16
Jan
Less Frightening Friday
Sharply higher open expected on B of A stabilization news. The IEA cut its numbers for demand for 2009 into the negative category but this was expected and at least so far, shares are holding above the $35 level giving energy stocks a chance to participate into options expiration. Not a lot going on in terms of energy company news today so I've included a look at rig activity vs natural gas production response and some other tidbits.
In Today's Post
- Holdings Watch
- Commodity Watch
- Natural Gas Inventory Review
- Stuff We Care About Today
- Odds & Ends
Holdings Watch: No changes yesterday
Commodity Watch:
Crude oil fell $1.88 to $35.40 yesterday, again closing well of its early day low of $33.20 as the equity market sank. The front month crude contract looks like this and the 12 month strip looks like this:
Food For Thought Watch: This Is A Record Steep Contango And Steep Contango Often End In Rallies. This is not necessarily a causal relationship...
- in that the events that give rise to a steep contango, such as near term glut conditions which are expected to resolve themselves when, oh, say, the economy gets off its keister, may in fact go on for longer than anyone thought leading to continuous pressure as the out months become the near months over time.
- and, significant new supply can yield a depression in those out months. However at present many potential sources of significant new supply are being backburnered (although crude will struggle to get back to 2008's highs before the end of 2010 due to the large surplus capacity OPEC now has in place and which will likely grow by 2 to 2.5 mm additional bopd by 2012 as Saudi Arabia, Iran, and Angola increase their productivity via new fields.
... but historically large contangos have presaged sharp reversals in the crude markets after significant supply curtailment has been incurred and demand has returned due to prices. This one may take longer to resolve as prices, at least so far, don't seem to be inducing further purchases as the weak global economyand haywire financial situation has yield. Just food for thought.
- IEA Watch: France's oil watch dog cut their forecast for global demand by 940,000 bopd to 85.3 mm bopd, a 500,000 bopd drop from 2008 levels. IEA is using a global GDP figure of 1.2% with China seen growing at 6.5% (its lowest rate in 8 years).
Natural gas tumbled $0.13 to close at $4.84, its lowest close since a one month sell off in September 2006 (before that support was in 2004). Click here to go to the full Thursday night post. This morning gas is trading up a dime.
Stuff We Care About Today
I get asked a lot about when the falling rig count will yield falling production numbers. My answer has been in the January or February data (which we see 60 days later from the EIA). That actually may be a bit conservative. Here a some things to consider:
- Barnett Vs Haynesville. Before looking at the following graphs its probably worth noting that the big, high initial production wells of the Barnett Shale, which fueled much of the recent supply growth in the U.S. were 15 to 20 day wells. Rig counts are plummeting in Texas (down 146 from year ago levels) and should continue to fall over the next few months. They are being somewhat offset by the Haynesville Shale wells which probably provide the highest IRR of all the shales at present. The Haynesville wells are much deeper and require something closer to 55 to 60 days spud to completion. So they may indeed be double, triple or even quadruple the initial production of a Barnett Shale well with the same decline profile (down 80% first year) you will get a lot less of them drilled per rig (6 or maybe 7 wells for H.S. vs 20 to 22 wells per rig in the Barnett) which itself will lead to a little bit lower gas production in aggregate. That's a little bit less gas if the rigs simply transitioned from Texas to Louisiana. Did I mention Texas is short 146 rigs? Louisiana is up 44 rigs from year ago levels. That's just not enough to offset the lower activity in Texas.
- The Steeper The Slide, The Quicker The Production Response. This intuitively makes since and it should be truer now than ever given the higher decline rate nature of where the production growth has been coming for but I won't beat that horse anymore.
Odds & Ends
Analyst Watch: Argus cuts (BHI) from $85 to $45, maintains Buy with the stock at $32.
By Nick Heath
Of DOW JONES NEWSWIRES
LONDON (Dow Jones)–Crude futures traded modestly higher Friday as market
participants opted to take their lead from stronger equity markets ahead of
another dismal prediction for global oil demand.
European equity markets advanced after a bail-out deal for Bank of America
assuaged fears of more disintegration in the financials sector, with the
optimism it generated enough to offset a brace of ugly losses reported Friday
by the bank and its peer Citigroup. Equity markets have been watched
increasingly closely by the crude market, seen as leading indicators of
economic health and associated oil demand.
Meanwhile, a somewhat muted price response greeted the International Energy
Agency’s 1 million barrel-a-day cut to its world oil demand forecast. Crude
demand globally is now expected to average 85.3 million barrels a day this
year, the IEA said, with economic recession in various parts of the world and
increased weakness in China putting a further squeeze on energy consumption.
“The price hasn’t been doing much but I think that may be more to do with
equity markets up today, the optimism there balancing things a little bit,”
said Simon Wardell, analyst at Global Insight. “Also, the IEA is always a
little bit behind like any monthly publication, although I think the downward
revision is significant,” he added.
At 1228 GMT, the front-month March Brent contract on London’s ICE futures
exchange was up 48 cents at $48.16 a barrel.
The front-month February light, sweet, crude contract on the New York
Mercantile Exchange was trading 31 cents higher at $35.71 a barrel. The more
active March contract, which becomes the front-month product Jan. 20, was up 3
cents at $43.57 a barrel.
The ICE’s gasoil contract for February delivery was up $7.75 at $465.50 a
metric ton, while Nymex gasoline for February delivery was down 104 points at
116.38 cents a gallon.
Despite the grim readings on offer from the IEA, the pessimism about demand,
which is currently widespread in the crude markets, cushioned its impact, some
said.
“Given the current economic climate – although a 1 million barrel a day cut is
large – it’s not a massive surprise,” said Tony Machacek, energy broker at
Bache Commodities in London.
Nonetheless, the weaker demand outlook limited crude’s advances Friday, as did
indications that supply remains robust. A developing trend for storing oil in
crude tankers has led to between 50 million and 80 million barrels currently
being held in floating storage, the IEA said in its report.
Further supply cuts from Organization of Petroleum Exporting Countries might
be necessary to trim the buildup in worldwide crude stocks, some said Friday.
Last month OPEC announced a 2.2 million barrels a day cut in output, effective
Jan. 1.
“With between one half and one day of global demand on the water in floating
storage, OPEC would have to tighten the market by one half to 1 million barrels
a day below current demand levels for an entire quarter to get rid of the
surplus,” analysts at JP Morgan calculated Friday.
“In addition, OECD stocks are probably around four days above normal. That
could cap prices for the rest of this year at least.”
-By Nick Heath, Dow Jones Newswires (Spencer Swartz in London contributed to this item)
Dow Jones Newswires
January 16th, 2009 at 8:54 am01-16-09 0744ET
LONDON (Dow Jones)–U.S. Henry Hub natural gas futures were seen lower for the
sixth month running Friday as bearish demand and a weakening economic outlook
continue to put pressure on prices, according to a Dow Jones Newswires survey
of 13 financial institutions.
A litany of weak economic data has put pressure on prices over the last month.
On Wednesday, prices tumbled after government data showed that retail sales
plummeted far more than expected in December due to the worst holiday shopping
season since at least 1969.
Last week, the U.S. unemployment rate for December rose to 7.2%, the highest
level in 16 years, according to Labor Department data.
Storage levels in the U.S. were 3.1% above the five-year average this week
and, despite cold weather, withdrawals have been smaller than expected as
industrial demand has waned.
The price of natural gas for delivery in the first quarter was seen 4.8% lower
than the previous month’s survey at $6.00 per million British thermal units.
The price was down 8.8% in the second quarter to $5.70/MMBtu.
However, the price for the fourth quarter was seen recovering by 5.8% to
$6.98/MMBtu. The average prices for 2009 and 2010 were almost unchanged at
$6.35/MMBtu and $7.50/MMBtu respectively.
(Gas prices in dollars per million British thermal units)
US NATURAL GAS
Institution 1Q 2Q 3Q 4Q average
2009 2009 2009 2009 2009 2010
Barclays 6.30 6.25 6.50 6.40 6.36 7.16
Cazenove 6.00 6.25 6.75 7.00 6.50 7.50
Citigroup 7.50 7.50 7.50 7.50 7.50 8.25
Commerzbank 6.00 6.00 7.00 8.00 6.80 8.50
Deutsche Bank 5.50 5.50 6.00 7.00 6.00 8.25
DZ Bank 6.00 5.75 6.50 7.15 6.35 7.26
ING 5.51 5.65 5.65 6.24 5.76 6.32
J.P. Morgan 6.00 5.50 6.00 6.50 6.00 6.50
Merrill Lynch 6.20 5.50 5.70 6.60 6.00 —
Natixis 6.16 6.10 6.45 6.95 6.40 —
RBS 6.10 5.20 5.40 5.60 5.60 7.30
UBS 5.25 4.75 5.00 7.00 5.50 7.75
UniCredit — — — — 7.50 8.00
MEDIAN 6.00 5.70 6.23 6.98 6.35 7.50
previous month 6.30 6.25 6.50 6.60 6.36 7.47
-By James Herron and Matthias Goldschmidt, Dow Jones Newswires
January 16th, 2009 at 8:55 amDow Jones Newswires
01-16-09 0705ET
17 here now, which is pretty rare, not getting above freezing, also rare as I’m located pretty much in the middle of the U.S., very much natural gas heated country.
January 16th, 2009 at 8:55 amCF Industries bid for TRA is too cheap, at just 3.8x 2009e EBITDA. I would expect it to trade up… CMP too, as people start to think about consolidation in the fertilizer industry. Cheap nat gas = good for TRA.
January 16th, 2009 at 8:56 amGreat article on WTI/Brent pricing (no link to the chart they refer to, but you get the picture):
West Texas Oil Prices Risky as ‘Chocolate Gloves’: Chart of Day
By Lee J. Miller and Minh Bui
January 16th, 2009 at 8:58 amJan. 16 (Bloomberg) — Oil traders using price indicators based on West Texas Intermediate contracts should instead benchmark against Brent, as the dynamics of the U.S. crude oil market “have become increasingly bizarre,” Barclays Plc said.
A distortion is occurring because WTI prices are built around the inventory level at the crude storage facility in Cushing, Oklahoma, the Barclays report said. The delivery point for WTI has taken on an additional 18.1 million barrels the past three months, while all U.S. storage has grown by 18.4 million barrels over the same period, said the Jan. 14 report.
“In other words, there would appear to be plenty of spare storage onshore in the U.S. outside of Cushing,” Barclays said.
That means prices used in WTI contracts have “little relevance to the U.S. market outside Cushing.”
The CHART OF THE DAY shows the increasing disparity between the March futures contracts for WTI and Brent crude. Notice how the spread, about $4.35 a barrel today, was less than $1 between Dec. 23 and Jan. 6.
“The problem is that WTI prices are being used in a wider
context: crude oil exporters link to them for the U.S. market, derivatives are based on them, investment returns are affected by their time spreads and policy makers in both consuming and producing countries use them as an indicator,” analysts including London-based Paul Horsnell and New York-based Costanza Jacazio wrote.
“WTI has become about as useful as a chocolate oven- glove,” they wrote. “So if you want to take a position based on balances and fundamentals, it is perhaps better for the moment to stick to Brent or other non-WTI exposure.”
BOP – would you think good news for the likes of AGU and POT as well?
January 16th, 2009 at 8:59 amThis makes me feel warm a fuzzy, ya know!
http://vortex.plymouth.edu/uschill.gif
January 16th, 2009 at 9:02 amBOP – I agree with 5 as it goes for oil traders but for U.S. based companies, oil prices are keying off the lower Nymex price. You can see the rest of the world giving the nod to Brent here:
http://tonto.eia.doe.gov/dnav/pet/pet_pri_wco_k_w.htm
January 16th, 2009 at 9:02 am#6 – one would think so. I would have to look at the multiples there… but, if the mrkt is valuing those guys at less than 3.8x 2009e EBITDA, I would think they should move up too. Problem is, all the other ferts (than TRA) involve some sort of mining-type activity. TRA is the only public US company that I know of that converts natural gas to liquid fertilizer. It’s a different operation that CMT, POT, AGU. Same end mrkt, different product.
I haven’t followed the other guys closely, as I used TRA as my go-to name when nat gas prices are cheap. Unfortunately, as TRA usually hits a seasonal low during late-Jan/early Feb, I’m currently sidelined on the name… may take a few tarding shares tho. The unsolicited offer is too low, IMHO.
January 16th, 2009 at 9:05 amGood to see some M&A back in the mrkt… it’s a stock-for-stock bid, so doesn’t rely on the debt mrkts to get done. But, should shake up some valuations in the chemical kids.
January 16th, 2009 at 9:08 amThanks BOP, the fert guys all used to hedge at the wrong time like airlines. Hopefully not the case this time around.
Oil up $1.20, hmmmm.
January 16th, 2009 at 9:09 amBOP- any other potential suiters for TRA in ur opinion?
January 16th, 2009 at 9:10 amTRA is pretty good about hedging… they don’t go that far out and don’t speculate. Only hedge a few months of production at a time and pass it through.
But, hear ya on “hedging.” Haven’t seen anyone that is perfect at it, in the long run, even Aubry.
January 16th, 2009 at 9:14 amrifkin – good question. As there is no one out there just like TRA… would think any of the fert guys might step up. It would diversify them away from mining operations. CF was the most natural bidder, but wouldn’t rule out the other guys. AGU bought UAP last year… TRA would be a fit with that, I would think.
January 16th, 2009 at 9:18 amZ – Looking at your graphs of rig count vs. production above. Hard to discern what is going on. Event A has rigs falling from a fairly low beginning # w/no discernible reduction in production, (looks like an increase). Event B count drops from a beginning rig count 63% higher w/an immediate production reduction effect. Time frame for event B looks to be prior to shale play activity ramp up although tight sand gas was fairly activity in that time frame.
Your interpretation?
January 16th, 2009 at 9:18 amZ,
January 16th, 2009 at 9:21 amWish I had your 17 degrees. We are at -22 right now.
JY – note that A was very high rig count at the time and that the fall in rigs was over a longer period. The lack of decline was most likely a result of the character of the wells being drilled on short being almost entirely conventional and CBM. Those CBM don’t have the flush production profile or the high decline rate and do last for just about ever.
The B period is more tight gas sand drilling which is somewhat comparable in decline rate to shale drilling (that was CHK’s doing in the Austin Chalk among others). Here you see the rigs come off and the production growth rate comes off quickly. More what I’d expect this time around given the fall we’ve had and the fall to come. It looks like we could see gas rigs fall by half before this is over, at least to 1,000.
January 16th, 2009 at 9:24 amNice Sane, what to keep up the demand end!
Gotta miss the open, back in 20 minutes.
January 16th, 2009 at 9:25 amZ #17 thanks. I’d guessed tight gas but wasn’t sure.
January 16th, 2009 at 9:28 amIG 213 (opened tighter, widened a bit)
January 16th, 2009 at 9:30 amIG 212 bonds liking the stock market
January 16th, 2009 at 9:38 amthanks z – great follow up to last night’s post.
a balmy 10 degrees here in NJ when i got up to get the paper this morning.
January 16th, 2009 at 9:41 amIG 211
January 16th, 2009 at 9:48 amwow, green.
January 16th, 2009 at 9:50 amBDI -27 881
TED +.047 1.03
Not improving today!!
January 16th, 2009 at 9:52 amBOP – any sense from the trading desk on the staying power of the broad market “rally” this morning. Only use the quotes because we’re green across the board and it looks a bit tentative to me with a lot of names pulling well off their opening highs. Could be a few pin plays here like SWN which popped, is dropping but could feel the pull of $30 pretty easily.
January 16th, 2009 at 9:54 amz – i’ll ask… on days when they don’t tell me first thing in the morning, it’s usually not a “strong conviction day.” and we both know that option expry day is the definition of “squirrely.”
January 16th, 2009 at 9:55 amnot a high conviction day, day-trading recommendation odds of 55/45… but, here goes:
go short the morning rally, usually early, and any rally near 10:05 and 10:25 for a sell-off into lunch and the early afternoon. HOD at 9:35 est.
also, he pointed out that the pits will thin out early, ahead of a long weekend.
January 16th, 2009 at 10:00 amWILDZ – $10KP
Added 5 FSLR January, $150 Calls (HJQAJ) for $1.61 avg, mostly on the bid, with the stock up $6.50. Highly riskly, blink or get a cup of coffee and the market can kill these kind of trade. FSLR overly beat down and starting to bounce and I obviously won’t stay long here. Will add some for Feb as well as I’d like to be in for the inauguration.
January 16th, 2009 at 10:03 amday trader program is out of the market, with a 7 point profit. done for the day. so, we’re on our own. option expry should produce some interesting volatility, tho… especially in the last 5 mins of the day.
January 16th, 2009 at 10:05 amSort of tough being here at a balmy 78 today. It will get down to 55 overnite.
January 16th, 2009 at 10:06 amTry to use the air conditioning today Ram, lol.
January 16th, 2009 at 10:07 amRegarding fertilizer production, CVI makes fertilizer without mining (part of their refining process) but you end up with an oil refiner too.
January 16th, 2009 at 10:09 amantrim – thanks! did not know CVI.
January 16th, 2009 at 10:11 amLast year CVI was looking to split into two companies but the financial disaster last year and the collapse in commodities prices pretty much ended that thought.
January 16th, 2009 at 10:13 amZTRADE: Added another 5 of the FSLR $150s for $1.35.
January 16th, 2009 at 10:15 amJack Lipinski sounds familiar… is he one of those serial-entrepreneur types?
January 16th, 2009 at 10:22 amOil and natural gas back to even on the day.
January 16th, 2009 at 10:22 amZTRADE: $10KP
FSLR – 1 February $175 Calls (HJQBO) for $7.30.
January 16th, 2009 at 10:29 amHK looks like pinning action setting in early.
January 16th, 2009 at 10:34 amI listened to SD conference last night. It seems to me that all is well. Just have to wait about 6 months for the market to anticipate 2010 earnings jump. Agree or disagree?
January 16th, 2009 at 10:39 amZTRADE: Tooking final set of 5 FSLR $150 Jan calls for $1.15.
January 16th, 2009 at 10:39 amEld. I think it moves higher when gas prices do (and I mean something like back above $6, that may take 3 to 6 months. The one thing I didn’t really get was the need to raise capex in the wake of the offering. They had previously stated that their half billion budget was good enough to meet contractual obligations on the CO2 removal plant to OXY. They couched it as insuring growth for ’10 but it does give me a bit of pause. I’d like to see everyone be happy with lower growth and staying well within cash flow instead of skirting along the border of capex/cash flow neutral status. Paydown some bank debt and spend even less on leasehold as that will only allow those prices to drop further. I’m holding my stock but I’m not ready to add yet.
January 16th, 2009 at 10:44 amZTRADE: Added 10 more of those on that dip for $75, last ones, for sure.Average cost now $1.12. Super fast trader today.
January 16th, 2009 at 10:47 amz- with HK possibly being pinned..are you looking to exit the next time it has a bounce?
January 16th, 2009 at 10:51 amPearl, exactly so.
January 16th, 2009 at 10:52 amIG 210… credit market continues to rally during the trading day.
January 16th, 2009 at 10:59 amacqtn premium driven to zero in the proposed TRA/CF transaction. I still think the unsolicited bid gets pushed higher, but time will tell.
January 16th, 2009 at 11:02 amOil off a buck now, time to put on rally cap, so far I’ve botched my expiration day day trade with FSLR.
January 16th, 2009 at 11:07 ammaybe this will help…
http://www.rallymonkey.com/video/kenindex.swf
January 16th, 2009 at 11:14 amdidn’t he get fired?
January 16th, 2009 at 11:15 amhe’s a Market Icon with the trading desk. you can’t fire a market icon!
January 16th, 2009 at 11:16 amha! someone tried, once. he came back.
January 16th, 2009 at 11:17 amwell he’s overpaid then…
January 16th, 2009 at 11:17 amfinancials sucking all the wind out of the rally right now.
stupid financials.
January 16th, 2009 at 11:17 amheard he works for peanuts….
January 16th, 2009 at 11:18 amBOP – gotta hand it to your trading desk’s call, spot on so far unfortunately.
January 16th, 2009 at 11:22 amyeah… just thinking the same thing. was hoping they got this one wrong.
January 16th, 2009 at 11:27 amthey called for the usual sell-off into lunch. where it gets a little more interesting, tho, is what happens at the end of the day, with options expry and light volume ahead of the 3-day weekend. they thought the sell off would continue through the day, but there was less conviction about what would happen after lunch.
January 16th, 2009 at 11:30 amre SD – The reason for the expansion as I understood it, was so that they could max out the plant rather than just meet their obligations.
January 16th, 2009 at 11:32 amI’m unclear on that, it sounded like when they originally whacked the budget I thought they were going to fill up the first stage. Maybe I remember wrong but I’ve now read others with the same thought. Also, they sounded like they are seeing more CO2 in some wells that previously we thought could be in a more sweet gas area. I think that’s part of whats holding the stock back now.
January 16th, 2009 at 11:38 amThe optimistic view:
http://www.cnbc.com/id/28691775
January 16th, 2009 at 11:39 amTh
January 16th, 2009 at 11:49 amThey were a little more pessimistic on oil.
http://www.cnbc.com/id/28691239
January 16th, 2009 at 11:50 amThanks Popeye. That’s the second lowest one I’ve seen so far.
Oil demand for 2009 is thought to be down between 200,000 and 1 mm bopd from 2008 levels. Non-opec supply seen slipping by a small amount, maybe 500,000 bopd and OPEC is looking like they will be off 3 to 4 mm bopd. Hmmm.
January 16th, 2009 at 11:58 amEIA Oct. Electric Power Monthly release has a few interesting nuggets (FWIW)
1. NG consumption revised downwards by 23 BCF. YOY DN 12.5%. The final figures were roughly in line with the Electric Flash monthly.
2. Coal consumption DN 4% and days inventory is up by 8.4%.
January 16th, 2009 at 11:59 amDecember production was up 6.6% YOY. I’m new to this but it would seem that production is increasing as demand is dropping.
md – how much was total generation down YoY? I am thinking only a 1% or 2 but that’s a guess.
anyone know what Obama is set to speak on within the hour?
January 16th, 2009 at 12:08 pmDN 4.2% following the total ind. prod. as reported by Fed reserve which was DN 4.1% despite REDTI( res. energy demand) up by 4.3%
Res DN 6.9% Arent more people home.
January 16th, 2009 at 12:16 pmComm DN 1.9% Hank N Ben working rd. the clock paying off.
Ind DN 4.9%
That’s a bigger percentage than EEI was reporting at the time. Re people home, I saw a story the other day that said utilities are seeing record late payment levels, and are starting to disconnect accounts.
January 16th, 2009 at 12:23 pmFSLR – Saw that you were playing so I thought I’d take a peek. That one is very difficult and I don’t know that the charts are going to be of much service, lots of very necessary lines, but probably make it look like a mess. Sorry, don’t know any other way.
January 16th, 2009 at 12:25 pmIf nothing else, get a feel for the 60 min look. Don’t like the rising wedge (if that comes to pass as the “right” interpretation).
Good luck with Dante’s world.
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2933882&cmd=show%5Bs159192183%5D&disp=P
What a disgusting looking day going into lunch. Maybe Obama’s economic stimulus speech can jumpstart the markets.
January 16th, 2009 at 12:28 pmFYI – bond mrkt has early close today at 2:00 pm EST.
So far, credit is holding up better than stocks. Talk that this mornings run up in stocks was mainly short-covering. Bank earnings hideous, but not as bad as feared. That said, they were hideous. And that reality continues to weigh very heavily on the mrkt.
January 16th, 2009 at 12:38 pmO.K., FSLR can start to move up now.
January 16th, 2009 at 12:39 pmUntil financials and home values stablize, it will be impossible to sustain much of a general stock market rally.
Are we 6 months away from that stabilization? That’s the question Mr. Market is asking himself.
January 16th, 2009 at 12:41 pmRefiners green on the day… any reason, z?
January 16th, 2009 at 12:42 pmnone that I see BOP
January 16th, 2009 at 12:43 pmhmmm…. thanks. Me neither.
January 16th, 2009 at 12:44 pmI saw one of the minions at CNBC yesterday say the trade now is to buy the refiners. Reasoning? Because gasoline cracks were no longer negative. I’d tell him to take a look at distillates: inventories, demand, production. That is what supported 2008 such as it was, if those collapse and everyone has to go back to relying on gasoline margins its going to be tough. The driver has not come back with low prices and people gripe about $1.65 /gallon gas now with $4 a very distant memory.
January 16th, 2009 at 12:47 pmWhat time does Obama’s economic stimulus speech start?
January 16th, 2009 at 12:47 pm15 minutes
January 16th, 2009 at 12:47 pmfeeling like a Fox Mulder moment…”I want to believe”
January 16th, 2009 at 12:48 pm#78 – well said.
January 16th, 2009 at 12:49 pmZMAN – If Hk is being pinned just under 17.50, I wonder if you can get more than 0.10.
January 16th, 2009 at 12:51 pmRam – maybe, was waiting on an afternoon bounce to green.
January 16th, 2009 at 12:52 pmObama speech starting now
January 16th, 2009 at 12:53 pmObama speech, short, sweet, not a lot new. Market down 58 at end of speech, we will see which way they want to take it now.
January 16th, 2009 at 1:06 pmI added more of that FSLR at $0.20 before the speech because I’m an optimist and glutton.
Ram – you know the trades labeled risky are not for you.
January 16th, 2009 at 1:14 pmBy definition, none of the trades here are meant for me, it just so happens that I coincidently trade similar to what happens here, including the risky business stuff – blahhhhh.
January 16th, 2009 at 1:21 pmAfternoon all.
British Bank Barclays lost 24% of its value in the last half hour of trading today. It was actually down 40% on the week! This is due to the fact that it turned down the British equivalent of TARP funds earlier this year but is rumoured to now be asking for funds. Apparently the UK Government are meeting again this weekend to try and put the finishing touches to more emergency funds for the banking system which is now on the edge again!
Broader market – preferred count says we are in 2 down (within wave 2 we are now in 5)due to complete shortly and the market move higher again.
January 16th, 2009 at 1:22 pmOil – still in wave iv and looks like another move to the upside needed.
January 16th, 2009 at 1:24 pmRam – I was kidding. You just seem to mention all of the risky(er) ones in addition to some of the others.
January 16th, 2009 at 1:24 pmNicky – in EW, do the closing prices matter more than the intra-day moves? It seems to want to close north of $35 for instance, yet we spiked quite a bit lower yesterday. Wondering if the spike lower to one of your key levels is satisfied by such a move or if it needs to close there too. Thanks as always for the EW education.
January 16th, 2009 at 1:26 pmBOP-I’m curious as to the whether the problems Barclays is now having (see #89) will have any effect on JNK which was formed by Lehman’s and is now managed by Barclays. It seems that risk abounds buy that probably qualifies as the most obvious statement of the day.
Thanks.
January 16th, 2009 at 1:34 pmThe HK $17.50 calls are bid $0.20 now.
January 16th, 2009 at 1:38 pmOil just went green.
January 16th, 2009 at 1:38 pmyeah..those things have been everywhere..from .05 to .40 back down…
January 16th, 2009 at 1:40 pmNov. Electric flash Report just released
Total Gen. DN 0.6% YOY
NG DN 2.4%
Coal DN 1.8% Stocks UP 7.5%
Retail Sales
Res Up 0.3%
Comm DN 0.3%
IND DN 5.4%
All Sectors DN 1.6%
http://www.eia.doe.gov/cneaf/electricity/epm/flash/january2009.pdf
January 16th, 2009 at 1:45 pmZ – closing prices are of no interest in EW. Its purely the wave pattern.
January 16th, 2009 at 1:51 pmThanks Nicky.
January 16th, 2009 at 1:52 pmFSLR can’t get away from 145…
January 16th, 2009 at 2:02 pmit will likely go back to 150 if the Dow can break back to morning levels. Big if but looking up now. This is why I don’t day trade: 1) I stink at it and 2) I get little else done while the trade is on.
Ram – gave a PlumpJack 99 cab to my accountant, should be ready to drink, right?
January 16th, 2009 at 2:10 pmYes.
January 16th, 2009 at 2:11 pmThanks, going to tell him that so I can have half myself. Try to limit myself to one or two $100 bottles per year. Normally I’m a $15 to $20 guy so if you have any recent picks feel free to drop them on me.
January 16th, 2009 at 2:12 pmHK pinned at 17.5?
January 16th, 2009 at 2:14 pmOrion – yes, been waiting on an end of day rally to pull it higher. So far no joy.
January 16th, 2009 at 2:15 pmchoices – #93… fair question, in today’s risk environment. I will give you what I think is the answer, then run off and do some more research on it. The JNK fund itself is an asset account, custodied at State Street. Barclay’s is the manager, but doesn’t own the assets. In the extreme, if Barclay’s goes BK, creditors would have no claim on the assets in the JNK fund. There might be a change in the manager (from Barclay’s to someone else), but that wouldn’t have to happen. Like when Lehman went under, but Neuberger Berman funds didn’t miss a beat.
So, the assets in JNK would survive — and frankly, not be affected by — whatever happens at Barclay’s. But, as I said, good question.
January 16th, 2009 at 2:15 pmI’m holding onto my Feb SU calls. What a depressing week.
January 16th, 2009 at 2:18 pmWouldn’t be surprised to see us sell off or just drift into the close, plenty of traders have already left.
Market open on MLK day?
January 16th, 2009 at 2:20 pmany thoughts REXX- getting hit pretty hard
January 16th, 2009 at 2:21 pmToday is a weird one in crude, front month up slightly, out months all off $1+. The front month may be some short covering. The out months are probably a better reflection of sentiment as people try to take into account the lower demand numbers although this was well telegraphed by the IEA.
January 16th, 2009 at 2:21 pmRam – No.
Nifkin – no, no news or broker comment I see. I don’t follow them but the recently revised targets are 400% higher than here.
January 16th, 2009 at 2:23 pmZ,
Gold up 32 points today. Puts the gold oil ratio over 23. Over 20 is thot to indicate oil is cheap and will go up.
Of course we knew that already, but one more straw in the wind saying stick with oil. Nevertheless, in this crazy time i think Cl could slip to 25 quite easily, but not stay there for long. What entry points we may have for the good ones if that happens!
January 16th, 2009 at 2:35 pmThis is a couple of days old but just thinking out loud. If Hugo Chavez is inviting foreign oil back into his borders, what does it tell you about decline rates and local expertise. Market does not care now but in the past he’s had trouble keeping production up with help. Must be bad now. He’s the #9 producer accounting for nearly 3% of global production.
January 16th, 2009 at 2:45 pmmahout – I think next week will be rough for oil early on. I agree, it could go to $25 for a short amount of time. I think OPEC will act again and maybe that would get Russia off the sidelines. They seem to have no trouble cutting off natural gas supplies and removing 10% of their production (about 1 mm bopd) would reward them from a revenue standpoint.
January 16th, 2009 at 2:48 pmhk is so pinned..market at its highest since am and that thing won’t get off of 17.51
January 16th, 2009 at 2:58 pmZ,
Poor Hugo. Would any oil patch company be nuts enough to deal with him? Cash up front is the only way to deal with a guy like Hugo. And that is certainly not in the cards for a company expected to bring capital with them to develop something for Hugo. Down, down, down he goes i hope). It couldn’t happen to a sweeter guy. It will sure help to see his production steadily dwindle, which it will.
January 16th, 2009 at 2:58 pmRe HK – only “hope” is a market rally. Same FSLR.
Hugo. Yep, man of the down trodden American heating oil consumer no more, big bad capitalist basher no more. Hard to buy the next election when you have no petro dollars. Ahmed will be in the same boat.
January 16th, 2009 at 3:00 pmZ,
I think with the Russians it’s all political power plays. They will sacrifice income and lie and deceive to bloody the noses of those they hate. And will attempt to gain new territory and political influence for themselves. They (the KGB cadre in charge now) really chafe with the loss of the old USSR and would like to get most or all of it back. Therefore, they regularly do things that don’t make good economic sense.
January 16th, 2009 at 3:08 pmIf I’m rememberins Simmons correctly (and this ties into the Chavez and other’s “smaller projects, greater reservoir complexity, etc” thesis) we’re looking at a loss of 9 MBOPD throughout 2009 just due to declines in already producing fields. Take away 1 MBPOD for reduced demand and we still need additions of 8 MBOPD to be able to produce at peak 2008 levels.
That 8 MBOPD is nowhere that I can see but I can see how we have excess on hand with everyone going flat out and demand flying under supply – at least for a quarter or so. We won’t find out about incapacity to deliver supply against demand until those “lines” cross again and then its apt to be a rather rude awakening. That said, I’ll be backing up the truck on the next dip in crude.
JR
January 16th, 2009 at 3:11 pmThin attempts at a broad market rally, not really helping yet.
January 16th, 2009 at 3:14 pmZ,
January 16th, 2009 at 3:17 pmI see people who are much much smarter than you saying how they love the refiners (as per your posts as well).
Sounds like a sell signal to me.
Daily charts of some appear to have short term bullishness, but the weekly views look like hell in a couple of instances.
I don’t like to short best in class if I can help it, so what’s a crap refiner?
WNR
January 16th, 2009 at 3:18 pmHi Z,
re the earlier points about WTI: how does it relate to the spot prices US producers actually receive? I.e. do they actually sell into local spot markets with their own prices or ???
January 16th, 2009 at 3:20 pmBarclays to report better than expected profits, “well ahead”
January 16th, 2009 at 3:23 pmRE 123: We producers sell at what our purchaser offers. We are discounted off of WTI based on API gravity that is lower than benchmark, hauling costs, and aside from API gravity, the desirability of the particular type of crude we are selling. (Asphaltene, paraffinic or napthenic).. We generally have the option for selling all our oil based on the closing for the day ON WHICH IT WAS physically trucked away or on the closing daily average over the month that is referenced.
Example: If WTI averaged $40 for the prior month, we are discounted about $3/bbl, we have to have our oil qualified/tested by the 25th and we are paid for it on the 20th of the FOLLOWING month.
January 16th, 2009 at 3:24 pmsorry, speaking when not called on there..
January 16th, 2009 at 3:24 pmDman – yes, differential varies from region to region, generally a small discount to WTI as that is a lighter oil than many produced.
January 16th, 2009 at 3:25 pmZ – you’ve mentioned SU as a proxy for crude & it does seem to trade that way. But they also have NG and refinery segments. Are those relatively small compared to their oils sands segment?
January 16th, 2009 at 3:25 pmJay – you said it much better than I did in 128.
January 16th, 2009 at 3:25 pmI didn’t see your until I hit enter or I just would have said see 125.
For modeling purposes, the analysts will have the oil production for each company broken out by region and each region will have its own discount and in a few cases premium to the benchmark price. They then try to tweak them from quarter to quarter and then you apply the hedges to come up with revenues. At least that’s what I did.
January 16th, 2009 at 3:27 pmZTRADE: out of the HK $17.50s for a dime, near total loss on that one.
January 16th, 2009 at 3:28 pmLast 30 minutes should be pretty wild, unlike most options expiration days, just has that feel to it.
January 16th, 2009 at 3:29 pmThanks for WNR. Up 10% on options expiry day. Figure it’s worth a contrarian attempt.
January 16th, 2009 at 3:32 pmRe SU – yes, its the oil sands part that really matters.
January 16th, 2009 at 3:33 pmWord of caution, many firms (possibly all) now auto-executing calls if the close is a penny over the strike. Makes for a surprising Monday (Tuesday in this case given MLK).
January 16th, 2009 at 3:36 pmJR,
I read the Simmons piece some time ago so i’m going on memory here, but as i recall he was quoting the IEA as saying
January 16th, 2009 at 3:37 pm9% decline (quite a big change for the IEA in getting more realistic he noted) and that was just for the large oil fields. The rate of decline being even greater than that for the smaller fields.
If these high rates of decline are correct, and i have no reason to believe they are not, we may have a dramatic reversal in the trend for Cl coming during 2009. What has torpedoed Cl up to now is the very rapid shrinking of worldwide demand which has kind of masked this also dramatic decline rate of existing fields. I almost forgot, they also said that this decline rate is INCREASING. When worldwide demand stops shrinking so rapidly the fundamentals of world production will be starkly visible.
Thanks Jay & Z
January 16th, 2009 at 3:38 pmCC to liquidate, 30,000 jobs gone.
January 16th, 2009 at 3:45 pmEarly Tini time! Everybody have a good 3 day weekened. Talk at ya on Tuesday. Stay warm!
January 16th, 2009 at 3:55 pmMahout,
That is my recollection as well. The decline rate may be 2 or 3X higher with wells/fields completed with multiple horizontal wellbores “bottlebrushed”.. so that when the inevitable water incursion occurs, it’s not a bell shaped curve, rather more like falling off a cliff. Cantarell is a perfect example and a harbinger of what we’ll see in the rear-view mirror when Ghawar has peaked.
If the Saudis let it be known that Ghawar was on the backside of the depletion curve, there would at least be full-on mourning among the world’s geologists at the impending loss of the Grandest Oilfield The World Has Ever Known (8% of global supply…).
January 16th, 2009 at 3:56 pmI’ve just noticed that weekly charts of a lot of energy stocks show the MACD just now crossing positive. Eg. SU HK CHK ERF & also XLE. In fact I haven’t yet tried one that didn’t show this.
January 16th, 2009 at 3:56 pmOuch. Beer thirty. Have a better one.
January 16th, 2009 at 4:02 pmDman, remember that moving averages are just that, averages. You can have price come up to meet an average or you can wait until time makes the line come down to meet price. Some of both happening now, but seems like the time element plays very strong. Not discounting your observation. Many traders swear by the MACD as their measurement of trend. Seeing as it’s still Jan and the savior is ready for the coronation, you may see it push some numbers up.
January 16th, 2009 at 4:06 pmtater: I guess my thinking is: WTI and NG are now below the cost of new production. Same goes for certain other commodities… eg some base metals & grains. We know that prices and the credit crunch are knocking out production of all these commodities. Prices have fallen as contracting economies reduce demand (except for those grains of course. Hmmm … I’ve added some DBA this week).
What I’m saying is that fundamentally we know these prices must turn up (and that’s without mentioning the race to see who can devalue their currency the fastest). So I’ve been looking for timing signals. The daily charts seem confused & waffly. But on the weekly scale, bingo: a very clear signal. I take your point about moving averages. But I would also point out that the last time the weekly MACD on the XLE crossed over was in July. Needless to say, that was crossing into -ve territory.
January 16th, 2009 at 4:17 pmEr, I just realized my maths abbreviation might not be obvious: “-ve = negative”.
January 16th, 2009 at 4:19 pmoil rigs down 17, or 5%
January 16th, 2009 at 4:20 pmgas rigs down only 4 but its one week and I expect the trend to continue for the rest of 1Q at least.
horizontal rigs down 4 as well
Absolutely agree with your assessment. MON was my playground of choice this week. Caught the bounce off the gap and now my wife likes me again. Funny how that works. Have a good weekend!
January 16th, 2009 at 4:22 pm