15
Feb
T. G. I. E(xpiration) + More Earnings (DRYS Big Beat, DSX A Small Miss) & CHK Has Reserves Out
The broad markets look determined to open lower as Bernanke's words from yesterday scare everyone. Meanwhile, commodities continue to rally beyond reason. If I don't talk to you in comments have a great three day weekend (market's are closed Monday for President's day).
Commodity Watch:
- Crude Oil jumped $2.19 to $95.46 yesterday continuing a rally that has most oil commentators shaking their heads. There wasn't really any news, even new hype, to warrant the continued gush higher in crude and Ben Bernanke reiterated his learned opinion that the economy is circling the drain which you would think would auger for weaker demand but not to this market. I think short covering is largely to blame and technicians are suddenly screaming $100 oil again. This morning oil is trading up another $0.40 closing in on $96.
- Asia crude demand remains strong. According to Bloomberg, crude shipments to China increased 1.8% in January and 4Q shipments to Japan increased 3.7%.
- Natural Gas soared yesterday closing up $0.38 to $8.77 with the day's rally more than doubling in the wake of an in line storage report . See last night's gas report here. This morning gas is up another 6 cents this morning.
- Rumor Watch: The unconfirmed (that's why it's a rumor) rumor du jour is that a large, Houston based hedge fund is in trouble over a natural gas short and is getting squeezed ala Amaranth in September 2006.
Holdings Watch:
CALLS
- (DRYS) - Exited the March $80 Calls for average $11.40, up 138% since entry on 2/7.
- (DRYS) - Used profits from the prior sale to enter March $95 Calls for $4.70 average.
- (CHK) - Exited the February $37.50 Calls for an average of $5.40, up 177% to average of two entries (1/3 and 1/24). A week ago these were only $0.30 and I opted to stay in them when asked at the time which turned out to be fortuitous. Still holding same strike $37.50 March calls.
- (COP) - Exited the March $80 Calls for $2.60, up 88% since entry on 2/8.
PUTS
- UNG March $42 puts entered for $1.75.
Earnings Watch - Time for the Dry Bulks:
DRYS Reports Big 4Q Beat
- 4Q07 EPS of $4.50 versus expectations of $4.04 (range from $3.82 to $4.35), up from $2.92 in 3Q07.
- Company average TCE (time charter equivalent) rate was $67,587, up strongly from 3Q07's level of $45,525 per day.
- 17% more planned fleet days in 2008 relative to 2007. At last report this figure was 16% higher YoY.
- They are "Fixing" Rates Faster This Year. 63% days remain unfixed for 2008. At last report this was 85%.
- Utilization Is Extremely High. 99.5% fleet utilization vs 97% in 4Q06 and 98.4% in 3Q07.
- Conference call at 10 EST.
Note: DRYS fleet is composed of largely Panamax vessels and it is these rates which are now seeing a sharp increases as they play catch up to already rebounding Capesize rates.
DSX Misses By 2 Cents.
- The headline will put the mark on early trading but they actually beat on the top line.
- Utilization continued to ride at 99.3%
- TCE increased from $25,323 a year ago to $36,459 in 4Q07
- Conference call at 9 EST.
Other Stocks of Interest Today Watch:
CHK Reports Reserves
- Reserves reach 10.9 Tcfe. This is just south of what I expected of 11 Tcfe but at 369% reserve replacement it is still easily "best in sho" among the large cap E&P realm.
- All-in F&D comes in at $2.08 per Mcfe. That's very low.
- Reserve life increases to 15 years.
- They also announced a small property sale in the Woodford and their exit from the Williston Basin; combined proceeds of about $240 million.
- They have a brief review of their current operations in their major project areas out with the release which I'll be going through in more detail as time permits.
- Conference call to discus reserves at 9 EST.
Odds & Ends
Analyst Watch: (CSIQ) to buy at Piper, (ALJ) to Buy at Carris, (PTEN) from sell to hold at Deutsche, Lehman cutting price targets for the refiners.
z- you gonna bail outta those UNG puts based on that news- or look to add?
February 15th, 2008 at 9:01 am8:45 am EST
Nymex Crude Pares Gain After Weak NY Fed Survey
By Greg Meyer
Of DOW JONES NEWSWIRES
From MARKET TALK:
[Dow Jones] Nymex crude briefly pushes above $96/bbl, then falls back after NY Fed survey shows business conditions deteriorated significantly in Feb, with the index at -11.72, falling below zero for first time since May 2005. Nymex Mar crude +29c at $95.75/bbl. (greg.meyer@dowjones.com)
Reported earlier:
LONDON — Crude oil futures hovered around Thursday’s closes in London Friday, as the markets reviewed the week’s price climbs in light of ongoing economic uncertainty and current market fundamentals.
In addition to a lingering row between Venezuela and Exxon Mobil, crude prices continued to draw strength from technical trading Friday, pushing Nymex light, sweet crude futures briefly above $96 a barrel for the first time in five weeks.
But with prices appearing to stretch beyond levels justified by current market fundamentals, analysts suggested prices might prove resistant to further climbs.
“We believe that in the wake of yesterday’s sharp advance, the energy markets have become somewhat overextended here,” said Edward Meir, analyst at MF Global in New York. “The almost $7 low-to-high move in crude this past week has more than amply discounted the Venezuelan/Exxon spat, and unless another shoe drops, we don’t think the market will be able to milk this issue for much longer.”
At 1240 GMT, the front-month April Brent contract on London’s ICE futures exchange was down 45 cents at $94.71 a barrel.
The front-month March light, sweet, crude contract on the New York Mercantile Exchange was trading down 15 cents at $95.31 a barrel.
The ICE’s gasoil contract for March delivery was up $1 at $848.25 a metric ton, while Nymex gasoline for March delivery was down 73 points at 246.88 cents a gallon.
Downbeat testimony from Federal Reserve Chairman Ben Bernanke to the Senate Banking Committee Thursday — during which he described the outlook for U.S. economic growth as “sluggish” — reminded markets of the troubles facing the U.S. economy, despite a series of mildly positive macroeconomic readings during the week.
With oil traders wary of reduced crude consumption amid a slowdown, the economic outlook — combined with a fifth week of builds in U.S. crude oil stockpiles revealed Wednesday — suggests both economic factors and oil market fundamentals could herald renewed downside pressure on crude prices.
“In the short term, simmering economic fears amid a rising inventory position represents a key source of downside risk to prices and a move back in the high $80s looks likely, especially in the event of disappointing economic data,” said analysts at Barclays Capital.
Meanwhile, the Organization of Petroleum Exporting Countries Friday said weakening world economic growth and demand prospects, alongside ongoing increases in U.S. and European crude and gasoline inventories, could soon force the producer group to pare back its own production to avert a drop in crude prices.
“These unfolding developments in the world economy and the oil market warrant close monitoring in the months ahead to ensure a timely response to changing conditions,” OPEC said in its February oil market report.
Prices were little moved in response to the report, which also saw the group revise its forecast for 2008 global oil demand growth by 100,000 barrels a day to 1.2 million barrels a day.
In addition to restrictions on Nigerian crude exports, the standoff between Venezuela and Exxon remains a prop of support for prices. But the oil market’s skepticism that Caracas will extend its action beyond its halt of exports to the major appears to have limited further price upside. More comments from President Hugo Chavez on the situation are expected in his weekly radio broadcast Sunday.
“We still feel that it is highly unlikely that Venezuela, which produces 2.3 million barrels a day (of which 830,000 barrels a day is consumed internally and 1.35 million barrels a day go to the U.S.) will cut off the U.S. entirely from its exports as their ability to sell oil at a profit to other markets is not favorable,” said Lehman Brothers analyst James Crandell.
Profit taking is also expected to affect crude oil prices Friday, ahead of a three-day U.S. weekend. The New York Mercantile Exchange is closed Monday in observation of the U.S. Presidents Day holiday. Electronic trading will continue as normal.
—By Nick Heath, Dow Jones Newswires
February 15th, 2008 at 9:03 amyona – added yesterday and that rumor, if true, means its a squeeze and likely to down draft after that firm has covered.
February 15th, 2008 at 9:07 amEntire coal sector downgraded at Goldman, including ACI, BTU, FCL, MEE, CNX. Site peak historical multiples, and coal supplies will come to market faster than thought.
February 15th, 2008 at 9:10 amCompletely off subject, need help understanding.
Ok, IMO the consumer is pulling back on spending, etc., etc., and so on. We’re seeing major retailers with lower numbers. Today ANF sales up 9%, etc. My question is, how can that happen? My buddies tell me that 14 year olds are not effected by the economy. I disagree. I think they are “Cooking the books”. Any thoughts? I’m going to do some work on it this weekend, and I may go short on it next week.
February 15th, 2008 at 9:11 amFTI earnings release yesterday seemed solid to my inexpert eye.
Call in progress: they are expressing confidence in continuing subsea systems growth.
February 15th, 2008 at 9:13 amCHK Reserves Conference call.
At the beginning of the year, they had wanted to get to 10, not 11 Tcfe by year end (they came in 10.9)
Think they will get to 13 Tcfe by end 2008 and 15 Tcfe by end 2009.
current acreage : 20-25K per acre in the Barnett, 10-15 in the core Fayetteville, $6,300 in Woodford.
Their PV10 has increases $7B or $14 per share due to the last 6 weeks move in gas prices.
February 15th, 2008 at 9:13 amHearing from a second source (Simmons) that a large hedge fund blew up yesterday that was short energy.
February 15th, 2008 at 9:19 amRe 5:
Looking at my 14 year old, I don’t believe they are affected by the economy. Most parents will try and shield their kids from the fact that this are tight or getting tough. Also every dollar my daughter earns or that her grandparents gives her go right to Hollester, ANF, Aeropostal, etc….
February 15th, 2008 at 9:19 amFTI conference call:
They still expect midyear spinoff of non-energy businesses
February 15th, 2008 at 9:20 amCHK Q&A
1) Barnett (about 25% of Capex)
2) Fayetteville
3) Sahara – west Ok
Commented they could replace company production this year from the Barnett alone and hold company production flat for the year if they only drilled Barnett and nothing else.
Where do expect to learn the most in 2008 from the emerging plays:
Marcellus Shale – they do have the largest acreage position – they’ve been quietly acquiring. (>1 million acres now), drilling for over a year, hz and vert wells, not disclosing results.
Emerging unconventionals: will not discuss today – reminds everyone that they see more shale than anyone else in the world every day…have built a shale core lab with 20 petrophysicists is leader in the world.
Basically, when they see something they like they keep quiet about and acquire acreage as fast as possible.
February 15th, 2008 at 9:26 amMorning all. Sane very funny re 9 – exactly where my daughters money goes to! I thought she was singled handedly responsible for their great numbers!
Z – if there is any truth to that hedge fund blow up rumour it could be very bearish for nat gas don’t you think? Mind you could be painful first – remembering Amaranth!
Energy is now into h a s territory which will not have escaped anyone. Funny to see PF betting against the rise this time.
Technically new highs are not out of the question at all but surely we are going to need a catalyst – I mean this %10 rally is on what???? Inventories that have been building for weeks. Yea right!
February 15th, 2008 at 9:26 amS – Thanks, I guess I’m just tight on $’s with my sons. Just makes me scratch my head and wonder why?
February 15th, 2008 at 9:27 amBroader market – options expiry – could be very volatile.
February 15th, 2008 at 9:27 amNicky – I certainly think that if that’s it the other hedgies are going to have fun swabbing the Streets with the belly up hedgies’ blood. But then gas prices should fall in a vacuum down to at least $8. NG not following crude all of a sudden, maybe it is starting. Glad to be short.
February 15th, 2008 at 9:29 amSam,
My son is cheap compared to my daughter 😛
February 15th, 2008 at 9:30 amWTI has resistance at 96.69 and 97.10
February 15th, 2008 at 9:33 amCHK Q&A
in the Western Barnett play in W. Texas, they are getting closer and have recently been completing vertically in the Barnett and horizontally in the Woodford in the same well. Seems to be working.
Addressed the criticism from critics about their leasing practices (early acquiring for too much). Aubrey pointed out that they can sell acreage for 10x what they bought it for originally if they want but for the most part they are keeping their acreage. For instance in the Woodford, they had some acreage that they thought was less prospective and end ed up selling it for 12x what they bought it for last year (may have been to NFX).
February 15th, 2008 at 9:35 amS – God knew not to give me girls, just three boys. You can smack em upside the head and 30 minutes later they are your buds. LOL
February 15th, 2008 at 9:42 amCHK just bitch-slapped (sorry but can’t think of a better expression) Joe Alman at JP Morgan for his criticism and characterization of their F&D costs. They say he’s wrong, that its not debatable and they schooled him in it. They say hes wrong on APC’s reserves too.
February 15th, 2008 at 9:43 amNicky – note gas running out of gas this am?
CHK call still ongoing but it went very well. They had some interesting comments on LNG in the line of those Mcf’s are needed around the world so unless prices rise here don’t expect them to just come herer.
Most asset packages on the way.
DRYS call in 10 minutes
February 15th, 2008 at 9:52 am9:31 am EST
Nymex Crude Breaches $96/Bbl, Sustaining Trend
By Greg Meyer
DOW JONES NEWSWIRES
NEW YORK — Crude oil futures breached $96 a barrel Friday for the first time since mid-January as traders shook off disappointing economic data to sustain the week’s strong upward trend.
Light, sweet crude for March delivery was recently up 84 cents, or 0.9%, at $96.30 a barrel on the New York Mercantile Exchange. April Brent crude on the ICE futures exchange rose 27 cents to $95.43 a barrel.
With Nymex pit trading closed for Monday’s Presidents Day holiday, some market participants expect a day of profit-taking. Through Thursday’s close, front-month Nymex futures had gained 4% over the week. Electronic trading will take place as usual Monday.
So far, however, market direction is on buyers’ side.
“Although the market generally consolidated overnight, the huge momentum shift during the past week will place the odds in favor of a Friday rally today ahead of a three-day holiday weekend for most traders,” said Jim Ritterbusch, president of Ritterbusch and Associates, a Galena, Ill.-based energy trading advisory firm. “The complex has moved back into a sort of twilight zone where specific drivers behind the price gains are difficult to define and where reasons for the strength become excuses instead.”
Crude strengthened despite a report showing manufacturing in the New York Federal Reserve’s district deteriorated significantly in February to its weakest level since May 2005. The prospect that a U.S. and global slowdown will undercut oil demand has weighed on crude since it surpassed $100 a barrel at the beginning of the year, though robust demand growth in developing countries continues to keep supply and demand balances tight.
“Geopolitical problems and tight fundamental market conditions remain and continue to expose the markets to upside risk,” Deutsche Bank chief energy economist Adam Sieminski said in a note to clients.
Among the political tensions supporting bids for crude this week has been ExxonMobil Corp.’s (XOM) escalating legal battle with Venezuela over a nationalized oil venture in the country. Venezuelan Oil Minister Rafael Ramirez said Thursday that about $750 million is fair compensation for Exxon’s share in the project. Exxon has won orders freezing $12 billion in assets of the Venezuelan state oil company as arbitration proceeds between the two parties.
Risks of weakening world economic growth and demand, along with mounting U.S. and European crude and gasoline inventories, could also force the Organization of Petroleum Exporting Countries to trim its own production to avert a drop in crude prices, the group said in its February oil market report.
“These unfolding developments in the world economy and the oil market warrant close monitoring in the months ahead to ensure a timely response to changing conditions,” OPEC said.
OPEC next meets to review output policy on March 5. Analysts say the cartel will have a hard time, politically, to reduce output if oil prices remain above $90 a barrel.
Front-month March reformulated gasoline blendstock, or RBOB, rose 3.74 cents, or 1.5% to $2.5135 a gallon. March heating oil climbed 84 points, or 0.3%, to $2.6750 a gallon.
—By Gregory Meyer, Dow Jones Newswires
February 15th, 2008 at 9:57 amin case you missed it
February 15th, 2008 at 9:59 amU.of Mich 69.6 v 76
Part 1
Despite High Stocks, Gasoline Heads Higher
By DAVID BIRD
A DOW JONES NEWSWIRES COLUMN
NEW YORK — What goes up, must come down. In the oil market, that rule seems to apply to gasoline inventories, not prices.
In the U.S., the world’s biggest oil market, gasoline stocks are at the highest levels for this time of year since 1999. While that’s helped pump prices dip to their lowest level since late October, higher prices are on the horizon.
Inventories will soon peak as demand increases ahead of the spring-summer driving season. With crude oil futures prices averaging above $90 so far this month — more than 50% above a year ago — and the most ever in February, retail gasoline prices are just beginning their march higher.
Nationwide average retail prices are expected to peak in May, as the summer driving season revs up, at a record $3.38 a gallon, about 25 cents more than a year ago, according to the federal Energy Information Administration.
The price jump adds further anxiety to the near-term economic outlook and comes amid signs that some drivers already are curbing their gasoline appetite.
EIA, which projects real U.S. gross domestic product growth slowing to 1.6% this year from 2.2% in 2007, sees gasoline demand inching up by 0.6% to 9.3 million barrels a day, after 0.5% growth in 2007.
Retail gasoline prices are expected to average a record $3.07 a gallon this year, a 9.4% rise, compared with the 2007 annual gain of 8.9%. Benchmark U.S. crude oil prices are expected to average $86.46 a barrel on a 19.6% rate of increase that is double the 2007 level.
But the Paris-based International Energy Agency, citing an International Monetary Fund forecast of U.S. GDP growth of just 1.5% in 2008, sees gasoline demand increasing by just 0.2%, just one-third of the EIA’s projection.
IEA — the energy watchdog for the major industrialized countries in the Organization for Economic Cooperation and Development — called signs of 0.2% gasoline demand growth in December surprising, given high prices and evidence of an economic slowdown.
Slowdown In California
IEA noted there is industry debate over whether consumers are changing their habits — by car pooling, telecommuting, using public transportation or even replacing their current cars with more efficient vehicles — on the conviction that high gasoline prices are here to stay.
While the short-term impact of high prices is open for argument, in the medium term, IEA said gasoline demand is “responsive to economic dynamics’ and “higher unemployment would likely reduce driving” and cut consumption.
In car-crazed California, where drivers drink up one out of every nine gallons of gasoline sold nationwide, officials are seeing what they call clear signs of at least a small sustained drop in demand. And before they slowed gasoline purchases, motorists in the state have shifted their discretionary spending to pay rising fuel bills.
Year-to-year gasoline sales volumes have dropped in California in the each of the six quarters between the second-quarter 2006 and the third quarter 2007, according to the State Board of Equalization, which tracks the data.
In October 2007, the latest month for which figures are available, Golden State gasoline sales fell 0.9%, or just around 10,000 barrels a day. That’s a slowdown from the August and September levels, which showed drops of 2% to 2.5%, or up to 27,000 barrels a day in the largest U.S. gasoline market.
Joe Fitz, chief economist for the state board, said that in 2006, service station taxable sales jumped 13%, reflecting rising gasoline prices. “Gasoline consumption decreased 0.7%,” he added.
Fitz said research shows gasoline retail prices in California rose by 79% between 2002 and 2006. Between 1981 and 2006, taxable gasoline sales in California rose by 42%, Fitz said, while the number of registered motorized vehicles rose by 77%, meaning that gasoline-demand growth was only about half of the rate of new vehicle registrations in that 26-year period. Miles-per-vehicle rates rose 28% from 1981 to 2006, but were fairly constant over the most recent 10 years, he said.
Between 2002 and 2006, vehicle registrations rose by 9.6% while gasoline sales rose 2%, he said.
February 15th, 2008 at 10:00 amPart 2
Shifting Spending Habits
If the long-term historical relationship held true, gasoline sales would have risen by 5.3%, Fitz said.
“While it’s difficult to precisely measure, these data…indicate that gasoline prices appear to have had a large impact in reducing gasoline consumption over this time period,” he said. “Of course other factors, such as as consumer responses to a greater awareness of global warming, could have also had impacts in reducing gasoline consumption.”
Fitz also found that drivers in California — the world’s eighth biggest economy — appear to be reducing discretionary spending to pay rising gasoline bills.
“In today’s economy many consumers consider gasoline to be a basic necessity,” Fitz wrote in a recent bulletin published by the state board. “As a result, consumers are slow to reduce spending on gasoline” even if prices increase dramatically.
Fitz said a study based on quarterly state figures from 1981 through mid-2005 suggested that California drivers reduced their spending for other taxable goods by 83% to pay for higher gasoline prices. Put another way, for every $1 more spent on gasoline, Californians spent 83 cents less on other taxable goods. The remaining 17 cents of each dollar in higher gasoline prices came from lower spending on non-taxable goods, reduced savings or increased borrowing, he said.
Crude Price Dominates
Even if gasoline demand slumps, crude oil prices — at 68% — have the biggest impact on the pump price, according to EIA.
U.S. gasoline inventories have risen for an unprecedented 14 straight weeks, by nearly 35 million barrels, or 18%. At 229.2 million barrels, stocks are the most since 1999, when gasoline sold for 92.1 cents a gallon and crude oil was just $12.02 a barrel. EIA projections show that gasoline stocks have likely peaked and will decline heading into the driving season. At the end of March, EIA sees gasoline stocks at 217.5 million barrels, the most since 1993 for that time of year.
Gasoline imports fell by nearly 27% in the week ended Feb. 8 to the lowest level since last November, in a sign that the stockbuilding is slowing.
While gasoline demand is “most vulnerable” to U.S. economic woes, analysts at Goldman Sachs said they are keeping their 12-month target forecast of $2.71 a gallon for Nymex gasoline futures — a jump of near 10% from current levels. Potential for a further big rise in U.S. gasoline stocks is modest amid tight global stocks and refinery turnarounds, which will restrain output, the analysts said.
Nymex gasoline futures settled up 3.6% at $2.4761 a gallon Thursday, the most since Jan. 4, while crude futures jumped 2.3% to $95.46 a barrel, the most since Jan. 9.
-By David Bird, Dow Jones Newswires
February 15th, 2008 at 10:00 am*FEB PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 69.6 V 76.0E; 15-YEAR LOW
February 15th, 2008 at 10:05 am– Lowest reading since FEB 1992
– 1 year inflation expectation 3.7% v Jan 3.4%
– Survey states past declines of this magnitude have always been associated with recessions (survey began in 1952)
OPEC May Cut Output If Supply Rises
By SPENCER SWARTZ
OF DOW JONES NEWSWIRES
LONDON — The Organization of Petroleum Exporting Countries said Friday weakening world economic growth and demand prospects and ongoing increases in U.S. and European crude and gasoline inventories could soon force the producer group to pare back its own production to avert a drop in crude prices.
“These unfolding developments in the world economy and the oil market warrant close monitoring in the months ahead to ensure a timely response to changing conditions,” OPEC said.
The group, in its February oil market report, said current production from all 13 OPEC nations currently stood at about 32 million barrels a day, which should result in rising global oil inventories in coming quarters.
Such stock increases were already apparent in the U.S., where commercial oil and gasoline stocks are now back above the five-year average following a steady draw down in December, OPEC said.
The group, whose output meets about four out of every 10 barrels consumed globally every day, shaved its forecast for 2008 global oil demand growth by 100,000 barrels a day to 1.2 million barrels a day, representing a rise of 1.4% from 2007. Total crude consumption globally this year is expected at 87 million barrels a day.
OPEC is scheduled to meet March 5 in Vienna to review its production policy. Analysts say the group will find it tough, politically, to reduce output, even amid weakening demand and rising oil inventories, if oil prices remain above a lofty, $90 a barrel level because of global economic uncertainty.
Crude prices cut their losses after the release of the OPEC report from around 40 cents down to just five cents at $95.40 a barrel at 1245 GMT.
OPEC left production unchanged when it met earlier February, saying global oil supplies were healthy and high prices were related to geopolitical issues, not oil market conditions.
OPEC is decidedly less optimistic on oil demand than other forecasters, including the International Energy Agency. The Paris-based IEA revised down its 2008 global oil demand forecast Wednesday but still sees crude consumption rising this year by 1.9%, a half-percentage point above OPEC’s forecast.
Added to its bearish outlook, OPEC said demand for its crude was expected to be even less in 2008 relative to its forecast in January following a revision to 2007 data.
The group said daily consumption of OPEC oil this year was now forecast to be 375,000 barrels less than in 2007, compared with an expectation for a drop of 307,000 barrels a day in its January report. Total demand for OPEC oil is expected to average 31.53 million barrels a day in 2008.
Another lingering concern for OPEC is the weak U.S. dollar. The effects of the weaker currency against Europe’s 13-nation euro shaved $2.10, or 3.6%, off the value of OPEC’s oil pricing basket in January to $56.13 a barrel from $58.25 in December, OPEC said.
The basket is an average price of 12 OPEC crudes. Dollar weakness has been a key reason OPEC has been inclined to see higher oil prices, which compensate for the currency’s fall, oil analysts say.
OPEC production minus Iraq, the only OPEC member that isn’t part of the group’s quota system, was 29.79 million in January, up 136,000 barrels a day from December. Including Iraq, OPEC output last month averaged 31.99 million, unchanged from December.
Saudi Arabia, OPEC’s de facto leader due to holding most spare production capacity, pumped 9.08 million barrels a day in January, up 100,000 barrels a day from December and 140,000 barrels a day above the kingdom’s output allocation under OPEC’s quota system, according to OPEC data.
OPEC revised down its forecast for non-OPEC supply this year by about 100,000 barrels from its January report due to weaker-than-expected capacity additions in countries like the U.S., Mexico and Norway. Non-OPEC producers are expected to pump 50.53 million barrels a day this year, up 1.07 million barrels a day from 2007, OPEC said.
—By Spencer Swartz, Dow Jones Newswires
February 15th, 2008 at 10:05 amgas strip starting to rollover or is that just wishful thinking?
DRYS call ongoing – they are getting into market comments:
market has stabilized, rumor that Chinese iron ore pricing is going to be set sooner rather than later …sets the stage for a “very nice ride up in the next few week” in dayrates. ~ DRYS chairman.
February 15th, 2008 at 10:10 amNat gas hit resistance at 8840 and then turned down. Too early to say but a move through 8660 may be an early sign.
February 15th, 2008 at 10:14 amDRYS call drawing to a close – nothing really new other than the comment about near term rates probably going higher next few weeks as the Chinese Iron Ore negotiations wrap up soon than expected. This would be up $5 to $6 easy in a friendlier market but is up on $2 now. I’m holding my new position.
February 15th, 2008 at 10:30 ampinning action setting in …. like watching paint dry.
February 15th, 2008 at 10:37 amMorning,
Read that here is a report this morning that a company called Fortune Super Equity Management has made a premium bid for a jack-up rig company named Scorpion Offshore (SPROF.PK).
Also my T/A mentions this am no one talking about potential head and shoulders in oil and everyone talking about ng-which she agrees with Z due for a pull back but she thinks up long term
Also Mr K buying market this am for short term trade
February 15th, 2008 at 10:43 amZ-if this Superior Oil true-? who else might benefit?
Think they do it to DRYS@ 85?
February 15th, 2008 at 10:44 amForgot to mention my T/A said NG was going up quite a few months ago-(maybe summer?) She has been spot on
Z-Correction Scorpion Oil was looking at deep chart
February 15th, 2008 at 10:46 amScoop – probably,, another big rally in rates and its filtering to the smaller ships, Capesize came off small.
February 15th, 2008 at 10:46 amDenise – who else benefit? ATW.
February 15th, 2008 at 10:48 amforgot to add this to the morning post – another piece of oil bearish news that people are ignoring. Russia is talking about cutting the export tax on crude. It had raised this tax last year which kept a lot of crude in its borders. It varies from month to month whether or not Saudi Arabia or Russia is the biggest crude producer on the planet so if they do this it potentially unlocks significant incremental barrels to the world markets. This comes from Dmitry Metyedev who will be the next president of Russia.
February 15th, 2008 at 10:53 amDenise – also Seadrill but I can’t trade them.
February 15th, 2008 at 10:53 amZ-I was just looking that they bought own 20% recently
February 15th, 2008 at 10:58 amNatural gas levered names getting spanked hard now. EOG down 3%, SWN down 4.5%, CHK only up a touch now. And yet NG is off 1 penny. Its as if the stocks are telegraphing the next move in NG.
February 15th, 2008 at 11:28 amthere goes oil into the red, followed by NG , Nicky its at $8.65 and falling now.
February 15th, 2008 at 12:18 pmZ- What’s happening to DRYS. Think March APA110&NFX55 still have value.
February 15th, 2008 at 12:31 pmhttp://news.yahoo.com/s/ap/20080215/ap_on_re_us/pipeline_explosion;_ylt=AmqEofketHnn1ibMgY0ppUqs0NUE
February 15th, 2008 at 12:39 pmHello,Too Quiet.Anyone Here
February 15th, 2008 at 1:16 pmyep, just hangin, ya know.
February 15th, 2008 at 1:19 pmWhat a sh**ty market
February 15th, 2008 at 1:28 pmS – Working on my “Bonnaroo” tickets
February 15th, 2008 at 1:33 pmyep, looks like Ben’s got us back to take profits in what’s been doing well.
February 15th, 2008 at 1:33 pmScoop – its going down with this bloody market. No reason in the call or the pr just a bad day. On the others we’ve got a month to find out but if I entered new strikes they’d be the next ones lower.
February 15th, 2008 at 1:35 pmZ – do you think today’s CHK call is more important than it’s forthcoming earnings call, or the other way around, in terms of what E&P analysts care about?
February 15th, 2008 at 1:45 pmI would say today’s PR and call is probably a bit more important than the earnings calls since it also had a update of operations by region in it. It being flat while the group names are down 2 to 4% tells you how it went.
February 15th, 2008 at 1:48 pmBone-
February 15th, 2008 at 1:49 pmBonnaroo should be primo dope this Summer, lineup seems to improve each year.
ZFLUSH: sent the XOM $85 calls down the river for $0.15 as the stock is being pinned just under the strike. 15 cents is better than no cents.
February 15th, 2008 at 1:49 pmSharing a funny one I read this week…”All your Clinton base are belong to us. Someone set us up the Obama”
February 15th, 2008 at 1:51 pmDRYS and group may yet close green. I’m not very concerned by today’s action. Think the group runs more during the next few weeks as rates continue to recover.
February 15th, 2008 at 1:51 pmIt’s really a shame when you report great numbers on a day when the market takes everything down.
February 15th, 2008 at 1:54 pmPopeye – couldn’t agree more. Especially since this market tries to discount all news within 15 minutes…which corresponds to most investor’s attention spans / memories. DRYS traded at $93 last night, may take awhile to get back there (like 3 or 4 days or 3 or 4 week…volatile stock/group/market.
February 15th, 2008 at 1:56 pmIf I answer questions a little late its b/c Blackberry is sending messages to me late and out of order. I normally chirp from the crackberry whenever one of you guys comment.
February 15th, 2008 at 1:58 pmI read the DJ reports.
February 15th, 2008 at 2:03 pmI’m long Apr. and MAy RBOB and Short HO.
Trades are doing ok since yesterday. You mnetioned few weeks ago that time to go in would be V Day and market’s agreeing with you. Yet this weeks number re: Imports of 10mbpd and consumption of under 9mpd keeping you on sidelines of refineries if I recall. Based on LY spread I’m looking to hold on for at least .20 spread give or take. What’s your thoughts
At least the action in UNG is pleasing today. NG looking increasing like its gone from “buy the dips” to “sell the rallies”
Forecast is not very near term bullish:
1-5 day map: http://www.accuweather.com/maps-temperature.asp?partner=accuweather&traveler=0&site=us_&large=0&fday=1&type=temp
February 15th, 2008 at 2:04 pm6-10 day map:
http://www.accuweather.com/maps-temperature.asp?partner=accuweather&traveler=0&site=us_&large=0&fday=2&type=temp
11-15 day map:
http://www.accuweather.com/maps-temperature.asp?partner=accuweather&traveler=0&site=us_&large=0&fday=3&type=temp
30 day map:
http://www.accuweather.com/maps-temperature.asp?partner=accuweather&traveler=0&site=us_&large=0&fday=4&type=temp
Just in
http://articles.moneycentral.msn.com/Investing/JubaksJournal/5PowerPlaysForNaturalGasStocks.aspx
February 15th, 2008 at 2:05 pmI’m surprised by the strength of RBOB with as much of it around as there is. If oil falls it should too. And I’m much more of a mind that oil sticks to $90 than holds a $100.
On HO, ULS is in fine shape but the dirty stuff (HO) is in shorter supply but we have no apples to apples this year to go by given the change in regs in Fall 2006. That said, HO prices should be coming off some soon as attention wanes.
As to me being on the sidelines that really applies to the refiners where I’m still not staggered by the crack spreads. Imports and consumption just contributing to the problems for crackspreads. 1Q is shaping up to be a right ugly one versus the year ago period making two consecutive quarters of poor performance. I really want to see gasoline consumption jump back up before I go back in.
So far, the decision to stay away from the group has been a good one and the Street’s attempts to get it going have been premature.
Look at SUN’s chart – teetering on the brink of going much lower…makes me want to take puts.
TSO at support but still near the lows, and
VLO, waffling around below $60 again….most unimpressive right now (and I like that one best).
February 15th, 2008 at 2:13 pmMD re 61 all good, big fat names….list could have used a little more differentiation in it of market cap.
February 15th, 2008 at 2:17 pmK – I’m buying 10 tickets to “Roo”. Rumor has it that Led Zep will be playing. I’ll sell my excess tickets to pay for my trip after they sell out.
February 15th, 2008 at 2:28 pmSorry, but my understanding is that the real LZ is not coming….its actually a gender-confused cover band called Lez Zeppelin. No, I am not making this up. You will profit on your unsolds.
February 15th, 2008 at 2:59 pmK – Lez Zeppelin is playing and is an all girl band playing. Robert Plant is signed, and it’s my understanding that John Paul Jones is also signed. What I’m hearing is that just before the “Roo” starts that Jimmy Page will sign. LZ has been talking about a world tour since their last concert on December 10th. We’ll see, since I’m a betting man.
February 15th, 2008 at 3:09 pmK – One more thing, MTV has bght “Roo” so that might make the difference.
February 15th, 2008 at 3:11 pmdrybulks trying to make a comeback…DSX at best levels of the day after the 2 penny miss.
E&P and service well off the lows as well.
February 15th, 2008 at 3:18 pmDread Zeppilin is one of my fav’s. They are a Rasta somewhat sound alike.
February 15th, 2008 at 3:19 pmI too prefer the Jamaican style Zeppellin as opposed to the chick band hailing from the Isle of Les Bos. However, I hear they are good.
February 15th, 2008 at 3:21 pmLooks like the late Fri. bargain hunters are making a bid.
February 15th, 2008 at 3:28 pmAgreed – look at them bid up IOC in hopes of a Tuesday morning press release.
Monday we are off by the way for President’s Day.
February 15th, 2008 at 3:29 pmSaracen Energy Posts Undisclosed Losses In Natural Gas
By KAJA WHITEHOUSE ,JOSEPH CHECKLER andCHRISTINE BUURMA
Of DOW JONES NEWSWIRES
NEW YORK — Saracen Energy Partners LP has posted undisclosed losses on natural gas trading and has been forced to liquidate positions, the latest fund to run into difficulties in the volatile market.
“We unwound some unfavorable positions,” said a spokeswoman for the Houston-based fund.
She said the Saracen fund is still liquid and is operating in the energy markets, including those for natural gas, coal, refined products and electricity.
Natural gas traders said the fund lost money betting on the difference between March 2009 and April 2009 natural gas contracts.
Founded by Neil Kelley and Michael Kutsch, former executives at Rotterdam and Geneva- based commodities trader Vitol, the Saracen fund was reported to be around $1.4 billion in October 2006 and some market participants estimate it stood at about $3 billion prior to its most recent losses. The Saracen spokeswoman declined to disclose the size of the fund or the size of the losses.
Saracen’s efforts to unwind its short natural gas positions could place upward pressure on the market, said Allen Rather, a private energy analyst in Victoria, Texas. If the fund attempts to buy back previously sold positions amid forecasts of colder weather, the resulting buying pressure could propel front-month natural gas futures past $9.00 a million British thermal units, he said.
The market rose dramatically on Thursday, jumping 4.6% to settle at $8.772 a million British thermal units as weather forecasts called for frigid temperatures in the U.S. Midwest and Northeast over the weekend. But Saracen’s efforts to cover short positions could also have contributed to the rally, traders said.
Saracen’s trading strategy recalls Brian Hunter, the energy trader with hedge fund Amaranth whose wrong-way bets on the price of natural gas in 2006 triggered losses of $6.6 billion and prompted the fund’s collapse.
Hunter predicted that March 2007 natural gas futures would trade higher than April 2007 contracts, and that January 2007 contracts would trade higher than November 2006 contracts. But the spreads between March-April and January-November shrunk dramatically as mild weather and a lack of hurricane activity led to high levels of gas in storage, sending natural gas futures tumbling.
According to traders, Saracen in essence made the opposite bet — that the spread between the March and April 2009 contracts would decline, when in fact it widened by 41.4% in a month. Frigid temperatures in the Northeast and Midwest in recent weeks have sparked greater demand for natural gas for heating, leading to a run-up in prices as supplies dwindle. And March and April natural gas contracts are historically volatile, determined largely by unpredictable weather patterns.
The natural gas market has recently seen an unusual level of volatility in long-dated contracts, said Charlie Sanchez, a natural gas trader with Gelber & Associates in Houston. Such volatility can indicate that a trader holding a large position is trying to counteract price movements in a particular direction, Sanchez said.
But holding a contract for an extended period in a choppy market is a risky move, he said.
“If you stay out there, you might get your head chopped off,” Sanchez said. “Firms managing their risk properly will cut their losses and get out of there.”
According to a 2007 press release, Saracen is active in physical commodity transactions and financial derivative trading in electric power, natural gas, crude oil, refined petroleum products, coal, emissions and weather products as well as energy equity and debt instruments.
—By Kaja Whitehouse, Dow Jones Newswires
February 15th, 2008 at 3:32 pm3:27 pm EST
Nymex Crude Ends Flat; Economic Reports Weigh
By GREGORY MEYER
Of DOW JONES NEWSWIRES
NEW YORK — Crude oil futures sped past $96 a barrel Friday before ending all but flat, unnerved by gloomy U.S. economic reports and deflated by profit-taking ahead of a long holiday weekend.
Light, sweet crude for March delivery closed 4 cents, or 0.04%, higher to settle at $95.50 a barrel on the New York Mercantile Exchange, after earlier rising to $96.67 a barrel. April Brent crude on the ICE futures exchange closed at $94.68 a barrel, down 48 cents.
The quiet close belied a strong week that lifted the front-month Nymex contract 4.1%. Friday’s close is a five-week high. Crude has risen in six of the last seven sessions.
Supply worries re-entered the picture over the week as a legal standoff between oil-producer Venezuela and ExxonMobil Corp. (XOM) prompted the South American nation to stop delivering crude to Exxon.
The amount of oil affected is fairly small, however, and analysts doubted Venezuela would seek to cut off additional oil to other U.S. customers. The head of the International Energy Agency, the energy watchdog for the wealthiest industrialized countries, said Friday consuming countries won’t need to tap strategic petroleum stocks to offset halted Venezuelan oil flows.
An assortment of economic reports Friday pointed to an economic slowdown in the U.S., the world’s top energy consumer. Manufacturing activity in the New York Federal Reserve’s region declined markedly to its weakest level in nearly two years. Consumer confidence registered a striking drop this month, according to the Reuters/University of Michigan mid-February consumer sentiment index.
“A bevy of not-so-friendly economic numbers that came out today really took the air out of the bulls’ balloon,” said Stephen Schork, editor of the energy markets newsletter the Schork Report in Villanova, Pa.
The Organization of Petroleum Exporting Countries on Friday trimmed its forecast for 2008 global oil demand growth by 100,000 barrels a day to 1.2 million barrels a day, representing a rise of 1.4% from 2007. Total crude consumption globally this year is expected at 87 million barrels a day.
Releasing its February oil market report, OPEC hinted weakening world economic growth and demand prospects and ongoing increases in U.S. and European crude and gasoline inventories could force the group to pare production.
“These unfolding developments in the world economy and the oil market warrant close monitoring in the months ahead to ensure a timely response to changing conditions,” OPEC said.
OPEC next meets to review production policy March 5.
Nymex will suspend pit trading Monday for the U.S. Presidents Day holiday. Electronic trading will continue. Analysts said some of Friday’s late selling was profit-taking in advance of the three-day weekend.
Front-month March reformulated gasoline blendstock, or RBOB, rose 1.77 cents, or 0.7%, to settle at $2.4938 a gallon. March heating oil fell 1.97 cents, or 0.7%, to $2.6469 a gallon.
–By Gregory Meyer, Dow Jones Newswires
February 15th, 2008 at 3:34 pmThanks for the find Sam. I’ll bet Saracen has company in their misery.
February 15th, 2008 at 3:37 pmYep, just the tip of the iceberg, imho
February 15th, 2008 at 3:38 pmFTI down after good earnings.
February 15th, 2008 at 3:47 pmOII advancing into earnings next week. Very tough market again all of a sudden.
Beer thirty – have a great long weekend.
February 15th, 2008 at 3:59 pmTini time, see ya Tuesday!
February 15th, 2008 at 4:02 pmZ re 62 – rbob inventories are at their highest level since 1999!
Even Miss FFFFFerson saying there is very little fundamental reason behind this rally.
February 15th, 2008 at 4:33 pmRIG baby you don’t treat me right!
February 15th, 2008 at 5:01 pmHave a great weekend all.
apbd
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