Tuesday – Volatility Abounds

Yesterday saw take no prisoners style selling, not just in energy but in tech

Commodity Watch:

  • Crude Oil: Opened below $94 on the Saudi increased production threat and ended down $1.70, at $94.62. This started a wave of selling that sent the energy sector tumbling and left the XOI, XNG and OIH down 3.7%, 4.0% and 5.6% respectively. Do I think the move is ridiculous over-reaction on a day when investors decided to jump back into financials? Yes. Does it matter what I think? Not really. I'm looking at longer dated options in some of the more beat up names and did some trades as the stocks fell yesterday. In the Novembers I'll be taking losses and a few profits on any strength today and tomorrow. Crude is trading off between $0.80 and $1.20 on reduced demand forecast by the IEA. 
  • IEA Cuts Demand Forecast. As usual, the International Energy Agency has overestimated global demand for oil and is now reducing its 4Q estimate by a whopping 570,000 bopd as well as it's 1Q08 number by 180,000 bopd. Instead of pointing fingers at OPEC to constantly raise production and at speculators who have "hyped" oil prices, maybe the IEA and EIA should spend more time taking their demand models back to formula because it from these models that statements regarding increasing tightness flows. I find the timing/direction of IEA's forecast revisions questionable ... remember that after calling for OPEC to increase production in October they chopped their 4Q demand numbers the day after OPEC met and hiked production.
  • Saudi Arabia says no production hike at this week's heads of state meeting. I think the story was a trial balloon to see if they could deflate prices without taking any action. Yesterday morning the Saudis and Kuwaitis were quick to say it was now time to talk hikes but by afternoon they all but dismissed such talk, at least for this week's meeting. They are playing the speculators and us by proxy like a fiddle.
  • Natural Gas: Opened higher, broke $8 and then sank back to close up less than 2 cents yesterday at $7.91 as the general market mood inspired nothing but selling after lunch time. Futures are trading back above $8 this morning as the market looks forward to the first draw of the season on Thursday.

Natural Gas Imports: Down another 0.4 Bcfgpd last week which exacerbate the period's colder weather in terms of a storage draw.

  • LNG Imports: 0.7 Bcfgpd inched up from last week's 0.6 reading but was still down 0.6 Bcfgpd from year ago levels.
  • Piped Imports: fell half a Bcf per day to 8.5 Bcfgpd, it's lowest level since July.
Putin Watch: He's not going anywhere. From AP ~ President Vladimir Putin said Tuesday that a convincing victory for the party he is leading in Dec. 2 parliamentary elections would give him the "moral right" to maintain strong influence in Russia after he steps down next year. If you live in eastern Europe get used to paying higher prices for your oil and natural gas. Despite near record oil production the Rodina has been keeping more of it at home and actually exported fewer barrels last month as new export duties took effect. As Russian production has outstripped even Saudi Arabia (however temporary that may be) Vlad has realized he doesn't need to join OPEC to turn the screws on the U.S.
Hugo Watch: Student protests are starting now over a planned December 2 constitutional referendum in which Chavez seeks, along with other powers, the right to run for president as many times as he wishes.  In other, unrelated, news (PBR) is pulling out of a large gas development project in Venezuela. 

Crack Spread Update: Still improving. Now 2 regions are doing being quarter to date than 4Q06.


Dry Bulk Shipping Rate Watch: Another Day, Another Bludgeoning Despite Inexpensive Valuations and Continually Improving Fundamentals

  • Capesize Spot Rates Hit All Time High Yesterday of $187,700 per day.
  • Panamax rates recovered from a slight dip last week to within 3% of its all time high.

DRYS vs RATES: Slump in Rates? No. Slump In Stock? Yes. 


For those of you that like to put numbers on charts the percentage changes from the beginning of October to present for Panamax and Capesize day rates and for the (DRYS) stock price are: up 19%, up 13%, and down 11% respectively. To be fair, if we take those numbers back to the beginning of the year we arrive at gains of 140%, 190%, and 365% respectively. On that basis DRYS sounds like it might have been ahead of itself. But consider also that it might have been behind and that it was running to catch up.  After all, while the day rates help to determine revenues, not all costs directly scale with higher revenue (in fact most don't) and so when you look at earnings this year versus last you see a four fold increase. 2008 earnings are currently estimated to rise another 37% to 115% depending on the analyst with the mean estimate calling for a 75% YoY gain.

DRYS Now trades at 5.2x 2008 estimated earnings of $16.24. Note that the high end of the range is the most recent estimate at $20.03 (4.2x forward multiple). The low end of the range remains nearly unchanged at $12.76 which drags the mean estimate down. In my book, recent charters at 90% of spot rates in Panamax and and nearly 80% for Capesize speak volumes about future demand levels. If they (the charterers) thought the spot rates are excessive, why are they locking at close to spot for the next year...unless they have to? So while we are all worried about the fall out from the sub-prime-idiots the Chinese are worried about how they are going to get their coal.


Holdings Watch: Expect to see me taking losses today on some November contracts.


  • (APC) December $60 Calls for $1.25. Last bid $1.05.
  • (DO) December $115 Calls for average $3.50. Last bid $2.75.
  • (COP) November $80 Calls for $1.55 (expires this week). Last bid $1.00.
  • (HAL) November $37.50 Calls for $0.50 (expires this week). Last bid $0.50.

Odds & Ends

Analyst Watch: (SLB) upped to add and (MDR) and (WFT) upgraded to buy at Calyon, (PXD) to outperform at Credit Suisse.


India's National Oil Company (ONGC) Sees Offshore Rig Shortage. Development of new gas finds of the east coast will be delayed for an unspecified period due to a lack of rigs. No small matter for the country as India's lust for oil and gas is second only to China's these days. Potentially good news for the likes of (PDE) , (RIG/GSF) and (ESV).     

91 Responses to “Tuesday – Volatility Abounds”

  1. 1
    Sambone Says:

    7:52 am EST

    Crude Falls On Weaker Demand Outlook

    By Nick Heath

    LONDON — Crude oil prices extended their losses during London trade Tuesday, after the International Energy Agency, or IEA, lowered its forecasts for global oil demand growth.

    Nymex light, sweet crude and ICE Brent futures both shed more than $1 in response to the IEA cutting its 2007 world oil demand growth forecast to 1.2% in its latest monthly oil market report, down from 1.5% in the previous report.

    The demand data added to ongoing uncertainty over a possible Organization of Petroleum exporting Countries output rise, and with prices moving further away from $100 a barrel and declines in global equity markets continuing to unsettle the crude market, sentiment appeared to be adopting a more bearish tone Tuesday.

    “Momentum is coming off, and the market is feeling it can come off quite a bit for the first time in a while,” a London-based broker said. “We haven’t finished this year and I’m quite sure it will try and go up again, and a lot will depend on equity markets and the dollar.

    “I’d still be buying the dips, but we’re seeing some changes going on,” he said.

    At 1224 GMT, the front-month December Brent contract on London’s ICE futures exchange was down $0.89 at $91.09 a barrel.

    The front-month December crude contract on the New York Mercantile Exchange was trading $1.02 lower at $93.60 a barrel.

    The ICE’s gasoil contract for December delivery was down $7.75 at $805.50 a metric ton, while Nymex gasoline for December delivery was down 225 points at 239.40 cents a gallon.

    In its monthly oil market report Tuesday, the IEA said there are signs high crude oil prices have started to depress oil demand in the world’s industrialized nations.

    Weaker-than-expected economic data in the U.S. and the former Soviet Union is also contributing to a downturn in demand, the IEA said in its closely watched report on oil demand and supply.

    “There are strong indications that high prices are depressing demand,” the agency said.

    The oil futures market responded swiftly to the news, falling to intraday lows, and the announcement also added to the confusion surrounding a potential OPEC production quota hike announcement before the end of the year.

    “The downward revisions in demand and on the call on OPEC will leave market participants in a greater guessing game as to whether a further increase in OPEC is likely or not,” said Olivier Jakob of Petromatrix.

    Saudi Arabia’s Oil Minister Ali Naimi said Tuesday OPEC will discuss output levels at the group’s December policy meeting in Abu Dhabi, adding the group “might increase” production.

    But he appeared to dampen speculation that the issue, and any output announcement, would be discussed at the organization’s summit meeting in Riyadh this coming weekend.

    “There is absolutely not going to be talk of a supply increase during the summit,” Naimi said.

    “OPEC has given the market some hope that there could be rise in output,” said a trader in London. “The probability at the moment of OPEC pushing up production is limited — but the difference from last week is that there could be a small chance, and that’s driven prices lower.”

    After Monday’s falls left crude prices further adrift from the psychologically important $100 a barrel mark, short term speculators Tuesday appeared to abandon their hopes of an imminent assault on three figures, opting to take profits instead.

    The expiry of December crude oil options Tuesday has been eyed recently as a potential catapult to $100 a barrel crude oil. But the potency of $100 call options — granting the option holder the right to buy at that price, and forcing the option seller to buy oil futures as a hedge as the strike price nears — appeared to have waned Tuesday morning as prices moved closer towards $90 a barrel rather than the elusive $100.

    “Options expire later today, and their likely failure to break the $100 mark, as some bulls were hoping for, could lead to further flat-price pressure,” said Edward Meir at MF Global. “All in all, crude prices should drift for a little while longer…we don’t expect the uptrend in crude resuming as soon — or as effortlessly — as it has in the past few weeks.”

    The crude market was also keeping an eye on the equity markets Tuesday, still sensitive to any indications of global economic health following comments last week from Federal Reserve Chairman Ben Bernanke that the U.S. economy should “noticeably” slow this quarter.

    European equities traded lower Tuesday, as sub-prime worries continued to pervade global bourses.

    With the market closely monitoring comments emerging from OPEC ministers in recent days, geopolitical concerns have moved slightly out of focus in recent sessions.

    But news of Turkish military activity Tuesday reminded the crude markets of simmering tensions in the region. Turkish warplanes struck a suspected Kurdish rebel hideout in Iraq early Tuesday, private Dogan news agency reported, citing Iraqi Kurdish officials, while Iraqi officials reported Turkish helicopter gunships attacked villages inside Iraq on Tuesday.

    The reported attacks came after Turkish Prime Minister Recep Tayyip Erdogan told his party members late Monday the date of an anticipated cross-border operation was “nearing,” a prominent legislator said Tuesday.

    While a military conflict in the region is likely to have limited impact on oil production, oil markets remain sensitive to the possibility of wider regional instability stemming from any escalation in tensions.

    —By Nick Heath, Dow Jones Newswires

  2. 2
    zman Says:

    Thanks, Sam….looks like people are starting to bottom fish energy. Worst oily performers yesterday like APA are doing the best this am.

    EXM halted up $4

  3. 3
    zman Says:

    DRYS locks in 2 of its Capesize vessels for $139 and $145kpd, and one of its Panamax’ for $82.5 kpd, all for 12 months.

  4. 4
    Sambone Says:

    US dollar was up yesterday, but now is decling again. Should help oil.

  5. 5
    Sambone Says:

    9:45 am EST

    Crude Drops More Than $1 On IEA Demand Forecast

    By Gregory Meyer

    CHICAGO — Crude oil futures edged further into negative territory Tuesday after the International Energy Agency projected slower world oil demand growth, and a key OPEC member oil minister batted down concerns about tightness in supply.

    In its latest monthly oil market report, the Paris-based International Energy Agency cut its global oil demand growth forecast for this year and 2008, in part blaming soaring prices.

    “It’s obviously the catalyst for the follow through from yesterday,” when the price of Nymex front-month crude futures sank $1.70 to settle at $94.62 a barrel, said John Kilduff, an energy analyst at MF Global in New York.

    The front-month December light, sweet crude contract on the New York Mercantile Exchange was recently down $1.14, or 1.2%, at $93.48 a barrel. Brent crude on the ICE futures exchange fell $1.18 to $90.80 a barrel.

    Also burdening futures prices were comments from Saudi Arabia’s oil minister Ali Naimi that the kingdom didn’t foresee a recession in the U.S. and that the world economy remained resilient. Naimi added he was skeptical about claims of worsening tightness in the world’s oil markets given that oil stockpiles are trending around their five-year average levels.

    Asked about the impact of oil prices close to $100 a barrel on the global economy, Naimi said, “The world economy is resilient and continues to be resilient.”

    The minister was speaking in Riyadh ahead of a summit meeting of heads of state from the Organization of Petroleum Exporting Countries at the weekend.

    The IEA report also noted that OPEC crude supply increased in October by 410,000 barrels a day to 31.2 million barrels a day.

    “Although the longer term supply situation is unresolved, this month’s increase of OPEC production of 500,000 barrels a day and the expected increase in non-OPEC supply in early 2008 should reassure the market that low inventory levels (52.8 days) could be stabilized,” Credit Suisse analysts wrote in a note to clients.

    The market’s reaction drove crude prices further away from the psychologically significant $100 mark. With prices now more than $6 below triple digits, it appeared unlikely that a large number of outstanding $100 December call options that expire Tuesday would spur last-minute buying. The options give the holder the right, but not the obligation, to buy crude futures at that price before the end of the day.

    Front-month December reformulated gasoline blendstock, or RBOB, fell 3.45 cents, or 1.4%, to $2.3820 a gallon. December heating oil fell 2.26 cents, or 0.9%, to $2.5595 a gallon.

    —By Gregory Meyer, Dow Jones Newswires

  6. 6
    Denise Says:

    Good morning,
    Reading the amount of in the money Nov spy and spx puts is way over calls-we could have a good day or two.
    After that?

  7. 7
    Denise Says:

    Hmmmm… my short guru just posted from Europe-
    said a chance today could be one DJ’s
    10 largest gain days-his tip off financials yesterday
    (he is also usually early)

  8. 8
    zman Says:

    Thanks D …could use a green day or too for November salvage.

  9. 9
    apbd Says:

    Hi All:
    Am long some TSO. Have to make a decision on tender. It seems like a no-brainer. Any reason NOT to tender?

  10. 10
    Denise Says:

    Another possible good tell-you should have read Cramers 7pm post-said don’t buy! don’t deploy capital yet-he usually can call a bottom by going bearish!

  11. 11
    zman Says:

    Oil falling out of bed now, down $1.50 at $93.10. $94 was key support yesterday, 93 is today.

  12. 12
    zman Says:

    APBD – Re TSO Tender. How do you not take that deal? I guess it depends on what your time horizon is but if you want a better price you’ll have to wait until next summer…of course, that’s not that long. But right now that puts the stock at a pretty hefty premium to VLo (20% on the fwd eps multiple) which I just don’t think is warranted.

  13. 13
    TTupp Says:

    re india watch: dont forget my new girlfriend DO.

  14. 14
    zman Says:

    oil = down $2.30. They are flushing an amazing amount of volume now. I think it bounces by the close.

    Stocks pulled back but look like they want to move higher if they can get a break from crude.

    T – I don’t know how deep the play goes and am not sure DO is in the area but it might be.

  15. 15
    zman Says:

    EXM reports at the bell.

    Consensus, $1.07, $45mm Rev.

  16. 16
    TTupp Says:

    not many posters lol

  17. 17
    TTupp Says:

    re:exm, this will be interesting

  18. 18
    zman Says:

    Looks like people decided enough was enough in the bulk shipping sell off today. DRYS and EXM up 10 and 15% respectively…they have a long way to go.

    Houston Financial Forum presentations (Nov 13 to 15)…lots of small caps telling their stories plus some interesting service co’s like Core Labs.


    T – re 16…I’m not LOL

    Nicki tells me inventories are delayed until Thursday due to Veterans Day.

  19. 19
    Sambone Says:

    Oil – 1st support is 86.45, 2nd support is 81.10

  20. 20
    bill Says:

    With coal prices estimated to go up 30 % chinese are trying to import as much as they can before the rise.

    The shipping rates are expected to drop off in 5 or 6 months

  21. 21
    bill Says:

    I heard it cost more to ship the coal than what the cost of the coal is.

  22. 22
    zman Says:

    Bill- I’ve read that a couple of places. Sounds exaggerated unless the coal is very cheap or the ship is exceedingly slow that would not be the case. Still, if you gotta have it, and they do, you gotta have it.

  23. 23
    zman Says:

    SUxs trade at BE, LOL. I entered that trade on 10/17 when oil was trading at $86. Nice hedge given that it is flat and oil is “backing off to $92” I have the DEC 95s and I’m going to hold them only a little bit longer.

  24. 24
    zman Says:

    The Core Labs presentation which you can get to via the link on #18 is a good overview of reservoir management.

    Core looks at EVERYONE’s reservoirs (everyone big at least) and they just said peak oil in 2008. Talking about slides in N. Sea, Cantarell in Mexico, and they just said 0 incremental barrels added in last 3 years to spare capacity in the middle east. These are not new except for the fact that they think we are at peak now, not next year like they previously thought. This presentation is well worth your attention.

  25. 25
    aitrader Says:

    Z – can’t find the presentation, do you have a direct link?

  26. 26
    zman Says:

    Core Barrel: used to look at 90 to 100 feet of cores per well. Now they look at multi thousand foot long cores.

    Lots of cores being cut. They will look at 52 miles of logs in Canada this year.

    4 to 5 miles of gas shale logs this year.

    Activity is way up.

    These guys help people understand what they are drilling into and demand is up since people are drilling into more and more complex reservoirs.

    They have moved from touching a well at the time of the core sample and at the time of a gas sample. They make money at each “touch”.

    With the Barnett Shales things have changed with the multi-stage fracs and multi-stage simu fracs (also good for tight gas sands)
    Now they touch the well at least five times now (meaning they get paid 5 times instead of two).

    this stock fell from 150 to 130 in the last 2 days after a long march up … it’s always been a good one and I’ve had that feeling of missing it for a long time.

  27. 27
    zman Says:



    if you go there and click the link at the top of the page you can then register and then go to the schedule. A direct link won’t work as you have to register.

    Oil below $92, down $2.90…stocks are holding up well which means they are looking through the trough caused by futures option expiration today.

  28. 28
    Sambone Says:

    11:17 am EST

    Nymex Crude Slumps On IEA Report, Options Trading


    CHICAGO — Crude oil futures plunged more than $2 a barrel Tuesday in the face of projections of slower world oil demand growth and the expiration of December crude options at the end of the trading session.

    In its latest monthly oil market report, the Paris-based International Energy Agency cut its global oil demand growth forecast for this year and 2008, in part blaming soaring prices.

    Options to buy or sell December crude also expire Tuesday, stoking volatility.

    “The IEA report started the sell-off, but when you have options expiration, you can expect big swings through strike prices,” which are levels where there are options to buy or sell futures, said Tom Bentz, an analyst at brokerage BNP Paribas Futures in New York. Prices sold off quickly when they slipped through $93.50 a barrel, falling as low $92.18 with 12 minutes. A big part of the moves is hedging by sellers of options to cover trades that are now losing money, he said.

    The front-month December light, sweet crude contract on the New York Mercantile Exchange was recently down $2.29, or 2.4%, at $92.33 a barrel, after falling as low as $92.05, its lowest intraday price since Nov. 1. Brent crude on the ICE futures exchange fell $2.36 to $89.62 a barrel.

    “I wouldn’t be surprised if we test $90 today; there is a lot of open interest in puts at that level” that could drive prices lower, Bentz said. Put options give the right, but not the obligation, to sell crude oil futures at a certain level by a certain date.

    The IEA, which is the energy watchdog for Organization for Economic Cooperation and Development nations, cut its 2007 world oil demand growth forecast to 1.2% from 1.5% in the previous report. The IEA also cut its oil demand growth forecast for next year to 2.3% from 2.4%.

    Also burdening futures prices were comments from Saudi Arabia’s oil minister Ali Naimi that the kingdom didn’t foresee a recession in the U.S. and that the world economy remained resilient. Naimi added he was skeptical about claims of worsening tightness in the world’s oil markets given that oil stockpiles are trending around their five-year average levels.

    “I believe the latest inventory numbers…are in the middle of the five-year average,” he said. “I don’t see the tightness that pessimists are talking about.”

    Asked about the impact of oil prices close to $100 a barrel on the global economy, Naimi said, “The world economy is resilient and continues to be resilient.”

    The minister was speaking in Riyadh ahead of a summit meeting of heads of state from the Organization of Petroleum Exporting Countries over the weekend.

    Peter Donovan, a vice president at Vantage Trading in New York, said the comments helped soften crude prices.

    The Saudis “are concerned about oil prices,” he said. “They don’t want to see them go straight up. The further you get away from $100, the more people are slapped in the face with a dose of reality that this doesn’t go straight up.”

    The market’s reaction drove crude prices further away from the psychologically significant $100 mark. With prices now more than $7 below triple digits, it appeared unlikely that a large number of outstanding $100 December call options that expire Tuesday would spur last-minute buying. The options give the holder the right, but not the obligation, to buy crude futures at that price before the end of the day.

    Front-month December reformulated gasoline blendstock, or RBOB, fell 6.25 cents, or 2.6% to $2.3540 a gallon. December heating oil fell 5.47 cents, or 2.1%, to $2.5274 a gallon.

    (Matt Chambers contributed to this article.)

    —By Gregory Meyer, Dow Jones Newswires

  29. 29
    zman Says:

    CLB is not cheap but it has not been cheap for quite some time,

    Guess everything is ok now, lol, in the broader market…dow up 172.

    From the story above exactly how does this sentence make sense:

    Also burdening futures prices were comments from Saudi Arabia’s oil minister Ali Naimi that the kingdom didn’t foresee a recession in the U.S. and that the world economy remained resilient. Naimi added he was skeptical about claims of worsening tightness in the world’s oil markets given that oil stockpiles are trending around their five-year average levels.

  30. 30
    zman Says:

    Suddenly DRYS and EXM are bargains.

  31. 31
    Sambone Says:

    GS = Interesting that they are short on subprime and long on their 50 billion of level 3 assets. “We are confident that we know how to evaluate these assets” CEO Lloyd Blankfein. Stock up 7% on this upbeat news as are the other financials. Wonder if it’s true?

  32. 32
    zman Says:

    I’m only confident these guys know how to evaluate their exit packages.

    XEC presentation sort of interesting. Cheap E&P turnaround story.

    Oil down $3 at $91.60

  33. 33
    zman Says:

    XEC has a deep woodford play starting…results soon. They have drilled the only two wells as of yet in the play.

    Might start doing a little work here.

  34. 34

    Did I mention that VMC was a good buy below $80?

    Starting to see some volume buy trades being picked off from time to time.


  35. 35
    zman Says:

    Q – Nice one…been busy getting my head handed to me with lower oil.

  36. 36
    ram Says:

    Re #16. Maybe some of us are stunned by the recent activity and also that this Friday is expiry – just maybe.

  37. 37
    zman Says:

    Ram – right, I agree. Just didn’t see the humor in it, that’s all. It’s not just energy when you look around lots of things got blasted, like the GOOG ($100 in 4 days) and AAPL, and then there was shipping and the solars etc, etc, etc.

    Oil breaking $91

  38. 38
    zman Says:

    Q – VMC looks pretty cheap, what are you long there now, the common or the options?

  39. 39
    zman Says:

    back in 30

  40. 40
    Sambone Says:

    Tha market don’t likum COP again today. Guess the crowd is exiting. Soon to buy. Not today, but soon.

  41. 41
    Sambone Says:

    When will RIG start trading “When issued”?

  42. 42
    zman Says:

    40 true.
    41 sometime between now and the end of the year. Deal not done yet.

  43. 43
    ram Says:

    One week certain energy stocks tie themselves to the overall market and the next week they decide to tie themselves to the raw material.

  44. 44
    zman Says:

    Ram – agreed, gets a little tiring at times.

    Interview over whether oil prices have peaked or not with oil down $3 today.

    John Kilduff (perma bull) ” I think we are seeing evidence of demand destruction and prices may have peaked.

    Other guest: man, oil traders are the ultimated fair weather fans… a couple of down days and its all over.

    JK: I think oil will certainly go higher, $100 before year end. Get some prozac dude.

  45. 45
    bill Says:

    go to dryships.com

    for goldman sach presentation

    click on presentations

    guiding 1 billion cash flow in 2008

  46. 46
    zman Says:

    Oil trying to stay above 91

    Couple of little stocks presenting at the Houston Energy Financial Forum that I own:

    SCU at 3:40 est
    END at 4:05 est

  47. 47
    zman Says:

    that number was $900 million just two weeks ago, latest fixings giving them confidence and the stock was a 115 then.

  48. 48
    Sambone Says:

    Uncle Phil – The waffle man


  49. 49
    zman Says:

    Across the board buying by SD’s management team from Friday at the IPO price.

    Oil down $4 at 90.66

    PF – I actually agree with about half his stuff today, lol. I have not seen any sign of demand destruction here though and I think it’s easy to say you see it when oil is fall and not when oil is rising. The numbers to date just don’t bear out what he and others have started saying in the last 48 hours as oil has fallen (and what they will forget as soon as oil starts rising again). As to the IEA, they habitually over estimate demand so there is no surprise in them cutting their numbers.

    The size of the cut was a bit big which makes me think they are trying to manipulate prices by scaring the speculators since begging OPEC for more volumes has not yet worked.

    Stocks appear to be torn between following the broad market up and oil down $4. After today, the impetus to sell should ease a bit but we may see one big drop into the high 80s before the buyers decide its time to run it up again.

  50. 50
    ram Says:

    Are any geothermal plays worth looking at for long term?

  51. 51
    zman Says:

    Ram: I’ve got a list but I’m not up to speed on them.

    I know Dr Phil likes BTJ.

    The list is BTJ, CGV, DWSN, IO, MIND and OYOG.

    Say SLB just bought a european one yesterday, not one of those. I plan to do some work there but so no rush as they are not heavily traded, as a group, on the option side.

    Amazing oil stock recovery underway.

  52. 52
    zman Says:

    RAM – sorry those are seismic plays…was thinking about them and transposed the thought.

    Biggest geothermal is CVX as you probably know from the commercials. I’ll look into some smaller ones where you might actually be able to get a little leverage on it. There are several small privates but I’m not sure about a public one, will check.

  53. 53
    zman Says:

    Bill, if you are around…are you still buying qmar and do you have any thoughts on EXM with earnings tonight. I am considering a leap 80 or 90 strike in April there abouts. Given a similar move tomorrow as today you could be looking at a nice 50% one day gain.

  54. 54
    ram Says:

    Thanks. I felt uncomfortable asking the same question twice.

  55. 55
    zman Says:

    only because I was being obtuse? ask it 10 times if you need to. hopefully I’ll actually read it and pay attention and answer by the 7th or 8th

  56. 56
    kiaora Says:

    Forgive my ignorance: but what would the difference be between an April call or leap? I thought leaps were for much longer time frames.

  57. 57
    ram Says:

    Obtuse….. Shawshank redemption?

  58. 58
    zman Says:

    kiaora – they are but around here anything longer than the front or next month I refe to as a leap to easily distinguish it.

  59. 59
    Sambone Says:

    1:59 pm EST

    Nymex Crude Drops To $90.30/Barrel

    From Market Talk:
    1851 GMT [Dow Jones] Nymex crude touches intraday low of $90.30 after International Energy Agency revises its global oil demand forecast downward. “If the market can stage a decisive close below $91.65/bbl the case for $100 crude oil in the near term will be seriously weakened,” says Walter Zimmermann, a technical analyst at ICAP/United. Nymex Dec crude -$4.25 at $90.37/bbl. (greg.meyer@dowjones.com)

  60. 60
    Sambone Says:

    inferiority complex = http://www.marketwatch.com/news/story/jim-cramer-defends-show-audience/story.aspx?guid=%7B37938F1C%2D6436%2D40C2%2DA214%2D469021D73E4C%7D&dist=TNMostRead

  61. 61
    Nicky Says:

    Afternoon all.

    Broader market looks to be making a move back to 1476 – 1489 – could take a couple of days.

    Then it ‘looks’ as if we need another leg down before a more decent rally.

    John Kilduff still sees oil over 100 short term i see. PF says we now won’t see it this year!

    Personally I see it bouncing tomorrow and then falling off a cliff but what do I know!

  62. 62
    TTupp Says:

    isnt leap more than 9 months? thats when you qualify for less margin

  63. 63
    zman Says:

    now that’s more like it…even COP going green.

  64. 64
    zman Says:

    Nicky – you know plenty. I agree with you re a bounce tomorrow…no data and probably no comments from int’l bodies slamming demand so you should see dip buyers which is what the energy stocks are telling you as they join the broad rally today.

  65. 65
    zman Says:

    T – I should have called it a Zeap.

    Drybulk 10 to 17% gains today…what a difference a day makes.

    Sam – I wonder if JC ever reads my show?

  66. 66
    zman Says:

    shawshank = great movie.

    another volatile day in oil land and still crack spreads improved, thanks to the lessor participation of HO in the slide.

  67. 67
    zman Says:

    OIH almost filled a gap from the end of August. It was pretty critical that it held the low today as that (177) was good support and the last down to 165. At 183 and change it seems to be matching up and exceeding the market’s gains now.

  68. 68
    Sambone Says:

    Z – Nope because he has to pay and he knows more, ya know! LOL

  69. 69
    zman Says:

    I dunno Sam….his script has been right out of my playbook on SLB vs HAL (after I spanked him the first time) and then RIG and OII.

  70. 70
    zman Says:

    DO went from dohh to whoa in about an hour.

    TSO acting like they are going to recommend shareholders take the deal.

    VLO, FTO benefiting (WNR too far away to matter).

    Sam you called the low on COP

  71. 71
    TTupp Says:

    is their some news leakage over there from TSO? whats going on in this sub-sector?

  72. 72
    zman Says:

    T – I see nothing anywhere, spec on the msg boards and yes I do go there from time to time is that they are recommending the deal. If you do a google search for Tricenda and Tesoro you only get some obscure reference on this site, lol.

  73. 73


    Sorry, hadn’t visited for a few hours.

    I’ve been playing QQQQ calls at the money with a 10% stop. 1 SD Bollinger Bands, 3 min volume bars. It’s been fun to play a 100 contracts today.

    As to VMC, I’d suggest waiting until the party gets crashed by bad news and you find VMC below 80 again. Then buy out a couple of months.

    It’ll fluctuate between 75-85 for a while… perfect opportunity to sell some short calls against longer position.



  74. 74
    Sambone Says:

    RIG – I sent an E-mail on the “when issued” and here is their response.

    No date has been set for the close yet nor has a record date been set, however we believe the close may occur before the end of the year.

    Investor Relations & Communications
    Transocean Offshore Deepwater Drilling Inc.

  75. 75
    zman Says:

    Cat looks out of the bag on the TSO/Tricenda deal

    Q – hey thanks for the response on the VMC…will watch a little more closely now. Still watching your WLT which has had a huge run.

    Sambone: yeah that’s what I’ve saying, still a foreign court approval needed (Cayman) and some other stuff they didn’t go into on the 3Q CC. Could be anytime in next 2 months.

  76. 76
    zman Says:

    Q – you ask from time to time on a end of options week quick play. The VLO $70 calls for $1.30 or even the 72.50s for .30 to .35 are not as risky as they look.

  77. 77
    TTupp Says:

    took 100 tso nov 60’s

  78. 78
    zman Says:

    gutsy move Mav! I like the VLO’s simply because they are cheaper and will fly up if it happens but not drop as much if it does not.

  79. 79
    rkbos Says:

    Z – any play for tonight’s EXM eps ?

  80. 80

    Okay, Z.

    What the heck, VLO’s been strong today.

    I just bought 20 @ $0.30, trailing stop .10 off the last

    let’s see how it goes!

  81. 81
    TTupp Says:

    took them mid-day too, to add to the loosing dec 72.5’s, not as balzy as the tso’s tho. but if i wake up tomorrow and they are bidding $5 itm thats a nice risk reward ratio, i got filled at an average of 0.70$

  82. 82
    zman Says:

    Re EXM: not willing to double down now. Will hold my near worthless way out of the money calls (which might be in the money given two more days like this) as I don’t have the confidence in them I had in DRYS. Also, holding the DRYS $125s which should benefit in case EXM knocks it out of the park.

    Q – you and T should get together for a beer…cut from the same wild man cloth. Good luck to you (I feel like a blackjack dealer when I say that)

  83. 83
    zman Says:

    Hopefully we get Nicki’s oil bounce in the morning 🙂

  84. 84
    zman Says:

    TSO speaking Thursday afternoon at the BofA energy conference.

    Will have a full schedule in tomorrow’s post with any luck.

  85. 85
    aitrader Says:

    EXM reporting 96 cents – looks like a miss, estimates were 1.07.

  86. 86
    zman Says:

    EXM: looks like a top line missed by a couple of million and the bottom line is 1.00 (after backing in an unrealized after tax low). Still a brick and the stock is giving back all of today’s gains. I doubt there is anything in the text that can salvage it. DRYS is off $4 which seems kind of stupid at this point given their revised guidance today and the fact that they didn’t miss. I would have expected it to benefit with a beat at EXM so I guess I( can’t fault the knee jerk sell. The EXM, though a miss still represented a doubling of income yada, yada, yada and no once will care for a bit.

  87. 87
    TTupp Says:

    re 85: look for that stock to give back todays gains tomorrow……

  88. 88
    rkpagadala Says:

    Z – can you please update your holding.. I wanted to buy some of your holdings. Now I am digging through the old posts.

  89. 89
    zman Says:

    rk – done.

  90. 90
    zman Says:

    rk – about half of the positions in the novembers have a snowballs chance in hell of coming out alive if we get a bounce in crude this week. Of the list, I fundamentally have faith in all but WNR (and maybe not EXM) for a recovery to higher levels and will be taking up or adding to positions in many of these names next week or the week after in Dec and January strikes.

    Highest degree of confidence in continued fundamental performance goes to CHK, NFX, APC, HAL, HK (PQ not on list but should be)

    while the highest potential for a jump in the stock (which also brings a great degree of volatility and the possibility of big down swings on any given day) goes to DO, RIG, OII, and DRYS.

    Finally the refiners are a special situation right now with VLO the cheap “best in class” name, TSO in the process of being priced by a deal, and FTO who is outperforming during tough times.

    hope that helps…as you can see November won’t be my best month but its not over until its over.

  91. 91
    aitrader Says:

    DSX reports 79 cents EPS vs. expectations of 45 cents – my scud DSX Nov 40’s might be worth something afterall with a major market rally today.

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