' Comment: I seriously think they should play that Darth Vader march music, you know,"DOM, DOM, DOM,DUM DE, DOM DUM,DE DOM" every time they introduce him on CNBC.
- Distillates rose 0.5 million barrels versus an expectation of a rise of 900,000 barrels. I don't talk much about distillates this time of year but they've become so overpriced because of the situation with gasoline that it's worth mentioning. Quite simply I ask:
Why has this inventory profile...
...Produced this price pattern?
click to enlargeThat's a $1.55 to $1.95 run (25%) in three months at a time when stocks have been more than comfortably high and at a time when heating oil prices are normally falling. Granted that oil has run up about the same amount in the first 5 months of the year but still we're pretty far ahead of the game storage wise. If anyone has any good ideas on how to play the forthcoming retrenchment in heat prices (aside from futures) I'm all ears.
Natural Gas Inventory Preview:
My expectation: 100 to 110 Bcf injection. Cooling load backed off a bit and heating demand picked up slightly relative to the week before when we got an injection of 95. However gross imports were up 0.3 Bcfgpd for LNG and 0.7 Bcfgpd via pipelines from the north so that's an additional 7 Bs. The over/under should be 95 this week.
Odds & Ends
Analyst Watch: - I'll add any in comments in the morning along with stock specific comments.
Bottom Line: Holdings Watch:
- Calls: No action.
- Puts: Added (MRO) June 120s for $4.High risk, high reward "too far, too fast" play. I'll be looking at more plays amongst the independent refiners today including some old friends that kicked my teeth in the last go round but have come "too far, too fast."
- Stocks: (WHT) - took an opening positon at $3.17. (CLR) continues to perform well out of the gate.
Here’s a true minnow of an E&P that could get a nice pop today.
UCPI.OB $0.36 (yep, that’s the stock price)
Had a nice discovery in E. Tx. 4 pays with an additional 2 to 3 possible in the area.
They thinks its a 10 Bcfe, 8 well development. They’ve got a little under 20%.
The stock’s been beat up but they recently completed a financing and this will be a big boost to both reserves and production.
Other than this they have an acreage position in the New Albany Shale, two wells they bought in 2005 and two discoveries they’ve made since.
CFO has some pretty good oil experience on his resume.
If it doesn’t run away from me on the open I’m throwing a little mad money it’s way. I probably wouldn’t chase it more than a $0.05 but they do have further near term catalysts in the form of more wells a few months out.
Morning Z, I had heard that tankers were shifting out of NY, but I heard capacity issues in NY were a driver. In fact Buckeye Partners which runs a major pipeline that serves a good chunk of the Northeast put out the following info last week:
Buckeye Partners said it won’t take additional orders during most of June for a pipeline running between New York harbor and western Pennsylvania because the line will be at capacity.
”There is quite a few barrels moving” through the system, said Ron Mohr, Buckeye’s senior manager of pipeline scheduling. ”We’ve got more than we can handle.”
So now I have to wonder, even if the refiners start humming and imports pop, is there a potential bottleneck brewing on the distribution side that will keep us from digging out of this hole?
Morning gang,
Nicky – saw the CVX news. Saw nothing re strike today
J – yes, rationing capacity is usually indicative of a system with too much of something on its hands. lol.
Calyon cut a bunch of driller and service names.
http://www.briefing.com/Investor/Public/Calendars/UpgradesDowngrades.htm
Strike is on: Just got this off Upstream:
Staff at the Nigerian National Petroleum Corporation began an indefinite strike today over welfare, with union leaders saying they will target oil production if their demands are not addressed within days.
The strike, which is also to protest against the privatisation of the country’s largest oil refinery last week, is expected to hit domestic fuel supplies for now, Reuters said.
It comes just five days before the inauguration of President-elect Umaru Yar’Adua on Tuesday. A separate two-day strike is planned by all unions on Monday and Tuesday, but they had previously said it would not affect oil output.
“The strike has started. We will wait for two or three days and see what happens. If we don’t get the desired results, we will then extend it to the upstream sector where the impact will be immediate,” Peter Akpatason, president of the junior staff union Nupeng told Reuters.
Peter Esele, head of the senior staff oil union Pengassan, said informal talks were already going on to try to resolve the issues at stake, while a formal meeting with the government has been scheduled for later today.
Just let me know when they run a story about the diverted and now stacked up gasoline tankers. lol. never happen or its a tiny mention later in the day I’ll bet.
Ahhhhh, commodities market, like politics, they pick and choose facts that suit them best.
No cynicism here…. no none whatsoever.
Sane
TK – got another early approval on their acq of OMM. Stock looks higher.
Good Day All…
Calyon cut a bunch of driller and service names,BUT they increased their price target !
What do you call this kind of downgrade..( buy to add ) when they down a name with some dumb rating( buy to buy a little on dips? ) and increase the price target?
MRO short blistering me this morning. No DD for now.
Everything else including service and gassy E&P calls looking decidedly more bullish this am.
PQ going $14. Still no well news but up stronger than group this morning. Odd.
H – We used to do that occasionally. Very confusing call for the salesman to make. “We’re raising our numbers but cutting our rating.” Salesman hear “cutting our rating” and stop listening.
Anybody here the gas storage consensus build exp?
Z…I understand the type of call and what it means, its pretty simple, cut and dry, I was just looking to have a lugh ns see if anyone can come up with a funny name for tis kinda of action..
Everybody, lets have more fun!
make like my question is comming from a novice if you like or just place an off the cuff answer,
but do we pullback on OH , to 165-170 first or do we fly above 175 first- OK how long till oih hits over 175?
YOU CAN SEE BY MY POST I’M NOT THINKING AND VERY BOARD>>YAWN!
104 Bcf –
Analysts were looking for 95
I was looking for 100 to 110
CNBC weathergirl says it’s not really bearish b/c we’re facing a hurricane season. wow.
NG – they forgot to take into account rising imports.
Nicky..is that a joke?
CNBC weathergirl says it’s not really bearish b/c we’re facing a hurricane season. wow
What about summer cooling season? AC running 24 hours a day–hell I been useing mine for 3 days already!
I know–I se it—I like your sence of humor-pre holly day gas builds not enough cap sill under 100%(lol) imports —to many laod ships-
Reallity—iarn iraserl and nigeria
on to me
I brought rig jun 95 p’s yesterday ( baddy me ) at 1.45—-I think I was to impainet and of course early—I think I’m gonna use this move now to dump them —-to early-
Have you looked at the b/a spreads on UNG this morning? $5 seems a little excessive.
Oops – meant UNG options b/a spreads
This has been nothing but up and down up and down ( oih &xle ) for a week now, its a traders dream!
monday I was buying puts then calls on tuesday- ( cept VLO puts on tues ) then yesterday its lite tickle rig puts….I’m pupped! tired! man o man!
I sold all my puts on RIG! I can’t stand the indesion, and constant buying–so instead of being whipped lashed into another buzz( ok maybe not today ) I just sold and am happy with the little profits on all!
Lars – which spreads, the options. I was just looking at writing some $53 calls there for $1.40 but I’m not likely to do it. Maybe the $54
Bush jawboning?
Zman – I was referring to the b/a spread on every strike price. Every Thursday around NG announcement time the spread seems to widen to around $5 for each strike. This lasts for an hour or so. At the time I looked, the bid on the Jun 53 was 0.25 and the asked was $4.80. Of course, as soon as I posted the above the b/a spreads came back in line 🙂
Lars – got ya. Look how much you can sell for calls for on the 55 and 56’s. That’s pretty good money considering nat gas would have to rally ~10% just to get them to break even in 3 weeks.
Thanks Nicky –
Stocks getting taken to the woodshed here.
out SU $80 June puts for $0.40. Nice loss on that one!
E&P in the woodshed but its more of a spanking than a slaughter.
I suspect it’s more profit taking with the broader market than fear of lower commodity prices.
NE $90 Jun Calls taken for $2.25
I sold my rig puts to early, scans for those oih , and mad as hell I had my finger on the buy botton for the vlo 75 jun P’s the other day on that spick, to buy at 1.3/1.4 then it ran and I chickened!
How is CNBC spinning todays action…
If anybody is intrested I’m sitting scratching my head, anyone else?
Who holding calls?
Zman – agree on the 55 & 56’s. I sold the 53’s a few days ago for 1.85 and it was a nailbiter for a couple of days, but I’m smiling now. BTW, finally got around to voting for you yesterday.
L – I like the higher strikes, less biting and the postential of not having to close them out at all!
Thanks for the vote!
H-I have been scratching my head for quite sometime, not just today.
I throught I was the only and only head scratcher, in thw hole in the head world!
This is what gets me, everyone was expecting oil to go up because runs would increase sooner or later, then you have a build yesterday , but a run rate of that 91.5, now are expections for this to be a near term top , because no one today is buy the need for oil to refine story?
N – what’s up with RBOB (besides the price)? Is this all Nigeria or did something break. My only put remaining is the new MRO and it’s flat on the day but the refiners aren’t doing much worse with gaso up $0.04 and crude off a buck.
This sell off to me looks like a little vent. I see some comments out there as people get happy to short the OIH, service, E&P what have you but this looks like a little profit taking dip. Nothing, other than gasoline prices should be reacting this way (and they’re not).
In other words I wouldn’t get all carried away with the puts right now.
FLASH : (
Been having a good go, but now I just stepped in the shit, and brought OIH JUN 170 C, at 2.70
I have a close eye on it and will take a loss against my prifits if it gets blisted–second wind of selling 4 sure comming. so all those puys u nuy I can move up 4 you now that I brought c’s
O yes nicky —your dead on —I was thinking without thinking!
what happened to oil at 67/
Nicky,
I believe heating oil will be bullish right through the fall. Like you stated, there are some issues already with the YoY supply comparisons.
What we have is a perfect storm for HO. A mild winter with a late cold snap (which is what we had in the NE) is partly to blame for the lag in supply we see now.
The other big issue is the recent EPA low sulfur diesel regs. As most probably know, diesel and HO are virtually the same exact product, in fact you can run your diesel car on heating oil with very little difference in performance. It used to be that refiners could very easily adjust ratios to produce more of one or another depending on demand. The new low sulfur regs now complicates things a bit, making it much more difficult to switch between the two. Right now the refiners are pushing out more diesel at the expense of HO. This should eventually balance out, but it could be an expensive winter for the HO crowd. If prices stay high in HO, imports should begin to get the market back in line.
Hopefully the global warming hippies are correct and will have a mild winter to help out.
Every gasoline pumper is out today preaching doomsday. Boy is it tiring.
Sane
hopefully CNBC will add the new Phil Flynn theme song soon so you can have some warning to mute you tv Sane!
just looking over the eia nightly shows a roughly even mix of refiners having problems and others comning back on line. Looks to me like this week’s numbers to be reported next week should show another small gain in utilization/production. Imports probably don’t go any lower than this week as they’re trying to get the gas in for the holiday with all hands on deck!
just wait, UN report just issued should clear way for tougher sancetion/white house talk for Iran.
That may save crude for the weekend.
MRO down a buck. FFFFfffffinnnallllyyyy
Z – What a difference a couple hours makes… MRO 120 puts @ 4.90/5.00… Hope that turned your smile upside down…
Meant Frown upside down… not good at this touchy feely crap…
N – agreed short covering and the good points for J
Got stopped out of SWN at $1.90 for nice gain but not as nice as it was!
ED – thanks … me hate touchy feely too but I got to try and fit in around here. It helps a little, Kind of like getting mugged and the guy leaves be change for a payphone.
z,
i was gonna vote for your site, but i don’t sign up or create accounts for any of that stuff. if it helps, i think the site is great. keep it up.
– paul
OT Zman, but you might want to check this out.
http://it.slashdot.org/it/07/05/24/167223.shtml
This Is the headline from Cramers latest Realmoney Storys today, Its an absolute tell…
“Action in Oil Stocks Is Only for the Nimble
2:45 PM EDT
If you sell here, you’ll only have to buy back lower, but an initial entry here’s too high. More”
Boy thanks for the heads up, I would hate buying higher-
O K I READ CRAMER
LOL Paul – you sound just like my wife. I said honey, go give me a vote and they ask to sign up and I sitting there looking at here and she says “they want my email” and I say “yeah, so” and she says “forget it, sorry but I don’t need the headache” So I made HER sleep on the couch. LOL.
Honestly, I understand and it does mean a lot that you like the site. I use a junk email with yahoo for that sort of thing if that tips the scale!
Took a 2x position in GRP $55 June calls for $1.90
It’s down the most of the OIH components on the Calyon downgrade and those guys, as H pointed out earlier, raised all their downgrade price targets. In Grant Pridecos case they went from $55 (where the stock is currently at ) to $60 which it didn’t quite get to a couple of days ago. This is a risky one but I’ll DD once tomorrow if the OIH opens lower.
OK SO they bid everything up yesterday, but today they sell…..topped(4 now or dam near ) OK so what changed from yesterday?
H – nada. Looks to me like most of the selling as far as the stocks were concerned is just pt with the rest of the market.
Good that means I”M never to early to lay down on the conveayer belt, heading to the buzz saw! why o why o why. I brought service calls today…sgeezze!