Wednesday – Oil Inventory Preview

Forget About It Watch: Obama To Forget About Windfall Profits Tax. "President-elect Obama announced the policy during the campaign because oil prices were above $80 per barrel," an aide on Obama's transition team said. "They are currently below that now and expected to stay below that." ZComment: that's welcome news for U.S. oil and gas companies. As to the aide's assertion that oil prices are expected to stay below $80 I can only employ one of my five year old daughter's favorite expressions, "if you say so, then you say so".

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Oil Inventory Preview
  4. Stuff We Care About Today - yesterday's big picture conference takeaways, a look at CPE valuation, NFX operations update.
  5. Odds & Ends

Holdings Watch:

  • (EOG) - $10KP Trade - Added EOG $85 December Calls (EOGLQ) for $3.70 with the stock up $3 after a sharp sell down yesterday. Listening to their presentation at Merrill now, story remains the same with a few interesting data point additions (see comments section).


  • (OIH) - $10KP Trade - Sold the OIH $70 December puts (OIDXN) for $5.65, up 69%. Will reposition after the next rally.

Commodity Watch:

Crude oil fell $2.32 to $46.96, a 3 1/2 year low. Stories that OPEC cheating is worse than expected were behind a second day of dropping prices along with the typical "economy is doomed, oil is more doomed" stories. This morning crude is trading flat in front of the EIA's weekly inventory report which the Street sees showing further builds in crude and product -- inventories.


Natural gas fell $0.18 to $6.42 yesterday. It fell before oil did and in contrast to more cold weather forecasts and I can only describe the day to day trading in natural gas as odd, even for gas. It looks like traders are selling for quick profits and buying more on seemingly negative news than normal. I still this fuel is bottoming and that as the rig count drop goes from a few flakes to an avalanche gas will gain support. See the Stuff We Care About Today for the latest gas macro impacts from EOG below.

Oil Inventory Preview


  • Crude: This number could really go anywhere as imports were massive last week and should back off in today's report. I don't expect another giant build in stocks due simply to the law of averages as it relates to those imports numbers. A more minor constraint would be refining capacity which appears to have risen slightly which boosts demand for oil. The contango in the futures market however will provide greater than normal impetus to tuck barrels away for sale at higher future prices.
  • Gasoline - Saw a report from AAA that gasoline demand is at its lowest YoY decline since April. With prices off as much as they are I can only say its about time. Need to see demand inching up into year end to get excited about gas.
  • Distillate. Oil-weighted Heating Degree Days showed another very cold week last week (second in a row) and after last week's tiny draw I'm looking for a drawdown  today which may be key to igniting a small rally in HO and crude. The Steet is looking for a 1 mm barrel build.

Stuff We Care About Today

Thoughts from yesterday's conference calls:

EOG Stuff:

  • They have 115,000 acres in the Haynesville, last figure I had was from this summer at 60,000 so they have doubled up in the play on the cheap.
  • Outside their core Parshall see lower IP and lower reserves per well but these wells are economic at current levels with a “nice” return (15 to 20% after tax rate of return at $50 flat oil).
  • Now they are planning to book “over” 80 mm barrels in aggregate in the Bakken via a "considerable" field extension
  • Everyone is dropping rigs in the Bakken

EOG Gas Macro:

  • CEO Mark Papa does not see a supply glut in 2009/10.
  • Horn river not contributing significantly during this time frame
  • Rockies gas will not have a lot of incremental transportation room to get volumes to market
  • Haynesville Shale will be pipeline constrained for 2 years
  • Gulf of Mexico gas production continues to slip.

PXD Service Cost Comments:

  • On drilling rigs: saying private companies seeing 5 to 20% cost reduction. Public companies want to see more rigs fall off before they cut dayrates more.
  • On well stimulation: at least one private company has cut prices by 30%. Of the public companies they deal with, one cut #s by 30% and the other has not yet cut
  • Steel costs: 8% drop in tubular costs, despite the fact that steel prices are off by half. Think it takes 6 months to work off tubular goods costs.
  • Other 35% of well costs off 20%.
  • PXD - other stuff. Eagle Ford Shale - they think they have a better area in terms of porosity (if not permeability) than what HK has there. They noted HK is already on their 3rd well now.

 Friedman Billings Fall Conference:

  • (PQ) and (WFT) Speaks At 10 am EST
  • NFX speaks at 11:30 EST

CPE Valuation Thouhgts:

  1. First, I'm staying away from the name for now as these kind of abandoned names will get punished into smithereens into year end.
  2. The following table is the back of the envelope on the stock without Entrada. That's fair since Entrada was not in the 2007 year end reserves and the development deal here included non-recourse debt that did not kick in until the project began production with repayment of principal not due for five years following that. 
  3. Potential catalysts include the sale of Itochi's interest in Entrada, CPE's or both. Year end may give it a boost. Higher crude could not hurt either.
  4. I've included some pretty bare bones math on $/Mcfe of reserves below. As you can see we're well below levels I'd normally deem reasonable for a takeout here, even $1/Mcfe for in the ground reserves implies a stock price of $4.
  5. Entrada is on hold but its worth something. They may sell it to a larger operator in the area or revitalize the project when oil prices recover. Note that previous gross reserve estimates for Entrada were 32 MMBOE (192 Bcfe) for the proved reserves alone with another 24 MMBOE in the probables category. I've given them no value for their 50% working interest in those reserves in the table below.


NFX Quietly Updates Operations

  • Deepwater Gulf of Mexico discovery at Sargent, Garden Banks 339. Bread and butter discovery for them, sub-sea tieback so relatively quick startup expected in 2010. This is called sticking to your knitting and not risking lots of exploration or development capital. This is the 4th deepwater discovery of this variety (bread and butter, not stand alone developments) this year.
  • Williston Basin (Bakken/Three Forks Sanish)
    • 10 wells completed and no one cares. Wow.
    • This includes a 1,010 BOEpd well in the T.F.S.
    • 160,000 acre comment is up slightly from last lease hold position count.
  • Woodford Shale: Year end exit target of 250,000 Mcfepd achieved. Sounds like pad drilling is reaping the benefits previously outlined.


Odds & Ends

Analyst Watch: Analysts remaining on sidelines.

121 Responses to “Wednesday – Oil Inventory Preview”

  1. 1
    Sambone Says:

    Z your early again

  2. 2
    Sambone Says:

    7:04 am EST

    Crude Hovers, Market Waits On US Inventory Data

    By Nick Heath

    LONDON — Crude oil futures wavered around Tuesday’s closing levels Wednesday as traders waited for weekly U.S. inventory data, and as other financial markets offered little clues to direction.

    Crude prices held near fresh multi-year lows set Tuesday, with market participants wary of another potential large build in U.S. crude stocks. But concerns over a slowdown in the global economy and the associated implications for crude oil demand continued to weigh on sentiment, serving to snuff out earlier upwards moves in excess of $1.

    At 1149 GMT, the front-month January Brent contract on London’s ICE futures exchange was up 30 cents at $45.74 a barrel.

    The front-month January light, sweet, crude contract on the New York Mercantile Exchange was trading 32 cents higher at $47.28 a barrel.

    The ICE’s gasoil contract for December delivery was down $5.00 at $483.50 a metric ton, while Nymex gasoline for January delivery was down 126 points at 104.57 cents a gallon.

    With market attention leaning more to demand side dynamics, market participants will be looking closely for an update on U.S. consumption in latest Department of Energy inventory data due 1535 GMT Wednesday.

    In a Dow Jones Newswires survey of 15 analysts, 13 predict U.S. crude stocks rose last week, with forecasts ranging from a draw of 2 million barrels to a build of 4.1 million barrels. On average crude stocks are seen rising 1.4 million barrels. Gasoline inventories are seen up by 700,000 barrel son average while distillates are seen unchanged. Refinery use is seen increasing by 0.2 percentage points to 86.4% of capacity.

    But while the weekly U.S. data represented the centerpiece of market attention Wednesday, some suggested that the significance of the weekly release has been overshadowed by the broader economic outlook and its portent of future demand.

    “(The statistics) don’t seem to be moving the market that much. Last week we had a surprisingly bearish report and prices continued to rise. I think people think it’s the bigger picture for demand, the projections looking ahead rather than the rear-view mirror,” said Simon Wardell, analyst at Global Insight in London.

    Financial market reaction to this week’s economic data releases and interest rate decisions could pressure crude lower still if they adhere to the market’s current pessimistic footing. The November U.S. ADP national employment report is due 1315 GMT Wednesday, a precursor to U.S. November non-farm payroll and unemployment rate data Friday. Meanwhile the Bank of England and the European Central Bank are due to announce interest rate decisions Thursday.

    “Between the ADP report today, the ECB tomorrow and the (U.S.) employment numbers on Friday there will be plenty of exogenous influences (equities and the Dollar Index) on crude oil,” Olivier Jakob, managing director of Swiss consultancy Petromatrix, said. “If they were to keep global markets in the meltdown mode and manage a break of the $45-a-barrel support, then the next target for the bears will be the test of the stronger $40-a-barrel support.”

    Following inaction at the Organization of Petroleum Exporting Countries’ gathering in Cairo over the weekend, the market now fully expects a production cut from the group when it convenes in Algeria on Dec. 17, as it attempts to staunch a drop in prices that has seen crude fall more than $100 from it’s July highs.

    Qatar’s energy minister, Abdulla Bin Hamad Al Attiyah, Wednesday said the group would “definitely” cut production levels at the meeting.

    “There is a tacit agreement to cut production in Algeria not because we want the cut but because there is an oversupply and slow consumption,” Al Attiyah said.

    —By Nick Heath; Dow Jones Newswires

  3. 3
    Sambone Says:

    Opportunity knocks with low price of oil


    Fabrice Taylor i a chartered financial analyst. ftaylor@globeandmail.com

    December 3, 2008

    The funny thing about oil prices is that the lower they go, the higher they’ll go – eventually. Oil bottomed at about $11 (U.S.) a barrel a decade ago. It’s no coincidence that the next 10 years saw one of the biggest bull markets in crude ever. Low prices mean less investment, and given how quickly existing oil production is depleting, it doesn’t take a long time for soft crude prices to kill investment.

    Consider, for example, what happened to non-OPEC oil supply over the past five years. The price of a barrel rose to more than $100 from $40 from 2004 to 2008. Yet non-OPEC countries, where the capital and technological expertise primarily reside, produced less crude.

    The problem is, in part, that the non-OPEC world is also home to the more expensive varieties of oil, and not just expensive to produce but also to find. They need higher prices, and sustained higher prices, to trigger the big-scale investment projects. At any rate, if production outside the Organization of Petroleum Exporting Countries hasn’t peaked yet, it’s close. Even mighty Russia appears to have levelled off.

    Yet the world needs more oil. The International Energy Agency’s latest world outlook sees demand in 2030 of more than 100 million barrels a day. It also figures existing production is declining at an average rate of between 6.7 and 8.4 per cent annually. Factor in growing demand and falling supply from existing sources and the world needs more than 60 million barrels of new production in the next couple of decades or so. That’s only going to cost an estimated $5-trillion.

    Meanwhile, it’s likely that OPEC’s market share is going up. And what do the sheiks and sultans say? For starters, that a “fair” price for oil is $75 (U.S.), more than 50 per cent higher from where it is today. They have expensive lifestyles to finance.

    There are skeptics who’ll say high prices destroy demand, and that’s true to a point. U.S. consumption is falling almost as fast as the price of a condo in Phoenix as people drive less or not at all, or buy smaller cars. But let’s put it in context. Recessions always dampen demand for crude. And more important, even if developed world demand falls, China and India still consume a fraction of what we do on a per-capita basis. If they want our lifestyles (why they would is another story), they’re going to have to buy a lot more oil, because there’s no substitute for it yet.

    There’s an opportunity for the investor. In time, most of the world’s oil production will come from national companies in OPEC. The era of the multinational producers is fading to black. But they’ll go down making investors some money.

    I submit that the key to preparing for the next spike in oil prices is to accept that you won’t know when oil will bottom or when it’ll surge again. It could take a few years. So the best idea is to pick up shares in companies with very long-life reserves and be wary of debt.

    Oil sands producers are facing some headwinds. Besides low prices, there’s the credit crunch, which limits their access to the billions of dollars needed to get going or expand. There’s also the growing environmental burden. But they have unmatched reserves and if you believe that we are heading for an oil shortfall, these projects will go through eventually. Existing ones will be profitable again even if they bleed in the short term.

    The other opportunity is acquisitions, such as Total’s expected bid for Nexen. The cost of replacing a barrel of oil in reserve has gone to almost $15 in 2007 from about $4 in 1997, according to BMO Nesbitt Burns Inc. That’s an average annual increase of 17 per cent. If it keeps up, you can see why we’ll need higher oil prices to feed even small increases in demand. Right now it might be cheaper to buy oil on the stock market than look for it in the ground.

    But there’s money to be made. The question isn’t if low oil prices will heal themselves, it’s when.

  4. 4
    Sambone Says:

    The Black Hole In The Black Gold

    NEW YORK — Either I need a stimulus package, or else the crude oil market is set up on the charts for a sizable bounce.

    Chart reading at its best is simply complicated. But in the case of Nymex crude, however, the relevant long-term support/resistance levels are lost in the shadow of this year’s trend, which has effectively obscured many logical trendline points. This is evident on the annual chart which shows the huge 2008 bar overshadowing the previous two bars, those for 2007 and 2006.

    By the way, calling the 2008 bar a “key reversal” pattern is obviously pointless. The relevant question is where this year’s steep downtrend might find a bottom. And if I’m not mistaken an important interim bottom may be close.

    Nymex January 2009 crude dipped earlier to a continuation downtrend low of $47.36. Hindsight tells me that the low is a test of formal support at $47.68. Moreover, the contract, roughly $1 above the intraday low as of this writing, is crowding a potential interim bottom in the $46.46-$42.96 support band.

    A spot check of momentum indicators confirms that the market’s downtrend is slowing. That observation squares with the prospect of an interim bottom, but it’s by no means conclusive.

    For now the nearest stop for trades based on the hourly chart is $50.56. If trades are stopped out look for a move up to $52.23 initially. In any case, crude wouldn’t trending higher on the daily chart until it took out $62.51 resistance.

    Finally, a move below the $46.46-$42.96 support band would be targeting initial support at $30.92 it appears now.

    (Data by CQG)

    –(Stephen Cox, a chartered market technician, is chief technician for Dow Jones Newswires

  5. 5
    Sambone Says:

    Oil Will Fall Further Without OPEC Action, Says BP
    By Eduard Gismatullin

    Dec. 2 (Bloomberg) — Oil prices will continue to fall during the next 12 to 18 months if OPEC fails to implement “sufficient cuts” and supply stays at current levels, according to Christof Ruehl, the chief economist of BP Plc.

    The world economy will stage a recovery from recession in 18 to 24 months, followed by “possible spikes” in oil prices, Ruehl told a conference in London today.

    “Demand is now plunging like a rock,” he said. OPEC, the supplier of about 40 percent of the world’s oil, may cut output once or twice more in an attempt to reverse crude’s 66 percent retreat from July’s record, he said.

    The Organization of Petroleum Exporting Countries will reduce crude production when it meets later this month in Algeria, the group’s Secretary General Abdalla el-Badri said yesterday. Concerns that a slowing world economy will hurt demand for fuel has pushed oil prices down to a three-year low.

    Crude oil for January delivery fell $1.12, or 2.3 percent, to $48.16 a barrel at 11:43 a.m. on the New York Mercantile Exchange. Futures touched $47.36, the lowest since May 20, 2005.

    BP, Europe’s second-largest oil company, has so far stuck to its planned capital expenditure program, Ruehl said. The oil producer may scale back investment in future to maintain its dividend, which “is a priority,” he said.

    On Oct. 28, BP reiterated capital spending at around $21 billion to $22 billion for the year.

    ‘Fair’ Price

    Saudi Arabia’s King Abdullah and oil ministers from OPEC members Venezuela, Algeria, Nigeria and Iraq said last week an oil price of $75 a barrel would be a “fair” level that supports investment in new capacity.

    BP’s Ruehl disagreed with their views, saying: “There is no fair price. There is a price, which balances demand and supply.”

    Most OPEC nations’ economies can sustain current oil prices, apart from three or four nations, Ruehl said. Countries that restricting access to their reserves should allow international oil companies to invest in production projects to meet demand for energy, Ruehl said.

    “Most investment could take place in areas, which currently locked for private companies,” Ruehl said. “If the purpose of the fair oil price is to allow investment there are easier ways of doing it, you just open up.”

    Oil and gas industry costs are falling because of the drop in commodity prices, Ruehl said. Service and equipment costs are bucking the trend because of contractual obligations.

    “We will see costs diminishing as the commodity price cycle is turning,” Ruehl said.

    Last Updated: December 2, 2008 12:25 EST

  6. 6
    Bob Says:

    Z-Thanks for CPE valuation. Will watch for day trade percentage moves through tax selling season

    I see Calyon downgrades CHK to underperform with target dropping from $41 to $15. They are concerned about 50 mm share offering dilution

  7. 7
    Dman Says:

    er, Z, looks like you were going to tell us one of your daughter’s expressions at the end of the first paragraph. The suspense is getting to me …

  8. 8
    BirdsofpreyRcool Says:

    No good news out there this morning, from a bond market perspective. Opening up quite a bit wider from yesterday’s close. Economic data continue to come in weaker than expected. And FCX’s comments about weakness in the metals market (global indicator of economic activity) and eliminating its annual dividend of $2/share aren’t helping the premarket mood.

    IG 271… +11 from yesterday’s official close. We are back to uncharted (wide, bad) territory. Might be a good day to ask Sam what bank preferreds he likes.

  9. 9
    BirdsofpreyRcool Says:

    For all you healthy people out there: Bally’s Total Fitness just went Chapter 11 (technically it’s Chapter 22, as they just emerged in 2007 from their prior BK). Anyway, the good news is that their gyms will continue to operate normally. More importantly, Bally sees buyers of their assets and a going-concern. This is good news as it indicates there is money out there to buy distressed assets. That should help the mood in DIP-financing land.

  10. 10
    Bob Says:

    At 9:28 SLB lowers guidance, stock below $40

  11. 11
    Sambone Says:

    BOP – Working hard to find “Distressed debt”. Three income ideas I like is CprM. Buy at 15 and under. At 15, that gives you a 14% yield. Risk is that “C” will go under. Hank and Ben won’t let that happen IMO. Callable in 2013 at 25. Second is MERprF. Buy at 14 and under. That gives you a 13% yield. Callable now at 25. Risk is that MER and BAC don’t merge, and 2 if BAC fails. Third is CFCprB. Countrywide debt is now on BAC books. Buy at 13 or below. 13% yield, callable now. All of these are cumlative. I like 13% yields going forward. Once the market settles, I think these puppys will go up.

  12. 12
    zman Says:

    Thanks D – don’t know how that got chopped off, it was there before I posted. Its more profound than it first appears by the way.

    Wow, ugly open, best to get that kind of thing out of the way early in the day week. Market continues to have no idea what to do with itself.

    I am reading a lot of people are perplexed by the lack of a bounce for something like 6 months in the crude market. Me too.

  13. 13
    zman Says:

    Thanks Bob, wonder if they thought no one would notice if they waited to the last minute.

  14. 14
    Pete Says:

    Boy are people up here in Oklahoma mad and upset with CHK

  15. 15
    BirdsofpreyRcool Says:

    sam – thanks! I was looking at some of the other Merrill Lynch pref’ds, but they are not cumulative. Good find.

    NFX 7 1/8 due ’18 at 70.5 = 12.5% ytw

  16. 16
    zman Says:

    Pete – stockholders or leaseholders or both? What’s the main theme?

    May add back to the OIH puts on this mini-recovery. Will await the oil numbers.

  17. 17
    Dman Says:

    Z – #12 part 3

    I remember TBP saying (about a year ago) that commodities tend to go one way for about 6 months and by then everyone thinks they can only go that way. Are we there yet? Dunno but the chart sure looks freaky.
    Took some DXO yesterday on account of I think oil will go higher but the “when” question is altogether too hard.

  18. 18
    Pete Says:

    Both and a lot of OK. investors big and small had major holding in it because of it being located in the state.

  19. 19
    Sambone Says:

    Correction – CprM is not cumulative

  20. 20
    zman Says:

    So the major gripe is that the stock has fallen and they owned it?

  21. 21
    BirdsofpreyRcool Says:

    IG coming off the wides, currently 268 1/2

  22. 22
    BirdsofpreyRcool Says:

    Non-Manufacturing ISM data due at 10 am EST… will set the near-term tone. Expecting 42.0, down from 44.4 last month.

  23. 23
    BirdsofpreyRcool Says:

    yikes… Non-manf ISM 37.3

  24. 24
    zman Says:

    ISM so bad it can’t get worse, like consumer confidence a couple of weeks back. The numbers start to get a little unbelievable when they take such wide swings.

  25. 25
    BirdsofpreyRcool Says:

    market shrugging off a pretty dismal ISM report.

    IG 268bps

  26. 26
    Pete Says:

    re: 20

    That plus Aubrey’s management style

  27. 27
    BirdsofpreyRcool Says:

    z – good point. too many unbelievable (bad) numbers to pick from. Bought some GE for a mrkt bounce.

  28. 28
    zman Says:

    Thanks Pete. Yep, he’s a bit of a gunslinger. Long term, that has worked out well but it can be problematic at times like this.

  29. 29
    BirdsofpreyRcool Says:

    A good friend works at GE Capital. GE is more into the energy (and e&p) biz than you might think. GE uses it’s balance sheet to raise $ at super-low levels, then partners with a select list of producers to form little producing JVs all over north america. They used to leverage these projects 2-3x… but cut back to under 1x over a year ago. Smart project/balance sheet/risk management.

  30. 30
    BirdsofpreyRcool Says:

    BTW, that is all public news re: GE.

  31. 31
    Pete Says:


    When and if crude starts moving up how would you play that with DIG?

  32. 32
    Sambone Says:

    Off subject – Makes sense to me

    1523 GMT [Dow Jones] – Comex gold is sharply lower, hurt in part by dollar
    strength amid expectations for ECB and BOE rate cuts, says Bill O’Neill, one of
    the principals with LOGIC Advisors. “Also, there is general liquidation of
    assets,” he says. This has included the funds. “And on the other side of the
    coin is the fact that the funds aren’t buying anything,” O’Neill says. Feb gold
    is $17.50 lower at $765.80 an ounce. (ALS)

  33. 33
    zman Says:

    Sorry, was on a call. Back to the above in a second.

  34. 34
    zman Says:

    BOP – yep, GE is one of the biggest oil service firms out there. Thanks for the color.

    Pete – when oil recovers I’ll get more aggressive with the unhedged oil producer plays and also with XOM which is a major comp of DIG. Picking a bottom in crude is not easy though I do think we are closer to a bottom than we are to going back to the 10 year low of $12.

    Group trying to green but number about to hit.

  35. 35
    zman Says:

    oil down 0.4 mm barrels
    gasoline down 1.6
    dist down 1.7

    bullish report

  36. 36
    zman Says:

    SUN in the refiners probably gets a good run here, vlo too.

  37. 37
    zman Says:

    gasoline demand ticked up from the prior week from 8.844 mm bpd to 8.933 mm bpd. That’s good for gas.

  38. 38
    zman Says:

    A bit surprised by the lack of reaction in oil but it looks like traders are writing off the crude number to the dip in imports. Funny thing is, traders have been talking crude lower by saying OPEC has been cheating and therefore imports would be high.

  39. 39
    BirdsofpreyRcool Says:

    z – you like the reaction better now? 😉

  40. 40
    zman Says:

    Ahhhh, that’s more like it.

  41. 41
    zman Says:

    Yep Bird, I do. Normally I’d try to take advantage of an obvious info/reaction lag like that but I hab a code en me ed and am feeling sloe

  42. 42
    BirdsofpreyRcool Says:

    ha! wondered at your sluggish response time today. BTW, care to finish what your daughter said? (you didn’t finish your opening comments this morning… and i would love to hear it).


  43. 43
    zman Says:

    I thought I did finish that. Check top of post. Very profound. Layers within layers with that kid. Learning to write too so I can take a vacation, lol.

  44. 44
    BirdsofpreyRcool Says:

    (oops… didn’t think to check b/f i asked. very “code-en-da-ed” of me)

  45. 45
    zman Says:

    Amazing how little attention the press is giving to Obama’s abandonment of a windfall profits tax. Other than it would amount to theft it was completely unworkable and would have done great harm to domestic production thereby raising prices. T Boone commented that the lack of such a tax would not boost production which I agree with but it is the removal of a potential negative which should be good for the E&P and domestic Majors.

    Still mulling adding those OIH puts back. What do you guys think of the broad market rest of week. We have a jobs number coming out soon that I think is for 340,000 lost…anything short of that and I’d bet we zoom higher. It’s bad yet but if “only 300,000” lose there jobs is it as bad as we thought?!

  46. 46
    Bob Says:

    VLO Headline: “Oct best month in company history”

  47. 47
    Dman Says:

    “If you say so, then you say so”

    I like it & I think I’ll start using it. A lot.

  48. 48
    zman Says:

    Don’t blink now but CHK is green. Just about every broker has thrown in the towel there so we may be getting to rally time in the next few days…especially if they don’t announce a secondary or do get another VPP or asset sale done.

  49. 49
    sane Says:


    Crude Down 2.3M
    Gasoline Down 416K
    Distillate UP 3.1M

  50. 50
    zman Says:

    Bob – I don’t see that but do see an 8K outline 2009 capex, will have a look.

    Dman – I think politicians are living by those words more and more. If you just keep repeating something enough it becomes true. Even the big 3 have employed it saying they are making cars people want to buy.

  51. 51
    BirdsofpreyRcool Says:

    z – i think this mrkt is kind of a random walk, until Friday’s numbers. Perversely, I would like to see a “bigger-than-expected-number” for jobs losses on Friday. Clearly, not that I want to see people lose their jobs, but if we can rally on a bad number (like we did after the ISM today), then we should be good to go through the end of December. If the employment number is “less-than-exp’d,” I think the mrkt will hold it’s breath until we get thru Christmas sales and the Jan employment number.

    Just musing out loud here…

  52. 52
    zman Says:

    Thanks Sane. Very troubling on the distillate side. I can stomach a small build here even with the cold weather as the weather/demand relationship is not as linear for heating oil as it is for natural gas on a weekly basis (though it is over time). But if distillates rise by that much it suggests a problem with diesel exports is cropping up. Any of you refining guys with a thought feel free to speak up and tell me I’ve nothing to worry about at this point.

  53. 53
    Dman Says:

    Z – my simplistic view:

    OIH at mid 2004 levels. The cliff-like object on the 5 year chart has gotta be reflecting a lot of the rig decline. If commodities move up that thing is going to rock.

  54. 54
    zman Says:

    Bird, that’s pretty solid thinking in my book although a much smaller job loss could inspire a 10% bear market (completely unsustainable) rally which would do wonders for some of my slightly out of the money December calls. As to people losing their jobs, its going to happen whether we want it to or not.

  55. 55
    BirdsofpreyRcool Says:

    Just sold out of my short-term GE position… so, that’s my vote… for now.

  56. 56
    sane Says:

    Re 52

    The strange thing is that the API’s distillate number matches the EIA data (Production vs. Demand ex exports ) better.

  57. 57
    BirdsofpreyRcool Says:

    (I really wanted to buy WG or CRK this morning, for a quick trade… but have to keep it large-and-liquid in this mrkt)

  58. 58
    zman Says:

    Dman – I hear ya that it may already be largely discounted in the stocks. But, the fact of the matter is that there is no chance for an improvement from current forward estimate levels for the service stocks. Not true of the E&Ps which you could argue are also discounting lower oil and gas prices. The E&Ps will benefit at the expense of those falling service costs next year in terms of getting more wells drilled for less $ and in terms of lower operating expenses. So E&P can see an improvement in the balance sheet and cash flow statements. So in my book, once money managers decide what their % allocation for energy will look like for the coming months and years a great piece of the pie will be allocated to Majors and E&P at the expense of service and that this will slowly ebb back in services favor late next year as people start to ponder 2010.

  59. 59
    zman Says:

    Sane – better use of your tax dollars would be to shut down the EIA outsourcing the necessary and reasonably doable stats gathering to the API.

  60. 60
    sane Says:


  61. 61
    zman Says:

    Bird – what you really are looking for then is a large cap E&P, maybe somebody like, oh I don’t know, EOG. Trust me, they are boring. Boring from a risk standpoint and an underleveraged capital structure (Papa actually thinks the right amount of debt is none which shows his lack of B-school attendance) but that’s what you want right now.

  62. 62
    BirdsofpreyRcool Says:

    z – it pains me to have to leave behind my little leveraged friends… but, I agree with you. That’s why I was leaning toward CRK and WG, both have net cash and great free cash flow. But, EOG fits the “large and liquid” criteria.

  63. 63
    Bob Says:

    46: The VLO headline is from the 8-K filing which is the Merill Large Cap Conference presentation. Headline is from the Retail sales page. Interesting slides showing worlwide demand by region

  64. 64
    zman Says:

    Oil flailing about it, now red again. Frankly, I don’t want it to try a V-shaped recovery. Hold here for a month and then put on a move as bears lose confidence and data comes out from the tanker trackers showing a decline in OPEC volumes. OPEC will cut but the resolve to cut a large number like 2 mm bopd is probably not there yet. Keep oil down here and it will be.

  65. 65
    Dman Says:

    Z – #58

    certainly take your point that the E&Ps are better set up that OIH for a move higher. On a pure value basis there are some compelling bargains but everyone is too scared to buy!

    So I’m not making a bullish risk/reward case for the OIH, just saying I’d be too scared to short it here unless I thought the commodities were due another leg down. Since they won’t start paying you to take crude away, the downside is limited from here 🙂

    Are you saying that OIH cannot improve from estimates because those haven’t yet been hammered down far enough? i.e. analysts still not there yet?

  66. 66
    zman Says:

    Thanks Bob, will look.

    About to get on NFX call.

  67. 67
    1520sbroad Says:

    #61 – i’ll throw SWN in the “right amount of debt is zero” camp – they have been aggressive about paying down debt over the years – selling assets, etc.

    EOG is on my short list for new positions.

  68. 68
    zman Says:

    Dman – yes, estimates have not come down as much as they will. SLB good indication of that today. Unlike in E&P model where you just take estimated volumes X price (net of hedge), suck out all the costs and derive cash flow there is much less transparency in OIH numbers so they are slow to move and less frequently updated and when they are its more of a judgement call.

  69. 69
    Dman Says:

    #64 I agree: it does look like a bottoming process, but a painful drawn out sort of arrangement. I think the market is basically driving traders nuts until no one will play & then everyone will have to chase & be wondering why they didn’t buy assorted energy stocks for $4, down from $40.

  70. 70
    zman Says:

    1520 – hear ya on that and those SWN guys are smart and going to benefit from better differentials once takeaway capacity form the Fayetteville is no longer a problem in December/January.

    Obviously, there’s no rush to get long much right now as market dictates all and we are yo-yoing about with little confidence.

  71. 71
    zman Says:

    NFX not until 1:35 EST, unlike listed in the post.

  72. 72
    Dman Says:

    Z – would you exempt the likes of DO from your prognosis?

  73. 73
    zman Says:

    Dman -agreed, in the meantime, the key is to not exhaust your capital to the extent you can’t play the subsequent $4 to $40 move.

  74. 74
    1520sbroad Says:

    Agreed – i’m firmly sitting on hands until at least after the Dec options expiration. Looking hard at some new names though.

    anyone ever heard of a company named houston wire and cable – HWCC is the ticker. Popped up on a screen with a good balance sheet, div yield, CA>CL, and infrastructure focus

  75. 75
    zman Says:

    Re – DO – yes. Estimates for 2009 are somewhere north of 75% locked in due to the contract nature of the business. 2010 is highly booked up as well. That’s also an income play as their dividend is tied to day rates in a pass through structure, so investing here is open to a broader class of investors than your typical energy equity name that does not provide yield. I think I am early there though due to the market, if not the something specific to the deepwater group. Also, negative moves on RIG have hurt it. And the CPE news scared everyone in the space. Have not heard what the cessation of drilling at Entrada means for that DO rig yet.

  76. 76
    md Says:

    Product supplied week Resid popped to 958.
    Fuel switching in effect.

  77. 77
    zman Says:

    md – did you notice gasoline and diesel production were both off. Maybe the contango is coming into play as given the crappy margins its better to store it and sell it higher. Maybe its just noise.

  78. 78
    BirdsofpreyRcool Says:

    Goldman now sees the non-farm payroll report coming it at a loss of 400,000 jobs. That would be a larger-than-expected-number, all right. Current consensus is for a loss of 330,000. But, it looks like that number will be revised up between now and Friday morning.

  79. 79
    zman Says:

    Sharon Epperson on CNBC calls today’s data from the EIA “surprising declilnes.” She really should read the post.

  80. 80
    zman Says:

    Morgan Stanley went from attractive to in-line on the clean energy sector. Wedbush took FSLr from Buy to Hold today. Never fails analysts give up at the bottom. FSLR actually rallying on the downgrade.

  81. 81
    Dman Says:

    Z – #79. You mean she doesn’t?

    There ya go, all my illusions shattered 🙂

  82. 82
    Sambone Says:

    LONDON (Dow Jones)–Funding for small to medium-sized oil and gas companies
    will remain scarce in 2009 and when capital does begin to flow it will be
    expensive, senior energy bankers said Wednesday.
    “Today, markets are shut. There is no high-yield paper coming to the market,”
    said Michael Powell, head of oil and gas and Barclays Capital at the World
    Junior Oil and Gas Congress in London.
    Debt markets may begin to reopen in the first quarter of 2009, but only for
    high-yield paper at a cost of around 15% for small oil and gas companies, he
    said. “If your debt costs 15%…you have to start to think differently about
    funding options,” he said.
    Small companies must, “budget to survive,” said Simon Ashby-Rudd, Managing
    Director of specialist oil and gas investment bank Tristone Capital. “If there
    is a perception of financing risk for companies today, investors will simply
    run for the door. That’s the position Oilexco found itself in,” he said.
    Shares in Toronto-listed Oilexco Inc. (OIL.T), which is very active in the
    U.K. North Sea, have fallen more than 80% since the beginning of August after a
    number of financing difficulties.
    “None of us should count on capital markets opening in the next six to 12
    months,” said Paul Colucci, managing director of investment banking at Thomas
    Weisel Partners. Companies likely to run short of cash during this time should
    consider selling stakes in their fields, doing deals with private equity firms
    or selling companies outright, he said.
    The bankers said they expected the number of acquisitions in the sector to
    increase next year. “Most of the (oil) majors have a significant amount of
    cash,” and are potential buyers, said Ashby-Rudd. “There is a huge amount of
    sovereign money out there looking to invest,” he said. Ten to 20 private equity
    firms have between $250 million and $1 billion and are looking to acquire
    groups of small oil and gas companies, he said.
    There is value in the sector, Ashby-Rudd said. “If you buy an asset in the
    market today, in three to five years you will make money,” he said.
    Buying a standalone oil or gas producing asset in the North Sea right now
    would cost around $20-25 a barrel of oil equivalent of reserves, versus around
    $8 a boe of reserves to acquire a North Sea oil producing company outright, he
    But the oil and gas companies that do have cash are likely to remain cautious
    in the short term, said Powell. “It’s tough to figure out what value is,” in
    the current market and, “people in a position to make an acquisition still
    don’t know what their view is around the oil price.”
    “(Companies) are also watching their cash position very carefully,” Powell
    said. “Financing has become a strategic issue,” and it would be foolish for a
    company to rush into a deal now that would leave them facing their own
    financing problems in six to 12 months, he said.
    Total SA (TOT) appears to be echoing this sentiment. U.K. newspaper The Times
    reported Wednesday that the French oil giant has decided against bidding for
    Canada’s Nexen Inc. (NXY) because the deal would be too risky in the current
    economic climate.

    -By James Herron, Dow Jones Newswires
    Dow Jones Newswires
    12-03-08 1220ET

  83. 83
    Sambone Says:

    Dman, Z does that to everybody.

  84. 84
    zman Says:

    Thanks Sam. Debt markets clearly staying frozen longer than I originally thought they would. The indebted with near term maturities are going to pay unbelievable rates to swap out their debt in the first half of 2009.

    Ha,ha, very funny.

  85. 85
    Sambone Says:

    Hmmm, question of the day, “What made Frosty the Snowman come to life?”

  86. 86
    zman Says:

    He was covered by a TARP which kept him frozen but technically alive.

  87. 87
    Sambone Says:

    TECHNICALLY SPEAKING: The Mother Of All Bubble Bursts

    By Rob Curran

    NEW YORK (Dow Jones)–The analyst who projected $200 oil should have lopped
    off a zero.
    The crash in oil, copper, grain and other commodity stocks in 2008 has
    outpaced that of technology stocks at the turn of this century – with many
    taking only six months for the 80%-wipeouts that took the tech sector two
    Chart watchers warn that the sheer momentum of the commodities selloff will
    likely carry losses even further. In other words, the very fact that oil has
    fallen by $100 and the stock of Potash of Saskatchewan (POT) by nearly $200
    since the summer makes further declines likely.
    “All of commodities are collapsing,” said Frank Lesh, futures analyst and
    broker at FuturePath Trading. “The oil charts are bearish. I expect commodities
    to [remain] under pressure in the first quarter of next year.”
    For the first half of 2008, hedge funds and other institutions placed
    speculative bets on oil and metals futures and on commodities stocks, telling
    clients that the problem in the U.S. banking sector couldn’t slow the growth of
    China, India or other major natural-resource consumers. Brokers vied with one
    another for the highest oil target, just as they once did with dot-com prices.
    “Half a billion people are moving into the middle class every year and they’re
    going to need gasoline,” the bulls said, echoing breathless promises of the
    past, such as “We will soon be buying our groceries online…”
    In July, as the thesis foundered, the bubble burst.
    “The majority of tech dot-coms and Internet names went to single digits,” said
    Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research.
    “If we think of this as a true bubble comparable to that, there could very well
    be some pain to come.”
    Shares of FreeportMcMoRan Copper & Gold (FCX) led the sector down again
    Wednesday, falling 18% to $17.89 recently – its lowest level in more than five
    years and about 86% from its summer peak. The miner warned that it would have
    to cut back production further to reflect the plunge in copper prices. Earlier
    this week, fertilizer maker Mosaic (MOS) warned of similar effects on its plans
    from the drop in grain prices, bringing it to new lows for the year. These are
    likely just the beginning of production and profit cuts for these companies.
    And hedge funds facing requests for cash back from clients are likely still
    major holders.
    For example, Goldman Sachs Group estimates that FreeportMoRan was among the
    most frequent stocks to appear in lists of top-10 holdings of major hedge
    funds, as of Sept. 30.
    To play the continuing down trend in these stocks, Detrick, of Schaeffer’s
    recommends buying bearish put options on Potash of Saskatchewan, hedged with
    bullish calls on seed and weedkiller maker Monsanto (MON), which has held up
    better than other agricultural-commodities stocks. Potash recently traded at
    $54, testing its last line of support from 2007, according to Detrick.
    “You get these big bounces,” he said. “If you look at the monthly chart of
    this thing, it was at $240 back in June. That’s an outright collapse.”
    Similarly, Detrick is bearish on coal miners, since Wall Street brokers have
    maintained their bullish stance, fighting the tape. About 70% of broker
    opinions on a basket of coal miners reviewed by Schaeffer’s were “buy” ratings,
    Detrick said. That means for stocks like Alpha Natural Resouces (ANR), down 86%
    from its peak, there are risks of downgrades, and more declines.
    -By Rob Curran, Dow Jones Newswires
    Dow Jones Newswires
    12-03-08 1300ET

    Just makes you feel all warm and fuzzy, don’t it?

  88. 88
    zman Says:

    market just marking time until beige book, then on to big 3 tomorrow and jobs Friday.

  89. 89
    BirdsofpreyRcool Says:

    IG 265… about where it went out last night

  90. 90
    zman Says:

    Nice market. NFX fbr starting now.

  91. 91
    Sambone Says:

    Fickle market today, eh?

  92. 92
    BirdsofpreyRcool Says:

    Trader’s Mrkt… directionless, but volatile.

  93. 93
    Sambone Says:

    By Maya Jackson Randall

    WASHINGTON (Dow Jones)–A Federal Reserve report Wednesday shows that economic
    activity across the nation has weakened even further, adding to this week’s
    string of dismal financial news.
    Since the Fed released its last Beige Book in mid-October, economic activity
    has softened further across all 12 of the nation’s Federal Reserve districts,
    which include major cities such as New York, Cleveland, Richmond, Atlanta and
    Chicago, the latest report shows.
    “Districts generally reported decreases in retail sales, and vehicle sales
    were down significantly in most Districts,” said the Beige Book, which is based
    on information collected before Nov. 24.
    The report also noted that tourism spending “was subdued” in a number of
    districts and reports on the service sector “were generally negative.”
    Additionally, the report found that manufacturing activity has declined in most
    The picture the report paints of the housing market was also rather bleak.
    Nearly all districts reported weak housing markets, adding that selling prices
    have taken a beating and sales activity is slow, but at least, stable.
    Meanwhile, the report finds that commercial real estate markets generally
    declined in most districts and lending standards have tightened.
    While the last Beige Book, released on Oct. 15, highlighted the energy and
    mining sectors as “positive,” it appears that that bright spot has now dimmed.
    The new December report points out that mining and energy production and
    exploration have started to soften in light of lower prices.
    Districts also reported weak conditions in the labor markets and said
    pressures on prices have eased. The Boston, Richmond, Chicago and Dallas
    districts all reported that demand for temporary staff decreased. Also, several
    businesses in the Atlanta District reported that layoffs accelerated and hours
    declined. Dallas officials said the labor market weakness was most pronounced
    in the manufacturing sector. At the same time, various areas said demand for
    so-called skilled labor was still strong.
    The report, a sneak peek into local conditions, is based on information
    collected during October and November, when the economy continued to waffle
    under the weight of the country’s worst financial crisis in decades. So it
    reflects how the housing market tumble and related credit crunch are continuing
    to weigh on local economies throughout the country.
    Whereas the October Beige Book indicated that the downturn had broadened to
    all 12 districts, Wednesday’s report shows that the slump has intensified.
    Fed officials will review the anecdotal information at their policy meeting on
    interest rates next week.
    Federal Reserve Chairman Ben Bernanke has already made clear that the central
    bank stands ready to do all it can to prop up financial markets and the
    economy. In a speech earlier this week, Bernanke said further interest rate
    cuts are “certainly feasible” and added that the Fed could also launch new
    liquidity programs to try to revive markets.
    -By Maya Jackson Randall, Dow Jones Newswires

    Dow Jones Newswires
    12-03-08 1400ET

  94. 94
    zman Says:

    NFX on track to post good numbers next year, can’t tell it from the stock. Hedge position has grown quite large now. Will have a blurb for tomorrow.

  95. 95
    zman Says:

    BEXP has some nice operations items out…no one cares for now. Stock probably dead money through year end but after that it joins the “its not the end of the world single digit midget portfolio”

  96. 96
    zman Says:

    NFX sounds very much like they will be the upper end of guidance for 4Q. Something I will keep in mind as the the 4Q results come out.

  97. 97
    zman Says:

    After rally cap on now. Volumes look light again, not as bad as holiday levels but not trading well.

  98. 98
    tomdavis12 Says:

    Z: UBS says market will be up 53% in ’09. NOT 51% or 54%.

  99. 99
    zman Says:

    Thanks for the laugh Tom

  100. 100
    BirdsofpreyRcool Says:

    Tom – is that up 53% from here? Or 53% from YE 2008? Could make a BIG diff!

  101. 101
    BirdsofpreyRcool Says:

    z – from now ’til mrkt close… what is the direction that will inflict the most pain on the most traders you think?

  102. 102
    zman Says:

    BOP – probably flat because everyone is trading VIX options.

  103. 103
    BirdsofpreyRcool Says:

    z – sneaky, out of the box answer. good one.

  104. 104
    Sambone Says:

    HOUSTON (Dow Jones)–Output of crude oil and natural gas from the Gulf of
    Mexico increased from two weeks ago, as energy companies worked to restore
    production that was shut in by Hurricane Ike, the U.S. Minerals Management
    Service said Wednesday.
    The agency reported that 14.9% of crude oil, or 193,910 barrels a day,
    remained shut in. The agency did not report figures last week but on Nov. 19
    reported that 16.3% of oil was still off line.
    The production figures are estimates based on reports of what operators expect
    their output to be, MMS said.
    Natural gas output of 1.544 billion cubic feet a day, or 20.9%, also remained
    off line. On Nov. 19, the agency reported that 24.4% of gas was still off line.
    The Gulf of Mexico produces about 1.3 million barrels of oil a day and about
    7.4 Bcf of natural gas, the MMS said.
    Workers remained evacuated from 51 production platforms, or 10% of the 694
    staffed production platforms in the Gulf of Mexico, the MMS said, citing
    numbers it gathered by 11:30 a.m. CST Wednesday.
    It could be six months before some facilities are operational.
    All of the rigs in the Gulf are staffed.
    Hurricane Ike made landfall on the Texas Gulf Coast Sept. 13 as a Category 2

    – By Susan Daker, Dow Jones Newswires
    Dow Jones Newswires
    12-03-08 1413ET

  105. 105
    zman Says:

    Anyone see a positive comment on solars or FSLR in particular?

  106. 106
    zman Says:

    Thanks Sam, saw that earlier. With 20% of Gomex gas production still online equaling about 1.4 Bcfgpd it has to temper possible gains in gas prices. As usual this time of year, the U.S. gas producers are in need of continued cold weather to get storage moving lower

  107. 107
    Sambone Says:

    This is the only thing I see;

    09:39 12/03 *DJ First Solar Corp Cut To Hold From Buy By Wedbush >FSLR

  108. 108
    tomdavis12 Says:

    Z: UBS is saying 1300 on the S&P by end of ’09

  109. 109
    ram Says:

    I wonder what will be the catalyst to energize manufacturing which will energize energy. Projects are being slowed or stopped at all levels except federal/military. I’m surprised that the ISM was in the mid 30’s. We haven’t seen the full effect of shutdowns or coming closings of manufacturing companies. Credit is still difficult at best for rental yards buying construction equipment.

  110. 110
    zman Says:

    Ram, how about a $700 B stimulus package with a good chunk spent on bridges, roads, etc?

  111. 111
    ram Says:

    Maybe the recent news of utilities creating solar farms is actually gaining interest with investors. I would bet there would be tax advantages in the future for power companies to generate power of some percentage from renewable sources.

  112. 112
    zman Says:

    Could be Ram. Saw some news regarding efficiency breakthroughs today (20% which is very high to most thin film products (more like 9%).

    I had thought FSLR would get a move 2 days ago over the SCE news in California and the added order for more rooftop commercial solar but it was a bad market day. Maybe the analysts are just getting round to making phone calls on that. Up $18 now.

  113. 113
    ram Says:

    Unfortunately, some companies can’t rely on talk and no action. There was a contraction in construction manufactures 7 years ago. There is another going on now. This cycle is more viscous. When companies stop versus slow down, the momentum to restart is also slow and awkward. You keep hearing about the monies for roads, etc., but until equipment is selling again, manufacturing is in the same dumper as retail – no money no buyers.

  114. 114
    ram Says:

    Is DRYS going out of business or what?

  115. 115
    zman Says:


    $2300 per day, down from $220,000 per day.



  116. 116
    Bleemus Says:

    South Carolina Electric and Gas is asking for a 37% rate hike to pay for two new nuclear reactors.

  117. 117
    ram Says:

    Whether it’s the BDI, energy stocks, or commodities, all their charts have similar appearances.

  118. 118
    zman Says:

    Agreed, they do. But that’s a 99% drop and as those ships are break even around $7,000 per day its pretty tough on the non-long term charter names like DRYS.

  119. 119
    BirdsofpreyRcool Says:

    The IG Index ended the day about where it did yesterday: 263 bps. Lackluster trading all day.

    JPMo took the oppy today to sell $350mm of FDIC-backed (Bair) bonds.

    GE Capital raised some 3-yr floating and fixed notes at 95-ish bps over 3 month LIBOR (“normal” times, this would be 20 bps over LIBOR… but, ain’t no way, no how normal times).

    Royal Bank of Scotland just hit the tape. It is issuing $2B of govt-backed notes. I am assuming it’s not our gov’t backing them.

    All this govt-backed debt issuance is good — for those who have access to that sort of thing — but it’s making it harder and more expensive for companies that CAN’T feed at the TARP Trough. Oh well… if this breaks the credit log jam, I guess it will be worth it. Problem is, not a log has freed itself from the massive pile-up yet. Guess we can still hope, though. Right?

  120. 120
    BirdsofpreyRcool Says:

    Getting a few phone calls from institutional trading desks… some equity-focused technical analysts are calling the bottom around here. That said, they are hedging that call with “we might still see lower lows.” But, for the most part, equity folks are starting to poke their heads out of the foxhole.

    Let’s hope (there’s that word again) that credit will see that equity survives sticking it’s head up… and started to crawl out of the foxhole too. That’s the way it will ultimately work, a sustainable equity rally will pull bond investors out of govt and govt-backed bonds and into corporate debt. That is what a credit thaw will look like.

  121. 121
    md Says:

    I’ve been AWOL for most of day.
    I’m fairly (2 yrs.) new at this so I’m learning and trying to stay outta trouble.
    I do not keep track of production but I see what you mean.
    I compare LY closest week numbers prior to adjustment. This is not perfect but consistantly so. With regards to LY pre adjusted numbers it’s a fair comp to this years weekly numbers which are pre adjusted so it comes out in wash. That’s what I figure anyway.
    What does strike me on stocks is that CL is way up,Distillate is way down and Gas is down. Other oils has been very strange in both Sept. montlhy with variance from weekly up a crazy 27M and it’s product supply was down. With exception of ethanol which is an estimate and delayed by 1 month does other oils contribute to gas or dist.
    It may hint at a slowing industrial base but not sure about transport base. This week it climbed and is closer to the Sept monthly number.
    It would seem that lower energy costs will bring consumers back to the pumps but not FEDEX to the diesel.
    The econmy should effect the consumtion as discussed where car sales are down 37% this month but that has trickle down effect on overall car pop.
    It does say that families may be giving up 2nd and 3rd car.
    That said any demand destruction or rationalization will more be more than made up in 2 yrs. and forward by BRIC. When to catch the wave will be a function of credit. The Globen mail article is on the money that the cheaper it falls the higher it will rebound.
    It’s the credit stupid.
    I hope to be back tomorrow.

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