Skeleton Post Friday

Posted on by zman

Sorry but today's post has been called on account of technical difficulties.  I had about half a post written when my laptop shut down and there's no time to retype/rethink what I already wrote. It wasn't earth shaking anyway. Apologies for the formatting but I'm on a tiny keyboard and down to 1 monitor from my normal 4. Look for a more Zmanly post on Monday.

Thanks to everyone for keeping the site alive in my absence and for the several update emails. I'll put in a skeleton post now but it will be very short. I will be around on a very limited basis today.

  • Oil: still heading to 90. Nigeria said Opec may review its quota in a bid to help ease crude prices but Nigeria would need to get control of its rebels for that to really be meaningful. Still, it should slow crude's rise to have OPEC back off of "it's out of our hands!" statements. Oil touched 90.07 in electronic trading on the back of a weak greenback and is now off $0.50 to just under $89 as I type this (maybe that will pull SU back off again). At this point, oil is going up because oil has been gong up. At some point the dollar will strengthen and crude will ricochet off a round number, like $90 or $91, and head lower swiftly. The entire "Crowd" is now sheepishly saying there's no "fundamental support" for oil prices up here, and then they turn away from the microphone and say to themselves and say "heh, heh, heh....I don't need no stinking fundamentals." Expiration is Monday so volatility will be nutty today.
  • Natural Gas: Smaller than expected injection met with selling. After an initial surge gas fell almost 8 cents on the day to $7.37. Gas is off $0.0 to 7.28 this morning.
    • long term bullish watch: jimbo sent along a piece on Qatar's inability to increase LNG production from one of its gas fields due to the field being "less geologically sound" than originally thought. Big pix stuff and no impact on gas today but worth noting for the longer term view.

Nice day on the long portfolio, especially CHK which continues to build momentum here.

Stocks of Interest

  • SLB- beat by two pennies with a little beat on the top line. It's not enough as the stock is marked down about $4 before the bell. As expected, international strong, N. America / GOMex weak. Have not pinpointed the trouble ....just a lack of beat or margin deceleration as this point but HAL is likely to pull back into a range that might tempt me to get long before earnings on Monday ($39 to $40 or so and looking at the November $40s).

Holdings Watch:

CALLS: Sold the RIG Oct 115 calls for $1.40 on a stop, closed 2.10 but that's what I get for being on a plane during market hours. That'll come to a 40%ish loss. Still hold the double helping of Nov 115s and they are back in the black after today's NE inspired surge. 

PUTS: Sold the ESV Oct 55s for $0.35, about an 80% loss. I'll revisit the name closer to earnings on the put side.

Odds & Ends

Analyst Watch: HEs to neutral at UBS, OSG upped to buy at B of A, someone named Broadpoint capital initiated coverage on most of the household ethanol names at neutral to sell which seems a little late to the mugging to me. Solar player SPWR price target upped massively at Needham and Piper. Merrill upped their PT to $125 on SLB (their favorite service pick) yesterday. Their second fav is RiG which might make some nervous but not I. Besides, RIG has not had the run nor does it sport the multiple of SLB. Same goes for HAL whose story is still evolving.

Lots more to say, no time today. Have a great one and I'll be around a bit this morning, then pulling limo duty.

 

 

 

 

77 thoughts on “Skeleton Post Friday”

  1. 8:24 am Est

    Nymex WTI Back Above $90/Bbl

    By Nick Heath
    Of DOW JONES NEWSWIRES

    LONDON — Nymex WTI crude oil futures traded to new record highs in London Friday morning, boosted by continuing weakness in the U.S. dollar.

    The benchmark November light, sweet contract climbed back above the psychologically important $90 a barrel mark to set a new record traded high of $90.07 a barrel after the dollar fell to a new low against the euro earlier Friday.

    The currency move triggered another wave of buying as the market continued to seize on any developments of bullish note.

    “We see little on the near-term crude horizon that will alter the bias towards buying the dips and driving prices even higher,” Rob Laughlin of MF Global said.

    “Although fundamentals do not warrant such high valuations, the market seems to have a mind of its own at this stage, and only something “seismic” could force prices down.”

    At 1159 GMT, the front-month December Brent contract on London’s ICE futures exchange was up $0.03 at $84.63 a barrel.

    The front-month November contract on the New York Mercantile Exchange was trading $0.34 higher at $89.81 a barrel.

    The ICE’s gasoil contract for November delivery was up $4.75 at $736.50 a metric ton, while Nymex gasoline for November delivery was down 1 point at 218.50 cents a gallon.

    Crude prices set new all-time closing highs Thursday, as the slide in the dollar boosted prices in New York trade. December Brent closed at $84.60 a barrel while November light, sweet crude settled at $89.47 a barrel.

    And a brief spike to $90.02 a barrel in electronic trading after the Nymex close set up the light, sweet contract for further heights Friday.

    “I think there is just a concerted will to take the market higher,” said Jim Rintoul of TheOilTrader.com.

    “We saw that last night — the market was in a slow drift after the earlier move higher, then climbed in the last hour to get a record close again.”

    The expiry of the November light, sweet contract Monday threatened a volatile end to the week Friday, with position adjustment likely to muddy the direction of crude, analsyts said.

    “The front month could go anywhere,” said Olivier Jakob of Petromatrix. “The expiry is on Monday, so I would expect a lot to get done today. It should be quite volatile later this afternoon.”

    The futures market was keeping a close eye on the options market Friday, meanwhile, with hedging of December call options raising the potential for further climbs in futures, particularly as the November light, sweet contract trades around the $90 a barrel mark.

    “I think the current rally has lot to do with hedging dynamics on options,” Jakob said, adding that a large layer of open interest on the $90 call on the December contract posed upside risk to the futures contract.

    “The level to watch is really $90, basis December, because if we go through that level, it’s likely we will see further upside coming from hedging of call options.”

    While many in the crude market continue to question the validity of crude’s record highs in relation to prevailing fundamentals, the expected tight fourth-quarter supply/demand balance not only justified current levels, analysts at Barclays Capital said, but would likely result in further gains.

    “Over the past three weeks U.S. crude oil inventories have fallen by 4.5 million barrels relative to the five-year average whereas the stock position has also deteriorated considerably in Europe,” they said.

    “With the market currently running a hefty deficit — and with the size of that deficit likely to increase moving into Q4, we see the recent move up in prices as fundamentally justified and we think that, for the moment at least, the door for higher highs remain open.”

    With prices moving further into virgin territory, speculation over whether a supply side response may be forthcoming from the Organisation of Petroleum Exporting countries mounts.

    An announcement from OPEC on production quotas is viewed as one of only a handful of potential developments that could plausibly challenge crude’s current uptrend.

    Nigeria’s Minister for Petroleum, Odein Ajumogobia, said Friday that global oil markets have plenty of oil, but markets shouldn’t rule out OPEC increasing crude production beyond what they recently agreed to provide from November to dampen record-high oil prices.

    “I’m not ruling out we won’t do something more. We’ll all see each other in Riyadh and we’ll discuss where things are with the market,” Ajumogobia told Dow Jones Newswires.

    The top leaders of the Organization of Petroleum Exporting Countries and their oil ministers will meet in the Saudi capital Riyadh for a summit in mid-November.

    Having spurred the latest leg of the current uptrend, no fresh news over Turkey’s parliamentary vote allowing its troops to pursue Kurdish rebels based in northern Iraq emerged Friday. But with the decision valid for one year, it ensures that an associated risk premium will remain priced into oil values in the absence of further developments.

    —By Nick Heath, Dow Jones Newswires

  3. RIG just opened at 115 after closing yesterday at nearly 117. Looks like a specialist dropped its open for some reason and erased yeaterday’s gains.

  5. RIG – its just the SLB pressure

    hal down $2 to 39 is unjustified

    ZTRADE: HAL Nov $40s for $1.20 to start for earnings on Monday.

  7. Thanks sam, SLB CEO was referring to N. American pressure pumping pricing. In my book, it’s a statement he has to make but one the brokers can spin with his next statement…demand is not going away. Int’l continues to look particularly strong as does their Western Geco division. People may also be a little disappointed that they announced progress on the share repo, about half done, and didn’t up/extend the program.

  12. 10:00 am EST

    Nymex Crude Down On Profit-Taking After Record $90.07

    By Elizabeth Landau
    Of DOW JONES NEWSWIRES

    NEW YORK — Crude oil futures were slightly lower Friday after hitting an all-time intraday high of $90.07 in early-morning trading, after the dollar hit a new low against the euro and as trade remained volatile ahead of November contract expiration.

    The front-month November light, sweet crude contract on the New York Mercantile Exchange was recently down 57 cents at $88.90 a barrel. Brent crude on the ICE futures exchange was down 67 cents to $83.81 a barrel.

    Front-month November reformulated gasoline blendstock, or RBOB, fell 2.46 cents to $2.1605 a gallon. November heating oil was 17 points higher at $2.3510 a gallon.

    Futures settled at an all-time record of $89.47 Thursday, supported by a trend lower in the dollar and tensions between Turkey and Iraqi Kurdistan.

    The euro hit a fresh all-time high above $1.4311 Friday morning, giving traders who use oil as a hedge against a weak dollar a reason to buy more. Oil is cheaper in other currencies when the dollar falls.

    Traders were taking profits ahead of expiration of the November contract Oct. 22, said Addison Armstrong, analyst at TFS Energy Futures. If the $88.38 level is broken, futures are likely to fall to yesterday’s low of $87.13, he predicted.

    “With profit-taking and expiration of the contract, I think today initially at least we’ll see more weakness, but you never know what the end of the day holds,” he said.

    Given the massive rallies in recent sessions, a fall of $1 or $2 would not be surprising, said Andy Lebow, senior vice president for energy futures at MF Global in New York.

    Recent price spikes have led some analysts to speculate that futures are soon headed to $100.

    “The next level is $100 that will be targeted, but I definitely don’t think it’s going there,” Lebow said.

    Tensions between Turkey and Iraqi rebels in northern Iraq continued to support prices, analysts say. The Turkish parliament earlier this week approved a potential military strike against the Kurdistan Workers’ Party, a decision that will hold for one year. Massoud Barzani, the president of the Kurdish region in northern Iraq, called on Turkey Friday to engage in direct talks with his autonomous regional government.

    Backwardation, the situation where the front-month contract trades higher than later months, has also been supporting prices recently, said Phil Flynn, senior market analyst for Alaron Trading Corp. in Chicago. In backwardation, there is less incentive to store oil.

    It appears that refineries and companies that use oil have been waiting until the last minute to buy more of it this month, boosting prices, he said.

    “If you need to secure supplies for November and you don’t have enough in storage, you buy it off the market,” he said.

    The market is due for a correction, and the best chance for that may be when the contract goes off the board on Monday, he said.

    —By Elizabeth Landau, Dow Jones Newswires

  13. Can’t believe this RIG trade.. been sitting on an almost 20% profit 3 times in a row now that got all wiped out the next morning, or into the afternoon… one volatile stock – if only I had a day trader mentality… investors seem really indecisive about this one since last earnings report. what are the current pros and cons? you seem to be a believer, Z, doubling down on it a second month in a row..

  18. pop – usally with an “H” it means Halted. I don’t see it halted today. It’s still trading down 8+%

  19. Check in from a coffee bar in wilmington, presto,

    Re rig: the main pros are low valuation and global long t strength in deeph2o mkt…cons the gsf merge adds a greater percent of JU rigs which is a med level concern

  21. Thats what I thought also, Sambone. Monday should be interesting. Screen still bleeding blue blood.

  25. Chinese oil stocks getting spanked
    PTR 238 down 12.20
    SNP 157.33 down 7.27
    CEO 183.25 down 9.79

  26. BRIEFING.COM] The major indices have extended their losses amid a dearth of buying interest. All 10 economic sectors are in negative territory, with energy (-2.5%) being the worst performer today.

    There is notable weakness in other key leadership areas, namely technology (-1.3%), financial (-1.2%) and industrials (-1.9%).

    The lack of buying interest stems from increased concerns about a further deterioration in credit quality and risks to the credit market. A flight to quality bid is evident in the Treasury market where buying interest has been notable at both the front-end and the back-end of the yield curve.

  31. CLR 22.38 down .56
    CHK 38.22 down .17
    TSO 52.04 down 1.04
    RIG 112.34 down 4.55
    VLO 68.75 down 2.47

  37. Is this time to move out of short term 3mos or less energy service names? HAL, NOV, FTI, OII, RIG?

  38. UPDATE: Schlumberger’s Grim 4Q US Outlook Hurts Sector Stocks

    Oct 19, 2007 11:13:27 (ET)

    HOUSTON (Dow Jones)–Oilfield service companies will see already-slipping rates in the U.S. accelerate their decline in the fourth quarter, said Schlumberger Ltd. (SLB) Chief Executive Andrew Gould.

    The company’s earnings beat Wall Street expectations on strong international growth, but the bleak outlook for the sector’s biggest market sent shares plunging across the board.

    “Pricing deterioration is still single-digit compared to last year, (but) I think it will accelerate slightly,” he said in a conference call with analysts. “Where the bottom is I really don’t know.”

    Drilling activity is up slightly from the year before, but a massive amount of new rigs and service capacity entered the market, a hangover from the years when natural gas prices and drilling were still rising. As a result, service companies have had trouble maintaining boom-era pricing, and earnings have started to suffer. Schlumberger’s earnings were up 35% in the third quarter from the same period in 2006, but analysts only saw the depressing results from North America, which makes up about 40% of the world market for oilfield services.

    “If (Schlumberger) isn’t safe, who is?” asked Dan Pickering of Tudor Pickering Energy in a note to clients. “North America really hurt (Schlumberger). Rest of the group is probably guilty until (they) prove themselves innocent.”

    The gloomy outlook hit Schlumberger’s shares, which were recently down 9.7% at $100.78, and dragged down the entire energy-services sector. Shares of Halliburton Co. (HAL) fell 6.2% to trade recently at $38.45, while Baker Hughes Inc. (BHI) fell 4.5%, BJ Services Co. (BJS) fell 3.4%, and Core Laboratories NV (CLB) was down 4%.

    Schlumberger earns only a quarter of its revenue from North America, compared with nearly one-half for most of the large international oilfield services companies. Halliburton and Weatherford International Ltd. (WFT) report earnings on Monday, while Baker Hughes reports on Oct. 26.

    “This result is not likely to allow for continued upside momentum,” Michael Urban, an analyst with Deutsche Bank, wrote in a note.

    Gould told analysts he still believes in long-term revenue growth from North America, but expected trouble in 2008 as rising capacity meets stable demand.

    Although Schlumberger’s third-quarter North American revenue dropped 3% year-on-year, and pre-tax operating margins were off 26.9% from the previous quarter, much of the drop came from storm activity in the Gulf of Mexico. Although no major hurricanes passed through the region, companies were forced to halt operations several times to prepare for potential storms.

    Schlumberger reported net income of $1.35 billion, or $1.09 a share, up from $999.8 million, or 81 cents a share, in the third quarter of 2006. The average analyst estimate was for earnings of $1.07 a share, according to Thomson Financial.

    -By Brian Baskin, Dow Jones Newswires; 713-547-9202; brian.baskin@dowjones.com

    (Mark Long contributed to this article)

    (END) Dow Jones Newswires

  39. Mkt (Overall) trying to come back somewhat. TRIN is only 1.15. Remember that this is lunch hour which is usally slow. DOW 13700 down 188. XOI 1476 down 25, XNG 548.91 down 7.65

  40. Dooch, don’t think one day is call to abandon service…brokers come to defense likely soon, still cheap and well liked sector

  45. I agree Zman, but I am spooked a bit. I made what I thopught were good calls this week (NOV Nov 85’s, FTI Jan 70’s, and Hal Jan 40’s) and all are getting smoked. I feel like I have especially caught a falling knife in NOV after last week’s Barron’s article

  50. Last check in.

    O.W. generally 2 to 3 times a week. I used to do it once a week but Scoop got on to me about that. I tell you when I do a trade in comments and in an email blast. The next day that trade is listed in Holdings watch.

    Trade: out the NBR $30 puts for a small loss (20%); last of the clean up expiry trades.

    Dooch – I hear ya, market jittery over all. I’m getting clocked in RIG due to SLB, which looks like a big over reaction. HAL’s cheapness is showing here although they too could say something spooky on Monday. today’s loss should dampen the impact. CHK and TLM cheapness showing here too. The CAM, FTi, Oii is a funtion of not being that cheap, great stories and long term but they’re due a pull back.

    Gotta go buy a camcorder battery and then be a driver for the afternoon. If you know I’m the guy at the Philly airport holding the handmade sign with the really sour look on his face.

  51. Out SLB Nov 100 puts for 225% gain, holding remainder for Monday AM margin calls. Paid for all the 95 SLB Nov puts and kepp 40% of the 100’s. Got all my initial $ back. Sold 1/2 of my HAL Nov puts for 150% gain. Will wait next week to see more certainty after closing positions on Monday. Agree that HAL is better value, can’t fight the trend.

  52. 2:04 pm EST

    Nymex Crude Down On Profit-Taking After Record $90.07

    By Elizabeth Landau
    Of DOW JONES NEWSWIRES

    [Dow Jones] Nymex crude falls more than $1 as the dollar has strengthened since hitting a new low against the euro earlier in the day and as traders take profits on still high prices, says Walter Zimmerman, vice president at United Energy. The dollar is “the horse that’s pulling the cart of crude oil,” says. “The fundamentals of energy don’t have a lot to do with it.” But given the recent record-breaking rally, the move downwards is not dramatic he says. “It would be premature to make it out to be more than end-of-week profit-taking.” he says. Nov crude -$1.20 at $88.27. (elizabeth.landau@dowjones.com)

  57. Z – Everything is at it’s lows for the day, XOM, etc. I just put my hedges (SKF, and SJH) back on for Monday. We’ll see.

  64. If we are heading towards a recession that changes the entire fundamental picture we’re building on… However, if there’s less demand for oil and that changes the crack spread, could that be spinned favorably somehow?

  68. Tini time, everybody have a good weekend. It will be interesting on Monday, to say the least.

  69. well, I’m down 45K for the day, if that wasn’t the bottom, guess I’ll be down some more.. hehe ! glad I can still laugh about it…

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