Wednesday – Oil & Natural Gas Inventory Previews

142 thoughts on “Wednesday – Oil & Natural Gas Inventory Previews”

1. By Nick Heath
   Of DOW JONES NEWSWIRES

   LONDON (Dow Jones)–Crude oil futures traded higher following news of Chinese
   interest rate cuts Wednesday, reversing earlier moves lower as traders waited
   for weekly U.S. oil inventory data.
   While Beijing’s rate move provided a burst of optimism in the crude market –
   where China is seen to be a driving force of world oil demand growth – analysts
   suggested that the news may have also triggered a wave of position adjustments
   ahead of both the U.S. Thanksgiving holiday Thursday and a likely long weekend,
   that also hosts a meeting of Organization of Petroleum Exporting Countries
   members.
   At 1222 GMT, the front-month January Brent contract on London’s ICE futures
   exchange was up $1.36 at $51.71 a barrel.
   The front-month January light, sweet, crude contract on the New York
   Mercantile Exchange was trading 89 cents higher at $51.66 a barrel.
   The ICE’s gasoil contract for December delivery was up $7.75 at $540.50 a
   metric ton, while Nymex gasoline for December delivery was up 321 points at
   112.70 cents a gallon.
   China said Wednesday it will cut its benchmark deposit and lending rates by
   108 basis points and cut banks’ reserve requirement ratio as it seeks to boost
   its economy. While seen as a positive move, crude’s resistance to a host of
   similar monetary and fiscal incentives threw doubts over whether this latest
   fillip would prove a lasting support for crude prices, with demand concerns
   linked to economic slowdown proving difficult to unseat.
   “It is very significant – China has been the engine behind oil demand,” said
   Eugen Weinberg, analyst at Commerzbank in Frankfurt. “But the flow of positive
   news over the last few weeks has failed to support prices. OPEC production
   cuts, dangers from piracy, interest rate cuts, rescue packages, bailouts all
   sorts of positive news has failed to support prices. Sentiment is so weak right
   now and it’s sentiment that’s driving prices lower.”
   U.S. Department of Energy inventory data Wednesday are expected to prove the
   last meaningful flurry of activity for the week, analysts said. With the U.S.
   on holiday Thursday, and many U.S. market participants likely to bridge the
   holiday with the weekend, widespread position closures are expected Wednesday,
   after which participants are likely to sit tight to wait on the outcome of
   Saturday’s meeting of OPEC members.
   “Unless the stats prove exception one way or another, I think this will be
   done and dusted for the week,” said Jim Rintoul, analyst at London-based trade
   advisory TheOilTrader.com. Demand numbers would likely be the most closely
   watched reading again, he suggested.
   In a Dow Jones Newswires survey of 16 analysts, 13 expect U.S. crude oil
   stocks grew for the ninth straight week last week. Crude inventories are seen
   up 600,000 barrels on average, while gasoline stock are seen edging 100,000
   barrels higher on average. Distillate stocks are called down by 500,000 barrels
   in average, while refinery utilization is expected to have risen 0.2 percentage
   points to 85.1% of capacity.
   Differing comments from OPEC officials in the run-up to Saturday’s gathering
   in Cairo leaves the outcome unclear, market participants say. With prices
   continuing to fall despite the 1.5 million barrel a day production cut the
   group announced last month, another trim is widely expected. However, doubt
   surrounds when the group will unveil the measure, either at Saturday’s event or
   the group’s next scheduled meeting on Dec. 17 in Oran, Algeria. Price activity
   immediately ahead of the meeting could prove decisive, some suggested.
   “We suspect that should oil prices fail to rally by week’s end, cartel
   officials meeting in Cairo will be given a green light to announce a production
   cut in advance of the more formal gathering on December 17th in Algeria,” said
   Edward Meir, analyst at MF Global in New York. “With energy prices as weak as
   they are and threatening to break below the key $50 mark, we doubt OPEC has the
   luxury of waiting for another three weeks before it announces what seems to be
   a foregone conclusion.”
   -By Nick Heath; Dow Jones Newswires
   Dow Jones Newswires
   11-26-08 0740ET

2. Crude Steady, Caution Before EIA Data

   Dow Jones Newswires

   SINGAPORE — Crude oil futures clawed back some ground in Asia Wednesday alongside steadying regional share markets and as the dollar weakened against the yen, shoring up dollar-denominated commodities.

   Sentiment, however, was cautious as traders weighed their expectations for weekly U.S. Energy Information Administration oil data due later Wednesday, as well as a meeting of the Organization of Petroleum Exporting Countries scheduled for Saturday.

   “The rapid decline in gasoline consumption…is a very worrying trend and it tells us that prices may have gone too far on the downside,” said Peter Beutel, president at trading advisory firm Cameron Hanover.

   “If OPEC cuts again this weekend, supply and demand factors will clearly favor higher prices.”

   On the New York Mercantile Exchange, light, sweet crude for delivery in January traded at $51.16 a barrel at 0640 GMT, up 39 cents in the Globex electronic session.

   January Brent crude on London’s ICE Futures rose 35 cents to $50.70 a barrel.

   Nymex crude Tuesday tumbled 6.8% at settlement partly after a U.S. Department of Commerce report showed a 0.5% contraction in the country’s third-quarter gross domestic product, reminding traders of deteriorating economic conditions.

   With the focus on the outlook for energy demand, traders are awaiting the EIA’s Weekly Petroleum Status Report, due at 1535 GMT.

   In the week to Nov. 21, U.S. crude inventories are expected to have risen 900,000 barrels, and gasoline by 100,000 barrels, according to the average prediction of 16 analysts polled by Dow Jones Newswires.

   Distillate stockpiles, which include heating oil and diesel, probably fell 800,000 barrels on week.

   The average refinery utilization rate is expected to be 0.2 percentage points up from 84.9% of capacity in the previous week, the survey showed.

   “We feel that the average industry expectations for about a 1 million-barrel crude stockbuild…are too low. A build in excess of 3 million-4 million barrels should not be ruled out,” Jim Ritterbusch at Ritterbusch and Associates said of crude stocks, which have climbed to their highest levels since mid-May.

   “Such a development could set the stage for another hard selloff into the (U.S. Thanksgiving) holiday, especially if accompanied by additional negative economic releases.”

   Meantime, equity markets continued to lend some direction to oil traders as a barometer of the health of the global economy.

   Stock indexes mostly rose in Asia, although Japan’s Nikkei 225 was among a handful that lost ground.

   At 0640 GMT, Nymex products futures also ticked higher with crude.

   Heating oil for December chalked up 112 points to 171 cents a gallon, while December reformulated gasoline blendstock traded at 110.50 cents a gallon, 101 points higher.

   Both the front-month contracts will expire at the end of the week.

   —By Yee Kai Pin, Dow Jones Newswires

3. LONDON, Nov 26 (Reuters) – Merrill Lynch MER cut its oil
   price forecast for 2009 to $50 a barrel from $90 a barrel on
   Wednesday, citing weaker prospects for global economic growth
   and a contraction in world oil demand.
   Merrill Lynch economists have lowered the growth of
   worldwide gross domestic product (GDP) to 1.3 percent for next
   year, while the bank’s commodity analysts now see global oil
   demand shrinking by 400,000 barrels per day (bpd).
   “Our economists have slashed their 2009 forecast to 1.3
   percent, a scenario that is consistent with a global recession,
   and we are now cutting our average WTI and Brent oil price
   forecast to $50 a barrel for 2009,” Merrill Lynch said in a
   report received by Reuters.
   “Also, we see a contraction in global oil demand of 400,000
   bpd or 0.5 percent next year.”
   (Reporting by David Sheppard; Editing by James Jukwey)

   Wed Nov 26 14:05:54 2008

4. Red but mostly directionless opening, very thin on volumes as you’d expect with wide spreads.

   Iran claims OPEC members producing above quota levels but so far that news is being trumped by Sam’s China story above. OPEC will need to talk about discipline at its meeting this weekend or no one is going to buy the cuts they have proclaimed.

5. Thanks Same for the Merrill note, exact same cuts as Tristone the day before. Like I said, good to get the analysts out of the way.

6. The IG index (our gauge for credit demand) opened unch’d from last night at 248 and then proceeded to tighten (good) at a fairly rapid rate on no volume.

   IG 238 -10bps

   Keep in mind that these levels (above 150bps) are insane to begin with. So, the IG index spreads are just indicators of sentiment at this point (lower = better; tigher credit spread).

   One theory making the rounds of the fixed income trading desks this morning is that clients expect to see a January rally. So, they are “buying risk” and pushing credit spreads tighter. Just to put it in context, the IG index was around 70 bps last December and everybody sold, expecting a Jan ’08 rally. While we are clearly at different levels today, the habit of expecting a January rally is tough to break. Assumptions always end in tears.

   A second theory is that there is a large seller of risk they last few days… possibly a fund unwinding (or winding down).

   Bottom line: tough to draw too many conclusions from this “rally” we are seeing in the IG Index from it’s wide last week of 280.

7. Thanks much BOP!

8. P.s. in the inverse world of “credit” and fixed income, “selling” the IG index is like selling puts. It’s an indication that investors think conditions in fixed income are getting better (all else equal). So, the more investors sell the IG, the tighter the spreads and the lower the index. Low/tight = good. High/wide = bad.

9. Re-visited CLR charts again (first 2 charts at the link). Also wanted to say that the CLR analysis reminded me of a different way to look at trendlines, basically you don’t always use the absolute high (or low). The most useful line may occasionally turn out to originate from the high that comes previous to the absolute high. I added the extra line to the EOG daily chart and it located the last two closes. Sorry for my previous omission.

   http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2933882

10. Trying and so far failing to add more SWN pre numbers. Looking at the $35s on a better gas number as per thoughts in the post.

11. Bird – any visibility yet on new IG issues for january? Any signs of interest? I am sure there are some folks that “need” to issue.

12. Z – It will be a slow day today on Wall Street. Don’t expect much until next week.

13. Sam – absolutely.

14. Thanks much Tater.

15. The front page of the WSJ ran a headline this morning about credit getting better.

    I wish.

    This is just hopeful thinking on the part of someone looking at a small part of the market and extrapolating wildly. The best illustration of the still-broken credit market is the shape of the CDS curves for individual company bonds. Those curves are inverted. In real life, Nature abhors inverted curves. They almost always mean that something “bad” is going to happen. Like, when the treasury yield curve inverts. 100% of the time we enter a recession, the Treasury Yield Curve was inverted.

    Anyway, some of the curves are at ridiculous levels in the 2-yr and under maturities. Also, there are still mostly sellers of individual credit (to get better, you need to see more active buyers than sellers). What the invesion is telling you is that investors are more worried about the next two years, much more than they are the next 10 yrs. Investors are literally freaking out over near-term default risk, or the risk of bankruptcies over the next 2 years. That’s not to say there won’t be bankruptcies over the next 2 yrs, but at the current levels, the expectation for the number of companies in trouble is way off the scale of reasonable.

    Bottom line: I wish credit was better (a la WSJ headlines). But it’s not. Stay nimble.

16. ZTRADE: $10KP

    SWN
    Bought (5)
    $35 December Calls(SWNLG)
    with the stock up slightly as per my thoughts on the gas storage number in today’s post.

17. 1520 – This feels a lot like last year. When the fixed income market (which basically shuts down from now through the end of this year) expected to see a rebound of company bond issuance in January. The first two weeks in January are CRITICAL in setting the mood for debt issuance. Given the 5 week hiatus prior to rolling into January, it is natural to see demand pick up in the first part of the new year.

    As mentioned in #15, last year fixed income investors expected a “normal” January. Instead, they were met with an almost immediate crisis (in a non-hyped, true sense of the word) in credit. It was the worst January for credit in anyone’s memory. This year, indications are that investors are again hoping for the January fixed income pick up. As last year taught us, we won’t know what the landscape looks like until we actually get there.

    But, hold onto your seats. Watching the appetite of investors to buy any debt )other than US Treasuries or other US-backed debt) in the first two weeks in January will be CRITICAL.

18. 1520 – I can not overemphasize enough, you just asked the 100 trillion dollar question. “Will investors be willing to buy corporate bonds in January?”

    The answer is: I sure hope so.

19. GDP just won’t give a pullback…guess that was it last week. Lots of prospects, Haynesville exposure, very little debt, big expected production growth = up.

20. So it begins;

    SHIPPING Nov. 26 (Bloomberg) — Half of commodity shipping lines are likely to breach loan terms in the months ahead after rental rates and vessel prices fell, according to Nordea Bank AB, the world’s largest arranger of loans to the industry. Banks will use the breaches to renegotiate lending terms and prices, Carl Steen, head of Nordea’s shipping, oil services and international division, said after a seminar in Stockholm today. Companies that fail to meet conditions are unlikely to be forced into bankruptcy, he said.

    http://www.dryships.com/index.cfm?get=report

21. Z – KWK has been on a bit of a diet lately. Gotten so small you can hardly see it. Any thoughts on what’s driving that?

22. Dman – KWK suffering from repeated downgradeitus. Analysts are completely throwing in the towel here …. at the bottom. I think it turns nicely probably just before 2009, need to look at their hedges. That is one of the new class of single digit midgets that will be in my “It’s Not The End of the World As We Know It” 2009 Portfolio.

23. By Benoit Faucon
    Of DOW JONES NEWSWIRES

    LONDON (Dow Jones)–Despite oil prices’ nosedive by nearly $100 a barrel since
    July, nervous OPEC members gathering in Cairo later this week appear likely to
    defer another oil-output decision until December so they can gauge the impact
    of two previous cuts.
    Worried by the sinking demand and rising storage levels that helped to tip oil
    prices below $50 a barrel in the last week, the Organization of Petroleum
    Exporting Countries has hastily arranged to meet Saturday in Egypt for
    consultations. The meeting coincides with a previously planned meeting of Arab
    oil-producing countries.
    OPEC members are assembling as the organization struggles to stop oil prices
    from plunging further amid widening global economic turmoil. OPEC members have
    a mixed record of trying to halt falling prices by cutting supply, especially
    when facing a recession.
    All OPEC members are expected to attend the Cairo meeting, where the group
    will review the current oil-market environment and evidence of its adherence to
    already-agreed production cuts.
    OPEC President Chakib Khelil said Monday, however, that OPEC most likely would
    suspend any further output adjustments until its next formal meeting, set for
    Dec. 17 in Oran, Algeria.
    “OPEC members will not take a hasty decision,” said Sadad Al-Husseini, a
    former executive of Saudi Arabian Oil Co., or Saudi Aramco. “They will review
    the situation and prepare for their Oran meeting.”
    OPEC President Khelil said, “The Cairo meeting will see consultations only …
    but there’s no set agenda.”
    Data show “compliance with the cut has been excellent so far,” Khelil said.
    The OPEC president also said, however, “Not enough information is available to
    make a decision, but if there were a meeting today a 1-million-barrel-a-day cut
    wouldn’t be enough.”
    Tanker tracker Petrologistics said Friday that OPEC members subject to quotas
    have removed more than 1 million barrels a day from global markets in the past
    month.
    Venezuela and Iran are calling on OPEC to swiftly reduce production again by
    at least 1 million barrels a day, only a month after the organization agreed to
    cut output by 1.5 million barrels a day. That output cut followed another OPEC
    move in September to reduce its supply by about 500,000 barrels a day.
    Libya also has said OPEC can’t rule out the possibility of agreeing to a new
    production cut this week when members gather in Cairo. Shokri Ghanem, head of
    the Libyan National Oil Co., told Dow Jones Tuesday, “We cannot tell if there
    will be a cut or not.”
    Despite two OPEC cuts in as many months, oil prices have continued their
    downward spiral. Last week, they plunged below the $50 per barrel mark for the
    first time in more than three years.
    Dwindling demand for petroleum has driven oil prices lower as consuming
    nations such as the United States and United Kingdom slide into economic
    recession, spurred by a collapse of consumer confidence and financial-industry
    troubles.
    Tuesday, the Organization for Economic Cooperation and Development, which
    represents the world’s most industrialized countries, said combined gross
    domestic product of its 30 members is expected to fall 0.4% next year.
    Oil prices have slightly recovered this week, with New York Mercantile
    Exchange oil futures trading up about 3.2% on the day at $52.41 a barrel at
    1431 GMT Wednesday.
    But the slide in oil prices since July has prompted Deutsche Bank AG, Goldman
    Sachs Inc. and Citigroup to downgrade their oil-price forecasts.
    Citigroup now says a barrel of oil will average $65 in 2009. But even oil
    prices at that level would be unacceptable for OPEC members Algeria, Angola and
    Nigeria. These members are reluctant to reduce oil output again soon and have
    said they consider $70 a barrel to be the minimum acceptable oil price.
    Various downward forecast revisions for 2008-2009 consumption suggest that
    falling oil prices have failed to shore up oil demand.
    The International Energy Agency, which coordinates energy policy for many
    industrialized nations, this month slashed its forecasts for 2008 global oil
    demand by 330,000 barrels from the 2008 demand estimate in its October report.
    The IEA even made its first substantial downward revision for 2009 oil demand
    in China and other emerging markets, which it had previously considered the
    most stable source of oil consumption growth.
    Looking ahead, OPEC expects consumption of its oil will decline by 910,000
    barrels a day next year to 30.9 million barrels a day. That’s a downward
    revision of 40,000 barrels a day from the 2009 forecast in its October report.
    As widening global economic turmoil crimps oil demand, OPEC members also worry
    oil inventories will rise – even during the Northern Hemisphere’s winter
    heating season, which ordinarily lifts demand and draws down key consumers’
    petroleum storage.
    The International Energy Agency said in its latest report that oil inventories
    in the U.S. and other industrialized nations during September stood at 55 days
    of forward demand cover – already well above the 10-year-average level.
    “The big concern in OPEC is that inventory number,” a person familiar with
    OPEC’s thinking said after the IEA stocks figures were released. If OPEC “can
    take care of that, prices may follow and rise. But it is difficult because of
    the demand environment.”
    OPEC would like to see its own output cuts met by similar reductions from
    non-OPEC oil exporters. When it meets Saturday in Cairo, the group may discuss
    prospects for such cooperation with exporters including Russia, the world’s
    largest non-OPEC oil producer.
    At OPEC’s September meeting in Vienna, Russian delegates pledged closer
    cooperation with the group. Russia renewed that pledge this week.
    “Russia will actively cooperate with OPEC; we will be coordinating our
    activities to defend our interests,” Russian energy minister Sergey Shmatko
    said Tuesday. “We want to work out and understand a production mechanism.”
    An OPEC delegate said, however, that Russia was not expected to be represented
    at the Cairo meeting.

    -By Benoit Faucon, Dow Jones Newswires (Spencer Swartz in London and Reem Shamseddine in Dubai contributed to this
    report.)

    Dow Jones Newswires
    11-26-08 1024ET

24. Bird – am seeing some activity in terms of debt deals (TOT) and revolver agreements (RIG).

25. The US 10-yr treasury note yield just dropped to it’s lowest EVER. That’s EVER. You can now invest your money in Uncle Sam for 10 years and expect to get paid 2.9837% per year.

    At what point do investors start looking at quality corporate debt yields (like NE’s 5-yr bonds, issued at a 7.4% yield the other day) and saying “why invest in 10 yr treasuries when Noble is paying me 7.4% for shorter-term paper”…? Again, back to that 100 Trillion Dollar Question.

26. z – #24. Ok… “debt markets shutting down for the next 5 weeks” is a relative-value statement. Bankers and traders and investors are still at their desks… but no issuer in their right mind, tries to come to market now. Unless you have to.

27. Huge enormous build.

28. huge increase in crude, up 7.3 mm barrels

    gasoline up 1.9 mm barrels

    dist off only 0.2 mm barrels

    bearish

29. On crude its imports, at 11 mm bopd, that’s monster and an outlier as numbers go

30. gasoline demand continued to ebb, still no help from prices there.

31. Looks like the world is trying to dump their oil on an old standby (us), but we’re already swimming in the stuff.

32. Oil is off from up $1.75 to flattish. The imports temper how bearish those numbers are as demand by refiners actually rose by 300,000 bopd from week to week. So its not a jump out the window number but hard to get excited about.

33. Bird #25 – The fixed income manager at the pension fund I work for wants to do exactly as you suggest — except on balance he will be selling fixed income through next year to raise cash to meet capital calls for private equity and to rebalance the fund toward publicly traded equities. Most large pension funds are in the same boat.

34. When do we get the natural gas number?

    Mahalo

35. Antrim – yep. Imports up 1.1 mm bopd from last week. That’s an extra 7.7 mm barrels for the week, pretty much explaining the build. Demand for crude was higher by 0.3 mm bopd.

    Too bad no one is minding the store. Congress made sure the SPR refill stopped when prices were over $125. Now at $50, we are adding 0 each week. Ugh.

36. 12 EST. See thoughts in the post on that.

37. API

    Crude UP 468K
    Gasoline up 1.6M
    Distillate UP 1.4M

    Looks like the API was a week early last week with there 8M build.

38. Re crude How long does it take for an OPEC cut to have an effect on shipments?

39. Gasoline demand year over year still down 2.8% which is flat with last week’s number. That one is pretty disappointing given the price action in gasoline. Guess we’ll have to wait for the unemployment checks to dry up before people get back in their cars for interviews. Hard to get excited about the refiners here.

40. Sane – you mean they were correct and the EIA as usual is playing catch up. Your tax dollars not at work very well.

    El-D – Assuming they cut when they said they would cut and assuming “storage at sea” is nil, probably 3 to 4 weeks. That’s a tanker running flat out at 12.5 knots per hour from the middle east to the U.S.

41. Coug – thanks for the color! Very interesting/provocative comment re: capitall calls for PE.

    I have absolutely NO DOUBT that your manager is a very very smart investor. Here’s the problem tho, unless there are buyers of corporate debt, the equity market can not support a sustainable rally. Back to that analogy of fixed income being the skeleton on which the body of the market is hung. If you don’t have any backbone, you can’t stand up.

    On the other hand, if managers/investors really really really WANT the stock market to rally. And are willing to invest irregardless of credit conditions, eventually that will pull money back into fixed income. As a matter of fact. That is the way that most “credit crunches” are solved… by money flowing generally back into riskier assets (like equities).

    The disturbing part of your comment, however, related to the capitall calls from Private Equity. Over the last 15 yrs, PE has been a massive driver of stock valuations. Without the marginal support of PE, stocks will have a harder time rallying.

    Underfunded pensions are a ticking time bomb (as others have pointed out on this site). The fact that they HAVE to post results and are willing to reach for risk in order to do so, may well set the valuation floor for this bear mrkt. Let’s hope so, anyway.

    Lots of moving parts. We will have a good idea of which way markets will move, by watching fixed income issuance during the first few (critical) weeks in January (again, kudos for 1520 for bringing up that massively-important point).

    Thanks again for your color.

42. Pricing in the equities is very holiday, with some stocks diving, and getting left behind by rallies. Not a lot of sense for the rest of today’s and Friday’s trading. Natural gas should provide the last impetus of the week for energy stock movement.

43. Bird – all I’m saying is that energy firms are able to get credit deals done so the market is not completely frozen. Four weeks ago I saw none of these going through and in the last week I know of 5. This was just announced: ATW $280 mm revolver for rig construction at 1.5% over the eurodollar rate. Would you view that as a bad rate for a smaller rig operator?

44. Oil back up a buck now.

45. By Gregory Meyer
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Early gains in oil futures largely evaporated Wednesday
    after U.S. government data showed a surprise gain in crude inventories.
    Light, sweet crude for January delivery was recently up 33 cents, or 0.7%, at
    $51.10 a barrel on the New York Mercantile Exchange, about a dollar less than
    levels before the Energy Information Administration’s weekly report. Brent
    crude on the ICE Futures exchange rose was up 63 cents to $50.98 a barrel.
    The EIA reported U.S. crude stockpiles rose 7.3 million barrels to 320.8
    million barrels in the week ended Nov. 21, vastly higher than analysts’
    expectations of a 900,000-barrel increase. It was the ninth straight weekly
    increase in crude inventories.
    “The market knee-jerked down when they saw a 7.3-million build in crude
    inventories,” said Pete Donovan, vice president at brokerage Vantage Trading in
    New York.
    The data showed gasoline stockpiles rose 1.8 million barrels to 200.5 million
    barrels, outpacing an average survey estimate of a 100,000-barrel gain.
    Stockpiles of distillates, which include heating oil and diesel, fell by
    200,000 barrels to 126.7 million barrels – one quarter of the decline analysts
    had expected.
    Crude had earlier rallied after China announced its biggest interest-rate cuts
    in a decade, raising the prospect the country’s booming oil demand will weather
    an economic slowdown. China, the world’s second biggest oil consumer after the
    U.S., slashed interest rates less than a month after introducing a massive
    economic stimulus plan. The People’s Bank of China said effective Thursday, it
    would cut benchmark rates by 108 basis points.
    “It shows you how far the global economy has fallen” when China has to slash
    interest rates to stimulate demand, said Phil Flynn, an analyst at Alaron
    Trading Corp. in Chicago. “This is just another reminder of how slow things
    really are.”
    The U.S. reported fresh evidence of a flagging economy Wednesday, with
    consumers cutting spending at the sharpest rate in seven years and durable
    goods orders falling 6.2% last month.
    With Thursday’s Thanksgiving holiday in the U.S., traders anticipated price
    moves will be dictated in part by attempts to resolve trading positions ahead
    of the weekend. A Saturday meeting of the Organization of Petroleum Exporting
    Countries adds a dose of uncertainty, however.
    Oil’s plunge from highs above $145 a barrel last summer has crimped revenues
    for OPEC members, who began to rein in output in September. Delegates to the
    cartel have sent mixed signals on possible outcomes from the Saturday meeting.
    In a note to clients, J.P. Morgan said the most likely outcome will be that
    OPEC doesn’t reduce output at Saturday’s meeting, but sends a “clear message”
    of a cut at its next scheduled meeting Dec. 17 in Algeria.
    Front-month December reformulated gasoline blendstock, or RBOB, rose 1.89
    cents, or 1.7% to $1.1138 a gallon. December heating oil rose 1.12 cents, or
    0.7%, to $1.7100 a gallon.

    -By Gregory Meyer, Dow Jones Newswires
    Dow Jones Newswires
    11-26-08 1109ET

46. Bird – I think we’ll see PE to start having an effect in the equity markets again next year. While the existing investments are being written down to match the drop in public equity multiples, the PE guys are sitting on some really big $ they raised this year. Big pension funds remain committed to the asset class. Recently, I’ve heard presentations from Schwarzman, Edens, George Roberts and others. All expect the credit turmoil to last into early ’09 and don’t want to go shopping until it starts to subside. Interestly, for this board, a couple of them said that they’re very interested in E&P companies and pipelines because the credit shortage is presently very attractive opportunties for them to get into a space they view as an excellent long term opportunity.

47. From 45 “It was the ninth straight weekly
    increase in crude inventories.” That’s just patently false. Recall a couple of weeks back we have 3 weeks of flat inventories. Reporters.

48. Coug – thanks for the color on their long term thoughts on E&P. Not to be a polyanna but I do agree. The longer prices stay low in what is a temporary demand reduced environment, the more difficult will be the challenge to re-establish growth. Rigs come off fast. They do not come back on in similar fashion as managements will be cautious in upping capex having been recently reminded about discipline and people let go will need to be re-acquired. We’re not there yet as hiring continues but that may change in 1Q09.

49. z – I know. Even I’m getting tired of reading/writing my negative comments. It would be nice if it wasn’t so. All I can say is that the credit market is as frozen as anybody has ever seen it. Does that mean that some trickles of liquidity here and there? Of course not. Short of a global, thermo-nuclear war, there is always some commerce that gets done. Even during the depths of the Depression, most people still had jobs.

    Since the gov’t announced their backing of various parts of the credit market, we have seen an uptick in the number of deals getting done. However, when you look at the actual buyers of the debt, you see that the gov’t has been buying while the private sector is still a net-seller.

    All I can say is: I call it as I see it. This could all turn on a dime (and probably will at some point). But, we aren’t there yet and not seeing the signs yet.

    Atwood comments to follow…

50. B team looks to rally equity market for 4th straight day.

    Crude up $3+.

51. Z: If you were to rank your love toward the offshore drillers, does this fit? 1.DO 2.NE 3.RIG.

52. Coug/z – with respect to PE investments… it’s a cart and horse issue. PE investment returns don’t work unless the backer can borrow a good chuck of the purchase price. So, need to see the fixed income markets open up first. Then you will see the PE guys jumping all over each other to put that cash to work.

    But, a number of the Private Equity deals that were done in 2005-2007 have yet to go bad. And go bad, they will. A Chrysler bankruptcy would mean a very bad-hair day for Cerberus… and all the banks that bridged them (thank goodness the banks weren’t able to dump those C bridge loans on the high yield market!). Anyway, Cerberus + C is only one high-profile example.

53. Bird – wouldn’t have you do anything other than call it as you see it. If its all negative it is what it is. But deals are getting done and it seems to me that more are getting done now than 4 weeks ago. FST last night another example with borrowing base re-affirmed (normally a non-event but they got an asset sale off as well).

    Tom = bingo.

54. Tom – thanks for those NE comments you sent last night, by the way. Re-affirmed what I was thinking.

    One thing of interest re the deepwater guys relative to other service is the high degree of “locked in-ness” the earnings for 2009 have. The rigs have almost entirely been contracted so the only downside to numbers is 1) unexpected downtime (always a possibility but unlikely a big swing on the numbers) and 2) contract cancellations (unlikely due to stiff penalties and not seeing this happen at all, not even threat)

55. JOYG showing some strength – maybe the China rate cut?

    Even WLT green.

    WFT up 9%! For a mini-SLB it can move quick.

56. Bird – I think Cramer summed up Cerberus/C best with his comment on them hiring Bob “I completely screwed up Home Depot and all I got was $200 million” Nardelli. Much less of that PE influence in the energy names.

    Hear ya Dman, even FSLR up today. SWN making another run at a breakout.

57. Whoever SMH capital is they upgraded my poor, lost, bludgeoned BEXP from Buy (initiated last week) to Strong Buy yesterday. That is another one for the INTEOTW portfolio referenced in 22.

58. z – it’s good that Atwood was able to lock in bank-backing for their new-build program. If i had to guess, it would be on rigs for which they already had highly-rated buyers. Don’t know those details, but would be shocked to hear it was otherwise.

    LIBOR +150bps on secured financing for hard assets with contracted buyers is NOT a good deal. But, it’s a deal. So, it’s good. In the recent past, I would expect to see something like LIBOR + 25-45 bps for a secured facility like that.

    Atwood itself (as of their last public balance sheet, 6/30/08) had $201mm of cash, $111mm of accounts receivable (vs 17mm of accounts payable), and only $170mm of bank debt. So, sadly, ATW’s ability to put a secured and currently undrawn credit facility in place is not a significant data point on the road map back to fixed income health. On the contrary, the fact that they are so proud and happy that it got done just goes to show how difficult it is for great customers to secure credit.

59. Bird – thanks. I guess I’m more of a cup half full guy on this one. This is a second revolver for them (they already had a $300 mm in place for rigs under construction). The rigs are under contract but the banks are more fearful than ever after PBR’s cancellation of under contract and under construction rigs a week ago. I think getting it done 100 bips higher than they’d like is better than halting construction and potentially breaching a contract and losing the rig commitment. When credit does free up they can always swap the deal for a better one…but not if party interested in booking the rig walks. Just thinking out loud. Not doing anything with ATW, just working on my sentiment meter.

60. z – the SMH Capital energy analyst is part of a really great team that just joined SMH from Coker Palmer. They have their roots in Howard Weil and Johnson Rice and are smack dab in the middle of the energy world in New Orleans. They have some of the best contacts/color in the biz. They keep their ears to the ground and are willing to think creatively. Glad to see they endorse your BEXP pick. Consider it a positive data point.

61. Thanks for the color on SMH. Love the Weil. Re BEXP that’s probably dead money 2008 for tax loss (sucker) selling. They may be able to post some good ops updates around year end but not sure anyone will care from a $2.50 stock. After Jan 1 looking for a real run.

62. SWN up 8%. EOG down over 1%. Go figure. Very rooky like action in the stocks. If it’s up today, it goes up more, if down, down more.

63. Down 66 Bcf,

    Street was at 45.
    I was at down 40 to 60.

64. NG up 30 cents.

    At a 66 Bcf withdrawal, demand is not completely broken by the financial crisis.

65. EOG finally coming green after the gas number. For once, that is a very good gas number, well above the Street which had grown a little too gunshy.

66. z – bank deals for companies with hard assets are on the top rung of the credit ladder. The fact that bank deals (and some public and 144a bond deals) are getting done in energy land is good. But, we are not alone in recognizing that energy is one of the few “investible” areas of the market… at least for cash flow-focused investors. However, do not fall into the trap of thinking that just because we are seeing a few more secured and highly-rated deals getting done in energy, the rest of the fixed income market is perking up. It’s not.

    And if the rest of the fixed income market does not perk up, industrial production will continue to slow down, dragging energy prices (and therefore the ability to issue energy-back debt) with it.

    But, won’t have a window into whether credit has become less frozen until January. Anything that gets done between now and the end of the year won’t tell us that much. That said, everyone expects credit to go on vacation (for the most part) between now and Jan 2nd. So, we shouldn’t have bad news from the credit market holding back a stock market end-of year rally. If that’s what stocks want to do.

    So, could be a nice December for stocks… baring some exogenous headline.

67. 5,000+ centrifuges in Iran, up from 4,000 in August.

    http://news.yahoo.com/s/ap/20081126/ap_on_re_mi_ea/ml_iran_nuclear

68. Heck of a run for the energy kids. Very nice to see. SD at $4.85 was a gift. HK at $12.50 was a gift. There was a lot of gift-giving last Thursday. Just in time for the Holidays!

69. Bird – in an ideal situation where demand for IG debt returned in January – who would you measure that? volume of deals? Spreads that deals get done at? All of a sudden the 10yr yield actually goes up? IG comes way in and gets back to normal?

    My argument is that this might be harder than usual to detect because we are now so far out of whack. Will interest come swelling back into the new issue IG debt market and be “undetected” because of so many other cross currents?

70. Bird – no doubt re 68. GDP was a gift last week at $23 as well.

71. Since we’re talking about gifts – BEXP a gift now?

72. I’ve read predictions of a rally until rumours of the next bank in trouble at which point markets will turn bearish until another bailout.

73. Ram – I think so, as long as you are willing to close your eyes to it through New Years

    VTZ – sounds fair, doesn’t it. Today would be 4 days in a row of upside for the equity markets, that’s just unheard of since August, lol.

    Stock trading starting to look like paint drying…

74. What do we attribute the strength in the Service sector to today? I thought the EIA numbers would have hurt it.

75. The first set of EIA numbers were bearish on the surface although oil got a break from the imports number being so high as to throw out the big build in crude stocks. Products demand was lower than expected and production was higher.

    The gas number was bullish.

    The OIH was up early and is the strongest of the energy groups today after being the weakest yesterday. Volumes are light but there are some big bounces. I’m going to add to puts if it take a bigger run into the close as this is pretty silly.

    SWN getting the best of the E&P rallies off the gas numbers, up 11+% now. See no reason to sell it here.

76. Yeah it sounds fair for sure I suppose. The markets have been that shortsighted lately.

77. HK vying for higher dollar per share than CHK.

    VTZ – market has attention span of a gnat, lacks any sign of a spine. Often these pre-holiday rallies are followed by sell offs on the following Monday as the A team hits the office and books profit.

78. EIA
    Total Inv.up 9.7.
    Product Supply for weekly and 4wk up but on strength of Jet, resid and prop.
    Gasoline is down.
    Re SPR – You are so right. It reinforces my faith in the shortterm thinking of the masses.

79. md – no kidding man. Demand down, so prices down = problem solved and Prius’ on big year end sale. Unreal.

80. 1520 – #69. Volume and diversity of sectors having access. Also (you are correct again), yields on treasuries moving higher (which, all else equal) would mean corporate spreads tighter. It’s not that tough to figure out if the log-jam breaks in January… just have to watch. Which is what I will do… and report back.

81. Government is always in reaction mode, never in planning mode. Boggles the mind.

82. 1520 – also, as you know, the size of the bond market dwarfs the stock market. If/when volume and buyer interest ticks up there, it won’t go undetected. Plus, whenever something goes “hockey stick,” the other side of the trade usually happens quickly. Spreads have blown out so very very wide, the last leg over just this last month. When real buyers appear, spreads will fall, fast. Won’t be able to hide that under a rock.

83. EIA NG Monthly
    Marketed Production (wet) DOWN 250 BCF from Aug.
    Breakdown FED GOMEX -148
    Louisiana -23
    Texas – 43
    WY -17
    Others -12
    How much attributable to IKE N GUS. Would downed pipelines contribute.
    I’ll wait for your comments tomorrow AM

84. Bird – gotcha – as i have said before i have enjoyed hearing your debt market analysis laid over the equity and more specifically energy equity side. All of my experience is ont he equity/options side and i gained most of that experience with only sporadic input from the debt arena. I’m curious to see how the next chapter in this plays out while being able to see both sides to some degree.

85. NG Monthly need to consider Sept 30 days less 1 day than Aug = 51 BCF

86. 1520 – thanks!

    When debt markets get back to normal (which they will), you won’t see me post as often (i promise!). In normal times, no one has to worry about whether the canvas is behind the beautiful painting, or the roads will be there when you head out for work, or will my backbone support me when i get out of this chair. In normal times, we can get back to the business of well-watching and rig-counting and modelling for cash flow and EPS. In normal times, you shouldn’t have to worry about whether the debt market is functioning anymore than you have to worry about whether there is air to breath when you step out the door.

    I look forward to being a much more infrequent contributor to this board.

87. md 83 – short answer to #83 would be hurricanes. Second would be that not all production shows up in the most recent month for some time, especially offshore. When you look at the MMS data it is always light in the front months to where it ends up.

    Regarding, days that is true, and is why I never look at the numbers in raw Bcf when viewing demand or supply. I always use Bcfgpd, otherwise February would always be a slumper.

88. When I was on the Street, my primary job was predicting NG weekly demand numbers and modeling N. American natural gas demand and imports. After that came the company coverage. The gas demand numbers are very hard to get a firm grasp on as the historical stuff is not very good. The production numbers are generally better and you can back up the federal data with data from at least the big producing states but it takes time to get the offshore data in hand so the first blush numbers are generally low. Again, I was a demand guy and lent a hand in the supply side from time to time (especially shelf and deepwater Gomex production stuff as I’m a fair hand a manipulating database sorts). Just trust me when I say the initial data is raw and can vary quite a bit if there are pressure base adjustments and variances in the amount of stripping of liquids going on.

89. bond mrkt just called it a day… stock market is now free to move about the cabin.

90. Thanks BOP, lol. Free to drift to the cabin ceiling.

91. Oil up $2.90…see, told ya there was no reason to jump out the window.

    NG up 52 cents. Next week’s withdrawal will be somewhat smaller, maybe half the size of this one as the weather was a little warmer this week. So that knowledge will put a governor on a bigger rally.

    I’m going to get quiet now as I detest babbling to myself on these holiday light volume days. Here if anyone has a question and if not, have a safe and happy Thanksgiving.

92. Here are the earnings results from Golar (LNG Shipper) that has some interesting points regarding energy, shipping, financing, and overall LNG market.
    http://biz.yahoo.com/iw/081126/0455826.html

93. THX for the background

94. Re Shippers- Will the Mogadishu Pirate Association force ships around the Cape and force rates up
    I havent been on your pages regularly so excuse the redundancy

95. md – no problem. Sometimes I gloss over stuff because I assume people think I know what I’m talking about or they don’t want the detail.

    Don’t know the answer to that. I did see that the Italians sank an innocent vessel they thought to be a pirate mother ship. Oops.

96. So bored I’m contemplating buying a car for the wife. Anybody have experience with the Volvo C30?

97. Are bad retail sales around thanksgiving going to be a potential source of a downtrend?

98. Honda Fit baby

99. V – If you ask the talking heads, Black Friday will be great.

100. Z: Drive the Volvo C30. Not thrilled with the mpg. Only in the 20 – 21 range. I do not do lots of highway miles.

101. Z,

     Aubrey and T. Boone say a Honda Civic GX NGV

102. Started adding to my DBA and MOO today.

     “The prices of many agricultural commodities are now clearly below their production costs,” Hitzfeld wrote. “We expect the coming year to bring a cutback in area under cultivation as well as a decline in the yield per hectare.”

     http://www.bloomberg.com/apps/news?pid=20601109&sid=aC.nz4FiZpkg&refer=home

103. Thanks Pete but I’d have to drive to OK city to fuel up!

104. Sam – I like the MOO too. At some point soon I’ll take a nibble at UGA too.

     Honda Fit too kidsy.

105. I have to concur on MOO, DBA and the rest, people have to eat, I believe that sector has been driven down a little hard.

106. I don’t read anywhere about using propane to run cars/trucks.

     In the 1960’s my fatehr ran his entire fleet of delivery trucks using propane. A simple modification was done at the local Ford dealership…this was in rural East Tennessee…if they could do that way back then, why can’t they do it now?

     There a lot of places in Atlanta to get propane, but not natural gas.

     What am I missing?

107. Actually Z,

     The Hondas have “Phill” http://automobiles.honda.com/civic-gx/refueling.aspx Fill at home, although this isn’t the idea “road trip” vehicle. Oh and don’t be in a hurry to fuel up 🙂

108. Z – I also bought a BMW 335xi for my wife. Who promptly took my Highlander and left me with the twin turbo 300hp four door. Oh darn… I really like the car, decent mileage when not stepping on it. My wife likes it also, easy to drive and a surprisingly large small car. Fits our two car seats easily.

109. Sambone, I’ve been thinking about adding to ag for a while as well and I’m also going to take a piece of soon.

110. Piece of POT was what it was supposed to say.

111. yes but Phil costs $3500 extra and you are using your most expensive form of natural gas to fill up with, the kind that has gone through the entire distribution system. The better rates people see are for gas that cost about half of what it costs at your house.

112. Problem with the whole NG car is until you can fill up at a station that is local it isn’t going to take off. I live in Wichita and would have to drive either to Topeka or to a location in Oklahoma. Then the feds will put a road tax on the car and probably will adjust the tax rates to even out the price to take away the incentive to owning one.

113. Z – My sons and family said the same thing about my Fit when I bought it, but it’s fun to drive, has lots more room than you think and gets great gas mileage

114. Z
     Maybe we should take a vote and make your decision easy
     C30 vs.
     FIT

115. Thanks Italy, will mention the 2 car seat thing as we are about to be in that boat. She likes the BMW1.

116. re:111

     But Z it is for the cause which is to help get CHK back into the 70’s

117. Pete…you have a good point.

118. I vote for job security, a Suburban or Tahoe is a nice ride, cheap too. A little more riskier than options re the warranty.

     Support the cause …

119. When you decide send a Zblast so we can trade off the news.

120. Wyoming – lol, and I do occasionally have to drive her car. So glad I talked here out of the Mini.

121. To Z and all my friends:
     Have a very blessed Thanksgiving.
     At least we can be thankful for the first half of 2008.
     apbd

122. Full disclosure, I have a different volume than most, triplets and another 10 months older so the Excursion and Tahoe work for us. plus my pay does better than most when we hit the $5/gal sweet spot.

     Excursion does get 24 mpg @ 80 mph though.

     Have a good Tgiving everyone.

123. How about a ZBLAST on this instead.

     ZTRADE:

     Sold (5) SWN $35 December Calls, SWNLG for $3.70, up 105% since entry this morning. Still holding calls at $25, $40 and $45.

124. FRO up another 12%, the day after a Goldman initiation at Sell. Oh how the mighty have fallen.

125. EOG soundly broken out of the $85 number now.

126. Wow, Wyo, you didn’t look that aged.

127. Z and everybody,

     Happy turkey day!

128. It’s not the age of the wine but the spirit in the cork …

     They are only 5 and 6, 2 months out of the year all the same age.

129. wyo how many are boys?

130. Twin girls in the triplets and 1 boy, then the 10 month older is a boy.

     Going to have to start paying more attention to your Blasts again, just picked up some BGZ for a trade.

131. Z, nice work on the SWN trade today. Are you still considering adding to the OIH puts?

132. Just for grins – OIH weightings

     Only 16 equities in the ETF

     http://www.holdrs.com/holdrs/main/index.aspAction=HOLDROutstanding&SubAction=OIH&HoldrName=Oil+Services+HOLDRS

     RIG ~ 17%
     SLB ~ 13%
     DO ~ 10%
     HAL ~ 9%
     BHI ~ 8%
     NE ~ 7%
     NOV ~ 6%
     SII ~ 5%
     WFT ~ ~5%

133. Zman,
     Drove the C30 in July, with 6-speed manual transmission. Loved it. Reminds me of the old Volvo P1800 station wagon, except driving the P1800 was like driving a tank.

134. Jason – that was a bit of luck but SWN has been my play on a big gas number. I was a little surprised to see how low consensus was.

     On the OIH, I think I will hold off for a trade on the half day Friday.

135. Thanks regale. Did it have the turbo?

     …ok declaring juice thirty and going to watch sponge bob with the tike. If you have to travel this weekend, drive safe but far, further than normal in fact. Gas is cheap so enjoy the weather while its not too cold.

136. By the way, according to my broker’s tally, which can be off by $500 or so, the $10KP ended the week at $12,500 which is a bit wild since it hit $5,000 mid week. Crazy market.

     Have a great Holiday!!!

137. just got back…. who let the Rally Monkey out of his cage??

     Happy Thanksgiving, all.

138. Z — yes, turbo. C30 was loads of fun to drive, and that’s high praise from someone who drove Porsches of the 911 flavor for 20 years of her adult life.

     Happy TG to all.

139. Regale – that info was good enough to get her on board for a test drive. I like the idea of her and the kiddos in a volvo safety capsule. Funny how car manufacturers charge more for automatic transmission; you’d have to pay us more just to drive one of those. Thanks.

140. 17796 Sept.Monthly Prod Supplied Down bet 850-1000 from weekly numbers

     Monthly Stocks Way up approx. 38000 from 4 weekly on strength of Other Oils 27000??
     Dist. 4500 Crude 700 gas 2700

141. Volvo comment – we have an XC90 with the 3rd row of seats. Very nice for kids and associated crap. Built like a tank and drives like one too but is still comfortable for the whole family on longer trips. The C30 looks like it has some of the features from the XC90.

     I have had at least one volvo in the rotation since i learned to drive. Great cars, if you take good care of them they last forever. Very solid. They’re boxy but they’re good.

     More Turkey.

142. Happy Thanksgiving to all

This site uses Akismet to reduce spam. Learn how your comment data is processed.