Thursday – Gas Preview and Oil Inventory Review + Multiples and Lots, Lots More

Sentiment Watch: Shade of red known as "de-leveraging". The energy groups for the last couple of days have looked like they want to pick themselves up off the floor but, at the end of the day, have been unable to shake off the swooning broader market. We've gone from window-dressing-end-of-quarter concerns about having "energy" names in the ownership column to panic about holding any names but cash (and that may not even be safe). In short, fund managers are worried about having jobs next month. And so the flight to commodities has begun. Gold, black gold, even lowly natural gas have caught a wave. I remain extremely cautious and will trade infrequently with shorter than normal holding periods until further notice.


In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Gas Inventory Preview - Street Sees 61 Bcf Injection
  4. Oil Inventory Review
  5. Stuff We Care About Today - Quick Sector Wraps
  6. Odds & Ends


Holdings Watch: No changes yesterday but expect to be a little busier today, likely taking the DIG calls off the table and potentially salvaging some beaten up September positions.

Commodity Watch:

Crude Oil rallied hard in the morning, paused after the EIA inventory press release (see review below) and then shot higher on the day as commodities turned into something of a safe have while the dollar started to look weaker. Oil closed up $6.01 at $97.16, its biggest one day rally since June. Long overdue. It was not fundamentals but a flight to commodities that inspired the rally. The EIA inventory report was in line with if not a bit more bearish than expectations on the products side (see the slide show below) but investors flocked to gold, natural gas, loaves a bread or anything else that did not resemble an investment bank yesterday. This morning oil is back above $100 as the dollar continues to weaken.

Natural Gas soared 8.5% on the day to close at $7.91. Traders will no doubt overshoot the mark here but the contract is wildly net short so this could take a quick trip to the high $8s which should help with my DIG call exit. This morning gas is trading up $0.25+ and like oil, back over a key psychological level ($8).

  • (WMT) To Go CNG? Pickens is out with a press release saying WalMart is investigating using compressed natural gas to run its truck fleet. 8,500 trucks running CNG would be a good further step in WMT's greening process and would likely lead other fleets to follow suit. It would also make a noticeble bump in natural gas demanded for transportation. 
  • IAEA Worries Over Global Natural Gas Supply. The group says "investment uncertainties, cost increases, and delays continue to be a major problem in most gas markets and are continuing to constitue a threat to long-term security of supply." We assume they don't mean in the U.S.

MMS Ike/Gustave Impact:

  • Oil: 96% of Gulf shuttered.
  • Natural gas 82% shuttered.
  • Damage from Ike continues to appear to be minimal (28 platforms destroyed in the shallow water, some damage to deepwater topsides and a rising toll of onshore damage which has yet to be quantified in terms of production loss)

Natural Gas Inventory Preview & Storage Thoughts: Welcome to the second shoulder season of the year, not too hot, not too cold, and as always, not too great for gas demand.

My Number: 65 Bcf Injection

  • Last Week: 58 Bcf
  • Year Ago: 63 Bcf
  • 5 Year Avg: 88 Bcf
  • Imports: rose from the prior week by 0.7 Bcfgpd or about 5Bcf for the week. LNG and imports from Canada both gained week to week and while overall imports are still down 1 Bcfgpd YoY this is the closest they have come to year ago figures in many months. This is also the should season for LNG coming to the U.S. so this is to be expected but if LNG tips ahead of year ago levels it could be the harbinger of one last bout of pre cold selling in natural gas.
  • Weather: Cooling degree days of  44 vs 59 last week and 57 in the year ago period. This more seasonal normal weather will reduce the sting of storm related shut ins until next week's number arrives.
  • Ike Impact: Offshore about 39 Bcf did not get produced for the reporting period, off slightly from the shut in gas number in the prior week from Gustav. Next week however, we get our first look at Ike's discombobulation of the onshore gas processing industry.

Street Consensus Number: 61 Bcf Injection (range of 48 to 76 Bcf) ~ from the Reuters Survey.

ZComment: The impact of Gustav / Ike should put storage on track for a meeting with 3.4 Tcf but the issue on the minds of traders and the Street remains the potential for a 2009 gas glut where production drives a record rebuild in storage next year. As you know I think the case for the glut, while arguable is a bit thin. Price takes care of price. 

Oil Inventory Review - Bigger than expected draw on crude, largely ignored since the numbers are Gustaved and Iked. 

CRUDE OIL - Another bigger than expected draw on crude stocks.

Refineries Still Hampered By Storm Related Shut Ins.

Imports Down Due To Storm...Expect them to return to something closer to normal in about 2 weeks.

Production fell further last week to 3.988 mm bopd. This year U.S production had been running near record levels before hurricane the storm related shutterings even though utilization has been on the low side of normal. While a majority of this production will bounce back in the near term it is likely some projects will be delayed for at least several weeks, further shoring up product pricing.


GASOLINE -  U.S. Gasoline inventories are at an 18 year low at least. This is as far back as the EIA's weekly inventory data goes.  The DOE is considering asking the IAEA for a products release from their reserves to help alleviate tightness in the gasoline markets while the EPA has relaxed environmental standards for gasoline since Gustav hit.




Gasoline Stocks: I'll just say it one last time...18 year lows. And it's not just storm related folks; if you look at the area in the red circle below you can see that the slope of the decline has been steeper than is normal for the season and given the current problems along the Gulf Coast I would expect inventories to continue to fall for the next 2 to 3 weeks as we seen increased turnarounds outside of the Gulf Coast region as refiners gear up for higher heating oil production.

DISTILLATES - Declining inventories at a time when they should be building up in advance of winter.



Stuff We Care About Today -

Sector Snaps: Taking a quick look at the other stuff around here besides the E&P and oil service names.

Independent Refining:

  • Sentiment: Mixed to cautiously optimistic near term, long term oversupply concerns in the international market. Estimates will be up coming up for the 3Q and 4Q periods but 2009 is still very much in question. I've been tentatively re-entering the group for the last 6 weeks.
  • Valuation: Cheap but it has been all year so "cheap for a reason" as estimates have been sliding all year as well. The deceleration in earnings estimates reductions is getting some notice however as the group is trying to make at least a short term bottom.
  • Names held here now: (VLO) and (TSO) calls.

Coal Producers:

  • Sentiment: Hot group turned very, very cold. Stocks in China are always low, now exceedingly so although hard data is difficult to come by. Coal price advances far exceeded those of oil in 2008 and although they have come off with everything else margins for most producers, especially higher BTU operators, are healthy. The group however has been pummeled going from hedge fund darling to source of funds in the last 4 to 6 weeks. Getting ready to position here, waiting on a little sanity in the groups and market in general and see no need to catch a knife or the bottom 10% of a rebound.
  • Valuation: As you can see from the second table below earnings estimates have not retreated while the shares have contracted sharply with the broad market sell down and a smaller decline in coal spot prices. Looking out to 20009/10 the group remains exceedingly cheap.
  • Names held at present: None, but I'm leaning towards entries in (BTU), (WLT) and /or (PCX). As with everything these days, I'm waiting for the deleveraging storm to pass.

Dry Bulk Shipping

  • Sentiment: pretty poor. Expected rebound in Chinese demand post Olympics has not yet materialized. Combine that with global economy downshifting and you have bulk rates that look like a double top.
  • Valuation: Cheap but again, estimates are falling pretty quickly here so maybe not cheap enough. We have been absent bulk plays for the last couple of quarters and I see no reason to play now. You can't wait on the global economy to recover before entering this group but I need to be able to see some sort of light at the end of the tunnel.

Solar: Will do for the Friday Post.

Odds & Ends

Analyst Watch: (PTR) upped to Outperform by Credit Suisse, (CEG) cut to hold at several firms, Goldman upped (HOC) to Buy, Merrill cuts (DNR) to neutral.

Housekeeping Watch: If you are having difficulty view the graphs please send us email noting the particular graph and your browser type to zmanadmin@gmail.com. Thanks.


160 Responses to “Thursday – Gas Preview and Oil Inventory Review + Multiples and Lots, Lots More”

  1. 1
    Sambone Says:

    By Angela Henshall

    LONDON (Dow Jones)–Nymex crude oil futures soared over $100 a barrel in
    London Thursday briefly spiking to $102.24 as the dollar weakened against the
    “As long as they (traders) see the dollar weakening they’re going to buy oil,”
    says Serge Laureau, commodities strategist at Saxo Bank in Copenhagen. “It’s an
    obvious play.”
    Laureau added the market has shifted its attention away from fundamentals to
    focus on dollar fluctuation. “All commodities are in the green today, from
    grains to precious metals, to energy – all climbing on a weaker dollar.”
    At 1220 GMT, the front-month November Brent contract on London’s ICE futures
    exchange was up $3.66 at $98.32 a barrel.
    The front-month October contract on the New York Mercantile Exchange was
    trading $3.98 higher at $101.14 a barrel.
    The ICE’s gasoil contract for October delivery was up $57.50 at $93.825 a
    metric ton, while Nymex gasoline for October delivery was 495 points higher at
    251.25 cents a gallon.
    Traders seized on the opportunity to buy as the dollar weakened across the
    board earlier Thursday after international central banks promised to inject
    capital into the financial markets.
    “No doubt the dollar has nudged us higher, although we see no clear direction
    for the session yet,” said Samir Tazi, a broker at CMC markets, who warned that
    the rally could be short-lived.
    “The inventories data was bullish and gold has had two days of strength, which
    may have fueled some positive sentiment towards commodities.”
    -By Angela Henshall, Dow Jones Newswires

    Dow Jones Newswires
    09-18-08 0828ET

  2. 2
    jack Says:

    mid american to buy consellation for 4.7b

  3. 3
    zman Says:

    SLB replacing AIG in DJ Global Titans 50 Index.

  4. 4
    BirdsofpreyRcool Says:

    z – your coal chart looks suspiciously like your refiner chart…

  5. 5
    BirdsofpreyRcool Says:

    WRES (Warren Resources)… i’ve never heard of them. does anyone here follow? i got some interesting comments on the company this morning. it might be worth looking at as an “oily” name.

  6. 6
    zman Says:

    WRES – I like, interesting method of drilling for oil in California. Talk about multiple wells from one pad.

    Thanks for the coal note, you win a prize!

  7. 7
    zman Says:

    From my March 17 Post:

    * On Friday Standard & Poors said “the worst is behind us” in reference to sub prime loss disclosures.

    * Paulson Defends (BSC) Rescue; Dodge Comments Regarding Other Banks. On Sunday morning, Treasury Secretary Paulson said the U.S. financial system is “more fragile than we would like right now.” No kidding. According to Thomson Financial he was directly asked whether other financial institutions are in similar shape to Bear and he responded with “Well, our financial institutions, our banks and investment banks are very strong and I’m convinced that they’re going to come out of this situation very strong.” He’s not telling us something…

  8. 8
    tater Says:

    Good morning,
    What do you make of the Morgan Stanley news?

  9. 9
    kaman Says:

    Coal group nice out of the gate…

  10. 10
    zman Says:

    Lot of games being played, they are not opening the DIG options for trading 13 minutes into the session…that’s weak.

  11. 11
    zman Says:

    Hearing Schumer/Clinton trying to force a ban on short selling. Anybody see that story?

  12. 12
    Fiveanddimer Says:

    Nicky, 860 was resistance for gold. It’s now trading at 877. What do you see next for the metal that is no one’s liability and has no counterparty risk?

  13. 13
    Eagle Says:

    F&D The next level she was looking at yesterday (post #109) was 62% FIB at 893. I took a small put position yesterday in GLD, and may add when/if it gets to 893. I like Gold long but everything looks to a short bump and then a ride down to the 600’s. DO you see something different?

  14. 14
    tater Says:

    Don’t want to start a big gold discussion, but you aren’t trading gold, you are trading paper promises (IOU’s) of gold delivery (yes the GLD too). Sounds like the very definition of counter party risk.

  15. 15
    1520sbroad Says:

    #11 – i did see a mention of Schumer/Clinton requesting that the SEC put a short term ban on short selling in financial companies. Struggling with internet connection today but i think it was in an AP wire story.

  16. 16
    zman Says:

    Thanks 1520.

    Tater – I assume you were not asking me about the MS merger news right. Other than finding the whole thing rather disturbing I have little opinion there. Is GS next, who knows? How the dollar continues to hold up here is a mystery.

    Names like EOG and CLR should move well if oil can take/hold $100 and gas can hand onto a range of $7.50 to $8. SWN, HK, GMXR and GDP could see big gains on the gas recovery as well.

  17. 17
    1520sbroad Says:

    On MS – did hear that they have halted most commodity trading via platts window. Not quite sure what the platts window is but my guess is that MS wants to de lever and take margin calls off the table for the moment.

  18. 18
    zman Says:

    Big Cap E&P running well but this time with market so I don’t give it as much credence. Long way from saying we are at a bottom…feels like a dead cat bounce but then not lower, just sideways. Street starting to grow a little spine with comments I am seeing this morning. Fool me once shame on you, fool me for the fourteenth time on the way lower unemployed me. Staying cautious, more than a little tempted to nibble but I’d rather do it in the red at lows just above yesterday.

  19. 19
    tater Says:

    Morgan news was what 1520 is noting. Kind of like my comment about gold, I am wondering what MS might have promised and might now not be able to deliver on due to lack of credit. Thinking it might upset the balances in trading, but now I remember that the fed will just come in and guarantee Morgan’s obligations, so not to worry.

  20. 20
    zman Says:

    There has been a tradeable pullback in front of oil and natural gas inventory reports (the 20 or so minutes before them) for the last few weeks. People have gotten very cautious in front of the numbers.

    Wow, Bush speaks and the commodities and energy stocks roll over.

  21. 21

    Hey Z.

    I hope you took my ‘RISKY Q-Trade’ Tuesday on Vulcan Materials.

    The stock gapped up 5 points from 73 to 78 this am and now about 77

    You asked ‘why VMC now?’ Perhaps it is one of the safe stocks for the ultimate recovery… but an industry that is now being seen as undervalued.


  22. 22
    zman Says:

    Hey Q – nope, did not take, congrats on the trade. Got some comps for me to look at over the weekend?

  23. 23
    zman Says:

    Gas number in 10 minutes. Bigger than 60 and I run from the DIG calls.

  24. 24
    zman Says:

    CLR upped to Buy at Merrill

  25. 25
    Sambone Says:

    Tater – #8, I think it’s a joke. Both have crappy balance sheets. So it’s like merge two ugly women doesn’t make one beautiful.

  26. 26
    zman Says:

    DIG – holdings now 22% XOM; next biggest position is CVX at 9%, then djusen swaps, then SLB at 6%. The E&Ps are in the 2 to 3% weight class.

  27. 27
    zman Says:

    Products falling hard this morning, gasoline down 2+%, heating oil down 1+%. That’s a little odd given the likelihood that inventories continue to decline for the next few weeks with capacity offline.

  28. 28
    Sambone Says:

    Good thing I don’t own MS.

    By Lananh Nguyen

    LONDON (Dow Jones)–Concerns about the position of Morgan Stanley (MS) in the
    global energy markets grew Thursday after persistent reports that other market
    participants are wary of doing business with the U.S. investment bank.
    Morgan Stanley, which is a major player in energy trading, has been hit hard
    by the current turmoil in the banking industry and has entered merger talks
    with Wachovia Corp. (WB) and other institutions, according to reports.
    Traders and brokers said there was increasing caution about doing business
    with Morgan Stanley, which is an important dealer/broker in global commodities.
    “I am hearing that counterparties do not want to have exposure to Morgan
    Stanley,” said an energy broker in London. “They would rather use an exchange
    to clear OTC (over-the-counter) trades.”
    The ClearPort clearing facility runs the world’s largest oil futures exchange
    in New York and using it would allow traders to avoid Morgan Stanley
    counterparty risk.
    “Lots of companies will stop trading with them, at least until there is
    clarity and until they have assessed their exposures with them,” said a
    European gasoline trader.
    Their words echoed earlier comments in Asia, where a broker and a trader said
    several trading houses have issued internal memos forbidding their traders from
    conducting swap deals with Morgan Stanley.
    In London, a spokesman for Morgan Stanley declined to comment.
    Any changes to Morgan Stanley’s commodities trading business in Europe would
    have a significant impact “because everyone in the market has exposure to
    Morgan,” said a crude oil and products trader based in London.
    Markets would suffer from “even less liquidity and more volatility” if the
    bank’s oil trading operations were affected, said the European gasoline trader.
    Earlier, brokers in Asia reported that Morgan Stanley had decided not to post
    bids and offers for distillates and fuel oil derivatives via the Platts trading
    The Platts oil pricing agency, a unit of U.S. publishing company McGraw-Hill
    Cos. (MHP), conducts daily electronic trading windows to match bids and offers
    for crude oil and products. Its assessments set benchmark prices that are used
    widely in contracts.
    Platts said it was “unable to confirm or deny anything” when asked about
    Morgan Stanley.
    In Europe, market participants said they would be watching Platts’ European
    windows for signs of activity by the bank, particularly in gasoil where the
    bank has a major presence.
    “They have a huge storage and physical position that ties up millions in
    cash,” a crude oil and products trader said. “If they do (participate), there
    will be a lot of people who start asking for credit etc. It will be attracting
    attention to their problem.”
    However, others said that any buyer of Morgan Stanley, which is regarded as
    one of the major players in the market, would want its profitable commodities
    business to continue.
    -By Lananh Nguyen, Dow Jones Newswires; (Reza Amanat in London and Florence Tan in Singapore contributed to this

    Dow Jones Newswires
    09-18-08 1018ET

  29. 29
    VTZ Says:

    Regarding Petro-Canada/UTS/Teck Cominco Fort Hills Project from yesterday, I quoted 135,000/bbl but actually it is closer to 175 or 200 if you include some third party costs (as I have been informed this morning). It comes in at the highest cost to date.

  30. 30
    zman Says:

    67 Bcf, that’s high

  31. 31
    zman Says:

    ZTRADE: Out DIG Calls for $3, up 58% since the 9/15.

  32. 32
    tater Says:

    Thanks Sambone, that note gives a good light on the situation.

    VTZ – I used to own UTS a couple years ago but it looked like it was going to take forever to get Forrest Hills online. Don’t you think that since they just sell portions of their equity to fund everything that they will just do it again(and again and again)? Seems to me that their end-game is to just be assimilated by Petro Canada, possibly at the expense of equity holders (kind of a take-under). That’s the feeling that I got.

  33. 33
    Dman Says:

    Buffett buys Constellation Energy for $4.7 bln


  34. 34
    VTZ Says:

    tater – Until these costs came in I thought UTS would be a strong independant powerhouse in the same way that Western Oil Sands was (now bought out by Marathon oil). Western was an independant and owned 20% of the Athabasca Oil Sands Project (AOSP) Operated by Shell until last year.

    I still think that they will trade some of their other lands for a reduction in up front capital but this does expose them to a takeout of their share by either Teck Cominco (TCK.B) or Petro-Canada (PCZ). That being said, I don’t think putting themselves up for sale will be what they do because the insiders hold a lot of shares and they realize that it would be an opportunistic buyout.

    I know people at Petro-Canada though and they have the same feeling as you that their production share will be dwindled as a result of up front capital.

  35. 35
    VTZ Says:

    Ultimately tater, they will try to raise capital. If they can’t raise sufficient capital they will likely sell out some of their land holdings that are outside of the Fort hills project to Teck or Petro-Can.

  36. 36
    tater Says:

    I last listened to a call about a half year ago, they sure seemed to love the area across from the current project, I forgot what they called it, I think it was a number. Anyway, I am pretty sure that they still own 100% of that one, kind of their ace in the hole. Problem is that it is worthless until Fort Hills gets the upgrader ok’d, etc. Fairly savvy biz plan, I just don’t have the patience.

  37. 37
    zman Says:

    Natural gas down 42 cents now to mid 7s. That 67 Bcf number was high to the Street and in line with my 65. Thought there is that Ike really was not impacting in a big way and the weather was tepid. Next week’s number will see a bigger impact and could be a bit shocking to the Street. Any lower on NG and I take some UNG for a ride.

  38. 38
    tater Says:

    One last thing and I’ll get off the phone here so somebody else can use it, CLR has a pretty clear downtrend line that it ran up into this morning around 38ish that is holding as resistance. Probably need to see it clear that line before it is going to start trending upward.

  39. 39
    sting Says:

    Good Am Zman….what are your thoughts about DUG calls or DIG puts as we approach heating season? Do you think this week’s flight back into “black gold” will be long lived?

  40. 40
    zman Says:

    Thanks Tater. I appreciate your TA on my thoughts. The whole group appears to have unbroken downtrends or just broken charts to me. I continue to look for sideways trading and then a move higher as we enter the 4th quarter.

    Broad market is going to need more help it seems…

  41. 41
    Dman Says:

    Z – #37 why no Ike impact? Wouldn’t the Gulf have been more-or-less shut in for the week ending 12 Sep? I can’t recall how much was bought back up between Gustav & Ike, so I guess that’s really what I’m asking.

  42. 42
    Wyoming Says:


    Did not know if this has been mentioned.


  43. 43
    zman Says:

    Sting – I think the group moves higher into the 4Q period so except for a trade after some irrational looking spikes I don’t contemplate going against the group for any length of time. If you look at the weightings of DIG and DUG you are really betting with (or against) the Majors with those and then Oil service and then the E&P names. If you have a market recovery DIG will rise and DUG will fall as a full third of their holdings are XOM and CVX. XOM has been one of the few bright points in the last slide for the Dow.

    Dman – there was an Ike impact to the tune of 39 Bcf but you also had much cooler weather and about 7 extra B’s from imports that you didn’t have in the prior week. The cool weather was not enough to get people to really fire up their heaters but it was enough to prompt open windows and off AC. I had a chart in yesterday’s post that shows how much was up each day. You can use the Calendar at left to get their or I can repost as an addendum to today’s post. It shows at the bottom the amount of gas off for each reporting period.

  44. 44
    VTZ Says:

    tater- to each his own… All I can tell you is that with a market cap of 800 million they are insanely cheap and they have some of the best undeveloped property there is so if you believe the world will have to tap the oil sands to meet demand or that oil price will stay above 100 long term (these are 40 year projects, I stress), then UTS is a steal of a deal.

  45. 45
    zman Says:

    Bird, don’t know if you are still playing around with it but KOG = WOW. Crushed, bashed over that delay and this market. At $1.40 with at least 3 wells getting drilled in the Bakken over the next 4 months its like a call option without an expiration data.

  46. 46
    VTZ Says:

    Also, anybody who says BQI is a better deal than UTS doesn’t know what they are talking about.

  47. 47
    Dman Says:

    Z – OK I just looked at the graph from yesterday, thanx.

    I forgot to ask: any reason for the jump in imports or just a fluctuation?

  48. 48
    Fiveanddimer Says:

    Tater, re 14. I never trade gold; never bought a share of GLD in my life. I buy bullion and salt it away as monetary insurance. I am not into TA, and experience has taught me that predicting the gold price is a losing proposition. I buy when the price comes down. If the price comes down more, I buy more. One of these days, the US$ will be toast. I hope to be ready for that day.

  49. 49
    zman Says:

    Re LNG pop = Noise would be my best guess.

    Five – hear ya re the dollar. One day OPEC will get fed up with a weak dollar and switch to Euros or wampum and then look out.

  50. 50
    zman Says:

    Bye-bye Dow and S&P morning pops.

  51. 51
    Pete Says:

    Is there any reason for HK to be falling like a rock compared to the others?

  52. 52
    tbone Says:

    Now who would of thought this was happening! LOL

    Interior to expand oversight after scandal

    The Associated Press
    Interior Secretary Dirk Kempthorne said Thursday he was disgusted by reports of parties, sexual relationships and lavish gifts between government oil brokers and energy company employees and that he was considering firing the federal workers involved.
    Kempthorne also told a House panel that he would appoint an attorney-adviser to watch over ethics in the Denver office at the center of the scandal. The office collects billions of dollars from oil companies drilling on federal lands.

    Kempthorne said he was considering how to deal with the workers involved who are still employed with the agency.

    “I can assure the committee that this process will be completed as swiftly as possible, and we will examine the full spectrum of disciplinary actions, including termination,” said Kempthorne, who said he was outraged by employees’ abuse of the public’s trust.

    Last week, in three separate reports, the Interior Department Inspector General Earl E. Devaney alleged that 13 employees in Washington and Denver were rigging bids, accepting expensive gifts, and partying with oil company employees from 2002 to 2006. A third of the 55 employees in the Denver office accepted gifts from oil and gas companies, the reports said.

    Devaney told members of the House Natural Resources Committee Thursday that the conduct of the Minerals Management Service employees was “egregious” and said he was at a loss to explain the behavior of oil and gas company representatives.

    “Simply stated, the MMS employees named in these latest reports had a callous disregard for the rules by which the rest of us are required to play,” Devaney said.

    Devaney, under questioning, said he was unable to show that any of the personal relationships brought benefits to the oil companies.

  53. 53
    zman Says:

    Pete – Nothing I see. Rolled over earlier on light volume and once it went red it got picked on. Days like today, weak get weaker. Could be a Lehman counterparty rumor, could just be one guy letting go of shares without regard for the bid. Don’t see it as something that culd not effect all of them. Was looking to take a little for a trade as long as it holds its recent low. Like the idea of holding very near the money options there over the weekend for a trade but just small. This group is still not ready to declare victory vs the broad market. The one thing I have noted is that buying into the large dips and selling quickly has been working more and more whereas over the last several weaks buying a weak energy name only gave you losses the next day and suddenly your strike was $10 out of the money and the option was toast.

  54. 54
    zman Says:

    Tbone – It’s unreal but not that surprising in that agency. They have not had good internal controls for years. At least they have not lost hundreds of millions of dollars this time. They owe the American Indian boocoo bucks. And if the guy on top needs to decide how to handle these employees were involved in bid rigging then I say he needs to go too.

  55. 55
    Pete Says:

    thanks Z

  56. 56
    zman Says:

    Doing a little digging Pete.

  57. 57

    VIX up at 38. VMC down a little to 73, yesterday’s close before gap up.

    nice little trade opp on the SEP 70s

  58. 58
    zman Says:

    Pete – the only thing I can see re why HK maybe different is that Lehman was their lead banker on the last deal. People may be translating that into the evil “counterparty risk”. I suspect it is noise but shorts may try to make something out of it.

    MS by the way says they are trading energy as usual.

  59. 59
    zman Says:

    End of the month very WILDZTRADE.

    HK SEP $22.50 Calls for $0.50 with the stock departing from the group’s mostly green action today and down about 3%. Don’t see any reason to really single them out, yes one their bankers is Lehman, and no I don’t think that will be a problem for them.

  60. 60
    zman Says:

    Q – who else does what VMC does?

  61. 61
    zman Says:

    Iran says no (again) to halting nuclear ops


  62. 62
    tater Says:

    Five re #48,
    Good for you! I really mean that. On my list of things to do, I just keep putting it off until tomorrow (and then it will be too late). You don’t mind telling me the address to your house and when you will be out of town?

    VTZ – Without a doubt, I defer to you on expertise about this company. I just think that currently the company is not adding to shareholder value, it is selling it for a chance at a smaller piece of a much larger pie (and then saying this is adding to shareholder value). Quite a few unkowns and judging from the past 2 or 3 years of the company under-estimating the costs of production (costs that really are not unknowable), traders/shareholders may be tiring of it. Thanks for your input, I appreciate what you are teaching me.

  63. 63
    tbone Says:

    Z, Any thoughts on DRYS lately? I’m considering a reentry.

  64. 64
    zman Says:

    HK continues to sink just after I trade it. Perfect. Ugh.

  65. 65
    zman Says:

    Tbone – I’m holding off on the group. If I do go back in it probably won’t be that name. Thinking EXM but really don’t have one picked out. DRYS has diversified into rigs which is not their game and a bit troubling. Also, there remain questions of self dealing by the president.

  66. 66
    1520sbroad Says:

    to me HK looks like someone unwinding, big trade when HK was up just before the NG number and now slow steady sells to get all the way out.

  67. 67
    zman Says:

    1520 – agreed. Stupid level of risk in that trade. Will require a group recovery to get who will in turn require broad market but probably not oil and gas to turn back up. Waste of time to make those type of trades as they are a distraction but when they work it offers a nice return.

  68. 68
    zman Says:

    Market getting killed suddenly. Ben I would suppose is out to lunch.

  69. 69
    1520sbroad Says:

    67-68 – tough to figure across the board. Loads of crazy stuff showing up in terms of opportunities (I think). I can only imagine others are seeing the same things but the big boys now have a mandate to take as much risk off the table as possible. Tough to find buyers for anything.

  70. 70
    1520sbroad Says:

    i do like the vix over 40 though.

  71. 71
    occam Says:

    re 45, my worry is that with the Bakken area reaching its take-away capacity, the small players will have a hard time getting new production to market, possibly for a year or longer.

  72. 72
    VTZ Says:

    tater – it just comes to the question of selling some assets or finding the capital to get some cash flow. Then you no longer have to worry about financing as much.

    Regarding costs, trust me that 2 years ago there was no way to predict what the costs would be a year ago and that today it is impossible to predict the costs a year from now.

    Not a single company has predicted the costs correctly… if they had then lots of things would have happened differently around here.

  73. 73
    zman Says:

    Occam – that is a very good point and have not looked into whether or not KOG has firm transportation agreements in place.

  74. 74
    Fiveanddimer Says:

    Any Ron Paul admirers in the crowd? Here are his latest comments on recent financial events. While most politicians have absolutely no clue about what is doing on, Ron Paul has been warning for years about what we are experiencing now.

  75. 75
    1520sbroad Says:

    parking brake now off HK

  76. 76
    zman Says:

    Five – thanks and yes. Am listening to it now.

  77. 77
    Dman Says:

    In case anyone thinks energy is having a bad day, check out some of the “better” financials: GS MS STT. STT opened at $68 and just bounced of $30. Yikes.

  78. 78
    zman Says:

    Dman – I hear ya on that. One thing is certain. The Street is going to punt a lot of their minions pre bonus checks. Merry Christmas fellas.

  79. 79
    Dman Says:

    Cramer is noting that the Baltic Freight Index is up three days in a row.

    It could mean that China’s buying strike is over.

  80. 80
    zman Says:

    Dman – could be but look at the chart two weeks ago people thought then too. I stick by my comments until I see a non mad monkey source talk about it. Will look at some of the bulk followers to see if they have noted it too.


  81. 81
    zman Says:

    Five – thanks for the Ron Paul. Very good stuff.

    Crazy market 0 to up 150 to up 90 in 10 minutes. Gold up another $48 today.

  82. 82
    zman Says:

    CME getting a lot of business from oil traders who are shying away from dealing with brokerage houses.

  83. 83
    Sambone Says:

    UK just banned “Short selling”. If you own any ETF’s that are short get out. I have never seen a total ban on short selling.

  84. 84
    zman Says:

    Hmmm, sounds like time for some DUG puts.

  85. 85
    Sambone Says:

    Wanna bet the US is next?

    LONDON (MarketWatch) — Britain’s Financial Services Authority on Thursday banned short-selling of financial stocks and prohibited any increase in new bearish positions in the sector. Also, disclosure will be required on all positions of more than 0.25% of a stock. The regulator said it may extend the bank to other sectors. The ban is due to remain in force until Jan. 16, but it will be reviewed in 30 days. “While we still regard short-selling as a legitimate investment technique in normal market conditions, the current extreme circumstances have given rise to disorderly markets. As a result, we have taken this decisive action, after careful consideration, to protect the fundamental integrity and quality of markets and to guard against further instability in the financial sector,” said Hector Sants, chief executive of the FSA.

  86. 86
    zman Says:

    Probably, bye-bye free market.

  87. 87
    zman Says:

    Nancy Pelosi oil price quote from yesterday’s House debate on drilling.

    “I think once you go past $35 a barrel, there’s incentive for them to drill. It’s not just about the drilling revenues, it’s about ending the subsidies” and securing greater royalties, she said.

  88. 88
    Dman Says:

    That headline (#85) has me blinking in disbelief in a way that nothing else this year has managed. I’d love to know what “careful consideration” looked like. Let’s see, a bunch of guys in a room screaming in panic?

  89. 89
    1520sbroad Says:

    #87 – don’t the barrels cost 35 bucks now?

  90. 90
    Dman Says:

    Z – #86 Bye bye British government would be my guess

  91. 91
    zman Says:

    She’s saying that at $35 there would be incentive to drill. I can say not in the Bakken, not in the deepwater Gomex, not in the Canadian oil sands. She has no idea what costs have done, what a hurdle rate is …not to get political because that’s pretty useless here but people like her will drive prices much higher if she gets to be in charge. They don’t bother to understand the economics. Why am I going to risk say $50 mm on a deep water exploratory well, then build couple of billion dollar platform to develop a 100 mm barrels and get $35 oil with a higher royalty on it and no first barrels royalty foregiveness? Its not like I know the barrels are there for sure. That’s why they call it exploration. The answer is I’m not. It will only be the biggest of the big kahuna targets I go after as all the little stuff (and by that I mean 100 and 200 mm barrel fields) just won’t get tapped. Unreal.

  92. 92
    tater Says:

    “The best way to destroy the capitalist system is to debauch the currency”
    – Vladimir Lenin

  93. 93
    zman Says:

    Yes, the very words Kim Jong Il lives by:


  94. 94
    1520sbroad Says:

    #91 – agree 100% there. All you have to do is put a big pipe in the ground and the oil just comes out — forever — right Mrs. Pelosi??

  95. 95
    1520sbroad Says:

    “You cannot be serious” — John McEnroe

  96. 96
    zman Says:

    Sudden oil rally into the close. CME going to have a good quarter if everybody suddenly does all futures trading through them to avoid counterparty risk.

  97. 97
    zman Says:

    Gold up $53.

    Gasoline went from down 5 cents to slightly up. The down made little sense, the flat close makes more sense.

    Oil is trading all over the map right now, very spotty, volume is half normal level.

  98. 98
    occam Says:

    What’s the problem with SLB?

  99. 99
    Dman Says:

    SLB hasn’t been its old self in quite a while, but energy names seem random today: NBR up, SLB down. NFX & PQ up, HK & XCO down.

  100. 100
    apbd Says:

    For Ben and Hank:
    When you come to a fork in the road, take it.
    Yogi Berra

  101. 101
    VTZ Says:

    Gold back to 880… hrmmm

  102. 102
    zman Says:

    Occam – No idea. Wish I could explain some of the moves I see but it seems to be fairly directional with the morning move. Weak get weaker. HK trying to fight that now but not a lot of luck.

    Why is the down up 250 points now? I was on a phone call and it went up 210 of those in the span of very little time.

  103. 103
    zman Says:

    Oh, they are talking RTC. No wonders. Why does the dollar rally on that?

  104. 104
    tater Says:

    no kidding, what the…?

  105. 105
    rlogan1301 Says:

    Can’t explain this market…craziness…had bid in for chk oct 40 @ 2.25 and it just starting jumping to 2.80…couldn’t catch it

  106. 106
    zman Says:

    Anybody remember a Simpson’s episode where Bart sells his company to a dot-com and they offer him more shares off a roll of toilet paper? That’s how I feel about the dollar now.

  107. 107
    zman Says:

    market up 335, wow.

  108. 108
    Dman Says:

    Beginning to think that stock is the way to trade this market. Having trouble moving fast enough with options

  109. 109
    zman Says:

    HK trying to go green, all I needed was a 350 point rally in the Dow.

  110. 110
    Sambone Says:

    By Brian Baskin

    NEW YORK (Dow Jones)–Crude oil futures rose for a second-straight day
    Thursday as the dollar weakened, but turmoil in the financial markets cut the
    rally short.
    Light, sweet crude for October delivery settled 72 cents, or 0.7%, higher at
    $97.88 a barrel on the New York Mercantile Exchange, the first back-to-back
    gains since late August. Futures ended more than $4 below the intraday high of
    $102.24 a barrel, and below the psychologically important $100.
    Brent crude on the ICE futures exchange closed up 5 cents at $94.89 a barrel.
    Developments in the financial world drove oil trading Thursday. Crude rose
    after the Federal Reserve increased the amount of dollars available to central
    banks worldwide, an act that sent the dollar to a two-week low against the
    euro. Movements in oil and the dollar are often linked, as investors balance
    the two in their portfolios.
    Ultimately the financial turmoil that prompted the Fed’s move knocked the legs
    out from under oil’s dollar-driven rally. Morgan Stanley Inc. (MS), which is
    among the largest investors in commodities, is the latest bank to come under
    pressure in the buckling credit market. The oil market has watched for signs
    that trouble at the major banks will bleed over into the wider economy,
    potentially causing a significant drop in oil demand.
    “Issues in the financial market are still weighing,” said Tom Bentz, a broker
    and analyst with BNP Paribas, adding that “the market’s been pulled in 10
    different directions.”
    A paucity of investors in the market could also have contributed to this
    week’s wild price swings, wrote analysts at Barclays Capital.
    Many hedge funds have liquidated their commodities holdings, especially in the
    energy market, in an effort to reduce risk during the latest round of credit
    market turmoil, Barclays wrote.
    “It should come as no surprise that the decline in liquidity has contributed
    to a marked increase in commodity market volatility,” the analysts wrote.
    Front-month October reformulated gasoline blendstock, or RBOB, settled 1.94
    cents, or 0.8%, higher at $2.4824 a gallon. October heating oil settled 4.23
    cents, or 1.5%, lower at $2.7824 a gallon.

    -By Brian Baskin, Dow Jones Newswires

    Dow Jones Newswires
    09-18-08 1513ET

  111. 111
    rlogan1301 Says:

    it has to run out of steam going that fast, right?

  112. 112
    Eagle Says:

    VTZ, time for the short term put trade on gold? The age of free money is coming back in style if only for a brief time, which I would think drives gold down ST. Looking for that down move to go long at the bottom. Energy the same.

  113. 113
    zman Says:

    rlogan – I could see them taking out 11,000, about 60 points higher. Don’t recall Nicky’s latest resistance levels on the S&P.

  114. 114
    Sambone Says:

    Wow, 530 point swing in the Dow today.

  115. 115
    rlogan1301 Says:

    thks zman..new to the board but love the discussion

  116. 116
    VTZ Says:

    gold 860… wow.

    Personally I think Gold is going to 1200 by the end of 2009 or something and higher longterm… I am terrible at timing though so I will make no predictions because it all depends on the fed.

    That being said I think the fed is stuck and will have to make funds available supporting gold… not to mention that if I was china or india I would be buying gold and not holding US dollars.

    Short term, Nicky and tater could be right with gold to the 650 range but that would have to be some fabulous speeches by the FED and a lot of talking the USD up.

  117. 117
    zman Says:

    yep 110 makes good sense re liquidity and volatility. Congress would do well to remember that that will apply to the crude market if they legislate a thin slate of players. Big events will drive huge swings in price.

  118. 118
    zman Says:

    And there was 11,000, lol.

  119. 119
    tater Says:

    As for the speed back up on say the S&P, it was so far down that it could get to 1240 before it’s too fast (look to chart on the Jan ’08 bounce)

    Gold, and the dollar. This is outright manipulation. All bets are off as far as I am concerned.

    Oil, last real currency. Give the liquidity and they’ll take it back to $150.

  120. 120
    VTZ Says:

    tater – manipulation how? Keeping/Talking the USD up? As in gold should be higher?

  121. 121
    Eagle Says:

    VTZ With you on the long term. Trying to get the timing right is a huge challenge, but I think we will have a better entry point coming up.

  122. 122
    VTZ Says:

    I hope so Eagle but I’m going to be playing the equities.

  123. 123
    tater Says:

    My understanding of gold (without starting the conspiracy talk) is that the market is VERY thin, in that it only takes a relatively small amount of money to push it.
    The US dollar price is controlled by the “illuminati” of central banks. By definition, it really is a conspiracy (by design). It is meant to be manipulated, and here we are.
    Longer term (one year) the dollar is toast again.

  124. 124
    Sambone Says:

    595 point swing on the Dow

  125. 125
    VTZ Says:

    gold 836…

  126. 126
    zman Says:

    Something very odd in the way HK is trading. Looks like it is being deliberately held down. Supply coming out at just under even on the day. Nasdaq has been offering stock a dime below the current bid.

  127. 127
    zman Says:

    Actually seeing that on several NYSE stocks today.

  128. 128
    VTZ Says:

    Z- what about NFX? It’s been fairly strong the last little while.

  129. 129
    Eagle Says:

    Moving out of gold and into the surge in the market. They coming pouring back into the market to catch the ride up.

  130. 130
    regale Says:

    Re #87
    Am joining late in the day, but 87 sort of reminds me of the famous Churchill quote, when accused by a dignitary’s wife of being drunk, replied, “Yes, Madam, but in the morning I shall be sober, and you will still be ugly.” Only as applied to Pelosi, it should read: Madam, you are an idiot.
    The pols. have ruined my hometown of San Francisco. BTW, I’m a big Ron Paul fan.

  131. 131
    zman Says:

    V – you know I like them. They should have well news in a few weeks although I’d wait for the 3Q call if I were them as good news has been bad for the stock of late. It’s below where they announced a 3rd production boost, and below their first Bakken success. I hold the common and have written my calls there for the month. Not adding anything except for quick trades right now.

  132. 132
    zman Says:

    Fair warning, HK green, I may tap out if I can get 75 for mine, otherwise I hold onto the HKIX through the open tomorrow.

  133. 133
    Dman Says:

    Agree action in HK looks odd in last hour. Some reasonable volume there too FWIW

  134. 134
    zman Says:

    Dman – just saw two block trades

    15:40 for 289500 shares
    15:50 for 137000 shares

    That’s a fund liquidating their position. That’s ok with me, pressure probably comes off with the close. If not they knew something the market did not.

  135. 135
    zman Says:

    See HK off a $1 in just a few minutes from flat. That guy just wants out, does not care price. Specialist probably just stepping out of the way.

  136. 136
    zman Says:

    Columbia River (Oregon) LNG terminal approved.

  137. 137
    BossmanG Says:

    Z, how are you viewing block trades?

  138. 138
    BossmanG Says:

    Maybe I can’t see that with my brokerage, thinkorswim?

  139. 139
    zman Says:

    I get them on Thomson news scroll.

  140. 140
    zman Says:

    A portion of those HK trades just posted out of sequence/late

    48,700 shares at 20.97 and 317,500 at 20.97.

  141. 141
    Popeye Says:

    I just saw:
    16:06 20.97 48700 NY
    16:06 20.97 317500 NY

  142. 142
    Popeye Says:

    Always late

  143. 143
    crysball Says:

    New MMS assessment on GOM Platforms

  144. 144
    zman Says:

    Thanks Crys, much obliged.

    Popeye. Looks like the rest of that fund’s sell order is flowing through now. Hopefully he’s sold all he needed to …by the end of day action I’d say he did but ya never can tell.

  145. 145
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