03
Apr
Thursday – Gas Preview & Oil Review
Yesterday's crude inventory report was a tale of resurgent crude imports and a large gasoline draw. The jump back up in imports I expected and I figured would weigh on crude. However, the big draw on gasoline, a function of elevated Spring Break demand and flattish production volumes, yielded a 5% rally in RBOB that dragged the crude complex higher, safeguarding crude from a close below $100, something many technicians are eying as a sign of certain doom for crude. In other words we remain range bound.
Holdings Watch:
CALLS:
- (DVN) Entering DVN May $105 Calls (DVNEA) for $5.
- (COP) Doubling COP April $80 Calls (COPDP) for $1.30. Takes average price to $1.66 vs last bid of $1.42. Why add more (COP) now? Two reasons:
- It's cheap to its peers especially in light of expected earnings growth:
- I like the Majors better than the refiners right now for a little exposure to a short term improvement (seasonal) in crack spreads. The majors have upstream segments to help offset weak refining margins. The independent refiners (VLO, TSO, etc) have no such ability.
- (COP) is out with an interim update which not surprisingly warns about refining margins but points to much higher pricing for the upstream side.
- (HAL) Exited remaining half of HAL April $37.50 Calls (HALDT) for $2.81, up 181%. We sold the first half of our position here on 3/26 up 110%. I'll likely add May calls in short order.
PUTS: No trades
Stocks We Care About Today:
PQ - Petroquest Operations Update. ($17.95) I've been away from the name for a couple of months and kicking myself ever since. The press release last night contained five pertinent data points, and I may enter Calls for a trade and for 1Q earnings if it gets driven down by the last one:
- Nice production rates being seen in the Woodford. PQ said it completed its 13th Woodford shale well with an IP of 6.3 MMcfgpd. This is well above target of 2.5 to 4.0 and more than three times the initial rate of the last known rate (the 11th well) we knew about here. At $4.5 mm the well is came in in the middle of the expected cost range. This translates into lower than expected F&D. Production here is now 19,000 Mcfepd, up from 15 at the end of February. They plan to complete two more wells within 2 weeks (just in time for the conference call on April 24th). Also, on the call, look for them to bump up their reported acreage in the play and I suspect they will participate in more wells (potentially non-operated wells) than originally planned.
- East Texas Growth Continues. Company continues to drill away on lower CV targets in its 50,000 acres in their Carthage field. Rate here now up to 17,000 Mcfepd.
- Fayetteville Shale Activity: This is a non-operated play for them but it looks like the number of wells here will easily exceed their original plan (they've drilled 37 year today and the plan was to only drill 60 to 80 for all of 2008) and they continue to add acreage.
- PQ Added More Collars But Remains Lightly Hedged: 40% of expected 2008 production is now hedged, which pretty light to many of its peers.
- Two of PQ's Gulf of Mexico shelf fields were offline during part of the first quarter. No details on how long they were off but they are not small pieces of production This will cause 1Q08 volumes to come in at the low end of the previous guidance range of 86 - 92 MMcfepd but I think they get a "get of jail free pass" for that (hopefully after a brief sell off) as:
- the 1Q exit rate was 93 mm/d and
- they maintained full year guidance of 94 to 100 MMcfepd (that's 13% YoY growth on the mid point of the range ~ 85% natural gas).
Valuation remains dirt cheap. Last October, I said (PQ) was cheap to the group as it traded at just under 4x 2008 CFPS estimates. At the time (October 16th to be exact with the stock at $12.58:) I wrote:
Its increasing focus on "resource plays will boost its reserve life which should in turn result in cash flow multiple expansion. The company has not yet provided guidance for 2008 and analysts are for the most playing the name pretty conservatively as CFPS estimates for 2008 are in line with those of 2007 at around $3.70. This should change soon as the company puts forward new production growth guidance. (See my initial look at the company here.)
I was right about the numbers coming up… That $3.70 number for 2008 cash flow per share now stands at $4.32 with some analysts printing numbers north of $5.
…But I was wrong about the multiple expansion. It just hasn't happened yet. Looking at 2009 numbers (once you're in 2008 everybody has to look out to the next year for comps) consensus is $4.76. That yields a paltry forward CFPS multiple of 3.8x. Even if you look only to the 2008 numbers (which are very light given the analysts reluctance to mark oil and gas closer to market) PQ still only garners a 4.1 x multiple. That's pretty cheap when you recall the company continues to transition into a longer lived resource play. 2007 saw reserve life expand modestly here to 5 years. 2008 should see a much more marked expansion (especially if they sell their Gulf of Mexico Shelf assets like I previously suggested…what better price environment could you get than this one?). Anyway, here are the comps as to why I call it cheap. Again, I may be getting long on weakness before their 1Q call.
(SWN) Selling Certain Fayetteville Shale Assets To (XTO). SWN selling about 6% of its acreage in the play for $520 mm. This keeps (SWN) out of the capital markets for its 2008 capex budget.
Commodity Watch:
Natural Gas: tumbled mightily in the morning but recovered with oil. That makes little sense to me but the volatility is pretty normal as we enter the shoulder season. Gas eventually closed up $0.11 to $9.83. This morning gas is trading back off a dime.
- Tropics Watch 2008: Hurricane season is not yet upon us but forecasts of a busy season may be about to get busier. At present, Bill Gray's Colorado State University forecasting team is looking for 13 tropical storms and 7 hurricanes this Atlantic hurricane season, beginning June 1st, but the team is likely to increase the outlook next week when it makes its first official forecast revision. So they are forecasting an increase in their forecast...sounds like someone is long natural gas at CSU. Gray sites a colder than average La Nina and very warm "sea surface temperatures in the eastern Atlantic particularly off Iberia and off northwest Africa, much like they were at this time in 1995 and 2005 when we had very active seasons"
EIA Gas Inventory Preview:
- My Number: 25 to 30 Bcf. Last year this same week was witness to a 35 Bcf injection. This is likely the last withdrawal of the season...ok, maybe the second to last.
- Last Week's Weather: Still Cool. HDDs were 137, down only slightly from the 142 of the prior which yielded a somewhat smaller than expected withdrawal of 36 Bcf in last Thursday's report.
- This Week's Weather: Warming Trend. The Climate Prediction Center pegged this week's weather at HDDs of 107. It will probably be a slightly bigger (cooler) number than that but it still puts us in line for the season's first injection.
- Imports: gross imports were off slightly to 8.9 Bcfgpd last week ...LNG remains mired at 0.6 Bcfgpd, just over 2 Bcfgpd short of year ago levels.
- Street Consensus: 32 Bcf. Another smaller than expected draw would likely send natural gas tumbling.
Crude Oil: Crude prices rallied $3.85 to $104.83 on the storage report. This morning crude is trading off over a buck as everyone comes back to the realization (via the high jobless claims number this morning) that all is still not right with the economy.
EIA Inventory Report Review
CRUDE OIL: Big import driven build.
Utilization / Refiner Oil Consumption: Record lows for this time of year as the refiners collective try to right the gasoline storage ship.
Imports surged nearly 1.4 mm bopd versus the prior week. This recovery in imports accounted for 9.7 mm additional barrels on the week.
GASOLINE - BIG Draw Down On Stocks. Stands to reason that if you produce less and people consumer more this will happen. You also had service stations, who had been postponing further gasoline purchases, bite the bullet in advance of Spring Break demand. Contrary to most people's belief, gas stations aren't making a killing at these prices but they are taking on considerably more risk.
Production Was In Line With Seasonal Norms. How can this be with utilization so low? Two words: blending components.
Imports: still running pretty flat at almost 0.95 mm bpd, not worth a chart.
Demand Pops With Spring Break. Gasoline demand is running 1.5 to 2.0% below year ago levels but those are very high levels. It proves that up $3.30 at least, gasoline demand in the U.S. is inelastic. We shall soon see if breaking the $3.50 per gallon mark at the pump has any impact.
Odds & Ends
Analyst Watch: JP Morgan cuts (CHK) to Neutral, ups (DVN) to overweight; Lehman trimming price targets for the entire roster of independent refiners and Majors.
7:29 am EST
Crude Down On Profit Taking
By Nick Heath
Of DOW JONES NEWSWIRES
LONDON — Crude oil futures fell by more than $1 in London Thursday as investors took profits from Wednesday’s sharp rally and on a slight strengthening of the dollar.
While an unexpectedly large draw in U.S. gasoline stocks outlined in U.S. government data appeared to trump news of equally surprising builds in U.S. oil stocks and further signs of slowing demand Wednesday, the ensuing rally was under scrutiny Thursday.
“It seems that an unexpectedly large build in oil inventories and sluggish demand from U.S. refineries have finally filtered through to investors, while last night market participants were concentrating on draws in inventories for refined products,” said Andrey Kryuchenkov of Sucden Research in London.
At 1111 GMT, the front-month May Brent contract on London’s ICE futures exchange was down $1.42 at $102.33 a barrel.
The front-month May light, sweet, crude contract on the New York Mercantile Exchange was trading $1.21 lower at $103.62 a barrel.
The ICE’s gasoil contract for April delivery was down $15.50 at $939.25 a metric ton, while Nymex gasoline for May delivery was down 454 points at 272.82 cents a gallon.
As indications of slowing economic growth continue to emerge, analysts said crude price resistance to an increasingly gloomy economic outlook may ultimately falter.
U.S. Federal Reserve Chairman Ben Bernanke publicly raised the prospect of a U.S. recession for the first time Wednesday. His comments accompanied reports that the International Monetary Fund and the Asian Development Bank are both adjusting lower their growth forecasts for this year.
“Weaker growth prospects will eventually trump other variables, such as the weaker dollar, in influencing price direction,” said Edward Meir, analyst at MF Global in New York. “Of course, moves like the one we had yesterday make such an argument more difficult to defend, but try as we may, we cannot fathom how commodities can push to new highs just as the odds of a potentially worldwide recession intensifies.”
Nonetheless, fluctuations in the dollar have continued to influence the path of crude prices heavily, and a slight strengthening in the U.S. currency against most major currencies Thursday helped pull crude prices lower.
With the relationship between the two expected to prevail in the short term, analysts suggest Friday’s U.S. non-farms payroll and unemployment data will be significant for both the currency and the crude markets.
“The main statistic for the week will be the employment number released tomorrow,” said Olivier Jakob of consultancy Petromatrix in Switzerland. “Would-be sellers on oil will stay on the sidelines until then.”
Institutional investment flows into commodities continue to support crude prices, some analysts said. Fund buying is expected to keep oil prices near current levels as commodities prove an attractive investment relative to other financial asset classes, they said.
“On the economic front it’s gloomy, and the relationship (between oil prices and fundamentals) is completely divorced,” said Jim Rintoul of TheOilTrader.com. “But funds have cheap money and they’re looking for a home for it.”
—By Nick Heath; Dow Jones Newswires
April 3rd, 2008 at 8:00 amJP Morgan downgrade of CHK comment: Analyst there is Joe Alman…he thinks he’s on to the company about their reserves and he’s wrong and they’ve proven him to be wrong. They shamed him on the 4Q conference call and he’s cutting them after the deal to be spiteful.
April 3rd, 2008 at 8:02 amZ:
GM
expect action again in UNG, what was the news about NG ?
April 3rd, 2008 at 8:24 amReason for JPM downgrade of CHK is on the wire. Joe calls them the least efficient in the sector and that they should be curbing, not boosting spending. Says recent decisions show a lack of financial discipline. Joe Allman is officially an idiot. He has never understood the story here, never will and is trying to break the stock. I suspect the other houses will wait for sellers to bring it down this am and then will step in to buy.
uop – no news yet nat gas, just trading off with oil as it traded up with oil yesterday. Inventory report at 10:30 est.
April 3rd, 2008 at 8:25 amRe: CHK – stock is however down a buck as JPM shareholders and a few others exit. This analyst has no credibility on this name and its starting to climb as I type. I will wait to add for the natural gas number but a day trade in the April 45 calls would not be a bad idea.
April 3rd, 2008 at 8:44 amUNG and NG trading tick for tick today, both down the exact same %. Sharp contrast to yesterday’s action when gas was off 1% more than UNG. Today both are down 2% with gas down $0.24.
April 3rd, 2008 at 8:50 amZTRADE: Took April $45 calls (CHKDI) with the stock off its lows (down $0.70).
April 3rd, 2008 at 8:53 amZ I played it safe took May $45 cost $1.more than April. I thought May offered better value for time.
April 3rd, 2008 at 8:56 amScoop – I took the leverage for a day trade or couple day trade. I think the recent syndicate will be all over this this morning to jam JPM. Talk about never getting in a banking deal again, lol. Not that the cat had a chance in the past but his statements this morning are fighting words.
April 3rd, 2008 at 9:00 am9:55 am EST
Nymex Crude Down On Profit-Taking; Seeks Direction
By Hyun Young Lee
Of DOW JONES NEWSWIRES
OTTAWA — Crude oil futures fell more than a dollar in early trading Thursday as investors booked profits from Wednesday’s late surge.
A bigger-than-expected slump in U.S. gasoline stockpiles Wednesday overshadowed a massive build in crude oil stocks, driving up prices to settle nearly $4 higher. But the price is still being pulled between the ongoing struggle among market fundamentals, economic concerns and movements in the U.S. dollar.
The front-month May light, sweet crude contract on the New York Mercantile Exchange was down $1.53, or 1.4%, at $103.30 a barrel. Brent crude on the ICE futures exchange fell $1.56 to $102.19 a barrel.
Wednesday’s oil stocks data showed gasoline inventories fell 4.5 million barrels in the week ended March 28, more than twice analysts’ expectations, amid stronger demand for the fuel.
Refinery utilization rates edged up 0.2 percentage point but the current level of 82.4% is still very low, and unless they ramp back up ahead of the summer driving season, prices could be primed for further spikes.
“Some traders concluded that if you don’t start moving the utilization back up, you’ll have to rely on gasoline stocks,” said Gene McGillian, an analyst at TFS Energy Futures in Stamford, Conn. “So gasoline prices will go up and that’ll drag the whole complex higher.”
Meanwhile, crude oil stocks jumped nearly three times as much as forecast, by 7.3 million barrels, powered by a hefty jump in imports. After an initial move down, the market shrugged off the information to focus on gasoline instead.
But demand trends reveal that consumption will likely slow in coming weeks, said Bart Melek, commodities strategist at BMO Capital Markets in Toronto.
Total petroleum products used over the last four weeks are down 1.3% versus a year ago, while gasoline is flat, he noted.
“Given that oil consumption will slow owing to seasonality and probably due to moderating global growth, the oil market looks primed to post material surpluses,” Melek said in a note. “As such, the coming weeks and months will test the resilience of this market and the importance of fundamentals.”
He added that crude oil prices in the $90s wouldn’t be a surprise.
Economic woes are also moving to the forefront, with a slew of bleak prognoses earlier this week. The International Monetary Fund and the Asian Development Bank both scaled back their growth forecasts for the year, while Federal Reserve Chairman Ben Bernanke Wednesday publicly raised the prospect of a U.S. recession for the first time since the slowdown began last summer.
However, some traders seem to view Bernanke’s comments as an indication the Fed may cut interest rates again, McGillian said. This would push down the U.S. dollar, which has led the way for Nymex crude price movements in recent weeks. A weaker dollar boosts the appeal of dollar-priced crude and other commodities as a hedge against inflation, as well as being a cheap buy for investors using other currencies.
A slight strengthening in the dollar has pressured Nymex crude in early trading Thursday.
Traders are also keeping an eye on U.S. non-farm payrolls numbers due Friday. Earlier Thursday, data from the Labor Department showed initial claims for jobless benefits last week surged to its highest level in more than two years, raising expectations for the third straight decline in payroll jobs.
Front-month May reformulated gasoline blendstock, or RBOB, was down 5.87 cents to $2.7149 a gallon. May heating oil was down 1.97 cents to $2.9313 a gallon.
—By Hyun Young Lee, Dow Jones Newswires
April 3rd, 2008 at 9:09 amCOP up now despite the refining margins warning. Like I said in the post, it should have surprised no one.
Very happy with the NBR and NBR double down now that the stock is almost to $35 I may take the double off the table.
April 3rd, 2008 at 9:12 amGas storage report: 29 Bcf withdrawal. Street was looking for 32 Bcf draw.
gas down $0.20 at $9.62 at time of report.
April 3rd, 2008 at 9:30 amoil up a buck now. Gasoline not keeping pace.
NG down 12 cents and inching up on yet another essentially in line natural gas report. This is probably the last drawdown of the season although next week’s report (for this week) will likely be close to breakeven, +/- 10 Bcf. We’ll know more when imports numbers are available next Monday.
April 3rd, 2008 at 9:42 amGOM Ultra Deep Shelf exploration –From Energy XXI (EXXI) press release today: “…The original Blackbeard West #1 exploration test, located at South Timbalier 168 in 70 feet of water offshore Louisiana, was drilled to 30,067 feet by a separate producer group but was temporarily abandoned. McMoRan resumed operations on March 18 with the expectation of deepening the well to a proposed total depth of 31,267 feet to evaluate deeper Miocene targets.
Current Blackbeard West participants include McMoRan, the operator, with a 32.3 percent working interest, Energy XXI with 20 percent and Plains Exploration Company (NYSE:PXP – News) with 35 percent…” Wonder who owns the remaining 2.7%?? The well was abandoned by Exxon et al because of pressures and temperatures that rendered drilling and evaluation tools unusable. Am unaware of improvements in these technologies in the preceeding 2 years that would now make this any easier.
This is a significant wildcat well w/potential to open essentially the entire Louisiana shallow (<1,000′ water)shelf to exploration below ALL existing producing horizons.
April 3rd, 2008 at 9:55 amZ:
April 3rd, 2008 at 9:57 amwith the numbers youquoted, will UNG go up today or the next days??
JY – could be the treasure island warrants … TISDZ. Also I know NFX still has a piece here…don’t know how much.
April 3rd, 2008 at 9:57 amUNG: I think it goes down in the next few days…I’m still long the APR $45 puts here but am considering rolling to May.
April 3rd, 2008 at 9:59 amJY – This is a huge potential but also a 1 in 50 or 1 in 100 shot in my book. I remember Shark and I was covering NFX when they came up dry here at Blackbeard/Treasure Island. Those TISDZ warrents are 42 and move on nothing but rumor.
April 3rd, 2008 at 10:05 amZ:
April 3rd, 2008 at 10:07 amCOP, i have stock and sold covered calls, now I am getting close to 8o, you think COP is good for more than 80 ?
Hey Z.
TLM !!
Wow, that option position from a few months backs was rigor mortis, I thought. Now it’s almost ITM!
April 20s. Around .45
SHould I load the magazine and hope for a quick transition into the money?
Q.
April 3rd, 2008 at 10:08 amWalter Industries!!
Read the quote from Mittal of ArcelorMittal.
The coked coal will nearly double. WLT is a great play on this front. This co. has nearly doubled in the past three months… after you and I got tired of chatting about it six months ago.
Q.
April 3rd, 2008 at 10:11 amZ- re #18 I’d say 1 in 100 is optimistic. probably a range of 75:1 to 150:1 for a COMMERCIAL find. They may find gas (oil unlikely at these temperatures) but to be commercial it will have to be big. Exxon et al spent over $100 million on the first well.
April 3rd, 2008 at 10:12 amJY – checking with NFX, think they kept a toe in, probably carried. By the way, the TISDZ is running of a sudden on volume. For those who don’t know (we haven’t mentioned the warrants for quite some time on the site) the warrants are an interest in a ultra deep (30,000+ feet), GOMEX shelf deep tertiary play called Treasure Island. Its a massive area and Blackbeard is a test of it.
Uop – COP is very cheap. As long as the group doesn’t fall apart I’d say yes.
Quarry – Long time no chat. TLM – I’m not adding, it appears stretched despite a cheap valuation. Coals are running without me. Got a little busy on the E&P front and missed the beginning of the move back up …wrote about it last week but did not trade it. Same goes for solars and those are pulling in so I may dip a toe there soon.
April 3rd, 2008 at 10:20 amQ – any thoughts on asphalt prices at present?
April 3rd, 2008 at 10:23 amDo you think TLM can break 20?
The premium, as it is, is eroding rapidly.
If no chance to break 20, I’ll dump them now and be happy.
Q.
April 3rd, 2008 at 10:23 amreply to #7- couldn’t agree more on JPM’s lack of credibility on CHK. I’m taking a longer view, looked like a good time to increase my Oct 45s. Hard to believe CHK won’t be over $50 by Oct.
April 3rd, 2008 at 10:23 amZ, any thoughts on DRYS?
April 3rd, 2008 at 10:23 amZ.
I don’t do asphalt contracting. My customers do. I never saw the question or the post from the other day you mentioned.
Give me a specific question, and I can find out for you, if it’s important.
Q.
April 3rd, 2008 at 10:24 amI bought the DUG
April 3rd, 2008 at 10:25 amApril 36 calls just now.
Q – I’d give it less than even odds.
Ellwodo – if you listen to the 4Q conference call they absolutely shamed him. I don’t often cast stone but I have no respect for Joe and its not just this stock…I think his motivations on this one though are personal and 0 to do with the future of the stock.
Popeye – no. just watching. feels like momentum has returned to the group. will do an update there soon (prior to 1Q report season)
Q – Sane was asking yesterday: “Off topic question, but does anybody know how much asphalt is going for lately?” I think he has a something to pave.
April 3rd, 2008 at 10:32 amGents-
April 3rd, 2008 at 10:41 amDid a little in-house analysis as part of my day-job last fall…it’s probably stating the obvious, but asphalt is essentially tailings (heavy junk left over from distillation)…as oil has risen in price, it becomes competitive economically for refineries to make other valuable by-products out of these tailings (than asphalt)…asphalt supply drops, price goes up. Z?
ZTRADE: Out DVN May $105 Calls for 7.10, up 42% in a day. Went up faster than I thought and I plan to trade back into it on weakness.
April 3rd, 2008 at 10:44 amMorning K – I don’t know a lot about asphalt but I remember FTO and HOC both saying repeatedly on past conference calls that asphalt pricing trails oil prices significantly which means that when oil prices rise quickly, the refiner gets hammered. What you are saying makes a lot of sense to me.
April 3rd, 2008 at 10:50 amGotta say I’m pretty happy with a green group, rising CHK and falling natural gas, now down $0.24 to $9.60 with UNG off a similar 2.4%.
April 3rd, 2008 at 11:17 amUop and other NG/UNG put holders – NG and UNG at LOD.
NG down $0.31 …think it continues to fall in the near term.
April 3rd, 2008 at 11:59 amZ:
UNG puts may 47 which i bought yesterday are up 22 %, you suggest hold on as NG will continue to drop?
April 3rd, 2008 at 12:03 pmUop – I think NG continues to slip over the next week…Just no fundamental reason for it to stay up at these levels. Will have some charts showing the increased potential for rapid rebuild versus year ago levels in tonight’s gas post.
April 3rd, 2008 at 12:06 pmMarket seems to be happy with Bernanke, SEC chairman and Paulson’s deputy comments in front of the senate. Lots of political grandstanding…not a lot of substance. May switch back to KGSR.com.
April 3rd, 2008 at 12:09 pmJust missed the PQ this am.
CLR = unreal. Anybody still holding stock here with me?
NBR going for $35, currently at HOD…service looking very strong
… very quiet around here, may go for a swim.
April 3rd, 2008 at 12:55 pmGood afternoon
Z-I think the up 400 down 400 up, down
ect… has taken a toll on us traders and many are taking a much needed short break
on another note read a comment wondering why the SPR ROSE TO A RECORD 700.9 mm barrels and is increasing at a rate 62,000 a day.
point made why increase now with oil over $100 and we did not after Katrina?
Also Mr K market reading 4-3 he is adding shorts and shorted xom this am
April 3rd, 2008 at 1:17 pmHear ya D Kinda beat myself … making not to bad $ in here though.
NG getting crushed now (down $0.43 at $9.40 as we approach NYMEX close) and E&P turning a blind eye which actually makes sense to me.
On the SPR … don’t get me started. We beg Saudi to produce more oil but say 50 to 60,000 bopd going into a bottomless pit of no return at $105 per barrel does not affect the big picture.
April 3rd, 2008 at 1:23 pmz:
hold on, NG and UNG dropping sharply
April 3rd, 2008 at 1:24 pmEnergy stocks getting weaker and CHK going towards LOD. Are we near a short term top in oil and stocks?
April 3rd, 2008 at 1:24 pmRam – I do not believe so.
April 3rd, 2008 at 1:25 pmThank you.
April 3rd, 2008 at 1:27 pmNBR through $35 now, hate to say it but it looks like a breakout and volume is on the rise.
April 3rd, 2008 at 1:48 pmZ- see volume on HK April $22.50
April 3rd, 2008 at 2:03 pmAlso june 20&22.50
April 3rd, 2008 at 2:06 pmScoop – see that, also some big pieces of stock coming across. Looks like a fund buying in to me.
April 3rd, 2008 at 2:11 pmWould a fund buy the stock and sell options at the same time? IF a fund is buying the $22.50’s for a naked call – then someone is taking a SUPPER WILDZ TRADE.
April 3rd, 2008 at 2:17 pmioc- rebounding on low volume
April 3rd, 2008 at 2:23 pmDRYS seeing healthy April call action
April 3rd, 2008 at 2:24 pmZMAN – Any thoughts on unloading anything prior to the unemployment numbers tomorrow? It seems the broad market is treading water with no momentum and a negative report would recreate the red sea.
April 3rd, 2008 at 2:30 pmIOC = I’m watching but staying away…hope to play the news if they ever have any.
Scoop – yeah, figures I’m just watching there too.
Ram – isn’t a negative report already figured in given the jobless claims today?
April 3rd, 2008 at 2:44 pmIf it’s flat to slightly negative, I fear there will be a sense of the FED is done lowering rates. It just seems like the market in general has stalled and needs something for momentum. The path of least resistance looks to be down.
April 3rd, 2008 at 2:47 pmIMMEO
April 3rd, 2008 at 2:48 pmZ – Just finished my DD. I’m buying BW under $30.00.
April 3rd, 2008 at 2:49 pm3:44 pm EST
Crude Falls On Gasoline; Market Eyes US Jobs Report
By HYUN YOUNG LEE
Of DOW JONES NEWSWIRES
OTTAWA — Crude oil futures ended lower Thursday, dragged down by weakness in gasoline prices ahead of a key U.S. jobs report which will likely set the tone for next week.
Light, sweet crude for May delivery settled $1, or 1%, lower at $103.83 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange closed down $1.23, or 1.2%, at $102.52 a barrel. Brent settlement prices weren’t yet available.
Gasoline led crude prices by the nose all day, pulling them down earlier in the session as investors booked profits from Wednesday’s surge on a bigger-than-expected drawdown in U.S. gasoline inventories. Crude then tracked higher as gasoline recovered but buckled just below the key resistance level of $106.50 a barrel before heading back down onto negative ground.
The drawdown in gasoline inventories completely overshadowed a massive 7.3 million increase in crude oil stocks, with traders also focusing on the “extraordinarily” low refinery utilization at 82.4%, suggesting further stocks tightening for the motor fuel.
But this is largely a product of heavy refinery turnarounds, partly compounded by some refiners making discretionary cuts due to low gasoline profit margins, said Antoine Halff, deputy head of research at Newedge USA, New York. Rates should head back up again as seasonal maintenance comes to an end and long-idled units return to service, he said in a note.
BP PLC (BP) has restarted a large crude unit at its Texas City, Texas, refinery, but it is running at reduced rates, a person familiar with operations said Thursday. The unit is operating at 185,000 barrels a day, but the person didn’t specify why it wasn’t running at its full 230,000 barrel-a-day capacity. The refinery has been in sequential restart since a fatal explosion in March 2005 and a September 2005 shutdown ahead of Hurricane Rita.
Meanwhile, U.S. gasoline demand remains weak, despite ticking higher in Wednesday’s inventory report.
“The phrase here is “demand erosion’,” said Eric Wittenauer, energy futures analyst at Wachovia Securities in St. Louis. “There are major concerns in the crude oil market about the underlying economic conditions.”
The prognoses for global economic growth turned decidedly bleaker this week, with Federal Reserve Chairman Ben Bernanke Wednesday publicly raising the prospect of a U.S. recession for the first time.
His comments prompted investors to head back into commodities, with some traders seeing them as an indication of further interest rate cuts from the Federal Reserve, which could push the U.S. dollar down again, said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.
Oil prices have been in a “tug of war” between those wanting to buy oil as a hedge against the waning dollar and others trying to acknowledge the prospect of falling oil demand, he said. A weaker dollar boosts the appeal of dollar-priced crude and other commodities as a hedge against inflation, as well as being a cheap buy for investors using other currencies.
Also, the International Monetary Fund is set to cut its global economic growth forecast for the year to 3.7%, managing director Dominique Strauss-Kahn told AFP Thursday.
But all eyes are on the U.S. non-farm payrolls numbers due Friday to direct the oil market into next week. Earlier Thursday, data from the Labor Department showed initial claims for jobless benefits last week surged to their highest level in more than two years, raising expectations for the third straight decline in payroll jobs.
“If it’s a really lousy report, the dollar will probably get hammered and you’re going to see oil prices fly again,” Flynn said.
Front-month May reformulated gasoline blendstock, or RBOB, settled down 4.93 cents, or 1.8%, at $2.7243 a gallon. May heating oil settled down 2.82 cents, or 1%, at $2.9228 a gallon.
—By Hyun Young Lee, Dow Jones Newswires
April 3rd, 2008 at 2:50 pmLast I saw, fed funds was discounting another 50 bps cut at month’s end. Inflation is on the fed’s mind but everything I’ve heard out of Ben over the last 2 days of testimony says further stimulus is on the way.
Don’t know BW
April 3rd, 2008 at 2:51 pmUNG got cracked for 4.6%. Suddenly the UNG $45s waking back up.
April 3rd, 2008 at 2:53 pmFlynn in #58 sounds frustrated re his negative call on oil prices which he stayed on as low as $87 this year. I think he’s right about tomorrow’s numbers, the dollar and the impact on oil. I also think that the stocks are paying more attention to the equity market than the crude market but this market looks like it wants to go higher…sure is ignoring a lot of crappy data.
April 3rd, 2008 at 2:56 pmBW is a specialty materials manufacturer , metallic and non-metallic, that has a problem of passing on their costs to customers. Maybe that is changing.
April 3rd, 2008 at 2:56 pmRam – the one thing I’d consider selling (and I’m not) is my double down on NBR which has moved up faster than I thought.
April 3rd, 2008 at 2:58 pmzman, new to the great site. should i have received a ‘blast mail for #32 above? Received all other ‘blasts i believe.
April 3rd, 2008 at 3:03 pmSeymoujs – Thanks and welcome! Yes, I’ve got you in the blast list and the DVN trade did go out as one. Probably caught by your corporate spam filter. Let me know if you want it sent to another address as well. You can reach me at zmanalpha@gmail.com
April 3rd, 2008 at 3:06 pmZ-Had to sell my NBR. 44% in that short a time is a gift.
April 3rd, 2008 at 3:07 pmCurious how more people piled into the April HK 22.5’s since it was noted above.
April 3rd, 2008 at 3:07 pmkiaora – hear ya, had my finger on the trigger two different times today at the buck level but got greedy (famous last words). Gotta say thank you Cramer on that one.
ram – yeah, looks like a few more buyers came in late.
April 3rd, 2008 at 3:11 pmopen positions updated on holdings and holdings wiki tabs.
April 3rd, 2008 at 3:21 pm