Thursday – Natural Gas Preview and Oil Inventory Review

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Big move on oil this morning (up $3+), back over $50 and infact $51 as the dollar continues to fall. Watch out for volatility with April crude expiration tomorrow but it's good to see contracts all the way out to December rising $3+ as well. Energy stocks are likely to put on a strong rally early.


In Today’s Post:

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


Holdings Watch:

  • I added a little more to the HK March $20 call position yesterday. 

Commodity Watch:

Crude oil fell $1.02 to close at $48.14 in yesterday's regular session following what can only be described as disappointing numbers relative to expectations from most aspects (see the oil review section below). The sell off was fairly apathetic however and crude rallied in the after market electronic session as the Fed's comment ignited the equity markets and firmed the credit markets. Expiration of the April contract is Friday so be ready for shenanigans with wide fluctuations in price and at least one during market hours test into the low $50s before the weekend. This morning crude is trading up nearly $3 to $51.


  • Gulf of Mexico Lease Sale Comes Up Short. Gulf of Mexico lease sale #208 was held yesterday and high bids totaled $933 million, down from high bids of $3.6 billion last year. Both sales were in the Central Gulf of Mexico and yesterday's sale actually had more tracts open for bid than last year's. Secretary of the Interior Ken Salazar was at the auction to personally oversee the lackluster results. Salazar commented that he believed new tax proposals on the oil and gas industry were not behind the smaller sale numbers. ZComment: Ken, you're delusional. I'd really like to know why the 6 million jobs in the domestic oil and gas industry are expendable.


  • Department of the Interior Watch: David Hayes has been approved for a full senate vote to become the Deputy Secretary of the Interior.  Mr Hayes held this position under President Clinton and has since been an emissary for Al Gore and is a senior fellow at the World Wildlife Fund.


  • Dollar Chart: Ben Whips The Dollar. With Federal Reserve Chairman Ben Bernanke pulling out all the stops to bail out the economy (yesterday promising to buy $300 billion in long term government bonds and $750 billion in agency mortgage backed securities) the dollar is going to have a tough time maintaining its "flight to quality/safety play" status. The retracement I have been looking for some time now and was writing about on Tuesday may now be in session.  My technical analysis skills may be primitive but you can't miss the following relationship...not with those big red circles on it.

Natural gas was unimpressed by a smaller than expected build in distillate inventories and was likewise unimpressed by anything Bernanke had to say, falling $0.13 to close at $3.68, a 6.5 year low. This morning gas is trading up very slightly in front of what will likely be a pathetically small gas storage withdrawal.

  • Accuweather Sees Less Active 2009 Storm Season. They see 13 named storms this season (June 1 to Nov 30, down from 16 last year.  See the story here.

Natural Gas Preview

  • My number: 35 to 45 Bcf.

    • History:
      • Last Week: 112 Bcf withdrawal on 179 Heating Degree Days
      • Last Year: 85 Bcf withdrawal on 170 Bcf
      • 5 Year Average: 52 Bcf withdrawal
    • Weather: Normal. Gas weighted heating degree days fell to 156 last week from 179 in the prior week (when we got that 112 Bcf withdrawal). This is in line with the normal reading for this week in history of 157 and a touch below last year's 170 reading.
    • Imports: Flat with the prior year, up 0.6 Bcfgpd from two weeks ago (so that adds about 4 Bcf)
  • Street Consensus: 25 Bcf withdrawal

ZComment: Even if we get the my more "bullish" number, next week's storage number coming from this week's tropical weather inspires little confidence in higher prices. For that gas will need a catalyst. I continue to point to falling rigs each Friday as proof positive that declines are coming and to end of month supply numbers which should show progress in erasing the supply surplus either at the of this month and more pointedly in successive months.


EIA Oil Inventory Review

CRUDE OIL - Bit of an odd number, crude inputs to refineries inched up partially offsetting a small increase in imports. I expect inventories to edge lower in coming weeks as refinery inputs move up seasonally. 



Strategic Petroleum Reserve Moving Up As Well. Recent decision to purchase barrels at low prices to refill draws taken following recent storms is adding 250,000 bopd to U.S. oil demand.


GASOLINE - Last week I though the drop in production looked a bit suspicious but since I was looking for a drop I let it go, this week we rebounded and my sense is this is government data trying to catch up to reality. I suspect production will skirt just below 2008 levels through Spring as gasoline cracks are the only thing keeping refiners in the black at present and over production would quickly (within 2 or 3 weeks) jeopardize that unless demand picks up considerably. Demand for its part is hanging in there despite all the job losses over the last six months, it is only off 1 to 3% depending on the week over the last month. Americans like to drive. Period. They do however seem to be more price conscious and the recent run up in price has slowed the spring time advance in consumption. I expect a return to trips in the car with the family this Spring as the week jobs picture makes traveling out of the country or on a plane less of an option for more of the masses.






DISTILLATES - Bloated total distillate inventories. Bloated ultra-low sulfur inventories, Bloated low grade diesel stocks etc, etc, etc. No signs that demand is picking up either.


Demand = Weak Might inch off the lows with as the planting season accelerates but I would not expect a real firming without more trucks rolling, consumers buying etc.  The export market which was strong all last year seems to be in tatters.


Stuff We Care About Today

Drybulk Thoughts:

  1. The stocks are on their heels. Earnings estimates have tumbled in lock step with shipping rates.
  2. Shipping rates are off the bottom, still low but now profitable again on a cash basis (rate less actual cost of running the ship). Note in the link that the smaller Handysize ships have come up the most and are at times ahead of the larger Panamax rates. Bigger ships aren't moving much in the second hand market but the Handysize vessels are finding an active market.
  3. China just turned its 3rd consecutive month of rising coal imports; February volumes were up 63% from January marking a 22 month high. Hmmm.
  4. China steel production was up 5% YoY in February. Global steel production was thought to be off by 24% in January and Chinese ore shipments are not yet rising since the Chinese are at loggerheads over pricing with suppliers.
  5. All of the charts look pretty much the same, descending based since the crash for the group which was pretty much wrapped up by October.
  6. Debt level vary quite a bit here and the higher debt players may have trouble in this low rate environment.
  7. Asset values are way down, especially for the big ships and still there is little activity in the second hand market. In the smaller, Handymax and Handysize ship markets however, there have been quite a few ships changing hands in recent weeks...perhaps this is attributable to the lower $ figures involved but that stability is translating through to the day rates for the same size ships, firming them more as mentioned above than for the bigger ships.
  8.  Several of the names look interesting at these levels but I plan to step up the level of work I'm doing here and am not ready to jump in just yet for anything other than relatively quick trades.  Not all of the entities on the list below will survive but when the economy picks up in late 2009 or 2010 or 2011 we will see a resurgence in demand and rising shares once again, perhaps rather quickly.

Drybulk Multiple Chart

Drybulk Portfolios.

Coming Monday:

Dry bulk look Part II - the balance sheets, time charter vs spot focus, and more comments.

The "I Will Survive" E&P List of the indebted and otherwise credit strapped who will, in the end, probably make it through the bottom end of the commodity price cycle.

Odds & Ends

Analyst Watch: Nada.

A Picture Is Worth A Thousand Words. Thanks to Wyoming for pointing this out:



136 Responses to “Thursday – Natural Gas Preview and Oil Inventory Review”

  1. 1
    zman Says:

    Dollar down another 1.5% from the end of that chart above in the post at 83.35.

  2. 2
    zman Says:

    OPEC must just about hate the U.S. today. The U.S. talks about getting off foreign oil, then asks them not to cut production just before their meeting last week. The next week the Fed deliberately sabotages the dollar which is what all the Cartel’s receipts are valued in.

  3. 3
    zman Says:

    Dollar just broke support, down 1.8% on the day. Good for U.S. exporters and oil prices. Bad for foreign trade partners. Dollar index at 83.1, support at 80.

  4. 4
    zman Says:

    …should have said commodities, not just oil in #3. Gold up 60 bucks.

  5. 5
    Sambone Says:

    By Angela Henshall

    LONDON (Dow Jones)–Crude oil futures soared over $51 a barrel Thursday, its
    highest levels since December, as the U.S dollar was weakened by news the U.S
    Federal Reserve will buy back debt and equities rallied.
    “(Crude) started to get stronger from the gold market earlier in the day and
    has broken some resistance levels, the weaker dollar is also a contributing
    factor,” said Christopher Bellew, a broker at Bache Commodities.
    U.S. dollar depreciation supports crude prices and other dollar-denominated
    commodities, Bellew added. The Nymex crude contract has also shown stronger
    signs of recovery since moving back to trade at a premium against the ICE Brent
    front-month contract.
    At 1234 GMT, the front-month May Brent contract on London’s ICE futures
    exchange was up $2.78 at $50.45 a barrel, after briefly hitting $51.11 a
    barrel, its highest level since Dec. 1.
    The front-month April contract on the New York Mercantile Exchange, which
    expires Friday, was trading $2.86 higher at $51 a barrel, after briefly hitting
    $51.65 a barrel, its highest level since Jan. 7.
    The ICE’s gasoil contract for April delivery was up $29.50 at $431.50 a metric
    ton, while Nymex gasoline for April delivery was up 602 points at 142.59 cents
    a gallon.
    Crude’s bull run past the key $50 a barrel levels is a technical rally set off
    by the weakening dollar, and not driven by fundamentals, said Olivier Jakob at
    Petromatrix. “To be sustained it needs to go with stock draws and refinery
    demand, and for now physical premiums in the Atlantic basin are under strong
    pressure,” he added.
    The market has survived a no-cut decision from the Organization of Petroleum
    Exporting Countries, followed by a bearish set of data on U.S stocks from the
    Energy Information Administration this week.
    Oil prices have come out the other side stronger to break the psychologically
    important $50 a barrel level, and are now “thriving on (higher) U.S stock
    markets and a weaker dollar,” said an oil analyst at PVM.
    A steep decline on EIA data was quickly reversed by news the Federal Reserve
    will buy up to $300 billion of bonds as part of a quantitative easing strategy,
    in a further attempt to drive rates lower. The U.S dollar weakened sharply in
    response and continues to push oil prices higher Thursday.
    “Thanks to the Fed announcement, the bulls were thrown something of a
    lifeline,” said MF Global analyst Edward Meir. “Whether Wednesday’s advance now
    extends into the balance of the week remains to be seen.”
    The energy agency report revealed a higher-than-expected 2 million barrel
    increase in U.S. crude inventories last week, which could largely be attributed
    to falling refinery runs.
    This may not be at all surprising in the middle of refinery maintenance season
    and ahead of the U.S driving season, but utilization levels are well below the
    five-year moving average for this period and down on last year’s levels, said
    VTB analyst Andrey Kryuchenkov.
    Gasoline stocks also surprised, jumping 3.2 million barrels and countering
    expectations for a decline.
    -By Angela Henshall, Dow Jones Newswires

    Dow Jones Newswires
    03-19-09 0855ET

  6. 6
    BirdsofpreyRcool Says:

    Good morning.

    FedEx commenting that “we have probably hit bottom.”

    GE saying Finance Unit to be profitable in 1Q and 2009

    Initial Jobless Claims came in lower than expected (although Continuing Claims is higher… less layoffs, but no one is finding new jobs)

    Positive feelings about the banking sector…

    All this should help stocks this morning.

    Now, if we could just get Congress to stop bashing business and turn away from the exercise of trying to burn high-income earners at the stake (funny how none of them mention clawing back the $90mm of bonus of Franklin Raines, who ran Fannie Mae into the ground), then the US can get back to the business of, well, business.

  7. 7
    zman Says:

    Add to 6, Corning saying they are seeing increased glass shipments. When people talk about industrial natural gas demand the big six demand sources are chemicals, steel, glass, refinig, food, and paper.

  8. 8
    zman Says:

    Oil bumping up against $52.

  9. 9
    zman Says:

    HK has a second gap to fill at $20.

  10. 10
    zman Says:

    Also adding to #6. Also funny how Congress voted not give themselves a raise … for 2010. The 2009 raise of $4,700 (2.8%) went through in January. For 2008 they got a pay increase of $4,100.

  11. 11
    BirdsofpreyRcool Says:

    Sure wish more people would start pointing fingers at the govt… the hypocrasy is thicker than molasses on a -20 degree day.

  12. 12
    zman Says:

    Apologies for the slow site refresh this morning…tech guys at host is looking into it.

  13. 13
    zman Says:

    Ok, site should be faster, dumped a couple of widgets that are slow responders today.

  14. 14
    BirdsofpreyRcool Says:

    Credit Market ripping higher (“ripping” is a technical term on the trading desk)

    IG 221 -8bps from yesterday’s close

    HY 70.5 +0.5 from yesterday

  15. 15
    BirdsofpreyRcool Says:

    z — HK… wowowowow

  16. 16
    BirdsofpreyRcool Says:

    z — if you put together the “I Will Survive” List, i’ll plow through the financial footnotes on the debt sections for you.

  17. 17
    zman Says:

    re 15, yep, that’s fun. Glad I uprisked it.

  18. 18
    BirdsofpreyRcool Says:

    BAC up over 10%

    Banks will lead us out of this.

  19. 19
    zman Says:

    BOP – that would be great. Will send your way in 30 minutes to an hour.

  20. 20
    BirdsofpreyRcool Says:

    IG 221.5 now… the ripping continues

  21. 21
    zman Says:

    HK closed the second gap, now 20.35

  22. 22
    zman Says:

    Getting out of the hole quickly on my NFX trade, still waiting on the options to open there.

  23. 23
    zman Says:

    HK March 20s bid $0.60 now. The wise man probably walks away from part or all of that position prior to the gas number coming out.

  24. 24
    zman Says:

    SU on fire, halted.

  25. 25
    zman Says:

    ZTRADE: $10KP – Half out of the HK March $20 Calls for $0.70, up 366%, with the stock at $20.50.

  26. 26
    Nicky Says:

    Good morning all.

    No comment from me about the fundamentals of all this!!

    Broader market – spx has resistance at 822 – 825 which I think will cap the first leg of this rally. Dow at the 7700 area. Then expect an ABC pullback. If this is the start of wave 2 up then we likely pullback to the 720 – 725 area on the SPX, 7000 – 7150 Dow before moving up again.

  27. 27
    zman Says:

    Good morning Nicky, thanks.

    When you get a chance there is a link at the bottom of the post that will allow you to post snaps of your screen as links in the comment section (here). Can’t wait to see your oil comments.

  28. 28
    BirdsofpreyRcool Says:

    DryShips Gets 3-Year, $630 Million Petrobras Contract (Update1)
    2009-03-19 13:30:53.166 GMT

    (Adds DryShips acquisition, potential spinoff in third paragraph, deep-water interest in fourth.)

    By Todd Zeranski
    March 19 (Bloomberg) — DryShips Inc. said its Ocean Rig unit was awarded a three-year, $630 million contract from Brazil’s Petroleo Brasileiro SA for exploration drilling in the Black Sea.
    Petrobras is the biggest user of deep-water drill rigs in the world, DryShips Chief Executive George Economou said in a statement today. DryShips, based in Athens, traded as high as
    $5.44 in early trading, or 30 percent higher than its closing share price in Nasdaq Stock Market composite trading yesterday.
    DryShips through its Primelead Shareholders Inc. subsidiary acquired Ocean Rig ASA and two drill ships for $1.6 billion last May. Economou said he intends to spin off the deep-water drilling unit.
    Producers including Petrobras, Exxon Mobil Corp. and Total SA seek to find and tap deep-water oil fields as production declines from established sites.

  29. 29
    reefguy Says:

    crzo- on list of do not…

  30. 30
    zman Says:

    SU, CLR, WLL, on fire as you would expect.

    That may trickle down to BRY and WRES if oil holds up. Adding WRES as a name to watch for the “I will survive list” ….caveat being that I don’t yet know if they will indeed survive.

  31. 31
    Sambone Says:

    By Kevin M. Nichols

    NEW YORK (Dow Jones)–Crude oil futures flew above $52 a barrel Wednesday in
    sharp response to the Federal Reserve’s latest efforts to jolt the U.S.
    Light, sweet crude rose to its highest level since Dec. 1 on the New York
    Mercantile Exchange, with the contract for April delivery recently trading at
    $51.44 a barrel, up $3.30, or 6.9%. Nymex crude earlier hit $52.25 a barrel.
    Brent crude for May delivery rose $3.44 on the ICE Futures exchange to $51.10
    a barrel.
    Oil followed through on gains made after the Federal Reserve announced an
    aggressive bond-market intervention late Wednesday. The Fed’s plan to buy up to
    $300 million in Treasurys and hundreds of billions more in mortgage-backed
    securities stirred hopes for the economy and drove down the U.S. dollar.
    The euro recently gained to a 10-week high of $1.3685, sending investors into
    dollar-denominated commodities like oil and gold as a currency hedge. Gold was
    up 6.4%, to $946 per troy ounce.
    “What the Fed has done certainly helps the economic outlook. With the impact
    being the dollar sinking and gold going up, it’s not a surprise that oil has
    risen too,” said Adam Sieminski, chief energy economist at Deutsche Bank.
    Oil reversed losses made Wednesday after the U.S. government reported domestic
    crude, gasoline and distillates stockpiles all rose last week, while demand
    remained weak. It has gained despite the Organization of Petroleum Exporting
    Countries decision this week not to add to recent supply cuts.
    “Fundamentally, crude should be lower,” said Tom Bentz, a broker and analyst
    at BNP Paribas in New York.
    Oil remains almost $100 lower than the highs of last summer. With the
    sputtering economy expected to trim more than 1 million barrels a day from
    world oil demand this year, many analysts say prices will remain under
    “I expect some modest stabilization in the economy, which will see demand
    increase a little as we go into 2010. As that happens, we’ll also see some
    moderate increase of the (oil) price level to around $60 to $70 a barrel over
    time,” ConocoPhillips Chief Executive Jim Mulva said at an industry conference
    Front-month April reformulated gasoline blendstock, or RBOB, rose 7.13 cents,
    or 5.2% to $1.4370 a gallon. April heating oil rose 10.94 cents, or 8.7%, to
    $1.3734 a gallon.

    -By Kevin M. Nichols, Dow Jones Newswires(Gregory Meyer in New York and Flemming E. Hansen in Vienna contributed to
    this report)

    Dow Jones Newswires
    03-19-09 0939ET

  32. 32
    zman Says:

    Reef – crzo to not survive? Say it isn’t so.

  33. 33
    BirdsofpreyRcool Says:

    reef — how strongly do you believe the crzo “poof” scenario? and that’s b/c of the redetermination, correct?

  34. 34
    Dman Says:

    Z – #24 halted?

  35. 35
    Nicky Says:

    Metals – wow!

    Looks like a larger wave 2 correction – we are now in C. Silver should rise just above 13.56. A move above the high at 14.68 says the bearish case is wrong.

    Gold has resistance at 950 which we are now through. Further resistance in the 970 region. Bearish case wrong above 1007.20

  36. 36
    zman Says:

    I never kick myself for missing a trade. Just no point to it and I sleep pretty well at night that way. But if I did, BEXP would be worth a kick.

  37. 37
    reefguy Says:

    Redetermination and the Barnett. Without the hedges, and because of the diferentials, there are no commercial PUDS at current prices.

  38. 38
    zman Says:

    Dman – it was earlier, order imbalance…everybody like them with oil over $50.

  39. 39
    BirdsofpreyRcool Says:

    reef — so that trillion of puds are about to go poof?

    what’s the differential in the barnett these days?

  40. 40
    zman Says:

    Reef – They cash flow though ok buy turning on previously drilled wells though, right, so its not a question of paying the interest, just that they will have to sell something to pay the bankers when the borrowing base is whacked?

  41. 41
    zman Says:

    Check the Texas differentials here BOP:



  42. 42
    zman Says:

    Oil up a bit and everybody suddenly likes solar again…go figure.

  43. 43
    reefguy Says:

    37- LOE is $1.31/M G+A is $.57/MCF a total of $1.88 before debt service. The actual relized price is about $2 now

  44. 44
    zman Says:

    BOP – re 28. Its things like that that make me think people have overly discounted a demand decline for the deep and ultra deep water demand for RIG and DO.

  45. 45
    reefguy Says:

    Waha is $2.59. Much of Barnett is prices that way. Subtract compression and transport(could be .40) and it is about $2.19 at the wellhead.

  46. 46
    zman Says:

    XLF negative

  47. 47
    zman Says:

    Thanks Reef. Like I was saying…ugly.

    Look at Carthage field (E. Tx), sub $3…this can’t last much longer or their won’t be a rig left drilling.

  48. 48
    BirdsofpreyRcool Says:

    Philly Fed Factory Index at -35 vs -39 expected. So, bad… but not as bad as expected.

  49. 49
    BirdsofpreyRcool Says:

    Obama Bear Market Rally Searches for Base Amid Doubt (Update2)
    2009-03-19 14:00:04.195 GMT

    By Eric Martin
    March 19 (Bloomberg) — As quickly as stocks plunged after Barack Obama became president, they are rebounding faster.
    The Dow Jones Industrial Average rose 14 percent from a 12- year low on March 9 after the biggest U.S. banks said they were profitable at the start of the year and the Federal Reserve pledged to buy $1 trillion of bonds. The gain cut in half the 21 percent drop in the seven weeks after Obama’s inauguration. The Dow fell 0.3 percent at 9:58 a.m. in New York.
    The speed of the recovery is a signal to some fund managers that the advance may fade as the longest U.S. earnings slump shows no sign of ending. Investors betting Obama will halt the recession snapped up stocks at the fastest rate since the start of the subprime mortgage collapse in August 2007, pushing the ratio of rising to falling shares to an 18-month high and the Dow above its 30-day average for the first time since Jan. 8.
    “It will take the next several months to see if we’re troughing and heading for growth,” said Jeffrey Kleintop, who helps oversee $233 billion as chief market strategist at LPL Financial in Boston. “That will probably temper the rally.”
    Speculation that Obama’s plan will succeed in stimulating the economy is spurring the second increase in five months, lifting stocks from the lowest levels in a decade. The jump that began Nov. 21 carried the Dow industrials 19.6 percent higher by Jan. 2, before fizzling when U.S. companies said fourth-quarter earnings fell an average 61 percent from a year ago, the biggest share-weighted drop ever.

    Fastest Slide

    The 20 percent slump between Obama’s swearing in on Jan. 20 and March 5 gave him the fastest bear market under a newly elected president in at least 90 years, data compiled by Bloomberg show. The Standard & Poor’s 500 Index plunged 36 percent in the last 12 months of George W. Bush’s administration as bank losses tied to subprime mortgages rose above $1 trillion and joblessness topped 7 percent for the first time in 15 years.
    The benchmark index for U.S. equities climbed in six of the last seven sessions, including yesterday’s 2.1 percent increase, after the Fed said it will buy Treasuries and bonds backed by mortgages. The index rallied as Citigroup Inc. and JPMorgan Chase & Co., based in New York, and Charlotte, North Carolina- based Bank of America Corp. said they returned to profit, boosting confidence the government is stabilizing the financial system. Obama’s budget includes $750 billion in funds for bank bailouts in addition to $700 billion already approved.

    ‘The Juice’

    The S&P 500 Financials Index added 54 percent since March 6, the steepest gain since S&P started tracking the industry’s performance in 1989, according to data compiled by Bloomberg. It added 10 percent yesterday, cutting the 2009 drop to 25 percent.
    “Those initial statements from the banks that they were OK in the first quarter gave the market the juice,” said Dan Greenhaus, an equity analyst for New York-based brokerage Miller Tabak & Co. “What percent is merely a technical bounce and what is a vote of confidence for Obama’s programs, I don’t know.”
    Analysts project profit at financial companies in the S&P 500 will decline 32 percent this quarter and 34 percent in the next, according to estimates compiled by Bloomberg. As recently as December, Wall Street was predicting bank earnings would rise
    32 percent and 56 percent in the periods. Financial companies slumped as much as 52 percent since the Dow peaked on Jan. 2.
    Corporate profits decreased seven straight quarters in the U.S. through September, according to the Bureau of Economic Analysis. Should earnings fall through this month, as analysts surveyed by Bloomberg project, it would be the longest streak since the government began tracking quarterly data in 1947.

    Obama Advice

    The S&P 500 and Dow rose more than 10 percent after Obama said buying shares “is a potentially good deal” for long-term investors on March 3. Both closed above their 30-day moving averages for the second straight session yesterday, a bullish signal to analysts who base forecasts on price charts.
    The S&P 500 traded for 11.7 times the profits of its companies over the past 10 years on March 9, the lowest since 1985, according to data compiled by Yale University professor Robert Shiller. He uses a decade of earnings to smooth out short-term fluctuations.
    The rate of gains may leave investors poised for disappointment, said Michael Nasto, the senior trader at U.S.
    Global Investors Inc., which manages $2 billion in San Antonio.
    When the S&P 500 fell to 682.55 on March 5, it was 14.6 percent below its average level of the previous 30 days.
    Yesterday’s close of 794.35 is 3.3 percent above the 30-day average. The 17.9 percentage point jump is the steepest since June 1938, according to data compiled by Bloomberg.

    ‘Phantom Rally’

    “We’re still looking at pretty much a phantom rally,”
    Nasto said. “It’s overstretched at this point, absolutely.
    There’s nothing fundamentally different than three or four months ago.”
    Nasto said the advance may start to prove durable should economic conditions improve and the resurgence in takeovers continue. New York-based drugmaker Pfizer Inc.’s $63 billion purchase of Wyeth Inc. in Madison, New Jersey, led $172 billion of deals announced by U.S. companies this year, according to data compiled by Bloomberg. The pace of deals is up 23 percent from the final quarter of 2008.
    Armonk, New York-based International Business Machines Corp., the world’s biggest computer services provider, is in talks to acquire Sun Microsystems Inc., located in Santa Clara, California, for almost twice its price on March 17, according to people familiar with he situation.

    Double Bottom

    “We can’t go straight up,” Nasto said. “But the M&A activity definitely is another piece that’s slowly coming together. We’re starting to build a base.”
    Still, the market’s drop last month below its November low may signal stocks have further to fall before the bear market ends, said Russ Koesterich, who helps oversee $1.5 trillion as head of investment strategy at Barclays Global Investors in San Francisco. Chart analysts prefer to see an index stop declining before it sets a new low, forming a bullish so-called “double- bottom” pattern that may signal a rebound.
    “If you look at previous rallies in this bear market, this is not uncommon,” Koesterich said. “You don’t want to chase the rally too soon. If you do, you better have a strong stomach.”

  50. 50
    Nicky Says:

    Currencies – looks like a 2c move so move is still corrective. $ could bottom around here where there is support or could move all the way down to previous low at 77.69. Euro we are into resistance here and if we go much further then the count shifts in favor of a move above 1.4720 before we top out.

  51. 51
    ram Says:

    If you missed the HK, are you done? Seems the market rolled over fast.

  52. 52
    zman Says:

    BOP – Here’s the I will survive list so far: (not saying they will, worth a look list should be the name for now)

    Tier 1

    Tier 2 – these are pretty troubled

    Tier 1 I’m pretty interested in owning the common if they work, Tier 2, could be worth a trade.

  53. 53
    BirdsofpreyRcool Says:

    z — i’ll start to work on the Tier 1s for now. good list.

  54. 54
    reefguy Says:

    Teir 2- EXXI, TXCO

  55. 55
    zman Says:

    BOP – I will add another handful of names but that’s a good start.

    Ram – I still have half. I probably won’t add more March as that’s tough and we get into pinning action very soon. Tomorrow will be wild with crude expiring so oil can go either way. All moves below round dollar levels have been bought which is quite the opposite of our experience since last July. I see the same bears pointing to 2 year highs on crude storage and I’d again tell them that absolute storage of oil or gas is less important than perceived direction and I think we are toppy in inventories, should be able to see it better in the next 4 to 6 weeks.

    On further trading today, I’ll buy post the gas numbers which could be a pretty big downer unless the Street is wrong and I’m right.

  56. 56
    zman Says:

    Thanks Reef – will add. Schiller is an oil and gas finder…too bad about the company.

  57. 57
    zman Says:

    PXD should be in the Tier 1 list too.

  58. 58
    zman Says:

    and maybe Denbury.

  59. 59
    ram Says:

    Sorry, I did not ask the question correctly.

  60. 60
    BirdsofpreyRcool Says:

    reef — hearing CRZO is 85% hedged at 6.75 for 1H09 and 6.10 for 2H09. also WAHA at 2.57 and Houston Ship Channel at 3.44. Heard about 50% of CRZO’s gas goes to the HSC.

    this sound right to you?

  61. 61
    zman Says:

    Ram – try again and I’ll re-answer.

  62. 62
    zman Says:

    Fair warning, if we get a bad gas number in 10 minutes I will smoke the remaining HK $20s and the SWN April 30s and reposition when the dust settles.

  63. 63
    ram Says:

    You answered the question in #62.

  64. 64
    zman Says:

    Ram, gotcha, cool.

  65. 65
    Dman Says:

    Z – speaking of missed trades: I slammed on a bunch of stock/commodity positions yesterday, simply because I don’t want to be holding the $ when Bernanke has made it clear he will print them to the end of time. On my list was SPWRA, but in the heat of the moment … I forgot it!! Just clean forgot.

    So now that I missed the 8% move … how do you see the fundamentals there versus FSLR?

  66. 66
    zman Says:

    Dman – Those are may too favorite sunshine plays. FSLR beats it both on capacity growth and low cost per watt but SPRWA has made some good inroads with big contracts of late. There is lots of capacity coming on line this year and next and I would rather go with the bigger names that seem to be setting the bar conservatively, especially having played the Chinese names before where things can seem rosy one second…just before you plummet of a cliff.

  67. 67
    zman Says:

    Gas numbers in 1 minute, finger on that trigger as I can always buy them back, will add the NFX to that list of quick sells.

  68. 68
    reefguy Says:

    60- sounds right. Their gulf coast gas goes ship channel.

  69. 69
    Nicky Says:

    Oil – I am somewhat late to say that resistance was at 52.85. We have broken the short term uptrend line but may retest it from below at 52.50. Next trend line comes in at 48.90.
    Just taking a look at the longer term count.

  70. 70
    zman Says:

    30 Bcf number, a little better than the Street.

  71. 71
    zman Says:

    Gas bouncing a bit on the number. No rush to sell …

  72. 72
    reefguy Says:

    BN screen says gas up .56 and going wild

  73. 73
    reefguy Says:

    z- somebody bught April for 4.42??

  74. 74
    zman Says:

    ZTRADE: $10KP Added 50 SD April $10 Calls (SDDB) for a dime. Following the gas inventory number which came at 30 Bcf vs 25 expected by the Street and sparked a 10% rally in gas prices.

  75. 75
    zman Says:

    Reef – yep, I see it, I’d just like a close over $4.

  76. 76
    zman Says:

    Bidding some April $7.50 SD but am unlikely to nab it.

  77. 77
    Dman Says:

    Z – I was looking at SPWRA because a while ago you showed how cheap it is (along with FSLR) and because the chart showed a terrific setup. But I don’t know, for example, how silicon prices affect them. There is talk about silicon prices falling (but then all commodities have been falling). Is this good or bad? I could see it being good (reduced costs), bad (forced to reduce selling prices) and good again (solar more competitive = bigger market).

  78. 78
    zman Says:

    Of course, SWN should be at the top of hedge fund manager’s list for a natural gas rally. CHK may be on there but further down as more indebted (that helps the rally) but more highly hedged.

  79. 79
    BirdsofpreyRcool Says:

    Obama Needs AIG’s Liddy, Not Other Way Around: Caroline Baum
    2009-03-19 04:01:00.14 GMT

    Commentary by Caroline Baum
    March 19 (Bloomberg) — Somewhere John Galt is smiling.
    The hero of Ayn Rand’s “Atlas Shrugged” is smiling because he’s seen it all before: the government’s intervention in the private sector; the constraints placed on business in the name of the people; the desperation on the part of government bureaucrats when they realize their leverage is limited; and — this part is still fiction — the decision on the part of business leaders to walk away from the enterprises they built.
    That’s all I could think about when I read that American International Group Inc., recipient of $173 billion in taxpayer funds, was paying out $165 million in bonuses to employees of its financial-products group, the poster boy for risk and greed.
    The Obama administration, Congress and the public are outraged taxpayer dollars are going to enrich the folks who got us into this mess. So am I.
    Members of Congress want to blame Edward Liddy, the former chief executive officer of Allstate Corp., who was recruited by former Treasury Secretary Hank Paulson in September to steer AIG away from the shoals.
    Liddy is paid $1 a year for his efforts. “My only stake is my reputation,” Liddy said in a March 16 open letter to Treasury Secretary Timothy Geithner.
    His only crime, as far as I can tell, is inheriting compensation contracts providing for retention bonuses for certain AIG derivative traders, some of whom have left the company, and listening to lawyers on his options.

    ‘Directive 10-289’

    Why should Liddy endure the public’s wrath for the sake of his reputation, which lawmakers will destroy in a heartbeat to save their own hides? Youwalkaway.com isn’t an option just for homeowners who owe more on their mortgage than their house is worth.
    In Rand’s magnum opus, the “men of the mind,” as she calls the nation’s producers, quit. Literally. They walk away from the mines, factories and businesses they built as the government tries to deprive them of their wealth through increased regulation and taxation. (Whether financial engineering constitutes production is an issue for another column.)
    Rand’s men in Washington believe they’re entitled to the output of these minds and the material rewards, enacting an Equalization of Opportunity bill, which is really about equality of outcomes; a Railroad Unification Act, to prop up weak carriers and destroy competition; and ultimately, as the economy collapses, “Directive 10-289,” which makes it a crime to stop working.
    The “looters,” as Rand calls them, fail to understand that the men of the mind may vote with their feet, refusing to work for the benefit of others.

    Eerie Parallels

    I’m not alone in noting the parallels in the government’s evolving response to the financial crisis. For a year I’ve been waiting for Paulson or Geithner to announce “the John Galt Plan to save the economy,” which is right out of Rand’s novel.
    It wasn’t until the AIG bonus brouhaha broke last weekend and I watched government officials flailing to contain the fallout that I realized the government is losing its leverage. Or maybe it never had any leverage to begin with.
    Let me explain. The government has been propping up teetering financial institutions, including AIG, Citigroup and Bank of America, creating the illusion that the banks need the government.
    The government doesn’t care about these institutions. It cares about the stability of the financial system: the totality, not the parts.
    Congress can refuse to allocate more money to institutions in which it already owns a share (80 percent in the case of AIG).
    It can levy a tax on the AIG bonus payments or withhold them from the next $30 billion cash infusion, although who would notice?
    And it can install new management.

    Reardon Steel

    Why hasn’t the government put in its own people already?
    Maybe no one wants the job.
    The government needs Liddy and Citigroup’s Vikram Pandit and Bank of America’s Ken Lewis to continue working to restore their firms to prosperity in the same way the looters in Rand’s novel need Hank Reardon and Francisco d’Anconia and Dagny Taggart, respectively, to run their steel mills, copper mines and railroad.
    From their perches as chairmen of the House Financial Services Committee and Senate Banking Committee, respectively, Democrats Barney Frank and Chris Dodd fulminate about the lack of regulation and about inflated CEO compensation. For Dodd, it’s a good opportunity to deflect attention from his sweetheart mortgages from former Countrywide CEO Angelo Mozilo and his questionable real estate deal in Ireland.
    All that’s left for life to imitate art completely is for these CEOs to quit. Let Barney Frank and Chris Dodd run AIG.
    Let’s see how they fare.

    Fact Versus Fiction

    The government needs these companies to survive — and buy back the government’s ownership stake — more than they need the government. Most of these CEOs are already wealthy. They don’t need a job working for the government, which is what running a bank amounts to today.
    What’s in it for them? One dollar of compensation? Their reputations? The house on the lake looks more appealing by the day.
    Is anyone surprised sales of “Atlas Shrugged” have spiked in recent months as reality comes to resemble Rand’s fiction?

  80. 80
    Dman Says:

    NG up 12% seems a tad extreme for 30 vs 25, but the context (NG way too cheap) sets up the reaction to the fairly minor news. Also by now the run up ahead of rig count tomorrow is predictable, so some front running of that as well.

  81. 81
    zman Says:

    Dman – all of that is true. The biggest worry now for solar is canceled contracts. Governments are feared to be shutting down the subsidy supply…that’s been the rumor and we have seen some contracts get re-directed. FSLR has a piece of their 2009 backlog that moves around but the biggest concern was Germany and the Germans have made assurances they will continue pushing solar through the recession. So prices are coming down but the demand is still there…reason I like FSLR so much is it is cheapest (of the non lab project names) on a cost per watt and they are still winning new contracts and growing and the balance sheet is strong.

  82. 82
    zman Says:

    80 … I would agree completely, too big a jump for a rounding error difference in a squishy month to predict numbers in. Gas is oversold and the shorts here are falling so it doesn’t take much in the way of positive news to inspire a rally.

  83. 83
    VTZ Says:

    Everyone see the 2-day move in barrick?

  84. 84
    zman Says:

    ZTRADE: Sold another quarter of my HK March 20 Call position for $1.10, up 633%, into today’s natural gas rally.

  85. 85
    Nicky Says:

    BOP – anything from the trading floor that may indicate they are starting to take profits from this rally?

  86. 86
    Nicky Says:

    gold looks like it wants to make a spike to the upside to finish off this move.

  87. 87
    zman Says:

    VTZ – pretty impressive. I still say they should have a different name for gold and other precious metals than “commodity”. Oil gets consumed and is gone. Gold is mostly still around and is just pushed about the globe a bit.

    Nicky – thanks for 69. Look forward to the count.

  88. 88
    BirdsofpreyRcool Says:

    Nicky — i’ll check for you.

    Head Trader said this morning he thought there would be profit-taking on the rally, then bounce, then close lower. I’ll check in and see what’s going on now.

  89. 89
    zman Says:

    Thanks for that piece BOP. So did we just get the mother of all bear market bounces to be followed by lower lows?

  90. 90
    Sambone Says:

    #89, Yep

  91. 91
    BirdsofpreyRcool Says:

    Nicky — Head Trader is sticking with his call this morning. Says we saw our bounce, now headed lower. Says the best trade for the rest of the day is to be short. But, he’s got his finger close to the trigger, if he’s wrong.

  92. 92
    Sambone Says:

    off subject – True Redneck Camisole Top


  93. 93
    Nicky Says:

    Thanks BOP. I think we see a correction but also wave 5 up doesn’t look done so I know what he means!

  94. 94
    zman Says:

    Sam – You’ll not I’m really not chasing the rally very hard here.

    U.S. now guaranteeing payments to auto parts suppliers.

  95. 95
    zman Says:

    Re 92: Classy Sam

  96. 96
    BirdsofpreyRcool Says:

    z — sadly, they needed to do that… guarantee payments to the auto parts guys. as i mentioned yesterday, the banks are invoking the MAC clause to cease lending to companies, even though those companies are in compliance with their bank agreements. was going to cause about 10 auto supplier guys to file Ch11 in the next week. for that reason alone.

  97. 97
    zman Says:

    ZTRADE: $10KP

    Entering 10 NBR April $10 puts (NBRPB) for $0.60. Stock is popping up with oil and the energy groups today to a 1 month high. I expect rig counts and day rates to continue to decline. The oil service group has proved a difficult short this year but given the fundamental picture I expect the E in PE to continue to slide.

  98. 98
    zman Says:

    Good discussion on the dollar now on CNBC.

  99. 99
    jat Says:

    With you on service, Z.. the whole group is getting ahead of itself before Howard Weil / Q1. I’ve heard 50%+ discounting on the pressure pumping side which, while the most marginal product line, is just an indication of where the overall pricing has gone. E&P mgmt already seeing 30-35% average cost declines and pushing for more, which they’re getting. While rig count will probably bottom in the next two months, this group can’t move straight up through then. SLB already trading at a trough valuation as well; I think Gould roughs people up with opening remarks on Monday.

  100. 100
    zman Says:

    Jat – Its a very good point you make about Weil. Couldn’t agree more and he has that accent for extra credibility. Good news for E&P, but time for an uglier turn for service. Every E&P CEO had a grin in his voice on the 4Q calls regarding commodity prices and service costs and a time for a real reality check.

  101. 101
    ram Says:

    ZMAN – Will next weeks Howard Weil Energy conference be an opportunity for E&P’s to put out new info.?

  102. 102
    zman Says:

    Jat – And I generally like NBR but the other land rigs are so beaten down and aren’t great traders on the options side. I am looking at taking some BHI and HAL puts as well but NBR seemed like a good entry point today.

  103. 103
    zman Says:

    Ram – Yes, you generally see a handful of press releases issued in the morning before they speak. Impossible to pick who will say what … don’t think HK or GMXR will say anything although HK could announce a couple of Haynesville wells that have been completed since the 4Q call so I plan to own some April calls by tomorrow afternoon. I would expect fewer press releases this year than in the past since activity is down for many participants and at a stand still for some.

  104. 104
    zman Says:


    $10KP Added 5 GMXR April $10 Calls (GUFDB) for $1.10. Going to wade into this one slowly as they approach their bank debt redetermination but also want to be long for well the next set of Haynesville well news coming in April.

  105. 105
    jat Says:

    With you on HAL in the short-term. Until we get a full sense on exactly how bad ’09 can be, I can’t argue for better than a $22.00 upside (peak multiple on peak eps/ebitda) and a $10.00 downside based on prior price / tangible book multiples seen in the last few downcycles. So it seems stretched right now.

  106. 106
    zman Says:

    Trader on CNBC saying China stockpiling grains, beans. Says they’d rather do that than face riots later. Says its a recent change. That helps shipper demand.

  107. 107
    BirdsofpreyRcool Says:


    · Some fatigue is finally setting in after a 17% run off March lows; that said, the shorts are still painfully aware of upside risks into quarter/month-end. With the tape a bit tired after Wed’s fireworks from the Fed, SPX falls 10pts, CDXIG11 is well off tights of the day, the USD continues to fall out of bed (DXY dn >2%), and gold continues to surge (up over $60 today!). Financials are certainly seeing profit taking, though tech is one of the best performing groups on back of ORCL’s 12%+ rise (after its strong earnings last night); energy, industrials, materials also act well. GE’s update this morning could be described as “better-than-feared” w/mgmt painting an outlook for Capital ahead of worst case (shrs are up 4%, off highs), although DFS sells off 11% after its report this morning. FDX is rallying ~9% today despite reporting earnings below St expectations (mgmt said on the call it was seeing signs of bottoming in int’l vols). Technically, the 50day MA on the sp500 (was 803 yesterday and is now 800) is proving a tough level to move beyond in a meaningful fashion. 775 is a big level on the downside – the close will be key today.

    · “Catalysts” for the sell-off today: 1) Financials lead the way lower as short covering buy demand abates (see below); 2) Some of the noise out of Washington is worrying some (not so much the House bonus tax, which not many think will get through the Senate, but the growing calls for Geithner to resign, worries that Congress won’t pony up additional cash should the White House ask for it, some talk that White House might do health care and cap & trade via reconciliation, etc); 3) USD getting crushed again for the second day, prompting more to question the wisdom of yesterday’s Fed move; 4) A concern that the market is “running out of catalysts” for the near-term (i.e. every major bank has already addressed Q1, tech sentiment has become very bulled up, the Fed has taken substantial action, etc).

    · Some disappointment w/auto plan? The Treasury is on the tape today w/a $5B auto parts aid plan today; the St may be a bit disappointed (recall some of the auto parts industry associations were seeking ~$25B+). The White House auto task force is due to make an announcement next week on an aid package for the broader industry.

    · Washington update; after the Fed’s “big bang” yesterday, its hard to imagine that more could be coming from Washington… The big events to watch: 1) TALF funding tonight (so far, there have been ~$7B worth of deals on the tape through the facility); 2) bad bank (a Treasury official said there could be more details sometime this week on a plan to help rid bank balance sheets of legacy toxic assets); 3) bank stress tests (the Treasury has said something is due by the end of Apr). The bonus tax bill being talked about in the House should pass as is for the most part (which makes for some unpleasant sounding headlines), but it will face a much tougher time in the Senate (a similar story to cramdown, which is having a lot of trouble seeing the light of day in the Senate for the moment).

    · Commercial real estate update: prices in Moody’s index fall 5.5% in Jan vs. prior month; largest decline in history of index (since ’00); prices off 21% from Oct ’07 peak

    · Credit has come off its best levels as stocks begin to roll over; CDXIG11 was ~8bps tighter earlier this morning and outperforming a flattish stock mkt, but has rallied back to unch’d as noon passes

    · Jobless claims takeaways (A. Reinhart): The rise in initial jobless claims over the last four weeks indicates that the March employment report will show another large decline in payrolls. Over the last three months, payrolls have fallen at an average pace of 662,000 per month, and they declined 651,000 in February. The March payroll loss will likely be at least as large as in February, and there will be another sizable gain in the unemployment rate.

    · Philly Fed update (A. Reinhart): The Philadelphia Fed manufacturing survey’s general activity index rose from a cycle low of -41.3 in February to a still very low -35.0 in March. However, the components of the survey largely weakened, and as a result, the ISM-weighted composite fell from 33.8 to an all-time low of 29.4. There were notable declines in new orders (-40.7 from -30.3) and employment (-52.0 from -45.8), and a huge drop in inventories (-55.6 from -24.3). The readings on employment and inventories are the lowest on record, and new orders is the lowest since 1980. The fall in inventories reflects difficult conditions now, but an inventory drawdown puts firms in a better position to grow production in the future.

    SP500 Performance Breakdown (from Bloomberg…as of 11:45pmET)

    · Biggest % gainers today: AIG, ORCL, MEE, X, ODP, AA, PXD, AKS, NBR, GM

    · Biggest % decliners today: DDR, PRU, MS, RF, MET, DFS, USB, MI, STI, BK, MTB

  108. 108
    BirdsofpreyRcool Says:

    what’s a “MIDDAT”…??

  109. 109
    zman Says:

    Thanks BOP

    Fed between a rock and a hard place on deflation. No tools to fight other than try to support asset values. Worry about inflation later must be their new mantra. We knew this dollar drop was coming…I don’t think its going to be over in short order…those are trillions with a T.

  110. 110
    zman Says:

    Staying power of crude and ng is impressive an hour from the Nymex close. Stocks hanging in solidly green in the face of a down Dow,SP500,Nasdaq.

  111. 111
    Sambone Says:

    (This story has been posted on The Wall Street Journal Online’s Environmental
    Capital blog.)

    Posted by Keith Johnson

    Maybe crude oil’s rally Thursday – Nymex futures are still above $50 – isn’t
    due to either a weak dollar or hopes of economic recovery, but simple
    supply-side math. From Barclays Bank:
    “The reaction to the latest OPEC meeting was, however, very different. The
    sentiment shift has been profound enough as to allow the rollover of targets to
    be taken fairly broadly as a sign of strength rather than weakness. Prices have
    rallied in the wake of the meeting, with the OPEC basket passing above $45 per
    barrel for the first time since the very start of this year, and with WTI
    moving back above $50 per barrel to its highest levels in more than three
    months. A broader market acknowledgment seems to have been made that the
    supply-side contraction has now overtaken the losses on the demand side, laying
    the basis for a period of tightening.”
    In other words, rather than looking at the overall economy, or even just the
    demand side, the oil market is tallying up the actual balance between demand
    and supply. That is scary, Barclays suggests – and not just because of OPEC’s
    newfound discipline.
    Like the International Energy Agency and OPEC, Barclays trimmed its already
    pessimistic outlook for non-OPEC oil production to a decline of 560,000 barrels
    this year and a full 1 million barrel decline next year. That basically amounts
    to a booby trap waiting in the path of the expected economic recovery.

    Dow Jones Newswires
    03-19-09 1320ET

  112. 112
    Sambone Says:

    Maybe we should give him some TARP $?

    March 19 (Bloomberg) — Venezuela is holding up payments to contractors, oil services companies and targets of President Hugo Chavez’s nationalization drive, indicating the country is running short of cash after petroleum prices collapsed.


  113. 113
    Jay Reynolds Says:

    Hon. Matthew Simmons has two new speeches up.


    Very telling to me, via another source, was that non-opec production (60% of world total) had been flat to down over the 7 year period that the price of crude had risen 500%.

    I’m reading and recommending Dr. Stephen Leeb’s new book “Game Over”. You may remember his 2004 book “The Oil Factor” which earned him some ridicule as “That $100 Oil Guy”.

    This time he’s looking at the interrelationship between the growing scarcity of a large number of absolutely key commodities and how we can hit an “Absolute Peak” in which production of a commodity hits an absolute economic limit as a result of these interplays… A very crude example might be the interplay in the costs of nat gas, water and steel as they all relate to oil sands production.

    Otherwise, life is improving somewhat in the stripper well patch. Actually may hit break even in the next week or two. It has forced me to get very creative though and we may be about to usher in a whole new paradigm of for the kind of production I operate – where one set of equipment operated yields the same oil in 160 hours/month as 40 sets currently yield pumping 28,800 hours/month.

  114. 114
    Crude oil prices back above $50 « Business News Says:

    […] Zman’s Energy Brain ~ oil, gas, stocks, etc… » Blog Archive … […]

  115. 115
    zman Says:

    Thanks for the Simmons link Jay. Glad to hear things are marginally improving. I think the new administrations is going to work hard for you to get prices back up, lol.

  116. 116
    Jay Reynolds Says:

    If you have time to peruse only one of Matt’s Papers this would be my recommendation:


    Surplus? What Surplus? Interesting data.

  117. 117
    zman Says:

    Re 112. Ha. No sale. He’s been going back and forth between seizing rigs and then paying for them and then saying he has no cash. He’s one of the ones seen as cheating on the current quotas more than the others and he can’t afford to cut more production.

  118. 118
    zman Says:

    Jay re 116. Thanks for posting the updated version.

    Slides 6,14,21 very telling.

    Slide 32 is what I was talking about earlier. Majors and E&Ps to “wage war” on vendors.

  119. 119
    zman Says:

    Slide 34 is pretty scary.

  120. 120
    zman Says:

    Will likely add some more service name puts tomorrow.

  121. 121
    occam Says:

    Reef – your rec on TXCO (to put it on the Tier 2 list) was obviousliy very helpful. Got any others?

  122. 122
    Jay Reynolds Says:

    Re 118:

    Vendors being pressed to put their lowest costs in writing. Customer then playing – hard – one vendor off the other.

    “Relationship” thread – ex: “Company Man” & toolpushers being pushed real hard. You know what makes those deals work. Prime workover contractor in our HS area being told that if they have 40% utilization of their rigs they’ll be lucky.

  123. 123
    zman Says:

    …which gets me back to my question about the current direction of things in D.C. from the post and why those jobs are deemed expendable. Poor lease sales will only lead to one thing…down and to the right U.S. production graphs.

  124. 124
    BirdsofpreyRcool Says:

    z — those jobs are expendable b/c 1) they are not union jobs, and 2) Al Gore doesn’t like them.

    That seems to be all the good reasons the majority in DC needs, these days.

  125. 125
    zman Says:

    BOP – don’t hold back now, tell us how you really feel. I guess you saw my bullet on the new deputy interior secretary working as an emissary of Al Gore?

  126. 126
    BirdsofpreyRcool Says:

    Yes, I did. And it empowered me to make the above comment. Thank you.

  127. 127
    zman Says:

    I do what I can to help. Take a look at Salazar’s wiki page.

  128. 128
    Jay Reynolds Says:

    So here’s what may be next for the new POTUS in fairly short order. With dearth of new projects no meaningful amount of new crude capacity is brought on and decline rates become about 2X what we have suspected. Meanwhile, rising demand off what was never really demand destruction rises to smack into the belly of falling supply like two jets at an airshow.

    Gov believes giant conspiracy, puts eggheads in charge of running multinational energy business, windmills are shown to require energy inputs to manufacture. Meanwhile, NSA has been analyzing satellite imagery and confirms that Ghawar has indeed peaked… Curtain Call, Exit Life As We Know It. Actually, there are some VERY serious “professional hobbyists” whose passion IS analyzing rig movement, location construction, etc., in Saudi Arabia. Very good vetting process going on with their data. I was most impressed.

  129. 129
    zman Says:


  130. 130
    kiaora Says:

    The head of the board audit committee for beleaguered American International Group Inc. plans to resign from the board this spring, according to people familiar with the situation.

    Michael H. Sutton, chairman of the four-member audit panel, has decided to not stand for re-election at AIG’s annual meeting this year. Oh, his previous position: chief accountant for the SEC

  131. 131
    BirdsofpreyRcool Says:

    z — just to clarify… your “I Will Survive List” is for companies you think can make it through this energy downturn, whether they are classified as “Tier 1” or “Tier 2,” correct?

    Said another way, both Tiers are companies that might come close, but don’t BK… if I understand it correctly.

  132. 132
    BirdsofpreyRcool Says:

    kiora — AIG is an amazing mess. However, you see where New Jersey is joining in to “investigate” AIG bonuses with 18 other states? Talk about activism govt… this is going to lead to some very ugly stuff for american business as a whole.

    I think we have Eliot Spitzer (and Rudy Giuliani before him) to thank for getting all this type of this govt activism going. Not good.

  133. 133
    mimster90 Says:

    Where does kwk, eog and gdp fit in the list? I was thinking of playing some covered calls on kwk, Do you think they are in danger of going a lot below $5?

  134. 134
    zman Says:

    BOP – re the list, just got back in the office after a post close break. I’m not ready to say all of those names “make it”, the tier 1 are more important as plays to me as that’s I do, options and some stock, while the tier 2 are more like dice rolls with pennies. I’ll end up owning KOG yet!

    PQ should have been on the list obviously, and in Tier 1.

    Mim- EOG isn’t on the list because there is no doubt they will survive. GDP I don’t have much concern either. KWK I could not say, am looking at it in that light, will be out with the list Monday or Tuesday.

  135. 135
    Jay Reynolds Says:

    Z & BOP & anyone else,

    Kindly requesting a little help w/ this. Normally I have a pretty easy time with Matt Simmons but these slides were geared towards a different audience I think.

    Slides 20 – 23 re USO ETF vs Glencore’s Credit Default Swaps.


    Also, slides 24 – 28 have a pretty good perspective on the Shale Gas “Miracle”.



  136. 136
    Wyoming Says:

    Capability Destruction, more commonly known as a VERP (Voluntary Early Retirement Program)


    Finally, someone makes sense south of the border, err except those tequila making dudes:


    For the Techno Geeks:


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