Monday Morning And The Fed’s Hits Keep Coming

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Well what now? Goldman Sachs and Morgan Stanley became bank holding companies over the weekend joining the vaunted ranks of (C), (JPM), and (BAC) meaning they will have access to the Fed window be able to further dot the landscape with commercial banks. Meanwhile, the rescue package now looks to be topping $700 billion and is likely to grow as congress seeks to tack on a stimulus package. So say we add a trillion dollars to the national debt (bringing it to $10+ T), it doesn't seem likely the U.S. Dollar will be able to ride that out without blinking first. Here's a good article on that.

In energy land, there's not a lot to talk about again; no mergers, no big wells, no new play of the week. I spoke with one E&P executive last week who said in the wake of the recent sell off in the equities, that everyone is just in "eyes focused on the job, not the stocks as the stocks  don't make sense right now".  The dearth of press releases would seem to indicate that his peers agree with him and that everyone is saving their newsworthy firepower for the 3Q press releases.

In Today's Post:

  1. Holdings Watch
  2. Commodities Watch
  3. Wrap Table
  4. Stuff We Care About Today
  5. Odds & Ends


Holdings Watch: The holdings Wiki and Performance tabs have been updated.

Commodities Watch:

Crude oil rose last week as the Fed, the Treasurery, the SEC, and the U.S. Congress conspired to save the world from the bankers by saving the bankers.
Good for the market, bad for future generations of tax payers and ensuring that a repeat of recent events will recur. Crude ended the week up 3% to close at $104.55. This morning crude is trading up again at just over $107 on the October contract (it expires today) while Novembers is trading up $3.50 at just over $106.

  • OPEC Watch:  Russia sending a high level delegation to the December 17. I would not expect them to join which is the obvious threat as the nobody tells the Russians to do but the Russians. Too much history there to side up with anyone not purely alingned with Russian interests.


  • Nigeria Watch: Cease Fire! MEND has declared a suspension of "Hurricane Barbarossa" for an indefinite period follow the shuttering of at least another 150,000 bopd of Nigerian crude production. MEND said it will reopen the campaign if attacked. In other MEND news, former group leader Henry Okah has kidney trouble and his lawyer says, needs medical treatment in South Africa. This could prove to be a bone of contention for Nigerian/MEND relations since the government has him on trial for terrorism and may not want to send him out of the country.

Natural gas also rose 2% last week to close at $7.53 despite a bigger than expected build in storage. Gas has been pummeled off its summer highs (now down 43% in 10 weeks) and traders are searching for reasons to bottom the commodity:

  • U.S. natural gas rig count is going to be increasingly important as we move towards the cold season. Last week gas rigs took a dip (see wrap table) and traders and analysts will applaud more of the same in coming weeks.
  • Weather Watch: Cooling degree days fell to 33 last week which is in line with seasonal norms and finally also with year ago levels meaning we should see a little catch up relative to year injections to storage in this Thursday's report.
  • MMS Watch: 89% of oil and 75% of natural gas production remain shut in from the Federal waters of the Gulf of Mexico.

Tropics Watch: Kyle may form early this week near Puerto Rico but looks only to be a threat to the east coast.

Stocks / Stuff We Care About Today

CHK Maintains Common Dividend. Still small but hey, its an E&P company and the yield is better than many of its few peers who pay a dividend. Only worth noting because they did not reduce it and I would not have expected them to given their hedges but the way the stock's been acting a cut almost seemed built in.

Odds & Ends

Analyst Watch: (CNQ) cut to neutral by Credit Suisse.

Article Worth Reading Watch: In the WSJOnline: "Eyes On The Road; Fueling Up With Natural Gas". Good article on compress natural gas cars and infrastructure. 1,100 fueling sites in the U.S. is a lot more than I thought. Also goes through the payout on these vehicles including the federal tax credit regime for buying them and at home processing stations.

Housekeeping Watch: $10k Portfolio. No, I have not forgotten about this but and will be implementing soon.






173 Responses to “Monday Morning And The Fed’s Hits Keep Coming”

  1. 1
    Sambone Says:

    By Nick Heath

    LONDON (Dow Jones)– Crude oil futures climbed more than $4 in European trade
    Monday, with confidence boosted by a proposed $700-billion U.S. government
    rescue plan to help alleviate the credit crunch.
    Concerns over supply disruptions in Nigeria and the U.S. Gulf of Mexico also
    helped push prices higher, as did a drop in the dollar, while traders said that
    prices received a boost from technical trade after Nymex light, sweet crude
    settled above $100 a barrel Friday.
    “It appears that sentiment has turned short-term bullish,” a London-based oil
    trader said. “That would be a result of the rescue package and confidence
    coming back into the market.”
    At 1126 GMT, the front-month November Brent contract on London’s ICE futures
    exchange was up $3.29 at $102.90 a barrel, having climbed more than $4 to
    $104.10 earlier.
    The front-month October light, sweet, crude contract on the New York
    Mercantile Exchange was trading $2.35 higher at $106.90 a barrel. The October
    contract expires later Monday. The November contract was up $3.18 at $105.93 a
    The ICE’s gasoil contract for October delivery was up $48 at $954.50 a metric
    ton, while Nymex gasoline for October delivery was up 504 points at 265.01
    cents a gallon.
    While the U.S. government plan to cordon off the debt and toxic investments at
    the heart of the global credit crunch eased jitters Monday, market participants
    retained some caution in assuming a more supportive outlook for global oil
    “The longer term impact of recent events on the U.S. and world economy may not
    even start to be felt for sometime,” said Michael Davies, head of research at
    Sucden Research in London. “We expect significant downward revisions of world
    oil demand for 2009 in the coming months as a result.”
    Second thoughts about the bailout plan weighed on the U.S. dollar Monday.
    However, crude maintained its reverse correlation with movements in the
    greenback, and was firmer on the currency’s weakness.
    Supply disruptions were overlooked at times last week as investors liquidated
    assets amid increasing turmoil in the financial markets. However, with the U.S
    government package helping soothe market risk fears, traders were closely
    scrutisining latest supply developments Monday.
    In its latest update Friday, the U.S. Minerals Management Service estimated
    that approximately 89% of the 1.3 million barrels of U.S. Gulf of Mexico
    production remains shut in, in the wake of Hurricanes Ike and Gustav. The U.S
    Department of Energy reported Sunday that approximately 2.3 million barrels a
    day of refining capacity is currently off line.
    “We are seeing supply issues dog the markets,” said Edward Meir, analyst at MF
    Global in New York. Energy Information Administration numbers due later this
    week would likely reveal further draws in U.S inventories he suggested,
    providing further support for prices.
    Helping cap crude’s climb Monday, Nigerian militants declared a ceasefire in
    their unilaterally-declared “oil war” Sunday. The Movement for the Emancipation
    of the Niger Delta targeted a series of pipelines during a week-long spate of
    violence in what it says was a response to a Nigerian army attack on its
    positions. Oil major Royal Dutch Shell said Saturday it won’t be able to meet
    more of its oil export obligations in Nigeria following several attacks ion its
    facilities over the past week. Nigerian oil officials said Shell’s production
    losses alone last week were about 150,000 barrels a day.
    “We suspect this announcement, assuming MEND makes good on it, will take some
    wind out of the bulls’ sails,” said Stephen Schork, editor of The Schork
    While Gulf of Mexico producers and refiners continue to bring their facilities
    back on-line in the wake of the recent hurricane closures, traders were keeping
    an eye on weather charts again Monday.
    According to the U.S. National Hurricane Center, a broad low pressure area
    located near western Puerto Rico could become a tropical depression later
    Monday. However current forecasting models suggest it should not pose a threat
    to the Gulf of Mexico.
    -By Nick Heath; Dow Jones Newswires (Spencer Swartz contributed to this item)

    Dow Jones Newswires
    09-22-08 0753ET

  2. 2
    Sambone Says:

    Sept 22 (Reuters) – Oil companies worked to revive U.S. oil and refining
    production in the wake of Hurricane Ike, which hit the Houston energy hub Sept.
    13 in the biggest hit to U.S. energy supply since 2005.
    The following outlines the impact of Ike and the leftover effects of
    Hurricane Gustav on the energy sector:
    *7 refineries, 9 pct of US refining capacity shut
    *19 refineries, 26.02 pct capacity, restarting or at reduced rates
    *89.2 pct of US Gulf oil production shut
    *75.4 pct of US Gulf natural gas production shut
    *27.67 mln barrels of crude oil cut
    *137.43 bln cubic feet of natural gas cut
    *48.07 mln barrels of refining cut (counting only plants completely shut)
    *Exxon says Beaumont, Tex refinery has water damage
    *Ike destroyed 49 GOM production platforms – MMS
    *Anadarko says repairing several Gulf platforms
    *Shell fixing Mars, Ursa, W. Delta 143, Cognac
    *Shell’s Eugene Island 397 gas platform toppled
    *Devon DVN: Platforms damaged, some output restored nN17339347
    *Targa Resources: Some gas plants off four, five weeks
    ***********************CRUDE OIL, NATURAL GAS********************
    *89.2 pct U.S. Gulf’s 1.3 million barrels per day crude output shut
    Friday, down from 93 Thursday, MMS says.
    *75.4 pct of Gulf’s 7.4 billion cubic feet per day natural gas output
    shut Friday, from 77.6 pct Thursday.
    *7 of 16 refineries still shut, 9 pct of US capacity
    *19 refineries, 26.02 pct capacity, restarting or at reduced rates
    REFINERIES SHUT: (Texas, Ike-caused unless otherwise noted):
    *Exxon Mobil 349,000 bpd Beaumont WATER DAMAGE
    *Lyondell 270,600 bpd Houston NEARING RESTART nN18505377
    *Marathon Texas City MRO 76,000 POWER RESTORED
    *Total 232,000 bpd Port Arthur nN13402189
    *Valero 325,000 bpd Port Arthur
    *Valero 245,000 bpd Texas City NEARING RESTART
    *Valero 130,000 bpd Houston NEARING RESTART nN17529648
    RESTARTING OR AT REDUCED RATE (Texas unless otherwise noted)
    *Alon 80,000 bpd Krotz Springs, Louisiana REDUCED
    *BP 467,700 Texas City RESTARTED nN20364786
    *Calcasieu 78,000 bpd Lak Charles, Louisiana REDUCED
    *Citgo 300,000 bpd Corpus Christi refinery RESTARTED (DOE)
    *Citgo 430,000 bpd Lake Charles, Louisiana RESTARTED
    *ConocoPhillips COP 300,000 bpd Sweeny IN RESTART
    *Exxon Mobil 503,000 bpd Baton Rouge, La IN RESTART
    *Exxon Mobil Baytown 567,000 IN RESTART nN11483411
    *ConocoPhillips 280,000 bpd Lake Charles IN RESTART
    *ConocoPhillips 247,000 bpd Alliance IN RESTART
    *Motiva 285,000 bpd Port Arthur RESTARTED
    *Motiva 235,000 bpd Convent, La IN RESTART
    *Motiva 220,000 bpd Norco, La NEAR NORMAL
    *Pasadena Refining 100,000 bpd RESTARTED
    *Placid 56,000 bpd Port Allen RESTARTED nN05310572
    *Shell-Pemex 332,000 bpd Deer Park IN RESTART
    *Valero 100,000 bpd Three Rivers REDUCED
    *Valero 90,000 bpd Ardmore, Oklahoma REDUCED
    *Valero 195,000 bpd Memphis, Tennessee REDUCED
    *On Sept 15, 24.6 pct U.S. capacity shut down due Gustav or Ike
    ********************ELECTRIC POWER IMPACT*************************
    *U.S. utilities continue to restore power after Ike
    **********************PORTS, WATERWAYS****************************
    *USCG eases Ike port limits in face of ship backlog
    *154 Ike-related oil spills, none major – USCG
    *********************PIPELINES, GAS PLANTS************************
    *Henry Hub lifts force majeure
    *Destin pipeline: Levels OK for normal ops at gas plant
    *Enbridge: Ike caused no big pipeline damage
    *7,700-mile Gulf South pipeline lifts shipper limits
    *Shell: Capline at scheduled rates
    *TEPPCO pipelines at 70 percent
    *Enterprise Products EPD restarts major pipelines
    *Explorer shipping refined products
    *Magellan some damage, partially back
    *Seaway crude line restarts nN14445912
    *9 U.S. nat gas plants shut, from 15, of 39 in Ike path
    *10 U.S. gas plants capable of restart when power back
    *19 U.S. nat gas plants at normal or reduced rates
    *SPR Bryan Mound, Big Hill, Tex; Hackberry, La,
    *Shell Houston-to-Houma crude line
    *Centennial Pipeline products line
    *Longhorn Pipeline products line
    *Portions of Marathon Pipeline system onshore, offshore Gulf Coast
    *Enbridge EEP: Four pipelines force majeure
    *Plantation pipeline at reduced rates
    *Colonial restarts distillate line after Ike, mogas down nN14329996
    (Reporting by Bruce Nichols, Erwin Seba; Editing by Richard Valdmanis)

    Mon Sep 22 12:28:51 2008 -GMT

  3. 3
    Sambone Says:

    Wow, just read where LEH (are they bankrupt?) has a 2.5 billion pool for bonus’s for 10,000 which is off limits to creditors. Wow!

  4. 4
    Sambone Says:


  5. 5
    zman Says:

    Sam – your tax dollars hard at work for someone who apparently wasn’t, lol. Just in time to buy their kids that GI Joe with the Kung Fu Grip!

  6. 6
    Nicky Says:

    Morning all. Great, so the Fed come to the rescue and their actions are seen as highly inflationary so we are back to looking at higher commodity prices again. The consumer just keeps on getting screwed which ever way you look at it. That said the crooks get their bonus’s and some so all is right with the world.

    Broader market – resistance is 1255, and then 1265 – 75. I think we may see a week of fairly wide consolidation (did bounce off the 1220 -30 area I had cited overnight) but higher highs are expected into the October 1st timeframe plus or minus a day. Not out of the question that the SPX makes a fairly big retrace back to 1185.

  7. 7
    zman Says:

    Thanks for the levels Nicky. On the bonuses it seems Barclays wants to keep the LEH executives so there you have it, no bonus, no deal. Maybe this is part of what led the Fed to let LEH file instead of bailing them out too.

    Energy opening very green, very light pre open volumes. No news out there except for storm related impact stories.

  8. 8
    zman Says:

    Dollar starting to take a hit.


  9. 9
    Nicky Says:

    Energy looks like a totally $ related story Z don’t you think.

    On the subject of the $ it is still not at my target area which was around 76 – possibly 75.

  10. 10
    zman Says:

    Nicky – I think its probably 2 parts dollar, 1 part hope of a better economy/demand recovery.

  11. 11
    Sambone Says:

    By Gregory Meyer

    NEW YORK (Dow Jones)–Crude oil futures rose to a two-week high Monday, fueled
    by Washington’s financial rescue plan, crimped supply and fresh evidence of
    growing world demand.
    Light, sweet crude for October delivery, which expires Monday, was recently up
    $2.32, or 2.2%, at $106.87 a barrel on the New York Mercantile Exchange, after
    earlier hitting $107.80, the highest price since Sept. 8. November Nymex crude
    was at $105.34, up $2.59.
    November Brent crude on the ICE Futures exchange rose $2.90 to $102.51 a
    Crude rose as traders saw the U.S. government’s $700 billion plan to buy
    troubled mortgage assets supporting demand. The dollar also weakened, creating
    an incentive for investors to shift money into commodities as a currency hedge.
    The euro was recently at $1.4624, from $1.4480 late Friday.
    “There’s just a general feeling that with these bailouts the economic outlook
    is a little more optimistic than it was,” said Tom Bentz, a broker and analyst
    at BNP Paribas Commodity Derivatives in New York. “You’re seeing some buying
    coming back.”
    A prominent militant group in southern Nigeria declared a ceasefire Sunday
    following a weeklong self-declared “oil war” on oil industry targets there. The
    Movement for the Emancipation of the Niger Delta group claimed a series of
    attacks targeting Royal Dutch Shell PLC assets, and Shell has twice been forced
    to invoke a clause protects it from from meeting obligations to ship some
    output from the country.
    A MEND ceasefire “has often proved a false dawn in the past,” analysts at
    Barclays Capital said in a note.
    The U.S. Gulf Coast continues to feel repercussions from hurricanes Gustav and
    Ike earlier this month, with the latest U.S. government report showing about
    89.2% of offshore oil output off line and refineries slow to restart. “The
    storm factor should subside further in importance,” as these facilities reenter
    service, said Jim Ritterbusch, president of the Ritterbusch and Associates
    energy trading advisory firm.
    China’s customs administration said the country imported more crude and oil
    products last month. Crude imports were up 11.5% in August from the year
    before, while diesel and gasoline imports soared.
    Front-month October reformulated gasoline blendstock, or RBOB, increased 3.15
    cents, or 1.2% to $2.6312 a gallon. October heating oil rose 6.67 cents, or
    2.3%, to $2.9645 a gallon.

    -By Gregory Meyer, Dow Jones Newswires; 201-938-4377

    Dow Jones Newswires
    09-22-08 0935ET

  12. 12
    Nicky Says:

    Lehman CEO Fuld Cashes Out 2.87 Million Shares

    … For $639,082.

    Dick Fuld, CEO and Chairman of the Board of the now-defunct Lehman Brothers (LEH), cashed out most of his remaining shares in the company at about 20 cents a share on Wednesday, Sept. 17. Fuld pocketed $639K in the sale. A year ago, those shares were worth $168.7 million.

    Fuld still owns 503,744 shares in Lehman, which were last trading at … Zero. The stock stopped trading on Sept. 17. Perhaps Fuld is going to sell his remaining stock certificates on eBay. Remember when Enron went under? Those stock certificates were big sellers! Everybody framed them for their walls to remember the day that a company went belly-up for creating and trading esoteric instruments. Sound familiar?

    Maybe Fuld will donate the proceeds from the sale of his Lehman Brothers stock (and the nearly $490 million that he’s “earned” over the past 14 years by selling options and grants) to the 25,000 employees left jobless due to Lehman’s bankruptcy.

    Even better, perhaps Fuld will write a check to the Treasury payable to U.S. taxpayers. After all, his company was instrumental in creating, trading, and profiting from the derivatives crisis that is now costing U.S. taxpayers hundreds of billions to mop up.

    More likely, he’s deposited it into his legal-defense fund, which he may need to tap sooner rather than later.

    And the Winner Is …

    By most accounts, hedge fund billionaire David Einhorn seems to be the biggest winner in the Lehman Brothers implosion. Einhorn is president and founder of $6 billion hedge fund Greenlight Capital.

    Einhorn has been shorting Lehman Brothers since at least November 2007 when the stock was trading around $60 per share and routinely challenged Lehman’s management to come clean about the true liability of its mortgage-related holdings.

    In a June 2008 interview with CNBC following Lehman Brothers’ announcement that it had raised $6 billion in capital after reporting a $2.8 billion loss for the quarter, Einhorn pointed out, “[Lehman Brothers has] raised billions of dollars they said they didn’t need to replace losses they said they didn’t have.”

    Einhorn’s warnings proved to be correct. And his firm reportedly walked away with $3.1 billion from its Lehman shorts, according to a report in London’s Evening Standard. That’s about double what Barclays recently offered for the most valuable parts of Lehman.

    Einhorn made some interesting insider trading moves this week as well. After adding 2.4 million shares of oil exploration and services company Helix Energy Solutions Group (HLX) worth $67 million from Sept. 10 – 15, Einhorn abruptly sold 28% of his holdings, or 3.5 million shares, of HLX worth about $94.7 million on Sept. 17.

    It’s a curious move, considering Greenlight had raised its stake to 13.8% of the company over the past year. But HLX hit an intraday 52-week low on Sept. 16. So perhaps Einhorn has decided to pare some of his losses in HLX.

  13. 13
    zman Says:

    Nicky – its a crazy world with some crazy volatility. Lots of games being played.

    Oil now up $3.50, NG down 3 cents. Stocks mostly red with the broad market.

  14. 14
    Bleemus Says:

    Regarding CDD. It has been colder here (SC)than I can remember for Sept for the last few days.

  15. 15
    zman Says:

    HK working, DUG trade working. Not much else doing much of anything.

    CLR will be speaking at the Herold Pacesetter’s conference tomorrow. As an unhedged oil play that stock is getting some swing here.

  16. 16
    antrimshale74 Says:

    Gold and silver moving hard again today.

  17. 17
    zman Says:

    Bleemus – yep, here too. Its supposed to warm up a bit this week according to accuweather although we are at that time when people simply unplug and open windows if possible.

  18. 18
    zman Says:

    That article in the WSJ online on CNG is worth a read.

    ZTRADE: CLR $45 October calls (CLRJI) for average price of $4.15.

  19. 19
    Nicky Says:

    Z – what does nat gas historically do at this time of year ie end of summer but before winter?

  20. 20
    Sambone Says:

    New one over Puerto Rico (93L). Should not affect GOM.

  21. 21
    zman Says:

    Nicky – in terms of price? It generally rises slowly in the second shoulder season (mid Sept to end of October).

  22. 22
    Nicky Says:

    Looking at euro chart – looks to be playing out as an ending diagonal so may get to 146.70 and then pullback to 144.00 area.
    If so indicates gold should soon see a pullback and possibly energy too.

  23. 23
    Nicky Says:

    Thanks Z – so in anticipation of winter then.

  24. 24
    zman Says:

    Not arguing with the charts but seems like a lot has changed for the greenback in the last week. Having trouble understanding how it fared so well last week.

    Nicky – yes, re winter expectation. Its generally a pretty modest “rally”

  25. 25
    Nicky Says:

    Well….$ I don’t believe has put in its highs yet. I am still looking for between 90 and 94 after this pullback.

  26. 26
    zman Says:

    Nicky – re 25. That’s a heck of a rally from here. Is that purely TA opinion?

  27. 27
    zman Says:

    By the way, would someone take a look at the CLR? Nicky or Tater or any of the chart gurus here. It crossed back up through its 20 and 200 day simple ma’s today.

  28. 28
    md Says:

    which section is the WSJ article in

  29. 29
    zman Says:

    XOI going positive now; OIH within a hair.

    BQI on the tape with a small private placement.

    VTZ – I’m planning on getting your piece out the door soon. Any updates needed?

  30. 30
    zman Says:

    md – its in the WSJonline. I think if you search of for the title it will come up, will see if I can find and will post link.

  31. 31
    Nicky Says:

    Yes Z purely TA. If so energy will take another leg to the downside after this rally has played out – btw this rally likely playing out as some sort of zig zag, so we see a pullback from this area and then another leg up.

  32. 32
    Fiveanddimer Says:

    Your tax dollars at work: US recommissioning the Fourth Fleet to patrol South American waters.


    How do we have the money and manpower to do this? Smacks of more neocon nonsense? Has anyone seen this in the MSM?

  33. 33
    zman Says:

    here ya go:


    Discusses the chicken and egg thing with the cars and the stations well. I had looked at the number of stations and had not found nearly 1,100 in the US. Could be a faster rollout than expected if people will start selling the cars. $1.90/gallon equivalent price with a Honda that gets 36 mph equivalent on the highway. Not bad.

  34. 34
    Bleemus Says:

    Z, Agree. I shut both AC heat pump zones off and opened windows a few days ago. Loving it.

  35. 35
    zman Says:

    Saw that Five…Brazil is freaked out about it.

  36. 36
    zman Says:

    Bleemus – yeah, me too. You realize of course that we are therefore part of the problem, lol.

  37. 37
    Dman Says:

    Hi Z,

    do you have a sense of the likelihood of our favourite E&Ps ambushing us with capital-raising anytime soon?

    BTW – MEND ceasefire = hilarious. Last one lasted about 10 days…

  38. 38
    zman Says:

    Bleemus – don’t get me wrong. I’d like to be off the grid all year long. Bad enough to do a lot of research into it and alt energy.

    Stories out saying people are waffling back into gold on safe haven buying.

    Credit Suisse whacking price targets for Husky, Imperial, TLM, PCA

  39. 39
    Bleemus Says:

    So true. Too funny!

  40. 40
    zman Says:

    Dman – If anything they will be cutting capex soon or promoting 2009 budgets that are closer to CF. Would not be popular at all to raise capital for a capex boost now. Don’t think ambush but gauntlet like the Eastwood movie. Street would absolutely mark your stock to sell ratings across the board.

  41. 41
    md Says:

    From economical point of view I am wary of Pickens and Aubrey’s plan. It’s been discussed here before so I won’t rehash it.

  42. 42
    Dman Says:

    #32 Does seem like a strange time for it …. but if Brazil is freaking out about it, how about the V-man himself, Mr Chavez? I suppose he can always make nice and offer to refuel the fleet with… er… Orinoco sludge…

  43. 43
    zman Says:

    NG hugging $7.50, down 2 cents. No news, no weather, not paying any attention to oil. I think that’s good. We don’t need a spike up in gas that no one will believe in to boost the stocks. At $8.25 gas on the 12 month Strip most producers are going to be fairly happy, the lower cost ones especially (think onshore, shale, you know the ones) vs the offshore guys who will have a bit of a tougher time.

  44. 44
    md Says:

    Back to Ike and GUS outages.
    Why isn’t the reduction in domestic supply not more bullish for NG and refineries. Is this action typical of prior outages of this size.

  45. 45
    zman Says:

    Chavez looking forward to regime change in the U.S. but I bet he is squawking about the 4th fleet too, just have not read that yet. Brazil is very paranoid about foreign powers coming and taking their relatively new found oil resources off the coast. This seems way off base to me.

    Solars ran hard in the rally but the charts look a little broken now. Could be thinking that govt. subsidized energy projects may get less $ as there is less $ to go around.

  46. 46
    md Says:

    What happens with the debt that banks sold to funds at heavy discounts. Is the Fed buying those back at full value.

  47. 47
    zman Says:

    md – It’s not seen as having a lasting effect. The permanent or long delay production is pretty small. Typically, the damage tally on matters long term if it is sizable.

    Don’t know the answer to your last re debt. Anyone?

  48. 48
    zman Says:

    FSLR down 5%, TSL down 12%. Solars may just be marking the market but these are pretty painful pullbacks. If you look at the always expensive names like FSLR, they are now trading at a little over 20x 2010 earnings and growing at 30 to 50% EPS per year.

  49. 49
    zman Says:

    Again, slow news periods. Suggestions for company briefs welcome for this week’s post.

  50. 50
    Sambone Says:

    By Steve Gelsi

    Shares of petroleum producer and refiners rose along with the price of crude,
    but natural-gas shares dipped slightly in mixed trading on Monday.
    The Amex Oil Index rose 0.3% to 1269, led by a 2.3% jump from Royal Dutch
    Shell (RDSA) and a rise of 2.7% by Hess Corp. (HES).
    Meanwhile, crude-oil prices advanced $2.49 to $105.20 on hopes for a historic
    bailout by U.S. Congress of the country’s ailing financial system.
    The Amex Natural Gas Index fell 1.2% to 568. The Philadelphia Oil Service
    Index subtracted 0.5% to 271.
    Among energy stocks in the spotlight, Kinder Morgan Energy Partners LP (KMP)
    filed late Friday to sell up to $5 billion in common units and debt securities.
    Shares rose 28 cents to $53.85.
    Constellation Energy Group Inc.’s (CEG) board of directors late Friday
    approved a $4.7 billion cash bid from MidAmerican Energy Holdings, which is
    owned by Warren Buffett’s Berkshire Hathaway Inc. (BRKA) holding company.
    Faced with a cash crunch and the need for a quick deal, Constellation rebuffed
    at least one other offer from a consortium led by Electricite de France and
    Kohlberg Kravis Roberts & Co., according to a report by The Wall Street Journal
    on Monday. The deal includes a $175 million termination fee, according to a
    filing with the Securities and Exchange Commission.
    Constellation Energy Group fell 10 cents to $25.66.
    Tudor Pickering Holt analysts said they expect one-time costs of about $700
    million in Halliburton Co.’s (HAL) third-quarter earnings update tied to
    hurricanes Ike and Gustav, as well as debt retirement.
    Excluding these issues, analysts said they expect Halliburton’s earnings to
    top their latest target of 77 cents a share, “due to strength in its U.S. land
    based activity and successfully passing on fuel surcharges in the pressure
    pumping business.” Halliburton plans to report earnings on Oct. 20.
    Shares of Halliburton rose 4 cents to $37.66.
    -By Steve Gelsi

    Dow Jones Newswires
    09-22-08 1115ET

  51. 51
    zman Says:

    The Treasury’s latest draft, sent to Congress on Sunday, could let overseas firms participate. It also leaves the door open for hedge funds to sell distressed assets to the government.

    That last bit is pretty scary. Does anyone see a list of assets or asset classes that could be sold to the government? No wonder the market is down 200. I suppose we get a rally when they pass the bill.

    Congress also seeking to limit executive pay. May be a little hang up there as the parties are diametrically opposed on that one.

  52. 52
    Sambone Says:

    Heck why not let the taxpayer take on the “Credit swaps” also.

  53. 53
    Sambone Says:

    Hank (Bazooka) Paulson should be named “Fund manager of the year”.

  54. 54
    Dman Says:

    Z – #50 how is it that the hurricanes would cost HAL $700m?

  55. 55
    zman Says:

    Lost work mostly. I thought the number looked high myself.

  56. 56
    zman Says:

    TDW gets the opposite effect, moving men back and forth to the platforms.

  57. 57
    cargocult Says:

    Sam, that is exactly right about Paulson. He is now managing the largest hedge fund in the world. What is his record like?

  58. 58
    zman Says:

    Senate democrats counter bailout proposal.


    Also, the Senates agenda this week. Note that they don’t work on Monday’s. Also, there is an item coming up on the high price of diesel and what to do about it. I think the answer is stop making it so hard to add refining capacity or legislate increases in mileage for trucks. Better yet, do both.

  59. 59
    zman Says:

    Cargo – He did well at Goldman. Bet you he heads back there in January. And now its a commercial bank. Think of how the name cache will be with the citizenry…I bank at Goldman Sachs. Wonder if this will be hard on the regional banks as deposits flow to GS.

    Energy group looks like it wants to green up if the market can get some legs.

  60. 60
    Wyoming Says:

    RE 58

    Who will invest $B when there are so many people gunning at the refineries? I would be very hard pressed to buy the stock of a company who will. Plus the large cost over-runs.

  61. 61
    Fiveanddimer Says:

    Re #53: more like a rogue trader than Fund Manager of the Year.

  62. 62
    zman Says:

    Wyoming – my refining contacts tell me there is 0 interest in adding capacity or in buying assets via merger even at the current depressed bargain basement prices in the current political environment.

  63. 63
    Nicky Says:

    I saw Friday that oil had had its biggest rally in history into Friday – strikes me as absolutely stupid they are running it up on the grounds of the economic worries being over. If that was the case then why is the $ lower. As usual the fundamental arguments do not stack up and everyone is making them up as they go along.

  64. 64
    Dman Says:

    Z – I notice CLR has the highest $/Mcfe in your table. Can you briefly ‘splain why it deserves that?

  65. 65
    zman Says:

    Sane – if you are out there, saw an interesting piece on micro scale hydro power in the latest popular mechanics. Pretty interesting what people are now thinking about in terms of “in line” generators (ones that require no dam) and even in pipe at the water treatment and water distribution utilities.

  66. 66
    Wyoming Says:

    Thanks, nice to know that my messed up world still has 1 thought working right.

  67. 67
    antrimshale74 Says:

    Obama mentioned yesterday that he wanted Paulson to be part of a transition, perhaps staying a bit longer, though not as Treasury Secretary. McCain would probably do the same, though he might actually keep Paulson on. Not sure if I can see Paulson returning to Goldman, at least not early next year.

  68. 68
    zman Says:

    Nicky – that rally did come on the heals of the biggest decline in oil prices in history and a rally in the dollar. Tit for tat.

  69. 69
    reefguy Says:

    waha- $5.01/HH-$7.82 ig differential

  70. 70
    zman Says:

    Dman – sure, which table are you referring to.

    Antrim – I hear ya but do you think he wants Ben’s job? Ha. There’s returning to GS and there’s returning to GS via consulting with a boatload of stock. I’d bet on the latter, but you’re right, probably takes a vacation and then goes at it.

  71. 71
    Fiveanddimer Says:

    I thought Paulson was leaving the administration right after the election. Did I miss something?

  72. 72
    md Says:

    While we’re at it Pickens would make a swell Energy Sect’y.

  73. 73
    zman Says:

    Reef – yep, that’s huge. Lots of processing capacity still shut in. Differentials look more like Rockies than Texas.

    If anybody wants a map of the natural gas market centers to see where we are talking about here ya go:


  74. 74
    Dman Says:

    Z – the one discussed under “Back of the Envelope  E&P Fun”


  75. 75
    zman Says:

    Nicky – but to add to my #68, I would say that it would be a lot better for oil to trade somewhat sideways in the 95 to 105 range and not just V back up which is unsustainable. We need to see signs that OPEC is really slowing. We also need to let the economy in the U.S. and the rest of the world, especially places that had been growing swiftly, get some sense of stability. Otherwise, the rally is doomed.

  76. 76
    zman Says:

    Ok, gotcha now. Reserves. 1) its a newer company to the public market and they often start high on reserves and settle lower over time as the public money from the IPO and secondaries is used to transition neighboring probable and possible reserves into the proved developed producing category, 2) its pretty oily and oil has commanded a premium as most E&P names are more gassy or balanced in terms of production and reserves mix, 3) it has an above average measure of potential reserves on a massive acreage position in a hot play (the Bakken), and 4) it has an above average growth rate while not having out of control costs.

  77. 77
    zman Says:

    Dman – I just added that table and the sensitivities one to the E&P tab for easier reference. Will be adding cash costs soon and a look at capex vs cash flow in a little bit.

  78. 78
    Sambone Says:

    HOUSTON, Sept 22 ( Reuters) – The October-December spread
    for West Texas Intermediate futures Monday bumped cash
    posted-plus contracts past $6, traders said.
    Posted-plus on the U.S. cash crude market was under $4
    Friday when futures time spreads were narrower.
    With refineries and pipelines coming back after Hurricane
    Ike, and cash trade headed into the roll period after NYMEX
    futures expire today, traders said they expected a few wild
    “I think this will be an active and rather exciting week,”
    one trader said.
    (Reporting by Bruce Nichols; editing by Gene Ramos)

    Mon Sep 22 16:13:51 2008 -GMT

  79. 79
    Sambone Says:

    MEXICO CITY (Dow Jones)–Average Mexican oil production for the first eight
    months of this year slid 9.2% on year to 2.83 million barrels a day, reported
    Petroleos Mexicanos Monday.
    Mexico has repeatedly had to lower its oil production target for 2008 due to a
    faster-than-expected decline at the giant Cantarell offshore oil field.
    Cantarell’s production plummeted 29.2% during the period to 1.1 million barrels
    a day, said Pemex.
    Cantarell’s slide has been only partially offset by Mexico’s second largest
    field, known as Ku-Maloob-Zaap, where output rose 39% to reach an average of
    688,800 barrels a day during the first eight months of the year.
    Mexican crude oil exports also fell considerably to 1.44 million barrels a

    -By Peter Millard, Dow Jones Newswires

    Dow Jones Newswires
    09-22-08 1227ET

  80. 80
    Sambone Says:

    NEW YORK (Dow Jones)–Saudi Arabia is cutting oil exports to some of its
    biggest global refining customers, but not in the U.S., an independent U.S.
    refiner said Monday.
    “There are Saudi cutbacks, but it did not affect us,” a person familiar with
    the refiner’s crude purchasing said. “It affected some of their big global
    Some of these large customers may have refineries in the U.S., but are only
    seeing supplies cut to assets outside the country, the person said.
    Traders with a second independent U.S. refiner and a U.S.-based producer and
    refiner also said that their Saudi crude volumes are unchanged.
    Earlier this year, Saudi Arabia raised production by about half a million
    barrels a day. The Organization of Petroleum Exporting Countries met in
    September and agreed to reduce production to the official quota. Saudi Arabian
    officials said the kingdom, the world’s biggest crude exporter, would only cut
    output if market conditions warranted.
    As oil prices fell to nearly $90 a barrel last week, market participants
    speculated that the Saudis could cut exports to prevent prices from falling
    further. Oil futures recently traded at $109.54 a barrel, up $4.99.
    The U.S. is often the last to feel the impact of a cut in Saudi production as
    refiners rarely purchase the full amount they are allocated each month. The
    unused barrels from the U.S. allocation are sold in the spot market or sent to
    refiners in Europe or Asia. This system gives the Saudis flexibility to “cut”
    exports to the U.S. without punishing customers.
    U.S. demand for Saudi crude was likely even lower this month, as Hurricane
    Gustav and Hurricane Ike forced refineries in Texas and Louisiana to shut down,
    for weeks in some cases. Refineries in those two states accept nearly
    two-thirds of Saudi oil sold to the U.S., according to the U.S. Energy
    Information Administration.

    -By Brian Baskin, Dow Jones Newswires

    (END) Dow Jones Newswires
    09-22-08 1150ET

  81. 81
    zman Says:

    Dman – one last thought. So how’s it useful to have a table like that? In the down times, when crude is falling and people are punked out on the group, the big multiples hurt you. CLR got woodshedded more than most. The table also shows that fat multiple of potential vs current bookings and that tells you that while they are small chances are they won’t always be so. If I had been more clever, I would have paid more attention to the multiple on the left when oil peaked and am now paying more attention to the one on the right in that table.

    Sam – ya know, Cantarell was only supposed to fall 15% this year. That’s trouble.

  82. 82
    Dman Says:

    Thanks Z

    Just looked at the WSJ article. It’s a shame the Phill system costs $5k. But that would fall dramatically if there was a serious number of them being sold & you’d expect to see them bundled with cars.

  83. 83
    Nicky Says:

    Z #68 – add to that following the biggest run up in history for the last 18 months!

  84. 84
    zman Says:

    Agreed – same goes for the cars, price goes down the more you make. Just saw a CHK commercial saying CNG cost about 40% less than gasoline. That’s probably true for gas sold at a utility site (like where the public transports fill up) but your house natural gas costs a lot more as it has come through the distribution system. Would like to see numbers on that.

    E&P catching a wave now.

  85. 85
    zman Says:

    Nicky – yeah, ok, ok, ya got me there. But I still say it was too low 18 months ago given the types and sources of oil. Oil sands just not going to work well sub $100.

  86. 86
    Dman Says:

    Z – since it is a bit quiet, just a comment I’d been meaning to make for a while. I don’t know how it can be addressed, but I wonder if there is some way to discuss long-term strategic aspects other than in the daily blog comments. It often seems out of place to mix longer time-scale questions in amongst the daily mayhem & I find it hard to concentrate on both at once, to put it mildly.

    But having said that, here goes: as the oil supply-demand situation is likely to remain tight (and get steadily tighter) in the coming years, the recent volatility (30% swings in a matter of weeks) could well become a regular attraction as ever smaller supply bumps or outages have outsized effects. Likewise the even greater volatility in NG & our favourite equities could continue and get even wilder. This kind of volatility will have drastic economic effects which will tend to amplify the oscillations.

    The reason I mention this is that it may not be all that long before energy is right back where it was in June & we’ll have to figure out how to approach that. As you say, if it happened right away it would not be sustainable. I doubt it will happen right away but suspect it will be soon enough to get the pundits in a spin.

  87. 87
    Nicky Says:

    The Fed’s ability to cut rates is fast disappearing…..

  88. 88
    zman Says:

    Nicky & Dman – agreed.

  89. 89
    Dman Says:

    #79 Am I reading that right? 29% decline in 8 months (?) … so an annual decline rate of about 44%?

  90. 90
    zman Says:

    RIG continues to break out.

    Dman – will ponder how to address big picture thoughts.

  91. 91
    zman Says:

    Dman – that’s how I read it. Every month they report these same basic figures: total Mexico, Cantarell, exports and every month they get worse.

  92. 92
    Dman Says:

    And now for some good news: as far as I know, Cramer has not yet started pumping E&P again. But it’s only a matter of time…

  93. 93
    zman Says:

    Dollar getting hit pretty hard now, back to 76.50 area. Oil move is a little nutty (up $8) and is influenced by expiration but the 12 month strip is on average up about $5.

    Dman – too true. JC will be all over E&P soon, now that its up for 3 of the last five days.

  94. 94
    Pete Says:


    Whats your take on T.Boone’s CLNE going forward?

  95. 95
    Nicky Says:

    What if anything did the CFTC put in place to stop speculation – let me guess – nothing.

  96. 96
    zman Says:

    Pete – I don’t know their financials. The concept is probably going to work though. I find it interesting that the stock doubled since TBP went on TV and oil fell $50. I’d have to dig in to get an opinion on where it goes from here but did see Boone is selling about 5% of his holdings. What I don’t have for them is comps. Its kind of like looking at a biotech company with a new drug and an uncertain market. Tougher than I like to make things. I had thought to buy a little common and hold it forever but it got away from me.

  97. 97
    zman Says:

    Nicky – last thing I saw out of CFTC said it was not the speculators fault that oil prices rose. Just passing that along so don’t throw a brick at me, lol.

  98. 98
    Nicky Says:

    Products vastly underperforming so is this move in oil expiry skewed?

  99. 99
    Nicky Says:

    CNBC now saying commodities are up because the deal in Washington is NOT going to be done – so why did oil go up last week when the deal WAS going to be done? Wish they would make their minds up.

  100. 100
    zman Says:

    CNBC needs to switch contracts on the oil they show (October up $10 at 114.50). November is up $6.30 at $109 and the strip is mostly up in the $5s now. Everybody just seems to be waiting on congress to get unfuddled. On your last Nicky re CNBC, they have no memory beyond 5 minutes ago. Oil is up on expiry volatility and a pounded dollar.

  101. 101
    Nicky Says:

    Nymex has halted trading…

  102. 102
    Dman Says:

    Nicky… #101 lemme guess … they’ve banned going long in commodities, lol

  103. 103
    zman Says:

    Dman – not yet. It just ran into NYMEX trading curbs. Too big a move too fast. Reopened now, up 11.34 at 115.90.

  104. 104
    Nicky Says:

    Massive short squeeze on expiry.

  105. 105
    Dman Says:

    Paulson: “No shorty financials”
    Traders: “Yes…I mean… *no* massa. No shorty. Trader understand massa”

    Paulson: “No longy energy”
    Traders: “No … I mean *yes*…I mean *no* massa! No longy”

  106. 106
    tater Says:

    Easy there Dman

  107. 107
    zman Says:

    Tater – any thoughts on the CLR chart would be appreciated.

  108. 108
    Sambone Says:

    By Gregory Meyer

    NEW YORK (Dow Jones)–Crude oil futures soared more than $10 to their highest
    price in nearly three weeks on Monday, fueled by a weaker dollar, crimped
    supply and fresh evidence of growing world demand.
    Volume in the benchmark October crude contract was extremely light ahead of
    its expiration later Monday, which analysts said aggravated its price move.
    Light, sweet crude for October delivery was recently up $10.53, or 10.1%, at
    $115.08 a barrel on the New York Mercantile Exchange, after triggering a
    temporary halt to trading after hitting a $10 daily price fluctuation limit. It
    rose as high as $116.98 a barrel.
    More heavily traded November Nymex crude was at $108.97, up $6.22, while
    November Brent crude on the ICE Futures exchange rose $6.12 to $105.73 a
    Traders struggled to understand why buying in the front-month Nymex contract
    was so fevered.
    “There’s obviously a big squeeze going on in October,” said Peter Van Cleve,
    president of T.W. Energy Consulting in Kansas City.
    “It’s (October) all by itself, today is expiration, but things have obviously
    gotten out of control.,” said Dean Hazelcorn, a trader with Coquest Inc. in
    Physical market traders said they were aware of no disruptions in the market.
    But refineries recovering from this month’s Gulf of Mexico hurricanes were
    seeking oil for imminent delivery, analysts said. The U.S. Gulf Coast continues
    to feel repercussions from hurricanes Gustav and Ike, with the latest U.S.
    government report showing about 89.2% of offshore oil output off line and
    refineries slow to restart.
    Crude rose as traders saw the U.S. government’s $700 billion plan to buy
    troubled mortgage assets supporting demand. The dollar also weakened, creating
    an incentive for investors to shift money into commodities as a currency hedge.
    The euro was recently at $1.4743, from $1.4480 late Friday.
    “The primary driver is that sentiment changed in response to the financial
    plan,” said Gene McGillian, an analyst at brokerage Tradition Energy in
    Stamford, Conn. “That’s helped address questions surrounding the state of the
    Reports that Saudi Arabia, the top producer in the Organization of Petroleum
    Exporting Countries, is cutting oil exports to some of its biggest global
    refining customers also helped spur buying, analysts said.
    In Nigeria, a prominent militant group declared a ceasefire Sunday following a
    weeklong self-declared “oil war” on oil industry targets there. The Movement
    for the Emancipation of the Niger Delta group claimed a series of attacks
    targeting Royal Dutch Shell PLC assets, and Shell has twice been forced to
    invoke a clause protects it from from meeting obligations to ship some output
    from the country.
    A MEND ceasefire “has often proved a false dawn in the past,” analysts at
    Barclays Capital said in a note.
    China’s customs administration said the country imported more crude and oil
    products last month. Crude imports were up 11.5% in August from the year
    before, while diesel and gasoline imports soared.
    Front-month October reformulated gasoline blendstock, or RBOB, increased 8.73
    cents, or 3.4% to $2.6870 a gallon. October heating oil rose 15.11 cents, or
    5.2%, to $3.0489 a gallon.

    -By Gregory Meyer, Dow Jones Newswires (Brian Baskin in New York contributed to this article)

    Dow Jones Newswires
    09-22-08 1400ET

  109. 109
    zman Says:

    So we can spend $700 billion bailing out the financials but we can’t help Ford build a plant for $350 mm that produces 65 mpg diesel cars?


    I’m not in favor of government getting into the handout business but that ship has sailed. Sheesh.

  110. 110
    tater Says:

    I figure a pullback at Friday’s high. It’s also a resistance area generated from the August lows and the May gap that has played a large part in the price action. I don’t have to tell anybody that oil controls.
    Also, be sure to respect the 50 EMA coming down from above. Look for the 200 MA to become support, that would be a great sign in my opinion on whether to commit new money.

  111. 111
    zman Says:

    Tater – as always, thanks much. RIG if you get time too please?

  112. 112
    Fiveanddimer Says:

    Re #99: if there was real concern that the bailout deal would not get done, would the dollar still be off almost 2% against the Euro? Would spot gold still be holding at just above 900? Would spot silver still be up 6% today?

  113. 113
    zman Says:

    up up $24. Hmmm, guess speculation works both ways. CNBC called the Friday position in oil “ultra-short”.

  114. 114
    Nicky Says:

    Oil front month contract now up over $22 to 125.00

  115. 115
    Sambone Says:

    Wow, 129

  116. 116
    zman Says:

    CNBC has Stephen Shork of the Shork report on regularly who has been calling oil lower for the last couple of months and before the peak as well. He’s afraid we may go back to $150. Bear in mind he is a short. He says things like oil not justified on supply demand at $100 let along current price. I’d have to argue with him there since you start running out of impetus to grow supply below $100. Anyway, glad to hear him tremble after so much cockiness of late. I agree the front month is way over done but its just a squeeze. The strip is still only up about $6 and will likely give some of that back in coming days.

  117. 117
    Sambone Says:

    2:26 (Dow Jones) Nymex crude is setting up for a major correction tomorrow, as
    the day’s massive jump in oil prices is almost entirely concentrated in the
    expiring front-month October contract, which is up $19.28 at $123.83/bbl.
    November futures, which become the front-month contract on Tuesday, are up a
    respectable $6.90 at $109.65/bbl. (BJB)

  118. 118
    Fiveanddimer Says:

    I recently read “Bad Money” by Kevin Phillips. I highly recommend it. Like Ron Paul, he is one of the few who saw the consequences of the debt binge. Here’s a three part interview with Bill Moyers and Phillips. Very interesting piece: Moyers leans heavily left, but Phillips is a former Republican strategist. They seems to agree on many points.

  119. 119
    zman Says:

    Personally I think getting excited over today’s move in crude is a complete waste of time. Shork is right in pointing out that products are not moving with crude (or at least not as much) but he fails to point out that traders aren’t wildly short products. He talks about the crack spread like today’s drop in margins is the end all be all of the story. Not so as tomorrow is a different day and this is just a squeeze, end of story. The group is up but only marginally after the hit it has taken and there has been no follow through on the equities for the last $15 move in the front month contract. So the title running across the ticker at CNBC “America’s Oil Crisis” is as ridiculous as they are.

  120. 120
    tater Says:

    I’ve got CLR on page 3 and RIG on page 5 at the link.


    I fully admit my interpretation of the RIG chart is a bit unconventional. It’s been working well for me though. If you want a more basic idea of what is happening, just ignore my straight lines and use the moving averages.

  121. 121
    1520sbroad Says:

    #119 – i think cnbc dialed in the jump in crude today as a way to increase ratings for maria bartiromo’s “black gold…” tomorrow night. conspiracy theory anyone?

  122. 122
    Eagle Says:

    Z IF the run up in oil is primarily attributable to expiry, then we should see a correction tomorrow, correct? If that is the case, then wouldn’t buying purs on USO be prudent. Strictly from a theoretical standpoint, of course.

  123. 123
    Nicky Says:

    Surely there is no one left oil now?

  124. 124
    Sambone Says:

    NEW YORK, Sept 22 (Reuters) – U.S. crude oil futures for
    October delivery surged more than $20 a barrel on Monday, the
    biggest gain on record, on the day the contract expires.
    Crude oil for delivery in November was up only about $6 a
    barrel in much more active trade.
    Below are analyst comments:

    “I realize that this expiration day and expirations in
    commodities can be really volatile, but this is scarily so.
    We’ve been looking for something that might be a good indicator
    as to what occurred other than there was a short squeeze and
    somebody was kind of looking hurt pretty badly.
    “Up until today, I think that the largest one-day move that
    I remember seeing is under $12 and today, we doubled that… It
    pretty readily points to the expiration trading being the main

    “The market went crazy here and it looks like the weakness
    of the dollar was a fuel for the sharp price increase. NYMEX
    October crude was also expiring and that provoked

    “The dollar is getting killed, the expiration of the
    October contract, inventories in Cushing are very low, many
    Gulf refineries are coming back up. And the bailout package is
    viewed as support for the economy.”

    “The run here in crude was the weaker dollar and with
    October going off the board they just put a short squeeze on it
    and just ran it up.”

    “It starts with the $700 billion bailout. Then we have the
    October contract expiring. Then we had all this bullish news
    from Russia to OPEC. We had been focusing so much on the
    demand dropping that the $700 billion takes that off the table.
    The dollar is down, the stocks are down and now investulators
    are jumping back into oil.”

    “Short squeeze, crude expiration– that’s it in a nutshell.
    The dollar did drop further today, but you’ll note that the
    October-November crude spread blew way, way out.”

    “With the dollar sinking more in one day against the Euro
    since April 2001, it’s no surprise that commodities, and more
    specifically oil, are spiking higher”
    (New York Energy Desk

    Mon Sep 22 18:47:45 2008 -GMT

  125. 125
    Eagle Says:

    Sorry, 122 should read PUTS not purs. Fat finger data entry problem.

  126. 126
    zman Says:

    Eagle – well maybe. USO is up 6% today as it has already started marking the November contract. So it did not get most of the rally (missed out on 2/3rds of it). So while we may see crude deflate a little, don’t look for a $15 drop as a pull back target. This takes a lot of the USO put purchase. I have the DUG calls and despite all the hoopla, DUG is down less than 1% today. If oil opens lower, the group will too, probably more and I’ll cover those.

  127. 127
    zman Says:

    I figured you meant puts and not the dreaded Potentially Usurious Rate Securities. No way I touch those.

  128. 128
    Sambone Says:

    WASHINGTON (Dow Jones)–Billionaire investor and veteran oilman T. Boone
    Pickens said Monday that oil prices will return to $150 a barrel next year,
    with limited new supplies coming online and global demand frozen, despite
    turmoil in economies worldwide.
    Pickens, speaking on the sidelines of an event in Washington, D.C., where he
    was pushing his natural gas plan for the country, said the Organization of
    Petroleum Exporting Countries will attempt to maintain a floor price of $100 a
    In the face of a potential economic meltdown in the U.S. and other major
    economies, oil prices dipped to near $90 a barrel last week, but rebounded on
    news of a $700 billion U.S. government bailout package.
    Nymex October crude was at $122.60 at 2:25 p.m. EDT Monday.

    -By Ian Talley, Dow Jones Newswires

    Dow Jones Newswires
    09-22-08 1432ET

  129. 129
    zman Says:

    I wonder if every day congress hesitates marks 200+ off the Dow.

  130. 130
    Nicky Says:

    #123 – that should have said no one left short oil?

  131. 131
    Eagle Says:

    Thx Z, that answered the other question I was pondering as well, which was: why isn’t USO up more than 6% with the front month up so much?

  132. 132
    zman Says:

    Nicky – Phil Flynn I would guess is still short. I would imagine a lot of them are short November and beyond since nothing has changed but the charts so … nope, wait a minute, that’s pretty much what happened when they went from bulls to bears overnight.

  133. 133
    Sambone Says:


    TARP – Troubled Assets Relief Program

    Section 8
    “Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.”

  134. 134
    zman Says:

    133 – sign of the times and a bad one.

  135. 135
    Dman Says:

    Nicky, there are still people who say that oil should be $50 because that is the marginal cost of coal-to-oil production. The recent mega-drop only encouraged them to think that oil was going back down where they think it belongs. So there could yet be some shorts left in oil.

  136. 136
    Bleemus Says:

    heard a rumor that the front month contract exploded to the upside as brokers were forced to cover newbie QM short traders positions because they didn’t realize it was expiration.

    Can you imagine the shock getting an email saying “Please bring your tanker trucks to pick up your crude”.

  137. 137
    Nicky Says:

    Z – re #116 – did you hear Shork say at the end that he thought this was a one day wonder and we go straight back down from here? The caveat was that if this carries on up tomorrow we are in serious trouble.

  138. 138
    tater Says:

    I know that I tend to get overly grumpy when I post fundamental reasoning, but…
    It strikes me as odd (I have better words than “odd”) that Goldman has access to the discount window (now permanent) in order to provide liquidity which in turn allows them to switch around their accounting so that they can push the oil trade again.
    So Paulson is in effect creating an inflated currency on the one hand by printing money, and creating real consumer spending power drop on the other by giving Goldman the cash at the window.
    Talk about having you cake.

  139. 139
    zman Says:

    or the email saying “pack your junk and get out” with security taking your pass key as you hit the door.

  140. 140
    zman Says:

    I did and I think he’s talking his book. Straight back down from where? The front month (November) is at 108.90, up $6.15 so the 120 number he got worked up about is meaningless. I agree its a one day wonder but he seemed shocked by it…no bigger sign of group think than when they are shocked by someone or several someones thinking differently from them.

    Hear ya Tater, I was thinking that in the mid to long term everything seems to be going GS’s way too.

    VRNM just keeps edging higher. No, I don’t own it, just pointing it out b/c its that cellulosic, BP backed play I watch and it has had a string of good days.

  141. 141
    Nicky Says:

    Tater – you and me both. Must be why we prefer TA!
    And I had so hoped we would see the end of GS and all the ‘corruption’ they bring to the market. Stands to reason Bazooka Hank would bail them out though doesn’t it especially as someone commented earlier on here he will probably be back looking for a job with them pretty soon.

  142. 142
    Bleemus Says:

    thinking back to my last post isn’t QM cash settled so that wouldn’t make sense right?

  143. 143
    Nicky Says:

    Believe it or not the broader market still looks pretty good – this is no more than a consolidation and points to higher highs ahead.

  144. 144
    Dman Says:

    #136. If they had shorted it, I guess the email would have read “where is your tanker, we want the oil you sold us”
    Reply: “Um, no tanker as such, but I could always drain the oil from my car. Would that do?”

    T-man: nothing wrong with a bit of grumpy fundamental reasoning.

  145. 145
    Dman Says:

    Bleemus, the rumour does sound a little too cute to be true. But fun just the same.

  146. 146
    Dman Says:

    #140. It seemed to me that Treasury only really hit the panic button when GS and MS looked to be in trouble.

  147. 147
    Sambone Says:

    By Gregory Meyer

    NEW YORK (Dow Jones)–Crude oil futures made their largest one-day gains in
    history Monday, fueled by frenzied buying in the low-volume expiring
    front-month contract.
    As crude for October delivery went off the board Monday on the New York
    Mercantile Exchange, a powerful surge of buying widened its lead over
    later-month contracts and at one point propelled it as high as $130 a barrel,
    up a stunning $25.45 in one day. The jump outpaced strong gains in other
    contracts. Traders said the anomalous move potentially reflected two factors:
    demand for crude oil among refiners recovering from hurricane shutdowns and
    traders who were caught off guard by recent market moves.
    “Obviously this is a squeeze play,” said Phil Flynn, an analyst at Alaron
    Trading Corp. in Chicago. “It’s somebody caught short on the last trading day.”
    Light, sweet crude for October delivery settled up $16.37, or 15.7%, at
    $120.92 a barrel on the Nymex. In dollar or percentage terms, the gains were
    the largest since Nymex first offered a crude oil contract in 1983.
    More heavily traded November Nymex crude ended at $109.37, up $6.62, or 6.4%.
    November Brent crude on the ICE Futures exchange rose $6.42 to $106.03 a barrel
    – Brent settlement prices weren’t immediately available.
    Physical market traders said they were aware of no disruptions in the market.
    But refineries recovering from this month’s Gulf of Mexico hurricanes were
    seeking oil for imminent delivery, analysts said. The U.S. Gulf Coast continues
    to feel repercussions from hurricanes Gustav and Ike, with the latest U.S.
    government report showing about 89.2% of offshore oil output off line and
    refineries slow to restart.
    Crude rose as traders saw the U.S. government’s $700 billion plan to buy
    troubled mortgage assets supporting demand. The dollar also weakened, creating
    an incentive for investors to shift money into commodities as a currency hedge.
    The euro was recently at $1.4743, from $1.4480 late Friday.
    “The primary driver is that sentiment changed in response to the financial
    plan,” said Gene McGillian, an analyst at brokerage Tradition Energy in
    Stamford, Conn. “That’s helped address questions surrounding the state of the
    Reports that Saudi Arabia, the top producer in the Organization of Petroleum
    Exporting Countries, is cutting oil exports to some of its biggest global
    refining customers also helped spur buying, analysts said.
    In Nigeria, a prominent militant group declared a ceasefire Sunday following a
    weeklong self-declared “oil war” on oil industry targets there. The Movement
    for the Emancipation of the Niger Delta group claimed a series of attacks
    targeting Royal Dutch Shell PLC assets, and Shell has twice been forced to
    invoke a clause protects it from from meeting obligations to ship some output
    from the country.
    A MEND ceasefire “has often proved a false dawn in the past,” analysts at
    Barclays Capital said in a note.
    China’s customs administration said the country imported more crude and oil
    products last month. Crude imports were up 11.5% in August from the year
    before, while diesel and gasoline imports soared.

    -By Gregory Meyer, Dow Jones Newswires

    Dow Jones Newswires
    09-22-08 1504ET

  148. 148
    Nicky Says:

    I thought the SPR was open if more oil was needed due to the hurricane disruption?

  149. 149
    tater Says:

    Fairly low volume for such a large jump in CLR.

  150. 150
    zman Says:

    re 148 – it is, they have delivered oil to several refiners in the coast and mid west.

  151. 151
    zman Says:

    If anyone sees anything on VRNM, please pass it along. Thanks.


  152. 152
    Sambone Says:

    Tini time

  153. 153
    nifkin Says:

    CHK reducing production- taking down capex

  154. 154
    tomdavis12 Says:

    Z: CHK cutting back CapEx in 2010.

  155. 155
    zman Says:

    Nif – thanks for the headsup. Going through it now.

  156. 156
    Nicky Says:

    In which case Z that comment in $147 about refineries ‘seeking oil’ is unlikely to be true.

  157. 157
    zman Says:

    Nicky – I think they mean a refineries come back on line, they will demand more crude. The SPR crude went to the ones that remained online but could not get oil.

  158. 158
    zman Says:

    Natural gas up a little after hours on the CHK news, probably marks an inflection point and will be a reason to buy UNG as this is what people have been waiting for and will not be the last capex reduction

  159. 159
    1520sbroad Says:

    gmxr production update just went across the wire – looks like some delays with rigs/materials, now guiding at low end of previous production guidance.

  160. 160
    Wyoming Says:

    Barnett production back on line over the weekend. Confirm Reef’s Waha price @ ~$5. Some lines are not full as we could not buy back gas to kick off a new well we completed last week. Pressures are too low for the compressors.

    Don’t know about other operators but you would imagine that they are flowing to sales too.

  161. 161
    bill Says:

    chk put out alot of info

    they could of put out a release a day for 2 weeeks

    Company Reduces Drilling Capital Expenditure Budget through 2010 by Approximately $3 Billion and Expects Approximately $2 Billion of Excess Cash Generation in 2009 and 2010 to Be Directed Primarily to Debt Reduction Lower Capex and Asset and VPP Sales Lead to Lower Production Growth Forecasts for 2008 of 18% from 21% and for 2009 and 2010 of 16% from 19% Company Closes Fayetteville Shale Joint Venture Transaction with BP America; Discussions Progress on Marcellus Shale Joint Venture; Company Resumes Plans to Sell a $1 Billion Minority Interest in its Midstream Business Company Provides Hedging Update; Substantial Decline in Natural Gas and Oil Prices Has Led to an Approximate $6 Billion Favorable Mark-to-Market Change in the Company’s Hedging Positions Since June 30, 2008 Company Completes Three New Haynesville Shale Wells in September with Average per Well Initial Production Rates Exceeding 10 MMcfe per Day

  162. 162
    bill Says:

    chk pdf


  163. 163
    bill Says:

    One final comment– I like how this company updates it’s outlook for shareholders.

    i wish other companies would do same

  164. 164
    Nicky Says:

    Cramer just spent 15 minutes recommending everyone pile into Gold.

    Hmmm will this be the usual kiss of death.

    Just remembering his call to buy nat gas at $13 and…

    didn’t he say we would never again see lows in this market below the July lows???

  165. 165
    Bleemus Says:

    Ok, just heard from my friend who works at XOM Beaumont refinery. Said “Looks to be about four weeks before we will be running again” AND “the exxon chemical plant next door said it would be up to a year before they can start back up”

  166. 166
    Bleemus Says:

    More comments from friend….

    “water was hip dip on my unit last week…i saw the water line today”

    “.i been hearing there’s hundreds of bodies piled up…but no official word on that yet and its got people here pissed off thinking it is a political cover up for the goddamn GOP”

    ” another freind that had a cabin down on the bolivar penisula….the water went OVER the roof…and it was on stilts 10′ high, the cabin is gone….only pilings left”

  167. 167
    bbbtest Says:

    Nicky – don’t forget his comment that all that mattered was bailing out AIG and the market would soar. He just forgot to say soar, as in like off a cliff.

    Bleemus – thanks for the Beaumont update. 4 weeks is not so bad. Hopefully the bodies comment is exaggerated. CHK traded slightly higher after hours, NG traded up a dime.

    Bill – agreed, CHK knows very well how to present their story.

  168. 168
    Nicky Says:

    bbb – now he is warning of a great
    Depression, that the Fed bailout is not going to happen etc etc.
    His timing is absolutely awful. He gets everyone in when they should be getting out and vice versa.
    Anyway whilst he is advising everyone to bail now I actually think we are setting up to move higher in due course….

  169. 169
    tater Says:

    I’m getting the impression that the dollar is about to pop back up. Are you getting the same idea?

  170. 170
    VTZ Says:

    Go ahead and post the article if you’d like but I’m in Palm Springs on vacation until next Tuesday.

  171. 171
    VTZ Says:

    If you keep track of all the questions I’ll answer em all next week when I have more time.

  172. 172
    Nicky Says:

    Hi Tater,

    Yes agree re $. My target area was 76 and then 74.80 where there is a gap….
    That said I did think we would get there in a 3 wave move to the downside rather than one wave in a matter of days! Not sure yet whether that means the downside is totally done or whether we see another up/down gyration.
    I suspect it may be the latter as I think it also possible that the oil move is a zig zag correction to the upside and we are soon to start the b part down before a further move to the upside which I think could go to between 120 and 125.
    Any thoughts on gold – feels like we should be getting close to a top for that too?

  173. 173
    tater Says:

    Honestly, I am the first to say that gold is beginning to bother me. I really feel that the market for gold is so thin compared to oil and the dollar that I am beginning to think that it’s getting manipulated (not because I can’t figure it out, but because it seems to be behaving in almost a “cute” manner). Oh well, wouldn’t be the first time a market was fixed.
    I think the weekly view that I have at the bottom of the first page of the link works. It could either go back to following the uptrend price channel, or just as easily continue to take the downward red channel. Best thing is that we will know very soon.
    My best guess is that the monkeys are losing control and that we may get a gold grab before the end of the year ($2K). But first comes the pressure on the central banks to prop up the dollar (so I agree that Cramer is mis-timing it).
    I think that we are also going to see oil really become a new black gold too (but that the oil companies will have a very hard time in getting the glory attached to their stock price).

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