Commodity Watch
- Crude Oil: fell $2.14 yesterday to $92.25 retracing half of the prior day's run up. This morning oil attempted a bit of a rebound early but has traded anotehr $0.50 to $0.75 lower following the release of higher than expect CPI data.
- Senate passes a better bill watch: The Senates version of yet another bill included increased fuel efficiency standards but does not punish oil companies for being oil companies, something I see as non-sensical as we try to "get off foreign oil" but reducing local companies return on doing it. The measure also includes a massive step up in the use of ethanol, especially cellulosic ethanol, over the next 15 years which should ultimately be good for the prices ethanol stocks (especially STKL who is one of the pioneers of the cellulosic kind), corn, cotton etc. A number of planned ethanol plants have canceled in recent days which should also help ethanol prices. The House is expected adopt similar non "Big Oil" slapping language in their version of the bill next week.
- IEA Boosts 2008 forecast. The agency added 200,000 bopd to its 2008 growth estimate yielding a YoY increase of 2.1 million bopd. These guys are notorious over estimators of demand and they are just as likely to reduce it based on global economic slowing next month. However, a lot has been written about domestic demand rising from the producing countries and if some of these lands do not raise their product prices (often set very low) then the IEA could actually fall short as the dollar's weakness only bolsters demand.
- Natural Gas: fell $0.21 yesterday to $7.19 (also down half of the Wednesday run up) after a larger than anticipated storage draw failed to impress. This morning gas is off another dime to fifteen cents in early trading once again threatening the $7 level. So what's the problem?
- HDDs were seen falling (warmer) this week relative to last suggesting a smaller draw next week (though still probably triple digits) and,
- Tropical Storm Olga was downgraded to a Low pressure system after coming across the Caribbean.
click to expand more detailed gas graphs
Storage by Region: Why show this? At present no reason as all the regions scream full but over time I expect the regional graphs to take on increasing importance, especially the Western region which may soon duck back out of record territory as more gas is physically able to get to market, helping to boost prices in the Rockies which benefit companies ranging from pure Rockies players like (BBG) to (NFX)
click to expand
Weather Comments: Warmer Than Normal, Eh?
- Last November saw 39 Bcf come out of storage by the weekly survey count and 48 Bcf by the EIA's monthly report. So let's call November 2006's draw about 45 Bcf.
- November 2007 may have been warmer than normal but it was 11% colder than 2006 and this showed up in the weekly data from the EIA. While the monthly data won't be available for another 2 months or so, the weekly reports indicated about 105 Bcf were pulled from storage. Makes sense: colder weather yielding more demand and all.
- I take issue with everyone saying gas should fall apart because we're likely to have a warmer than normal winter. That's too vague a statement. That colder than normal weather I highlighted in November was also indeed warmer than normal. ...and it still yielded more than twice the prior year's withdrawal.
- Looking at December's first half I don't see the real warmth just yet. The first week saw degree days of 198 vs 180 normal. The expectation for the second week of December is 177 (and likely to be revised higher) and is 17 below normal so call the first half of the month normal. Withdrawals are so far in line with last year . Again, these numbers are also colder than last year. So when they say "warmer than normal winter" they must mean the second half of December on, right? Just something to bear in mind. So far...not exactly tropical.
A Look At Storage Possibilities Going Into Year End
I'd expect the actual withdrawals to come close to the average case above. The warmest case has little chance of being close to the mark as we will probably pull that much gas from storage next week. Recall that at present we are 1% above YoY levels so I'm expecting storage to dip back into deficit territory shortly.
Holdings Watch: End of month housecleaning...I killed some positions that were almost but not quite complete scuds.
- Out SU December $95 puts for $0.40 (89% loss).
- Out VLO Dec 72.50 calls for .05 (90% loss). Still hold the January $67.50 calls
- Out TSO Dec 50 calls for $0.10 (95% loss)
- Out YGE December $35 calls for $0.45 (54% loss). Still hold the March $45s
Odds & Ends
Analyst Watch: Credit Suisse on the downgrade warpath this morning: (FTO), (DVN), (KWK) all cut to neutral from buy; (EOG) and (NFX) cut to underperform from neutral. So they've been wrong as the stocks marched higher and no they intend to be wrong some more. (VMC) initiated with a sell and $75 price target at B of A. (JASO) price target increased from $70 to $100 at Piper, (FSLR) and (SPWR) started at outperform at Pacific Crest.
8:35 am EST
Nymex Crude Steady After IEA Oil Demand Revision
Of DOW JONES NEWSWIRES
From MARKET TALK:
[Dow Jones] Nymex crude is steady in volatile screen trading after the International Energy Agency ups its forecast for 2008 global oil demand growth to 2.5%, from 2.3%, to total demand of 87.8 millions bbls. A stronger dollar keeps a lid on gains. “This update from the IEA is about the only remaining bullish price prop that we view as capable of supporting values at the present time,” says Jim Ritterbusch of Ritterbusch and Associates. Nymex Jan crude +16c at $92.41/bbl. (greg.meyer@dowjones.com)
Reported earlier:
LONDON — Crude oil futures climbed over $1 higher in London trade Friday, recouping some of Thursday’s losses, as International Energy Agency predictions of increased global demand for crude oil in 2008 supported prices.
But a stronger dollar weighed on prices, however, reversing much of the day’s earlier climbs.
Aside from the IEA report, there was little fresh fundamental news for the market to consider, leaving Friday’s trade marked by relatively volatile price movements, with low volumes and the expiry of the ICE January Brent contract contributing to choppy trading conditions.
At 1227 GMT, the front-month January Brent contract on London’s ICE futures exchange was up 68 cents at 92.80 a barrel.
The front-month January light, sweet, crude contract on the New York Mercantile Exchange was trading unchanged at $92.25 a barrel.
The ICE’s gasoil contract for January delivery was up $3.25 at $828.50 a metric ton, while Nymex gasoline for January delivery was up 56 points at 238 cents a gallon.
ICE Brent crude futures were already trading $1 higher prior to the publication of the IEA’s report Friday, with position adjustment ahead of the January contract expiry appearing to steer prices higher.
Climbs in both Nymex and Brent crude futures were extended following the report’s publication, however, which predicted increased global demand and shrinking stockpiles in Organization for Economic Co-Operation and Development countries.
The agency raised its forecast for world oil demand growth in 2008 to 2.5%, compared with 2.3% in its previous report. Oil stockpiles held by industry in OECD countries had fallen almost 100 million barrels against the same levels a year ago, the agency said
“Yesterday was a knee jerk reaction to dollar strength and a retracement from the highs,” a trader in London said. “Today we have bullish fundamental news from the IEA to offset.”
However, immediate market reaction to the monthly oil market report from OPEC, also published Friday, was muted.
OPEC said the global economic outlook for 2008 has significantly “worsened” but kept its forecast for oil demand growth next year virtually unchanged.
Crude price rises were disrupted by further climbs in the U.S. dollar Friday. A cheaper dollar is usually seen as supportive for crude prices, and has been a contributor to current high crude price levels.
The greenback continued to take support from strong data out in the U.S. Thursday. Retail sales and producer price inflation data rose by double the rates economists were expecting, and eased worries of a sharp downturn in the U.S. economy.
At 1227 GMT the euro was almost 1% lower against the dollar at $1.4503.
Some suggested renewed support for crude prices might be due to the influence of a recent return of buying interest in crude futures, particularly from funds.
“It looks to us that fund traders may be getting back in on the long side after taking almost a month off,” said Peter Beutel of Cameron Hanover, who pointed out Wednesday’s near $5 climb in Nymex crude futures was accompanied by a 15,000 contract increase in open interest.
Volumes were relatively thin again in European trading, as market participants wound down ahead of the Christmas holidays and year end. Along with the Brent January contract expiry, it contributed to relatively choppy trading.
“Volumes are low. Christmas fever is coming in, and it is expiry,” a broker in London said. “I wouldn’t even be looking at January today. In these volatile conditions, it’s not worth it.”
—By Nick Heath; Dow Jones Newswires
Texana : re CLR’s position in the woodford…will check. don’t know ARD, will look, thanks.
Welcome back Sambone
oil off a buck now on the stronger dollar, technical selling, and a weak broad market which of late has been running with and not against oil.
Thanks Wyoming for the emails…will read momentarily.
Crude oil is now trading in contango (meaning Feb crude is more expensive than the front month—this could be a sign traders think there is plenty of crude to meet near-term demand). Rafael Ramirez says Venezuela supports Brazil’s entry to OPEC; says Venezuela producing 3.2mln barrels a day (they produced 2.44mln per day in Nov). OPEC spot tanker fixtures rose to the highest level since February 2005. OPEC estimates 2008 world oil demand at 87.1mln b/d (the cartel says demand for OPEC crude will be 31.4mln bpd next year; including Angola and Iraq, OPEC produced 31.135mln bpd in Nov). The IEA raised its forecast for global demand by 115,000 barrels a day to 87.8mln barrels (2.5% above 2007 levels). IEA also lowered its est for 2007 demand for OPEC crude by 100,000 bpd (these ests often are revised). Potential for large nor’easter expected to blast the Northeast this weekend. Goldman says the street’s outlook for 2008 natural gas is too bearish (firm says current natural gas prices and equity values reflect the assumption of a warm winter and overdone concerns over higher LNG imports and US production growth. Firm’s best sector plays are EOG, COG, XTO, RRI and KGS). Contrary to the Goldman call is Credit Suisse who reduced their natural gas price outlook for 2008 (Credit Suisse cuts NYMEX gas target to $6.75 from $7.50 on oversupply concerns).
Big red open on very little volume.
Thanks RS… I’d add that Goldman has a heck of a lot more sway (doesn’t mean they are right) than Credit Suisse. Also, Credit Suise has been neutral as the stocks marched up and now they are getting more bearish. Fool me once, shame on you, fool me twice…don’t fool me again, lol.
are you watching that dog YGE this morning
Z: any views on DRYS at the moment?
RE: YGE. Still hold the Marches, didn’t feel I had enough time on the Decembers. It’s not a dog for being cheap, I am for botching the December trade.
RE: DRYS. Looked at bulk rates yesterday, appear to be trading further off. DRYS is exceedingly cheap but the direction on EPS for 2008 is uncertain at present with those rates. I’m not willing to dip more toes until I see a happy basing/bottoming chart, nothing V shaped, something more like an L (with the serif) The stocks trade on charts more than valuation and right now they are watching those spot rates come in a bit. I’m waiting.
9:26 am EST
Nymex Crude Down On US Inflation Rise
By Gregory Meyer
Of DOW JONES NEWSWIRES
NEW YORK — Crude oil futures fell Friday on fears that quickening U.S. inflation could eat into petroleum demand.
Light, sweet crude for January delivery on the New York Mercantile Exchange was recently down 55 cents, or 0.6%, at $91.70 a barrel. January Brent crude on the ICE futures exchange, which expires Friday, rose 27 cents to $92.39 a barrel.
The market dropped after the U.S. Labor Department reported U.S. consumer prices surged 0.8% in November, partly because of higher energy prices. The data surpassed Wall Street forecasts of a 0.6% increase in the consumer price index, according to a Dow Jones Newswires survey.
The data also complicate the Federal Reserve’s monetary policy decision-making as it seeks to head off an economic slowdown without stoking inflation. The dollar immediately rose against the euro after the consumer price report’s release, also pressuring oil prices.
“If there’s inflation, there will be weaker demand,” said Michael Cambria of Eagle Futures on the Nymex floor. “That’s what caused some of” the selloff.
Earlier, the International Energy Agency raised its projection for global oil demand in 2008, saying it would grow by 2.5% next year to 87.8 million barrels a day. Its projection last month called for a 2.3% increase.
The Organization of Petroleum Exporting Countries, which supplies about 40% of the world’s oil, issued its own oil market report that left projections for world oil demand growth next year virtually unchanged despite a worsening global economic outlook.
OPEC forecast world oil demand to grow 1.54%, compared with its projection of 1.53% growth made the previous month. It expects oil demand to grow 1.3 million barrels a day on-year to average 87.1 million barrels a day next year.
The market may have discounted both reports, said Nauman Barakat, senior vice president of Macquarie Futures USA in New York.
“I think both of these reports may not be taken as seriously as they should because the suspicion is they may in fact be tainted by their own bias,” as the International Energy Agency is the energy watchdog for the Organization for Economic Cooperation and Development, which include the world’s largest energy consuming nations, and OPEC is a producer group that earlier this month left production quotas unchanged.
Front-month January reformulated gasoline blendstock, or RBOB, rose 30 points, or 0.1% to $2.3774 a gallon. January heating oil rose 1.83 cents, or 0.7%, to $2.6330 a gallon.
—By Gregory Meyer, Dow Jones Newsw
Slight greening of the energy names with a very modest recovery in the Dow and S&P. Looks to me like the large cap E&Ps will jump if the rest of the market comes back up a bit. Again, liking the way energy is trading relative to weak oil and gas and a weaker market.
FTO with an in-your-face move to the Credit Suisse downgrade. Liking the move VLO for my Jan calls, don’t think it will be enough to have saved my Dec 72.50s punted yesterday.
McClendon keeps buying…did a jt. int. audit there years ago (1990 maybe) when they were first starting…never thought they’d make it…very incompetent early on imho. Heard me was part of Kerr McGee family but an oil lobbyist I know says that isn’t true…anyone know for sure?
Jivey, never heard he was related to KMG fam. He used to have the best deal in the oil biz with a large working interest in every well they drilled. He’d end up plowing it back into the stock sometimes buying $20 to $25 mm worth per month for months on end. Definitely a smart cookie now. His buddy over at SD is no dummy either.
go APA go.
come on CHK!
going to reenter RIG soon, more reading and expectations for 2010 of $20+ eps starting to show up in print.
thx Z…
what month/X are you thinking of for RIG?
Irish, this is z,
Probably the jan 140 or 145s …like to see this dip play out on on bit. Everyone is now talking what abetter fleet new RIG has relative to DO and the better earn gro story this gives them
thanks. that was what I was looking at.
THe CHK JAN 37.50’s are at a .80 prem. Does that seem cheap?
Ram abit cheap relative to some other one mo just in the money calls but then the stock laxks volatility. As long as gas does just collapse (which i dont expect) chk should be closer 40 or hopefully above…they may have some color out ye exit rate prior to their 4Q #s in feb…will check to see what their past behavior has been re pre ye pr’s
Nicky’s bud
http://www.321energy.com/reports/flynn/current.html
tanker rates are soaring….
NAT is 100 % spot and a good buy here at 34.35
Topt my favorite is at 3.39 and worth 7.00
TNP (z recomended) has a mixture of spot and time charters with a 50 50 share on the upside
The recent oil spill of south korea will help double hull tankers.
other players that will do well are osg,tk,& fro
For income investors
DHT and vlccf & atb should be considered
vlcc rates topped 200 k per day today and suezmax at 100 k
Just a week a few weeks ago they were at lows of 20 k per day
YES Grandma rates are 10 times higher and the stocks havent really moved!
I took TNP calls and mused about taking TK and FRO and OSG which seem to have run harder than most
Any thoughts on those B?
Also it seems that topt’s secondary coincided with on on short term peak in drybulk rates…can u quant how much each of their new hmax’s adds to eps given current rate?
So Phil Flynn is a full on bear now. Predicting we have seen the high for oil now through 2008 and that the IEA which he says normally underestimates demand (quite the opposite of what I recall) is now over-estimating it.
The problem I have with a guy like this is that he has DECIDED to be bear now. He sights no data and the long term forces he mentions were in place back 5 weeks ago when he was a raging bull. New data can and should change your opinion on a stock or a commodity for sure but just deciding we should suddenly go the other way is a bit lame without back up. Maybe he’s saying we trade sideways. But he just say I think the IEA has overestimated demand because of a slowing economy in the US. A slowing economy does not necessarily mean reduced oil consumption in the US nor in the more emerging areas.
wow CLR!
Last comment on Credit Suisse and then I’ll leave them alone. They are the brilliant guys who brought you PINN back in June. Overpriced Rockies gas player that has done nothing but go down since then. If they liked that and not NFX during this time frame…well, get a clue. Now PINN may be more reasonable…tune in this weekend for a bonus piece.
Z – Who DO you like? LOL
for E&P and service coverage I think the guys at Simmons are pretty smart. Jefferies used to be pretty good, Johnson Rice for E&P, Cantor for drybulk, tankers and commodities…don’t really have a favorite for refining as they all seem to botch the numbers, and am looking for someone in solar who understands the game there beyond politics
oh yes, and Sambone for weather
Snicker, snicker!
Also, he’s a funny guy!
re 24
topt is more of a wet player than a dry sector
They have 19 tankers, and only 1 dry dulker.
they have orders for 6 new product tankers and 5 more bulkers
Even though the dry rates have fallen from obscenely high levls they are still extremely high rates
as far as the other 3 names you mentioned
TK and FRO and OSG .. i like them all but dont own them. They are much larger and better capitalized than any other tanker stock. Fro is more aggressive..osg is cautious..ceo thinks his stock is worth 100 and its trading in the 70’s
topt is a value play on assets and a turn around story. The higher rates gives confidence in the turn around
Bill thank you very much.
Too man LOD’s on my screen, going for a bike ride. See ya all @ happy hour or the poor house.
NG at $7
http://www.brs-paris.com/index.php?page=news&type_news=tanker&page_news=1&numero_news=551
check out todays tanker newsletter
BTU at $61, ugh…should be there.
oil seeing an end of day bounce, market lacks any conviction unless its solar stocks
heating oil and rbob both up now; oil about to be.
a late day rally in oil likely to a have strong positive effect on APA and RIG
http://www.streetinsider.com/Insider+Trades/Chesapeake+Energy+(CHK)+CEO+Buys+Another+50K+Shares/3200540.html
patience is not one of my virtues…..
T: never could have guessed, lol
oil closed down a buck, group looks like a sea of red other than some alt enerrgy and the refiners.
bill: re NAT, looking at NAT’s chart it looks very promising in a coil pastern with implied upside of about 6$. the options aren’t that liquid which is a piss off though. Why aren’t anyone buying these stocks?
i got lucky with the pops of tk and fro last week. TK looks prime again, but FRO might try to fill the common gap it made last week. whatcha think? these rate sustainable? why are they like this? it looks to me from the historical charts they quickly revert back to the mean…
any thoughs on my thoughts?
what you can tell im a hot head from conversing with me in a blog? eek. lol
its mind boggling how fragmented this industry is. it’s almost reminiscent of Mao’s “backyard furnace” campaign in communist 1940’s China involving 90 million peasants
btu z! cramer says sell sell sell! we should always listen to him about everything
PBR down $4, getting a little more tempting.
Market just dying now.
T: when did he say it? Love for it to get back to $55 so I can get back in.
couple of shows ago
tsl wants to go to 35 or 65
z out of your experience does pinning action happen the last week or last day? do you now how the market makers do this?
ya know the YGE is lot cheaper than the TSL
pinning action generally only last Friday pre exp. I assume they do it by walking away from bids or offers as they see fit to get the stock to a certain level.
the feb cl contract is now more than the jan, but the rest later dated ones that that are all backwarded. isn’t this significant, since it probally means we will move into full contango sooner than later?
re pinning: i would imagine they have alot of stock opposite of the option short they have as a hedge too, thus giving them the ability to sell to depress or cover short to lift prices of the underlying.
are tsl and yge similar companies?`
T: not putting a lot of stock in a flip from backwardation to contango just yet as the front month is influenced by the approaching expiry on Tuesday.
TSL and YGL both in the solar biz.
i knew that you joker.
beer thirty
have a great weekend