26
Aug
Gustav Vs Euro Smackdown Tuesday
Sentiment Watch: Bored but eying Hurricane Gustave which looks like the first serious threat of the season to the Gulf of Mexico. Trading volumes are typical for the last week of August and in many cases less half of norms and companies are likely to save any real news they have for a bigger audience next week. Analysts ... well, most analysts are barely around so look for a few token ratings changes but no sector calls. Commodities are mixed this morning with oil tracking the course of the dollar (see below), not the storm, while natural gas, which is local and could care less about the weakening Euro, is rallying hard pre open. My sense is that if Gustav remains on track for a central Gomex strike, the dollar and inventory reports will take a backseat to traders and guys like me playing junior meteorologist.
Tropics Watch: Hurricane Gustav (category 1) is currently expected to be a Cat 3 (major hurricane) by Saturday morning as it skirts the southern edge of Cuba and heads towards the central or western Gulf of Mexico. Some of the models forecast a more westerly track which could take it over the Yucatan before it hits the Gulf.
Short Interest Watch: With Gustave expected to be a Cat 3 storm on the lip of the south eastern Gulf going into the long weekend would you really want to be short the commodities or the stocks? Could mess up one's vacation.
- NYMEX Natural Gas net short interest remains near record highs as it has all year long. This kind of thing may put a ding in that, especially since most analysts and traders are of the opinion that the worst of the damage to gas prices is behind us and that marginal economics in many plays will lead to curtailed capital programs before long.
- Short interest figures for some of the names we follow around here:
In Today's Post:
- Holdings Watch
- Commodity Watch
- Stuff We Care About Today
- Odds & End
Holdings Watch: No Changes Yesterday.
Commodity Prices:
Crude Oil closed up $0.52 at $115.11 in light but volatile trading with a late surge into green brought about by the quick formation of tropical storm Gustav. This morning crude is trading off $2 with a sharp rally in the dollar. I would expect this move to reverse if Gustav's track solidifies towards the central Gulf of Mexico.
- Dollar Watch: The dollar is moving higher as the business sentiment index in Germany reported a bigger than expected decline, sending the Euro back to levels not seen since February. Just about every economist now expects the European Central Bank to cut rates and the Fed to raise them. I have no issue with the former but the latter is far from certain given the weak state of affairs in the U.S. (and the fact that we are in an election year) so while the Euro may look comparatively weaker than it did recently to the dollar, the idea that the dollar should be zooming higher as the Fed wages war on inflation seems a bit overdone.
- OPEC Watch: As the dollar shows signs of life and the threat of a global inventory bloom continues, I would expect them to become a little more likely to shave production quotas and to really hammer home quota discipline at the September 9 meeting.
Natural Gas closed off 2 pennies to $7.82 but has no concerns about the Dollar and is rising $0.30 this morning as Gustav approaches.
Stuff We Care About Today
APC Repurchase Plan:
- $5 billion share repurchase approved for now through August 2011 (that equates to about 18% of current shares outstanding at yesterday's close of $57.84),
- $600 mm by year end 2008 expected to be taken taken into treasury,
- They see increased spending in 2009 and beyond but maintenance of a 25 to 35% debt to cap ratio.
- Also updated guidance and while not much is expected of APC's 2008 production profile they did say they are coming in above the mid point of 3Q08 guidance of 51 to 54 mm BOE.
Denbury Buys Conroe Field With CO2 Flood Potential:
- Purchase price: $600 million for a 91.4% interest in the Conroe Field north of Houston
- What They Get:
- Conventional Reserves: 18.2 mm barrels with a PV10 of $530 mm (so this accounts for most of the deal value)
- Tertiary Recovery Reserve Potential: 130 million barrels of oil equivalent
- These are higher operating cost reserves no doubt in the $25 per barrel ($4.16/Mcfe range) for LOE and capital needed to develop them probably gets the full cycle cost up to $35 per barrel...still pretty attractive with an IRR > 60% at $110 oil.
- Yes they need to build a pipeline for the CO2 but they're experienced at managing CO2 distribution and I don't see the cost as a major hurdle.
- All in all, I think it is a pretty strong deal for them, significantly boosting their tertiary recovery sourced reserves.
- The stock is generally never cheap given their strong growth rate and somewhat unique operations but at 5.6x 2009 CFPS of $4.35 it is cheaper than I can remember.
- I'll be looking at calls here.
OII - Just a mention since they are my favorite "hurricane actually strikes the Gulf" play. They made a fortune cleaning up the mess left from Katrina / Rita and that business has only recently died back. The threat of a real powerful storm in the Gulf general sends their shares skipping higher and heh, I like them anyway.
Refining Watch:
ZComment: 1.5 Steps Forward and 2 Steps Back. I expect this trend to end soon as winter approaches and traders take note of the fact that the type of distillate the U.S. uses to heat its homes is in shorter supply than normal and that gasoline supplies have fallen sharply from recent bloated levels in only one month.
Odds & Ends
Analyst Watch: Jefferies cuts (GW) from Buy to Hold, BMO trimmed its target on (GW), ...otherwise, analysts have left the building.
By Nick Heath
Of DOW JONES NEWSWIRES
LONDON (Dow Jones)–Crude oil futures fell more than $2 in European trading
Tuesday as fresh concerns over shrinking European economic growth boosted both
demand fears and the U.S. dollar, and overshadowed the development of a
hurricane in the Caribbean.
German business confidence plunged to its lowest level in three years in
August according to data published by the Ifo Institute Tuesday. It followed on
from GDP data published earlier in the day showing the German economy shrank in
the second quarter of 2008, the two raising fears that the eurozone’s largest
economy is in recession – which could weigh on demand for crude oil.
Adding to pressure on crude, the U.S. dollar powered higher against the euro
and other major currencies following the German readings, amid concerns that
other economies will endure the same severity of economic downturn experienced
in the U.S.
“The outlook for Europe is not good: the numbers are not good in the U.K., in
Germany….Europe is also hurting. And a stronger dollar offsets some of the
weakness in the price of oil – it’s very difficult to go back to $145 on crude
oil with the euro where it is,” said Olivier Jakob of Swiss consultancy
Petromatrix.
At 1201 GMT, the front-month October Brent contract on London’s ICE futures
exchange was down $1.06 at $112.97 a barrel, having earlier traded down to
$111.65 a barrel.
The front-month October light, sweet, crude contract on the New York
Mercantile Exchange was trading $1.18 lower at $113.93 a barrel, up from
earlier intraday lows of $112.36 a barrel.
The ICE’s gasoil contract for September delivery was down $2 at $1,018.75 a
metric ton, while Nymex gasoline for September delivery was down 223 points at
286 cents a gallon.
The U.S. National Hurricane Center Tuesday upgraded Tropical Storm Gustav to a
category one hurricane and warned that it could become a category two hurricane
before it makes landfall in Haiti later Tuesday.
At 5 am EDT (0900 GMT) the center of Gustav was located near about 100 miles
south-southeast of Port au Prince, Haiti and about 300 miles southeast of
Guantanamo, Cuba, the NHC said, and is moving toward the northwest at nearly
nine mph. It is expected to turn toward the west-northwest and a decrease in
forward speed is forecast for Wednesday.
While market participants were likely to closely monitor the path of Gustav,
analysts questioned the potential influence the hurricane could have on oil
prices given the current market environment. Many drew parallels with the muted
impact that met the recent three-week closure of the Baku-Tbilisi-Ceyhan
pipeline that transports, on average, 850,000 barrels of crude oil a day.
“The chances are if it does cause disruption it’ll not be severe. The BTC was
out for such a fair length of time and that didn’t have much of an impact. I
doubt that a hurricane is going to have more of one,” said Simon Wardell,
analyst at Global Insight in London.
Comments from some Organization of Petroleum Exporting Countries officials
lured traders’ attention to the group’s upcoming meeting scheduled for Sept. 9.
After Iranian Oil Minister Gholam Hossein Nozari suggested Monday that a cut
in the group’s crude production may be in order after the recent price decline,
Iran’s OPEC governor said Tuesday that members favor a balanced crude oil
market and could still decide on rolling over or cutting output. But a top
Libyan oil official told Dow Jones Newswires Tuesday OPEC is likely to decide
to keep its formal production policy steady when it meets.
“While some price hawks will (and are already) calling for a cut in the
cartel’s official production, I think this is unlikely,” said Robert Laughlin
at MF Global in London, who suggested that OPEC was likely to rein in some of
its reported overproduction first, while verbally talking the market up with
“bullish rhetoric”.
Market concerns over increased tensions between Russia and North Atlantic
Treaty Organization countries, remained heightened Tuesday after Russia
confirmed that it had signed a decree formally recognizing the breakaway
Georgian regions of Abkhazia and South Ossetia as independent states.
The Group of Seven industrialized countries had expressed “alarm” Monday over
reports that Russia’s parliament recognized the two breakaway Georgian regions
as independent nations, a U.S. State Department official said, while U.S.
President George W. Bush said Russia should not recognize them.
The U.K. government Tuesday rejected Russia’s formal recognition of the
regions, while the French foreign ministry said it was a “regrettable
decision”.
-By Nick Heath; Dow Jones Newswires
Dow Jones Newswires
August 26th, 2008 at 7:41 am08-26-08 0825ET
Oil Stockpile Gain Predicted
DOW JONES NEWSWIRES
NEW YORK — U.S. crude oil stocks are expected to increase in data due Wednesday from the Department of Energy, according to a preliminary Dow Jones Newswires survey of analysts.
The data, put out by the department’s Energy Information Administration unit and covering the week ended Aug. 22, are due at 10:35 a.m. EDT Wednesday.
Crude oil inventories are expected to rise by 900,000 barrels, according to the mean of six analysts’ forecasts. Four of the six expect an increase, with estimates ranging from a draw of 2 million barrels to an increase of 3 million barrels.
Gasoline inventories are seen falling by 2.2 million barrels, according to the analysts’ average, with all but one analyst surveyed eyeing a decline. Estimates range from a drawdown of 5 million barrels to an increase of 2 million barrels.
Stocks of distillates, which include heating oil and diesel fuel, are expected to rise by 400,000 barrels. The six analysts are evenly split in predicting a decline or an increase, with estimates ranging from a decline of 1 million barrels to an increase of 2.4 million barrels.
Refinery use is seen rising by 0.2 percentage point to 85.9% of capacity.
In the prior week that ended Aug. 15, U.S. crude stockpiles swelled by a surprising 9.4 million barrels — the largest weekly barrel gain since 2001. The jump reflected imports whose arrival on the Gulf Coast had been postponed by Tropical Storm Edouard, analysts said.
Tony Rosado, a broker at GA Global Markets, said he expects to continue to see gains in the past week, partly because a 110,000 barrel-a-day crude unit at Valero Energy Corp.’s (VLO) Corpus Christi, Texas, refinery was offline.
“Added supply would help put a downward direction” on prices in the oil market, Rosado said.
Analysts’ Estimates
Analyst Crude Gasoline Distillates Refining
Alaron Trading +2 +2 +2 +1
Cameron Hanover +3 -5 -1 +0.45
GA Global Markets +2 -1.5 +2.4 -1
MF Global-Fitzpatrick +1.1 -3.6 -0.8 +0.8
Ritterbusch & Assoc -2 -1.6 -1 unch
Summit Energy -0.6 -3.4 +0.6 unch
Average Estimate
Figures in millions of barrels, except for refining use, which is reported in percentage points. Figures are rounded to two decimal places in table, one decim l place in averages and story. For analysts providing forecasts in a range, the verage of the upper and lower ends of the range is used.
—By Gregory Meyer, Dow Jones Newswires
August 26th, 2008 at 7:44 amGustav looks like it could be extremely dangerous to me – that said if it is behind a crude rally it is likely to be VERY short lived.
August 26th, 2008 at 7:45 amUS Oil Demand May Be Weaker Than Indicated
By DAVID BIRD
A DOW JONES NEWSWIRES COLUMN
NEW YORK — The sharp decline in U.S. oil demand may be even greater than thought, raising the specter that third-quarter demand could slump below the second-quarter level for the first time in 20 years.
Clobbered by the weak economy and surging prices, weak demand in the world’s biggest oil consumer is hardly a secret. But signs of a still steeper decline come amid inventory levels that have risen far above expectations.
The combination could strike a heavy blow to crude oil futures prices, now groping for direction after a 21% drop from record highs in early July.
Early data from the Energy Information Administration for the first half of August show oil demand running at 20.2 million barrels a day so far in the month.
Measured against the revised demand for the full month of August 2007, at 21.025 million barrels a day (a five-year low for the month), current demand is off 3.7% or nearly 800,000 barrels a day.
But the EIA projected Aug. 12 in its Short-Term Energy Outlook that U.S. oil demand would average 20.73 million barrels a day this month, a drop of 295,000 barrels a day, or 1.4%, from a year ago.
Even if the apparently inflated August projection — which now looks like a pipe dream — is correct, U.S. demand this month would still lag the year-ago level for the 13th straight month.
The 20.73-million-barrel-a-day figure for August, said Tancred Lidderdale, an EIA analyst in charge of the outlook, is based on “historical seasonality in demand for all products,” which shows average growth of 468,000 barrels a day in August from July.
August Demand Spike Unlikely
The August figure sticks out like an elephant hiding between two mice, as it is book-ended by demand estimates of 20.32 million barrels a day in July and an identical level projected for September.
But latest preliminary EIA indications for July show U.S. demand averaged even lower than forecast, at just 20.148 million barrels a day. That’s some 600,000 barrels a day, or 2.9%, below a year ago, and the weakest level for the month since 2003.
Signs of weaker-than-projected demand cast strong doubt on the EIA’s projection published less than two weeks ago that U.S. demand in the third quarter will average 20.46 million barrels a day, a surge of 520,000 barrels a day from the second quarter.
Last year, U.S. demand in the third quarter rose by just 100,000 barrels a day from the second quarter, and the five-year average growth is 300,000 barrels a day in the period.
Estimating third-quarter demand may be the trickiest test of the year, as the period straddles the peak of the summer demand season in July and August and the pre-winter month of September.
Projections often take their root from historical patterns and in some ways it becomes a leap of faith as to which figures accurately reflect the trend. In the in-between-seasons month of September, demand has slumped from August by an average of more than 800,000 barrels a day in the past five years.
Applying that drop-off to current indications for August would slash September demand to 19.4 million barrels a day, the lowest since 2001. And it would drop third-quarter 2008 demand to below 20 million barrels a day for the first time since 2002.
A third-quarter level that weak would mark the first time since 1989 that demand in the July-August quarter averaged below the second quarter. The EIA currently estimates second-quarter demand at 19.95 million barrels a day, down 3.3%, or 689,000 barrels a day below a year ago, and the weakest level for the quarter since 1981.
The EIA’s revised estimate for June demand is due out by the end of this month, and based on the recent trend, demand could be revised down.
June Weak Before Revisions
The current projection for June shows demand at 1.8%, or 377,000 barrels a day, below a year ago at 20.346 million barrels, the weakest June level since 2003.
But the estimate also would show June as having the strongest oil demand for any month since December 2007, with demand for distillate fuel (heating oil/diesel) posting a record high for the month at 4.133 million barrels a day.
There are strong questions, though, as to whether distillate demand for the month actually was that high. Demand figures have been strong reflecting record high levels of exports to Chile, where diesel fuel has been needed in electricity generation. But heavy rains in June have booted Chile’s hydro-power sector, slashing distillate demand. The only question is how quickly the lower exports will appear in the U.S. data.
The EIA’s Lidderdale said typical increases in July-August U.S. oil demand aren’t driven by gasoline demand, but by distillates, as pre-season heating oil requirements move along the supply chain, and higher jet fuel and asphalt demand.
“Right now there may good reason to suspect the increases in these products that we’ve seen in the past may not materialize with high energy costs and already stretched budgets,” he said. Further, he said, June and July U.S. demand data may also show “overstated” exports.
Signs of potential weaker demand come as key U.S. oil inventories are sharply higher than expected.
U.S. crude oil stocks in the week ended Aug. 15 jumped by 9.4 million barrels a day — the biggest weekly rise in seven-and-a-half years. At 305.9 million barrels, crude stocks at mid-month are up 12 million barrels from the end of July. They are already 18.9 million barrels above the level the EIA predicted for the end of August in its Aug. 12 outlook.
Stocks Bloated As Runs Drop
The rise in crude stocks comes as refiners, seeing low oil demand, have slowed operations. So far in August, refinery runs have averaged 14.8 million barrels a day, or 640,000 barrels a day below the EIA’s expectations for the month.
As gasoline enters the final weeks of a stunted summer season, posting the biggest demand drop since 1980, stocks have slid below the EIA’s projected levels. At 196.6 million barrels, and 8.6 million barrels below the expected end-August, stocks are still in line with historical levels, due to lower demand.
While the EIA projects that the pace of the decline in U.S. oil demand later this year won’t be as aggressive as the steep drops of almost 900,000 barrels a day over the first five months of the year, that’s far from a bullish sign.
The year-to-year monthly drop-off in U.S. oil demand began last August. So while the first-half plunge is measured against strong year-earlier data, the latest figures are proving weaker than last year’s already weak demand levels.
And, look for the those weak demand figures to be pushed even lower with coming revisions.
–(David Bird, senior energy correspondent for Dow Jones Newswires, has covered global oil markets for more than 20 years.
August 26th, 2008 at 7:45 amBroader market – support at 1260 and then 1253. Resistance at 1275 and then 1280.
August 26th, 2008 at 7:46 amCrude is up?
August 26th, 2008 at 8:02 amMorning Guys/Gal
Fed minutes going to be pretty important today for the dollar.
Nicky, I would agree it will be a short lived rally if it alters course. But on the current track Gustav will shut in most of the U.S. Gulf of Mexico oil production for several days and maybe a week even if no damage. That’s about 1.6 mm bopd or 31% of U.S. production. Then you’ve got the same for imports coming from Mexico. Finally this track, if it doesn’t weaken too much on an island or two along the way, will put it in position to strengthen to a five and then you’ve got to be looking at offshore and onshore damage. It is a slow mover and given that it will only be at the mouth of the southern Gomex on Saturday, who wants to be short oil into a long weekend as it marches through the center of the Gulf getting stronger the whole time. That is, if it stays on target.
August 26th, 2008 at 8:04 amCrude was up a dollar just a minute a go, now up 80 cents, Nat gas up 5%.
August 26th, 2008 at 8:04 amBerstein upgrades EOG to neutral with 127 target.
August 26th, 2008 at 8:07 amSam – dollar also backed off a quarter of its morning move helping crude.
August 26th, 2008 at 8:08 amIf Gustav hooks left, which it very well may, crude will come off hard although that may put Mex’s big offshore fields in its path.
August 26th, 2008 at 8:12 amZ,
August 26th, 2008 at 8:14 amIf the scenario you outline in #7 comes about, besides ‘OIL’ are there other plays do you like going into the long weekend?
Crys – Besides oil and some oil service names like OII and the refiners (if we get a Gulf Coast strike) I might like puts on TRA and AGU as they could see a sudden large jump in their natural gas costs but it probably won’t translate and depends on their hedges which I’m not currently up on. Same goes for DD which has more liquid options but you can get countered there by a positive move in the Dow. If oil really moves up then the put play on the airlines and select truckers may be in order.
August 26th, 2008 at 8:19 amAll of the east coast scenarios for Gus have left the building.
http://tropics.hamweather.com/2008/atlantic/gustav/modelsmap_zoom1.html
August 26th, 2008 at 8:22 amZ – re 7 – I disagree – even if it were to enter the GOM it will still be a very short lived rally. If you remember Katrina we saw a spike which was retraced in a heartbeat. BTW my idea of a short lived rally is a week! If you want to play it imo you will need to be in and out very quickly.
August 26th, 2008 at 8:27 amUnfortunately I still have two wave counts on the table. The more bullish one says we are now on our way up in C of an ABC and if we are I would say most likely target is between 125 – 130.
Then we don’t disagree since I was talking about through the weekend to next Tuesday which is by my count, 7 days, lol. If it tears things up then longer.
August 26th, 2008 at 8:30 amTake a picture of your screen and go to the beach…just not along the Gulf Coast. Nice green open. Will wait a little bit before nibbling at any new positions as the hype may back a bit as some of the charts come into overhead supply from the last 2 months of sell down.
August 26th, 2008 at 8:33 amSilver up, gold only off .3%. Wow, how’s that for a dollar rally?
August 26th, 2008 at 8:34 amAny views on how long you’re going to hold the HK 40s?
August 26th, 2008 at 8:36 amShell apparently has no new oil discovery in Saudi’s “empty quarter”. Had been cited last week….apparently no true.
Elwo – Friday/Tuesday thinking now, letting it run up a bit here but still down like 60 or 70% on that position. The $35s coming up nicely now.
Thinking about adding COP as my refiner quick play while continuing to hold VLO.
Thinking about adding HAL back.
Go SWN, that’s much better.
August 26th, 2008 at 8:39 amZTRADE: COP $85 September calls for $1.80 (COPIQ) with the stock at $83. Adding a little more refining exposure in the face of Gustav.
August 26th, 2008 at 8:49 amOil taking everything with it now including the metals. Speculators all over this one and no doubt GS will be pushing it for all its worth.
Also don’t rule out them opening up the SPR if Gustav hits the oil patch…
I will add that even the more bullish count is very short term. Both counts are intermediate term bearish….this will come down faster than it has gone up!
August 26th, 2008 at 8:54 amNicky – its only up $2.
August 26th, 2008 at 8:56 amAlhambra – took a long look at WEL last night. Very interesting, big transition going on there. Still cheap but chart doesn’t look like an energy stock. SWSI interesting too as the snubber/hyraulic workover rigs seem to be getting preference in the shale plays…faster completion, less chance of damaging the shale.
August 26th, 2008 at 9:03 amThat WEL chart is freaky.
August 26th, 2008 at 9:16 amWhat time does the NHC release it’s next Gustav update?
August 26th, 2008 at 9:20 amCHK thru $50
August 26th, 2008 at 9:21 am11 EST
August 26th, 2008 at 9:26 amQuick heads-up. Be careful with WEL. Resistance from the April ’07 high at 3.00 looks like an area for price to pullback. Doesn’t have to, but…
August 26th, 2008 at 9:26 amFYI,
Jubak adds PBR
”
August 26th, 2008 at 9:26 am(PBR) isn’t just discovering a lot of oil and natural gas. It’s discovering them in tough geologies and then drilling for them in really challenging environments. That combination showcases the Brazilian giant’s emergence through cutting-edge technology and makes it a very attractive partner for national oil companies that don’t want any piece of the Western oil majors as partners. Two 2007 discoveries, the Jupiter and Tupi oil and gas fields, exemplify the company’s new stature. Either of these fields alone would be the biggest find since the 2000 discovery of the giant Kashagan oil field in Kazakhstan. But the newfound oil lies under 4.5 miles of ocean water and then under as much as 17,000 feet of sand, rock and salt. Tupi alone could cost between $50 billion and $100 billion to develop. At the end of that process, though, Brazil’s proven reserves could equal those of oil powers Nigeria or Venezuela, and Petrobras will be an acknowledged leader in oil-field technology. As of Aug. 26, I’m adding these shares to Jubak’s Picks with a target price of $85 a share by March. Full disclosure: I own shares of Petrobras in my personal portfolio, and I will buy more shares three days after this column is posted.)
“
NEW YORK, Aug 26 (Reuters) – Shell Oil RDSA.L said on
Tuesday it was making arrangements to evacuate some workers
from offshore oil facilities in the Gulf of Mexico ahead of
Hurricane Gustav.
“Evacuations could begin as early as Wednesday. There is no
impact on production at this time,” Shell said in a press
release.
(Reporting by Richard Valdmanis)
Tue Aug 26 14:20:26 2008 -GMT
August 26th, 2008 at 9:27 amThanks Tater. I like to see these little names make a higher high, bounce lower and then buy so I won’t be on it soon. Also, thinking longer term on that as it’s cheap and has no options, just a common trade.
August 26th, 2008 at 9:28 am$5 dollar reversal Z…
August 26th, 2008 at 9:29 amNicky – You mean from from $112? Ok fine, although the $5 last $2 to $3 really as Gustav was just clouds yesterday. I’m just saying if it stays on course it the direction of crude will likely be up all week as it won’t get to the bottom of the Gulf until Saturday and we are in a long weekend and I don’t think people would want to risk being short after a $30 tumble from the highs with the possibility that it blossoms into something really nasty. But I’m not reading a chart when I say that.
August 26th, 2008 at 9:40 amNorth Korea reversing nuclear dismantlement ops:
http://news.yahoo.com/s/ap/20080826/ap_on_re_as/koreas_nuclear
August 26th, 2008 at 9:42 amZ – Agree. What are the chances though they have more idea about where it is going before the week is out?
August 26th, 2008 at 9:42 amNicky – we’ll know better every three hours on this one. If nothing going on by Tuesday agree oil gaps lower but I think it holds up until then unless it changes course (still could go ruin peoples labor day in Cozumel).
August 26th, 2008 at 9:45 amZ – any thoughts on the potential price ramifications for NG if Gustav does have a Cat 4 hit on U.S GoMex?
August 26th, 2008 at 9:45 am9:57 am EST
Oil Rises $2/Bbl As Hurricane Feared
By Gregory Meyer
Of DOW JONES NEWSWIRES
NEW YORK — Crude oil futures sprang more than $2 early Tuesday on fears a hurricane will hit the Gulf of Mexico’s extensive oil infrastructure.
Light, sweet crude for October delivery was recently up $2.46, or 2.1%, at $117.57 a barrel on the New York Mercantile Exchange. Brent crude on the ICE Futures exchange rose $2.24 to $116.27 a barrel.
A tropical storm churning across the Caribbean escalated into a hurricane overnight. Hurricane Gustav was passing near the Haitian capital of Port-Au-Prince. The National Hurricane Center said most indications are the tempest “will be an extremely dangerous hurricane” and reach the Gulf of Mexico by early Sunday.
Whether Gustav would cause damage to the U.S. Gulf Coast, home to 40% of U.S. refining capacity and a quarter of the nation’s crude production, remained a matter of conjecture early Tuesday. So far this year, named storms and hurricanes have not destroyed any key U.S. energy infrastructure.
“We’ve kind of dodged a bullet on a couple of these already,” said Peter Donovan, vice president at Vantage Trading on the Nymex floor. “The psychological impact of hurricanes working their way through the Gulf can put upward pressure under prices.”
Hurricane fears competed with economic worries for the market’s attention. Nymex crude had dipped close to $112 a barrel as the dollar rose to a fresh six-month high against the euro on a dour business confidence report in Germany. The dollar’s recent strength has helped push down crude prices as investors have less reason to seek a currency hedge in hard assets. The euro was recently $1.4644, from $1.4754 late Monday.
Along with short-term storm threats, uncertainty lingers over longer-term supply from the Organization of Petroleum Exporting Countries as the producer group’s Sept. 9 policy meeting approaches. Libya’s top oil official, Shokri Ghanem, said Tuesday the group is likely to keep formal production steady with oil prices at $115 a barrel.
“There is some concern about extra production being in the market, but at today’s oil price I think OPEC may decide to keep production unchanged,” Ghanem, head of the Libyan National Oil Co., told Dow Jones Newswires from Tripoli.
Iran’s OPEC governor, Mohammad Ali Khatibi, said Tuesday that “at the moment, the market is not balanced, there is oversupply.”
Data on U.S. demand and supply is due for an update Wednesday, when the Energy Information Administration releases its weekly oil estimates. Analysts surveyed by Dow Jones Newswires on average predict crude stockpiles rose by 900,000 barrels the week ended Aug. 22, while gasoline stockpiles fell 2.2 million barrels and stocks of distillates, which include heating oil and diesel, rose by 400,000 barrels. The rate of refinery use is seen rising 0.2 percentage point to 85.9% of capacity.
Front-month September reformulated gasoline blendstock, or RBOB, rose 9.77 cents, or 3.4% to $2.9800 a gallon. September heating oil climbed 9.91 cents, or 3.1%, to $3.2505 a gallon.
—By Gregory Meyer, Dow Jones Newswires
August 26th, 2008 at 9:50 amany idea why west coast crack was down so much?
August 26th, 2008 at 9:56 amIsle – pretty much just speculation but a run on the 8.70ish level (as per Nicky I think) which if surpassed makes $9 an obvious target. Depends on where it goes from there and how compact the storm is. They are going to evacuate a lot of people but if it cruises more westerly, its not as big a concern for nat gas, if it runs up toward NOLA into the Mississippi Canyon. Central vs West is about 4 to 1 on gas production so think Texas landfall not as bad, Louisiana landfall, very bad for gas.
August 26th, 2008 at 9:56 amG – yep, crude imports soared for the w. coast more on a per barrel and % basis than in the other regions.
August 26th, 2008 at 9:58 am324
WTNT42 KNHC 261445
TCDAT2
HURRICANE GUSTAV DISCUSSION NUMBER 6
NWS TPC/NATIONAL HURRICANE CENTER MIAMI FL AL072008
1100 AM EDT TUE AUG 26 2008
AN AIR FORCE RECONNAISSANCE MISSION EARLY THIS MORNING FOUND PEAK
FLIGHT-LEVEL WINDS OF 91 KT…AND AN SFMR SURFACE WIND OF 78 KT.
THESE MEASUREMENTS SUPPORT AN INITIAL INTENSITY OF 80 KT. A
DROPSONDE RELEASED IN THE EYE OF GUSTAV DURING THE LAST AIRCRAFT
PASS THROUGH THE CENTER JUST BEFORE 1200 UTC…FOUND A SURFACE
PRESSURE OF 982 MB…BUT WITH 12 KT OF WIND AT THE SURFACE…SO THE
MINIMUM PRESSURE HAS BEEN ESTIMATED SLIGHTLY LOWER. THE AIRCRAFT
AND EARLIER MICROWAVE SATELLITE IMAGERY INDICATE THE PRESENCE OF A
VERY SMALL EYE…HOWEVER THE EYE HAS NOT YET BECOME APPARENT IN
CONVENTIONAL SATELLITE IMAGERY.
GUSTAV CONTINUES TO MOVE NORTHWESTWARD TOWARD THE SOUTHERN COAST OF
HAITI…WITH AN INITIAL MOTION ESTIMATE OF 325/8. TRACK MODEL
GUIDANCE IS IN GOOD AGREEMENT ON A TURN TOWARD THE WEST-NORTHWEST
VERY SOON AROUND THE SOUTH SIDE OF A MID- TO UPPER-LEVEL RIDGE
LOCATED OVER FLORIDA. THERE REMAINS A LARGE AMOUNT OF SPREAD IN
THE MODELS AT 72 HOURS AND BEYOND. THE 00Z UKMET AND ECMWF MODELS
MAINTAIN THE RIDGE OVER THE GULF OF MEXICO…WHICH KEEPS GUSTAVE
MOVING WESTWARD TOWARDS THE YUCATAN PENINSULA. THE
GFDL…HWRF…AND GFS WEAKEN THE RIDGE WHICH ALLOWS FOR A
WEST-NORTHWESTWARD MOTION INTO THE CENTRAL GULF OF MEXICO. THE NEW
NHC TRACK FORECAST LEANS TOWARD THE GFS/HWRF SCENARIO AND IS A
LITTLE TO THE RIGHT OF THE MODEL CONSENSUS.
CONDITIONS APPEAR FAVORABLE FOR ADDITIONAL STRENGTHENING BEFORE THE
August 26th, 2008 at 10:00 amCENTER REACHES MOUNTAINOUS TERRAIN ALONG THE SOUTHERN COAST OF
HAITI. SOME WEAKENING IS FORECAST DURING GUSTAV’S PASSAGE OVER
LAND…AND SINCE IT IS A VERY SMALL SYSTEM IT COULD WEAKEN A LITTLE
MORE THAN SHOWN BELOW. THEREAFTER…GUSTAV IS EXPECTED TO BE OVER
WARM WATERS AND IN A LOW SHEAR ENVIRONMENT…WHICH FAVORS
STRENGTHENING. THE OFFICIAL FORECAST IS BELOW THAT OF THE GFDL…
BUT IS CLOSE TO THE INTENSITY CONSENSUS AND THE HWRF.
Next advisory at 2. Crude backed a bit here as the worlds small storm and potential for weakening hit.
August 26th, 2008 at 10:02 amNat gas could run as high as 9.0 – 9.5 imo – at this moment I am not convinced an important low is in but we could still see a run at the 9.0 area and then a lower low OR the low was in yesterday as it did get to the top end of my target area which was 7.3 – 7.6 and if that is the case there is plenty more upside ahead.
August 26th, 2008 at 10:03 amTks Z. 11AM NHC update Gustav curves more northerly
August 26th, 2008 at 10:04 amFrom a sentiment standpoint I agree with Nicky on #45 on the part about “an important low not in yet” because fund managers still see a glut of gas next year.
August 26th, 2008 at 10:09 amBy David Bird
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)–U.S. oil demand in June was 1.17 million barrels a day,
or 5.6%, lower than a year ago at 19.553 million barrels a day – the lowest
level for the month since 1998 – revised government figures released Tuesday
show.
Demand was slashed 793,000 barrels a day, or 3.9%, from the earlier estimate
that put the figure at 20.346 million barrels a day – which would have been a
drop of just 1.8% from a year ago and the strongest level for any month since
December 2007.
The revised June figure is the weakest demand level for any month since May
2003, data from the Energy Information Administration show.
The 5.6% drop in June demand is the steepest in any month since a 7.2% fall in
February, when demand fell 1.527 million barrels a day.
The steep revision for June put demand in the first half of 2008 at an average
of 19.780 million barrels a day, down 936,000 barrels a day, or 4.5%, from a
year ago.
That’s the biggest drop in the first six months of the year since 1982.
Preliminary figures had shown a first-half drop of just 202,000 barrels a day
from a year ago.
Demand for gasoline, the most widely used petroleum product, was revised down
to a show a 4.4% decline from a year ago, at 9.071 million barrels a day – the
weakest level in June since 2001 and the lowest for any month since March. June
demand was revised down 2.8% from preliminary data, which put the figure at
9.335 million barrels a day, the strongest in any month since August 2007, but
the weakest in June since 2004.
Revised six-month gasoline demand is down 2%, or 180,000 barrels a day, from a
year ago, at 9.071 million barrels a day.
Demand for distillate fuel (heating oil/diesel) was revised down 9.8%, or
405,000 barrels a day, from the estimate, to 3.728 million barrels a day in
June, the lowest level for the month since 2002 and the weakest in any month
since July 2003.
June distillate demand was down 386,100 barrels a day, or 9.4%, from a year
ago. That’s the biggest year-to-year decline for distillate demand in any month
since March 2002, when it fell 393,000 barrels a day, or 9.5%, EIA data show.
January-June distillate demand averaged 4.062 million barrels a day, down
4.7%, or 199,333 barrels a day, from a year earlier.
-By David Bird, Dow Jones Newswires
Dow Jones Newswires
August 26th, 2008 at 10:09 am08-26-08 1100ET
Thanks Sam – not pretty revisions. You gotta think the IEA and OPEC will be taking another look at their 2008 demand numbers and revising them lower for the 2H.
August 26th, 2008 at 10:14 amthose of you wondering about WEL. there is strong probability for them to earn around 25-30 cents EPS this year and market has just realized that (a bit lately). With 30 cents EPS and let say PE 15, which is still low for a company with around 50-70% yoy growth, you could get 4.5 dollar price.
August 26th, 2008 at 10:17 amWEL is still cheap, if they manage to achive their own targets.
Z – I don’t think they have a clue. They use “Quant” models. Nobody is really sticking a dipstick in the tanks to see. You know the same models used to price toxic paper that the banks have as tier 3. Real numbers don’t show up until about two years after.
August 26th, 2008 at 10:20 amThe EIA has gotten demand numbers so wrong for so long, I don’t really listen to them that much anymore.
everyone wondering about WEL monshoot, should look on their Q growth:
http://finance.yahoo.com/q/is?s=WEL
if they managed to retain their margins, 30 EPS in 08 is doable.
August 26th, 2008 at 10:21 amThanks for the input on WEL. Volume has picked up. The sell off in oil and energy really stung, but talk about resilience. Also note, Oil States Int’l controls a lot and has been selling lately, but officers have been holding.
August 26th, 2008 at 10:21 amThanks Teo. Am still doing a little reading there…lots of big OPEC country contracts of late. Very interesting, don’t yet know what they plan to spend on the coming product line additions. Anyone got any recent or old Street language here only too happy to read on weekend. SWSI too. Thanks.
August 26th, 2008 at 10:22 amSam – I evaluate the EIA numbers every week because price/traders do. Can you trust the numbers? No… but directionally they are generally, sort of, in the same universe as something close to reality. Gotta use what you have.
A – wish owners held more, only 2.6% as per their Aug presentation.
August 26th, 2008 at 10:25 amBill – what do you use for VLCC day rate data? I was using one site and their data went bonko on me. It’s the first link under tankers on the Transports tab.
August 26th, 2008 at 10:27 amBy Jim Jelter
Energy stocks pointed higher Tuesday, riding higher oil and natural gas prices
August 26th, 2008 at 10:33 amas Hurricane Gustav raised concerns about supply disruptions in the Gulf of
Mexico.
Anadarko Petroleum Corp.’s (APC) shares rose 5.7% to $61.14. The company
announced late Monday that it plans to buy back up to $5 billion worth of its
stock, or roughly 18% of its shares outstanding.
Anadarko’s move put it at the top of percentage gainers in the Amex Oil Index,
which was up 1.3% at 1318 points.
Oil giant Exxon Mobil Corp. (XOM) was up 1% at $79.48, Chevron Corp. (CVX) was
up 0.2% at $85.70, and ConocoPhillips (COP) was up 1.1% at $82.72.
Meanwhile, crude-oil prices reversed earlier losses on news that Tropical
Storm Gustav had intensified to hurricane strength as it moved toward Haiti.
The National Hurricane Center in Miami warned that Gustav could strengthen
further over the next few days as it heads for Cuba, entering the Gulf of
Mexico over the weekend.
The forecast, combined with heightened rhetoric between Moscow and Washington
over the situation in Georgia, pushed up the price of crude oil for October
delivery by $1.83 to $116.94 a barrel on the New York Mercantile Exchange.
Natural gas futures were also showing big gains Tuesday because of Hurricane
Gustav, up 6% at $8.30 per million British thermal units, boosting the Amex
Natural Gas Index 2.9% to 606.4 points.
The Philadelphia Oil Service Index was ahead 1.9% at 299.3 points.
-By Jim Jelter Dow Jones Newswires
08-26-08 1124ET
Dollar now given up half its gains on the day. Was consumer confidence out today, don’t see it? Fed minutes in a few more hours.
August 26th, 2008 at 10:38 amOil still selling down post the 11 est report on Gustav. As oil is trading based on the last words of forecasters I think it will move up again in the next day or so as it reaches warm water south of Cuba. Last thing I’ll say about Gus for the next few hours as its really a waste of time to get too hyped up over this just yet.
http://www.accuweather.com/news-top-headline.asp?partner=accuweather
August 26th, 2008 at 10:48 amZTRADE: Re-entering HAL calls. $47.50 September calls (HALIW) for $0.75 with the stock up about twenty cents on the day and underperforming the Oil Service group yet again.
August 26th, 2008 at 11:03 amNEW YORK, Aug 26 (Reuters) – Gasoline and diesel
differentials in the U.S. Gulf Coast surged about a nickel each
on Tuesday on fears that Hurricane Gustav may disrupt supplies
in the nation’s refinery row by the weekend, traders said.
The strength in Gulf Coast spilled into other hubs, with
gasoline and diesel gaining in the Midwest, traders said.
“All thinking is about the storm,” said a trader in the New
York Harbor, where gasoline values also rose, albeit slightly.
The U.S. National Hurricane Center said the storm could hit
the Gulf Coast as a powerful Category 3 storm on Sunday,
slamming into a region that is home to almost half of total
U.S. refinery capacity. The Gulf also produces about a quarter
of U.S. crude oil and 15 percent of natural gas output.
In refinery news, a fire hit a hydroformer unit at Exxon
Mobil’s XOM Baytown, Texas, refinery, but was extinguished
and production was not affected.
Valero on Monday cited no impact to production from a
weekend snag with compressors at its Texas City refinery.
The NYMEX complex was led higher by gasoline and heating
oil futures, which both surged more than 2 percent on
heightened worry over supply disruptions from the storm.
“So, at this point, it appears that the market is a bit
dominated by those buying ‘storm insurance’,” one Gulf-based
market watcher noted in a report on Tuesday.
For a list of refinery outages, click REF/US
U.S. GULF COAST
U.S. Gulf Coast gasoline and diesel rose sharply early
Tuesday on fears that Hurricane Gustav would enter the Gulf of
Mexico over the weekend, disrupting refinery and oil production
operations.
Prompt cycle 50 conventional M2 gasoline traded at 8.75
cents over the October RBOB futures screen at midday Tuesday
with offers holding at 9.00 cents over, up from the 2.75 cents
over traded late Monday.
Ultra-low sulfur diesel traded at 7.50 cents over the
screen but offers moved up to 8.00 cents over the October
heating oil screen. On Monday, it was pegged at 3.00/3.50 cents
over the screen.
Low sulfur diesel traded at 4.00 cents over the screen, up
from the 2.00 cents over on Monday.
NEW YORK HARBOR
Any month conventional regular gasoline M2 was set at about
4.00 cents under the benchmark September RBOB futures, up
marginally, traders said.
Reformulated F2 RBOB gasoline barrels were bid at 1.50
cents over over futures for any month barrels, up about a half
cent from Monday’s levels.
Asked if gasoline in the hub was reacting much to the storm
headlines, a trader said: “We’re up a little but not really.”
Among the distillates heating oil barges were again offered
flat at 1.00 cents under the screen and likewise ultra-low
sulfur diesel offers were steady at 8.00 cents over futures and
low sulfur diesel at 3.00 cents over.
Jet offers fell a quarter cent at 10.50 cents over.
MIDWEST
Group Three gasoline differentials crept back up on
Tuesday, tracking the Gulf after being pressured by a build in
Magellan pipeline inventories on Monday.
Group gasoline traded at 7.50 cents over the September RBOB
contract, up 2.25 cents. Earlier, August any barrels traded at
4.60 and and 5 cents over.
Ultra-low sulfur diesel gained a cent from late Monday
levels, trading at 13 cents over the September.
In Chicago, newly prompt cycle 1 gasoline was pegged up a
penny at 13 cents over the board.
Same cycle ultra-low sulfur diesel was up about a penny and
a half, pegged at 14 cents over the October heating oil
contract.
(Reporting by Haitham Haddadin, Janet McGurty, and Rebekah
Kebede)
Tue Aug 26 16:10:59 2008
August 26th, 2008 at 11:17 amZ – have you got any feel for GMXR mgmt? any insights there?
any feelers out for the conference in Dallas next week? Looks like a couple of Haynesville related discussions there. HK looks like they are presenting afternoon of 9/4.
August 26th, 2008 at 11:17 amIsle – I don’t know them, like the way they present but that’s it.
Re Lehman, have not looked at the schedule yet but everybody goes to that one. Count on the host to present bearish views on oil and natural gas. It will be interesting here the analysts who are looking for a glut of gas to introduce management teams who refute that.
August 26th, 2008 at 11:23 amWhy would you hold a conference if your stance is negative? Aren’t these conferences for the benefit of their shareholders? It seems like a waste of time and money for LEH.
August 26th, 2008 at 11:27 amThey hold it every year around the same time, its one of the big energy conferences.
August 26th, 2008 at 11:28 amnot sure if this is the one you are talking about.
http://www.hartenergyconferences.com/index.php?area=details&confID=67
See the 3:30 pm timeslot
August 26th, 2008 at 11:30 amLink to list of presenters at Lehman conference. (Click Tues, Wed, Thurs at top of page)
http://cc.talkpoint.com/LEHM002/090407a_jw/agenda.asp?day=Tuesday
August 26th, 2008 at 11:43 am1520 – nope that Hart’s M&A conference.
Thanks for the assist Bob.
August 26th, 2008 at 12:02 pmAin’t these the cats that supply europe with their energy, so they won’t freeze in the winter?
Dow Jones Newswires
08-26-08 1303ET
PARIS (AFP)–Russian President Dmitry Medvedev said in an interview with
French television broadcast Tuesday that if European nations “want relations to
worsen, they will get it.”
“We will do everything we can to avoid” a new Cold War, Medvedev said. “In
this situation the ball is in the Europeans’ court.
“If they want relations to worsen, they will get it,” he told LCI television.
“But if they want to save a strategic relationship, which is absolutely in the
interest of both Russia and Europe, everything will be fine.”
The European Union heavily criticised Russia’s recognition of the rebel
Georgian provinces of South Ossetia and Abkhazia as independent states.
“It strongly condemns this decision,” the current French E.U. presidency said
in a statement. “This is contrary to the principles of the independence, the
sovereignty and the territorial integrity of Georgia.”
The E.U. will now “examine from this point of view the consequences of
Russia’s decision,” the statement said.
Dow Jones Newswires
August 26th, 2008 at 12:25 pm08-26-08 1322ET
It seems to me that the more unstable this situation becomes the more Russia makes in oil revenue. No?
August 26th, 2008 at 12:28 pmIt sounds like NATO will take a back seat to EU’s energy needs.
August 26th, 2008 at 12:34 pmZ: There seem to be some new Wall St. consensus that was not around 3 months ago. 1 We are oversupplied with natural gas. 2 The ECB will have to cut rates and the US$ will strengthen causing commodities to weaken. These new accepted views seem to be why our sectors are being treated as cyclicals where peak earnings are now and ’09 earnings will be lower. How much do you agree or disagree with this NEW consensus view.
August 26th, 2008 at 12:36 pmYou would think that when Russia puts the energy carrot in front of the EU, that should be a positive for energy prices.
August 26th, 2008 at 12:40 pmBy Anna Raff
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)–Oil and natural gas futures prices jumped Tuesday after
a storm in the Caribbean strengthened into a hurricane, sharpening its aim at
Gulf of Mexico energy facilities.
As of 11 a.m. EDT, Hurricane Gustav was approaching Haiti’s southern coast
with maximum sustained winds near 90 miles an hour, according to the National
Hurricane Center. Gustav is forecast to move into the warm Gulf waters on
Sunday, and could make its entrance as a Category 4 storm, according to some
meteorologists.
Though weather models this early are volatile and subject to change, many show
Gustav churning toward the Louisiana coastline later next week, cutting through
hydrocarbon-producing regions and possibility hitting a key refining hub.
Even with this uncertainty, “the entirety of the Gulf Energy Production region
is now threatened by this potentially very dangerous weather scenario,” said
Jim Rouiller, senior energy meteorologist at Planalytics.
Light, sweet crude oil futures recently traded 60 cents, or 0.5%, higher at
$115.71 a barrel after rising as high as $117.89 a barrel on the New York
Mercantile Exchange. Natural gas futures were up 48.2 cents, or 6.2%, at $8.307
a million British thermal units. Gas futures are more sensitive to potential
output disruptions because gas volumes are more difficult to replace than
crude, which can be easily delivered to the Gulf Coast via tanker.
Shares of energy companies were also trading higher on the back of higher
energy prices.
Worries about Gustav’s impact to U.S. energy supplies have surfaced just days
before the three-year anniversary of Hurricane Katrina, which hit New Orleans
on Aug. 29. 2005. Not only did Katrina devastate homes and kill almost 2,000
people, together with Hurricane Rita it damaged a swathe of refineries that
account for 40% of the nation’s crude processing capacity. Plants were offline
for months following the storms; fuel prices spiked as a result.
So far, one energy company said it could evacuate crews from the Gulf as early
as Wednesday, and others polled said they were watching the storm closely.
Overshadowed By Sentiment
While Gustav is the most significant hurricane threat to energy infrastructure
to develop in a few years, oil traders’ responses have so far been relatively
tepid. This is due partly to other factors that are weighing on oil, which has
dropped 21% from an all-time record settlement high of $145.29 a barrel hit
July 3 on the Nymex. A strengthening dollar, which makes oil more expensive for
buyers using other currencies; falling U.S. oil demand; and more output from
Saudi Arabia are offsetting bullish storm sentiment.
Opening fresh bets that prices will rise is especially risky if the vagaries
of the weather determine the payout. While Gustav may enter the Gulf with winds
of 135-140 miles an hour, forecasts of the storm’s path four and five days out
are considered to be unreliable. Earlier this season, initial run-ups in
futures prices due to hurricane fears have fizzled out.
“We’re going to see the market ebb and flow and see the expansion of the storm
premium this week until we get a clearer idea of the path of this storm,” said
Jim Ritterbusch, an energy trading advisor in Galena, Ill.
Gustav will largely avoid making landfall in Cuba, which is “not good news”
for Gulf interests, said Morris Bender, a senior meteorologist at the National
Oceanic and Atmospheric Administration’s Geophysical Fluid Dynamics Laboratory
in Princeton, N.J.
Avoiding Cuba will allow Gustav to maintain strength, Bender said. A weather
system coming from the U.S. likely will affect the storm in three days and will
influence Gustav’s path.
Royal Dutch Shell PLC (RDSA) said personnel evacuations could start as early
as Wednesday.
“Given the current track for Gustav and the expectation that it might enter
the Gulf of Mexico this weekend, we are making logistical arrangements to
evacuate staff who are not essential to production or drilling operations,”
Shell said in a statement.
Refiners have more time to prepare. By the time Gustav approaches,
meteorologists will be more confident of its potential danger, and because
their employees work on mainland, they don’t have to rush to coordinate
helicopter evacuations out at sea.
“We obviously have meteorologists, we obviously track storms,” said Karyn
Grace, a spokeswoman for Total S.A. (TOT), which operates a
232,000-barrel-a-day refinery in Port Arthur, Texas. “We will do whatever is
appropriate. If a company in this region isn’t prepared, then shame on them.”
-By Anna Raff, Dow Jones Newswires
Dow Jones Newswires
August 26th, 2008 at 12:43 pm08-26-08 1338ET
Tom – At least 4 things have changed for the groups in the last 3 months.
1) oil lost upward momentum as demand “growth” slowed. I put growth in quotes because global demand is still set to grow this year and next.
2) We went from yahoo gas prices which had gotten too high to a huge sell down in nat gas prices due to fears of a supply glut. I think these fears are largely unfounded as: a) the deliverability out of the new basins like the Haynesville are a ways off, just can’t turn it on like a switch. b) The Marcellus won’t be meaningful until 2009. c) Demand keeps growing, especially at these prices for industrial and generation. d) prices are higher (much higher) internationally so LNG will stay away even as new supply comes on e) prices are sub marginal for many plays at current levels, especially in the Rockies – price takes care of price, f) the Barnett growth is slowing … this has been a big source of growth we have seen, g) the decline on these shale wells are asymptotic so after the initial flush production you are producing much less one month out and maybe 10% of initial production (IP) within 18 to 24 months…so if you don’t drill as many production falls off quick.
On the earnings front, its more of a mixed bag than to say 2009 will be less than 2008. Many of the E&P names are set to grow top line volumes by double digits so depending on where prices are, you still have growth in earnings and the stocks are by no means expensive on P/CF
On the dollar, who knows. Its all relative so while the U.S. economy may be circling the drain longer than expected, the dollar may rally against Europe which has only recently approached the loo. Dollar plays a part in price but supply will trump it over the long term.
August 26th, 2008 at 12:50 pm…GUSTAV MADE LANDFALL ON THE SOUTHWEST PENINSULA OF HAITI…
A HURRICANE WARNING REMAINS IN EFFECT FROM BARAHONA IN THE DOMINICAN
REPUBLIC WESTWARD TO LE MOLE ST NICHOLAS HAITI.
A HURRICANE WARNING IS IN EFFECT FOR CUBA…FOR THE PROVINCES OF
GUANTANAMO…SANTIAGO DE CUBA…AND GRANMA. A HURRICANE WARNING
MEANS THAT HURRICANE CONDITIONS ARE EXPECTED WITHIN THE WARNING
AREA…GENERALLY WITHIN 24 HOURS.
A HURRICANE WATCH REMAINS IN EFFECT FOR HAITI FROM LE MOLE ST
NICHOLAS TO THE NORTHERN HAITI/DOMINICAN REPUBLIC BORDER.
A HURRICANE WATCH REMAINS IN EFFECT FOR THE CUBAN PROVINCES OF LAS
TUNAS AND HOLGUIN. A HURRICANE WATCH IS ALSO IN EFFECT FOR JAMAICA.
A HURRICANE WATCH MEANS THAT HURRICANE CONDITIONS ARE POSSIBLE
WITHIN THE WATCH AREA…GENERALLY WITHIN 36 HOURS.
INTERESTS IN CENTRAL AND WESTERN CUBA AND THE CAYMAN ISLANDS SHOULD
CLOSELY MONITOR THE PROGRESS OF GUSTAV.
FOR STORM INFORMATION SPECIFIC TO YOUR AREA…INCLUDING POSSIBLE
INLAND WATCHES AND WARNINGS…PLEASE MONITOR PRODUCTS ISSUED
BY YOUR LOCAL WEATHER OFFICE.
THE EYE OF HURRICANE GUSTAV MADE LANDFALL ON THE SOUTHWEST PENINSULA
OF HAITI ABOUT 10 MILES…16 KM…WEST OF JACMEL…SHORTLY AFTER
100 PM EDT…1700 UTC.
AT 200 PM EDT…1800Z…THE CENTER OF HURRICANE GUSTAV WAS LOCATED
JUST INLAND NEAR LATITUDE 18.2 NORTH…LONGITUDE 72.8 WEST OR ABOUT
40 MILES…60 KM…SOUTHWEST OF PORT AU PRINCE HAITI AND ABOUT 190
MILES…310 KM …SOUTHEAST OF GUANTANAMO CUBA.
GUSTAV IS MOVING TOWARD THE NORTHWEST NEAR 10 MPH…16 KM/HR.
A TURN TOWARD THE WEST-NORTHWEST WITH A DECREASE IN FORWARD SPEED
FORECAST IS EXPECTED LATER TODAY…AND A GENERAL WEST-NORTHWESTWARD
MOTION IS EXPECTED WEDNESDAY. ON THIS TRACK THIS HURRICANE SHOULD
MOVE ACROSS THE SOUTHWESTERN PENINSULA OF HAITI LATER TODAY AND NEAR
OR JUST SOUTH OF EASTERN CUBA ON WEDNESDAY.
MAXIMUM SUSTAINED WINDS ARE NEAR 90 MPH…150 KM/HR…WITH HIGHER
GUSTS. GUSTAV IS A CATEGORY ONE HURRICANE ON THE SAFFIR-SIMPSON
SCALE. SOME WEAKENING IS LIKELY WHILE GUSTAV MOVES OVER HAITI…
HOWEVER RESTRENGTHENING IS FORECAST AS THE CENTER APPROACHES
EASTERN CUBA ON WEDNESDAY.
HURRICANE FORCE WINDS EXTEND OUTWARD UP TO 25 MILES…35 KM…FROM
THE CENTER…AND TROPICAL STORM FORCE WINDS EXTEND OUTWARD UP TO 70
MILES…110 KM.
ESTIMATED MINIMUM CENTRAL PRESSURE IS 981 MB…28.97 INCHES.
GUSTAV IS EXPECTED TO PRODUCE TOTAL RAINFALL ACCUMULATIONS OF 4 TO 8
INCHES OVER HISPANIOLA…EASTERN CUBA…AND JAMAICA…WITH ISOLATED
MAXIMUM AMOUNTS OF UP TO 20 INCHES POSSIBLE. THESE RAINS WILL
LIKELY PRODUCE LIFE-THREATENING FLASH FLOODS AND MUD SLIDES.
COASTAL STORM SURGE FLOODING OF 2 TO 4 FEET ABOVE NORMAL TIDE LEVELS
ALONG WITH LARGE AND DANGEROUS BATTERING WAVES CAN BE EXPECTED IN
AREAS OF ONSHORE WINDS IN THE HURRICANE WARNING AREA.
REPEATING THE 200 PM EDT POSITION…18.2 N…72.8 W. MOVEMENT
TOWARD…NORTHWEST NEAR 10 MPH. MAXIMUM SUSTAINED WINDS…90 MPH.
MINIMUM CENTRAL PRESSURE…981 MB.
THE NEXT ADVISORY WILL BE ISSUED BY THE NATIONAL HURRICANE CENTER AT
August 26th, 2008 at 12:52 pm500 PM EDT.
The bear case is particularly weird in the service area. The whole bearish view on NG depends on frenetic drilling causing a glut of NG. The shale flows fall off quickly if drilling slows… so the bears are trying to have it both ways. They say drilling will continue to grow, so therefore sell the drillers!
August 26th, 2008 at 1:01 pmMore for Tom
Back to oil – 3) OPEC and friends went from talking oil up to talking it down. Don’t know if that is political or what but they got awfully dovish and I’d guess they are scared the U.S. will go green if prices goes higher, maybe they are trying to influence the election.
4) Oil Service – fundamentals took a decided turn for the better as pricing power re emerged. Stocks are growing and its just not in them. Deepwater pull back makes no sense, onshore I can see the threat but I don’t see a big downturn in activity.
August 26th, 2008 at 1:09 pmRam – Agreed re EU, they don’t want to be shivering this winter.
August 26th, 2008 at 1:10 pmZMAN – Does it seem odd that HK would have a higher premium in their calls than SD?
August 26th, 2008 at 1:13 pmCurrent track/model, which doesn’t mean much at this point.
http://my.sfwmd.gov/portal/page?_pageid=3194,21328260,3194_21169354:3194_21260388:3194_21260861&_dad=portal&_schema=PORTAL
August 26th, 2008 at 1:15 pmZ – what do you think of KWK here. It is trading almost at year-ago levels.
August 26th, 2008 at 1:16 pmRam – re HK, its just been more volatile than SD since SD took that big fall. I sold SD $40 Sept calls against part of my position the other day which I may yet regret.
Dman – need to have a fresh look but I like if um, ng bounces which I guess a bit of an obvious caveat.
August 26th, 2008 at 1:18 pmFDIC releasing its bank report early – number of banks in trouble 117 up from 90.
August 26th, 2008 at 1:19 pmZ: Thanks for your detailed explainations. I did not mean for you to spend some much time.I do read your stuff so I do agree with most all of your thoughts. Maybe I’m just a little frustrated with the financial experts that keep repeating a consensus view even if it has no basis in fact. In June you could not get enough steel pipe. Steel stocks went up every day. Now they can’t move. You could not get enough rigs to drill. Now there is over supply. I guess a cold winter or 8.50 – 9.00 NG will change everything.
August 26th, 2008 at 1:22 pmSurprised to see NOV flat today.
Nicky – wonder if that impacts the dollar.
From market watch ~ “Although members generally anticipated that the next policy move would likely be a tightening,” the timing was far from clear and depended on incoming barometers on economic growth and inflation. Many economists don’t believe the Fed will start to push up rates to fend off inflation until next year.
August 26th, 2008 at 1:23 pmFor all those not listening to CNBC (who are probably most wise!) they are ramping oil and Gustav every five minutes and are all sounding like Sharon Epperson on inventory day.
August 26th, 2008 at 1:23 pmCramer is about to come on with “drilling and natural gas plays including some names you may not have heard about”
August 26th, 2008 at 1:25 pmCramer about to talk drilling and nat gas….
August 26th, 2008 at 1:26 pmTom – I appreciate the question as it makes me less complacent and forces me to stay awake on this cold, cold August day. I think September will be interesting. No one is making new, big bets now. Some very smart people are expecting a continuation of the same use of the energy and commodity sectors as ATM’s to buy shares of things like Freddie and Fannie. I happen to think things are about to get better but I won’t be pig headed about it and will go to cash rather than suffer another July to mid August style beating if the mkt wants to get really irrational again.
August 26th, 2008 at 1:26 pmIf it’s truly a name you haven’t heard of that’s doubly irresponsible of him to pump it into a hurricane. Very sad what has happened to that channel. They used to be good.
August 26th, 2008 at 1:31 pmI rarely watch CNBC but had to see how they were hyping this storm. Channel full of bozos now.
August 26th, 2008 at 1:35 pmDon’t like the look of the broader market – has to hold these levels (11300 ish on Down and 1260 ish on SPX) or it could get ugly very quickly.
August 26th, 2008 at 1:38 pmPresident Bush – Russia must reverse irresponsible move on Georgia.
August 26th, 2008 at 1:43 pmDJ French Foreign Min Kouchner: ‘We Fear War, Don’t Want One’
August 26th, 2008 at 1:44 pmRe 94 – yeah, that’s likely. What’s next, impost sanctions…do that and Med-Put will start their own SPR.
August 26th, 2008 at 1:44 pmz – u still have WH having nice day also my EVEP having good day. on their conf call last wk were very optimistic and raised div to 75 cents and indicated they would raise it again at end of quarter.
August 26th, 2008 at 1:48 pmThis may explain recent trading in energy names.
http://news.yahoo.com/s/ap/20080826/ap_on_re_us/sat_scores
August 26th, 2008 at 1:51 pmOff subject – Aaahh, only in the south!
http://bluegrassbeat.wordpress.com/2008/08/26/sex-charge-dropped-after-hensley-apologizes-for-joke/
August 26th, 2008 at 1:53 pmZ – at the risk of being simplistic, I would have thought the fast money was out of energy by now. If they aren’t, then what are they doing calling themselves fast? Oh that’s right, *I’m* the one calling them fast. Well, anyways, it seemed like a good argument for a while.
I’ve been looking at the Shanghai index lately, because if China’s slight slowdown becomes a recession, oil is going lower. The index is still grinding lower, after a big spike (7%) caused by a JPM analyst saying there would be a huge economic stimulus package. He clarified that he was not basing this on talks with officials but on his own analysis & the market retreated. But his analysis is interesting, based on past Chinese responses to economic crises and also on the pressing need for huge infrastructure works in China. He is essentially suggesting that the government will use an export slowdown as an opportunity to accelerate domestic development. This seems to me to be the flaw in the bear case on China: the bears say it is due for a recession and an export slowdown will trip it up. But China is a command economy with a big shopping list of internal projects, a stated intention of “surpassing” the West and is sitting on huge cash reserves. Why wouldn’t they just turn up the dial on the internal growth-o-meter?
Another point arising in trying to understand the predictive value of the Shanghai index for the Chinese economy is that it is of course a very unseasoned market. There is (according to the JPM guy) a huge amount of insider stock now becoming free to trade and it is weighing on the market but (I infer) it doesn’t really have any economic significance.
http://www.reuters.com/article/marketsNews/idINSEO1160220080826?rpc=44
August 26th, 2008 at 1:53 pmLoL Z re SAT score comment 🙂
August 26th, 2008 at 1:55 pmZ- The writing skills explain CNBC
August 26th, 2008 at 1:56 pmIt explains why I can’t find an intern with the ability to learn excel.
See the WH up, have no idea why. I’ll take it though. Still thinking pretty long term there although deference to Dman’s comments should be made since I don’t follow the China markets and it is a Chinese stock.
August 26th, 2008 at 1:57 pmOur local weather reporting that the wave coming off Africa which is behind Gustav most likely to head off into the Atlantic.
August 26th, 2008 at 2:00 pm#94 Let me see if I have this straight. President Bush is advising a powerful country that large powerful countries invading small, poor countries is not a good idea. Have I got that right? He could back up his argument by pointing to his own miserable experiences in the invading things department, but I suspect he forgot to mention them.
August 26th, 2008 at 2:06 pmZ: FDIC report: Problem banks 117 up from 90. FDIC coverage ratio fell. Will have to assess banks more.
August 26th, 2008 at 2:08 pmZ- er… I put just about everything I know about China into #100, so I’d be a bit alarmed if anyone started deferring to my China analysis. I do think it’s an important part of our puzzle though, so it would be great to hear from anyone who knows the country. Maybe even some Chinese ZEB subscribers out there (??)
August 26th, 2008 at 2:12 pmTom – right when they can’t afford it. Sounds like an industry I want to invest in, lol.
August 26th, 2008 at 2:12 pmAnother example of those SAT scores. Headline on OPEC with no basis in the story.
http://business.scotsman.com/energyutilities/Opec-set-to-cut-oil.4421625.jp
August 26th, 2008 at 2:15 pmCRR breaking out to 2 year highs, without me, CLB moving up as well.
August 26th, 2008 at 2:16 pmMore headline fun: this article sez EOG is up 5% due to a Sanford Bernstein upgrade.
http://biz.yahoo.com/ap/080826/eog_resources_mover.html?.v=1
I guess NG up 6% had nothing to do with it.
August 26th, 2008 at 2:21 pmAh Dman, me thinks we thinks too much, lol.
That OII is outperforming the OIH by double, shoulda listened to my morning thought myself. Ah well, can’t kiss em all and in this market most of them have been ugly shortly thereafter.
August 26th, 2008 at 2:25 pmNOV doing a whole lotta nothing is pretty weird on a day like this.
August 26th, 2008 at 2:27 pmAgreed re NOV.
My FRO started out dropping and is almost back to even. Still think that falls off but obviously they’ve got interest at current levels, pretty strong volumes.
CNBC showing a track into the Gomex like it is a sure thing, satellite looks iffy to north, need to see it start turning soon. 5 pm est update will be interesting.
Cramer has really lost his swing, his names were HAL and NBR and not pop for them since … I guess his recs only work in the thin air of the aftermarket.
August 26th, 2008 at 2:35 pmCantarell story around saying the field produced 974,000 bopd in July, this is about five days old but reuters is reprinting it for some reason. One thing I would add is that this biggest of Mexico’s fields is producing half of what it was in 2004 and PEMEX had said on Aug 1 that it expected production at the field to decline to 1 mm bopd by the end of 2008 so that came 5 months early. NBR, SLB, HAL all to benefit if Mexican congress goes ahead and allows foreign investment…their onshore Chicontepec field has given large bids to NBR and that would likely increase more if foreign dollars are let in.
August 26th, 2008 at 2:41 pmBy Gregory Meyer
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)–Crude oil futures crept higher for a second straight
session Tuesday, bolstered by concerns a hurricane could churn through
important energy facilities on the U.S. Gulf Coast.
Light, sweet crude for October delivery settled $1.16, or 1%, higher at
$116.27 a barrel on the New York Mercantile Exchange. Brent crude on the ICE
futures exchange closed at $114.58 a barrel, up 55 cents. Brent settlement
prices weren’t immediately available.
After strengthening from tropical storm status overnight, Hurricane Gustav
made landfall on Haiti Tuesday, the National Hurricane Center reported, with
maximum sustained winds near 90 m.p.h. Traders pondered whether it could
eventually strike the U.S. Gulf Coast, home to 40% of U.S. refining capacity
and a quarter of the nation’s crude production.
“We’re going to see the market ebb and flow and see the expansion and
contraction of the storm premium this week until we get a clearer idea of the
path of this storm,” said Jim Ritterbusch, president of Ritterbusch and
Associates, an energy trading advisory firm in Galena, Ill.
The hurricane center warned the storm could reach the Gulf of Mexico by 8 a.m.
Sunday. Royal Dutch Shell PLC (RDSA) said personnel evacuations from the Gulf
could start as early as Wednesday as Gustav heads northwest through the
Caribbean Sea. Shell reported no impact on production.
Adding support to crude futures was Russia’s recognition of the breakaway
Georgian provinces of South Ossetia and Abkhazia as independent states, a move
that prompted protests among Western leaders. Russia is the world’s
second-largest exporter of crude oil.
“The strength in crude today was precipitated primarily by Gustav, and
secondarily on Russian geopolitical concerns,” said Kyle Cooper, director of
research at IAF Advisors in Houston.
Cooper said new private forecasts indicated Hurricane Gustav now appears more
likely to miss the U.S.’s coastal energy installations, helping damp an earlier
rally that took Nymex crude prices to $117.89 a barrel.
Oil remains pressured as triple-digit prices weigh on demand. The Energy
Information Administration reported revised data Tuesday showing that U.S. oil
demand in June was 5.6% lower than a year before. At 1.17 million barrels a
day, that’s the weakest June consumption since 1998.
A unit of MasterCard Inc. (MA) reported that last week U.S. gasoline demand
measured by purchases at the pump rose 1.3%, to 9.579 million barrels a day,
but it was down 2.9% from a year ago.
Traders’ focus is likely to shift to weekly EIA oil inventory data due at
10:35 a.m. EDT Wednesday. Analysts surveyed by Dow Jones Newswires on average
predict crude stockpiles rose by 1.0 million barrels the week ended Aug. 22,
while gasoline stockpiles fell 2.5 million barrels and stocks of distillates,
which include heating oil and diesel, rose by 600,000 barrels. The rate of
refinery use is seen rising 0.1 percentage point to 85.8% of capacity.
Front-month September reformulated gasoline blendstock, or RBOB, rose 8.74
cents, or 3%, to settle at $2.9697 a gallon. September heating oil climbed 5.85
cents, or 1.9%, to $3.2099 a gallon.
-By Gregory Meyer, Dow Jones Newswires
Dow Jones Newswires
August 26th, 2008 at 2:42 pm08-26-08 1517ET
Stepping out 15 minutes early. Have a good one. Back with all the weather news you can use at 5 est, lol.
August 26th, 2008 at 2:48 pmZ:
August 26th, 2008 at 2:51 pmThanks much for #75 and #78. They were great. “Price takes care of price”- I love it. How could it have been said more efficiently! As far as OPEC is concerned: I’m sure they are concerned about the U.S. going green. But I for one have great confidence in their greed. Also in their shortsightedness. I still feel they will not allow Cl to get much below 105. It would make them very uncomfortable.
Thanks mahout, too kind.
Not much change since last updated at 5 EST
Satellite: (click animate)
http://tropics.hamweather.com/2008/atlantic/gustav/clir/latest.html
Tracks:
August 26th, 2008 at 4:21 pmhttp://tropics.hamweather.com/2008/atlantic/gustav/modelsmap_zoom1.html
TROPICAL STORM GUSTAV DISCUSSION NUMBER 9
NWS TPC/NATIONAL HURRICANE CENTER MIAMI FL AL072008
500 AM EDT WED AUG 27 2008
GUSTAV HAS BEEN HUGGING THE NORTH COAST OF SOUTHWESTERN HAITI THIS
August 27th, 2008 at 4:07 amMORNING WITH STRONG BANDS OF THUNDERSTORMS TO THE EAST AND SOUTH OF
THE CENTER. AN AIR FORCE RESERVE RECONNAISSANCE PLANE FOUND A
MINIMUM PRESSURE OF 998 MB AND RELIABLE SFMR WINDS OF 45-50 KT. THE
INITIAL INTENSITY WILL BE SET AT 50 KT. LITTLE INTENSIFICATION IS
FORESEEN UNTIL THE CENTER MOVES FARTHER AWAY FROM THE HIGH TERRAIN
OF HAITI. THEREAFTER…A STEADY INCREASE IN STRENGTH IS LIKELY…
ESPECIALLY AFTER THE CENTER MOVES INTO THE MORE OPEN WATERS
NORTHWEST OF JAMAICA. VERTICAL SHEAR IS FORECAST TO BE LIGHT…AND
COMBINED WITH THE DEEP WARM WATERS…RAPID INTENSIFICATION COULD
OCCUR IN A COUPLE OF DAYS WHILE THE CENTER IS NEAR OR SOUTH OF
WESTERN CUBA. THE OFFICIAL FORECAST IS REDUCED FROM EARLIER DUE TO
THE INITIAL WEAKENING BUT STILL SHOWS THE STORM BECOMING A MAJOR
HURRICANE IN THE NORTHWESTERN CARIBBEAN SEA. IN THE LONGER-TERM…
THE GLOBAL MODELS HAVE A VARIETY OF UPPER-WIND PATTERNS…BUT IN
GENERAL THE UPPER WINDS APPEAR TO BE FAVORABLE ENOUGH TO SUPPORT A
MAJOR HURRICANE IN THE GULF OF MEXICO. IT SHOULD BE NOTED THAT
BOTH THE GFDL AND HWRF ARE MORE AGGRESSIVE THAN THE OFFICIAL
FORECAST.
Oil & Gas Activity: locations and completions
http://www.shreveporttimes.com/apps/pbcs.dll/article?AID=/20080827/NEWS05/808270368
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