Melee Monday

Posted on by zman

Commodity Watch: Higher.

  • Crude Oil: After springing to but not maintaining all time highs of just over $84 last week on a combination of Turkish/Kurd hostilities and an unexpected draw down in crude inventories November crude is trading up $1.00 to 1.25 this morning, well into record territory of as high as $85.19. A Bloomberg survey released over the weekend called for falling prices this week. I think we will take out $85 for a closing level and failing to close above that level we are likely to trade slightly lower. The bulls appear to be in charge however and I expect downside to be contained above $80 for the next couple of weeks.
  • Ecuador To Rejoin OPEC. Now that Correa has learned to steal from the best of them, big brother Hugo, he is seeking to make good on a campaign promise to get his country back into the welcoming arms of OPEC which Ecuador left in 1992. At the risk of spreading my persona non grata status to yet another Latin American country, allow me to suggest that OPEC collect the $5.3 billion Ecuador owes them from the last time it was hanging out in the clubhouse, up front with interest. Let's see, 15 years at 10% should come to a tidy sum of $22 billion or about double Quito's annual budget.
  • Natural Gas: After trading off just 1% last week natural gas is putting on a bit of a show this morning rising $0.20 (or 2.8%) to $7.16. I find the move somewhat puzzling given the latest forecasts that show a return to warmer than normal for the eastern two thirds of the U.S. for the coming week. Simply put, it is up with oil.
  • Fall-Like Weather Expected to Abate Yet Again. The near term outlook from Accuweather. If this keeps up much longer gas will be in for some near term pressure back into the mid to lower $6s.
  • Tropics Watch: Nada. The NHC says a low pressure system near the Yucatan is unlikely to develop into storm.
  • La Nina Watch: slight strengthening is seen although predictable relevance there is still pretty iffy. Here's a page for learning about La Nina.  The long term temperature maps are due to be revised in at the end of this week which could provide an inflection point for gas prices if they stay or get any warmer than normal. 

Weekly Wrap: If you missed the weekly wrap click here. It contained an under the covers look at the XOI which shows that although the index is approaching its all time high it is by no means near it's highest valuation and is still relatively cheap to the S&P500.

Stocks We Care About Watch:

A Few Words On Coming October Expirations: 

  • (ESV) Puts - The number of rigs contracted in the U.S. GOMex fell another 3 to 89 to yield regional utilization of just 69% according to ODS-Petrodata Group.  While Baker Hughes does not provide a breakout of Shelf versus Deepwater rig activity it's a pretty safe bet that the weakness continues to come from the shallow water segment. The following chart shows the number of rigs actually turning to the right in the GOMex. It just gets weaker and weaker.

gomex-rigs-101207.jpg

Despite this continual punishment and a penny after penny reduction in 3Q earnings estimates my $50 strike puts will undoubtedly be on the scud list at month's end. For the $55s I still hold out some small hope for but am not looking to "get back to even" as that logic is as always impractical. The market doesn't care what I paid for a stock or option so why should I? I should just make the best sale possible, especially given the short amount of life these have left.

  • (CAM) $110 Calls - This was labeled a "hate your money trade" from the beginning and that title has proved more than apt. Still, the stock is incredibly volatile and a good day in the energy market could reignite the options value allowing me to salvage the position.  
  • (COP) Calls - I've already rolled into the Novembers and will be coming out of the October 85s on the first glimmer of real strength (probably this morning if this oil move is sustained into the open).
  • (RIG) October $115 Calls- I've pre rolled into the November $115s and will look to exit the October $115s at earliest convenience this week. 
  • (NBR) $30 Puts - I still think this one suffers into earnings but will need to roll to Novembers to capture the move. The stock rebounded as the market's recent "bad news is good news" sentiment took hold of it.

Other Stocks We Care About Today Watch

  • (PTR) - Shanghai IPO may debut around Halloween. PTR is now up 53% in the last 5 weeks having leapfrogged TOT in the last month in terms of market cap. It now trades at 11.2x 2008 consensus CFPS of $19.35, a premium to all of its major oil company peers save (CEO), the closest of which is (XOM) at 10x 2008 numbers. 

majors-101207aaa.jpg

Note: since I made the table above over the weekend PTR surged 10% in Asian trading on news it increased oil and gas production by 2.6% and 17.3% respectively for the 3Q period (up 5.6% on a BOE basis which puts it on track to make the company's 5.3% 2007 target). It's market cap is now roughly equivalent to that of (GE) and at $420 billion is only $100 billion away from being the biggest publicly traded firm on the planet. Two months ago PTR was the fourth largest big oil and less than half XOM's size. Of course, if XOM had the desire ability to grow it's domestic production they wouldn't be looking over their shoulder now. Of course, given their cash flow generation they're probably not concerned as they will just keep buying themselves back.

  • (APC) - moving forward with its plans to spin out the mid-stream assets of Western Gas in a MLP. Comment: smart move for them, continues to pay down debt by monetizing assets that otherwise would go largely unnoticed in NAV calculations.
  • (DRYS) announced this morning it is offering 6 million shares in a secondary. Buy low, sell high.
Current Option Holdings:
 
open-options-101207.jpg
 
October Closings:
 
october-closed-101207.jpg
 
Earnings Watch: not really rolling yet for the energy complex
 
  • Thursday: solar player (SPWR); trucker (USAK)
  •  Friday: (ACI) and (SLB) 

 

Odds & Ends

Analyst Watch: (E) cut to neutral at Credit Suisse. I'll add any additions in comments.

 

 

156 thoughts on “Melee Monday”

  1. 7:45 am EST

    Crude At New Highs on Turkey, Buying

    By Nick Heath
    Of DOW JONES NEWSWIRES

    LONDON — Crude oil futures traded to new record highs in London Monday morning, driven by a combination of technical buying and concerns over any Turkish decision to undertake military action in Northern Iraq.

    “The only real supportive element over the weekend is coming from Turkey,” says Olivier Jakob of Petromatrix.

    And attempts to break out of recent trading ranges added technically-inspired buying pressure, he said.

    At 1131 GMT, the front-month November Brent contract on London’s ICE futures exchange was up $1.27 at $81.82 a barrel, just below the new record high of $81.93 a barrel set earlier in the day.

    The front-month November contract on the New York Mercantile Exchange was trading $1.19 higher at $84.88 a barrel, after hitting a fresh record high of $85.19 a barrel earlier in the morning.

    The ICE’s gasoil contract for November delivery was up $9 at $707.75 a metric ton, while Nymex gasoline for November delivery was up 249 points at 211 cents a gallon.

    Monday’s early assault on historical highs marked a continuation of last week’s momentum, traders suggested. With Brent and WTI both having brushed aside previous traded highs, further gains were likely, with fund buying activity predicted to be key.

    “We didn’t see heavy profit-taking on Friday and we’re still trading upwards today,” said a trader. “The funds seem to have control of it and there’s no reason to come in and sell. We could hit $85 a barrel on pure speculation alone.”

    Last week’s data from the U.S. Department of Energy and the International Energy Agency, which both pointed to a possible supply squeeze during the final quarter of the year, have added a pillar of support to crude prices. And with tensions over potential conflict between Turkey and rebels in Northern Iraq rising, current fundamentals have taken a distinctly more bullish tone, luring fresh buying interest.

    Latest data from the U.S Commodity Futures Trading Commission published Friday revealed speculators had already increased their net long positions in Nymex WTI futures by 12,720 contracts to 69,190 contracts over the seven day period ending Oct. 9.

    Open interest has continued to rise since, analysts said, fueling crude’s gains.

    “Open interest increased by a startling 75,285 contracts on Tuesday, Wednesday and Thursday, during which prices gained $4.06 a barrel,” said Peter Beutel of Cameron Hanover. “We don’t know yet whom it was that was buying, but we can say it was new buying driving prices higher.”

    Anticipation of a Turkish military assault on Kurdish rebels in Northern Iraq remained firmly at the top of the geopolitical agenda Monday, traders said.

    News reports over the weekend cited Turkey’s Prime Minister Recep Tayyip Erdogan as saying preparations had begun for a Turkish cross-border operation into Northern Iraq. A vote in the Turkish Parliament approving any action is expected to be held this week, with legislators expected to voice strong support for a military campaign.

    While no crude oil production has yet been lost amid the escalating tensions, the perception it could be cut is adding pressure to crude prices.

    In addition to destabilizing the region, any incursion poses a threat for physical crude oil flows, analysts suggested, with the Kirkuk-Ceyhan pipeline transporting Iraqi crude to Turkey one possible target.

    However, the larger Baku-Tbilisi-Ceyhan pipeline could also be susceptible to Kurdish rebel attacks, analysts said, and potentially affect a considerable volume of crude.

    “The amount of oil at risk (between 1-1.3 millions barrels a day) is not negligible and, being short-haul crude oil, a Turkish intervention in Northern Iraq will keep an additional risk premium on the price of crude oil,” said Petromatrix’s Jakob.

    —By Nick Heath, Dow Jones Newswires

  3. They can say what they like but this is pure spin. It may well add to the instablity in Iraq but it is not going to have any effect on oil output from that region which has been negligible in the past four years.

  4. OMG even PF says he is surprised at the strength in oil this morning! He is citing a weaker dollar – hello the dollar is stronger this morning???

  6. First leg up in wti looks close to being done – maybe another pop. Resistance above the 85.17 high is at 85.40.

    A move below 83.50 confirms wave ii in progress.

  7. drys 6 m shares is not quite an offering but more than a shelf filing. They can call up cantor and say sell 500 k at the market and do this up to 6 m shares.

    They call it a controlled equity offering. If drys likes the price they sell shares up to the 6 m limit.

    I fully expect them to issue these shares and you can say this is the pause that refreshes.

    Earnings will be fabulous and rates are still getting better. The push higher will continue to 150 and perhaps more, imho

  14. Hey Z.

    What do you think of SLB Oct 115 Calls at 1.75? SDBJC

    Hoping for upbeat earnings pop.

    Q.

  16. Citi takes SNP from SEll to Buy – and the stock jumps another 12%. Talk about asleep at the wheel.

    TLM upped from neutral to buy at credit suisse.

    Wedbush takes its SPWR PT from 87 to 100. (they announce Wednesday)

  18. Hope the guys at PSW got out of that BTU short.

    President and COO of NFX – David Schaible dies of cancer at 46. David was a great guy and a smart smart oil man. He will be missed.

  20. Q – Nice. Longer term they should both do well but with the changes HAL has been making look for them to slowly narrow that valuation gap.

  24. Q – 105s ok, the 110s still hurting but tipping up a bit

    CNQ – Tupp, sorry don’t actively follow, saw a downgrade there this morning at credit S.

  28. thanks for the link, you read alot eh lol? now your dipping into the canuc papers when do you sleep?

  29. drys oct iv’s back up into the 100’s from 75 on friday.. come on 130 hold off till friday! lol short 100 $130’s, this could be stressful.

  31. sleep is for analysts and/or those who play them on TV ;-> Just kidding, I’m actually asleep right now.

    sorry I missed that, who’d they interview?

  32. i dont know- switched back the cooking channel- eppersons ugly voice was making my ears bleed. all they kept chirping about was that this stock was up 600% yoy

  35. Drillers week again. Maybe ESV / NBR will good enough to fall off and give me an exit. Energy decidedly less positive than the open…well we’ve got $85 and now we have to wait for the gurus at Goldman to tell us our next move, lol.

  36. N – Nope, remember it’s Goldilocks/Parting like it’s 1999/Alfred E. Newman “What me worry”! My question is, wasn’t the story about Goldilocks and the three BEARS? Lol

  37. Nicky – I just want you to be prepared for when your boy PF does an about face and tells you this move is justified.

    Broad market bear trap in its nacency.

  38. 9:52 am EST

    Crude Makes New High Above $85 On Turkey, Supply

    By ELIZABETH LANDAU
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures pushed further into record territory Monday, rising above $85 a barrel as tensions between Turkey and Iraq mounted and concerns about a tight supply situation continued.

    The front-month November light, sweet crude contract on the New York Mercantile Exchange was recently up $1.51 at $85.20 a barrel after rising as high as $85.30, the highest ever price for a front-month contract. Brent crude on the ICE futures was up $1.19 to $81.74 a barrel, after earlier reaching a new record of $81.93.

    Turkey has been considering an assault on the bases of the Kurdistan Workers’ Party, a group that has been fighting the Turkish government since 1984, in northern Iraq. Preparations for a cross-border operation into northern Iraq have begun, Turkey’s Prime Minister Recep Tayyip Erdogan said, according to news reports from the weekend.

    The fate of the Kirkuk-Ceyhan pipeline, which carries Iraqi crude to Turkey, as well as the potential for general instability in the region, is supporting crude prices, analysts say.

    “There’s concern that the gains that were made in the recent (U.S.-led) surge in Iraq may be set back” by Turkey, says Phil Flynn, senior market analyst for Alaron Trading Corp. in Chicago.

    But heavy buying, especially on the part of funds, could have more to do with higher crude prices than the Turkey conflict, said Addison Armstrong of TFS Energy Futures.

    “It’s hard to say that Iraq-Turkey is priced into the market sufficiently because we don’t know what’s going to happen,” he said. “The military hasn’t crossed over yet.”

    The Organization of Petroleum Exporting Countries said Monday that it cut its fourth-quarter estimate of non-OPEC supply by 110,000 barrels a day from its September report to 51.04 million barrels a day, citing declines in output in Mexico, the United Kingdom, Brazil and Sudan.

    The announcement is “just another factor that’s underpinning the perception of tight markets,” Armstrong said.

    Futures edged toward new highs last week on tightness reflected in reports from the Department of Energy and the International Energy Agency on Thursday. The DOE’s weekly U.S. inventories report posted an unexpected 1.7 million-barrel draw in crude oil stockpiles. The International Energy Agency report said that crude oil inventories held by industrialized countries covered fewer days of demand at the end of August compared to a month earlier, and suggested a general third-quarter stock decrease contrary to seasonal expectations.

    Analysts also cite the weak dollar, which makes crude cheaper for traders using other currencies, as a factor in higher commodity prices generally. Economic indicators will also play a meaningful role in oil prices, Ritterbusch & Associates in Galena, Ill., said in a research note.

    “A continued strong stock market will continue to conjure up images of strong fourth-quarter oil demand, while any further weakening in the U.S. dollar will remain suggestive of a continued immunity to high oil prices overseas,” the note said.

    Front-month November reformulated-gasoline blendstock, or RBOB, was up 2.82 cents, or 1.4%, to $2.1133 a gallon. November heating oil rose 2.55 cents, or 1.1%, to $2.2719 a gallon, rising as high as $2.2905, an all-time record for the front-month contract.

    —By Elizabeth Landau, Dow Jones Newswires

  41. Sambone – he’s such a promoter. Mostly last week’s new as well. He’s a poster child alright, a poster child for the short bus.

  43. #38 Jeepers surely that bull Addison Armstrong is not admitting that it is speculative buying on the part of the funds driving this up. His normal BS is that this is fully justified.

    Okay we have had our little iv this morning and this looks like v.

  45. CAM trying to make a move here. Still holding the 110s.

    N – that was just for you. I think some bears are getting confident the market will collapse hard here as people point to everything from financial quarterly earnings (which we knew were going to be down) and the price of crude, which has been high for awhile now. The resiliency of the market justifiable or not is pretty amazing.

  46. Z – I didn’t realise PF had ever turned bear for more than 5 minutes anyway. He is rushing about covering every comment he makes obviously hoping to come out bathed in a glow of glory!

  48. N – I agree, that’s what I was trying to say.

    The bad thing about trading energy stocks the way you have to with options is that you’re caught weighing every little move. Now the stocks “need” oil to hold increasingly higher levels which are going to be pretty hard to maintain. They are not discounting $85 oil by any means (historical relationship between avg CF multiple or NAV (deep discount there) but once oil takes out a new level, it has to hold near it or the stocks will suffer an option smashing move.

    If oil were to retreat to the mid $70s I could still make a pretty strong argument that they (the E&Ps, majors and oil service) should hold current levels fine (with what would amount to a $10 drop in oil) but you know that in reality, they won’t.

    The strip falls $10 between now and Jan 2010 but half of that drop is accomplished by June 08 which should tell you these prices are pretty bubbly front month but that there is demand growth backing, not tightness, but what I’d call a firm market, next year.

  50. Q – The $110s on CAM or the $65s on FTI might be your play for expiration. Since I won’t be here on Friday my $110s will be long off the table.

  51. I would have more ‘belief’ in this oil rally if it really was supported by fundamentals. The fact that it is clearly speculation (the fundamental reasons being given are just not there) means we are very susceptible to a pretty big pullback in prices.

    A rally built on fundamentals is probably away down the line.

  52. N – so a 1.8 mm bopd delta from demand vs supply is not a fundy reason? You mean you’re not buying the EIA/IEA’s 4Q dem numbers? For shame. Of course, even if they don’t make there, production is lower QoQ so it will get tighter. If you ask me if we should be $30 higher than the same time last year based on the foreseen levels of tightness I’d have to be on TV to tell you yes.

  56. RAM, Re: #49

    Yeah, why not, when a stock gap trades up 23 PTS! at the opening, why not just hold them four more days til expiry.

    Maybe the Chinese will read today’s Barrons cover.

  57. Z- do you think the dow jones newswire is worth the subscription fee? and before you said there was a good site (free) for eps consensus’ what is the best one/?

  58. T – yeah, I think it worth the fee but then again, I’m on constantly and have a monitor just for the M/ENE scroll (energy mkt news).

    Free estimate: yahoo finance or google finance both work pretty well for EPS and Revenue. I prefer yhoo but that’s just b/c I’m used to it. The Goog stuff is good and a bit more advanced in some ways.

  62. who saw that swiss ex-pat rip apart the us asset markets today? that chunk morning call reporter didnt even know what to say to him….

  63. doesn’t look like integrateds and E&P’s are too convinced of te crude rally….

    Z- do you know why cvx seems to be under performing it’s peers recently?

  64. T – just a guess but their warning over margins showed particularly lousy results in Europe margins, down upstream volumes and a lack of support from the chemical division. Probably hard to get excited about it prior to earnings. They did come out and say early this morning that they expect long term margins to be “robust”. I think that’s more than a fair statement for the domestic market given the dearth of capacity growth relative to demand for gasoline.

  68. TT re #55 – resistance due to a wave relationship without getting too complicated.

    Samborne – haven’t had the tv on much today.

  69. 12:19 pm EST

    Reading The Texas Tea Leaves

    By STEPHEN COX ,CMT
    A DOW JONES NEWSWIRES COLUMN

    NEW YORK — Quite a few people dismiss technical analysis as divination, likening it to entrail reading or some such. Of course, I disagree, but I understand. Technicians, with their cookbooks of curious patterns, can be head and shoulders above the rest of most of us when it comes to wacky-sounding pronouncements.

    I’ll try a light and sweet take on the crude oil market, and see if I can keep it straightforward.

    Nymex November crude oil rose earlier to $85.28, which is the high for the uptrend from the second-quarter 1998 low of $10.35. Long-term charts suggest that futures may be set up for a significant correction when $85.82 resistance is tested, and a downtrend to $72.09 would in that case be a reasonable consideration.

    You now have a serviceable mnemonic. The $85.82 target is a trivial arithmetical anagram of the current record high of $85.28. I swear I’m not making this up, and I recall running into this sort of numerical relation several times in the past — frequently enough, at least, to make me think that it might a reliable indicator. But perhaps I shouldn’t say such things.

    Although I’m not making this up, I may be dead wrong. And if that’s the case, then Nymex crude will be going for initial long-term resistance at $88.48 initially.

    And, by the way, I think that so many technicians don’t give the theory of chart analysis its proper due for the simple and understandable reason that they’re too busy trading off the charts. A good excuse, that.

    S&P 500 Correction Shaping Up, Or Down, That Is
    The S&P, near 1550.50, if it takes out support at Thursday’s low of 1546.72, would be trending lower the daily chart, and so would be pointed down to a potential bottom at 1544.85 at least. Even lower trading might be going for 1483.29, however.

  72. CAM – this would be a all time closing high for the stock.

    NG is getting three times the move oil is. Did someone say “cold winter” earlier? NOAA, CPC , anyone?

    WTI – next 7 months up $1.40 plus. Any geopol news. Surely this can’t all be weather!

    Stocks showing lack of confidence in the both the CL and NG moves.

  75. PF reminds of Prissy in Gone with the wind; “Lawzy, we got to have a doctor. I don’t know nothin’ ’bout birthin’ babies”.

  78. Well last i heard Z was warmer winter than average but colder than last year.

    This move is starting to look somewhat crazy….

  80. T – Re CHK: 92% gas, highly hedged, great management, no need to issue equity, great management (yes, again), strong production growth and going to be the #1 producer of gas in the U.S. next year ahead of all of the majors, breaking out of a 2 year long base, tons of drilling locations (11,000 plus), steep discount to a reasonable NAV, oh yes, and great management.

  82. Well if we can count on him to ramp it to 100 its probably a good move!

    This has to be having an impact on the broader market now….

  84. Z I think you forgot great management (when they aren’t issuing converts to torpedo any great moves in the stock)!!! 🙂

    Question: Do you actually think any of the majors would take them over? I mean COP got MURDERED for that Burlington acquisition a few years back…

  86. Bill,

    Re DRYS: Is the use of proceeds earmarked for new deliveries already announced or for completely new ships. That’s $750 less fees, could get you another 4 or even 5 Panamax’s if they act quick.

  91. My 2 cents on Aubrey (not that it means much)…He built CHK from scratch when gas was at like $1-2 to what it is now…I think he’s done a great job of acquiring the “safe” assets that are almost all inland and not in the Gulf and are pretty free of weather risk…And I believe that CHK’s cost of acquisition is low enough so that when gas gets low, they can still produce down at lower levels of gas, but they choose to shut it in to realize higher prices…

    I think his only “fault” was killing stock price moves almost every time with his issuing of converts…

  93. Doesn’t he get proceeds of some of the wells they drill (ie, he’s a partial owner of the wells)???

  94. Ah we now have them on CNBC (which I have finally turned on!) talking $100 crude in 3 months time.

  95. Oil bounced off $86, HO not quite keeping up, gasoline more than keeping up so cracks will be up today.

    Scoop – no loans but for years Aubrey had one of the sweetest deals in the oil business. Don’t know if he still does but he used to have a small working interest in EVERY well they drilled as part of his contract with the company. This afforded him enormous cash flow so he has routinely been able to make stock purchases in increments of $10 to $25mm sometimes on a monthly basis over the last several years.

  96. How wrong was Cramer on his HAL will never move call back at $33-34. Pretty much nothing but up since then to $41.60 now. fooolyahhh

  101. The move in the energy market ought to be enough on its own to completely tank the broader market – it has to impact the consumer in the end.

  102. Wow, natural gas up $0.46 (6.6%) at $7.435. My hats will have all turned to dust before I get the chance to eat one. 😎

  103. N,

    It is if you look at consumer spending. It was up on gasoline sales almost alone. Even Chinese refiners are like “Uhhh..” when it comes to oil prices.

  104. S – good points. PTR and CEO already said they were losing their heads on refining in China at $75 oil. $86 is a disaster but the gasoline prices are controlled by the state…as are the subsidies they receive for operating their facilities at a loss. This pretty much gives them a free hand to outbid other oil companies as their govt is in favor of them growing, unlike our Congress.

  105. N – Energy should effect the market, BUT it won’t until a gallon of gas hits $4.00+ a gallon. Gasoline is like the frog in a pot on the stove. If you throw the frog in with the water boiling, he’ll jump out. If you put the frog in cold water and then gradually heat the pot, the frog will boil to death. We have a pot of cold water and a frog at the minute. Alfred E. Newman “What me worry”.

  106. I love the winter weather reason,

    Colder than last year, but warmer than average == OMG it’s ICED EARTH!!!!!! Shortages Shortages Shortages…

    I am anxiously waiting for a day all of the doom and gloom profiteering settles down ( probably not in my lifetime ).

  107. 2:32 pm EST

    Nymex Crude Oil Hits Record-High $86/Barrel

    By ELIZABETH LANDAU
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures hit an all-time intraday high of $86 a barrel Monday as concerns escalated about a Turkish incursion into northern Iraq and as a weakening dollar made crude futures more attractive to non-U.S. investors.

    Light, sweet crude oil for November delivery was recently up $2.45, or nearly 3%, higher at $86.14 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange hit a record intraday high of $82.54 and was recently trading up $1.77 to $82.32.

    Growing tensions between Turkey and Kurdish rebels in Iraq are “probably what’s giving us the impetus for this strong move-up today,” said Brad Samples, an analyst at Summit Energy Services in Louisville, Ky.

    The Turkish Parliament is scheduled to vote Wednesday on approval of a military operation against the Kurdistan Workers’ Party in northern Iraq, local news stations reported. Turkey has been considering an assault on the bases of the Kurdish group, which has been fighting the Turkish government since 1984, in northern Iraq.

    Analysts also say the weakening dollar, which makes crude oil cheaper to buy for traders using other currencies, as a factor in higher crude and other commodity prices in general.

    “We’re seeing traders continue to invest in commodities such as energy, looking for a higher return than may be available in the equity markets,” said Andy Lebow, an analyst with MF Global in New York.

    Nymex November crude futures had been trading in a narrow band between $78.25 and $83.90 a barrel for about a month before pushing to new records Friday. Monday’s run-up in crude prices has been driven in large part by momentum from last week’s rally, analysts say.

    “What we have seen is a technical break-out on last-week’s close reaching new records,” said Eric Wittenauer, an analyst at A.G. Edwards in St. Louis. “It brings more people into the market.”

    Front-month November reformulated-gasoline blendstock, or RBOB, was up 6.9c, or 3.3%, to $2.1541 a gallon. November heating oil rose 5.116c, or 2.3%, to $2.2975 a gallon. Heating oil hit a record intraday high of $2.3027.

    —By Elizabeth Landau, Dow Jones Newswires

  109. Re #95 Does anyone else get a little nervous when the CEO has a working interest in the wells drilled by his public company?? Guess it depends on when he gets his interest. From spud of well? At casing point? Gee, THAT would certainly lower his personal risk. After 28 years in the E&P business I could see some conflicts arising out of a working interest arrangement. Of course, far fewer conflicts w/a working interest than an OVERRIDE!!

  110. Well I expect some sort of reversal tomorrow even if its only short term!
    Samborne – you are quite re re #105. And we are nowhere near the highs RBOB hit earlier in the year.

    Sane- its quite ridiculous – people will get burned in this.

  111. Hmmm re # 107 – more people into the market eh? Late length…

    Anyone try that new Fox station today?

  112. Sambone – if you know anyone who still smokes that makes a pretty good analogy as to how the rest of us feel about driving. I can’t tell you the number of times I’ve heard “I going to quit when the price of pack hits $2…then 2.50…$3…now its $5 in a lot areas and $10 in others. Those who have quit are addicted to the gum now which is your ethanol in this story.

    We should call this the Pelosi Parabolic Oil Rally – your tax dollars at work branding a 90 year old event genocide when the situation over there is this tense. She said “there’s never a good time for passage of a bill like this”…well I can tell you there are worse times and this is one of them .

    Sane – re China – very true.

    FOX B News – I checked out their website…whos who of former Street.com writers.

    JY – I believe, and I’m going on old memory that it was all wells prior to spud. But you make a good point. I think that deal is over now but the guy is worth a little of $2B so he probably doesn’t mind and he’s still got all the working interest from the inception of CHK forward.

    Gas too crimps us for a bit, a neighbor buys a Prius, then we all just sit back and pay it.

    Sane – yeah, like when was the last time we had a normal winter? We bought my daughter a flexible flyer two years ago and the thing is pristine. Somebody ought to invent some snap on wheels for the runners to convert them for dry pavement. Of course, you’d have to do away with all the bloody lawyers first.

  113. N – #107 – makes sense to me since the US$ continues to fall. Petro Countries are getting fried.

  114. Sambone,

    We can thank Bernake an Co. for the accelerated dollar fall. I am truly intrigued by the “print your way out of trouble” theory.

  115. ZMAN – Remember, I am relatively new to the energy world – Does the spread on the “raw” material vs. finished product for gasoline, HO, and nat gas change with the seasons?

  116. CNBC now spinning that oil is actually cheap when adjusted for inflation. Really starting to push $100.

    Now they are talking to Greenspan about oil and he seems to think that the price is fine.

  117. Shouldn’t he shut up and move into an old age home? Market is screwed up enough without him spouting off…

  118. Z – I live in a city where people commute. If Gasoline hits $3.50 a gal at the pump, they will gnash their teeth, whine, and moan, but they won’t stop driving. Been there, done that. They will slow their spending elsewhere such as WMT to buy underwear, etc. At $4.00+ they will somewhat slow their driving but not stop and take public transport. It will take a 2×4 upside the head for Americans to slow their demand for gas to make it count. When it hits, which it will $4+, then it will effect the market, IMO
    By the way, I liked your pack of cigs example.

  119. Lol Brian. they will love him for saying that we have yet to see the worst in the housing market!

  122. OMG I wish I hadn’t turned it on – now they are going to wheel out the Chairman of Exon and ask him about $100 oil!

  125. Nicky, I like my markets semi-screwed up and going down with my November positioning…I don’t need him screwing with things and getting into Uncle Ben’s head for another friggin’ rate cut…

    We haven’t seen the worse, guess we’ll all be living in cardboard boxes shortly…

  127. Ram – margins move seasonally yes, take a look at the chart on the Refiners & Cracks page. Those peaks on the left hand side of the regional crack spread chart generally occur in the summer as the demand for gasoline drives gas prices up more than crude lifting the 3-2-1 crack. They generally but not alway fade in 3Q and bottom in 4Q.

    Natural gas is a more complicated question. The price of oil comes into play as it influences the value of the wet components in the gas stream. Gas producers will strip out more or less of the natural gas liquids from the stream before selling it into the gas pipelines which impacts the amount of NG available for injection or withdrawal.

  128. Naa just kidding about the $100 oil action, because then all we will hear about is $150 and then $200 and on and on and on. farce

  130. Just musing but higher oil from here and the ethanol companies might start to look attractive again prices have crashed with the corn glut and it’ll be in high demand for blending.

  131. Isn’t Zimbabwe on the track for a couple hundred percent inflation this year. Now that is what I am talking about….. Yeee Haaawwww.

  132. Watching one’s p’s and QQQQs.

    Over at PSW there’s a lot of chatter about ‘watching the Qs’, the QQQQs.

    The XLF index is declining after C’s earnings and the regional banks will show their deep financial wounds more quickly than the money center banks.

    ============
    Rock, Paper, Scissors / Wooly Worms / Coin Flip: PTR puts or calls?

    Oil’s in its own world right now.

  136. 3:38 pm EST

    Nymex Crude Settles At Record $86.13, Up $2.44

    By ELIZABETH LANDAU
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures soared nearly 3% Monday to trade over $86 a barrel, as tensions mounted between Turkey and Iraq and traders continued a rally from Friday. A weakening dollar and signs of a tight supply situation ahead also helped boost prices to new records.

    Crude oil prices hit an all-time intraday high of $86.22 a barrel, more than $2 higher than the previous record $84.05 achieved Friday.

    Light, sweet crude oil for November delivery settled $2.44, or 2.9%, higher at $86.13 a barrel on the New York Mercantile Exchange, the highest settlement price ever for a front-month contract. Brent crude on the ICE futures exchange rose $2.20 to $82.75 a barrel, and hit an all-time intraday high of $82.90.

    News of a possible Turkish assault on Kurdish rebels in Iraq gives the “image of troops waiting to go into northern Iraq, inflating expectations,” said Brad Samples, an analyst at Summit Energy Services in Louisville, Ky. The conflict is “probably what’s giving us the impetus for this strong move-up today,” he said.

    Preparations for a cross-border operation into northern Iraq have begun, Turkey’s Prime Minister Recep Tayyip Erdogan said, according to news reports from the weekend.

    The Turkish Parliament will vote on Wednesday on the approval of a military operation against Kurdish rebels in northern Iraq, local news stations reported. Turkey has been considering an assault on the bases of the Kurdistan Workers’ Party, a group that has been fighting the Turkish government since 1984, in northern Iraq.

    Some market watchers said the effect of the attack on oil production would be minimal, and instead attributed Monday’s rally to strong buying from funds, boosted in part by a weaker dollar, and renewed upward momentum from last week. Futures had been trading in a narrow band between $78.25 a barrel and $83.90 for about a month before pushing to new records Friday and Monday.

    “What we have seen is a technical break-out on last-week’s close reaching new records,” said Eric Wittenauer, analyst at AG Edwards in St. Louis. “It brings more people into the market.”

    Funds have been pouring money into the market, said Tony Rosado of IAG Energy Brokers in Ft. Lauderdale, Fla.

    “Whether or not the commercial side of the market wants to adjust itself to high prices, the funds are more in control,” he said. “The bulls are in control, there’s no question about it.”

    Analysts also cited the weak dollar, which makes crude cheaper for traders using other currencies, as a factor in higher commodity prices generally. The dollar lost ground Monday to its main rivals. The euro was recently trading at $1.4202 from $1.4176 late Friday. The dollar was at Y117.29 from Y117.62 Friday.

    “We’re seeing traders continue to invest in commodities such as energy, looking for a higher return than may be available in the equity markets,” said Andy Lebow, analyst at MF Global in New York.

    Also cited as a factor supporting prices was a report Monday by the Organization of Petroleum Exporting Countries in which the cartel cut its fourth-quarter estimate of non-OPEC supply by 110,000 barrels a day from its September report to 51.04 million barrels a day. OPEC cited declines in output in Mexico, the United Kingdom, Brazil and Sudan for the adjustment.

    General concerns about supply tightness have been supporting prices in recent sessions, reflected last week in reports from the U.S. Department of Energy and the International Energy Agency. The DOE’s weekly U.S. inventories report posted an unexpected 1.7 million-barrel draw in crude oil stockpiles. The International Energy Agency report said that crude-oil inventories held by industrialized countries covered fewer days of demand at the end of August compared to a month earlier, and suggested a general third-quarter stock decrease contrary to seasonal expectations.

    This week’s DOE U.S. inventories report, scheduled for release Wednesday at 10:30 a.m. EDT, could play a key role in the next move for crude. Analysts expect crude inventories to grow by 1 million barrels, according to a Dow Jones Newswires survey.

    “If we don’t see another build (in crude) this week, it could get ugly,” Samples said. “We could put a strong challenge at $90.”

    Front-month November reformulated-gasoline blendstock, or RBOB, settled up 7.24c, or 3.5%, to $2.1575 a gallon. November heating oil rose 6.08c, or 2.7%, to $2.3072 a gallon, a new record.

    —By Elizabeth Landau, Dow Jones Newswires

  137. Notice how oil can only trade in $5 increments all of the sudden. At $80 the price to beat was $85. Now it’s $90. Soon it starts moving in $10s

    .

  141. the latest flip flop:

    John Kilduff who a week ago was calling for a correction in oil now says $100 crude is a certainty by year end!

  146. Out HALAV bought 1.1 on 9/28 sold 2.35. Bought small SLBWS Nov 95 puts to hedge. SLB getting ahead of itself, may be punished if they don’t beat. HAL may go in sympathy. Will flip back around once a direction is clear.

  147. Wyo – Nice! I’ve been caught out of the move since last expiry. At this point I have to agree that good earnings from SLB won’t likely be good enough to keep the stock up …at 22x 08 #s they need a beat to keep the momentum going or catalytic news.

    At 14x I like HAL better and they are making changes. Still, if SLB takes a brief hit on earnings it will provide an op to buy HAL cheaper. If SLB beats big and runs I’ll be looking to buy HAL before their 3Q date.

  148. Z.

    Whaddaya think: Oct HAL 42.5s for .25?

    Can the old girl chug up hill another point and we hit a lick?

    I’m gonna be at a conference in L.V. Wed-Fri and don’t want to have to dog this trade in the airport.

    I’d rather not have to settle on 4000 shares of HAL if it closes at 42.51 while I’m in the air on Friday.

    — the ORNERY side of me wants to own HAL for a two-bagger because PSW and Happy’s 100 portfolio started out with IBM.

    Cheers.

    P.S.- Kiddies: this is for money you hate… unpublished trade…

  149. It’s had a heck of a run but at least its cheap and a name I like. I won’t be around much Thursday or Friday so I’m certainly not doing it.

    As far as PSW comment I don’t follow you. Hope they got out of the BTU put trade before it reversed.

  150. Q – also, if you’re going to be out of the office why do you want to place a highly volatile OOTM call with 3 days to expiry? That’s like playing a hand of blackjack, not looking at your cards and saying hit me.

    The Refiners and Cracks tab is updated for crack spreads through October 12. Continued margin improvement in the West and Pacific NW regions. Very good for TSO and a big reason as to why I continue to hold my November calls there.

  151. lg options activity on hk dec 15& jan 15&20’s. lg call position put on nov 50 nfx ,from the price it looks like they sold these calls. Any sites were u can check to see if these went off @ bid or ask. thx tex

  152. Tex – Its a great thought and I noted the call volume today despite the stock being down on a very green energy day. I’d say that makes it likely they’re saying, going ahead, take my stock if you dare on the HK

    On the NFX, not certain but I’d bet more than a buck those are longs.

    Sorry, don’t know of such a site or how you’d be able to tell if its writing or just inventory.

  154. Texana – I think from a stockholders perspective those guys are thinking, hey, oil has run up a lot, why not write options and when oil falls cover them. I’m very bullish on HK at present, see Tuesday’s post.

  155. z thx as always for infor on hk, i noticed that the open interest on the jan 15s was reduced by about 1800 contracts from yesterday THEY HAVE ALREADY TRADED 1250 MOST IN 2 BIG BLOCKS

  156. WNR-Been doing DD. Lowest PE in group. With adding Giant ENR is 4th Largest Refiner.
    Why the Low Price??????????????

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