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Holdings Watch:
CALLS
- (COP): Going to take a hit this morning. Late yesterday bought the OCT $85 CALLs for $2.15. They are pre-announcing lower refining margins this morning relative to 2Q levels which should shock no one but the generally downer tone of the press release won't help the stock this morning. Interesting to note that in most regions their 3Q crack spreads are higher than year ago levels.
PUTS: No Action
Commodity Watch
- Crude Oil: Crude had dollar strength induced plunge for most of yesterday only to recover almost all of its losses by the close, ending down a non earth shattering $0.19 to $80.05. This morning oil is rallying $0.50 ahead of inventory numbers.
- Blazing Oil Sands Watch (two problems yesterday at) : Could be price supportive
- Syncrude: output cut to 70,000 bopd
- (SU) output cut by 85,000 to 175,000 bopd after a small fire. No timeline set yet for getting the facility back on line. I doubt the stock will be impacted much but if it is it'll be worth a trade especially if the EIA numbers are crude bullish.
- Natural Gas Was Very Strong Yesterday. Gas had another big day yesterday rising 5% on a combination of storm fears and news that imports fell off last week. This gas is trading +/- a nickel around $7.40.
- Tropics Watch: Noel on the way? Right now it's just a low pressure system but forecasters think it could strengthen into a tropical storm before it comes ashore on Friday. Currently, the model track indicate landfall near the Texas Louisiana border in the heart of refining territory.
- Independence Hub Production Increases to 440 MMcfgpd: This was announced yesterday afternoon but is worth mentioning as it has encountered some delays do to loop currents but is nonetheless ramping towards its 1 Bcfgpd capacity.
EIA Oil Inventory Report Expectations (from the Dow Jones Survey)
Comments: Utilization is expected to have risen by 0.4% to 87.3%. From the chart below you can see that crude imports rise somewhat during the summer months and fall during the shoulder months (Spring and Fall). The other things you can glean from the chart is that imports are volatile and that they don't output together very long strings of consecutive expansions nor contractions. They are what I call "peaky" often moving by double digit percentages in either direction from week to week. Part of this peakiness results from the fact a good percentage of imports arrive by tanker. Squeeze in a few extra tankers one week and a few less the next and you have a pretty broad swing. This week I suspect imports will back off a bit based on the behavior of the numbers. I didn't see any anecdotal evidence to support this but I wouldn't be surprised to see a slightly larger crude draw. Most press stories keep indicating falling demand from refineries will result in the small crude draw but at the same time they non-sensibly point to high week to week refinery utilization.
Last week we got a surprise build in crude driven by a big jump in imports. The following chart shows weekly crude imports on a barrels per day basis this decade.
Crack Spreads: Still slipping lower except for the West Coast where they continue to improve (Hello Tesoro!):
click to expand
Stocks We Care About:
- International Coal Rally: Calvino pointed an article last night regarding rising Asian coal demand and prices. It's a good read. Essentially China, which became a net importer of coal earlier this year is boosting the price it charges South Korea and Japan due to shortages, Indonesia is missing production quotas and Australian capacity is straining to meet demand (we've been hearing about port delays for months now and part of them are attributable to high demand and part are due to last minute price increases.) The continuation of these trends has positive implications for the larger ship size bulk shippers like (DRYS), (QMAR), (DSX), and (EGLE). On the coal producer side it certainly won't hurt prices here to see them north of $75 per ton in Japan. I'll hold my BTU for now (it has coal mines on the East coast of Australia) and will probably beef holdings in the coal sector soon possible adding to Peabody but also potentially adding (ACI) and (WLT).
- Kurdish Watch: Kurdish authorities just authorized four more exploration licenses, one to Heritage Oil (HOC), one to French producer Perenco, and two others that have not yet been announced. This goes to sentiment for oil in the Kurdish region and the fact that at least part of Iraq is getting its act together and moving forward. My play here is (AXC.TO), Addax Petroleum who has their Taq Taq development already underway in the region. I'll be updating my report on the reports page soon to reflect Addax' plans to being production of 200,000 bopd from the region by 2010.
- (CVX) - Tahiti Deepwater Development Delayed Again. They've already announced delays here back in June but Upstream is citing a report saying production of the platform's 125,000 bopd could be delayed until mid 2009.
Odds & Ends
Analyst Watch: Nada
WLT Trades With Coal Companies... Comparison of WLT to the Dow Jones Coal Index:
...Not The Homebuilders. Comparison of WLT to Toll Brothers:
an sup from comments
Hey Z.,
Thanks for the graphs. Please respond to #91 from yesterday. I distracted the board with my (timely) rant on Blackwater, sorry for the distraction.
Need some seasoned counsel on the WLT entry.
Q – RE WLT I’m more likely to be ITM and out to November.
Nat gas backing off a dime now. Storm in the gulf likely to be just rain.
COP is going to stink early on their PR. Will watch it trade for a bit before making a decision.
Morning all – nat gas has some minor support around 7.280.
PTR down $11, assumedly on Buffett continuing to reduce his stake.
CEO off $7, SNP off $6
NG is at that first support level.
BTU trade back in black
COP getting punished but it’s fairly well contained for now.
Who’s looking brainy on that btu trade now?
Chinese oils getting hit very hard. Guess it was there time. Don’t see any comments.
Selling in DRYS not panic looking
Cal – you are. Thanks for the article.
ESV continuing to slip. I’m no TA guy but it looks like it really needs to hold above 55.10 or it could be in for a bad day
any comments on dvn had higher option vol last week.
vlo / tso getting crushed back again. Could change with the right inventory report. I won’t be on the radio show today.
Z – you made my day. Too bad my girlfriend still calls me PInky.
DVN was rumored to be the target of an XOM takeout last week. That makes some sense as it’s the biggest producer in the Barnett and would make Exxon a nice gassy division plus their deepwater GOMex portfolio is pretty deep (no pun intended). I haven’t run valuations on it in the last couple of weeks but it’s not exceedingly expensive. I find it difficult to play acquisitions with options so I rarely do it. See TLM. Hot one minute and then people start to lose faith / interest and move on to the next one. There are hedgies that set themselves up by starting these rumors ya know.
I am looking at a triumph of vermillion on my screen.
Next support level on nat gas is 7.215.
A move below about 7.150 is getting a little deep for this just to be a corrective pullback.
Cal – cool. Pinky? Must be a CT thing, she’d never say a thing like that in TX, lol.
TSO calls still close to breakeven as volatility boost premium.
No such luck on the VLO options.
Chinese Oils getting pummeled. I don’t see a play unless its an all or nothing call at the close for a morning bounce…I say all or NOTHING because they might just gap lower.
Thanks Nicky – you read my brain!
RAM – if you are out there, I’m waiting on the number in 20 minutes before passing final judgement on the VLO calls. If the number is a big gas draw I might add the 67.50 VLO October CALLS and if it’s a huge Mogas draw with an inline oil number I might add another slug of the 70s but it would have to be 3+mm plus draw on mogas which I don’t see. On TSO, I’ll be looking at left coast inventories, cracks are shaping up nicely there and if they drop or don’t rise I’ll be looking to double my TSO calls.
Wow – DRYS recovery. Still holding …interesting to see the call volume dry up on down days. People refuse to take profits there.
Sane – you around? Do you subscribe to the API?
Sambone – just got your message re COP. I’m not much of TA guy so all the help in that arena is welcome. On the Fundy side, not much in the press release should be seen as new, maybe a little bit about Lukoil on the cost side but margins were down (duh!) from 2Q but mostly above 3Q06…will post their regional cracks tomorrow.
If anyone has a TA opinion on COP I’m happy to hear it. I went in small and may add but it looks to be like current levels are critical to hold (83.60-83.70) or it’s got another buck of drop easy.
Pinky and the Brain were two animated characters a few years ago on the Cartoon network. Brain was always hatching plots to take over the universe and Pinky was much brawnier then the Brain and was expected to do the heavy lifting.
Oh its from that. Ok. Good thing she wasn’t a fan of Ren and Stempy!
The Chicoms getting pounded??? I would love to buy some PTR, if it only went down to a 58 times earnings multiple, I would back up the truck.
PTR: 15.8x 2008 eps of $11.27
CEO: 15.5x ; $10.35
SNP: 12.7x ; $9.53 (bargain of the group)
XOM: 13x
CVX: 10.9x
COP: 8.9x (the US bargian)
EIA in five minutes
Q – nice call WLT
O.K.
gas and dist production down,
oil up 1.2
gas down by o.1
dist down by 1.2
should be good for refiners
weird report
Aye very weird.
CNBC have taken to reporting this late.
traders on cnbc trying to ramp it and say we are going to run out of heating oil.
87.5 utilization
I do not see this as being bullish for rbob and certainly not for wti.
Z, someone gave you a plug on mn1 and your drys recomendation.
😉
Most of the discussion today was on drys
Think most everyone now working on the warm fall assumption, so a gentle downward slope as the underlying feature of this market appears to be reasonable. I am keeping a chunk of cash, first time in a while, but also some ng and oil exposed in a small e&p.
Cushing oil inventories “jumped” 300,000 barrels to 18.4 million. By last week’s logic this should send crude down by $4 to $5. It won’t.
Imports of crude were off a little so they’ll lay the bigger than expected in crude stocks on the refiners lack of demand as they point to the lower production
Nicky – I’d say it’s neutral for mogas. West Coast mogas increased so TSO backing a bit now.
Thank Fraser.
No trades yet.
I see skies of red, and specks of green, on my trading screen.
Nicky – re the HO comments on CNBC – they can’t be getting that from this report. I said we’re low but stocks continue to build …those guys don’t have the details of the report in hand so their comments are pre pared. WAJ – I’m coining a new internet acronym WAJ = what a joke.
On the whole I’d say the report is modestly bullish for refiners and bearish for crude, especially crude over $80. Which again is bullish for the refiners. Everybody keeps talking about 3Q margins but the fact of the matter is crude stocks are high and adequate and product stocks are low for gasoline and ok for distillate (although they should have built these season and I’d guess the draw is middle men taking inventory before prices run more while they read headlines about $100 oil)
Funny thing is, refining stocks are more likely to trade up if oil does than if it falls. There wasn’t anything in this report (like the Cushing build) that traders can’t ignore.
Added 300,000 barrels to the SPR
I agree Z re HO – you sensed they were just trying to ramp it. They were all alarmist about cold winters etc. As usual total garbage.
‘Funny thing is…’
This is the kind of weirdness that’s keeping me on the sidelines.
There she blows. Now they can talk about all the things they are worried about and push it up. Truth of the matter is that we haven’t even made it to 23.6% correction of the move down yet – so let them have their fun for now.
There goes oil…guess it doesn’t matter if you add barrels or not cushing, only if you take them away.
Nicky – can you do EW on a stock? COP if you would please. Thanks.
Cal – safest course
TRADE: NOV $50 TSO CALLs for average $1.80
z, did you see the 1.6M barrels added to the spr last week.
No API yet.
Gasoline demand slacked again to about 9.1
Sane – no, I missed that, thanks. I thought they were going to spare the consumer on refilling it until after winter. They just said we’re going to get hit by much higher HO prices this fall…wouldn’t it make sense to reduce demand where you can?
Anybody got an angle on these wind farms approved off the Texas coast. West corp or some such?
Ram – I fear I offended you. My wife tells me I’m sarcastic, not funny (she has no sense of humor so how would she know?). Please comment if you feel like it.
WLT will not stop rising for me to get a toehold. ;-(
Re 41
W.E.S.T. Looks like a private company out of Louisiana.
TSO looking strong now.
RBOB over $2 again. Nicky – can I get an update on your levels there?
VLO and TSO within a stone’s throw of coming positive on the day.
DRYS green again.
Sane – thanks. Anybody got the blade or generator play here. I know I’ve asked before but I lost it. Also, is there a dominant service company that puts these things together?
Calv. Check into this one. AU exchange.
CENTENNIAL COAL
Established in 1989 and listed on the Australian Stock Exchange in 1994, Centennial is a coal mining and marketing company supplying thermal and coking coal to the domestic and export markets. The Company is a major fuel supplier to the New South Wales energy industry, fuelling approximately 47% of the State’s coal-fired electricity.
Centennial sells approximately a third of its coal into the export market. Coal is exported through ports at Newcastle and Port Kembla in NSW. Customers include power stations and steel mills in Japan, Korea, India, Europe and South America.
Popeye – shhhh, don’t jynx it, LOL
Thanks Dr D! Did you see my thoughts on your little Canadian Single Digit Midget yesterday. Lot of upside in the E of the E&P but valuation appears stretched to me.
Okay fib levels to look at for the retracement:
WTI:
8075 (38.2)
8132 (50)
8189 (61.8)
RBOB –
20170 (50)
20322 (61.8)
10 dma is at 20167 and 20 dma is at 204.41
Distillates –
21775 (23.6)
21976 (38.2)
22139 (50)
22301 (61.8)
20 dma is at 221.50
10 dma is at 223.12
Z – what is COP the ticker for and then I will take a look.
Z, the only way I can jinx is by taking a position. Missed that one.
By the way, the NOV 50 Call volume on TSO is pretty telling.
COP = conoco
Sorry Popeye. I still think COP comes back and RIG. The VLO 70s are a stretch.
Frustrating day
1) COP – languishing
2) HK – not in and it keeps going up
3) WLT – ditto
4) refiners trading with oil and not cracks
5) ESV – just can’t fight the buyback…still think they have to warn but I need to roll to November on the $55s and take a 30% hit. The 50s look toasted.
Fraser – any thoughts on QMAR, EGLE, DSX?
It occurs to me that the premiums on the shipper are just prime for buying the stock and writing calls. I mean, take EXM for example…good business, rising stock but at $60, the November $65s are trading 4.30 to 4.80, hmmm
Z – did not hear about the wind farm. However I did hear that American Superconductor and Teco Westinghouse are going to try to develop lighter, more efficient windings. Guess which mighty might is using Westy for contract mfg. Yep, and they have been crawling up penny by penny day by day. Also consider that Endesa, suzlon and vestas are tres chi chi and cost beaucoup euros. Our mighty might is priced in the Yankee peso.
Doc – interesting, are they moving up today? or can we get in and wait for the catch up.
windform article in the Houston Chronicle..http://www.chron.com/disp/story.mpl/headline/metro/5183168.html
Z. SNG I hear you. Over the years I have done well with start-ups by looking at who is backing them. One can’t time the market on junk like this.
Q for Z:
I’m trying to get a handle on PDS (Precision Drilling) ahead of their earnings call (25th Oct). The weekly chart looks promising, the daily looks a little iffy.
So … any thoughts on the drilling outlook in Canada for 08?
Thanks RJ – will take a look
Dr D: Two words: Greg Noval…= Successful SOB
Dman – let me get to that in tomorrow’s post. As you know, I’m not high on the land drillers but I don’t want to dismiss it off the cuff either.
Out for 30min – keep TSO rising
HK – uugggg, through 17 now…gotta bop
I don’t know, but I think there’s three drills working up north now, and one is fixing a flat. Look at Advantage’s presentation for the nice charts.
Good news form The Great White North! aboo debi is about to get blocked from prime west. Only my opinion, but just because you are born on top of an oil swamp, does not mean you should have money to buy the labor and industry of hardworking people. Especially since the filthy infidels, like us Americans and the Canux can no town shares of abbo debi oil co. by law!
http://www.thestar.com/News/article/262991
the link
Only off 66 pennies so far.. hmmmm. must think the canux are kidding.
Looks like I didn’t miss much.
Cal – what ticker are you speaking of?
non DRYS dry bulks ripping higher
BTJ- Bolt Tech. Any thoughts out there????
CPTC.OB Give a look. Both have been good to me,
Dr. D – yeah, I remember you asking about Bolt awhile back. I’m not a big fan and it has no options. The stock’s making a bit of a recovery from a long slide, what’s the news?
pwi, see me shorting it?
CPTC looks watch worthy. No earnings until 2009 but huge rev growth. Will do a little looking around. Anybody got any good comps?
PWI – Interesting but that’ll be a rumor swirly and I don’t do those.
First they buy Pogo’s oil up there, then Pioneer’s , now they want Prime Wests. Well, Harper wants to get elected too, and I don’t see him taking a director’s job on the aboo debi’s oil co.
This is what I’m saying, they don’t have comps, suzlon, endesa, vestas are in chi chi land priced in euros. the only one here is ge and they are booked out to 2009, and they have conversion electronics issues that composite does not.
Read the link – that seems a bit more tha just somebody say so.
Ever heard of Bob Seeger song, ‘Like a Rock, oooooh, like a rock.’
Cal – will look at tonight
Go TSO, come on VLO
Ok, here’s the gist of it, from the Totonto Star.
‘Sources have told The Canadian Press that Industry Minister Jim Prentice is concerned about foreign state-owned entities snapping up Canadian firms in the key resource sector, particularly Canadian energy firms.’
ten minutes and twenty cents.
Z – Conoco Phillips – of course, silly me!
Interesting chart and looks very similar to the run up in crude over the last few years.
No serious damage done to the uptrend as yet. Obviously the 5700 area is major support. It looks to me as if we are tracing out a correction and once complete we could embark on what will be a final leg higher before a more significant downturn. The correction could go back to the 7300 level.
Is it possible the upside is actually totally done and we are already at the beginning of a more major move lower? Yes it is and the 5700 area holds the key to that.
Short term(I am talking weeks and not days) it looks poised to head lower and at least test the 8000 level again.
Out of interest what are you thoughts on it?
Cal – nice
Nicky – thanks, just hoping it holds current levels, valuation is cheap, news out today hurt it should have mostly been factored in. I like but I’m waiting and watching for now.
Crude = wow. Anybody hear the latest spin here…could use a good laugh.
Heating oil does not have much in the way of resistance until 22050 and then 22240.
TLM warned Alberta of coming Capex cut if they pass the tax suggestions into law.
Says they’ll cut spending by $500 mm in 2008
WTI currently being turned back at the 38.2 fib level which also is resistance. Next resistance after that is 81.50.
COP XOM BP etal. Phil’s “DO NOT BUY LIST” All Energy-Mining stocks that “RENT” not own land in a country where over-night the rules can change-(COP) unless the P/e is adjusted down. ala Russia.
Another 5-10% drop in OII and I’ll get back in.
The disturbance in the GOMEX looks less organized today. Another area of disturbance is more likely to form near the Bahamas and move west.
Dr D = I rent, not own COP for trades, but it already is a lot cheaper than the others you mentioned plus it actually has plans to grow production of both oil and natural gas.
WTI – the bulls are going to need to hold 80 into the close otherwise we could see a more serious sell off tomorrow.
Z Good point, short term trades are differnt., I have not been on a trading “board” in a number of years. I tend to think long term. However, your trades have been profitable.
Banc of America analyst says COP’s PR today largely contained no new information and was generally in line with Street expectations.
The Marketwatch reporter adds:
Refining margins at COP are expected to be $14.74 down “a whopping $12.56″ from the second quarter”
That’s great reporting:
a) they are supposed to be down from 2Q levels, that’s pretty common,
b) 2Q levels were a record so its not suprise the drop looks big or at least no surprised to anyone with spinal fluid,
c) 2Q06 levels were $14.86…hmmm, so we’re roughly in line with year ago margins…how terrible.
capacity utilization for the third quarter period was 93% which is higher than most.
Dr – some of them at least. And I think longer too but that’s mostly stock positions, things like CLR, NFX, AXT.to, END (big loser for me but I have a very long view there) and a few others.
Distillates has support at 21660 but if that goes….
Gotta love this market, oil rolls over while products remain up 1/2% and the refiners fall??!!!???!!
Nicky – think they rally oil into the close?
19870 equivalent level in RBOB
DRYS down $4 now, mo-mo stock
Z – I think they will defend 80
Some good flip flop quotes in here
While crude saw a surprise build most of it was on the west coast. (like that suddenly matters to these guys?!)
Gasoline demand is falling but the decline in it will lead the complex higher.
All of this is not bad news for TSO
http://ap.google.com/article/ALeqM5i5TtajgUpSm7KY5jf-lCJGHBB-tAD8S1S6JO0
I agree re 80 but they’re taking their time
TRADE: This is a day or 2 day trade:
DRYS: October $100 CALLS for $3.10 and 3.20. This is risky from a technical perspective as in “catching a falling knife” but China didn’t just go AWOL and they are still the cheapest bulk shipper in the group.
Dr D: re post 85
Would you include countries like USA and Canada in that “rent not own” bucket? On federal lands, the rules are constantly changing. In DW GOM, they made a mistake in contract and now want everyone to pay for their mistake.
Also, the tax laws are constantly changing, drawing more and more profit away from private industry and into the inefficient hands of government. And we have the brainless Dem’s yelling for ‘windfall profits taxes’. That is almost as bad as anything the mad man from Caracas could do. And the Canadian Halloween Surprise on taxing royalty trusts.
Just goes to show, the rules are constantly changing no matter where in the world you are.
lame effort to close crude green.
I hate mo mo stocks
Mark – good points. How do you ensure $100 oil? Put HC in charge.
Watching a very red but currently directionless marketwatch right now. Maybe a slight positve leaning into the close for energy.
DRYS trying to hold $94, down $4+
To: MMa. #100- Risk I refer to is not taxing. Stealing you land which can happen in parts of Afica, S.America, Russia. Every politico is after your money, Dems & Rep.
DJIA failing into the close, taking energy with it.
BTU has given up 2/3 of days gain, same WLT.
Looks better for a crack up of the PWI deal. TAQA ceo says he’s ok with it.
http://www.canada.com/nationalpost/financialpost/story.html?id=888e89e9-1dac-4acb-b493-2a97792df576&k=94503
Yea I saw that with btu, up by 3 plus at noon and now..
Cal – Why would TAQA say that unless they’re trying to soft peddle the deal? I’m not saying you are wrong but it doesn’t sound like they are giving up , just trying to sound non-threatening in the market place of public sentiment. What do the shareholders want, have they voiced an opinion.
Anybody here a Street Consensus for the gas # tomorrow?
Interesting point, TAQA trying to play nice. Shareholders want the 45% premium. Harper already sprung the Halloween surprise, now this rat in the box from Alberta, but guess who would not pay any taxes to Ottawa when they leverage out debt to five times earnings. So if they let the deal run and give away PWI because he destroyed the shareprice with taxes, he looks like a fool. That’s my thoughts on this anyway.
Z – consensus is 70 – 75 BCF
Last year was 74 BCF
Five year average is 68 BCF
BTJ has had 2 monster sequental Qtrs. on Earnings rpt Fri. up 30% from Wed.
Peak minerals: 1-Peak Oil, 2-Peak Metalurical Coal. Now we have 3-Peak Gold.
Mining companies report “NO” new finds & sky-rocketing costs. Any hot pics out there?
Cal – good point.
Thanks – Nicky
ACtually, now I think TAQA is trying to get pwi shareholders in a tizzy and let them scream about free market principles.
Dr D
1) peak oil is a misnomer
2) peak met coal – I don’t know, but I really doubt it
3) I’m not a gold bug but I know some are in here. Guys with ideas on gold please forward.
Cal – that’s what I was thinking and again why I hate playing these things b/c I’m not in the know enough to figure it out. Politics not my bag
Hey Z.,
Did I miss a “TRADE:” for WLT?
Just logging in for first time.
Exciting day, it seems:
GMKT (QMFJE) +56% (S.Korean E-bay, worth a look!)
DRYS (I’ll hope for a down gap tomorrow)
VMC hanging in on a down day!!
VLO (68.5 please!)
TSO I’m still up 15%, 1 more point and I’m out
WLT- I’m gonna jump in tomorrow.
Q – no, I didn’t pull the trigger on WLT
Don’t hope for a gap down on DRYS since I caught the falling knife with the Oct 100 calls.