Wednesday Market Mea Culpa?

Flight To Liquidity Day Whatever. Tuesday Wall Street to dumping anything and everything except energy commodities in exchage for cash. Today looks like more of the same and there's little that rising commodity prices or company specific good news can do to boost shares in the group. I'm not tempted to bottom fish this market and while several E&P  names and indeed the Oil Service index are called higher before the open (see Tropics watch below) I don't trust these rallies to be sustainable in the face of the broad market's current baby and bathwater mentality. The Dow is flirting with 13,000 and the next obvious support is in the 12,500 to 12,600. CNBC should start a new ticker bug: how much the Dow is above 0.

  • CPI up 0.1%, core up 0.2%; both in line. At least by measures the Fed cares to look at, inflation is not a concern. You'd think this would give the Fed a little more breathing room but maybe they don't trust the CPI either.
  • Nymex confirms it has no funds with Sentinel, a firm that manages short term cash for commodity trading firms and hedge funds and which yesterday halted withdrawals. Furthermore, Nymex confirms Sentinel isn't a clearing member for Nymex and that all Nymex clearing member firms continue to meet their obligations.
  • Meanwhile, financials continue to suffer. More mortgage companies are grabbing headlines by saying they're not funding closings on mortgages that aren't eligible for resale to the U.S. Govt. In broker land, UBS has said the turmoil in the U.S. market could hurt its results.

Early Read On Oil Inventories (from the Platts survey)

  • Crude: Expected down 2.4 million.
  • Gasoline: Expected down 900,000.
  • Distillates: Expected up 1.3 million.

Tropics Watch: Tropical Storm Dean tracking toward GOMEX. The low centered in the Gulf also appears to be blooming in intensity as it moves almost imperceptibly towards the northwest.
Shell Evacuating Workers From GOMEX. Shell said it is evacuating non-essential workers from platforms in the western Gulf of Mexico and shutting in a tiny amount of gas production just in case Tropical Storm Dean heads that way. Other majors and E&Ps are of course watching the storm tracks closely.

Storm Concerns Result In Commodities Called Higher: Again, whether or not the stock market cares is an entirely different matter.

  • Crude again toying with a move back up through $73, a level it failed to hold on Monday. Near term crude probably takes out Mondays 73.19 level and closes over it as well.
  • Natural Gas called up $0.14 to back over $7 again.
  • RBOB retesting the $2 level from below this morning.

OPEC Watch: OPEC is now looking for a "more bearish global growth trend" attributable in part to the sub prime mess in the U.S. which could reduce demand in the second half. That's the sound of the nail in the September meeting production increase coffin. They'll just stick to quiet cheating for now.

Odds & Ends 

Analyst Watch: (GSF) upped to neutral at Bernstein, (GDP) upped to neutral at Sun Trust, (RDC) cut to underperforman at Bernstein

North Sea Oil Rig Fire: A (DO) rig off the coast of Scotland caught fire and has been evacuated according to Reuters. Sounds like everybody got off OK and that the blaze has been brought under control. The rig was contracted to Oilexco and no details are available yet on damage.

Venoco (VQ). Lots of little details to cogitate on from the conference call and I'm interested but given the general market environment there's no rush so I'll probably publish one mini reports next week.

Earnings Watch:

  • Gastar Exporation (GST) reported 2Q07 results last night...I don't think anyone is going to be too excited about these results, especially today but with the stock so beaten about and production continuing to rise this may be one to look at once the broade market dust settles.
    • Reported EPS of ($0.03) versus an expected loss of 0.02. Mopre importantly, CF was in line (slightly lower) than 2Q06 levels.
    • They took a ceiling test write down on gas reserves in E. Texas as prices ended the quarter below $6. It's an accounting thing ...the reserves are not gone and it's a non cash charge but they don't get to write them back up in the future either when prices rise which is one of the many rules the SEC needs to address with regard to reserves.
    • Revenues were $8 million which is short of the  $11.2 expected
    • On a brighter note, production was up 14% YoY and 7% sequentially to 14.1 MMcfepd yielding a welcome decline in per unit LOE to $1.10.
    • Operationally they continue to perform in the deep Bossier of E. Texas. Will drill 1 or 2 more this year as well as a step out to their high rate Donnelson #3 well
    • In Australia their 6 well pilot coalbed methane project on PEL238 is "progressing well". They expect to add 2P (proved + probable) reserves (we go by 1P in the U.S.) by year end or the end of 1Q08 here. The reserve engineer on task here is Netherland Sewell so you don't have to worry about the quality of the report.  Volumes here will be potentially be sold for power generation.

 Have a safe day and I'll see you in comments!

91 Responses to “Wednesday Market Mea Culpa?”

  1. 1
    codydog Says:

    Merrill’s downgrade of CFC, and some other comments on mtg brokers will spook some, but the offset is the Fed has already said they stand prepared to maintain an orderly funds mkt today. I think today is also the last or second to last day to pull cash out of hedge funds for the quarter.

  2. 2
    codydog Says:

    DEEP looks cheap in the pre-mkt but I’m gonna wait to see why.

  3. 3
    yunker Says:

    Anyone following the big rise in differentials between gas at Opal, WY and Henry Hub? Diffs have risen from $1.80 in early July to $3.80 during the day yesterday. Didn’t hear much about this from the Wyoming gas producers (Ultra, Questar etc.) in their 2Q conference calls except that they were all happy about their hedges. Transporters have to be loving the arbitrage!

  4. 4
    Stephen Says:

    Get in the hole!


  5. 5
    codydog Says:

    is SUN the only kinda major not to have facilities in the Texas region?

  6. 6
    El Diablo Says:

    Not looking to stir anything up here, but just want to get this out there:

    The large natural gas short position that has been building even in the weeks before hurricane season means there are some very large bets out there that hurricane season does not worry some large market participant.

    Secondly, the ‘ol pump and dump works much better when there is a piece of titillating news.

    Finally, USD/JPY broke below 117 last night, lowest level since end of March. The issue is whether there is more Yen carry trade to unwind. If that is the case, the unwinders will not be focusing on fundamentals or technicals as they exit.

    Sorry I don’t sugar-coat my observations and opinions, they should just be taken at face value, nothing else implied.

  7. 7
    Nicky Says:

    Morning all.

    We have some big weekly support levels on Dow at 12920 – 12,982, SPX 1402 – 1414.

  8. 8
    codydog Says:

    El D–Large is a question of perception – what rocks the NG mkt is a normal trade size in bonds or s&p.

    If you could post some prices where you expect the mkt to go, I’d find it very helpful and add some real meat to your comments.

  9. 9
    zman Says:

    Cody – the short position is massive by historic standards. I’ve been talking about it for months here.

  10. 10
    zman Says:

    CODY – TSO is a no show on the gulf coast. They’re west coast, HI and Alaska.

  11. 11
    Nicky Says:

    The Energy Report for Wednesday, August 15, 2007

    This will have to become a reality TV show at some point. It’s the battle of the Super models! Which one do you prefer: the American or perhaps the European? Well the models continued to fight it out all day going back and forth gyrating from side to side! Of course I are talking about the American and European weather models that are hard at work trying to predict the path of Dean the tropical storm. What kind of models did you think I was talking about?

    Dave Tolleris at WKRISK is a man who knows his models and was right when he said yesterday, “the idea that TD 4/ Dean would pass north of Puerto Rico is patently absurd.” Dave said the GFS American model had changed course and now is on a path as of yesterday afternoon towards downtown Houston. WXRISK says the 10 day European model which he says is the best in the world has Dean making landfall at Mobile, AL at apprx speed of 944 mb which Dave says is an amazing intensity for 10 days out. Mr. Tolleris says that the difference between the Midday GFS and the Midday European Model is that the GFS has Dean tracking between Cuba and Jamaica then west north west into the Gulf making landfall at Houston Texas. The European model overall has the same track but the model has Dean further North tracking North of Cuba into the Florida straits giving Miami a direct hit but still tracking West North West then at day 9-10 Dean turns North ,North West then again North.

    And if that isn’t enough for you another tropical depression is forming in the Gulf and could soon become Tropical Storm Erin! No not Burnett just plain old tropical storm Erin. This storm is now known as TD5 or tropical depression 5 was as of last night about 425 miles out Brownsville, Texas. This storm is not expected to have the potential fury of Dean but is already reducing production.

    Shell oil has evacuated all non-essential personnel from the Gulf and has already shut down 5 million cubic feet of production from its North Padre Island field. Concerns for safety are paramount right now and we may see more evacuations as TD5 develops.

    All of this is supporting the complex right now but one would really have to wonder if we would be higher at all if it were not for the storm. The concerns about the economy are mounting and we may be seeing some signs the consumers are starting to feel the strain. No, I am not just talking about Wal-Mart and Home Depot reporting disappointing results. I am talking the daily list of new problems with lenders cropping up on a daily basis. The market’s focus is on storms right now but concerns over the equity market are still a major issue. We could be creating a storm oil price bubble that may pop if the two storms are deemed at some point to be less of a threat. In other words, more than likely energy prices would be lower on fears that this crisis may spread and ultimately slow demand. If things start to look real ugly on the equity side the rally in oil may be a bit muted.

    We will also have the weekly oil inventory numbers from the Department of Energy. A key thing to look for is any big drop off in demand. We should see gas demand drop if the Weekly MasterCard SpendingPulse number is any guide. Dow Jones reported that the Weekly survey showed that US gas demand fell 1.6% on the week. According to MasterCard Advisors gas demand dropped by 1.106 million barrels, or 158,000 barrels a day. That drop puts demand at the lowest level since July 6th but still stands 1.6% higher than a year ago. Dow quotes Michael McNamara the reports chief author as saying that, “the wet weather in the east last week was probably a drag on the number of people driving. The extreme heat also probably contributed to one of the larger demand decreases seen since early summer.” I wound wonder if the drag on the economy was also a drag! We will see if the EIA agrees.

    After the storms settle the outlook for demand will be the key!! Watch the shifts in demand numbers closely.

    And don’t forget the geo-political part of the equation. Iraqi oil officials kidnapped and the US is to designate Iran’s National Guard as terrorists according to the Drudge Report. It’s a lot to watch.

    It’s a TV Triple Header! See me on First Business TV and also on Bloomberg TV for the inventories and later on CNBC. Volatility is making position trades a bit more difficult. We may want to move stops intraday as well as entries! You need to call me for the latest updates at 800-935-6486 or email me at pflynn@alaron.com. To keep up with the latest sign up for the Phil Flynn Energy blast and Alaronenergies and to open your account! Thanks for all the calls and emails! Keep them coming.

    Buy September crude at 7170 – stop 6970.

    Buy September RBOB at 19200 – stop 18700.

    We’re long September heating oil from apprx 19600 – raise stop to 19600.

    We’re long September natural gas from apprx 670 – stop 650.

    Have a GREAT day!

  12. 12
    Nicky Says:

    Can I just add that I would not bet against David Tolleris.

  13. 13
    zman Says:

    EL – 1st point – I’ve been talking about the short position for a very long time. Look at the week wrap pieces on Saturdays – it’s generally there or in the Monday pieces.

    don’t get your second point.

    #3 – true. every major business news avenue is talking about the carry trade from market watch to npr.

  14. 14
    El Diablo Says:

    By large size, I meant relative to historic gas market, then again, there appears to be many new participants.

    Z knows I’ve been short for months. I don’t intend to cover (or reassess) until $4. It is possible to get there this fall, not confident on timing though, depends largely on economic developments. With increased market-wide volatility, it could easily bounce to $8 short-term.

    Re: Hurricanes, I have argued for months on this site that our supply situation is so strong that the risk of a real winter supply shortage is incredibly low, even if there are large disruptions from storms.

    My target is derived from supply and demand. Nat gas demand has not grown for 10 years and will not grow as economy decelerates, even if there is no recession. A recession would just cause a fall in demand. On the supply side, LNG is the marginal supplier and their market share is only increasing (as it should with these high prices). While LNG suppliers love getting $7 for their gas, their marginal cost is slightly less than $4 and they will continue to supply it to that level.

    While this may all be a little too academic of an argument for most, the realist in me looks back to March 2003, the start of Iraq war and the cheap money times that inflated all sorts of assets, not just these commodities. We are starting to see some of the other expensive asset plays unwind, as that continues, I expect the commodities to follow, more quickly if that unwinding leads to economic distress.

  15. 15
    zman Says:

    Anybody else having trouble reaching my site today or is it just me?

  16. 16
    codydog Says:

    z–your site keeps failing

    El D–I’d find it useful if you could post your average short price and how many lots you’re short in NG and if you’d sell more if the mkt rallies. That comment would add a lot of validity to your comments

  17. 17
    scoop006 Says:

    site was down from appx: 9:37-9:43

  18. 18
    optiondragon Says:

    UNG calls Sept 47@ 3.70, looking at these for hurricane plays.
    Zman or Nicki what are your feeling on NG prices going forward?

  19. 19
    El Diablo Says:

    RE: pump and dump, fomenting, painting the tape

    A ‘relatively’ small buy when everyone is talking about storm fears sends prices remarkably higher. If you’re convinced you’re right on your short position, you would add there. Added benefit is that the more buyers you suck in on the way up, the larger the ultimate fall will be. ie, If you want to add 1,000 contracts to your short position, why do it at $7.10 when a well-timed market order to buy 500 contracts will take it up $0.20-$0.30 where you can short 1,500. While very technically illegal, virtually impossible to prove.

  20. 20
    Nomad4x Says:

    El Diablo- I agree for the most part with you assessment. Although I won’t rule out fear in the market.

    Z – I couldn’t connect for 5 minutes.

  21. 21
    codydog Says:

    so El D–how many lots are you short and whats your average? I dont think anyone here trades 500 or 1,000 lots of NG except in fantasy land.

  22. 22
    ndog Says:

    cody today is the last day to request a redemption typically. 45 days in advance.

  23. 23
    codydog Says:

    nd–i thought so too. wondering if theres gonna be a massive short squeeze later as the extent of redemptions becomes apparent.

  24. 24
    zman Says:

    OD – I see UNG rallying into the weekend with each weather forecast that puts Dean tracking toward the GOMEX out of fear and potentially out of short covering. A lot of this current near record short position was entered into with gas at $6 and that’s a pretty good hit for these guys with a hurricane barreling in. UNG could easily take out $46 but of course don’t fall in love with your gains.

  25. 25
    El Diablo Says:

    Z-You have consistently pointed to the large short position, and you have also consistently pointed to it as a source of potential upside pressure (the covering thereof). This sort of presumes that the large short position will or must reverse. What if it continues to grow? I’m just arguing that that risk has received little attention here.

  26. 26
    Nomad4x Says:


    You don’t have to trade 500 lots of NG lose a substantial amount of money.

    Write 2 NG options and tell me how secure your account feels?

  27. 27
    El Diablo Says:

    Cody-I don’t trade in that size, but the people that move prices on a daily basis do. What I do or what size I am is totally irrelevant to the market. I just pay attention to what those people do, I’m not one of them.

    I could tell you anything you want to hear regarding my size. But that’s how these ‘anonymous’ forums degrade. My size does not validate or invalidate my points, only the market will do that over time.

    I’m also not trying to convince any of you of anything, just offering my view. Take from it as little as you want.

  28. 28
    ndog Says:

    cody I’m with you. everyone says the only funds which will suffer redemptions are only the ones with poor performance/issues. i doubt it. i think all the hedges will suffer some, if not significant redemptions, as people reassess risk and move to more solid ground. if your fund is up, all the better to move out and lock in the gain.

  29. 29
    codydog Says:

    nomad–risk is always a question of perception –

    but some of us here will actually post entry and exit levels and position size as a sign of good faith for our comments. El D has taken a non main stream view, which is great, but I think if he posted his size and average price, it would add substance to the discussion . You may be critical of a GS or a hedgie who trades a 1,000 lots a clip, but they have skin and dough in the game so their comments take on validity.

  30. 30
    zman Says:

    El D – RE #25. First statement – true. Second statement also true although the timing is up in the air.

    Yesterday you shrugged off the importance of my marginal well economics at sub $6 gas comment, and that of heat related gas demand lending support to prices, and basically said all the hurricane talk here is noise and that we’re all a bunch of TWC watching misguided types.

    So I don’t know if there’s much point in me chatting with you on this but here goes.

    If the shorts continue to add it just swings the pendulum further towards panic when something changes; supply disruptions, storm induced or otherwise from Canada or from local producers who again, are feeling the pinch. I sat down with some pretty smart producers a couple of months back on the subject of LNG and they had hashed out $6 to $7 as the medium term price for gas to induce continued growth in LNG imports. And that was before prices started to recover in Europe. Canadian volumes to the U.S. is a given to fall and so far it has held up better than expected.

    But tell me how more shorts in a stock or a commodity make that vehicle go down in price. Is it the absence of buyers? Is the crowd always right in your book? In many stocks, a high degree of short interest is met with months or years of sideways and not down action and then an explosive cover move. Just curious why you think the big bet is right here. Gas traders may look at Henry Hub prices but the differentials around the country are all negative to HH save Appalachia right now. Some steeply as someone above pointed out.

    I appreciate your dogged pursuit of your thoughts but I can’t make you see my points and your tone is I would say somewhat less than constructive. Therefore, as I think my typing time is wasted on you forgive me if I answer (or not) in pretty short statements.

  31. 31
    zman Says:

    Here’s a sign of the times

    Icahn announced increased ownership in APC and there is 0 reaction to the news.

  32. 32
    codydog Says:

    I’d add that my comments are non-judgemental in nature and are aimed at pushing the discussion forward in a constructive way.

  33. 33
    MMarkkk Says:

    El: I can agree with you on some of your points. Right now we have a storage surplus. But with a few days/weeks of disruption in the Gulf, we could put a hefty dent in there. Two, while you say demand hasn’t increased, I’m more worried about supply. We are drilling a heck of a lot more wells and we aren’t adding new supply. And the wells we are drilling decline by 50% (that’s F-I-F-T-Y percent) in the first year. If prices drop to $4, we will stop drilling. That I know.

    Lastly, while LNG has an incremental cost of $4 (or less), why would anyone sell LNG in the US at $4 when they can send it to the Far East for $8? Why are we seeing lots of LNG imports? Prices are high and Europe isn’t using much this year due to weather. But if prices go down the LNG trade will redirect to other markets. All of this until about 3 years out. Then some of the major LNG projects will come on line in the Middle East. All of these are being built with long term committments to LNG re-gas plants on the Gulf Coast. These will be contractually locked in to the Gulf Coast and moving the spot market LNG won’t be possible as prices decline.

    Thanks for making this a conversation and debate. If we all agree, its a love fest and nothing personal, but I’m not sure a love fest with this cast of characters would be “natural”.

  34. 34
    codydog Says:

    any views on #S?

  35. 35
    El Diablo Says:

    Why the breaking point now?

    Commodities are not stocks: their prices have very real and immediate economic impact. If GOOG goes to $10,000 it does not increase everyone’s cost of doing business. Commodities break for various reasons, not the least of which is the inability of the economy to bear the high prices. All the commentators that were calling for $4 gasoline this spring used some form of that analysis: people paid it last year so they will this year. What they overlooked is that people felt flush with cash or wealth last year. There is convincing evidence that that is beginning to change now.

    As you know, stocks and commodities price differently. Commodity prices can fluctuate wildly on a very small shift in supply/demand. My overall assessment is that the real risk for a small shift in that dynamic is right now, when we are well-supplied with gas and facing a very real risk of at least a small drop in demand.

    I shrugged your well economics argument because I don’t believe they are on the margin–i.e. not needed, we could debate that all day. They will certainly run when they are in the money though.

  36. 36
    codydog Says:

    el d– your comments are wonderful, but if you could let me know your position size and average short price, it would add tremendously to your arguments.

    anyone have thoughts on DEEP today?

  37. 37
    zman Says:

    Thanks Mark. That was much better put than what I wrote and I agree with it without reservation. Especially the part about unnatural love fests.

  38. 38
    El Diablo Says:

    I’m not trying to dominate the discussion so this is my last post (unless provoked…)

    We should all agree that 2003-2007 marked a period of great (above average) economic expansion worldwide and also marked a period of dramatic rises in the prices of commodities and hard assets.

    We will just have to keep discussing whether prices go up or down from here.

  39. 39
    Sambone Says:

    I’m waiting on the sellers to finish and then I’m going back in, either today or sometime soon. Once their ships come back online, I think their #’s will be much better going forward.

  40. 40
    Sambone Says:


  41. 41
    zman Says:

    5.2 mm barrel draw crude – double again.
    1.1 mm bbs gasoline draw – in line little large . gas production inched up a hair.
    distilliate disappoints with a 0.2 mm rally.

    All pretty bullish for crude and products at least near term.

  42. 42
    codydog Says:

    Valero Energy says no significant change in Gulf Coast refining ops due to tropical depression – Reuters

  43. 43
    codydog Says:

    sam–thanks, looks like forced selling to me in DEEP

  44. 44
    zman Says:

    El – Your comments are welcome and thought provoking. Thanks for playing.

    Sane – do you have the alternate read on inventories?

    Cody – I’d be surprised if there is any change at all due to rain. lol. Reuters tracks the number squirrels caught in an electric wires if you dig deep enough. That’s the the best and worst thing about the newswires. Lots of information and lots of useless details.

    Sambone – have you been over the PR for guidance vs prior. Is the downtime the only thing coming into play? If so, I’d be interested in taking a deeper look.

  45. 45
    sane Says:

    Crude oil inventories fell by 2.5 million barrels to 333.90 million barrels in the week ending August 10, the American Petroleum Institute reported Wednesday. Gasoline supplies fell by 800,000 barrels to 202.3 million barrels in the latest week, while distillate stocks declined 200,000 barrels to 128 million barrels, API said.

  46. 46
    codydog Says:

    NOAA– Says some stengthening is forecast during the next 24 hiours and Dean could become a hurricane tomorrow

  47. 47
    zman Says:

    HK – just not holding up – looks like smaller players getting hit a little harder during all of this. After the quarter, people couldn’t get enough. Now it looks like a source of funds.

  48. 48
    Sambone Says:

    DEEP – One time items, day rates down from last year because of less work in the GOMEX, Largest backlog of work going forward, going from shallow water to deep water, opening office in middle east, shipe coming online this quarter. I like the direction. I’ll dig more tonight.

  49. 49
    zman Says:

    XOM reports it’s preparing structures for heavy with in the path of TD 5. No production curtailment, no people yanked. MRO reports same. TD 5 is expected to become a TS before hitting the Tx Gulf Coast tomorrow.

    I’d doubt anything at all comes of this one except the tiny 5 mm/d shell has shut in which is less gas than my dog produces. Still, it shows shear and sea surface heat are conducive.

  50. 50
    Stephen Says:

    CRK doing well as my hurricane NG long, thankfully back above where I bought it on Monday, before Mr Broad Market stepped in.

  51. 51
    zman Says:

    Thanks Sambone – did they note if the day rate decline restricted to the shelf? I’ll try to dig a little later as well.

  52. 52
    zman Says:

    Stephen – you’re lucky, my remaining Aug calls I got basically trapped in are underwater. This market is not to be trusted.

  53. 53
    zman Says:

    Question from yesterday, think was rammastr re gassy names teed up when the dust settles: CRK, CHK, EOG, APC, SWN, KWK, NFX, HK, HAL are all fine.

    I’m in many of these in the Augusts and in NFX, SWN, and HAL in the Septembers.

    USO breaking on out to the upside.
    UNG up 2.5% and watching the weather.

  54. 54
    codydog Says:

    does coal lead/lag NG ?

  55. 55
    zman Says:

    PTR – upgraded the size of their 1H07 discover at Nanpu in Bohai Bay from 3 to 3.27 Billion barrels. This discovery alone would boost PTRs reserves by 16% from YE06

    The stock is down from $160 to $132 in the last 5 weeks …looks to be making a bottom here to me.

    Cody – lags slightly

  56. 56
    zman Says:

    Coal – analysts hate the sector right now and the stocks have gotten whacked. The lack of real early summer caused many to downgrade the stocks. I like ANR in here although I don’t any right now and if the sector wakes up (as it did a few days ago before again retreating) then liquid names ACI and BTU will likely move up first.

  57. 57
    codydog Says:

    Chevron says no evacuation planned for tropical depression 5- Bloomberg

  58. 58
    Nicky Says:

    Distillates has some major resistance at 20450. Rbob at 20380.

  59. 59
    KL Says:

    Z, re: PTR, what do you think of Warren Buffet’s unloading some of his shares due to the Chinese gov’t’s rigid price controls?

  60. 60
    Nicky Says:

    Tropical depression looks more like a rain event on Texas.

  61. 61
    zman Says:

    KL – I guess I don’t make much of it but others do and that factors into the slide along with this market. His focus is a bit longer than mine if you know what I mean.

  62. 62
    rammastr Says:

    ZMAN – Thanks!

  63. 63
    Nicky Says:

    My preferred count is going along nicely.

    WTI currently in ii up – $75 looks easily achievable and we could see $76.

    Once that tops (no doubt after Dean!) we should turn down hard in iii.

    If the preferred count is wrong it makes no difference for the short term except that we will make new highs in WTI before turning down.

    Nat gas – as stated the other day I am still looking for a move over 7500 short term.

  64. 64
    KL Says:

    Z, thx

    Nicky, thx

  65. 65
    Nicky Says:

    Wider markets still look vulnerable to new lows here. Either this next low crashes on down or we stage a sharp 1 – 2 week rally and then crash into September/October.

  66. 66
    Nicky Says:

    First Enercast predicting a build of 15bcf for nat gas tomorrow.

  67. 67
    zman Says:

    Nicky – thanks – that’s tiny!

  68. 68
    El Diablo Says:

    RE #33, MMarkkk

    From 8/12/2005 to 11/11/2005 (pre, during, and post Katrina/Rita) we injected over 750 bcf, with each and every week having a net addition to storage.

    As I’ve argued with the ‘terror premium’, at these storage levels, you really have to see something catastrophic (greater than anything we’ve seen before) to get us in a supply crisis. Not that it can’t happen, just that its likelihood is very low. Yet it appears to me that the market is pricing such an event in as a certainty.

    I just think that Crude or Gasoline should attract hurricane plays well before natural gas, to the extent funds have extra cash to throw around now.

  69. 69
    zman Says:

    USO and UNG up exatly 2.6% apiece. Stocks could care less as they eye the broad market. Dow negative again and toying with break back through 13,000 to the downside.

  70. 70
    codydog Says:

    looks like someone just dumped UNG

  71. 71
    El Diablo Says:

    MMarkk (I’m not flaming you, just trying to make a convincing point):

    Not only was the net injection the case in 2005, it has been the case each and every of the past 10 years, both in terms of net additions of that magnitude and positive injections every week (with exception of a couple early Nov cold weather draws).

    I harp on this because this is another fallacy that has been ‘sold’ to the market by greedy long speculators (none of you) as they were buying the highs and looking for someone to ‘sell higher’ to.

    I do know energy markets and I do not buy into fear-inducing hype. All this data can be verified on EIA gas storage site.

    My new attempt at diplomacy: no comments are directed at you (or anyone) personally, just my attempt to dispell market assumptions that I have good reasons to disagree.

  72. 72
    Nomad4x Says:

    DJ MARKET TALK: Nymex Gas Falls As Traders Await More Storm News

    Nymex natural gas pares gains amid thin trading as traders
    second-guess predictions about a tropical storm in the Gulf of Mexico and
    another in the eastern Atlantic, says Ryan McArdle, a broker with TFS Energy
    Futures. “Traders are holding onto their lots because they’re uncertain about
    whether or not a hurricane is going to affect anything,” McArdle says. “People
    are kind of wary to put it all out there.” Erin is headed for Corpus Christi,
    Texas. Dean, in the Central Atlantic, could develop into a hurricane by Thu and
    could enter the US Gulf, the NHC predicts.

  73. 73
    MMarkkk Says:

    No offense taken!

    I work on the supply side, drilling wells, buying companies, watching economics, approving projects. I know that what we are doing today isn’t feasible at $4 gas, or even $5 gas. A large percentage of today’s production isn’t sustainable at $4 gas. The Fayetteville, Woodford and some of the Barnett Shale not to mention most of the Rockies new tight gas doesn’t get drilled at $4 or even $5. So, as the hundreds of wells drilled each year decline by 50% and no new wells are drilled, watch our supply curve. It craters quickly. And that’s not even mentioning the wells that get shut in due to companies withdrawing production at those prices. That’s where I’m coming from. I have several published reports from various consulting groups/gov’t agencies that show production forecasts given various pricing scenarios. We lose about 10 BCF/day when prices are dropped from $8 to $4. That’s probably light and it assumes a 10% return on investment.

  74. 74
    Nicky Says:

    David Tolleris – Dean has a better than 55% chance of becoming a code 5 hurricane.

    That could give us a great shorting opportunity……

  75. 75
    codydog Says:

    Just curious if any of you have read, “reminisensces of a stock operator’ by Lefevre…..

  76. 76
    Saeed Says:

    the 12z WED GFS is out to 120 hrs…. the GFS model continues the trend from this morning in a more WEST trend for DEAN. ( keep in mind the GFS from early Tuesday has DEAN turning out to sea !!) At 108 hrs the model has DEAN tracking S of Jamaica heading for the northwest Caribbean. The KEY here is the huge DOME of HIGH pressure in the jet stream over eastern Fl the northern Bahamas and over GS SC and NC. The Midday models shows this Dome as a BUBBLE… and IF Dean latches onto the western side of the Bubble DEAN will turn NW into the Gulf

    If Dean does NOT see this western side of the DOME over the se coast and the Bahamas he will plow into the Yucatan. At that point he could come back over the open water into the central Gulf western Gulf or sw Gulf but not as strong

  77. 77
    KL Says:

    I’ve read it Cody. It’s the best thing I’ve ever read on trading.

  78. 78
    optiondragon Says:

    Codydog that book is a classic and sits on my desk(looking at it now) the story is about Jesse Livermore one of the greatest traders of all time who made the equivalency of one billion dollars shorting during the ’29 crash.
    child prodigy of sorts, i want to make a movie of it someday I think it would be cool.

  79. 79
    El Diablo Says:

    Learn from Jesse’s mistake: no matter how bad you (or I) suck at trading, there is no reason to end your life.

  80. 80
    zman Says:

    The SuperTraders is a nice compilation of thoughts from big league names and gives a good history of how a lot of the systems in place today were developed. Also Trader Vic is a great read.

  81. 81
    El Diablo Says:

    Mmarkkk, On the supply side, I always err on the side of betting with technology, not against it. I’m referring to exploration, development, and lifting costs. Given little demand growth, my bet is that our rate of technological (cost saving) advancements will outpace any demand growth. This works on the demand side too, my natural gas boiler is far more efficient than those produced just 10 years ago.

    As for the big supply argument: how much gas is left–ain’t gonna be settled here. You either believe in the peak or you don’t. Doesn’t take much to deduce where I stand on that one.

  82. 82
    zman Says:

    Guess they don’t like the latest track, eh?

    UNG getting creamed.
    Sept gas down $0.14 to $6.80.

    Gassy stocks are off a little but I think its more Dow Sickness than gas.

    Crude still up a couple of percent.

    El D – your right about peak not being solved here.

  83. 83
    codydog Says:

    el d- interesting argument about lack of demand – do you see it as a function of improved tec + conservation, or demand destruction due to a collapsing economy?

  84. 84
    El Diablo Says:

    Its both, Cody. Demand in fact has risen due to addition of 450k MW of gas-fired generating capacity in past 10 years. However, that incremental demand has been completely offset by reduction in industrial demand (due to high prices). Residential/commercial have no real noticeable trends, despite increased adoption of gas as a heating source vs. fuel oil over past 15 years, so the technology gain is embedded in there.

    Of note on the industrial demand, I assume part of the loss can be attributed to our loss of manufacturing to other economies (Mexico, Asia). Interesting point there is that, yes, China demand is growing, but it also cannibalizes demand elsewhere (US factories). I don’t recall Phil Flynn analyzing this aspect….

  85. 85
    El Diablo Says:

    While everyone is throwing out quotes, my fav comes from Mark Twain:

    “There are three types of lies: Lies, Damn Lies, and Statistics.”

    Beware of the simple demand-driven statistics, a full understanding of the dynamics requires extensive analysis, not just looking at China’s GDP growth. Shame on the media for repeating baseless claims instead of encouraging thoughtful and thorough analysis.

  86. 86
    optiondragon Says:

    El Diablo- so true. The man suffered from a long bout of depression, its a pity that one of the miracles of today is the way we treat that condition now.

  87. 87
    zman Says:

    Cody – he’s looking at annual numbers. We’ve had this discussion. Go back 10 years and start to finish you’re at the same Bcfgpd of annual that you were then.

    I used to be a N. American gas demand analyst in a previous life and I can tell that the causes are warmer winters that have offset gassification of new regions of the US, industrial demand weakness which is in part real as manufacturers learned to use off gasses and other types of energy as gas prices rose from $2 to $5 for both manufacturing itself and for their cogen, increases in the energy efficiency of new single and multi family construction. I don’t know what you mean by collapsing economy. On the weather side, we’ve had several of the warmest winters on record and while gas is increasing used for generation in the summer this has not offset the winter dips when you look at the years as a whole. And when you look at the storage chart, not like I post is as an annual range but as a string, the peaks keep increasing.

    El – D also makes a good point on industrial moving overseas.

  88. 88
    El Diablo Says:

    Here is a string of natural gas storage injection totals (Bcf) from the 14 week heart of hurricane season (Aug 1 – Nov 1) from each of the past 13 years. They are not in order:

    682 745 680 895 862 714 674 712 857 578 1017 875 766

    Without cheating or guessing, it is impossible to discern which of these numbers is from 2005, the ‘scary’ back-to-back direct hits on our gas wells in the GOM. Despite the hype, there was no statistical impact from Katrina and Rita.

    With Nat Gas storage levels currently at 2.9 Tcf, even achieving the lowest injection of the past 13 years puts us at 3.5 Tcf in early November.

  89. 89
    T-Tupp Says:

    never been to europe b4. Budapest was unreal. very beautiful. it reminded me of Montreal which is also a beautiful city.

    i miss Schumacher though, he brought so much excitement to the sport- for some strange reason i loved his cockiness.

  90. 90
    Stephen Says:

    Where did everyone go? MDR got slaughtered.

  91. 91
    asset gps tracking Says:

    asset gps tracking

    umm it really depends.

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