Wrap – Week Ended 11/14/08


Yuck. That was less than fun. Market in full out fear and loathing mode. On to the wrap (comments below table).

1) Misery Continues for Crack Spreads .... As It Does For The Refiners

  • Gasoline. Though gasoline demand held fairly flat resulting in an decrease in the year over year deficit to only 2% whole prices continue to fall. Demand appears to be stabilizing with prices down 30% to year ago levels. Imports fell sharply but one week does not a trend make so we will need to see more of that and lower production as well if prices are to stabilize.
  • Heating Oil. Prices have fared better than gasoline in this falling crude environment due to the lingering strength of the exit market. Refiners frequently opine, "if we could make only diesel." It's a futile wish.
  • Refiners. Estimates continue to fall and analysts appear to have given up on calling a bottom for the sector until the new year. We are seeing some insider buying, most notably in (SUN) but until the group takes a time out (via more maintenance and lower utilization) or until the consumer comes back a bit or more or a snap of extended cold weather hits its hard to get excited about the group. A string of buyout rumors in group appear to be completely unfounded yet somewhat effective exit strategies for hedge funds in need of funds.

2) Rig Counts Show Broad Declines...More To Come. Often analysts and fund managers look for an event and when it doesn't happen that day or week or month they start doubting their original prophecy to their own detriment.  They forget that the last time rigs were laid down it didn't happen over night. But it happening, from the big cap E&P's down to and especially including the mom and pop drillers, many of whom have either gone to 0 or will soon be at 0 rigs.

Natural Gas Directed Rigs. E&P and service companies looking for a big drop here. A month ago the range was 200 to 400 rigs off the top of 1,600. Now estimates range from 300 to 800 rigs with CHK this past week saying they are comfortably around the 600 number. One thing that's not in many E&P analyst's models for 2009 is the significant expense reductions this will cause as everything from steel to pressure pumping falls off. 

Horizontal Rigs. We're seeing a lot of activity move from lower return conventional and in some cases resource plays (like the Barnett and Woodford) to higher return plays like the Haynesville Shale.This week's dip is the first of size we have seen and is likely just a bauble in the numbers.

3) CFTC Shows Crude Speculators Went Net Long Last Week. Shhhh, don't tell congress, but the speculators are back on the long side in oil. Despite all the cries from talking heads for $40 and lower oil the non-commercial types are lining up on the other side of the trade.  Hmmm.

4) Alternative Energy Not Feeling The Love. The mantra over the last week has been that President-Elect Obama's long announced $150 billion, 5 million job alternative energy life support plan will be back burnered due to falling oil, natural gas, and coal prices (what short term memories we have) and the tsunami of funding needs brought about about by the global financial meltdown.  In his youtube address this morning, PE Obama showcased the program again as a means to get the economy rolling. 

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Holdings Watch:  The $10KP ended the week at $13,300 with 37% cash.

Closed Trades:

to be added....

3 Responses to “Wrap – Week Ended 11/14/08”

  1. 1
    md Says:

    Timminco was in the National Post. Are you familiar with them.

    Which of the steel and oil service will suffer due to declining rig demand.

  2. 2
    zman Says:

    md – I’m putting the response in the Monday post.

  3. 3
    » Comment on Wrap – Week Ended 11/14/08 by md » Oil Stocks Investing Says:

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