14
Feb
Thursday – Oil Review & Natural Gas Preview + A Few Stocks of Interest
Yesterday was another lovely day for an options expiration week. This morning it looks like we will get at least a little follow through prior to Bernanke speaking this afternoon which should give us an opportunity to punt more February contracts, many of which have risen from the ashes in the nick of time.
Commodity Watch:
- Natural Gas fell 5 cents to $8.39 yesterday appearing to start the near term rollover towards the low $8s I'm looking for but is called up a dime plus in early trading this morning ahead of today's EIA inventory report as traders eye one more bigger withdrawal next week.
- Gas Storage Preview:
- My Number: 120 -130 Bcf withdrawal.
- Imports: down 2.4 Bcfgpd week to week.
- Weather: 167 natural gas-weighted Heating Degree Days last week (tropical for February). This compares to 212 HDDs in the prior week (when we saw a withdrawal of 200 Bcf) and 267 HDDs last year (254 Bcf). Last week was quite a warm up and the closest comp this season was the last week in November when we saw 88 bcf come out of storage.
- Street Consensus: 118 Bcf withdrawal.
- Crude Oil closed up $0.49 to $93.27 yesterday after a somewhat smaller than expected build in crude stocks was reported by the EIA and comfirmed by API numbers. Crude is trading up another $0.65 this morning meaning the March contract has marched nearly $8 per barrel (~ 9%) in the last 4 sessions.
The Oil Inventory Report Review:
Crude Thoughts:
U.S. Production - Rolling Over Again? I rarely write about U.S. production but it does matter. An increasing focus on Rockies oil may be helping to mitigate aggregate declines but I would have thought the recent soaring oil rig count would have shown better results than the following chart indicates.
Crude Imports Tumbled 760,000 Bopd Week to Week. Imports just couldn't maintain the 10 mm bopd mark from more than a few weeks in a row and I would point out that if they had held even with last week we would have been looking at a very different day today as this would have yielded a 6 mm barrel draw, something I said was unlikely in the Wednesday post.
Inventory Levels Continue To Improve ...
.... But For How Long Will This Build Continue? The following chart shows typical storage action for the approaching season. In general, with the ongoing seasonal maintenance at refiners and lack of heating related demand you can expect storage to rise for the next 10 to 12 weeks before it seasonally peaks in the early second quarter. This is normal and oil prices don't necessarily key off this unless the trend becomes more steep or more shallow (or breaks trend).
Gasoline Levels Remain Adequate and gasoline should begin to become more important to pricing of crude in the next month or so. Demand regainedthe 9 mm bopd mark but only barely. The following chart kind of says it all for me right now on gasoline and refiners.
Distillates - already starting to fade in terms of importance as the heating season starts to noticeably wane soon.
Earnings Watch & Stocks We Care About Today:
(CLB) - Core labs reports solid quarter.
- EPS of $1.36 (net of one time items) vs expectations of $1.35.
- Guidance of $5.75 to $6.00 for 2008 EPS equates to about 23% growth but is short of Street Consensus of $6.12.
- These guys analyze reservoirs and help operators producer their assets more efficiently. They are benefit from increased product depth focused on the resource plays in the U.S. (shales) as well as crude oil enhancement plays at points around the globe.
- They are recording record revenues across all product segments (reservoir description, production enhancement, and reservoir management) and across all geographic segments. In short demand keeps rising.
- Moreover, many of their services are readily scalable leading to improving margins.
- Conference call at 8:30 EST.
(COP) Wins Contract To Develop Sour Gas Field In U.A.E. As part of the privatization of some middle east assets, Conoco has been awarded a contract a $10 billion contract to develop sour gas from the Shaw field by the Abu Dhabi National Oil Company. Wins like this often lead to more wins like this.
(DRYS) Reports after the bell today. Conference call 10 am EST Friday.
Holdings Watch:
CALLS: (beefing up March positions)
- Entering APA March 110 Calls for $3.50. These were to replace the Feb calls I shipped off earlier in the week.
- HAL March $37.50 calls for $0.45. Also a rollover of Feb calls.
- Added a small batch of March DSX $35 calls for 0.75. Still holding the March 25 Calls. 4Q results will be released bmo Friday.
PUTS: No Action
Odds & Ends
Analyst Watch: will add in comments if any.
CHK raised to outperform at Wachovia – I helped train the analyst here. Smart guy, little slow out of the block this time in my opinion but the stock is cheap and I’m sure he’ll do fine with it.
February 14th, 2008 at 7:15 am…and he cut EOG to market perform. I’m sure that’s a valuation call as it reached $100 yesterday and is trading at 6.3x 2009 CFPS. (6.8 x 2008 numbers)
and CHK is trading at a paltry 4.5x 2008 numbers, despite a higher growth rate, by far greater reserves per share etc, etc, etc.
February 14th, 2008 at 7:21 am7:33 am EST
ICE Brent Up $1, Technical Buying Supports
By Nick Heath
Of DOW JONES NEWSWIRES
LONDON — ICE Brent crude futures traded more than $1 higher in London Thursday, as ongoing supply disruption concerns and a slight easing of economic fears kept upwards pressure on prices, triggering technical buying.
Despite broader U.S. recession concerns and builds in U.S. crude and gasoline stocks, moves higher faced limited resistance Thursday.
“We’re in a very technical environment at the moment,” said Jim Rintoul of TheOilTrader. “Fundamentally we should be lower but technically it’s well supported.”
At 1224 GMT, and ahead of its expiry Thursday, the front-month March Brent contract on London’s ICE futures exchange was up $1.13 at $94.45 a barrel.
The front-month March light, sweet, crude contract on the New York Mercantile Exchange was trading 84 cents higher at $94.11 a barrel.
The ICE’s gasoil contract for March delivery was up $9 at $842.25 a metric ton, while Nymex gasoline for March delivery was up 222 points at 241.21 cents a gallon.
—By Nick Heath; Dow Jones Newswires
February 14th, 2008 at 8:39 amOne more bit on CHK:
http://www.forbes.com/2008/02/13/billionaires-zell-buffett-biz-cx_af_0214billiebets.html?partner=yahootix
February 14th, 2008 at 8:42 amECA and TOT blew out their numbers.
February 14th, 2008 at 8:42 amOil up $1.26 to 94.54. When is oil not in “a very technical environment”?
Drybulks are called up early – earnings get busy there tonight and tomorrow.
February 14th, 2008 at 8:46 amCold mass in the midwest and south this weekend moves into the north and central east next week. Significant warming trend seen in the 11 to 15 day forecast.
February 14th, 2008 at 8:48 amHi Z
Tading view on CLB?
February 14th, 2008 at 9:23 amerm… that was supposed to be “trading view”
February 14th, 2008 at 9:26 amQMAR EPS 7 cents vs estimate of 41 cents
February 14th, 2008 at 9:28 am9:14 am EST
LATEST ON OIL Format For Printing
Crude Rises As Buying Mood Defies Soft Demand
DOW JONES NEWSWIRES
1412 GMT [Dow Jones] Nymex crude trades above $94/bbl, despite new oil statistics showing US crude and gasoline inventories are growing. “The mood in the market has clearly turned more positive despite the absence of any significant change in the dynamics of fundamentals,” Barclays Capital says. Nymex Mar crude +$1.20 at $94.47/bbl. (GM)
February 14th, 2008 at 9:32 amNew trend? Service stock (CLB) gives solid report and *doesn’t* get slammed at the open
February 14th, 2008 at 9:42 amBob – that QMAR 4Q goes to $0.35 when you back out the one time stuff. The danger of trusting headlines. Anyway, the small miss won’t matter as this keys off the price of EXM and the group’s action.
CLB has had a nice run and I was unable to catch the call this morning and will listen to the replay when available.
Sam – these guys are all such fair weather fans of crude. “oooh, ooooh, its up! I must like it now!!!” lemmings.
February 14th, 2008 at 9:43 amanyone know why tsl is the only one not to report their numbers this morning?
February 14th, 2008 at 9:47 amZTRADE:
Out COP March $80 Calls for $2.60, up 88% since entry on 2/8.
February 14th, 2008 at 9:49 amWow BTU really trying to save my coal there, lol. Thought those Feb 60s were toast more than once.
Getting ready to punt the XOM too, thought that once was dead as well.
February 14th, 2008 at 9:56 amthat’s it im calling china- i took callers at the close…. at least the shares are up
February 14th, 2008 at 9:58 amZTRADES:
Out DRYS March $80 Calls for average $11.40, up 138% since entry on 2/7.
Used profits to enter DRYS March $95 Calls for $4.70 average.
February 14th, 2008 at 10:12 am9:48 am EST
Nymex Crude Gains As Supply Concerns Persist
By Gregory Meyer
Of DOW JONES NEWSWIRES
NEW YORK — Crude oil futures moved choppily Thursday, adding to the week’s gains as worries about supply overpowered indications of weakening oil use.
Light, sweet crude for March delivery was recently 98 cents, or 1.1% higher at $94.25 a barrel on the New York Mercantile Exchange after rising as high as $94.66 a barrel. Brent crude on the ICE futures exchange was trading up $1.26 at $94.58 a barrel.
Analysts were surprised by the robust interest in crude after a U.S. government report showed demand slackening for most oil products and big increases in crude and gasoline stockpiles.
“The mood in the market has clearly turned more positive despite the absence of any significant change in the dynamics of fundamentals,” Barclays Capital said in a note.
Buying sentiment was bolstered by continuing perceptions of risk on the supply front. After a U.S. court upheld a freeze on more than $300 million of the Venezuelan state oil company’s assets in its legal dispute with Exxon Mobil Corp. (XOM), the Venezuelan oil minister called the move “judicial terrorism.” Petroleos de Venezuela SA earlier this week said it would stop shipping crude oil to Exxon in response to the U.S. company’s legal efforts to win compensation for a nationalized oil project.
In Iran, a major oil exporter, diplomats say advanced centrifuges have begun processing small quantities of uranium gas, the Associated Press reported, a disclosure that comes amid concerns over Tehran’s controversial nuclear program.
“The headlines once again are trumping fundamentals, and it continues to support prices,” said Stephen Schork, editor of energy markets newsletter The Schork Report in Villanova, Pa.
The International Energy Agency revised world oil demand growth projections downward Wednesday. While this would point to pressure on prices, it has also renewed speculation that the Organization of Petroleum Exporting Countries will cut output when it meets March 5, Schork said. OPEC supplies about 40% of the roughly 87 millions of barrels of oil the world uses each day.
Edward Meir, an analyst at brokerage MF Global, said concerns over over a slowing economy and waning demand “seem to have taken a back seat for the moment. However, these concerns are by no means over, and could come back to haunt the market, but timing seems to be everything these days, and in this regard, things do not feel very “sellerish” just now.”
Front-month March reformulated gasoline blendstock, or RBOB, rose 1.98 cents, or 0.8% to $2.4097 a gallon. March heating oil added 1.79 cents, or 0.7%, rising to $2.6335 a gallon.
—By Gregory Meyer, Dow Jones Newswires
February 14th, 2008 at 10:24 am120 Bcf withdrawal…in line with expectations. Gas is running higher on the number….go figure.
February 14th, 2008 at 10:30 amZ – #13. Agreed as always. The “Crowd” is starting to enter again. No place to hide these days. I just ignore them, and buy when “Mr. Market” gets depressed. It’s the long term that’s important. As Jim Rogers saids, commodities have a usual run of 10 to 15 years. We’re in the 5th to 7th year. I’ll sit tight and add as time goes on.
February 14th, 2008 at 10:31 amSam – that strategy should provide a nice retirement.
February 14th, 2008 at 10:33 amMorning all – the second Bernanke opens his mouth the market starts to come off -such resposibility!
February 14th, 2008 at 10:34 amwith the gas number safely out of the way, gas prices are back to tracking oil higher.
Morning Nicky – the guy’s a wet blanket.
February 14th, 2008 at 10:35 amNFX finally up today and first since during the conference call 3 days ago now. Just like APC, they will take it higher than pre call…especially if we keep gas up here, lol.
February 14th, 2008 at 10:39 amGo CHK Go!Huge breakout off a 2 year base. Finally, finally, finally. See comments 1,2,3.
February 14th, 2008 at 10:41 amLooks like energy market is giving us a repeat of this time last week.
February 14th, 2008 at 10:41 amexcept oil hasn’t been this high since early January.
February 14th, 2008 at 10:44 amN – What’s interesting to me is that he continues to throw money from the helicopter, BUT the banks are not lending. Look at SLM. The suits are not lending. They are increasing ATM fees, raising credit card fess, etc.
February 14th, 2008 at 10:44 amGot bop to a meeting, keep things going green…except for NG. Back in an hour.
February 14th, 2008 at 10:47 amanybody have any insight as to NFX has been flat?
February 14th, 2008 at 10:47 amDooch – walking out the door but in a nutshell, people didn’t like $3/Mcfe finding costs…the Woodford is new, costs are already much lower, the horizons there are stacked so you may see the Caney and a couple of other levels there in each well in the future. Very big potential. But guidance stayed the same and investors wanted more. Much the same as the APC reaction “great quarter, but what have you don for me today?” Silly analysts, five days later the stock starts to move. Same happens here I think except its starting early. I know these guys and they are extremely excited about Arkoma but also Rockies and that says nothing about exploration (4-5 in the deepwater this year etc). Ok, now I’m late. See yall in a bit.
February 14th, 2008 at 10:51 amInsanity move by energy yet again. This give OPEC zero chance of a production cut….. the world will go ballistic if they start saying we need to make a cut at these levels.
February 14th, 2008 at 11:01 amGood morning-news from my front-
My ace T/A lady thinks we can chop ahead positively for the next three weeks or so
Mr. K -now has reversed and is buying DUG this am-thinks we are due for a pullback-market has had big advance off lows
also thinks energy is over owned
reshorting btu and fcl of fcl guidance(he covered the other day-his timing has been impeccable in this space-)
and I thought this was interesting on ng-
February 14th, 2008 at 11:18 amV. Farrel)the BTU, or heating equivalent, between natural gas and oil is 6:1. Six mmbtu’s (million British thermal units) of gas equals the heat equivalent of one barrel of oil. The price relationship the past 10 years has been 7.8:1 for a whole lot of reasons, including being a politically safe U.S.-based industry and transport differences. These differences change the 6-to-1 heat exchange to 7.8-to-1 dollar exchange. With oil at about $93 a barrel, a heat equivalent price of gas would be almost $12 per mcf (million cubic feet). Gas has been bouncing around $8 per mcf, so it looks like there is a big cushion; the industry in general has been replacing its production at such a prodigious pace that I feel M&A is around the corner.
ECA I have been in ECA for a number of years with CHK my#1 & ECA #2. We picked up 15% just on the weaker dollar.
My focus is longer term. I am now buying more CHK leaps $50-09 @2.45. Very cheap (1/2) compared to similar APA & ECA 09’s
February 14th, 2008 at 11:25 amN – I think they will cut. Their arguement will be that there is plenty of oil out there (supply) and that it is the speculators that are moving the market. Remember, last fall when “W” asked them to increase? Hugo needs higher prices, the US dollar is dropping in value, which hurts the middle eastern countries, so IMO, they will cut.
February 14th, 2008 at 11:26 amI will be amazed Sam. WTI will be at 115 in a heartbeat….
February 14th, 2008 at 11:36 amBernanke misdjudged things again? Seems to have brought the rally to an absolute standstill. This session was previously unplanned and maybe he should have left it off the agenda.
February 14th, 2008 at 11:39 amWe are at a critical point here. 12350 area must hold on Dow or new lows here we come.
Ok, I’m back… this Bernanke cat is cursed.
February 14th, 2008 at 12:24 pmZ- can you address #34. TY
February 14th, 2008 at 12:33 pmI think the ratio of 6:1 (oil:gas) or 10:1 (for you Canadians do it differently) has just about 0 bearing on the price of natural gas. How wet the gas stream is in aggregate can cause the price of oil to drag or depress nat gas to some extent because the liquids stripped from the stream trade in closer to oil than does the methane but the binding relationship went out the window long ago. The old saying goes, “oil is global, gas is local” … this is still true.
When I talk production or reserves for the E&P companies I speak in terms of BOE or Mcfe – those are convenient equivalents since every one of them produces some oil and some gas, we lump it all together to more easily compare things…BOE or barrel of oil equivalent = 1 barrel or 6 Mcf of gas. 1 Mcfe or MCF equivalent = 1 Mcf or 1/6th of a barrel of oil.
But does $93 gas get you to $12 natural gas? No, it does not. Like I said, if the aggregate gas stream gets wetter, like much of the Barnett shale production, then you see more stripping of liquids when oil prices are high, which reduces available gas volumes and in term increases gas prices.
February 14th, 2008 at 12:42 pmThank you for that informative reply.I feel better now.
February 14th, 2008 at 12:51 pmZTRADE: Out CHK Feb $37.50 Calls average $5.40, up 177% to average of two entries (1/3 and 1/24). Still holding same strike $37.50 March calls.
February 14th, 2008 at 12:51 pm12:03 pm EST
Nymex Crude Gains As Supply Concerns Persist
By GREGORY MEYER
Of DOW JONES NEWSWIRES
NEW YORK — Crude oil futures breached $95 a barrel to a fresh one-month high Thursday as fears a recession would drag down oil demand abated.
Light, sweet crude for March delivery was recently up $1.84, or 2% higher, at $95.11 a barrel on the New York Mercantile Exchange after rising to $95.44 a barrel, the highest front-month intraday price since Jan. 10. March Brent crude on the ICE futures exchange, which expires Thursday, was trading up $1.91 at $95.23 a barrel.
In Senate testimony Thursday, Federal Reserve Chairman Ben Bernanke said he sees a “sluggish” U.S. economy picking up later this year and signaled openness to further interest rate cuts. Claims for U.S. unemployment benefits fell more than expected last week, while in December the U.S. trade deficit narrowed sharply.
John Kilduff, senior vice president for energy at brokerage MF Global in New York, said reports that Japan’s economy grew strongly in the last quarter also helped boost crude.
“The market has been struggling with whether we are recession-bound or not,” he said. “That’s an indicator that whether or not we are, there’s some life out there in the rest of the world and energy demand could hold up.”
Crude rose despite U.S. government data released Wednesday that showed demand slackening for most oil products and big increases in crude and gasoline stockpiles.
“The mood in the market has clearly turned more positive despite the absence of any significant change in the dynamics of fundamentals,” Barclays Capital said in a note.
Buying sentiment was also bolstered by continuing perceptions of risk on the supply front. After a U.S. court upheld a freeze on more than $300 million of the Venezuelan state oil company’s assets in its legal dispute with ExxonMobil Corp. (XOM), the Venezuelan oil minister called the move “judicial terrorism.” Petroleos de Venezuela SA earlier this week said it would stop shipping crude oil to Exxon in response to the U.S. company’s legal efforts to win compensation for a nationalized oil project.
In Iran, a major oil exporter, diplomats say advanced centrifuges have begun processing small quantities of uranium gas, the Associated Press reported, a disclosure that comes amid concerns over Tehran’s controversial nuclear program.
The International Energy Agency revised world oil demand growth projections downward Wednesday. While this would point to pressure on prices, it has also renewed speculation that the Organization of Petroleum Exporting Countries will cut output when it meets March 5. OPEC supplies about 40% of the roughly 87 millions of barrels of oil the world uses each day.
Oil is getting closer to its record intraday high of $100.09 a barrel, reached Jan. 3. Kilduff said in an earlier client note that “it may require an unbroken string of optimistic economic reports before energy markets can completely shake off lingering concerns of weakening oil demand.”
Front-month March reformulated gasoline blendstock, or RBOB, rose 4.95 cents, or 2.1% to $2.4394 a gallon. March heating oil added 4.10 cents, or 1.6%, rising to $2.6566 a gallon.
—By Gregory Meyer, Dow Jones Newswires
February 14th, 2008 at 12:58 pm#39
Is Bernanke Headed For The Exit?
These are the personal views of Peter Morici, a professor at the University of Maryland School of Business and former Chief Economist at the U.S. International Trade Commission:
Today Ben Bernanke appeared before the Senate Banking Committee. In his testimony, he noted the shortages of credit, especially the reluctance of banks to extend credit to one another, and the inability of the banks to securitize Alt-A, Subprime and Jumbo mortgages. The latter makes all but Fannie Mae conforming mortgages and home equity loans too scarce.
In plainer terms, if you are not a prime borrower seeking a first mortgage of less than $417,000 you are having a tough time finding financing. The stimulus package will raise that limit but only for prime borrowers.
Since September, the Fed has lowered the target federal funds rate 2.25 percentage points but to little avail, because the bond market no longer trusts the major New York banks to package mortgages into securities.
Bernanke has simply not addressed this more fundamental structural problem that frustrates his monetary policy.
The large New York commercial and investment banks are operating with a flawed business model. Essentially, compensation for executives is based on the volume of securities transactions and is lavish. These bankers are encouraged to slice, dice and puree mortgages into unintelligibly complex securities, to support the high profits and compensation packages of recent years. Recently, even securities backed by fairly safe student loans have been greeted with skepticism, because of their arcane structures, intended to generate big bonuses for their engineers.
Historically, mortgage banking and the business loan activities of commercial banks did not support the kinds of profits and salaries earned at investment banks. The combination of commercial and investment banking over the last two decades has raised the expectations that those that underwrite mortgages and business loans should be compensated at levels comparable to those facilitating more complex merger, acquisition and investment activities. This has motivated the development of arcane, engineered mortgage- and other loan- backed securities.
The hard reality is that banks borrowing at 5% and lending at 7% cannot reward those that underwrite mortgage- and other loan-backed securities at the levels comparable to traditional investment banking. All the financial engineering under the stars can’t change that math.
Bond buyers have figured out the value added in these complex securities is negative and risky. Banks like Goldman Sachs that sold these securities to clients while shorting the market are now viewed with great suspicion.
So far the banks, flush with infusions of capital from Sovereign Wealth Funds, have not had to make necessary adjustments in their business practices. Those sources of capital see no problem with the business practices of banks that managed to lose their stockholders one% of GDP, because these funds have non-profit motivations for investing.
Bernanke needs to speak to these issues, and encourage the adoption of sounder business models. If he does not, the recession will be long and hard.
Bernanke has responsibility for encouraging the sound functioning of credit markets.
He is ignoring this task through silence, and he may have to be shown him the door.
February 14th, 2008 at 1:00 pmCHK bought March $45’s @.85
February 14th, 2008 at 1:18 pmSam – interesting comments by Peter Morici in #45. I always did wonder just where all that masters-of-the-universe compensation was coming from.
Maybe Bernanke needs to be shown the door, but how would that message be transmitted to the President? I guess someone will just have to sit Junior down and say, “Now listen, this Bernanke is really doing a heckuva job. But remember when your pal Don… what was his name…Rumsfeld, yeah. He was doing a heckuva job and then he had to go? Remember? It’s kinda like that”.
February 14th, 2008 at 1:21 pmparty over at FSLR – ben is a buzzkill
February 14th, 2008 at 1:26 pmZ didn’t listen to BB.What did he say that effects FSLR?
February 14th, 2008 at 1:29 pmWell having opened his mouth and stressed the downside risks he will no doubt have to rescue the markets from himself with further rate cuts shortly.
February 14th, 2008 at 1:30 pmNothing, he just put the kybosh on this rally and FSLR just ran out of steam.
February 14th, 2008 at 1:30 pmSPX doesnt really have much support until 1340. We may see a bounce to 1360 region and then a further fall to the 1340 area.
February 14th, 2008 at 1:31 pmDOW – 12304 is the line in the sand rather than 12350 I noted earlier.
February 14th, 2008 at 1:33 pmZTRADE:
March UNG $42 puts for $1.75. with natural gas now up 33 cents to $8.70+. Seems like short covering and the move in oil are driving today’s 4% rally. Cold weather will soon fade and I expect gas to soften soon.
February 14th, 2008 at 1:53 pmNat gas has resistance at 8830 and 9050.
February 14th, 2008 at 2:07 pmOil up $2. Oil stocks certainly buying the last bit of this rally. Just too far, too fast without good reason.
February 14th, 2008 at 2:21 pmZ Latest thoughts on BTU please
February 14th, 2008 at 2:27 pmBTU – that’s pretty open ended. Can you be specific?
February 14th, 2008 at 2:30 pmSure.just wondering if BTU sells off with UNG
February 14th, 2008 at 2:35 pmNG 6;1. This would equal CL:NG 2:1 on a contract basis. Looking at prior years and even now there seems to be a co-relation when on many days they trade in tandem oddly enough at 1:1.
CL and NG are trading today in tandem on BTU basis CL mar. up 2X 1.50 = 1 NG 3.00
Gas is local. However, as per yesterday’s comments Is Eurasia LNG not more attracted to Europe at their prices which I understand is aligned to brent CL. (Gasoil)
February 14th, 2008 at 2:44 pmOn this note I’m looking at EIA short term (2008) outlook for NG. It shows stable supply and demand. Drilldown shows Canada reduction of only 200 BCF. p.a. which seems unrealistic. LNG supply is projected same as 2007. When Canada serious supply reduction finally does kick in then
A. Where will NG come from
B. will Gas still be local
aahhhh soooooo. That’s an interesting thought on the concept that gas often trades coal. I think a lot of people are looking for the coals to do well this year but it has had a nice little run….maybe a better way to play the expected down move in gas than UNG which I find trying to trade. I now remember why its been so long since I traded UNG…very thin. Re 57 I just thought you were poking me in the eye over my yet again worthless call position there.
February 14th, 2008 at 2:47 pmMarket crashing …did Ben say something more?
February 14th, 2008 at 2:48 pmMarket don’t want to wait till the next FOMC
February 14th, 2008 at 2:58 pmU.S. production now: about 55 Bcfgpd
Canadian imports (gross): ~ 9 Bcfgpd
LNG: less than 1, averaged 2 Bcfgpd last year.
If Canada falls and prices here warrant then it will come from increased drilling and LNG. Still, those numbers will have to shift dramatically for me to stop using that old saying.
February 14th, 2008 at 3:01 pmmd or anyone, is another cut priced into to rates now?
February 14th, 2008 at 3:02 pmZ – they just downgraded one of the bond insurers…
February 14th, 2008 at 3:03 pmN – Can’t find the downgrade. Which one?
February 14th, 2008 at 3:09 pmre: UNG
Z I have definitely found that there is no volume in the options- but the stock is acceptable- meaning i can get in and out reasonably well without dealing with ridiculous spreads
February 14th, 2008 at 3:13 pmN – Found it, FGIC downgraded from AAA to A3 (6 levels) by Moody’s
February 14th, 2008 at 3:15 pmYona – I used to use SWN – 99% nat gas, but I hate shorting, high growth, good companies. Also, the stocks often don’t correlate well with the commodities over short stretches. But I agree, UNG options trade poorly. Anyway finds a more liquid proxy for Natural gas with liquid options ta boot and they get a ZEB hat.
February 14th, 2008 at 3:16 pmDrybulks look like they may get a rally into the close.
February 14th, 2008 at 3:18 pm3:10 pm EST
Nymex Crude At 5-Week High As Economy, Supply Eyed
By GREGORY MEYER
Of DOW JONES NEWSWIRES
NEW YORK — Crude oil futures shot to a five-week high Thursday, led by easing concerns about the economy and perceived risk on the supply front.
Light, sweet crude for March delivery climbed $2.19, or 2.4%, to settle at $95.46 a barrel on the New York Mercantile Exchange. March Brent crude on the ICE futures exchange, which expired Thursday, closed at $95.11 a barrel, up $1.79. The more actively traded April contract climbed $2.26 to $95.19 a barrel. Brent settlement prices were not immediately available.
New economic reports calmed some worries about an economic slowdown in the U.S., the world’s No. 1 energy user. Claims for U.S. unemployment benefits fell more than expected last week, while in December the U.S. trade deficit narrowed sharply. In Senate testimony, Federal Reserve Chairman Ben Bernanke said he sees a “sluggish” U.S. economy picking up later this year and signaled openness to further interest rate cuts.
“Bottom line, I think the market has decided the economy is not going to have a recession right now,” said Peter Beutel, president of Cameron Hanover, an energy risk management firm in New Canaan, Conn.
The dollar slid to a one-week low against the euro amid Bernanke’s testimony, supporting dollar-denominated crude futures.
Nymex futures closed at the highest price for a front-month contract since Jan. 9, when they settled at $95.67. Oil is now 4.2% off its all time settlement high of $99.62 a barrel, reached Jan. 2.
“It could stall out, but the bigger picture is still looking bullish from a technical standpoint to perhaps retest the $100 area again,” said Tom Bentz, a broker and analyst at BNP Paribas Commodity Futures in New York.
Bentz said Thursday’s expiration of options on March crude futures hoisted prices higher. The number of $95 call options, which gave the holder the right to purchase March crude futures contracts at $95 a barrel, totaled a relatively large 8,243 before the market opened Thursday, according to Nymex data. The largest batch of March call options, written with a $100 strike price, expired worthless.
“When you come into the final couple of days of options trading, every time you get to a particular strike level you’re going to find volume that comes into the futures market to protect against exposure in the options market,” Bentz said. “As you took out 93 bucks, you had buying come in. After $94, more buying came in. Ninety-fives were the ones I thought we were going to target, and we did.”
Supply concerns also fed buying sentiment. As a legal fight over a nationalized oil venture escalates between Venezuela and ExxonMobil Corp. (XOM), Venezuelan Oil Minister Rafael Ramirez told reporters spot oil sales to Exxon were being suspended and the country was considering what actions to take regarding oil supply to a refinery in Chalmette, La. that is a joint venture between Exxon and Petroleos de Venezuela SA, or PdVSA, the state oil company. Chalmette imported 77,433 barrels a day from Venezuela in November.
In Iran, diplomats say advanced centrifuges have begun processing small quantities of uranium gas, the Associated Press reported, a disclosure that comes amid concerns over the oil producer’s controversial nuclear program.
Front-month March reformulated gasoline blendstock, or RBOB, climbed 8.62 cents, or 3.6%, to settle at $2.4761 a gallon. March heating oil settled 5.10 cents, or 2%, higher at $2.6666 a gallon.
–By Gregory Meyer, Dow Jones Newswires
February 14th, 2008 at 3:19 pmQuestion – What is it going to take for Americans to “wake up’? A two by four upside the head?
http://www.detnews.com/apps/pbcs.dll/article?AID=/20080214/BIZ/802140491/1148/AUTO01
February 14th, 2008 at 3:26 pmanybody got a date for EXM to report?
February 14th, 2008 at 3:35 pmDRYS should be out after the close.
February 14th, 2008 at 3:37 pmDSX some time between this afternoon and the open.
Sam: amazing article in # 73. It seems predestined that Detroit will cede future car markets to …well just about everyone else, who are building smaller, efficient/alt-fuel/electric etc. for the future.
Z – on the LNG big picture: as more regas plants, tankers etc come on stream, won’t the NG market end up transitioning to a global one? With crude ever on upwards, substitution of NG for transport will accelerate (already common in asia, beginning in US, see CLNE). So a shift closer to BTU parity would seem to be the endgame.
February 14th, 2008 at 3:37 pm#65 Don’t know. Once BB hinted that rate cuts are needed it becomes self fulfilling prophecy and the market needs it’s fix just to sustain itself at this level.
#73 It’s what’s keeping the Big 3 alive
February 14th, 2008 at 3:52 pmMD – #73, Agreed, but for how long?
February 14th, 2008 at 3:55 pm191 point swing today on the Dow
February 14th, 2008 at 3:56 pmDman – It will take a very long time if that ever happens. Given the size of the resource pool here I think that local supply will dominate in our lifetimes. Not saying LNG doesn’t have its place but I remember talking about this in the mid 90s as something that would be and early 200s thing and we are no where near LNG wagging the price dog. Also, efficiency/new technology will in time supplant some natural gas demand. Natural gas should used to heat things, to make ehtylenes etc, electricity? not really so much, not with new tech like solar, we used to use a lot of oil to generate electricity, now less than 3%. right now 20% of generation comes from NG and people see that going to 30% and it may but then I think it gets replaced with something else.
As to cars its a tiny market. It can grow rapidly in terms of %s and it will still be tiny. Nat gas is not a great fuel for cars outside of fleets. In the U.S. we used 2 Bcf in the month of November to power cars. That’s out of total gas demand of 1800 Bcf. Seriously 2. But it was at half a B per month in the mid 90s when they started tracking it so it looks like pretty great growth. I’ll put it in a chart in tonight’s gas post.
February 14th, 2008 at 3:58 pmTini time, Happy V day, ya know!!!!!
February 14th, 2008 at 4:01 pmZ- What explains why today RBOB is stronger than HO when NG is stronger than CL.
NG is not practical for transport. Iran doing conversions big time because they’re subsidising their CL anyway and then have to pay someone to refine it. Just in case they decide to go nuclear they’re preparing for sanctions.
I see Tata’s, new technologies (in hybrid,plug ins for city driving) replacing CL for transport before it replaces NG for heat.
February 14th, 2008 at 4:12 pmHope I didn’t confuse with the above so let me be clear, I think nat gas is a bad choice for anything but some fleets and it will be costly for them.
the connection between ho and nat gas is pretty lose, – I can’t explain the moves, maybe its technical. the moves in the price of any of them today make little sense but its going to be colder first in gassier parts of the country before it hits the HO intensive parts. NG has got to be short covering. That big short position in NG has got to be suffering and this has to be the weaker hands folding…many have been very short all winter…I’m sure this is not what they had in mind.
February 14th, 2008 at 4:20 pmrates continues to go up today. The Panamax rates are continuing to play catchup.
http://www.dryships.com/index.cfm?get=report
February 14th, 2008 at 4:25 pmZ- Any news on DRYS
February 14th, 2008 at 4:31 pmnothing yet
February 14th, 2008 at 4:32 pmI can only think that Bernanke must be short these markets and uses every opportunity he can to hit the podium and make sure the market tanks. I cannot think of a single time in the last six months when we haven’t had a triple digit loss on him speaking! I don’t get it because if this carries on in 3 weeks time he will have to be rescuing a stock market crash that he started!
February 14th, 2008 at 5:16 pmDRYS 4Q of $4.50 (after backing out a gain) vs est of $4.04. Stock is trading at $90.
February 14th, 2008 at 5:43 pmsimply click the following internet page
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May 12th, 2014 at 11:40 pm