Crude and the energy stocks will hinge on the words of OPEC like bond traders deciphering a Fed statement. I'll be
Commodity Watch
- Crude Oil: Closed down $0.99 to $88.32 in roller coaster style trading.
- OPEC Watch: still waiting on decision. Will post in comments.
- Enbridge reopens last of damaged pipes.
- Natural Gas: yesterday down $0.06 to $7.155.
Gas Thoughts from yesterday's comments (Illustrated Version)
Yesterday Dave J wrote:
I manage a 50 story office building in Houston and buy the electricity for it, which is based on the NG price. I like this site because it helps give me a feel for whats going on day to day. I am close to buying the rest of 2008, but interested what the opinions on how low this NG price can go. Thanx
My somewhat long winded response follows (for those of you who don't always read the comment section) augmented with pictures! I've put any new text in [] for clarity. Also, I've inserted the graphs as thumbnails to conserve space but clicking anywhere on them will open them in their own window.
Hi Dave…it may take me a few comments to address that so bear with me.
As you know storage is at record levels not seen since 1990, besting last year’s levels which were well above anything recent.
click to enlarge. 
click to enlarge.
Primary driver of the surplus has been the shale plays. Barnett leads the way but Fayetteville (AR) and Woodford (OK) gold rush mentality have yielded record rig rate for Arkansas (just topped 50 rigs and that’s up from 2 or 3 in years past) and 200 in Oklahoma which is a 20 year record and I guarantee it is gas and not oil as it was when last the Okies saw that many rigs turning to the right. Colorado, New Mexico and obviously Texas are drilling balls to the wall right now.
click to enlarge.Also we just added nearly a Bcfgpd from the Independence Hub in the GOMex which should yield a small bump in production even after rest of region declines.
This chart of the GOMex illustrates the long-term problem faced there:
So the production side is bearish for NG right now and you’ve got a bit of drilled but not completed wells in the shales waiting higher prices before their operators hook them up. Many of these will get added by year end so the operators can report higher exit rates for 2007 relative to their 4Q numbers. Helps give them a jump on 2008 % guidance targets since they get to start from a lower base.
[Total Dry Gas Production Is Up 2.0 Bcfgpd YoY Through August (most recent data available). Despite a near 20 year high for the U.S. gas rig count, U.S. dry gas production is not exactly exploding. Much of the reason for this is the high decline rate nature of the type of well behind the surge: the shale well. Sure you get flush production of 1 to 3 MMcfgpd as a ballpark range and in rare cases like some recent horizontals drilled by (NFX), but initial declines trim volumes by half withing 3 to 6 months in most cases. So you have to keep drilling them to keep production growing. There's also the matter of increasing extraction of natural gas liquids (ethane, propane, butane and other higher hydrocarbons heavier than the methane we use to heat homes and generate electricity) which reduces available gas for storage as these products are stripped from the wet gas stream. Extraction losses have been on the rise due to the higher value of liquid BTUs relative to gas prices.]
First Texas, Which Accounts For A Third of Lower 48 Natural Gas Production...
click to enlarge....And Then The Complete Lower 48 Production Picture.
click to enlargeOn the imports side [of supply]:
[Imports from] Canada is a wildcard. Drilling has fallen off a cliff due to low prices and so far this has not had a huge impact on imports to the U.S. I would say that won’t continue, especially with rising demand from Albertan oil sands producers (they use the gas to cook the oil out of the rock it’s trapped in). I watch the numbers weekly and a dip below 8 Bcfgpd will get noticed by gas traders. We’re running 8.2 Bcfgpd now.
click to enlargeFurthermore, record LNG shipments this year helped boost that gas storage surplus. Here there has been a change in the last two months as now LNG shipments have fallen to very low levels. This started with a nuclear reactor problem in Japan which forced them to import more gas a couple of months ago…since then there has been a gradual exodus of LNG tankers from the Atlantic basin to the east taking gas from Qatar and Russia and even from closer places like Trinidad to Asia. While imports hit 3.6 Bcfgpd last summer, they have trailed off to 0.6 Bcfgpd at present which is just under half of year ago imports. I don’t see them returning to this market soon in a significant way given a colder than normal forecast for Europe (which also imports gas at times) and the ongoing demand from Asia…Not unless NG tops $8 or even $8.50 for an extended period this winter. So this factor is slightly supportive of gas.
click to enlargeBut the biggest factor is weather. The Producing region (hello Barnnet shale) has continued to inject gas very late into the season (normally we’d be pulling gas from storage in all three gas regions this time of year). I was listening to Tom Ward (ex CHK president) now running (SD) this morning and he plainly said “we need some winter weather or we see lower gas prices 08 relative to 07″ and then “I’m amazed how much gas people are getting out of the shales” …you can see what he thinks about prices. I’d also point out that it looks like they hedged ALL of their first 3Qs of 2008 gas production with an average over $8…you don’t do that if you think gas is going markedly higher soon. You would do it if you thought the 12 month strip was in jeopardy of falling.
As to a level. $7 is key. Fail to hold that and I’d bet we take a quick trip to $6.50 or maybe a little lower (again, two weeks of warm weather would do it) and then the curtailment press releases come and we waffle around until a big arctic blast blows in and you’ll see spikes into the $8s again. But the storage level not really coming off with cold last week is concerning. It may have been the steep contango…it may have been higher production. This Thursday will be more telling as we don’t shift contracts forward so the contango is less of an issue and it is again the coldest weather we’ve seen this season. Need to see a big draw or gas will test $7.
Hope that helps. Given my gassy weighting right now I hope I’m wrong…but my names are cheap and not discounting $6 let alone $7 gas.
EIA Report Preview
Z Comments: Not sure this report will get noticed on an OPEC meeting day. Crude imports unlikely to be as high this week given the Enbridge outage last week and more reports of fog in the Houston Ship Channel and the fact that imports were near record levels last week and those kind of numbers rarely come in twos. We also had some refinery issues last week so its possible utilization could slip a bit this week and with it demand for crude but again, I don't think this will have much bearing given the OPEC announcement.
Stocks of Interest Today:
- (SD) good conference call yesterday but no guidance until March for 2008 is a little lame in my book. Doesn't hurt my opinion of the stock and I still think analyst recommendations will be stellar here either today or tomorrow.
- (OII) got away from me on a mini-breakout. Continue to watch
- (BTU) climbing away as well and it's decoupling from North American natural gas prices is interesting. Need to get back in but will wait for a bad day in the group. That's never more than a day or two away these days.
- (CLB)...still interested, still waiting for the stock to see if it can regain some direction.
- (NFX) got little follow through after announcing those new monster wells in the Woodford. This market has the attention span of a gnat and this is one that the analysts and bankers don't see a near term deal from and therefore the focus is elsewhere. Meanwhile R/P expands, production leaps, costs fall and reserves are set for low cost big percentage increase as they get to play the drill up the resource play, book the surrounding PUDs game. Hmmmm.
New and Improved Tanker Multiples added to the renamed Transports tab at upper left. Many thanks to Bill for helping me put together a list of convenient links to track rates and news on both the dry bulks and tankers.
Key Tanker Takeaways:
- I'm still coming up to speed having taken a longer hiatus from trading these names
- In general rates have been falling as have estimates. When you look at 2008 earnings, often they are expected to be down from 2007.
- Many of the names trade on yield and that's not yet incorporated into my thinking...a little more excel work to go there.
- Some of the companies, like (FRO), have been supporting their dividends by selling off tankers during these tough rate times. Obviously you can only do that for so long.
- I think when the names "come back" or "turn the corner", the liquid big dogs and pure plays run up first
- Higher OPEC production is good for the VLCC (very large crude carrier) endowed. TK, FRO all the way down to little VLCCF which has a couple of massive Capesize drybulk ships on its roster.
- Oil inventories in OECD countries are below average and in line with the five year average but 9% off year ago levels in the world's #1 consumer. Replenishment will be key
- All of these are optionable save (ATB) and (RAMS)
- Bill likes TOPT as they diversify into the realm of drybulks
- Part of the weakness in rates has been a boom in the global tanker inventory. Recent announcements that 60 vessels will be converted to drybulk service over 2008-09 will help to alleviate this glut.
- If I felt compelled to buy tanker calls today (say OPEC boosts ouput by a million bopd) I'd have to look at TK, FRO, and OSG - all are volatile and have liquid options trading, and have had recent pullbacks as people start to believe OPEC may do nothing. VLCCF and TOPT appear interesting among the minnow players.
- If OPEC did nothing I think the names with vulnerable looking charts will see the worst damage... (SFL)
- TGP and GLNG are slightly different animals in that they are weighted towards the gas markets. Need to do a little more work here on how many vessels are under construction but the amount of LNG liquifaction and regassification capacity is set to skyrocket. We're a cold winter away from seeing rates for these guys explode.
Odds & Ends
Analyst Watch: I'll add these in comments.
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5:53 am EST
Nymex Above $90/Bbl On OPEC Decision
By Nick Heath
Of DOW JONES NEWSWIRES
LONDON — Crude oil futures leapt more than $2 Wednesday on news OPEC will leave its current production quotas unchanged.
Nymex light, sweet crude futures broke back above $90 a barrel in the process, as lingering market hopes of a production increase, and lower prices, were scotched.
OPEC said it would hold current oil production steady, but added that it will meet in January as it surveys global economic growth and energy demand.
“No action from OPEC is definitely bullish,” a London-based trader said. “If they aren’t meeting again until the end of January, any action then will be too late for the northern hemisphere winter I would think.”
At 1044 GMT, the front-month January Brent contract on London’s ICE futures exchange was up $2.04 at $91.57 a barrel.
The front-month January light, sweet, crude contract on the New York Mercantile Exchange was trading $1.93 higher at $90.25 a barrel.
The ICE’s gasoil contract for December delivery was up $22 at $809.75 a metric ton, while Nymex gasoline for January delivery was up 523 points at 230.40 cents a gallon.
—By Nick Heath, Dow Jones Newswires
8:02 am EST
Nymex Above $90/Bbl On OPEC Decision
By Nick Heath
Of DOW JONES NEWSWIRES
LONDON — Crude oil futures leapt more than $2 Wednesday on news the Organization of Petroleum Exporting Countries will leave its current production quotas unchanged.
Nymex light, sweet crude futures broke back above $90 a barrel in the process, as lingering market hopes of a production increase, and lower prices, were scotched.
OPEC said it would hold current oil production steady, but added that it will meet in February as it surveys global economic growth and energy demand.
“No action from OPEC is definitely bullish,” a London-based trader said. “If they aren’t meeting again until February, any action then will be too late for the northern hemisphere winter I would think.”
At 1225 GMT, the front-month January Brent contract on London’s ICE futures exchange was up $1.34 at $90.87 a barrel.
The front-month January light, sweet, crude contract on the New York Mercantile Exchange was trading $1.16 higher at $89.48 a barrel.
The ICE’s gasoil contract for December delivery was up $17 at $804.75 a metric ton, while Nymex gasoline for January delivery was up 253 points at 227.70 cents a gallon.
Following the Abu Dhabi meeting’s conclusion, OPEC confirmed in its final communique that it would leave output unchanged “for the time being”.
“Having reviewed the oil market outlook, including the overall demand/supply projections for the year 2008, in particular the first and second quarters, the conference observed that market fundamentals have essentially remained unchanged,” the communique read, “with the market continuing to be well supplied and commercial crude/product stocks remaining at comfortable levels in terms of days of forward cover.”
Nonetheless, the 13-strong group continued to be concerned that oil prices remain volatile, exacerbated by financial speculators, the document added.
“Given the need for extreme vigilance in assessing the market during the coming months, the conference decided to convene an Extraordinary Meeting in Vienna, Austria, on Friday, February 1 2008,” the communique added.
“We have enough stocks in the market and 52 days of cover…there is no reason for prices to go $100 a barrel”, Secretary General Abdalla Salem el-Badri said later, referring to recent record high prices above $99 a barrel.
Traders agreed that while prices would firm on the news, a test of recent highs was unlikely.
“(The decision is) obviously supportive but I’m not sure this will have us testing highs again. Supply seems adequate right now,” one said.
Ironically perhaps it was last week’s fall in crude oil prices — largely driven by speculation the OPEC would boost output — that was seen as being central to ministers’ decision.
“We believe that the move below $90 a barrel has acted as the key swing factor in OPEC’s decision, making the achievement of a consensus to stay put a far smoother process than it would have otherwise been,” Barclays Capital analyst Costanza Jacazio said. “Should prices have been $10 higher, resisting an increase would have been harder.”
Despite the decision to leave crude oil output unchanged, production by member countries in excess of assigned quotas remained a possibility.
Prior to the meeting, analysts at Lehman Brothers suggested that there was “a strong likelihood that Saudi Arabia will unilaterally raise their own output to show their commitment to price stability” if production levels were unchanged.
Those predictions can trace a precedence in OPEC’s Sept. 11 decision to raise output by 500,000 barrels a day, which was widely seen at the time as to be “legalizing” existing overproduction.
“It’s a simple rollover,” said Mike Wittner, analyst at Societe Generale in London. “This way the Saudis can increase gradually (by upping exports) and there would be no need to undo an increase with a quota cut ahead of lower demand in spring.”
Analysts said that OPEC members would also have been wary that a decision to raise crude oil output at this meeting could lead to exports arriving in northern hemisphere markets just as both the peak winter consumption period was ending, and spring refinery maintenance got underway.
Speaking ahead of Wednesday’s meeting, Jim Rintoul of TheOilTrader.com said, “If OPEC increased production now it would be a disaster for them — production would arrive right at the northern hemisphere’s winter end.”
Such a scenario would lead to a possible supply glut and severe downward pressure on prices, he had warned.
“(If production was raised), I think the oil price would be close to $50 a barrel by the time we get into spring next year”.
However, the arrangement of the Feb. 1 meeting in Vienna — initial reports suggested that the organization would reconvene in January — left some doubts over OPEC policy unresolved.
“It shows they (OPEC) are uncertain about what’s going on in the market,” said Eugen Weinberg at Commerzbank.
“OPEC has concerns about economic growth especially in the U.S. It’s saying “we are a bit concerned whether the market can take these prices’.” February’s meeting would continue to weigh on prices, despite the initial move higher Wednesday, Weinberg added.
The decision was a case of OPEC keeping its options open, said Helen Henton of Standard Chartered.
“There’s so much uncertainty over how much impact high oil prices have had on demand” that OPEC will want to see how demand fares over the next few weeks before making a decision, she said.
Recent dollar weakness has meant the rally for oil prices has diluted returns for producing countries, she said, but a bounce for the U.S. currency by January would make a production hike more palatable.
Price moves higher were initially hesitant following the emergence of news that OPEC would not open the taps. Traders suggested that that may have been due to market anticipation of Wednesday’s weekly U.S. Department of Energy inventory report, due out at 1530 GMT.
The run up to the weekly update on the health of the U.S.’s energy stockpiles was slightly overshadowed by speculation preceding the OPEC meeting.
Analysts expect U.S. crude oil stocks to fall by 700,000 barrels in the week to Nov. 30, according to the average of a Dow Jones survey of 14 analysts.
Gasoline inventories are seen growing by 700,000 barrels, according to the analysts’ average, while stocks of distillate, which includes heating oil and diesel fuel, are expected to fall by 400,000 barrels. Refinery use is seen increasing by 0.1 percentage point to 89.5% of capacity. .
—By Nick Heath, Dow Jones Newswires
OPEC unchanged, oil not exactly raging higher. Focus will quickly shift back to inventories it looks.
Analyst Watch: TGP upped to buy by Citi
Angola and Ecuador receive their first quotas of 1.9 mm bopd and 0.520 mm bopd. Angola is producing ~ 1.8 now and had been seeking 2.5 as they should be able to produce that much in the very near future. This is pretty restrictive (welcome to the club guys). Ecuador produces > 500,000 bopd only on a good day.
XOM will make a nice straight-forward play if oil can crest $90. Foreign oils like PBR and PTR could see a sizable run as well.
On the E&P front, APA benefits most on the bottom line from higher oil prices.
DO may get another shot at $120+ today as nothing changed since yesterday except the oil situation improved. Yesterday’s service swoon was caused by a over large reaction to refinancings at the new combined RIG.
I’m waiting for things to cool off a bit before jumping on the “opec did nothing bandwagon buy it ’til your head explodes” bandwagon. We do have inventories out in a little under an hour…if we get the bullish green light there then I’m in with both feet.
but if you think about it, the way this market focuses on each piece of data as if a weekly number holds sway over their entire outlook, then a surprise build in crude would smash these early gains.
wow, look at DO go.
mixed reaction from the tanker stocks…not really the news they wanted from Opec but they should be happy production is higher than people thought it was.
NFX breaking highs from two days ago, initial breakout day on the new Woodford. There is lots of pent up demand in the stocks that have said good things like NFX, APA, APC, DVN, HK (and to a certain extent DO) in recent days…muted response has been due to the “wait and see” on OPEC
Nat gas getting saved by oil now
9:44 am EST
Nymex Crude Rises After OPEC Leaves Output Alone
By Matt Chambers
Of DOW JONES NEWSWIRES
NEW YORK — Crude oil futures rose early Wednesday after OPEC said it would leave production unchanged until at least February.
Meeting in Abu Dhabi, the Organization of Petroleum Exporting Countries said the market remains well supplied and that it will meet again Feb. 1 to reassess.
Light, sweet crude for January delivery on the New York Mercantile Exchange was recently up $1.18, or 1.3%, at $89.50 a barrel, after rising as high as $90.39 soon after the decision was reported. Brent crude on the ICE futures exchange rose $1.02 to $90.55 a barrel.
There has been a hesitant reaction by traders to the decision, partly because key U.S. inventory data are due at 10:30 a.m. EST. The data could provide more information on how well the world’s biggest energy consumer is supplied going in to winter. Prices are 10% off their record high $99.29 a barrel set Nov. 21, pressured by concerns of an economic slowdown in the U.S. A perception that the U.S. is less likely to attack Iran, after a National Intelligence Estimate said the Persian Gulf oil producer stopped its nuclear weapons program in 2003, could also provide a drag on prices.
“With the economic outlook turning a bit more bearish this week and a perception that geopolitical risk has been lowered, we suspect a bullish inventory report will need to be seen in order for energy markets to build on overnight gains,” said Mike Fitzpatrick, vice president of risk management at MF Global in New York.
U.S. crude stocks are expected to drop by 700,000 barrels in Department of Energy data for the week ended Nov. 30, according to a Dow Jones Newswires survey of analysts. Gasoline stockpiles are seen growing by 700,000 barrels and distillates, which include heating oil and diesel fuel, are seen falling by 400,000 barrels. Refinery use is seen increasing by 0.1 percentage point to 89.5%.
Front-month January reformulated gasoline blendstock, or RBOB, rose 2.12 cents, or 0.9%, to $2.2729 a gallon. January heating oil rose 2.61 cents, or 0.9%, to $2.5379 a gallon.
—By Matt Chambers, Dow Jones Newswires
Topt is on sale today as they just had a fire sale on a secondary.
FWIW, I participated in the secondary and bought some more pre market.
The tanker names that trade are very interesting.
They all pick up oil from point a and deliver to point b. their operating structures aare different , some more leveraged than others.
Some pay out all cash flow (nat,dht,vlccf,atb) some retain it all (topt), and some retain some and pay out some (tnp, gmr).
So in analyzing these companies, the dividend players trade at higher multiples and a premium to asset values, the non dividend payers are discounted
any DRYS thoughts today Z?
ff – I dunno, down to 1 screen (laptop) for the next 2 to 3 hours so I’m a little hampered. will get back after the inv numbers on the bulks
amazing how market does not care about oil one day and its the excuse dejour the next
crude down 8 mm barrels….!!!!!!!!!!!
enbridge related drop in crude inventories, its a one time drop so not as big a reaction.
big build in gasoline and distillates not great #s for the refining stocks
numbers analysis?
this thing on, Nicky you out there?
Sane, api available…odd build in gasoline given demand was flat week to week. very squirrely
build out Cushing holding oil from a big rally.
utilization down a 0.1% kind of like I thought possible.
this is good for the E&Ps like APA all the way up to the majors like XOM and COP; also very good for service…holding HAL and DO now…may add CLB, OII
definitely got my import number drop…
10:34 am EST
Nymex Crude Rises After OPEC Leaves Output Alone
By Matt Chambers
Of DOW JONES NEWSWIRES
NEW YORK — Crude oil futures rose early Wednesday after OPEC said it would leave production unchanged until at least February.
Meeting in Abu Dhabi, the Organization of Petroleum Exporting Countries said the market remains well supplied and that it will meet again Feb. 1 to reassess.
Light, sweet crude for January delivery on the New York Mercantile Exchange was recently up $1.18, or 1.3%, at $89.50 a barrel, after rising as high as $90.39 soon after the decision was reported. Brent crude on the ICE futures exchange rose $1.02 to $90.55 a barrel.
There has been a hesitant reaction by traders to the decision, partly because key U.S. inventory data are due at 10:30 a.m. EST. The data could provide more information on how well the world’s biggest energy consumer is supplied going in to winter. Prices are 10% off their record high $99.29 a barrel set Nov. 21, pressured by concerns of an economic slowdown in the U.S. A perception that the U.S. is less likely to attack Iran, after a National Intelligence Estimate said the Persian Gulf oil producer stopped its nuclear weapons program in 2003, could also provide a drag on prices.
“With the economic outlook turning a bit more bearish this week and a perception that geopolitical risk has been lowered, we suspect a bullish inventory report will need to be seen in order for energy markets to build on overnight gains,” said Mike Fitzpatrick, vice president of risk management at MF Global in New York.
U.S. crude stocks are expected to drop by 700,000 barrels in Department of Energy data for the week ended Nov. 30, according to a Dow Jones Newswires survey of analysts. Gasoline stockpiles are seen growing by 700,000 barrels and distillates, which include heating oil and diesel fuel, are seen falling by 400,000 barrels. Refinery use is seen increasing by 0.1 percentage point to 89.5%.
Front-month January reformulated gasoline blendstock, or RBOB, rose 2.12 cents, or 0.9%, to $2.2729 a gallon. January heating oil rose 2.61 cents, or 0.9%, to $2.5379 a gallon.
—By Matt Chambers, Dow Jones Newswires
Sorry for the repeat.
No API Yet
Those numbers are strange. Looking at the data, the midwest only drew about 100k and that is where the endbridge pipline runs to. 6M of the draw was gulf coast.
Sad…. Still filling the SPR at $90 oil
ZTRADES:
Adding to HAL Dec $37.50s for $0.70.
Thanks Sane
RE # 9
Drys is a good buy. they will split 3 for 1 and i expect that they will get to 45 post split or 135 pre split
Sane – there was a little fog in the HSC but you’re right the numbers make little sense. Also, the rally in Cushing stocks makes little sense…the guys at API will tell you “that’s what you get for using estimates”
funny my site bears disappear on big draw days, lol.
bill…power of the lemming, eh re split moving a stock, lol. agree its cheap but split moving a stock is yet another reason to hate momentum stocks. still, if it works, it works
crude numbers: makes you wonder if they bust check them at all. crude traders still on the sell trade.
oil looking to go negative
P
PBR is a buy & XOM is a Short
API
Crude down 8M
Gasoline up 3.6M
Distillates up 750K
10:48 am EST
Crude Inventories Drop Far More Than Expected
NEW YORK — U.S. crude-oil inventories in the week ended Nov. 30 fell far more than analysts’ expectations, according to data released Wednesday by the U.S. Department of Energy.
Crude stockpiles dropped 8 million barrels to 305.2 million barrels, the department’s Energy Information Administration said in its weekly report. That compared with an average forecast of a 700,000-barrel draw in a Dow Jones Newswires survey of 14 analysts.
Gasoline inventories rose 4 million barrels to 200.6 million barrels, compared with an average survey estimate of a 700,000-barrel gain.
Distillate stockpiles rose 1.4 million barrels to 132.3 million barrels, compared with analysts’ forecasts of a 400,000-barrel draw.
Refining capacity was unchanged at 89.4%. Analysts had expected a 0.1 percentage point gain.
U.S. Oil Inventories:
For week ended Nov. 30.
Crude Gasoline Distillates Refinery Use
EIA data: -8 +4 +1.4 unch
Forecast: -0.7 +0.7 -0.4 +0.1
Figures in millions of barrels, except for refining capacity, which is
reported in percentage points. Forecasts are the average of expectations in a
Dow Jones Newswires survey of analysts earlier in the week.
—By Gregory Meyer, Dow Jones Newswires
Did DRYS announce the split date yet? Seems like it’s having trouble breaking levels today.
I like it without the split but hey I can never figure it out why a stock goes up on a split
23: that’s bold. I agree PBR long, I would not be shorting XOM….i understand your basin in problematic portions of the world. It may have a little more teeth now than before but its always been that way and the stock is continuing to generate massive cash flow so they will continue to shrink the float and reserve due to risky nation investing are not coming off their books. From an options perspective that argument just not work.
24: thanks Sane…wow, they match up. now cnbc is saying all that matters is Cushing…nice of them to boil a 10 page report down to one number.
Z, what are your thoughts about the CHK 37.50s? It doesnt seem like the NG outlook is bullish. I like the underlying, just dont know if we will get any movement by Jan
Bill re stock split b/c of the lemmings.
FF – have not seen the date…strong fundamentals aside, group looks twitchy as some investors who got in late are using the last few days bounce to get out while others, like us, think about bottom fishing. These guys are tied to the broad more than they are to their own fundies. If you think we get the 50 bips that seems priced in then maybe you buy here.
Thanks guys!
CHK trading very frustrating. I’m holding out a little longer before rolling a little longer. Got enough for now and the stock usually trades better on events than on group action (like its doing toda). As to gas, down side is limited to mid $6s. CHK hedges will give them $8+ but people don’t think about that so much. I really like owning the stock, owning the options is an exercise in patience / frustration. Amazing to me that all of the concerns the Street had over growth and deals have been alleviated in last few months and still the Street can’t fall in love.
APC, NFX – nice move going on here.
APA tied to oil but showing recovery…most oil leveraged name (except for maybe SU)
PQ looking to breakout…not going to miss it again.
CNBC is talking oil prices lower and I just got a cartoon from an Alaron trader buddy of Nicky’s entitled “the sky is falling”. My sense is these guys are talking their book and getting long for the next move up.
here are a few more good links, weekly reports
tankers
http://www.fearnresearch.com/index.gan?id=190&weekly=1&weeklysection=1
bulkers
http://www.fearnresearch.com/index.gan?id=190&weekly=1&weeklysection=2
lng and gas
http://www.fearnresearch.com/index.gan?id=190&weekly=1&weeklysection=3
Z Give Warren Buffett a call on CHK he buys “BEST IN CLASS” when cheap.
SNG-$2.91 in Trinidad Have it a long time bought more yesterday & today. Rig owned buy SINOPEC & BG GAS is a partner Drill down to 14,000Ft & will hit target pay zone within 10 days.
Good Cheappie.
by the way, HK moving back up in here as well.
oil up $0.85 and climbing to 89.18. Think a close over 89 may help turn this around a bit but a close over 90 is what traders would need to suddenly find reasons for oil to start marching up. They can talk about Cushing all they want as it relates to price but the overall inventory level falling below 90% of year ago levels is the real story here. Yes imports sagged causing the dip but they are very unlikely to make it all back up next week and therefore my “just another bump in the road” chart remains intact as we have now passed the 3rd bump on our way lower throughout 4Q and into 1Q which almost certainly will be more demand intensive.
P – what does that mean re CHK? I love CHK (cheap, grower, biggest gas producers in the US next year and all that) but the options are problematic to trade. I own the stock and you will see me writing calls against it monthly starting the next time they break $40.
Bill – thanks for the links…will add to the transports tab tonight.
11:36 am EST
Nymex Crude Pares Gains On Cushing, Product Rise
By Matt Chambers
Of DOW JONES NEWSWIRES
NEW YORK — Crude oil futures pared early gains Wednesday, shrugging off a massive draw in U.S. crude oil stockpiles and an OPEC decision to leave production unchanged.
Instead, traders focused on a gains in distillate and gasoline stockpiles, and in inventories at the Cushing, Okla., delivery point for New York Mercantile Exchange futures. Also holding back crude’s run higher, the big, 7.9 million-barrel, draw in crude stockpiles was mainly attributed to short-term glitches in imports, rather than any substantial change to supply and demand factors.
Light, sweet crude for January delivery on the New York Mercantile Exchange was recently up 45 cents, or 0.5%, at $88.77 a barrel, after rising as high as $90.39 soon after the OPEC decision was reported. Prices were around $89.40 before the data was released. Brent crude on the ICE futures exchange rose 53 cents to $90.06 a barrel.
U.S. crude oil stockpiles fell by 8 million barrels last week, the Department of Energy said. That compared with expectations for a 700,000 barrel draw in an earlier Dow Jones Newswires survey of analysts. Gasoline stockpiles rose by 4 million barrels, compared with expectations of a 700,000 barrel build. Distillate stocks, which include heating oil and diesel fuel, rose by 1.4 million barrels, compared with expectations of a 400,000 barrel fall.
Refinery use was unchanged at 89.4% of capacity, compared with expectations for a 0.1 percentage point gain.
Inventories at Cushing rose by 700,000 barrels.
“The Cushing number spooked some people and the market had also been looking for draws in distillates,” said Tom Bentz, an analyst at brokerage BNP Paribas in New York. The drop in crude overall was largely due to fog in the Houston Ship Channel and stoppages from Canadian crude oil imports, which only lasted days, Bentz said, meaning it will likely be a short-term glitch.
Meeting in Abu Dhabi, the Organization of Petroleum Exporting Countries said that it would leave output unchanged because the market remains well supplied and that it will meet again Feb. 1 to reassess.
Front-month January reformulated gasoline blendstock, or RBOB, fell 1.12 cents, or 0.5%, to $2.2405 a gallon. January heating oil rose 22 points, or 0.1%, to $2.514 a gallon.
—By Matt Chambers, Dow Jones Newswire
Z- What are you considering on PQ? Decs? ITM at 12.50 or OTM 15?
…or common on a slight pullback?
Doc – trading an exploration prospect eh? THAT is riskier than just about anything you’ll see me do. Not to pull your chain today but cheap and low price have nothing to do with each other. I don’t call 19x TEV/EBITDA cheap. It’s a single-digit midget..that certainly doesn’t mean it’s cheap.
Kaman – re PQ – I’m thinking Jan or Feb., $12.50 or if you go a little longer $15 or even $17.50. Probably wise to wait on a pullback.
CNBC guys saying hedge energy, start to go long financials. somebody pass me a pistol
Buy Finacials? Wow, glad I don’t watch the talking heads!
Sam – apparently they are a better value, even with an unknown quantity of off balance sheet trash,
looks like somebody is trading the Dec 15 PQ calls all of a sudden
WB taking another 300 million in loan loss reserves. That puts it at 900 million. E Trade got 27 cents on the dollar for it’s Toxic paper, and most was highly rated. Orange County has 20% SIV = Toxic paper. Fla froze redemptions. I know I’m not the brightest star in the heavens, but I still smell smoke on these balance sheets, which means there is still fire. Somebody is going out, just not sure who yet. Watching ABK and MBI. i think they will be the first to go, IMO.
topt is up from the secondary price of 3.00 to 3.30 as I write this.
It was 4.70 on Monday, and the offering makes them worth more.
Take a peak…
Z– SNG- I have been profitably investing small amounts of money in HIGH RISK start-up mining-energy stocks only when I see that they “smart-money”partners. If you do some DD you will find that there is over $100 million in smart money investing.
Can they drill ‘DRY HOLES” absolutely, but if they hit it is a 10 bagger.
http://cnrp.ccnmatthews.com/client/canadian_superior_energy/headlines.jsp
sharon efferson says high gasoline prices are taking a toll on consumers as seen by the falling gasoline demand numbers.
last week gasoline demand was just over 9.3 mm bpd, a record for the week in history. This report shows demand just under 9.3. Peak summer was 9.6 to 9.7. WTF is she talking about? What a boob.
Bill…will do a trade there soon.
doc…I understand, I was just making the distinction between low dollar stock and cheap stock. I will specifically look at it. By the way, I abhor phrases like smart money…names mean a lot more, everybody with a stack of cash thinks they are smart money.
z- Agreed, Smart money today like in
Sub-prime invstors.
You will like what you read about SNG. However it is a crap-shoot.
Thanks Doc, I will check it out. Sorry if I seem a bit grumpy with the earlier response…I’m trading from a hospice center today which makes me a little edgy
zman
your grumpiness is certainly understandable
but sharon epperson drives me crazy on a good day
perhaps all subscribers of good conscience should be encouraged to express their frustrations with her horrendous reporting to cnbc
Thanks yona, I’d take her job. I figure all I’d need is a lobotomy and a pair of tights and I’d fit right in, lol.
DRYS dead while Dow up nearly 200? maybe a signal to sell.
Z in “tights”. Gotta see that. I’ll call it Z tight. LOL
crude down $0.50…$87.20 support level pretty key.
Sam, “you’re a funny guy”
Funny? How do you mean funny? I make you laugh? I look funny to you?
apbd
T must be happy, the RIG woodshedding continues. getting more and more tempting but this oil roll is helping maintain my call diet for a bit
You mean, let me understand this cause, ya know maybe it’s me, I’m a little fucked up maybe, but I’m funny how, I mean funny like I’m a clown, I amuse you? I make you laugh, I’m here to fuckin’ amuse you? What do you mean funny, funny how? How am I funny?
All right, so I only saw it a couple of times and I didn’t go to ” you tube ” to brush up.
apbd
oil at that critical 87.20 level, down $1.10 to $1.20
stocks have come off highs but are trading with broad
re 59, being right makes me more happy than the money made. i think im may be starting to lose my mind lol. sort of like the guy who taught me how to trade options , um who is in jail now lol
i took pbr calls mid-day, and still holding up here with crude faltering. whast jan cl at?
86.96
did it close below sharon epppppessssssss(lisp)onnnsss key 87+change price?
did not close below there at the nymex close but traded below it in the after market.
i made a boat load of trades today z, im surprised at your heavy hand. must be the hospital food.
nah, group still lacks conviction for all its green today
too late for SU puts?
The Bovesba is on a tear this year and is on the new leg up on a fresh rally probably going to last until the end of the year. i think PBR retests it historic highs (aka 120, cheap options too). took some in the afternoon.
took tankers : FRO, TK
took TSL short: for a quick retracement already starting, will enter long soon thereafter. these options are not priced in the moves this stock makes.
took: OII cause i think this rally may have legs for a fer session. i think deep douwn you wanna come play too Z!
mulling: selling juicy expensive puts on RIMM , slightly OTM, maybe with a purchase at a lower strike for some insurance.
mulling: drys long: weird action there, i feel the stock has clearly reversed, but no conviction here to sustain the rally. option prices are becoming more attractive also. glad i didn’t hop in this morning though.
mulling: FSLR for a couple week long short with puts when it all comes crashing down. and these 930-100am rally so happening (general stupid public money calling their brokers for this $70 stock mascarading at a $250 stock).
why is oil falling with this crazy draw and opec not increasing any new goo?
forgot above to mention that im gona initiate rig at 125$, prob tomorrow.
3:22 pm EST
Note – I think Matt is repeating.
Nymex Crude Falls As Product Inventories Grow
By Matt Chambers
Of DOW JONES NEWSWIRES
NEW YORK — Crude oil futures fell to a fresh one-month low Wednesday, ignoring an OPEC refusal to raise output and a big slump in U.S. crude oil stockpiles. Instead, traders concentrated on growing gasoline and distillate inventories, a potential easing in tensions over Iran’s nuclear program and concerns U.S. economic growth may slow.
Crude’s inability to hold gains made on both the output decision and the crude oil inventory slump indicates a significant turnaround in sentiment from recent months when crude seemed on an unstoppable rise toward $100 a barrel.
Light, sweet crude for January delivery on the New York Mercantile Exchange settled 83 cents, or 0.9%, lower at $88.27 a barrel, after earlier rising as high as $90.39. Prices were recently at $86.98 in late electronic trading. Brent crude on the ICE futures exchange fell $1.0.3 to $88.50 a barrel.
Prices are now 12% off their record intraday high of $99.29 a barrel reached Nov. 21 and have fallen in six of the past eight sessions.
“The geopolitical landscape has quieted a little, people are concerned about the economy and I think the market has run out of steam for now,” said Steve Bellino, senior vice president of energy at brokerage MF Global in New York. Bellino said a rise in U.S. gasoline and distillate stockpiles, as well as an inventory build at the Cushing, Okla., delivery point for Nymex crude also weighed on prices.
Nymex crude hit an intraday high of $90.39 a barrel after the Organization of Petroleum Exporting Countries said it wouldn’t raise production, despite calls from big energy consumers like the U.S. for more supply to help ease record high prices.
The U.S. Department of Energy, in its closely watched weekly inventory report, said crude oil stockpiles fell last week by a massive 7.9 million barrels, more than 10 times the average forecast for a 700,000-barrel draw recorded in a Dow Jones Newswires survey of analysts. The report caused a spike above $90 a barrel but prices slid over the remainder of the session as other factors in the report were digested.
Gasoline stockpiles rose by 4 million barrels, compared with expectations of a 700,000-barrel build. Distillate stocks, which include heating oil and diesel fuel, rose by 1.4 million barrels, compared with expectations of a 400,000-barrel fall.
Refinery use was unchanged at 89.4% of capacity, compared with expectations for a 0.1 percentage-point gain.
Inventories at Cushing rose by 700,000 barrels.
“The Cushing number spooked some people and the market had also been looking for draws in distillates,” said Tom Bentz, an analyst at brokerage BNP Paribas in New York. He said that the fall in crude was largely due to import delays that were short-term glitches.
Dense fog kept oil sitting in tankers off the Texas and Louisiana coast for up to two days last week. Imports on the Gulf Coast fell to 5.3 million barrels a day, a low reached only one other time since Hurricane Katrina. As a result, Gulf Coast stocks fell by 5.9 million barrels a day.
Crude oil traders’ interpretation of the session’s events is in stark contrast to the mood that has punctuated its more-than-40% gain this year.
“Before, it was any news is good news; now it’s any news is seen as pessimistic,” said Rob Kurzatkowski, a futures analyst at optionsXpress Inc. in Chicago. The significance of OPEC’s decision to stand pat on oil production was tempered by what it might say about global economic growth, he said.
Concerns that the U.S. economy may slow, easing world oil demand, along with a a perceived easing of some international tensions are also weighing on prices, analysts said.
A U.S. National Intelligence Estimate report released Monday said Iran probably halted its pursuit of nuclear weapons in 2003, which analysts say lessens the chance of a U.S. attack on the Persian Gulf oil producer over its refusal to halt a uranium enrichment program.
Front-month January reformulated gasoline blendstock, or RBOB, fell 3.47 cents, or 1.5%, to $2.217 a gallon. January heating oil fell 2.25 cents to $2.4893 a gallon.
(Greg Meyer contributed to this article.)
—By Matt Chambers, Dow Jones Newswires
I’m too scared to short FSLR.
Citi/Smith Barney update on RIG
Transocean Inc (RIG)
Confusion Surrounding Convert Creates Opportunity
* Unwarranted Stock Weakness – We believe confusion surrounding
RIG’s pending $6 billion convert offering has pressured the
stock. Proceeds will be used to repay part of the $15 billion
bridge loan associated with the GlobalSantaFe merger. While
exact details of the offering will not be known until the final
prospectus is filed, we do not think it will be highly
dilutive.
* Clarifying Example – Dividing the $6 billion convert value by
a conversion price of $170/share (our guess but likely in the
ballpark) results in an incremental increase in share count of
35.3 million shares. Additionally, assume that RIG stock price
climbs to $200/share by the time of conversion. The value to be
paid out to shareholders is therefore $7.06 billion ($200 *
35.3 million shares.
* Key Takeaway(s) – Here is the key – the offering does not
result in additional shares until the stock trades above the
conversion price, and if this occurs only the increment above
the conversion price is associated with equity. Therefore, in
this example, $6 billion would be paid in cash, leaving only
$1.06 billion in equity. Dividing $1.06 billion by $200 results
in the issuance of 5.3 million shares. To put this in
perspective, 5.3 million shares is less than 1.7% of current
shares outstanding. The dilutive impact is therefore very
small.
* Reiterate Buy Rating – We reiterate our 1H rating, with a
$168 target price.
FF – SU — may double my 95s but only if we see 87 become a near term top in crude, this recent rally appears to be takeover spec…hard to believe at these multiples but stranger things have happened.
T – you know I want to …kicking self on a few like oii and btu
agree with you on RIG…be there soon…absolutely agree with was Sam just posted
looking at solar but need get a little more reading under my belt. the dichotomy in sector valuations says I’m either missing something or that FSLR are way over.
as to why oil is reacting this way, I think traders failed 90 and headed lower and then it snowballed and now people are coming up with reasons. still think 86 is low.
ZTRADE: Entered RIG December $130 calls for $3.20. Risky but I think Citi is right.
thanks for that note Sam, they said that very well. I can’t blast from here due to a retarded mouse issue with my laptop.
Sam..thanks for the Rig article
Z, gotta another chinese solar guy for the list: LDK
good amount of options trading on this guy
Thanks A, will add…looking forward to getting my hands dirty on these guys. Alt energy plays are going to suffer the most if we suddenly find ourselves in a falling oil environment
Hey Z.!
I missed the questions you asked me about VMC and the industry.
Can you email your comments and questions to me? Then I’ll answer and post them for the community.
Thanks.
Q.
sam where did you get that article?
as much as i want t short fslr, i think it might make an appearance at 260$ before this time next week…. chart look is prime for a BO.
back to Brazil. look at the chart guys , keeping in mind that these asset price become squed from currency changes in the real vs usd. but impressive, especially the hard right edge. PBR BPR BPR PBR. the spewing heads at cnbc have been touting them every day of late, especially that slick rick of an international reporter they have had on fast money lately, although i hate to say it he seem pretty sharp.
found another site for dry rates
PS they look great
http://www.lloydslist.com/ll/news/sector/marketIntelligence.htm?subjectCode=Dry&intelCode=Fixtures&pager.offset=0
ok, couple more solars: CSUN, HOKU, YGE, AKNS, ASTI and BTUI
T- Would BO stand for “buyout” or “blow-off”…j/k , when that music stops there won’t be nearly enough chairs. -K
Z- The RIG trade today…what’s the five letter option code…I’m not immediately seeing a Dec 130 call that traded around $3.
Hey K,
RIG LF 3.10 x 3.20 at close
Thanks A on the solars and thanks B on the traspo links
break-out