Monday Morning – Energy Quiet, Broad Market Sees Recession

Link to The Weekend Wrap: Natural gas rig commentary and much, much, more.

Commodity Watch:

  • Crude Oil: advanced 3% last week to close at $105.15. This morning crude is off $0.40 despite another early morning dip in the dollar. I've said it before but it bears repeating that the E&P stocks will do better from a stock performance perspective with oil in the mid 90s and even the mid 80s than they will under a triple digit environment. From a financial perspective higher oil means greater revenue, EBITDA etc for most but it looms over the stocks as it did last week with everyone concerned about it killing the economy and eventually its own price. As it stands, if oil were to fall into the mid 90s, the preponderance of the E&P universe would still marked increases in 1Q and 2Q CFPS estimates in the next couple of weeks. 
  • Hugo Watch: Venezuela has recalled troops from the Colombian border after a negotiated settlement was reached.
  • Natural Gas: moved up 4% last week to close at $9.77. This morning gas is trading $0.04 lower as it marks the decline in crude. 
  • Weather Watch: HDD's Past The Hump. Gas-weighted heating degree days came in at 170 versus prior expectations of 164 but still 20 less than year ago levels for the week when a withdrawal of 104 Bcf was reported. The early read on this week is for HDDs of 144.
  • XOM Sees Global LNG Capacity Up 400% by 2030. Exxon highlighted its joint venture with Qatar gas where it is building four new LNG trains and developing tankers with double the capacity of current ships.
  • Rig Watch: Natural Gas Rig Count Jumped by 38 Rigs This Week.This was in the weekly wrap but its worth showing here. If you read the wrap just skip on down:

Many recent converts to natural gas bullishness have cited the flattening of the natural gas directed rig count over the last year. In fact, despite a large jump in the past week, gas directed rigs are still 9 rigs short of year ago levels (see the first and second graphs below). The bulls say that if this continues, flush production from the resource plays (primarily shales) that have driven this growth will fall off allowing storage to do the same or at least refill at a slow rate. Here's where they are either wrong or in some case deliberately omitting a simple fact. Large and small cap E&P's participating in these plays are finding increased efficiencies and better initial production from going horizontal. The number of rigs drilling horizontal in the Lower 48 has never been higher (see the third and fourth graphs below). Moreover, an increasing number of wells are being drilled with dual or multiple laterals and in general lateral lengths are increasing. While this has been found to be efficient from both an economic and a resource recovery potential perspective it does take longer to accomplish, hence the flattening of the gas directed rig count.    



Odds & Ends

Analyst Watch: (UPL) started at neutral at RBC, otherwise, very quiet. 


Subscriber Request: Hemi Energy Group (HMGP) - pink sheet listed, very hard to find information on except from the company website and they appears to be the hypey style I run screaming from. They PR'd Hillary Clinton coming for a campaign visit to Fort Worth! Oooohh, aaahhhh. Some of the rules I paid quite a bit to learn when I was younger:

  • 1) avoid the pinks like the plague.
  • 2) avoid penny stocks    "    ".
  • 3) avoid situations were management of a development stage anywhere on their website mentions the word "billions".
  • 4) avoid stocks where there is an almost daily string of press releases (these guys are not too bad in this respect) AND the language sounds like its written by someone who doesn't read about or belong to the industry.
  • 5) avoid companies that don't report on time or simply don't report results at all.
  • 6) avoid companies that show you a picture of their HQ but don't mention their people, which are often as important as the assets under the ground.
  • 6) avoid the pinks like the plague (can't stress this enough).

From what I can tell of this 6 cent stock, they are operating stripper wells (wells with < 10 bopd of production) in Kansas and buying leases in the Barnett Shale in Texas, attempting to get in the way of larger oil companies as the play expands.  I'm not saying this won't work but the stock action will be dominated by:

  • 1) the price of oil,
  • 2) stock hypsters/manipulators,
  • 3) the dream of someone like CHK wanting to drill on one of their bits of acreage in Texas.

On a reserves per share basis they have no where near the underlying assets (2.15 mm BOE as of a semi-annual report? ) to carry the number of shares (51 mm, I think) they have outstanding. According to the company they were cash flow positive in December and January on production of 461 and 669 barrels (that's the whole month folks, not per day)  so I guess they don't pay themselves much which is admirable but also makes you wonder why their talent doesn't go somewhere where it can get paid more. Not the head guy, he's obviously got a dream and he's sticking to it, but the rest of their team you gotta wonder about.

There are so many high quality, high return names to get to know and play that I just have to pass. Can it go back to 17 cents from whence it came last Fall? Sure but it can also easily go to $0.03 and no one anywhere will say "holy smokes, that's not right, that shouldn't be". 


97 Responses to “Monday Morning – Energy Quiet, Broad Market Sees Recession”

  1. 1
    Sambone Says:

    3:15 am EST

    Nymex Crude Holds Steady But Doubts Creep In

    Dow Jones Newswires

    SINGAPORE — Crude oil futures bounced off earlier lows Monday in Asia as traders weighed continued support from a weak dollar against growing concerns that a global economic slowdown could hurt demand over time.

    With the oil market’s near-term fundamentals widely acknowledged to be unsupportive for prices to stay near record highs, second guessing is creeping in as the market becomes increasingly sensitive to signs of recession.

    “Given that recent high prices are mostly from speculative money, crude may plunge when the currency-driven commodity boom is finished,” said Ken Hasegawa, a broker with Newedge Japan.

    On the New York Mercantile Exchange, light, sweet crude futures for April delivery traded at $105.22 a barrel at 0700 GMT, up 7 cents, in the Globex electronic session.

    On London’s ICE Futures exchange, April Brent crude rose 4 cents to $102.42 a barrel.

    Oil prices earlier came off negative territory as bargain hunters stepped in due to continued weakness in the dollar, the same factor that has driven the market in the past month.

    The dollar, which touched a fresh low against the euro Friday, sending Nymex crude to a new all-time high of $106.54 a barrel, Monday weakened against the yen.

    Still, there are doubts over what’s ahead, with other dollar-denominated commodities — including gold, a traditional hedge against inflation — already cooling off.

    “When the move to the upside either stalls or stops completely, they(buyers) will stampede for the exits. Unfortunately, when that will be is impossible to predict,” Mike Fitzpatrick, vice-president for energy risk management at MF Global, said in a Friday note to clients.

    Friday, the U.S. Commodity Futures Trading Commission said in its weekly report large speculators, including hedge funds, were still increasing their net long exposure on Nymex crude.

    This stood at 99,539 contracts in the week to March 4, from 91,625 in the previous week, the Commitments of Traders report showed.

    At 0700 GMT, oil product futures traded mostly sideways.

    Nymex heating oil for April slipped 20 points to 294.50 cents a gallon, while April reformulated gasoline blendstock stood at 270 cents a gallon, 57 points higher.

    ICE gasoil for March changed hands at $963.25 a metric ton, down $9.25 from Friday’s settlement.

    —By Yee Kai Pin, Dow Jones Newswires

  2. 2
    zman Says:

    TSO drops poison pill provision that adopted during the Tracinda offer period.

  3. 3
    Dman Says:

    Hi Z,

    any thoughts on the equation:

    EOG pullback = opportunity


  4. 4
    zman Says:

    D – exactly my thoughts…I like to give Monday’s a little time to mature but maybe in a couple of hours. NFX also in that category.

    One caveat is that the stocks may start to watch the beginnings of a decoupling of crude and natural gas trading. The usual dip buying in natural gas seems to be less enthusiastic this morning. While a pullback in natural gas even all the way to $7.50 would not dent estimates in would dampen sentiment.

    A better indicator on the EOG trade, at least on short term basis would be watching APA to see if it can further the move.

  5. 5
    Sambone Says:

    9:36 am EST

    Nymex Crude Trades Lower On Economy

    By Brian Baskin

    HOUSTON — Crude oil futures are trading lower Monday, with last week’s jobs data still weighing on the market.

    Light, sweet crude for April delivery traded 65 cents lower, or 0.6%, at $104.50 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange traded 89 cents lower at $101.49.

    The April contract settled 32 cents lower on Friday, after the Department of Labor issued data showing the biggest drop in nonfarm payrolls since March 2003. Although futures hit a new record after the data was released, concerns about the economy heading into the weekend ultimately sent crude lower at settlement.

    Little has happened since then to affect the mentality within the energy world, hence the weak opening, said Addison Armstrong, an analyst at TFS Energy Futures in Stamford, Conn.

    “(The economy) was certainly the overriding sentiment early on in the session,” he said, adding that “volumes are pretty light so far today.”

    Futures haven’t settled down twice in a row since Feb. 6, however. Others see demand from the rest of the world picking up the slack. China’s General Administration of Customs said Monday that oil imports were up 18% from a year earlier in February, at 3.61 million barrels a day.

    “Tight fundamentals remain the dominant force underpinning prices .. there is growing evidence that Chinese oil demand remains remarkably strong,” wrote analysts at Barclay Capital.

    Threats to supply remain on the backburner, especially after Colombia and Venezuela defused a diplomatic conflict heading into the weekend.

    The dollar, which drove the rally from $87 in January to $106 last week as it weakened, remains a force in the market. The U.S. currency firmed a bit Monday from lows hit at the end of last week, depriving oil of a reliable source of support it has used to overcome past signs of slowing demand.

    Even if the dollar continues to weaken, its role might not be so predictable, wrote Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Ill., in a note to clients.

    This year’s percentage oil price gains have been almost double the decline in the (dollar),” he wrote. “There is room for a pullback in oil prices of several dollars/bbl even if the dollar remains on a downward course.”

    Front-month April reformulated gasoline blendstock, or RBOB, recently traded down 4.30 cents, or 1.6%, at $2.6513 a gallon. April heating oil traded 1.05 cents lower, or 0.4%, at $2.9365 a gallon, although it began the day trading about 1 cent higher.

    Armstrong sees heating oil as leading the energy complex, as cold weather settles in across much of the U.S.

    “It’s a combination of heating oil turning around, cold temperatures and the fact that the dollar made new lows against the euro (on Friday) that is probably limiting the downside,” he said.

    —By Brian Baskin, Dow Jones Newswires

  6. 6
    zman Says:

    Crude bouncing nicely now (natural gas not really following the lead). Mexico’s 3 main export points to the U.S. have been open and shut a number of times since January due to high seas. They probably contributed to last week’s lower imports number which along with climbing refinery utilization gas us the unexpected draw on crude stocks. Mexico indicated they are all open this week but that they were down an undefined amount of time last week. Could auger for another pull on stocks this Wednesday.

  7. 7
    zman Says:

    Drybulk rates very late this morning, still not out.

    DRYS getting hammered, rest of group off. This is not what you expect out of a group whose leader beat estimates, where rates and estimates are rising. We’ve gone from the mid 80s to the low 60s in 3 weeks. I hate momentum stocks…

  8. 8
    zman Says:

    oil suddenly through $106…go figure.

  9. 9
    zman Says:

    D – well, there’s your answer, big cap E&P running and they may well take EOG positive. Still down $1.40 at this point. Energy in the midst of going green, even the refiners. Oil shooting back into record territory.

  10. 10
    Sambone Says:

    Wonder when Charles is gonna pump up ABK again?

  11. 11
    Dman Says:

    Dang it. One minute I had a screen full of bargains to choose from. Now not so much. Can’t even blame the $ for oil move as it seems to be steady against the Euro.

  12. 12
    zman Says:

    Actually thought of calling Charlie to see if he could do a story on DRYS but 9/10 of his efforts seem to be on the short side.

    D – EOG is still off.

    I see no news to account for the crude jump, looks technical to me. Will try to rouse Nicky.

    APA leading the way, up a buck now.

  13. 13
    Denise Says:

    Z-note the volume on IOC-heavy so early?

  14. 14
    zman Says:

    Re: IOC…they had a 1/2 mm share block trade earlier. Somebody thinks they know something. May take an April call here.

  15. 15
    Denise Says:

    Looks like 5k each of 22.50 calls and puts also

  16. 16
    apbd Says:

    Did someone turn on Daylight Saving Time without telling me? Always a day late and a dollar short. Hey, there’s an idea; short the dollar.

  17. 17
    zman Says:

    Denise, see that in the Marches…these guys are often late with news so I’m thinking longer dated calls.

    Morning A, nice of you to join us but I think that’s unpatriotic at this point. Market looking for a 3/4 cut at the Fed meeting next week (3/18). If they are going to do it I see no reason to wait…Goldman thinks there’s a chance of a surprise rate cut although last time that took a sharply dropping global market. 500 dow point lower and Ben wakes up.

  18. 18
    Sambone Says:

    Uncle Phil


  19. 19
    Denise Says:

    Z-wouldn’t buying common and a April put be a less expensive alternative? Since the news will definitely happen you skip the premium of a call? Also won’t it take time for IOC to climb? so you can wait? Sorry for the questions-I rarely by options-checking my thinking
    Also any change in your thinking of price drop-gain ratio?

  20. 20
    zman Says:

    D – In this case, when the news hits I think you either have $10 upside immediately or it gets cut in half. One alternative is that they have gas shows in the well but still no production test. Gas shows should be assumed at this point and I’d find that to be a little disappointing. They should have extremely high permeability here as in the last two wells so again, that should be no upside news. They need a production test and you may or may not get it. The delay here has been overlong without one.

  21. 21
    Denise Says:

    Off topic
    Great Doug Kass article on Bershire Hathaway if anyone has a interest-well worth a read

  22. 22
    zman Says:

    Natural gas just couldn’t avoid the pull of up $2 crude, now topping 107…once again, stocks not really buying it or you’d see names like SU flying.

  23. 23
    reefguy Says:

    ioc- could the 500k with collar be a short cover?

  24. 24
    zman Says:

    Reef – yep, wonder why they think they know something.

    Stocks just not happy with $107 oil. Come on Ben, if you’re going to cut just cut. You’ve given up on curbing inflation for now, just do it. Maybe they are waiting for CPI Friday?

  25. 25
    Sambone Says:

    10:36 am EST

    Crude Futures Rise On Positive Econ Data


    [Dow Jones] April crude is trading slightly higher after spending most of the morning down. The US Commerce Department released sales and inventory data showing a jump in both — typically a sign of a strong economy. That helps counter Friday’s jobs data, which had more negative implications. The April contract trades at $105.75, up 60 cents. (brian.baskin@dowjones.com)

  26. 26
    zman Says:

    Bill – any thoughts re DRYS …down $5 and cratering. BDI index still unavailable which is odd by this time of day. Normally I’d say $5 is nothing for these guys but this comes on several similar days and despite the rising tide of day rates so what gives? Not another dollar from me until I get this. Others in group down from 3 to 10%.

  27. 27
    redjack Says:

    shipping report

  28. 28
    zman Says:

    Still don’t see anything real that would support this move to 107 in crude and the stocks agree with the market.

  29. 29
    kaman Says:

    In the shadow of $107 oil, I was just reflecting on a prediction you made last November I think, that if oil stayed above $90/bbl til March, we’d be seeing $4/gal gas. It would seem that oil held up its end of the deal, but estimates are that gasoline will crest around $3.50 this Spring. (Don’t get me wrong, no complaints as I drive an Expedition) We’ve all had collateral damage from the refiners’ performance for the last few months….just wondered how you were viewing the landscape now. Is this divergence sustainable for several more weeks? thanks-K

  30. 30
    zman Says:

    K – I’m still sticking with $4 gasoline sometime this spring. EIA puts the peak at $3.40 right now but look for them to up that number when the short term energy outlook (STEO) comes out tomorrow. California was already seeing localized $4.25. Given where oil is now though, not sure that $4 has helps them much. Unleaded is near a record (at $2.71 its about 3 pennies off that level here) but has been completely outpaced by oil year to date. A now 15 year high on Finished gasoline is keeping wholesale prices in check but that should change as demand picks up. Ethanol which makes up the biggest chunk of the Finished inventories that it ever has, has had no such timid price increase and was at a new record as of Friday. So yes, I still see gasoline at the pump hitting $4 this sping, early summer…unless we all just stay in doors when this crummy weather abates.

    Oil at 107.55 now….think Nicky said $110 last week. Like I said in the post, this pricing isn’t really good for the stocks.

  31. 31
    Sambone Says:

    11:24 am EST

    Crude Hits $107, Weak Dollar Still A Factor


    HOUSTON — Crude oil futures traded at a new high Monday, with the market seizing on the dollar’s weakness in an otherwise quiet morning for the energy world.

    Light, sweet crude for April delivery traded $1.60 higher, or 1.5%, at $106.75 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange traded 84 cents higher at $103.22 a barrel.

    Futures rose rapidly to make Monday the ninth out of the last 10 sessions where a record was set. No market-moving event immediately jumped out to analysts, with the dollar weaker but not at a new low, and a mixed retail inventory report offering little spark.

    “We don’t really see any news behind this, just the continued “hey, if inflation is out there, you’re better off in a commodity,'” said Walter Zimmermann, a vice president at brokerage ICAP/United in Jersey City, N.J.

    Oil has risen $20 since January as speculators pour into commodities as a hedge against inflation. The dollar’s weakness, while seen as increasing the risk of inflation, also makes commodities priced in U.S. currency appear a relatively cheap buy. From wheat to gold to oil, prices have steadily risen as the dollar’s value has declined.

    The sudden rise in oil prices was also fairly isolated — Brent rose by only half as much, while gasoline futures were unchanged. This could indicate that prices will drop again if the dollar or other factors don’t provide fresh support, Zimmermann said.

    Crude futures spent most of the morning trading below Friday’s settlement, still focused on jobs data released at the end of last week showing a surprisingly large decline in nonfarm payrolls. The Commerce Department issued a report Monday showing big increases in U.S. wholesale inventories and sales, though Thursday’s retail sales data typically garners more attention.

    While the U.S. economy appears to be slowing, the developing world has shown fewer signs of reducing demand for commodities. On Monday, China’s customs agency reported strong year-on-year growth in oil imports for February.

    But some see the crude market as no longer worrying about the actual supply or demand for oil.

    “Crude oil can no longer be thought of in context of supply-demand fundamentals, rather you have to look at this market as another asset class,” said Stephen Schork, editor of the Schork Report. “The same way you trade stocks of Yahoo and Microsoft, this is the way crude oil is trading right now.”

    Front-month April reformulated gasoline blendstock, or RBOB, recently traded down 3 points at $2.6940 a gallon. April heating oil traded 1.94 cents higher, or 0.7%, at $2.9664 a gallon, as cold weather grips much of the U.S.

    —By Brian Baskin, Dow Jones Newswires

  32. 32
    kaman Says:

    It will be an interesting academic exercise to see if demand picks up seasonally even at these price levels.

  33. 33
    zman Says:

    Zimmermerman hit the nail head. If you can’t beat ’em, join ’em.

    K – yep, with prices some 30 to 40% higher at the pump demand is flat to off 1.3% during the slack season. If demand falls relative to year ago levels we are well above the five average.

    Even natural gas isn’t buying this run in crude…stocks remain keyed to the broad market. I suspect if oil goes ahead and makes a serious breakout towards 110, the group will respond with a rally as Wall Street says “there’s your one safe port in a storm”

  34. 34
    reefguy Says:

    Gas now believing oil up .10

  35. 35
    zman Says:

    Nat gas couldn’t ignore crude for long. From down $0.14 to up $0.10 so far today.

  36. 36
    reefguy Says:

    one year strip $10.27

  37. 37
    zman Says:

    oil and gas seen as one of the very few remaining safe harbors as the equity market gets more and more nervous. As much as both are up energy stocks could seem to care less. Pretty much my perfect idea of a bad monday as I’m short gas and long the equities.

  38. 38
    reefguy Says:

    Any hedge funds imploding today?

  39. 39
    reefguy Says:

    Gas is gonna cross $10

  40. 40
    zman Says:

    Reef – on technicals alone.

  41. 41
    Sambone Says:

    Reef – None today that I see. I’m sure margin calls are out and we should see a bunch more before it’s over.

  42. 42
    reefguy Says:

    S- margin calls don’t mature till market closes… look for after hours news

  43. 43
    zman Says:

    Still update for the BDI…very odd, usually out right after the open. DRYS down 9% now.

  44. 44
    reefguy Says:

    oil and gas testing highs from here to close

  45. 45
    redjack Says:

    z..BDI 8624 (+88)

  46. 46
    zman Says:

    RJ – ty, so its up again and the stocks are abandoning ship again. That makes sense.

  47. 47
    zman Says:

    Even the dollar is stronger today, which was an early morning excuse for the strength in commodities.

  48. 48
    redjack Says:

    nope, I bought some APR calls. Buying on the dip…

  49. 49
    uop Says:


    hanging in with your March UNG PUTS??

    or rolling ?

  50. 50
    zman Says:

    RJ – agreed but I’ve gone back to the well enough here to be perhaps over cautious.

  51. 51
    zman Says:

    UOP: re UNG: hanging on another day or two, then I have to roll. Nothing worth rolling really in the 40 through 42 level. Maybe 10 acts as a ceiling to ricochet off of (profit taking) but its hard to tell how much new $ is just coming into the market….fundamentals be damned.

  52. 52
    zman Says:

    NG just ticked $10

  53. 53
    Bob Says:

    Z and Bill:

    BDI up today: Baltic Exchange Daily Fixture/Index List 10/03/2008

    BDI 8624 (UP 88) BCI 12625 (UP 167) BPI 8609 (UP 42)
    BSI 5206 (UP 59) BHSI 2483 (UP 25)
    Last published BDTI 1162 (DOWN 9) BCTI 930 (DOWN 5)

    DRYS possibly down on secondary rumor? SEC filling 3/7/08? 6 – 6.6 mm shares for 30% dilution

  54. 54
    zman Says:

    Bob – thanks, I heard secondary rumors and maybe that’s it but the filing is an amendment to a shelf registration filed back in October. You’d think it would be in the stock by now…guess not.

    Market taking it on the chin now. Should be a signal for Ben he needs to go ahead and cut now.

  55. 55
    reefguy Says:

    ioc- another 500k straddle on March $25. Looks like shares as well

  56. 56
    zman Says:

    more re 54: Why it pulls DSX down 10% and the rest of the group down 5%+ is odd too.

  57. 57
    zman Says:

    Notice oil is up 2.80, nat gas is up 0.28; back to pattern of the last few weeks. All logic out the window. Oil at 108!

  58. 58
    Bob Says:

    Z-agreed…one problem with momo stocks, but it sure helps on the way up! Momo players waiting for retest of $48

  59. 59
    reefguy Says:


  60. 60
    yona Says:

    Spitzer! HAH!!!!!!

  61. 61
    zman Says:

    $5,500 an hour hooker? For shame, Elliott, for shame. Please tell me he used public funds!

  62. 62
    yona Says:

    please tell me they have pics of him dressed like a woman

  63. 63
    reefguy Says:

    Was the hooker Barney Frank?

  64. 64
    zman Says:

    reef – that draws to mind a pretty ugly mental image. thanks a lot, lol?

  65. 65
    reefguy Says:

    Eliots last interview is happening now…

  66. 66
    reefguy Says:

    z- I got it wrong..it was with Corzine

  67. 67
    zman Says:

    Might actually rally the stocks as the next guy who tries to clean up the Street will be given only 1/2 the credibility. Man that’s a tall high horse to fall off of.

  68. 68
    apbd Says:

    Spitzer just got off a call with Bill Clinton. ” I did not have sex with that woman…”

  69. 69
    Sambone Says:

    Wow, glad I own SKF! C below $20.00. Who would have thunk it!

  70. 70
    zman Says:

    A – LOL

    The market has flat-lined here as everyone is waiting on the Spitzer spin-conference.

  71. 71
    zman Says:

    Nice Sam. Only bright spot I had today is SD making a move on $40. Most other energy pathetic but at lease it has momentarily stopped falling.

  72. 72
    zman Says:

    Everyone who ever had to deal with Sarbanes is too busy laughing to do anything else right now.

  73. 73
    xweto Says:

    Z: not sure when the NG mania stops but a clue might be the lack of mo in TLM & ECA which has been red all day even as the hedgies pile into the energies. Round and round the merry-go-round goes where she stops …

  74. 74
    zman Says:

    X – group does not believe this action in natural gas or oil. I have a handful of stocks up on two screens with about 100 tickers.

  75. 75
    Sambone Says:

    Wow, he’s gonna resign as NY Gov, being reported.

  76. 76
    zman Says:

    his statement just said he failed to live up to his own standards and that he was taking no questions. definite admission of guilt. he’s toast.

  77. 77
    zman Says:

    Oil and natural gas ended up 2.62%, and 2.64% respectively. HO and RBOB completely failed to keep up with oil.

    Marketing starting to sink again. Anyone hearing anything more on a surprise rate cut? Maybe Ben is busy deleting emails and text messages.

  78. 78
    Sambone Says:

    Z – nothing on my screens this pm.

  79. 79
    Sambone Says:

    3:12 pm EST

    Crude Hits Another Record As Investors Pile In


    HOUSTON — Crude futures moved further into uncharted territory, with oil gaining its own momentum in defiance of a decline in other key commodities.

    Light, sweet crude for April delivery closed $2.75 higher, or 2.6%, at $107.90 a barrel on the New York Mercantile Exchange, a record settlement. The front-month contract hit an intraday high of $108.21, marking the ninth session of the last 10 where a new record was set.

    April Brent crude on the ICE futures exchange settled $1.78 higher at $104.16, also a record settlement.

    Futures have risen $20 in under two months largely on the weakness in the dollar, which makes commodities priced in the U.S. currency relatively cheap for buyers in other currencies. This allows speculative investors to interpret signs of a U.S. recession as a reason to drive up prices on the expectation that more negative economic data could inspire the Federal Reserve to cut interest rates, further weakening the dollar.

    But the dollar held steady on Monday, helping to send metals lower and mute gains in distillates and gasoline, which over the last few weeks have risen in concert with — and often in excess of — crude futures. Crude oil appears to have gained its own momentum, market participants said.

    “It’s fast money chasing faster money,” said Dean Hazelcorn, a trader with Coquest Inc. in Dallas. “Why crude oil? That’s where the volume is — that’s where you can get your hands on contract.”

    The move from the intraday low just over $104 a barrel on Monday to the latest record was a “self-fulfilling self-reinforcing price advance,” said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Ill.

    The U.S. Energy Information Administration releases its short-term energy outlook on Tuesday and weekly oil and product inventory data Wednesday. These indicators, along with the Commerce Department’s retail sales data release on Thursday, are traditionally used as cues for oil prices, though their impact has been muted lately.

    A Dow Jones Newswires survey of analysts found an average forecast of a 1.7 million barrel increase in oil inventories for the week ending March 7, a 100,000 barrel increase in gasoline stocks and a 2 million barrel draw in distillate inventories. Last week saw a surprise draw in oil inventories, after seven-straight weeks of gains.

    “I don’t think economic data is going to be able to (send prices lower),” Ritterbusch said. “If we saw strengthening of the dollar over a two to three-day period and combined that with decidedly bearish (inventory) stats .. that would be enough to slow things down.”

    Trading has remained focused on demand as no threats to production in crude-exporting nations has risen to the forefront in recent days. The last such event, a diplomatic row between Colombia and neighbors Venezuela and Ecuador, was defused heading into the weekend.

    Front-month April reformulated gasoline blendstock, or RBOB, closed 2.53 cents higher, or 0.9%, to $2.7196 a gallon. April heating oil closed 2.93 cents higher, or 1%, to $2.9763 a gallon.

    —By Brian Baskin, Dow Jones Newswires

  80. 80
    zman Says:

    K – here’s a piece from today discussing the likelihood of $4 gasoline. One of the guys in the story makes the point that the rally in gasoline inventories has been made possible by increased production of winter grade gasoline. I really don’t see how its more of a factor this year than any other but it is a different perspective from my blending products swollen statement (which I back up with data).


  81. 81
    zman Says:

    Thinking about adding to SU.

  82. 82
    zman Says:

    ZTRADE: SU $105 March calls for $2.80.

  83. 83
    reefguy Says:

    z- canada says new oil sands plants have to sequester carbon.

  84. 84
    zman Says:

    reef- that’s bleeding edge (in other words high $) technology…that will change the economics even with oil way up here.

  85. 85
    zman Says:

    and of course its not great on the SU, doing some reading.

  86. 86
    zman Says:

    reef, is that today’s new…sure don’t see it?

  87. 87
    reefguy Says:

    Saw it on Bloomberg about 20 minutes ago. will scroll back

  88. 88
    zman Says:

    ok, just read it in the globe and mail. SU should be ok for a time as it reads ” plants that have yet to hit the drawing board” . Their expansion plans are well along although this would impact future development.

  89. 89
    reefguy Says:

    Confirmed SU. Regulations to be finalized in next year and go into effect in 2010. John Baird Enviorment minister said from Ottawa

  90. 90
    reefguy Says:

    Canada Requires New Oil-Sands Projects to Capture, Store Carbon

    By Greg Quinn
    March 10 (Bloomberg) — Canadian oil-sands projects that
    start operating in 2012 or later will have to capture and store
    carbon emissions, according to new environmental rules that
    also largely ban new “dirty” coal-fired power plants.
    The regulations will be finalized next year and come into
    force at the start of 2010, Environment Minister John Baird
    said today in a statement from Ottawa.
    The process of extracting oil from tar deposits in the
    western province of Alberta is one of Canada’s biggest sources
    of greenhouse-gas emissions, which may more than double by 2015
    as production rises, a United Nations report said last year.
    Because energy companies are just now starting to develop the
    technology to store carbon underground, the rules may deter
    investment in the tar sands, an energy executive said.
    “We have to figure out how to do it and what it costs,”
    Charlie Fischer, chief executive officer of oil and natural-gas
    producer Nexen Inc., said today in Edmonton, Alberta, before
    the announcement. “If you don’t know what it costs and how
    you’re going to do it, that could just stall the investments.”
    Enbridge Inc., Canada’s largest pipeline company, said in
    February it will lead a group of 19 energy firms in a project
    to limit pollution by developing ways to store carbon dioxide.
    The project is studying if it can inject and store carbon
    underground, perhaps in salt-filled reservoirs buried at least
    8,000 feet (2,438 meters) down.
    Stephen Hazell, executive director of the Sierra Club of
    Canada, said before the announcement today that carbon capture
    rules might slow new investment in the tar sands and even halt
    the growth of emissions within five years.
    “There will have to be a timeout or moratorium on new tar
    sands projects until the new technology is brought on stream,”
    Hazell said.
    Prime Minister Stephen Harper’s Conservative Party
    government was criticized last year when it announced its
    initial climate-change plans, pledging to reduce emissions 20
    percent by 2020. Opposition parties with a majority of seats in
    the legislature said the plan wasn’t tough enough on big

  91. 91
    Wyoming Says:


    Saw your comment last week about Oolitic reservoir. We did some work with CVX in Lost Hills and I recall their reservoir had high porosity (~32%) and low perm (<7 mD). They were always looking for a way to produce it without a frac. Could be why the source thought it was a matrix (half right).

  92. 92
    zman Says:

    “If you don’t know what it costs and how
    you’re going to do it, that could just stall the investments.”

    My thoughts exactly.

    Does OXY have lost hills now?

  93. 93
    Wyoming Says:

    OXY bought Elk Hills. 2nd place Bid was like $1.5B behind them. They made up their purchase in the winter of 2000 when Enron did their thing. Actual sold some contracts in LA for ~$100/mcf during that time.

    If Oxy bought it it would be in the past couple of years.

    Lost Hills is a big steam flood.

  94. 94
    Wyoming Says:

    What is your tak on TSO? From an S&R perspective?

  95. 95
    zman Says:

    I don’t see much to get excited about in the group. They are cheap by historical standards but they will get cheaper if cracks don’t improve. 1Q west coast cracks are running about half levels seen a year ago. If I was going to own right now other than VLO it would be them but I’d rather focus on the producers at this juncture who are just banking cash flow at record rates.

  96. 96
    uop Says:


    Spitzer story:

    name Spitzer in German is Penetrator, Sharpener.

  97. 97
    apbd Says:

    Do you think it’s possible that Elliot and his pal Jim Cramer double dated?

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