Thursday – Oil Review and Gas Preview

Sentiment Watch: Crowded ledge.  And this market makes me feel like a Pollyanna as I expect one of the few strong sectors left (energy) to weather the financial storm better than this. While I can make a strong case for my E&P names, I'm contemplating puts on some service names (see HAL below) as even after the beating they have taken, its hard to see a positive close for them into year end in the face of what will likely be a rig count that is spiralling lower. Today we may get the first withdrawal of the season for natural gas and we'll need to if the recent bounce is to have legs. In the oil review I go over some pretty neutralish numbers that are apparently still less important than the equity markets' drop. Looking for a blood red open today and rising volatility and will likely not add to positions into weakness as you just can't tell at the moment how weak the markets will get.

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Preview
  4. EIA Oil Inventory Review
  5. Stuff We Care About Today
  6. Odds & Ends

Holdings Watch: No changes yesterday.

Commodity Watch:

Crude oil fell $0.77 to close at $53.62 yesterday. See a review of the EIA's inventory report below. On the whole, it was not an overtly bearish report and given the decline oil has suffered in recent weeks my sense is that it would have ended the day higher with heating oil on the report were it not for the 400+ point drop in the DJIA. This morning oil is trading off almost $2.

  • Shortsighted Government Policy Watch: Alberta will lower the royalites on new oil and gas wells for the next five years to stimulate drilling. This, from the government that is planning to raise royalties on existing wells on January 1 and who were told, in no uncertain terms by industry, that doing so would result in less capital invested in the province.

Natural gas rallied another $0.23 yesterday to close at $6.74. This morning gas is trading up 5 cents ahead of the inventory numbers.

  • Oh Yea Of Oversimplification Watch: ``If we get a long, cold winter, these ample supplies will start to look tight, the economy be damned,'' said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. ``This is a reminder that gas is primarily a heating-related business.'' ZComment: cold is key now but I've got to take issue with people who continue to think of gas in that "primarily heating-related business" light. Not really. Just to illustrate my point, the following pie is from 2007 total year gas demand.

  • Lease, plant, and pipeline has nothing to do with heating, that's 8%, electrical is primarily for cooling and industrial contains is largely used either in the making of steel and chemicals and in other processes irregardless of the season. Commercial and residential are more closely tied to to space heating but even there you have commercial chiller units used in the summer, hot water heating, and cooking. So gas should be thought more of as an all all season fuel as the summer peaks slowly move up closer to the traditional winter spikes. This is probably a worthless rant on my part so put it down to educational purposes.


Natural Gas Storage Preview

My Number:  +/- 10 Bcf. Its pretty tough to get the switch over week correct. The Street is looking for a 5 Bcf withdrawal so anything positive down to 10 Bcf on the withdrawal side is probably going to be seen as bearish for gas given the recent run. The important thing is that we

  • Weather: 122 HDDs last week (which is the current week for the natural gas inventory change number) vs 77 in the previous week which yielded a really ugly 62 Bcf late season injection into gas storage. This is close to normal for this time of year. Next week HDDs are seen rising to 153.
  • Historically Speaking:
    • 5 Year Avg: 2 Bcf withdrawal
    • Last Year: Unchanged. Last year saw HDDs of 108.
  • Imports: Down from the prior week. Last week saw imports fall to 7.8 Bcfgpd from the previous week’s 9.4 level.  Imports are 1.5 Bcfgpd from year ago levels. So this adds about 10 Bcf to the week, all other things being equal.

Production: Latest monthly figures (from August) confirm healthy rise in production from the continental U.S. in the second half of 2008. I expect this to moderate in the first half of 2009 as a sharply falling rig count is unable to offset the hyperbolic decline rates that come after the flush initial production from the shale plays. 

Street Consensus: 5 Bcf Withdrwal. Again, I think a negative 10 number and gas can hold and even rally towards $7. Anything on the high side of 5 and especially another build will likely send gas quickly retreated. 

EIA Oil Inventory Review


CRUDE OIL - Slightly bigger than expected increase in crude stocks after 4 weeks of stagnation. Not uber bearish.


Imports Rally Slightly ... Still middle of the road. From week to week imports are bumpy, due to logistics and survey accuracy if nothing else but they should trend lower now, both for seasonal reasons and because of lower volumes from OPEC.

GASOLINE - in line to slightly smallish build in gasoline stocks. Bottom line, demand is stabilizing as prices fall. Obviously demand is off due to the economy as these are bargain basement prices so its not time to get all excited about gas just yet. If production continues to fall for another couple of weeks then I will wait another couple of weeks and then perhaps, just maybe, get excited.




DISTILLATES - Decline in inventories vs a small expected build.  While stocks remain just under average levels for this time of year the modestly good news is that cold still equals demand and last week's coldest weather of the season so far prompted a drawdown on stocks despite continued strong production levels. While we don't get export numbers on a weekly basis, it is apparent that diesel exported from the U.S. remains in high demand.




Stuff We Care About Today

(HAL) Sees Potential Shortfall (comments from analyst meeting yesterday afternoon).

  • CFO says it will be "very challenging" to meet their revenue and financial growth goals in 2009
  • Share repurchase halted in favor of hoarding cash
  • Eastern hemisphere business has been less affected but in North America, the spending curtailments by large and small operators are hurting them.
  • Otherwise they plan to stay the course on capital spending.
  • Shares have fallen significantly but estimates may fall further. Currently the Street is looking for flattish EPS in 2009 relative to 2008 but the stock and the analysts will likely continue to fall back as the rig count falls off.

(XTO) Provides 2009 Guidance:

  • Looking for 18% production growth...
  • ...with $2 billion in free cash flow...
  • ...of which they plan to dedicate $1.25 billion to debt reduction.
  • Should be received fairly well, other than the market move expected this morning, as this is one of the higher leverage large cap E&Ps.

(RRC) Provides Marcellus Update:

  • Company says moving from testing to development phase,
  • will have 3 horizontal rigs drilling early 2009, going to 6 by YE09
  • otherwise few actual new details and a somewhat odd release but news from the E&Ps has been slow.

Odds & Ends

Analyst Watch: (DSX) upped at JPM to overweight (the stock has been tumbling since they cut their dividend in the 3Q report to maintain flexibility.  JPM also cut another bulker, (EGLE), to underweight. Argus takes price target on Buy rated (RIG) from $170 to $120.

161 Responses to “Thursday – Oil Review and Gas Preview”

  1. 1
    zman Says:

    Oil down $3.20 pre open at $50.40, headed to a $50 test today. If it holds we may see a short covering rally. This may also compel OPEC to cut production on Nov 29 despite recent statements to the contrary. I don’t think that pushing oil back towards $60 which the cuts may do would be unduly burdensome on the global economy and would instead act to shore parts of it up.

  2. 2
    Sambone Says:

    By Nick Heath
    LONDON (Dow Jones)–Crude oil futures fell by more than $1 in European trade
    Thursday as equity markets slid on an intensification of global recession
    fears, abetting concerns that demand for crude will wither as a result of
    decreased economic activity.
    ICE Brent crude dropped to $50.30 a barrel, its lowest level since May 2005,
    while Nymex crude continued to break 22-month lows, falling to $51.95 a barrel
    and edging nearer to the psychologically-important $50 a barrel mark in the
    Drops across European and Asian equity markets provided a catalyst for the
    slide Thursday, and followed the Dow Jones Industrial Average closing below
    8000 for the first time in more than five-and-a-half years Wednesday, a
    development that weighed heavily on crude prices.
    Demand unease hardened following Wednesday’s U.S. Department of Energy data
    providing further evidence of shrinking gasoline consumption in the world’s
    largest economy amid tougher economic conditions.
    “We’re seeing another wave of deleveraging and risk aversion, which is
    basically causing liquidation in various asset classes and it’s commodities and
    oil as well,” said Mike Wittner, head of global oil market research in London.
    “On the oil fundamentals side, even though OPEC is cutting, the market is more
    focused on weak crude demand than the cuts in crude supply, simply because the
    demand weakness is more visible.”
    At 1233 GMT, the front-month January Brent contract on London’s ICE futures
    exchange was down $1.25 at $50.47 a barrel.
    Ahead of expiry Thursday, the front-month December light, sweet, crude
    contract on the New York Mercantile Exchange was trading $1.53 lower at $52.09
    a barrel.
    The ICE’s gasoil contract for December delivery was down $9.00 at $538.25 a
    metric ton, while Nymex gasoline for December delivery was down 328 points at
    107.42 cents a gallon.
    A raft of pessimistic economic data readings, including those from emerging
    markets – and China in particular – continues to keep prices under pressure,
    analysts said, with expectations of more economic hardship to come.
    “Over the past week, macroeconomic data confirmed the severity of recent
    economic weakness, reinforcing the concerns flagged by extremely weak physical
    commodities markets,” said analysts at Goldman Sachs Thursday. “We believe that
    poor credit conditions and their negative implications for economic activity
    will continue to pressure WTI crude oil prices lower towards our near-term
    downside scenario of $50 (a barrel).”
    Doubts still surround whether the Organization of Petroleum Exporting
    Countries will declare a production cut – in addition to the 1.5 million
    barrel-a-day cut announced last month – when it meets at the end of next week
    in Cairo. Ahead of the gathering, caution over a possible crimp in output could
    offer some resistance to further falls, but a decision to hold pat risks
    opening the route to further falls, some analysts said.
    “Should they pass up on the opportunity, we very well could see the next ‘shoe
    drop’, where prices could test – and likely break – the $50 mark,” said Edward
    Meir, analyst at MF Global in New York. “We believe that OPEC has been
    surprisingly blase about initiating aggressive production cuts in a market that
    is clearly oversupplied.”
    -By Nick Heath, Dow Jones Newswires

    Dow Jones Newswires
    11-20-08 0753ET

  3. 3
    Sambone Says:

    * Koch, Shell hire supertankers for storage
    * Higher future prices encourage companies to store

    By Luke Pachymuthu
    DUBAI, Nov 20 (Reuters) – Oil companies plan to store
    millions of barrels of crude at sea as they wait for demand to
    pick up and prices to rise.
    So far oil companies have booked ships capable of holding up
    to 10 million barrels, brokers have said, more than the daily
    output of top exporter Saudi Arabia.
    On Thursday U.S. oil trader Koch and Royal Dutch Shell
    RDSA.L were the latest to confirm bookings of additional Very
    Large Crude Carriers (VLCC), brokers said.
    The companies were not immediately available for comment.
    Brokers said the cost of hiring vessels at current depressed
    rates would be less than the gains from waiting for an upturn in
    crude prices and in refiners’ profit margins.
    More oil and trading firms were also considering floating
    storage, they said.
    U.S. crude has fallen more than $90 from its July
    peak above $147 a barrel as the slowing economy hurts global oil
    Some of the vessels were to load crude in the North Sea, the
    first time large volumes have been placed in floating storage
    there since the oil price crashed to below $10 a barrel in 1998.
    “All this oil has to go somewhere, especially if the
    refiners aren’t running at capacity,” a Singapore-based crude
    oil trader said.
    Koch has booked VLCC the Dubai Titan, with capacity to hold
    over two million barrels, for storage off the U.S. Gulf Coast.
    They added that Koch had already taken two other VLCCs for
    storage in the U.S. Gulf.
    Oil major Shell RDSA.L has booked a second supertanker to
    store North Sea crude, ship brokers said.
    They said Shell would use the Front Crown to load North Sea
    crude in the second week of December. The vessel will travel
    east to Indonesia’s Karimun Islands, where oil is often
    transferred from supertankers to smaller vessels for delivery.
    Shell booked another supertanker last week to take two
    million barrels from the North Sea for storage in the U.S. Gulf.

    Although prompt delivery oil is very weak at less than $52 a
    barrel on Thursday , its lowest level since January 2007.
    Contracts for March and April next year are above $54.
    That has triggered some speculation big oil producers in the
    Organization of the Petroleum Exporting Countries could also
    store crude on ships for later sale.
    But for Middle Eastern exporters, responsible for the bulk
    of any OPEC output cut, it is still cheaper to keep the oil in
    the ground.
    “The only reason as a producer you would pay money to put
    crude in floating storage would be if you would otherwise
    struggle to get it out of the ground,” said one Gulf industry
    (Additional reporting by Simon Webb; editing by Barbara Lewis)

    Thu Nov 20 13:22:49 2008

  4. 4
    Sambone Says:

    Crude’s Wild Ride Won’t End With Dec Expiry


    NEW YORK — The wildest ride ever in crude oil futures prices is about to come to an end. But the expiration of the Nymex December-delivery crude contract on Thursday doesn’t mean the volatile oil market will calm down anytime soon.

    Traders said neither end of the life-of-contract extremes in the December crude contract — a low of $19.75 a barrel back in February 2002 or a high of $148.60 last July — are in the cards anytime soon.

    Still, prices likely haven’t yet put in the low for 2008, despite settling down 77 cents at $53.62 a barrel Wednesday, the weakest price since Jan. 22, 2007. Front-month Nymex crude futures have plunged 63% from the record settlement of $145.29 a barrel set on July 3.

    Prices in the near term are targeting the intraday low of $49.90 from January 2007. If that fails to hold, there’s little to stop crude from tumbling through $40. Some analysts see a bottom of $30 a barrel in 2009, if the recession continues deep into the year, and lower if China’s economic woes deepen.

    The current global economic crisis not only pummels near-term oil demand, driving down prices and sending OPEC scrambling to trim output, but also threatens to starve investment for long-term projects.

    The biggest risk, though, may not be how low prices can go, but when they’ll start to recover and how steep that trajectory will be.

    Boom To Bust And Back Again
    “We’re in a price range where, the longer we stay here, the more bullish the longer-term prospects become,” said Tim Evans, senior analyst at Citi Futures Perspectives. “We’re in the bust phase of the cycle, but that’s going to set up the next boom.”

    Nymex lists crude for delivery in each month through December 2014 and for June and December through 2017, though the furthest-dated contracts are untraded. December 2016 crude settled Wednesday at $86.48 a barrel, the priciest contract on the board, but with little volume. Front-month December 2008, the cheapest on the board, is priced at a discount of $32.86 a barrel to December 2016.

    Anyone buying the December 2008 contract at its contract low and selling at the life-of-contract high of $148.60 would see a profit of $128.85 a barrel — enough to buy two barrels of crude now and pocket $20 in change.

    But there are as many unknowns in the current market outlook as potential profits in that mind-boggling spread.

    OPEC ministers meet on Nov. 29 in Cairo to review the impact of their Oct. 24 decision to cut output by 1.5 million barrels a day. The price of OPEC’s reference basket of crudes was at a 3 1/2-year low of $46.55 a barrel on Tuesday, down 19% from the day OPEC agreed to the cuts.

    The Cairo talks will set a strategy for further cuts to be made at a scheduled Dec. 17 meeting in Algeria, as OPEC lurches from one crisis meeting to the next.

    Oil’s fortunes are intrinsically linked to the global economic recession, which is impacting China, the world’s second-biggest oil consumer. The economic troubles have slashed U.S. oil demand to the lowest level since 1999. Many analysts see 2009 global oil demand falling by 500,000 barrels a day in the first decline since 1983.

    Eyes On China
    Phil Flynn, a broker at Alaron Trading Corp. in Chicago, said he sees oil near $50 at close to the near-term bottom.

    “If the recession goes deep into next year, I believe $30 will be the new bottom,” he said.

    Holding the $30-a-barrel level for Flynn requires China, which mounted a massive economic stimulus program, to bounce back sooner rather than later from its economic woes. Oil prices could fall below $20 again on “a big meltdown in China,” Flynn said. “I am hopeful that the stimulus in the system will help China avoid that, but, if not, better get ready for a test of that $12 low again,” he said, referring to the depths of the price crash in early 1999.

    Citi’s Evans thinks if OPEC continues to cut oil output until it tightens the market, prices could swing back up toward $80-$85 a barrel next year, with an average price of around $70 for the year. Prices will need to be sustained near $80 to keep pace with needed long-term investments to boost production.

    –David Bird, senior energy correspondent for Dow Jones Newswires, has covered global oil markets for more than 20 years

  5. 5
    Sambone Says:

    Somali Pirates Demand $25M For Saudi Tanker


    NAIROBI — Somali pirates who hijacked Saudi oil super-tanker Sirius Star are demanding $25 million in ransom and have set a 10-day deadline, one of the pirates told AFP.

    “We are demanding $25 million from the Saudi owners of the tanker. We do not want long-term discussions to resolve the matter,” Mohamed Said told AFP from the ship.

    “The Saudis have 10 days to comply, otherwise we will take action that could be disastrous,” Said added, without elaborating.

    Seized at the weekend in the Indian Ocean some 500 miles (800 kilometers) off the coast of Kenya, the Sirius Star is now anchored at the Somali pirate lair of Harardhere, according to local officials.

    The super-tanker was loaded to capacity with 2 million barrels of oil when it was seized along with its crew of 25 — 19 from the Philippines, two from the U.K., two from Poland, one Croatian and one Saudi.

    It was the largest ship yet taken by Somali pirates and the attack furthest away from Somalia.

    On Wednesday, Saudi Arabia’s foreign minister, Prince Saud al-Faisal, said the ship’s owners are in talks with the pirates, but the company that operates the Sirius Star has remained tight-lipped about the claims of negotiations.

    “We cannot confirm, nor deny” reports of negotiations with the hijackers, said Mihir Sapur, the spokesman of Vela International, a subsidiary of Saudi oil giant Saudi Aramco.

    As international rage mounted over a situation described by the International Maritime Bureau as “out of control,” the African Union said the surge in piracy was a result of worsening security in Somalia.

    “This is a clear indication of the deteroriating situation with serious consequences for the country, region and the international community at large,” African Union Commission chief Jean Ping said in a statement released in Addis Ababa.

    He called for “stronger and more co-ordinated efforts,” to return stability to Somalia, “including a rapid deployment of a United Nations peace force.”

    Somalia has lacked an effective central authority since the 1991 ouster of President Mohamed Siad Barre set off bloody power struggles that have defied numerous bids to restore nomalcy.

  6. 6
    zman Says:

    Horsepucky re 2 above

    “Demand unease hardened following Wednesday’s U.S. Department of Energy data
    providing further evidence of shrinking gasoline consumption in the world’s
    largest economy amid tougher economic conditions.”

    Daily gasoline consumption last 3 weeks
    9,005,000 barrels per day
    9,002,000 bpd
    8,962,000 bpd
    Pretty normal for it to ease in the Fall before picking up around the holidays.

  7. 7
    BirdsofpreyRcool Says:

    IG 248

    I am going to go out on a limb early (in credit, not the stock mrkt) and say that this is at, or near, the wide we will see in credit today. The bond market is all about “Armageddon” this morning, and when too many people say the same thing it usually doesn’t happen. We went from all out, firm-wide, bullish calls from a month ago in credit, to very bearish at these levels. Heck, +250 bps doesn’t seem to mean anything. It’s not a number that makes any sense (in that it is so ridiculously bearish)… so, I think what you are seeing is an expression of sentiment, not economic expectations (although I still think we haven’t seen the bottom in the mrkt yet).

    Anyway, I think you might see some short-covering today in credit. If for no other reason than the bears were able to push the IG index to the 250 level with such ease. They will probably think about taking profits here.

  8. 8
    BossmanG Says:

    BOP, just a stupid question, when you say short-covering in credit, do you mean short covering in bonds, swaps, or? or just in general?

  9. 9
    zman Says:

    Capitulation land. Natural gas down 27 cents from up 5 cents when I wrote the post. No news other than oil is down $3+ near $50 even. Real baby and bathwater time.

  10. 10
    BirdsofpreyRcool Says:

    BossmanG – I’m using the IG index as our proxy, but I am really talking about the credit market in general. We opened at such hideous levels this morning, it almost makes sense to rally back a bit from here.

    Honestly, there are no stupid question in credit. The debt mrkt is a byzantine labyrinth of obfuscation… even for those of use who live in its universe. The good thing is that in “normal times” people don’t have to worry or even think about the credit market. It’s like having to worry about stepping out your front door in the morning and wondering if you will have air to breathe. You just never have to think about that possibility. That is the way the credit market should work. It is the skeleton that holds the body of the market together and allows it to stand upright and walk. But, who thinks about your skeleton on a daily basis? Normally, you don’t have to.

  11. 11
    BirdsofpreyRcool Says:

    Intra-day comment from a greally great market strategist. His comments relate to Fannie and Freddie debt, which are now explicitly backed by the US Taxpayer, but trading at around +175 bps to treasuries (they were about +5-7 bps before this mess, and before the govt backing was explicit):

    We are off to another horrid start in credit today. More pressure is being applied to FNM/FRE debt as credit bears press the lame duck attack. We remind people that when we have run charts of FNM debt going vertical in the past, bad things have followed. This action is putting further pressure on corporates. Just one out of thousands of possible examples: Citi Jr. Subordinated Debt issue is down 2 points in price today despite the boosting of the stake of the Saudi Prince.

  12. 12
    zman Says:

    Going to be low 20s in the South over the weekend. That’s pretty early for cold like that. NG falling like a stone with oil.

  13. 13
    Sambone Says:

    By Hyun Young Lee

    OTTAWA (Dow Jones)–Crude oil futures slipped below the crucial $50 a barrel
    level Thursday as a gloomy U.S. jobs report added to the barrage of bad
    economic news.
    Light, sweet crude for December delivery was down $3.27, or 6.1%, to $50.35 a
    barrel on the New York Mercantile Exchange, after sinking as low as $49.91 a
    barrel. Meanwhile, Brent crude on the ICE futures exchange broke $50 a barrel
    earlier, trading recently at $48.83 a barrel after falling as low as $48.20 a
    More signs of economic gloom came from the U.S. Labor Department early
    Thursday, which said new claims for unemployment benefits defied expectations
    for a drop to soar to 16-year highs. Initial claims jumped 27,000 to a
    seasonally-adjusted 542,000 in the week ended Nov. 15, the highest level since
    July 1992.
    The report follows Wednesday’s hammering of the stock market, with the Dow
    Jones Industrial Average dropping through 8,000 points for the first time since
    early 2003.
    This had the expected impact on already dismal demand. Total U.S. oil demand
    fell in the week ended Nov. 14, and in the last four weeks was 7% weaker than
    year-ago levels, according to Wednesday’s report.
    “There’s really no good news – it’s just the drumbeat of bad economic news,”
    said Gene McGillian, an analyst at brokerage Tradition Energy in Stamford,
    Conn. “Nothing’s halted the slide (of crude prices).”
    And there’s room for crude prices to fall much further. Walter Zimmermann, an
    analyst at ICAP/United Energy in Jersey City, N.J., pegged support levels at
    $48.40 a barrel and then $44.15 a barrel, but this is “the bullish case” for
    crude prices. If these levels don’t hold, oil could slide into the $41.90 to
    $38.15 zone, he said in a report.
    Front-month December reformulated gasoline blendstock, or RBOB, fell 7.41
    cents, or 6.7%, to $1.0329 a gallon. December heating oil was down 5.14 cents
    at $1.7083 a gallon.

    -By Hyun Young Lee, Dow Jones Newswires

    Dow Jones Newswires
    11-20-08 0926ET

  14. 14
    zman Says:

    I have to go shoot some new 3D over the future intern. Hopefully back by 11 EST. Somebody post the occasional market stat as I’ll be watching from blackberry. Also, NG numbers at 9:35. See post for thoughts on gas relative to the number.

  15. 15
    BirdsofpreyRcool Says:

    So much for an attempt at optimism… the high yield index is dropping like a stone.

  16. 16
    Sambone Says:

    Goldman Sachs: Closing All Our Oil Trading Recommendations

    SINGAPORE (Dow Jones)–Goldman Sachs (GS), one of the world’s top energy traders, said in a report late Wednesday it will close all of its oil trading recommendations, as “we do not expect significant upside potential” in the near term.

    “The volatility in the past few weeks has mostly been to the downside and the pressure on the oil complex has increased,” analysts led by London-based Giovanni Serio said in a report.

    This comes as benchmark oil prices continue their rapid descent, with New York crude futures trading Thursday below $52 a barrel for the first time since January 2007.

    The market has lost more than 64% in value since hitting an all-time high of $147.27 on July 11 and is down over 43% on year as persistent economic pessimism fans expectations for global energy demand to weaken.

    -By Yee Kai Pin, Dow Jones Newswires;

  17. 17
    Sambone Says:

    Dome mining. 1929 $6, 6 months later $3.50, 1932 $60+

  18. 18
    BirdsofpreyRcool Says:

    Sambone – do you have a target exit price on SKF? or, you using it to hedge.

  19. 19
    Sambone Says:

    BOP, Hedge, bght in Feb at 96

  20. 20
    Sambone Says:

    No target. More blood to come in the Banks.

  21. 21
    VTZ Says:

    Is today finally the type of capitulation in energy that might mean the end? or is this just your typical day in the market now?

  22. 22
    Sambone Says:


  23. 23
    BirdsofpreyRcool Says:

    nice stats hitting the tape:

    S&P falls to 776.76, matching low during 2002 Bear Market

    S&P 2008 loss is biggest annual drop on record.

    So… are we “there” yet?

  24. 24
    BirdsofpreyRcool Says:

    ok… i have to take a deep breath before posting this… it’s like seeing a purple cow…

    IG 277 +30bps

  25. 25
    Sambone Says:

    Dow going to 6800 according to my charts. S&P tp 670.

  26. 26
    VTZ Says:

    I know nobody probably cares but the Alberta govt proposed a 5-year break on the royalty increase (as a result of the royalty review last year) in order to encourage more drilling in Alberta again as it had become less competitive compared to BC and Sask.

    It might mean more gas out of Alberta and less burden on the oil sand projects.

  27. 27
    reefguy Says:

    6 bcf injection

  28. 28
    john11 Says:

    16 bcf

  29. 29
    VTZ Says:

    Hurry! Sell faster!

  30. 30
    reefguy Says:

    my bad, very bad 16 b injection

  31. 31
    Sambone Says:

    By Hyun Young Lee

    OTTAWA (Dow Jones)–Crude oil futures hit a three-and-a-half year low
    Thursday, sliding briefly below a crucial support level.
    Light, sweet crude for fell for December delivery fell $3.87 to $49.75 a
    barrel on the New York Mercantile Exchange, a level not seen since May 25,
    2005, before rebounding to $50.80 a barrel. Brent crude on the ICE futures
    exchange was trading down $2.45 at $49.27 a barrel.
    Traders have pegged $49.90 a barrel, the low of 2007, as the key level to hold
    to prevent a freefall to $40 a barrel. But the expiration of the December
    contract Thursday means that attention has already largely shifted to the
    January contract, where trading volumes are almost seven times heavier.
    “Breaking $49.90 is psychologically important, but you would have to discount
    it because it’s in the December contract,” said Peter Donovan, vice president
    of Vantage Trading in New York. “January is a much better barometer.”
    He noted that the January contract had traded perilously close to the key
    support level, falling as low as $50.21 a barrel. The contract was trading
    recently at $51.25 a barrel, down $2.85.
    Traders are also keeping a wary eye on the Dow Jones Industrial Average, which
    is down another 150 points after sliding below 8,000 late Wednesday for the
    first time since early 2003.
    Front-month December reformulated gasoline blendstock, or RBOB, was down 5.7
    cents, or 5.2%, at $1.0500 a gallon. December heating oil was down 3.56 cents
    at $1.7241 a gallon.
    -By Hyun Young Lee, Dow Jones Newswires
    Dow Jones Newswires
    11-20-08 1043ET

  32. 32
    Sambone Says:

    Dow green?

  33. 33
    zman Says:

    16 Bcf stinks. We’ll get a withdrawal next week but the numbers are coming in pretty fat to the Street meaning the storage situation was carried at lower injections on the back of down Gomex production and now that that’s back look for it to take longer to eat into storage.

    Unreal damage being done to the Bakken players, the Haynesville players etc.

    BEXP down 24% on no news. Pretty much at max pain for energy.

    The only thing holding up worth talking about is XOM.

    The only bright spot is that we have fallen so far so fast that the major indexes are due some kind of bounce. I suspect it will be fleeting.

  34. 34
    md Says:

    IG 277 +30bps

    hUH. Is that 307 or 277.3
    Why post the .30
    TY Z for HK and BOP for IG

    Your heads up a couple of days ago was appreciated.
    Z I was fortunate to make up a bit on buying HK 10/16 and sold 11/17.

  35. 35
    md Says:

    Oh yeh and I dipped into BeXP @ 4.00

    Injections High. We can look forward to another week. Can’t say the same for Wall Street.

  36. 36
    zman Says:

    ZTRADE: $10KP trade. Sold (10) EOGKQ for $0.15, down 91% to average cost. I think EOG comes back and may even snap back but these have 1 day to go and the strike is unlikely to be achieved.

  37. 37
    isleworth Says:

    Z- is PQ going out of biz – trading like that….talk about value…

  38. 38
    zman Says:

    Isle – Stocks are trading like the industry is going out of biz.

    There is still an ongoing consolidation of capital dedicated to energy flowing from the E&P names to the Majors. XOM going green with DJIA. Cash is king.

  39. 39
    BirdsofpreyRcool Says:

    IG 270 +23

    There is now talk on the CDS credit desk that we might get back to unch’d on the day. That wouldn’t surprise me. As I said this morning, when everyone thinks the same way, the mrkt goes the other way. Still heading down over the next few months (agree with Sambone)… but might see some relief today.

  40. 40
    BirdsofpreyRcool Says:

    my, my… who’d of thought i’d be happy to see

    IG 263 +16 bps

  41. 41
    md Says:

    LW injections Revised.

    I get the feeling that in 3 weeks we’ll be at the same levels as the last two years. Having said that we has 7 cm of snow up here which is a bit early. But last years winter was 3800 HDD if my figures are correct and that is going to hard to duplicate. Although Bastardi claims this yr. will be hard on the
    (high consuming?) Eastern Seaboard as opposed to midwest.

  42. 42
    BirdsofpreyRcool Says:

    I think z pointed out a while back, tho… only the first 30 and the last 30 minutes of the market really count. The rest is just playing ping pong with yourself.

  43. 43
    md Says:

    SKF= Short Knife Falling

  44. 44
    zman Says:

    Rumor must be swirling again that XCO goes private. Reef, you hearing anything?

    BOP – yep re last 30 minutes, we do another incredibly short lived high velocity bear market rally. Pretty sure I’ll short the OIH the next time we get 2 days of up performance there or maybe 1.5 days, 2 is asking a lot.

    Will do an XOM trade in a bit for a bounce, not investing, just trading.

  45. 45
    BirdsofpreyRcool Says:

    IG 262… so, not going back to 247 just yet. Still, backing away from the Purple Cow is a relief.

  46. 46
    md Says:

    31-Oct-08 3412 Revised

    3472 Revised

  47. 47
    BirdsofpreyRcool Says:

    md – what investment conclusions can we draw from the revised figures? and thanks for pointing that out.

  48. 48
    zman Says:

    I see it md, they revised last week’s injection down from 62 to 60 and the week before that up from 12 to 19. This is the reason we need more government jobs, to prevent this kind of mistake, lol.

  49. 49
    zman Says:

    Bird – none really, its rounding error.

  50. 50
    BirdsofpreyRcool Says:

    Confirmation of the Purple Cow trade… the following comment from the CDS trading desk on the IG quotes we have been seeing:

    “For what its worth, the IG mrkts that you see aren’t real. It does not feel like anyone has an axe to actually buy IGs here. Feels more like the street is using lower equities to push things wider so they can sell. I personally think that today is a selling opporutnity in IGs. At least for a short period. Keep a tight stop… say 280 as the level? But think you let the street have it here and sell. Bids are trying to push so people lift the offers. We’ve seen too many days like this. Get long for a trade and pray.”

    Translation: these wide levels represent sentiment and not actual trades. Think shorts have pushed sentiment too far and could see a short-covering rally here in credit.

  51. 51
    zman Says:

    ZTRADE: $10KP trade, not for the weak hearted.

    XOM $75 November calls (10) (XOMKO) added for a quick play on today and tomorrow’s trading for $0.63 with the stock at 72.40.

  52. 52
    md Says:

    Z you allude to it in #33. Can you elaborate

    “meaning the storage situation was carried at lower injections on the back of down Gomex production and now that that’s back look for it to take longer to eat into storage. ”

    I’m a new hand at this .IMVHO the storage will take a back seat and feed off Wall St worries. The IG has more relevance at this time. As Z said”XOM going green with DJIA. Cash is king”you guys may confirm this but what XOM lacks in P1,2-10 they will more than make up for in P Green Cash. A good time to be a B O P

  53. 53
    md Says:

    I nominate Dingell for Natural Gas Czar and overseer of weekly injections

  54. 54
    BirdsofpreyRcool Says:

    just noticed SD… wow. almost down to $7.00

    Tom Ward took that public almost exactly a year ago at $26.00. I’ll bet if the credit market unfreezes Tom and his team might think about doing a good old fashioned MBO.

  55. 55
    zman Says:

    md – I agree that absolute storage will take a backseat to the markets as far as price is concerned. Only a falling rig count (which takes time) and some pick up in industrial numbers can help gas outside of the obvious: Really Cold Weather that is Sustained For More Than Just Half A Week At A Time.

    Who knows why they did the revision. In the past it has been anything from a reclassification from base to working gas to a data entry error. I suspect it is the later since they are giving specific dates.

    But the crux of the matter is, production is up about 5 Bcfgpd, imports are down 1 (or so) Bcfgpd. That leaves 4 extra and we may be seeing industrial demand come under the knife due to the credit markets. I can think of 1.5 Bcfgpd that can fall off for weeks at a time in the form of ammonia (fertilizer). If farmers can’t borrow money to buy seed and fertilizer the fert guys will slow down production, even with the low NG price. Just thinking out loud.

  56. 56
    VTZ Says:

    BOP- how about CHK at 16? wow

  57. 57
    zman Says:

    FYI, Spud #2 has estimated P1 of 5 lbs 10 oz, with an EUR of about 8 pounds in 3 weeks.

  58. 58
    BirdsofpreyRcool Says:

    VTZ – true… but CHK traded as low as 11.99 when Aubrey was forced to sell and the October 10th panic hit. SD is at a new low. I’ve been told that SD stock price is a proxy for hedge fund flows… guess this is one more piece of evidence.

  59. 59
    BirdsofpreyRcool Says:

    IG 270 again.

    rats. It may not be “real,” but it’s still scary to look at.

  60. 60
    zman Says:

    Re SD – I still hold that one. Thinking long term, (very long it looks like at this point). I see no reason to add as the selling is beyond reason which does not preclude it from getting halved again. The bigger names, the really big caps are still coming in as well and while myself and several authors think their will be buffet style dining by the majors in 2009 they are mum about their plans now. Why bother drilling when you can let the market discount it for you to the point that buying reserves on the Street will give you record low finding costs and bolt on production growth next year.

  61. 61
    Sambone Says:

    Off subject

    Ok Troopers, for those yield whores like me, here is what I’m buying in todays market.
    Buy MER pfr F at 12 and under. Currently callable at 25. At 12 has a 15% yield. It is cummlative. 7.28% at 25, 1.82 INT per share. Risk is that MER and BAC don’t merge (I’m betting they will), and that BAC will go out of biz (I’m betting they won’t). Collect 15% yield for 5 years, BAC calls me in at 25 (Once market has settled down the road), then that is a 36% total return per year in 5 years. Higher if BAC calls me earlier than 5 years.

  62. 62
    BossmanG Says:

    re 57, great to hear Z! keep us updated

  63. 63
    BirdsofpreyRcool Says:

    Sambone – great idea. thx for sharing.

    can you give a little more assist? bloomberg has 16 pages of MER perferreds… what’s the stated divid?

  64. 64
    BirdsofpreyRcool Says:

    Sambone – never mind. found it. Thanks. It’s a good idea.

  65. 65
    zman Says:

    I’ll add my plug for yield. In the $5 to $6 natural gas range, LINE’s dividend should be safe and is likely to inch up slightly from the 75 cents per quarter. Their last conference call was very much in line with that way of thinking and they have kept a high ratio for an MLP of distributable cash flow to actual distributions for some time now. At $13 that’s a 20% yield. Some other MLPs have higher yields now but I don’t have the degree of certainty that they can keep that div up that I do with LINE.

  66. 66
    BirdsofpreyRcool Says:

    hmmmm… seeing headlines that some sort of bipartisan agreement on auto-aid has been reached.

    who’s next? Macy’s??

  67. 67
    zman Says:

    ZTRADE: XOM November $75 calls (10) sold for $1.27, up 102%, in the 10KP.

  68. 68
    MMarkkk Says:

    Quicky post: how about a congressional deal to help bailout CHK, HK, Big Oil, etc.???? Guess that might be what you call a brain fart! Haven’t been around for a while as the last 4 weeks have been pretty busy. Next several weeks will be holidays…Reiterating someone’s earlier comment: Cash is King and XOM is King of Cash!

  69. 69
    zman Says:

    ZTRADE: $10KP Trade. Bought (2) EOG $80 December calls (EOGLP) for $5 with the stock down $4 at 72.75.

  70. 70
    VTZ Says:

    Z – reinforcing your comment re credit and nat gas usage by fertilizer companies, pot and agu are getting killed because people don’t believe the demand/pricing data I suppose.

  71. 71
    zman Says:

    Mark – always good to have you around. If you still are, how low is M&A on the Major’s list of things to do right now or when credit frees up a little.

  72. 72
    Sambone Says:

    2:33 11/20 *DJ UAW Chief: ‘Key Senators’ Reach Preliminary Deal On Autos

  73. 73
    Sambone Says:

    By Fawn Johnson

    WASHINGTON (Dow Jones)–Oversight Committee Chairman Henry Waxman, D-Calif.,
    on Thursday succeeded in his bid to unseat the powerful chairman of the House
    Energy and Commerce Committee, U.S. Rep. John Dingell, D-Mich.
    House Democrats voted 137-122 to give Waxman the post. The vote upsets the
    seniority system that House Democrats generally honor when it comes to
    committee assignments.
    “Seniority is important, but it should not be a grant of property rights to be
    chairman for three decades or more,” Waxman said after the vote. “It ought to
    be an important consideration, but not the sole consideration in taking a
    leadership position.”
    Dingell has led Democrats on the Energy and Commerce Committee since 1981.
    In a statement, Dingell congratulated Waxman on his win and promised to work
    closely with him.
    Dingell also promised to continue his commitment to his constituents, “to
    protecting and creating jobs, to providing health care for all Americans, to
    working to getting our state and nation’s economy back on track.”
    Behind Dingell, Waxman currently is No. 2 on the Energy and Commerce
    The highly unsual shift in committee chairmen will likely have a dramatic
    impact on a host of industries, particularly the automobile and energy sectors.
    While the Energy and Commerce Committee has jurisdiction over
    telecommunications, consumer protection issues and the drug industry, most
    observers believe Waxman’s effort was based on his differences with Dingell
    over environmental policies.
    Waxman said he argued to House Democrats that the Energy and Commerce
    Committee needed a change in leadership to pass top Democratic priorities like
    climate change, health reform, and energy policies.
    “We have an opportunity that maybe comes only once in a generation, and I
    think that the Democratic caucus agreed with me that we must meet that
    challenge and move forward on those important policies,” Waxman said.
    Dingell has been a strong defender of his home state’s auto industry. Dingell
    is considered more conservative than Waxman on environmental issues, such as
    climate change.
    U.S. Rep. Earl Blumenauer, D-Ore., a Waxman supporter, said the change in
    leadership of the Energy and Commerce Committee might help climate change
    legislation. In the last Congress, the House made progress on climate change,
    but “around the committee, rather than through the committee,” he said.
    Leading up to the vote, Dingell’s supporters were highly vocal about the
    problems posed by Waxman’s efforts, saying a Dingell ouster would force the
    Energy and Commerce Committee to start over again with legislative efforts in a
    number of areas.
    House Ways and Means Committee Chairman Charles Rangel, D-N.Y., a Dingell
    supporter, expressed disappointment about the vote. “He was lauded by everyone
    as being a great American, a great patriot, a great leader,” Rangel said of
    Dingell. “Those attributes are no longer a consideration.”
    “I think it was highly inappropriate,” said U.S. Rep. Rick Boucher, D-Va., who
    campaigned on behalf of Dingell. “There was no obvious reason for another
    person to chair the committee.”
    By contrast, Waxman and his supporters were virtually mum about their effort.
    U.S. Rep. George Miller, D-Calif., who is close to House Speaker Nancy Pelosi,
    D-Calif., was openly campaigning for Waxman because of his high-profile
    investigations as head of the Oversight Committee.
    U.S. Rep. Jan Schakowsky, D-Ill., spoke at the closed-door caucus meeting on
    Waxman’s behalf. She held up a prescription bottle and an apple during her
    presentation. Waxman “was the sponsor of generic drug legislation,” she said
    outside the meeting. The apple “is safer now because of Henry Waxman and his
    pesticides regulations. The next two years are critical. It’s not personal.”
    Dingell, who is 82, has led the Democrats on the Energy and Commerce Committee
    for decades. He chaired the committee from 1981 to 1994 when Republicans took
    control of the House. He then was ranking Democrat on the committee until 2007,
    when he again assumed the chairmanship as Democrats resumed control of the
    Waxman, who is 69, didn’t hold a full committee chairmanship until 2007, when
    he took the helm of the Oversight Committee. Waxman led the Democrats on the
    Oversight Committee as ranking member from 1997 to 2006.

    -By Fawn Johnson, Dow Jones Newswires
    Dow Jones Newswires
    11-20-08 1219ET

  74. 74
    zman Says:

    After doing a little more digging on Waxman last night and knowing what I know about Dingle and emissions standards I’m please to see the switch. Its time the U.S. car companies made more efficient cars and not just talked about it. How about funding Tesla motors now.

  75. 75
    md Says:

    What’s the symbol

  76. 76
    VTZ Says:

    “Bipartisan auto aid agreement reached: aide”

  77. 77
    VTZ Says:

    The senators plan a news conference for 2.30 p.m., the aide said.

  78. 78
    Sambone Says:

    MD – My symbol is MERprF. Yahoo is MER-PF

  79. 79
    BirdsofpreyRcool Says:

    IG 257 +10 bps

  80. 80
    zman Says:

    People got back from lunch and sold the rally.

  81. 81
    BirdsofpreyRcool Says:

    Market wants to fade the rally here… as it has been doing all day. So, question for you: what direction would cause the most pain? I think a rally. But it’s purely based on the concept that this market these days is in the business of infliction the maximum pain to the broadest group of investors.

  82. 82
    zman Says:

    BOP – I dunno. Just watching the levels on energy, in many cases we are not back to the October lows. But what has performed best is getting cashed hard the last 4 days. I’m fearful of next week in a very light volume, no news, and few buyers market.

  83. 83
    zman Says:

    XCO and XOM only games in town today. Couldn’t have less in common. XCO is subject to an LBO rumor. XOM is flush with cash and benefits on the refining side as oil prices are falling more than products. I may take another quick shot trade at XOM or CVX for a pre press conference rally in the broad market.

  84. 84
    BirdsofpreyRcool Says:

    z – just an intra-day comment. direction of the mrkt is still pointed down and to the right over the next few weeks (?) or months (??). Can’t have a sustainable rally unless there is some sustainable good news and/or credit thaws.

    So far, no glimpses of either of those. Too many lay-offs still to come. If automotive wants a bailout, they had better hope the vote is sooner than later. The mood of the country is going to be less and less willing to support above-mrkt jobs with other people’s hard-earned and hard-taxed money.

  85. 85
    ram Says:

    Could HK get pinned at $15 now?

  86. 86
    zman Says:

    Re: HK. Just guessing but yes, based on the open interest I’d say just under or at $15. Not $12.50 like how the chart seems to indicate.

  87. 87
    zman Says:

    Nevermind the prior CVX comment above, can’t make that work today. Will do XOM again if market falls pre press conference. Gotta do something to stay away at this point.

  88. 88
    Sambone Says:

    #87 – Drink Adult beverages heavily.

  89. 89
    reefguy Says:

    xco- rumor is real, just who is the suitor?

  90. 90
    BirdsofpreyRcool Says:

    uh-oh… now auto-aid is being delayed.

  91. 91
    reefguy Says:

    cpe- down another 28%. 3/4 million shares, more forced hedgie selling. Trading at what, like .7 next year ebitda?

  92. 92
    BirdsofpreyRcool Says:

    IG 267… fear taking hold again.

  93. 93
    zman Says:

    Reef – its just sick what they are doing to the single digit crowd. Midget tossing on a scale only rarely seen. PQ, SD, BEXP (down 25% today), DNR, BRY about to join, KWK….its just unreal.

  94. 94
    Sambone Says:

    NEW YORK, Nov 20 (Reuters) – Spot gasoline eased in the
    Gulf Coast on Thursday despite a big drop in the futures
    benchmark as Colonial Pipeline froze shipments of motor fuel on
    its main line for a newly prompt cycle, traders said.
    Colonial Pipeline, the largest line shipper of oil products
    in the United States, on Thursday froze shipments for Cycle 66
    on its main gasoline line north of Collins, Mississippi, as
    nominations exceeded line capacity. nN20401007
    “There will be no additional nominations to cycle 66
    accepted at this time,” Colonial told shippers in a notice.
    Meanwhile, in the New York Harbor, heating oil and diesel
    price differentials were largely steady, supported by cooler
    temperatures in the U.S. Northeast.
    But price differentials in the hub may face pressure soon
    as the arb is seen open for sending gas oil cargoes over from
    Europe for the first time in a year and a half, according to
    European traders.
    “The price will go lower,” said one NY Harbor trader.
    In refinery news, ConocoPhillips COP said it will
    restart Thursday unnamed units at its 247,000 barrels-per-day
    Alliance refinery in Belle Chasse, Louisiana, after a “minor
    upset” a day earlier.
    U.S. crude and products futures continued to slide as
    slumping stock markets fueled concerns about demand already
    curbed in a slowing economy. December gasoline and heating oil
    futures were down about 4 percent and 2 percent, respectively.

    Cycle 66 61-grade ultra-low sulfur diesel was offered at
    2.25 cents under the December heating oil benchmark that also
    was lower, traders said.
    Cycle 67 ULSD was heard done at 3.50 cents under. But
    little was heard on grades 74 low sulfur diesel or grade 88
    heating oil in the early going, traders added.
    Newly-prompt cycle 66 conventional gasoline traded at 3.75
    cents under December futures then fell further to 4.00 cents
    under, down from 3.75 to 3.30 cents under late Wednesday.
    “It traded up to minus 3.30 yesterday in the window and
    held there,” a trader said.
    “This morning, it traded -325,-350,-375,-400 and is
    holding. They are reporting -375 done again … but I didn’t do
    that one but other numbers yes.”
    The decline came after Colonial told shippers “there will
    be no additional nominations to cycle 66 accepted at this time”
    on its main gasoline line north of Collins.

    Cash heating oil asking prices held steady at 0.25 cent
    over the benchmark December futures, brokers said.
    Offers for ULSD were unchanged for a second day at 7.50
    cents over the December futures as was low sulfur diesel at a
    premium of 1.25 cents to futures, traders said.
    Jet fuel offers eased a quarter cent at 8.50 cents over and
    kerosene was unchanged at 13 cents over.
    Gasoline was in range with prompt M5 conventional regular
    priced either side of 6 cents over the futures in the early
    going. Any month barrels were valued between 3.25 and 4.00
    cents over.
    “It’s still at those same levels,” a trader said.

    Chicago cash gasoline differentials were set at 8.75 to
    8.25 cents under the December print, down from either side of 8
    cents under midday Wednesday.
    In the Group Three, N-grade gasoline was set at 2.00 to
    1.50 cents under futures and later set around 2.25 cents under,
    up from early Wednesday’s 2.75 to 2.25 cents under, traders
    X-grade ULSD diesel in the Group was pegged early on at
    1.25 to 2.00 cents over the print, and was later valued at 2.50
    cents over, compared with 2.10 cents over the print Wednesday.
    Chicago ULSD diesel was either side of 0.50 cent under,
    flat with late Wednesday and compared with a wide range of 0.75
    cent under to 0.25 cent over futures earlier that day, traders
    “Not much is changing hands,” a trader said of the
    lackluster early Midwest market action.
    (Reporting by Haitham Haddadin)

    Thu Nov 20 18:32:18 2008

  95. 95
    zman Says:

    Bird – did that just cross the wires re Autos?

  96. 96
    BirdsofpreyRcool Says:

    Yes. Red headline on Bloomberg. Says dems will reconveign in washington in december to take up the issue again.

  97. 97
    zman Says:

    Here’s a positive for oil prices…Russian oligarchs take effective control of TNK – BP, BP’s Russian venture as foreign executives (Brits) flee the country. Not good for future investments in Putin Land.

  98. 98
    BirdsofpreyRcool Says:

    We are getting a lot of conflicting headlines out of Washington today… goes with the territory, i suppose. But now saying that “leaders aren’t endorsing compromise plan.” Interestingly enough, it’s the democratic leaders who are balking now. At least, that’s the latest headlines.

  99. 99
    BirdsofpreyRcool Says:

    IG 268

  100. 100
    ram Says:

    Dem’s refusing to use the $25B for fuel efficiency to use for liquidity. Pres has said he would veto anything else. Stalemate.

  101. 101
    zman Says:

    Paulson about to speak on the economy. I would pay him not to.

  102. 102
    reefguy Says:

    xb $1.05 a gallon that means about $1.65 at pump by Dec 10

  103. 103
    BirdsofpreyRcool Says:

    z – #101…. LOL. agreed.

  104. 104
    zman Says:

    Reef- yep, more gasoline in the tank to drive from going out of business sale to inventory liquidation to the next job interview and still not buy anything or get hired.

  105. 105
    tomdavis12 Says:

    BOP: Do you consider any of these events to be meaningful in getting the bond market back to normal. 1. Libor rate much lower 2. Comm’l paper market better since Fed Reserve buying directly from issuers. 3. Central bankers cutting interest rates 4. IMF rescue of Iceland, Hungary, Belarus and others. 5.Fed currency swap of 120B with Singapore, Brazil, Mexico and South Korea. 6. China’s 586B stimulation package. Just wondering if there are any silver linings out there.

  106. 106
    gaamblor Says:

    Is there a summary available for what levels trigger knockouts for CHK hedges? and exactly what happens if its triggered?

  107. 107
    zman Says:

    Oil falling back off pretty hard late in the session, down $3.37 to $50.30.

    Dems about to talk about the lack of a deal with the Autos.

  108. 108
    zman Says:

    gaamblor – as of their last conference presentation the CFO indicated that they are greatly reduced the significance of their knockouts. I think the phrasing was that they had “substantially eliminated” the knockouts.

  109. 109
    zman Says:

    I’ve got a bid in on those XOM’s again, well below market, probably would get triggered if XOM hits breakeven on the day.

  110. 110
    zman Says:

    Paulson speaking, market dropping. Capitalism rah, rah speech. No new ideas.

  111. 111
    BirdsofpreyRcool Says:

    tomdavis – really only China’s stimulous package is the only good thing for markets. On the other hand, it’s not particularly good for credit. As the Chinese have been large buyers of US fixed income, that is $586B less that they could spend, buying debt in our markets.

    Sadly, the only reason that LIBOR and the US commercial paper markets have gotten better is that the US Govt is buying paper. And the US Govt is buying paper faster than investors are selling it. So, there has been a NET LOSS of investor money, flowing into the commercial paper market.

    I have seen no signs (zero, nada, ziltch) that the US credit markets have thawed… even one teeny weeny bit. The only thing that is moving bonds at all is the fact that our Gov’t is buying them. This can’t go on forever, of course.

    Watch Fannie and Freddie bonds (if you can find a quote for them)… when you see spreads for those govt-backed bonds fall back to under +100 bps (or so) from about +175 today, that should signal a crack in the iceberg.

    But, people WANT to believe that credit is “doing better.” They WANT the stock market to rally. At some point, a sustained stock market rally is another way to turn up the heat on the bond market and break it’s deep freeze suspended animation.

  112. 112
    zman Says:

    ZTRADE: $10KP

    Re purchased (10) XOM $75 November calls for 1.10 with the stock up about $0.50 on the day. Risky and not going to hold for long.

  113. 113
    MMarkkk Says:

    BOP: thoughts on playing PST and TBT in this market? Ultrashort plays on the treasuries.

    Z: M&A…cash is king. Would you/could you borrow money to buy something today? Not hearing many companies/targets screaming for mercy so why would anyone sell?? CHK had to sell but others are just slowing down spending and letting their hedges bring in the cash. As a board member (in my dreams) I’d vote against any takeover in today’s low price environ. But some folks have a lot of cash on their balance sheet so who knows. XOM has a few dollars in spare change…they could buy a few companies…or countries!!!!

  114. 114
    tomdavis12 Says:

    BOP: Thanks. How about this thought. Any banks that have taken from TARP will have to cut their dividend. Over 2000 banks have taken. Is that in today’s prices?

  115. 115
    zman Says:

    Thanks Mark.

    Ok, oil below $50.

  116. 116
    zman Says:

    Traders were looking for oil to hold 49.90 which was the 2007 low. I could have told them that anything below $50 would trigger an avalanche of selling that will make stopping only a dime lower impossible. The trick was to hold $50 and that failed. So now, OPEC has little choice but to act. At these prices, the IEA should ask them to CUT, not produce more as we are looking an a non-investment enticing environment which will in the medium term result in much higher prices.

  117. 117
    md Says:

    Z – Is there any particular reason for CHK . Are all of energies suffering due to BWBW. Which have credit concerns.

    BOP Can you star FNM Bond Indicator
    along with IG.

    We need a school of Zober thought over here.

  118. 118
    md Says:

    BWBW= baby with bath water syndrome

  119. 119
    zman Says:

    CHK has been weak and got weaker with oil and gas. Don’t see anything specific. The have a good bit of debt but also good coverage and nothing due until 2012.

    XTO has high leverage, but again good coverage.

    Some of the smaller players, especially the unhedged are going to be in trouble as far as debt outstanding vs potential asset write downs if oil and gas prices are at these levels on Dec 31.

    Can someone please make Paulson stop talking.

  120. 120
    md Says:

    Someone should tell Paulson that he’d be entitled to carbon credits for every minute he keeps his mouth shut

  121. 121
    zman Says:

    md – no doubt. Here’s a long list of stuff we tried that ended up failing. That about sums it up. Or how about, we tried, we failed?

  122. 122
    BirdsofpreyRcool Says:

    Mark – i don’t make calls on either treasuries or gold. there are too many reasons for people to buy/sell those instruments that have little to do with fundamentals (that I understand, anyway). there are a lot of very smart people who do a good job of calling those mrkts (i’m just not one of them). thanks for asking, tho.

  123. 123
    zman Says:

    ZTRADE: $10KP

    Added another (10) XOM $75 November calls for $0.70.

  124. 124
    BirdsofpreyRcool Says:

    md – keeping some generic monitor of Fannie/Freddie is a good idea. Let me work on that and get back to you. I’m a junk bond specialist, with some corporate and govt bond trading in my background. Never did agencies, so need to get a handle on what’s the best way to monitor directly.

  125. 125
    BirdsofpreyRcool Says:

    tomdavis – not sure the mandatory divd cut for TARP-banks is a good across-the-board idea. First, some banks were forced to take gov’t assistance. Second, at some point, banks want to access the public markets to shore up their balance sheets. If the banks have the current cash flow to pay dividends, you don’t want to kill your shareholder base by cutting the dividend.

    If a bank uses the TARP to pay a dividend, that’s a no-starter. But, TARP funds are only supposed to be available to “viable” banks… so, supposedly, that isn’t an issue.

    Did i answer the question you were asking? Or, did i go off on a tangent…

  126. 126
    md Says:

    The spread over treasuries would be good.
    Probably a good idea to do max. 3 postings a day of it so it does not become too time consuming.
    How does Sam’s MER.PR.F sound to you.

    GM is holding it’s own from the below $2 club to $3. Wonder if a repeat of AIG stock gyrations is about to play.

  127. 127
    zman Says:

    Volumes are much higher today. Feels like capitulatory selling.

  128. 128
    BirdsofpreyRcool Says:

    IG 275 sorry to see this

  129. 129
    BirdsofpreyRcool Says:

    e&ps just getting smashed with a sledgehammer today. what’s new? why today? yes, it feels like some holders just throwing in the towel. SD and CLR are particular favs of Hedge Funds… getting sheeeelacked.

  130. 130
    md Says:

    Solutions anyone

  131. 131
    zman Says:

    md – re 130. Solutions to what, this market?

  132. 132
    zman Says:

    With oil falling like it has and the stocks following you would normally have consolidation in the industry. But not with the way the financials are locked up. Don’t know when the speed of the slide will stop but the snap back, when it comes, is going to be a mother.

  133. 133
    zman Says:

    Contango still very steep. December contract, which expired today, at 48.70, December 2009 at $60. $12 for 12 months!

  134. 134
    zman Says:

    Thanks B, will include in the switch from backwardation to contango in the post tomorrow

  135. 135
    BirdsofpreyRcool Says:

    This has a little bit of a feel of “margin call / liquidation” to it. Wonder if we will hear about some new, commodities-focused fund closing tomorrow. Sure oil is down 10% for the front contract… but this has a “run for the exits!!” flavor.

  136. 136
    Sambone Says:

    Off subject

    By Tennille Tracy

    NEW YORK (Dow Jones)–With the stock market waffling between positive and
    negative territory and several financial stocks taking a steep dive, traders
    did something Thursday that they rarely do – they bought options that expire in
    a matter of hours.
    Under normal circumstances, traders steer clear of options that are nearing
    their expiration dates. That’s because they have a greater chance of losing
    money when they bet on a company’s stock moving in a certain direction, by a
    certain degree, within a short amount of time.
    On Thursday, however, traders showed up in droves to buy and sell November
    options in many of the largest financial companies, despite the fact those
    contracts become obsolete when the market closes Friday.
    “I think the volatility buying – with options expiring tomorrow – has been
    extreme,” said Steve Sosnick, an equity risk manager with Interactive Brokers’
    Timber Hill.
    Among the most active names on the day was Citigroup Inc., where traders
    showed interest in both near-term calls and puts. Calls convey the right to buy
    a company’s stock at a fixed price, while puts convey the right to sell it.
    As trading in Citigroup climbed to twice the normal level, investors flocked
    to November puts that allow them to sell the Citigroup shares for $5. The
    contracts are priced at 35 cents and make money if the shares drop below $4.65
    before the end of Friday.
    With Citigroup recently trading at $5.14, down 19.7%, those contracts would
    require another 10% move to the downside before becoming worthwhile.
    There was noteworthy activity in Citigroup calls, as well, with investors
    picking up batches of November $7.50 calls. Those contracts are priced at 5
    cents and make money if Citigroup pulls above $7.55.
    Thursday’s activity coincided with a decision by Citigroup to buy $17.4
    billion in assets held by its structured investment vehicles and to write down
    $1.1 billion to reflect losses among the assets.
    Investors also proved willing to trade near-term contracts in JPMorgan Chase &
    Co. With activity in JPMorgan at twice the normal level, investors showed
    interest in November $25 calls. The contracts are priced at $1.25 and make
    money if the company’s shares climb above $26.25.
    JPMorgan shares recently traded at $24.95, down 12.3%, which means they would
    have to bounce 5% higher before the contracts become worthwhile.
    Investors also picked up November $22.50 puts, which are priced at 35 cents
    and make money if JPMorgan shares slip below $22.15.
    With so many investors willing to speculate on the direction these stocks will
    take in the next 24 hours, the options market is signaling just how volatile
    the market has been and will most likely continue to be.
    After several days of wild swings and dramatic moves, investors believe
    anything can happen and they’re willing to bet that it does.
    “I think that everyone has started to stretch their definition of what is
    possible in this market,” Sosnick said. “Unfortunately, that tends to be with a
    glass-half-empty mentality.”
    The definition of what’s possible also included a 10% move in Goldman Sachs
    Group, as traders flocked to near-term options in that Wall Street firm.
    They picked up lots of November $60 calls, which are priced at $1.25 and make
    money if Goldman shares jump above $61.25. They also picked up November $50
    puts, which are priced at 75 cents and make money if Goldman stock dives below
    Goldman recently traded for $57.14, up 3.6%.

    -By Tennille Tracy; Dow Jones Newswires
    Dow Jones Newswires
    11-20-08 1530ET

  137. 137
    Sambone Says:

    By Gregory Meyer

    NEW YORK (Dow Jones)–As crude dips below $50, the dark days of the early
    1980s are haunting the oil market.
    Benchmark crude on Thursday ended at levels not seen since May 2005. But it’s
    the early 1980s, when the U.S. entered a deep recession and world oil demand
    declined four years running on a conservation push and spiking prices, that
    offer a more useful reference point.
    “We could have negative oil demand growth for four years in a row again,” said
    Philip Verleger, an independent energy economist who served in the Carter
    administration. “This is a really bad recession.”
    Light, sweet crude oil for December delivery, the front-month-contract,
    settled at $49.62 a barrel on the New York Mercantile Exchange. This is the
    lowest close since May 23, 2005. Back then, rising prices were a phenomenon of
    exploding growth in emerging economies, also taking a boost from the 2003 start
    of the war in Iraq. Oil’s latest rally took off from $30 a barrel in late 2003,
    crossed the threshold of $40 in May 2004 and continued to climb in a bid to
    keep pace with demand growth and an array of supply concerns. Crude peaked
    above $145 in mid-July.
    Today, the price spike and fallout from the financial crisis have caught up
    with consumers, smothering demand growth. This resembles in some ways the
    1980s, when prices peaked near $40 a barrel, the U.S. economy entered recession
    and an oil glut emerged.
    Just as the rise in prices that characterized much of this decade marked a
    boom in the cyclical oil cycle, the current downturn is very much the bust.
    Today, the economic outlook is decidedly stark. The International Monetary
    Fund sees growth of 2.2% in 2009, falling below the fund’s traditional
    threshold of a world recession. In 2005, oil demand in the most industrialized
    countries grew annually for the last time, while China’s oil demand was taking
    off, according to the Energy Information Administration. Next year, the agency
    sees world oil demand essentially unchanged from 2008, while other analysts eye
    a decline.
    The fall has so far proven unstoppable.
    While it took three years for crude to climb from $50 a barrel to its $147.27
    peak last July, the trip back down took four months and many analysts think
    prices are set to fall further.
    “I don’t think you’re going to see a huge recovery in oil prices until the
    world economy starts to recover,” said Lucian Pugliaresi, president of the
    Energy Policy Research Foundation in Washington.

    An Earlier Parallel

    To be sure, there are big differences between now and the 1980s. That decade’s
    price spike followed the 1979 Iranian revolution and Iran-Iraq war. The Nymex
    crude futures market was only created in 1983. U.S. consumption was poised to
    spring back and set new records.
    Potentially reinforcing a trend toward softer demand, President-elect Barack
    Obama has embraced strict controls on carbon dioxide emissions, which would
    force greater efficiency in the way the U.S. burns oil.
    “The big difference between then and now is in the early 1980s, we were
    starting a deregulation wave, and now we’re starting a really big regulatory
    wave,” Verleger said.
    Many analysts warn that today’s low prices will squelch investment in new
    supply, potentially forcing prices to skyrocket a few years from now when
    demand is revived in a rebounding economy. The International Energy Agency’s
    latest long-term energy outlook sees oil demand rising by a quarter by 2030 to
    106 million barrels a day and talks of “a real risk that underinvestment will
    cause an oil-supply crunch in that timeframe.”
    Others paint a less bullish picture.
    “Demand destruction today rivals that caused by the oil shocks of the 1970s,
    and may prove to be, to an even greater extent, a game changer,” noted Antoine
    Halff, deputy head of research at futures brokerage Newedge USA. Besides weak
    demand, the costs of getting new supply are likely to fall alongside oil
    prices, and major exporting countries will have a difficult time further
    cutting output, Halff said.

    -By Gregory Meyer, Dow Jones Newswires
    (END) Dow Jones Newswires
    11-20-08 1533ET

  138. 138
    Sambone Says:

    Thar she Blows, uh I mean goes!

  139. 139
    zman Says:

    XOI down 10%
    XNG down 15%
    OIH down 17%

    market literally crashing into the close. DJIA off 425.

  140. 140
    Sambone Says:

    This market kinda reminds me of Maj. T.J. King Kong (Slim Pickens) in the movie “Dr. Strangelove, or how I learned to stop worring and love the bomb” in the scene where he is on top of the hydrogen bomb riding into the missle site. Yee Haww!, Yee haww!

  141. 141
    Sambone Says:

    Maj. T.J. “King” Kong – Well, boys, we got three engines out, we got more holes in us than a horse trader’s mule, the radio is gone and we’re leaking fuel and if we was flying any lower why we’d need sleigh bells on this thing… but we got one little budge on them Rooskies. At this height why they might harpoon us but they dang sure ain’t gonna spot us on no radar screen!

    Kinda reminds me of our oil stocks.

  142. 142
    Sambone Says:

    D*#@, Look at SKF, Wow!

  143. 143
    BirdsofpreyRcool Says:

    IG 285 +38bps. this is “blood in the streets”

  144. 144
    Sambone Says:

    15:57 11/20 *DJ 3 Critically Hurt In Delek Refinery Blast, Fire -TV

  145. 145
    Sambone Says:

    Tini time

  146. 146
    zman Says:

    I honestly cannot recall a day this bad. You would think my screen was populated by banks that routinely fall 20 to 30%.

  147. 147
    MMarkkk Says:

    Sold some April 7.50 CHK Puts for $1.25…equivalent of having to buy CHK at 6.30/sh…Who knows! Double Down on cold table??? At least in Vegas you get free drinks!

  148. 148
    BirdsofpreyRcool Says:

    the 10-yr treasury note just dropped to 3.06%… this is the lowest yield on record.

  149. 149
    MMarkkk Says:

    LGCY…70% of 2009 production hedged at $85/bo…paying 23% distribution…probaly will take a small hit on the distribution, maybe down to ONLY 15%????

  150. 150
    zman Says:

    Mark – pretty amazing. Wonder if we get a bit of a bounce on oil soon as the December contract died today (literally). I’m heading out for a bit. Can’t think of anything to say about today right now.

  151. 151
    ram Says:

    Just when you think you have some base in the making. Apparently the PPT is AWOL, otherwise this is simple profit taking. I’m not sure what is considered catostrophic anymore.

  152. 152
    MMarkkk Says:

    Z – only thing to say…BEER-THIRTY! And at this rate, it’ll have to be Busch or Natural Light!! No more Alaskan Amber or Dogfish IPA in this market!

  153. 153
    VTZ Says:

    Is there “Lucky” beer in the US?

  154. 154
    jy Says:

    There was a beer called “Lucky Lager” we used to buy in Columbia, MO in the late 1970’s for ~$4/case. Don’t know if it still exists. It was pretty good beer, especially for the price. We grad. students weren’t too discriminating.

  155. 155
    VTZ Says:

    Yeah Lucky is what I’m talking about, they still sell it here, haha.

  156. 156
    carpet cleaning Filton Says:

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