Wrap – Week Ended 02/22/08



1) The energy sectors outperformed the broad market. As you can see from the table above rising oil and natural gas prices helped out but the energy remains tied to the broader market's woes YTD despite generally blow out fourth quarter results. 

2) Oil tops $100 As March Contract Expires; April Crosses Into Trip Digits And Closes at 98.81. Oil surged last week as global unrest (Turkey, Nigeria) and the prospect of a quota cut from OPEC on March 5 outweighed a bigger than expected oil increase to U.S. crude inventories.

  • Turkey Watch: Turkey declares open season on the PKK. In an escalation of their push to eradicate the Kurdish rebels, or PKK. , Turkey sent 10,000 troops across the border in Iraq on Friday. Traders speculated that the PKK could retaliate by blowing up oil infrastructure but I think that's a pretty remote possibility.
  • Nigeria Watch: Rebel leader Henry Okah to be granted access to legal counsel. The media didn't give a lot of credit to Okah's rumored death and subsequent "hell to pay" comments from MEND but the turn in the oil chart and move above $100 ties to within minutes of the original PR from MEND stating their belief that he had been killed while in government custody. Presumably if his lawyer is allowed to see him this means he's alive and such a meeting may at least temporarily deflate tensions in the region (and oil).   
  • OPEC Watch: Should I Stay or Should I Cut Now? The Cartel meets March 5th. This week's bigger than expected will give the group another argument to reduce production quotas. They may choose to be benevolent, especially if oil continues to hug $100, but I think if crude retreats toward the upper $80s a 500,000 bopd cut may be seriously considered. 

3) Natural Gas Surged With Colder Weather. March gas is now up 18% ($1.40/Mcf) in the last three weeks to $9.146, an 8 month high.


4) Natural Gas Short Position Hits Another Record ...There's a battle of rare proportions being fought between long time bears and recent bull converts in the natural gas market. While bulls have taken the upper hand in the last three weeks the bears continue to place a bigger bet on a near term tumble. I suspect a dip back into the $8.70s or so would inspire rampant profit taking. Of course, take that for what it's worth from a recent gas short (near term only please, long term I'm a gas bull). 


5) U.S. Gas Rigs Plateau - Activity Off Slightly YoY.

 chart TBA

6) Earnings Wraps - TBA in a subscriber-only post later this weekend.

  • CHK
  • OII
  • PQ

7) Earnings Calendar -  Week 5 Table TBA Sunday


8) Holdings Watch - Subscribers click here to see latest holdings.

  • (CHK) Sold a portion of my March $37.50 calls for $7 the day before

Not yet a subscriber? Here's a roadmap for fixing that! 

8 Responses to “Wrap – Week Ended 02/22/08”

  1. 1
    Nicky Says:

    Z – difficult to see nat gas coming down short term when there appears to be no end in site to the cold weather. I am wondering whether it may get to 10 before we see a pullback….

  2. 2
    Nicky Says:

    Further to the last post I have just taken a look at a couple of weather sites and it seems the weather is due to warm up quite dramatically by 1st March which is only next Saturday…I doubt nat gas is gonna wait until then to react to that forecast….expiry may play a part later in the week though…

  3. 3
    Nicky Says:


    Still threatening to cut production….

  4. 4
    Wyoming Says:


    How does the USO (3rd highest ETF short) impact the physical price of WTI? It would appear at +3.5% YTD, there is already some pain. What will a little capitulation do?

  5. 5
    zman Says:

    Hey, just tuning back in. Oil and gas off to the races early tonight. NG up $0.20 on next to 0 volume at $9.35. Looks like exhaustive move to the upside, purely messing with the shorts and not sustainable.

    Wyoming – agreed re pain on the shorts. On the USO affecting price of WTI I’ll have to check, it used to be too small in the big picture but their size has grown. will look into.

  6. 6
    bill Says:

    on drys


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