Wednesday – Inventories Tomorrow But Let’s Get Focused Today

Crude Oil Was Bailed Out of a Steep Dive Just Prior To The End Of Trading To Close Just Above $63... Blame the dive ($2.05 shaved off the July contract to end at $63.15) on uncommonly civil global behavior:

  • in Nigeria as the uniions called off their strike, presidential power was peacefully handed over (so far), and the movement for the Emancipation of the Nigerian Delta (MEND) said they would consider the conciliatory first statements from new president Yar'Adua who promised a Marshall Plan for the swampy, impoverished and incredibly oil rich Delta region, and
  • in Iraq where the US and Iran ended the first set of talks in 27 years between the two nations without coming to fistacuffs.

...And Gasoline Took A Presidential Beating.

 At 10:50 am yesterday I said:

"Funny: June RBOB may have recovered but July is off 1.9 cents, Aug down almost 3 cents"

Nicki responded: "Yes Z, Something will have to give prior to expiry on Thursday."

How right you were Nicki! 

As Phil at PSW and I have been musing for weeks now, the passing of Memorial Day was a buy the rumor, sell the news event for RBOB, which collapsed $0.1058 to $2.298 (June) and remains heavily backwardated in the out months which fell even harder (July down $0.1171 to $2.19 and August fell $0.1106 to $2.141). It probably didn't hurt the slide that several refinery restarts were also announced yesterday!

Early read on the EIA's Gasoline Report Tomorrow:

  • Consensus: 1.43 Million Barrel BUILD.
  • Phil Flynn: 2.0 Million Barrel DRAW.  I only single him out because he's running hard against the pack this week. Possible motivations for such a projection:
    • a) he thinks there will be a 2 mm barrel drawdown -or-
    • b) he's desperately trying to drag consensus lower. Why would you do that? If you are a well known energy personality who not only comments every MSM outlet available but also trades futures the reasons are simple. Either:
      • 1) you are hoping to create a buying opportunity when the number comes out and it's bigger and drives gasoline prices down (like last week). At that point you go on CNBC, who conveniently forgot how off your number was, and attempt to drive RBOB back up with tales of doom and gloom while videos of refineries burning are played just over your shoulder. I'd bet on this one.   - or -
      • 2) you've quietly gone short and by pulling the consensus number down you helped to create a  "bearish disappointment" . Not likely but possible.

Hey kids, how about a little history of gasoline demand and stocks around the Memorial Day driving weekend?

Contrary to all the MSM spin demand doesn't just explode out of the gates as people go driving for a three day weekend.


..And similarly, inventories don't suddenly nose dive before, during, or after the famed driving weekend.

stocks-2003-to-2007-052907.jpgclick to enlarge

Switching Gears, Natural Gas Did Surprisingly Little Yesterday. The July contract traded off $0.06 to $7.73 which says a lot about the fear of the upcoming hurricane season. Usually a down $2+ oil day would result in more weakness in the natural gas contract than a few pennies.

Here's my early look at the natural gas storage numbers for the week:

  • My expectation:  105 to 115 Bcf BUILD. I'll have the factors influencing this number on the Thursday morning post but for now just know that they include higher gross imports and lower weather related demand.
  • The midpoint of that build would decrease the YoY storage deficit to 8%, down from 16% just 5 weeks ago. Imports and production are to blame for the rapid rebuild.

Eyes On Texas Watch: According to preliminary data for the month of March from the Texas Railroad Commission, natural gas production from the Lone Star State is running 1.8 Bcfgpd ahead of March 2006 levels. That's nearly 60 B's extra per month.

Production may be putting a top in gas prices. Add those higher Texas volumes to steadily rising production in Wyoming and recovering production in the GOM and Oklahoma and you might think we're awash in gas. And you might be right! Tune in this weekend for an update of the latest North American Supply Demand picture show!

Odds & Ends

Analyst Watch: I'll add in comments tomorrow.

Your Opinion Counts Watch: And I want it! I'm exploring ways to monetize this site which will allow me to do more in depth company and big picture energy research:

  • I've looked into ads. They don't keep the lights on and they can slow down the site. Plus they clutter things up and I have too many tabs cluttering things up as it is!
  • Monthly/Quarterly/Annual Subscriptions. Would you pay a  subscription fee for this site? My enquiring mind would like to know.  I would offer discounts to early subscribers and long time haunters of the site. I will also be able to offer a discount package to get access to both my site and the philstockworld site where I freqently post and comment.
  • Newletter subscription. That's in the works but it's a different more forward looking approach that's more integrated with the fine fellas at philstockworld.com.
  •  So let me know what you think.

54 Responses to “Wednesday – Inventories Tomorrow But Let’s Get Focused Today”

  1. 1
    zman Says:

    MEND now saying they’ve dismissed Yar’Adua’s pledges as just words and are demanding the release of rebels being detained by the government or they will continue their attacks on oil facilities. Ya just knew it couldn’t last.

  2. 2
    zman Says:

    Cracks page has been updated through 5/18/07. Look for another update in a day or so.

    CFTC page is being rebuilt.

    Performance page will be updated tonight.

    Iran and Snafu pages are being retired for now.

  3. 3
    zman Says:

    Weekly wraps are in the process of being rebuilt following my last crash. They will return this weekend.

  4. 4
    J Says:

    I’m starting to think these MEND guys are on the take. I think the Nigerian govt slips them some beer and a few bucks to cause some trouble every now and then to prop up oil prices. Looks like the new president already learned that peace would be bad for the treasury.

  5. 5
    SLM Says:

    Cash gas at Henry Hub for tomorrow is $7.73, up $.22 from yesterday.

  6. 6
    zman Says:

    Thanks SLM. Looks the stocks are finally starting to notice that!

  7. 7
    jazzkool Says:

    Zman, I like you and your info. I would be willing to subscribe.


  8. 8
    zman Says:

    Here’s your higher n. gas prices today.

    tropical low forming off w. coast of Cuba. They say it’s unlikely to develop but with Friday being the official start of hurricane season it’s got everyone bugged!


  9. 9
    Stephen Says:

    I’m definitely in favour of ads over subscription. I always click on ads.

    You could try a text-only banner ad where the text meets the comments. And more image ads at the bottom of the side bars, which is usually where the comments begin.

  10. 10
    SLM Says:

    What do you think of selling the dec 30 Put on LNG and buying the dec 35 put?

    A trading service is recomending it.

  11. 11
    zman Says:

    SLM – it’s not a bad play but be aware that that stock will run like a banshee with a strong blow in the Gulf. It’s a little less costly to do the Septembers. Have you asked Phil at PSW about it?

  12. 12
    zman Says:

    That ANR chart/story looks even more appealing with nat gas rebounding.

  13. 13
    zman Says:

    150,000 bopd offline Nigeria due to renewed village unrest. Stepped out and hadn’t seen that!

  14. 14
    zman Says:

    Agreed. Gasoline is again taking it on the chin and oil isn’t exactly soaring to the moon. Yet the refining stocks continue to run higher. wild.

  15. 15
    zman Says:

    PQ – another new high. Very close to liquidating as the $12.50’s are working well but I have to sell everything before mid month. I’d roll if I weren’t going to be out of town so long.

  16. 16
    zman Says:

    APC hitting new highs. I’ll be tapping out of that one as well this week.

  17. 17
    zman Says:

    Summer gasoline strip down a 1.5 cents

    MRO at new highs. I’m about to give up on that as it’s exploration success of late is garnering it a lot of attention.

  18. 18
    H Says:

    Zman, Would I get a discount, as a long time reader/hunter

  19. 19
    H Says:

    What kinda of fees are we talking about, I wouldn’t pay any high sub rates..why don’t you just try asking for a low fee for starters- advertize for what the site is and what it and you can off first( which IS PLEANTY ) but experment with a token sub rate-

  20. 20
    H Says:

    BTW – I closed all my shorts on NOV DO NE, yesterady and thim morning for a flattish ending.. I did not like the action enough to really go against the treand,,,,,and LIKE I SAID YESTERDAY>>I knew the selling in stks would not last, which is what I ment to say and what we have….no one ready to give up anything here-

  21. 21
    H Says:

    So _ so far RBOB is falling a bit, and HO is too, while oil finds a footing–and even though things are what they are this rally contiunes, no stk selloff in engery comples at all..with all this peek talk of the commidity-

  22. 22
    zman Says:

    Hey H, thanks for the suggestions.

    would you qualify for a discount – certainly!

    As to the fees that’s up in the air. definitely a discount for going for a longer subscription (quarterly/annual) vs monthly as having people come in and out is a big headache. Nothing exorbitant for certain. Probably on the order of a round trade and half ($30/mo for a quarterly sub) for the first tranche. Or much less than a cup a joe a day.

    Congrats on those trade closes. Pretty damn timely my friend!

    The action in the refiners is unreal. Investors aren’t buying the winds of change thesis in the gasoline markets. This could end very badly for them if they all try to get out at once.

  23. 23
    H Says:

    Yes…thedoor would be broken off the wall,so yea.-BUT ?

    anyways-that sounds fair and what I was suggesting-count me in!

  24. 24
    zman Says:

    H – door broken off wall?

  25. 25
    zman Says:

    Just watched the CNBC energy update. Blaming the selling in gasoline on contract expiry and citing traders who say we’re not out of the woods yet! Classic!

    Failed to mention what’s driving nat gas for an apparent $8 test.

  26. 26
    H Says:

    YA knoe,…small door, fire…they’ll push so hard the hinges will go flying to china! but really i do not see this happening at all tommorow or friday-

    I n case anyone would be intrested to know-C.S.F.B ( who–sounds like a swiss cnbc ) just put out a note, saying to short RSH as a trade, they say they are short, and that all the growth and the turnaround is backed well into the shares, and they still like the new management just that they belive – he and his doings are in the cake and frostiing-

  27. 27
    H Says:

    their selling their leangth!, what r they saying about the stks? eric?

  28. 28
    sane Says:

    $30 a quarter sounds fair to me. I know I would sign up.
    I know I would rater pay than have a ton of ads all over.
    Just my 2 cents 🙂


  29. 29
    bill fraser Says:

    ok based on 22 cent up move and anticipated good supplies for ng, i am shorting here. let see if i cover my $30 sub fee 🙂

  30. 30
    bill fraser Says:

    regarding tankers,

    you may recall i like topt at 4.50 now at 6.20. Im still long 70 calls. Its worth 8.

    TNP is my second favorite company in the space but im out now due to price.

    q2 and q3 are seasonally soft for tankers so i wouldnt chase here.

  31. 31
    zman Says:

    Bill F – I’ve been wondering where you’ve been! Great call re tankers.

  32. 32
    Another Phil Says:

    Anyone see this one?


    Is Flynn reporting out of Tulsa now?

  33. 33
    zman Says:

    AP – LOL. I agree with the tense comment,

    Same goes for nat gas with what amounts to a thunderstorm off cuba yielding a $0.20+ gain in gas.

  34. 34
    H Says:

    Thats Funny ! FIRE WEB SITE_

  35. 35
    H Says:

    Everything gose higher now- including that dress on that prom date! breakouts comming-energy and company!

  36. 36
    zman Says:

    Bill F – if you were fast you could have done very well! lol!!!

  37. 37
    zman Says:

    Done on (Sold call positions):

    NE June 90s position @ $3.60
    NFX June 45s @ $2.50
    1/3 out HK June $12.50 @ 3.60

  38. 38
    robert shoenfeld Says:

    what is the status of mro tso puts?

  39. 39
    zman Says:

    Still holding the TSO puts thinking about a DD there. Not wanting to rush in. This is very small bet right now. I can make the case for a larger one but that doesn’t mean that I won’t get my head handed to me shorting this one even if gasoline and cracks fall like I expect.

    MRO – still holding, set a limit earlier which was too tight and missed my sale like an idiot..

  40. 40
    Loren Says:

    Do a google search for “monetize blog”. There are dozens of options, and lots of people write about how they do it, and some even talk about how to do it without being intrusive. Google text ads are just the beginning. Could also rent yourself out to review other sites/books/etc. Or include inline ads for targeted words.

    I think this guy, http://www.johnchow.com, is one of the most well-known.

  41. 41
    Loren Says:

    Err, there’s no comma in the domain name, silly WordPress.


  42. 42
    zman Says:

    Thanks Loren.

  43. 43
    zman Says:

    ANR – up $0.60. Chart looks fantastic. They’re right in the sweet spot of what will move with a strong nat gas market.

  44. 44
    Popeye Says:

    OIH is putting me in the poor house.

  45. 45
    zman Says:

    Popeye – their business is just too good to short and the prospects only getting strong (except in Canada) this summer.

  46. 46
    H Says:

    Zman-and Co.

    esp z-

    What do you see for the expections on Oil/Gas and Distllates?- along with the capticty and production plus the imports?

    A lot their TIA. if you can answer–If not look foward to your morning comments-

  47. 47
    zman Says:

    H and N – I’m thinking numbers will be close to consensus but I want to run some traps before going with that. I’ll let ya know in the morning.

    Call open and close positions have been updated on the Zeb Perf page.

  48. 48
    T-Tupp Says:

    valero has cracks updated through the 25th posted on their website. the data is more recent.

    z- btw, how are these regional cracks calculated???

    all i can figure out is the cash price of RBOB, multiply it by 42 for the size of a barrel and then subtract the cash price of a barrel of WTI. but that gets me an arbitrary number.. help please lol

  49. 49
    Jonathan Says:

    I have no idea what the refiners are going to do short term, but long term i think this capacity tsunami is a big issue. ZMan, I saw your response to the below message, but what do you think the impact of the new capacity will be on crack spreads?

    I using this bullish sentiment to lighten up VLO positions. Oil (both crude and refined) is globally integrated (can be transported)…There will be a tsunami of supply coming on line in 2008 & 2009, (by my calculations about 8-12% growth (vs. .5% historic capacity growth) In Saudi and India they have enormous projects in the works. 2006-7 were unusual years in terms of idle capacity. Crack spreads headed south long term. Still like VLO because they are most complex and best positioned. These stocks shouldnt be at 8x EPS given cash generating ability, But its going to be choppy ride IMHO

  50. 50
    homan Says:

    zman you are smart guy but all stocks are going up dips are a buying oportunity all your put postion are idiotic. You missed the big run in the sector your an expert at come on dude wake up. You are to smart not to be rich.

  51. 51
    homan Says:

    but let me sound intelligent. have you noticed tso stock almost doubled why have you not owned this. Its going to run into this number. and all dips are buying oportunities untill all of retail owns this.

  52. 52
    homan Says:

    but great work on the site very informative expcept for the part where you have been betting agains refining stocks wake up

  53. 53
    T-Tupp Says:

    work on your grammar bud

  54. 54
    Daniel Says:

    I couldn’t understand some parts of this article s Get Focused Today, but I guess I just need to check some more resources regarding this, because it sounds interesting.

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