Thursday – Gas Preview and Oil Review

162 thoughts on “Thursday – Gas Preview and Oil Review”

1. Sam,

   Do I understand correctly that you are back in for a third round trip (ie, currently long) SKF?

   Regards,

   JR

2. Market heading for a wow-big open on crude. A little confused here. I see IMF doubling funding to help with the crisis and positive comments about data looking like bottoming out of the G20 members. Wondering if its mostly talk as the data I see, from Jobs to consumers deliquencies hitting record highs looks pretty bad to me. Consumer confidence at 26 instead of 25, is that really an uptick? Makes me nervous when everyone is saying there are signs of bottoming. I see a few things but nothing to get overjoyed about.

3. Oil through $52, 7.5%. No one listening to the IEA demand comment, everyone listening to G20 and to OPEC which said again that investment in oil developments has dropped to “dangerously” low levels. Given the recent rise in stocks and the falling dollar, which hurts their currency reserve valuations, you have to think they take steps to further shore up the price of oil.

4. Oil Jumps Back Past $50/Bbl As Equities Surge

   By NICK HEATH
   Of DOW JONES NEWSWIRES

   LONDON — Crude oil futures Thursday climbed more than $3 to back above the psychologically important level of $50 a barrel, market sentiment boosted by a surge across regional equity markets.

   Traders put to one side Wednesday’s U.S. Energy Information Administration data, revealing builds in U.S. crude and products stocks, choosing to focus instead on developments on regional equity bourses.

   European and Asian equities picked up where U.S. stock markets left off Wednesday, advancing on better-than-expected U.S. manufacturing data and auto-sales reports.

   Thursday’s meeting of Group of 20 leading industrial and developing nations, as well as expectations that the European Central Bank will announce an interest rate cut at 1145 GMT are expected to set the tone for the remainder of the day.

   “The stock markets are up, there’s a bit of euphoria. If we can push on now from here, we’re going back to the (recent) highs,” said Jim Rintoul, analyst at London-based trade advisory TheOilTrader.com, although he warned that further advances would need “some fundamental support to continue”.

   At 1106 GMT, the front-month May Brent contract on London’s ICE futures exchange was up $2.81 at $51.25 a barrel.

   The front-month May light, sweet, crude contract on the New York Mercantile Exchange was trading $2.50 higher at $50.89 a barrel.

   The ICE’s gasoil contract for April delivery was up $32.00 at $446.25 a metric ton, while Nymex gasoline for May delivery was up 403 points at 141.20 cents a gallon.

   Hopes that the G20 leaders meeting in London will conclude with an agreement on how to resolve the economic downturn helped brighten sentiment Thursday. The European Central Bank is also widely expected to announce a 50 basis point cut at 1145 GMT as part of attempts to nurse member economies through the slowdown.

   Any disappointment at the G20, however, could undermine the latest upswing in stock markets, analysts suggested, a development that would likely threaten crude’s rebound given the recent strong correlation between the two.

   “Ultimately there must be some resolutions made today, as every world leader will be acutely aware that if they can’t find common ground, billions could be wiped off the global stock markets over the next couple of sessions,” said Chris Hossain, senior sales manager at ODL Securities in London.

   Thursday’s sharp moves, meanwhile, continued the volatile theme that has dominated crude prices moves in recent weeks, as nascent optimism that the economic downturn has bottomed out periodically gives way to fresh bad news — and vice versa.

   “During periods of calmer or more constructive macroeconomic data flow, the widespread view that supply-side damage means that prices are too low on medium- and long-term supply grounds gains footing, but when the fear returns, the view that prices are too high on short-term demand grounds motivates further selling,” said analysts at Barclays Capital. “We would expect to see several more of these episodes of 10% plus up and down moves over very compressed time periods.”

   With their output cuts widely seen to have helped underpin crude prices in recent weeks, OPEC Secretary General Abdalla Salem el-Badri said Thursday that the oil producer group is doing an “excellent job at this time” in implementing the 4.2 million barrels a day of output reduction, although he didn’t say by how much OPEC had improved its compliance since it said last month that compliance was roughly 80%.

   “Let’s finish the 4.2 (million barrels a day) first,” he told reporters on the sidelines of an oil conference, when asked about OPEC’s future production plans.

   —By Nick Heath, Dow Jones Newswires

5. Jay,

   Yep, I’m gonna lose today though. I’ll stay long. Something for everybody to remember the old saying: “Sell in May, and go away”.

6. Sam – yep, not just a catch phrase. You said it last and you were certainly right. Looking to use this bounce as a re-entry point for oil service puts.

7. headlines:

   FASB votes during board mtg to relax fair-value accounting

   FASB gives banks “significant” judgement in valuing their assets

8. FASB eases fair-value standard blamed in crisis

   FASB votes to relax fair-value after pressure from lawmakers

9. Head Trader thinks we sell off after open, due to fear about tomorrow’s non-farm employmment number.

   No technical colour today.

10. BOP, just saw that on FASB. I might just seel my long SKF today with a loss. With that news, the banks are back to their old tricks again.

11. Positive moves in credit indices this morning:

    IG12 198 -4bps from yesterday

    HY12 72.20 +1 full point

12. Sambone — saw an estimate this morning that with the FASB relaxation, banks could see a 20% boost to 1Q09 earnings, as this gets to be applied retroactively.

13. Sam,

    One day early – quote and otherwise – Sold DXO yesterday, opened SKF.

    Quote: “I picked a bad day to stop sniffing glue”.

14. Sambone — FWIW, i think SKF will work again… probably sooner, than later. Commercial and consumer headlines are hitting, but not really kicking the banks yet.

    Plus, LOTS of troublesome headlines to come out of Washington over the budget bill and cap-and-trade.

    Only thing I know for sure, volatility is still king.

15. #12, brought to you by the same folks who brought you Sub prime, Congress. Saves Ken Lewis’s job.

16. crude rally on weaker US$ vs EURO? ECB cut less than expected at 25 bps vs street expectations of 50 bps?

17. BDI -36 1538

    TED 96

    BDI seems to be in another free fall. Seems(?), no seems about it. It is a free fall.

    Have a great day everybody.

18. Z – The only way that Suncor’s breakeven is 40$ or more is if they are including some development capital costs. At these NG prices I’d hazard a guess at operating/sustaining capital costs around closer to 35-37.

19. Does anyone have a good argument for relaxing FASB? I’ve heard all the CNBC losers talk about it but I strongly doubt it’s going to help to remove any of these assets from their balance sheets.

20. I hear ya V, he was speaking at the CFA Institute and all I was able to grab was a few of his quotes. What you say makes sense and he may just be rounding up as he said the economics are “closer to break-even at $40”

21. Re: #19, as BOP indicated, it gives the banks “significant”judgment in valuing their assets-I do not see how the auditors are going to do their jobs unless there is one hell of lot of amplifying instructions-it is going to make for very interesting discussions between the auditors and management.

22. Smart money probably walks on those CRK calls prior to the gas number.

23. I understand that it gives them significant judgement. Right now some of the marks could already be too high so the banks marking them higher really doesn’t inspire any confidence in me that someone will want to buy them.

    The last thing I want to do is give them more judgement because they haven’t shown themselves to be good judges of their value so far.

24. Z – are you feeling that the CRK’s are more sensitive to the number than the HK 22.5’s?

25. Watching LNG, the company, creep higher. Been doing quite a bit of reading, some old stuff I had around and some new stuff I’ve been receiving almost daily on LNG (you have my thanks and keep sending). That company seems like a boondoggle to me. If you go back in time and look at presentations from a year ago, the big tsunami of gas was call for for 2008 but failed to materialize. They have a giant amount of processing capacity. Brand new and sitting empty. The older facilities have all ramped their capacity, many adding tech to double their send out capacity. I’ll have this all in the post and hopefully better organized but I’d be suspicious of all these claims coming out that Asia doesn’t want the gas so that it must come to the States when the States prices are lower than what people are paying in Asia and in Europe. And when there is a supply overhang just to the North in Canada (their storage is very full too). Anyway, just letting you know I’m thinking about the LNG wildcard daily. And watching the LNG (the company) chart inch higher into what I would normally refer to as a beautiful scoop chart.

26. Jay, I think the $35 CRKs are more sensitive, yes. The CRK $30s not as much.

27. VTZ — as the FASB rules were written, “common sense” completely went out the window. The auditors could point to an absolutely ridiculous trade or an index that was the target of a bear raid and say “That is where you should mark your entire holdings.” I don’t blame the auditors… they needed to be able to point to some “outside” indicator… b/c it’s defensible. But, it also allowed the Bears to force banks to mark assets way below the “common sense” level.

    How do you legislate “common sense” into the system? There is no good way. That is why good mngmt teams count so much. But, can’t be handcuffed by your auditors. There will ALWAYS be some bad apples… but, shouldn’t throw everyone in jail b/c 5 or 10 or 15% of the population is bad.

28. re 33 relative to the HK’s. Part of that is looking at delta on the options, part my gut to the NG number.

29. Z – Do you follow NKO (Niko Resources)? They started their gas production in India this month and they are supposed to increase production from 350 mmcf/d to up to 2.8 bcf/day by the end of 2009 which would roughly double India’s gas production.

30. Wyoming – if you have an opinion on the management change at HAL let me know. Seems young guy quitting who was thought to be in line for the top job. Maybe its nothing, just don’t know him.

31. BOP – What if 50% of the big bank population is bad?

32. #19, Politics.

33. V – I’ve heard the name but little more. As you’d guess, India is one of the ongoing strong sources of LNG demand. Not sure what LNG’s demand picture looks like now but its growing. That kind of increment is pretty amazing as that would suddenly make them bigger than CHK.

34. Fair warning, I may kick out those CRK $35 calls and leave the $30s in place, bigger faster move than I anticipated.

35. VTZ — then we are all screwed.

    Personally, I have seen auditors make companies do some amaziningly stupid, expensive, ridiculous things… real value distruction by applying a rule in a way that it was never intended… just b/c an auditor could point to an outside mark. Also, auditors will tell you one thing, one year… and you will change your operations entirely… then they come back the next year and tell you they reviewed their prior decision and to change it back. Then they will CHARGE you for all the time the spent, doing that.

    I’m not picking on auditors, per se… but, i’m no fan of putting MORE power in their hands. I am a BIG FAN of common sense. And personally, i do not believe that over 50% of bank mngmts are bad.

36. ZTRADE:

    $10KP – Out (15) CRK $35 April calls for $1.05, up 172%. Will hold the $30 calls for awhile, and may rebuy these as the expected and potentially catalytic operations update has not yet been released.

37. BOP – I was talking about 50% of these distressed/toxic assets on the big bank balance sheets. I really doubt that those assets are worth anything close to the banks say otherwise people would be picking them up with any of the assorted govt supported plans (or even without at a small discount).

    Granted, we all know the banks think they are entitled to being able to win on every trade.

38. VTZ — but, fair warning, i think the “free market system” is also still the best system we have. Albeit flawed… but, better than any alternatives. This is not a popular position these days… but, the press has done a good job of downplaying the role of govt and trade deficits in the financial meltdown. They blame it on free markets, when, in fact, the US has one of the most regulated mrkts in the world. But, i could rant on for a long time on this topic… i will spare the board and shut up now.

39. VTZ — PQ’s bonds are trading at a 30% yield. Is that right? Probably not… time will tell. Likewise, there is a lot of stuff on bank balance sheets that has been marked to nonsensical levels. When market participants are scared, no one cares about “true valuations.” I think we have run too far in the other direction at this point. But, time will tell.

40. OTC derivatives and PQ’s bonds are not comparable.

41. #38-make sure we factor in the lawyers in the equation-auditors have deep pockets, thus a favorite target right behind doctors.

42. Bout time!

    MOGADISHU, Somalia (AFP)–At least one Somali pirate was killed and two others
    wounded after a naval vessel patrolling the Indian Ocean fired on their boat
    and destroyed their mother ship, witnesses said Thursday.
    Local fishermen in the pirate den of Harardhere in northern Somalia said the
    incident occurred Wednesday afternoon, but the naval vessel was unknown.
    “One pirate died and three others were injured after they approached a navy
    ship. They were given warning signals but they ignored and kept approaching and
    their mother boat was destroyed,” local fisherman Abdullahi Isa Mohamed told
    AFP.
    Other residents who confirmed the incident said the men were on board small
    boats hunting for ships to attack.
    But the U.S. Navy Fifth Fleet command and the European naval mission off the
    pirate-infested Somali coast said they had no information regarding the sinking
    of a pirate mother ship.
    The coastal town of Harardhere is often used by Somali pirates to hold
    hijacked vessels and their crews, releasing them after often hefty ransoms are
    handed over.

    Dow Jones Newswires
    04-02-09 1017ET

43. NG backing a small amount, number in 5 minutes. Supply numbers not out yet.

44. Rarely do you see a Hold rating generate an 11% boost in a stock (GMXR). Crazy times. $9 target is very lowish but it could be p/CF and not related to NAV… have not seen Weisel’s math. Potentially initiating now to upgrade on the redetermination and the well news expected in early May here.

45. 0 Bcf

46. Gas going to bounce it seems.

47. #41.. choices — exactly!! And that is why “common sense” has flown out the window. Everyone is afraid of being sued. And the Credit Macro Bears know this.

    VTZ — only comparing PQ bond prices (which i think are ridiculous) to bank balance sheets to point out that even in something as relatively simple as an asset-backed company’s bonds, you can have pricing that is outta whack. Now, multiply that by 1000, and you have some of the destructive consequences of mispricing on bank balance sheets… both good and bad. Ultimately, it comes down to a level of trust. If you don’t have some trust, why would you put any money to work in the market? We all try not to have “blind trust”… but, we can never know everything that goes on behind closed doors. Which is why the quality of managment is #1.

48. Caveat to 45. EIA reclassified 9 Bcf from working to base gas category. Would have been a build of 9 without the reclass.

49. Z-
    Please explain #48.
    Never heard of “base gas” category.
    Thanks.
    Allen

50. Gas figuring that caveat out, going negative now.

51. What we look at is working gas. Gas that can be consumed. There is an underlying amount of gas for pressure maintenance of the salt caverns where much of the gas is stored. That’s base gas. I’ll grab some figures for you but from time to time they make an adjustment to what is calculated to be Base vs Working.

52. From the EIA:

    Base gas (or cushion gas) is the volume of gas intended as permanent inventory in a storage reservoir to maintain adequate pressure and deliverability rates throughout the withdrawal season.

    Here’s a good primer on storage:

    http://www.eia.doe.gov/pub/oil_gas/natural_gas/analysis_publications/storagebasics/storagebasics.html

53. Z-
    Thanks. That’s good enough for me.
    Allen

54. Rolled back the DVR to see if CNBC bothers to read the storage footnotes. Nope. These are the same guys who would have freaked out over a 9 Bcf build vs 0 Bcf expectations. But they simply don’t know about it. Sad really. I feel like calling Jon Stewart.

55. RJ picked up CXO with a Buy and $40 target. Another interesting little name.

56. gas down 4 cents and falling, stocks paying more attention to the broad market for now. HK keeps slipping higher.

57. CRZO — upped to overweight at Johnson Rice.

58. Z, thanks about 52.

59. CRZO — that was “old news”… from 3/31… but, plays into the theory that their bank line will not be reduced after the redetermination is done… will know by end of april.

60. Good morning all. SPX has resistance at 835, then 850, 860.

    We may have seen a very small wave 2 complete yesterday at the lows – I don’t like it but its possible and now we are in 3 up.

61. Good morning Nicky. The good news to 60 is that it will offer better levels from which to go short or write puts.

62. 59- Maybe we out to pool that April news?

63. The alternative is running out of time and getting a touch high – we would need to roll over very soon.

64. Bossman – you’re welcome, glad to be of service.

65. re 62. I really think GMXR is the next beneficiary of the redet effect.

66. OK… pretty darn significantly positive move in the high yield CDS index today. Anything over a 1/2 point move is large… but, here’s the current quote —

    HY12 72.75 + 1.5 point !!!!

67. Chavez, baby!

    http://news.yahoo.com/s/ap/20090402/ap_on_re_us/lt_venezuela_us_opec;_ylt=AnpV4xRsmISao6MFPrGWXAkS.MwF

68. BOP- I had to step away for a bit, good talk though.

69. Re 67. Once a cheater, always a cheater. He’s still up to it I’m certain as we are seeing inflated inventories along the Gulf Coast as imports rally.

70. Uncle Phil

    http://www.321energy.com/reports/flynn/current.html

71. VTZ — agreed. Thank you.

72. Gordon Brown announcing all will be okay with the world. Why do those words sound somewhat hollow. Maybe cos his government led us into this pile of crock and didn’t even see it coming!

73. Nicky — I think i posted this before… but this time, this is just for you. This guy gets it!

74. From newswires ~ Opec may be able to live with oil prices around $50 a barrel in 2009, the group’s secretary general Abdullah Badri said today, another sign the group has limited its price aspirations for now because of the weak global economy.

    The comments are the first indication from Opec of how long it can withstand oil at $50, below the $70 to $75 band many in Opec and the oil industry say is needed to encourage investment in new supply.

    “We cannot really invest at current oil prices. Maybe we can live with it this year,” Reuters quoted Badri telling a conference in Paris. “The cost of adding new capacity is still high.”

    Badri added: “2009 is the most difficult year for the world to live.”

75. By the way, COP warned this morning. Will miss on weak gas prices in NAM and weak gasoline marketing margins globally. Stock up 5%.

76. BOP – thanks for 73.

77. BOP – yes seen it. The guy is so eloquent and puts it perfectly as you say. Many many people are talking about it too…

    At this rate ‘sell in May’ is going to look very good.

    That combined with Cramer ranting on about the end of the depression this morning! How many bad calls does this guy have to make before they get rid of him. My sincerest hope is that Dow sub 5000 may see the back of him but I doubt I would be so lucky!

78. Nicky — I am in awe of people who speak in full paragraphs without the use of teleprompters. The fact that I agree with what he says, just makes his performance that much more enjoyable. So nice to know that those people actually exist. Too bad we don’t have an American Senatorial equivalent.

79. I haven’t checked this but I am hearing that the BDI (Baltic Dry Index) is down for the 15th or 16th day in a row today representing a decline now of 45% from its 10th March high. This shows the global economy is getting worse and not better.

80. Not that I am suggesting fighting this tape – the bulls need their day. That said everyone also knows that this is not the start of a new bull market. This rally is absolutely atypical of a bear market rally.

81. AIG’s dirty laundry:

    http://www.ritholtz.com/blog/2009/04/aig-before-cds-there-was-reinsurance/#more-22986

82. 11:19 (Dow Jones) In a research paper, economics professor James Hamilton
    looks at some of causes and consequences of the run-up in oil prices from 2007
    to 2008, which he excerpts on his Econbrowser blog. While speculators and the
    Fed certainly played key roles, oil price appreciation was “an inevitable
    consequence of booming demand and stagnant production,” he says. “It is worth
    emphasizing that this is fundamentally a long-run problem, which has been
    resolved rather spectacularly for the time being by a collapse in the world
    economy…Policy-makers would be wise to focus on real options for addressing
    those long-run challenges, rather than blame what happened last year entirely
    on a market aberration.” (SMR)
    (http://www.econbrowser.com/archives/2009/04/causes_of_the_o.html)

83. A link to the BDI is at the upper lift under the transports tab or you can click here to see the chart:

    http://www.dryships.com/pages/report.asp

    It has been steadily giving up ground with more damage being done to the Capesize (biggest – must round the Cape) ships and less to the Panamax (so named for being able to fit through the Panama Canal). Prices highly dependent on iron ore and coal shipments going to China to make steel. Iron ore prices are thought to be set to fall 40% from 2008 levels which puts them back at 2007 prices but the negotiations with the Chinese and suppliers are set to drag on for another month. The lower the price, the more the Chinese buy and they are really looking for a 50% cut to prices. So in about a month, you could see spot drybulk prices rally as the paper work is signed and more volumes start moving about the globe.

84. I think what we’re seeing this past week is a lot of
    “false volume”.
    That is, market makers and brokers trading shares
    amongst themselves with no real equity changing
    hands.
    To the armchair investor this creates the illusion
    that there is real movement (or volume) taking
    place when, in fact, there is not.

    Its a common ploy used on Wall St. to convince
    investors that a lasting rally is in the works and
    to “get in now” while the going is good (when in
    fact it isn’t).
    A form of naked short selling, if you will.
    You’re classic pump & dump with a twist.
    Stay away….

85. 82 – Agree with that and know that policy makers in the West continue to blame speculators and not fundamentals.

86. What’s the current thinking on jobs tomorrow, in line with ADP or something smaller? I imagine the first time we see a smaller than expected number we touch off a pretty big rally. Looking to add HAL back as a Put and don’t like the idea of stepping on a mine.

87. Bloomberg survey expecting a loss of 660,000 jobs. But, given the ADP number, could easily see that might higher. Don’t know what the “whisper number” is yet. Will post if/when I hear it.

88. “much higher”… oops

89. CRZO — short covering.

90. I have heard in excess of 800k

91. Off subject

    I want one!

    http://www.tampabay.com/news/bizarre/article988709.ece

92. re 90 – That would have to deflate this rally.

93. Jobs: every month the whisper gets so high that nothing could shock anyone, probably the usual of right around expectations with upward revisions in the past months to mute the effect. not even a conspiracy theory it makes sense for the data to get worse as the responses are tallied

    Market does not seem to care at all about jobs right now though

    gas is jumping Z is the data out?

94. MIDDAY Overview

    Equities stage impressive rally, continuing the move from yesterday; sp500 up ~30 points to 840; Dow +3.5%, sp500 +3.6%, Nazz +4% (Nazz now pos YTD again); Dow moves back above 8000 ~835 was def. a big technical level being watched on the sp500 cash (above that eyes now turn toward 850). Pain trade remains to the upside. Commodities are mixed (crude +$3.80 to $52, gold -$21 to $904) as the USD weakens (DXY -1.2%), treasuries move lower across the curve and credit tightens. Best acting sectors today – tech (up >4%), industrials (up >6%), consumer discretionary (up >5%) – these higher beta, earlier cycle groups seeing real buying occurring; within industrials, transports are best acting major sector today (up ~8%). Financials are strong again (~4%), although seeing some select profit taking in certain names (as people recycle the money back into higher beta groups). The “safe” sectors (health care, utilities) are laggards (pharma is in the red today). While all the focus is on financials and MTM, the real buying/interest is in these early cyclicals.

    Some of the positives being cited for the strength:

    · more encouraging eco news – this is prob the biggest underlying trend of the market as important indicators continue to flatten out: China’s Mar Manufacturing PMI rises to 52.4 vs. St 49.0; China’s Manufacturing Output Expands for 1st Time in 6 Months; US factory orders came in higher than expected for the month of Feb (although the prior month was revised lower); U.K. house prices posted a surprise increase in March rising 0.9% from February; March Auto Sales came in at 9.8M vs. 9.1M in Feb.; and ACT prelim truck data (released midday) remains very weak BUT saw a sequential uptick for the month of Mar.. This has been a big theme for weeks now, w/eco numbers around the world signaling a stabilization in activity following a steep decline in late ’08/early ’09.

    · G20 meeting more successful than the press had been playing up – the G20 agreed to triple the resources of the IMF from the current $250B up to $750B; coming away from the G20 finance ministers meeting a few weeks ago, the consensus thinking was that resources would be doubled to $500B and maybe raised higher – looks like now it will officially be raised to $750B. The G20 in general appears a bit less contentious than some of the press had been playing up

    · ECB – the actual cut today was less than expected (they went from 1.5% down to 1.25% while the St thought they would cut a full 50bp), although Trichet said that rates aren’t necessarily at a floor and that the ECB would consider “non-conventional” measures @ its meeting next month

    · Gov’t action – the FASB vote today on MTM rules, which widely expected, is still helping give a bump to equities and sentiment; note that banks will be allowed to apply the rules to their Q1 earnings. BAC’s Ken Lewis on CNBC this morning said that he doesn’t anticipate the rules helping his earnings all that much.

    · Credit finally participating; CDXIG12 is ~8bps tighter and HY12 is up a full 1.5pts

    · Sanguine comments from bank CEOs; BAC’s Ken Lewis on CNBC this morning said they are seeing huge refinancing applications (Lewis says applications on some days topping $5B at the company), and said theyr’e also seeing some signs of hope on economic front. DB’s CEO made positive comments in an FT interview..”We said the first two months were good and March’s operating revenues were solid”.

    · Encouraging news around hedge funds – the FT this morning said investors are tentatively returning to the space following a very tough ’08 – “Many hedge funds have seen investor panic recede as they record positive returns…Large amounts of withdrawal requests by investors have been cancelled at some of the biggest funds”; OZM published an 8K this morning showing continued gains in its Mar performance

95. Gaam – good thought but no, not out yet. Probably has more to do with oil up $4 and the Dow up 4%.

96. re 79
    Apparently a lot of newbuilds are appearing, from orders placed when shipping was much tighter. Some think this is an important factor in the BDI decline. The other thought is that there was a shipping surge after credit thawed a bit, which may be partially worked off.

97. Occam – good add, should have said as much. Another problem for the dry bulkers are the lack of transactions. Normally we see an active second hand market for ships, without that and strong demand and with newbuilds entering service there is little pressure to keep rates up.

98. I just wanted to comment on one Suncor related item.

    It seems like COS.un has taken SU’s role as the pure play in the oil sands and trades on the swings in oil price. It has been outperforming as of late over CNQ and SU and I continue to like it on pull backs.

99. VTZ – not coming up on my system, does it have a U.S. symbol?

100. COSWF

101. coswf.pk

102. BEXP crashing last few days. Any reason?

103. Still no supply update on gas, may come out post market, may require a tax hike.

     Looking to add half position of HAL puts back pre close, probably towards EOD and with a little luck near HOD.

     My ATW idea scooted higher, will wait, that one works better with time, but it does have a couple of things on the 3 to 4 month horizon which could prove to knock it about a bit.

     Nice patience on KOG BOP. Good call on too low. They got all the benefit from the BEXP press release that BEXP didn’t, lol.

104. Thanks BC

     Occam – press release disappointed on two fronts. They need to sell acreage and announced the sale of 6 mm which is a drop in the needs bucket. Two, their west of the Neeson Anticline results were not gangbuster.

105. How is a 10 billion $ company on OTC.

106. Going to buy a little put position back in HAL soonish, would like to see supply data but I really think its about falling numbers and the potential for them to warn. Probably take a little more at the close and then see how it opens. Given their history, they may or may not warn re 1Q. I’m sure most in the stock expect a lousy 1Q, guidance going into the out months likely scant to non-existent due to lack of visibility.

107. z — thanks for the KOG comment. Until they come out with some more news we can hang some valuation on, i think the stock is fairly priced around here.

     That said, if KOG had any debt, I would have run for the hills. Debt + low commodity prices = death march. Some guys are strong enough to make it… others just collapse by the side of the road. Not a pretty mental picture. But, too much leverage at the wrong time, never is.

108. z, are you sure gas data is today? on wednesday you said it would be friday

109. Upcoming Events

     Obama Press Conference at ~1:15 following G20.

110. Yes, they moved it up a day yesterday. Spoke with EIA on the phone to confirm.

111. Re 109, So maybe Obama juices the stocks into the close.

112. Z–

     For what it’s worth on OSX, we covered our SLB yesterday at open. Can’t take full credit because, while it was my expected value, I was out sick and don’t know if I would’ve had the balls to do it. Now, I need more of a pop to put it back on and feel safe. On HAL, I don’t have an opinion on the options side but my EV for the stock is $14.80, so I’d be waiting for more of a pop there to also feel safe. HAL underperforming the group by a lot so far today. They report first this season, estimates still too high, and they also talked a bunch on the last Q1 about how international would hang in there. That’s not happening anymore.

113. EIA data out.

114. http://www.eia.doe.gov/oil_gas/natural_gas/data_publications/eia914/eia914.html. I’d be interested in any thoughts from more informed readers. It looks like they changed some of the methodology which throws some comparisons off, but we certainly didn’t grow anything MoM.

115. Jat – I hear ya, wanted a bigger pop myself, watching the estimates walk down daily, this thing gets more expensive by the minute standing still. I’m just DCA’ing into a position, not too troubled to double down at half the price if need be.

116. Yeah, regarding a preannouncement, I’m very much on the fence as to whether that’s coming from a lot of folks. There’s nothing to preannounce if you refused to guide on Q4 calls because you had an unprecedented lack of visibility. Plus, nearly all service companies were phoning up the sell-siders early this week and late last week about how their estimates were too high. HAL has been pushing people down since at least the Lehman trip in mid-March. Gould is holding a lunch here in NYC on Monday, he’ll probably do the same thing.

117. VTZ #105 They don’t want to list in the US. They sell on the Toronto.

118. #117 — little issue with SarBox costs, maybe?

119. Looking at their tweaks now, no big changes, December was revised up slightly, numbers not quite apples to apples but not terribly borked. EIA still looking at back data.

     Wyoming refuses to decline but Texas starting to roll, Louisiana not showing a pop and you may be seeing Cotton Valley production falling off and/or getting choked out by higher pressure Haynesville production … definitely no mountain of gas just yet. Recovery in Gulf of Mexico from ’08 storm season saved the day for January.

120. add to 119: “Other” states flipped lower as well, there’s going to be some odd math in there but again, no big growth.

121. BOP, probably. I spoke to the CFO a couple of years ago and his statement was why should they? BTW, I believe they will switch to a corporation soon from a income trust.

122. 914 out z

123. I’ll have the slide show out for tomorrow’s post.

     Bottom line:

     Lower 48 gas production: 58.62 Bcfgpd, off from 58.85 Bcfgpd in December.

     Onshore U.S. gas production: 52.3 Bcfgpd, off from 53.06 Bcfgpd. Louisiana, Texas, Oklahoma, New Mexico and “Other States” eased, Wyoming advanced but not above November levels.

124. Seeing the credit indices weaken… would think there is some money that comes off the table, ahead of tomorrow’s jobs report. Just prudent, in this volatile mrkt.

     IG 198

     HY 72.5

125. # 121 LOL. thanks. good colour.

126. POTUS on TV now.

127. CNBC seem to be in a bit of an uproar. Not sure I heard this right but apparently Congress have passed a provision that any bank asking for Talf money will have to be disclosed. CNBC saying this could be very dangerous as it could potentially lead to a run on the bank in question. Market seems to have sold off a bit on this.

128. Congress doesn’t have enough business sense to run a lemonade stand on a busy corner in the middle of August. And yet, I continue to be amazed at how stupid their decisions are as to how to “manage” American private enterprise.

129. Z – how is 59.6 “off from” 58.85 ?

130. Yes, I wanted to know that too.

131. It was a typo I corrected and which the system did not take. One second.

132. Lower 48 gas production: 58.62 Bcfgpd, off from 58.85 Bcfgpd in December.

     Lower 48 excludes Alaskan volumes which are produced but reinjected for oil reservoir pressure maintenance and as such don’t enter into the supply demand picture.

133. NBR not lagging the rally and back on my Put to do list.

134. GSCO sold some of the SPX futures this morning… but now, they are back in the pit, buying.

135. Just watching Cramer declare the markets not dead. Amusing.

136. Z – what do you think are the prospects for share appreciation in LINE? (as distinct from income, where the case is clear enough).

137. I finally figured it out!

     Jim Cramer is “Mr. Market”!

     http://ezinearticles.com/?Ben-Graham-And-Mr.-Market&id=122055

138. Samb – I saw youwent back to SKF again. You still think it will “run” up again?

139. BOP, curious, how do you what GSCO is doing? or how could one tell?

140. Dman – Price appreciation will come with firm footing for the E&P group which will come with a) a better, more confident market and b) a flattening of the price in natural gas. Stop NG from falling and you arrest thoughts of worthless reserves etc. They aren’t your big pop on a rebound in gas prices as they are hedged. But the better market environment will entice dollars off the sidelines and some of those dollars want energy exposure and some of those dollars want to get paid to wait. So as the group rise and Mkt Value/Reserves rises, that lifts their boat. How much it goes up ultimately depends on commodity prices. I’m holding for awhile given their plan and the security of the distribution. If prices walk up they can always unlock some hedges and up their capex to grow production and the distribution.

141. #137 So right. Especially lately, when I’ve seriously wondered how much medication the guy might be on – and how often he forgets the pills.

142. CLNE turning in a nice day, up 18%, looking for a breakout on volume. Its up on TBP applauding a bill in congress (hs 1835) that would promote ng as a fuel for cars and trucks.

143. Has anyone looked at ONAV in the recent past?

144. END up 45% today. Cash is better than Norway any day.

145. Ram, I had second thoughts this morning about being long, but since it’s huge a large postion, I’m still long and strong on SKF.
     My take is that when GM goes out, it will be a world of hurt and the banks will take the brunt of it. Just read that the big banks now have 200 Trillion of exposure to Derivatives.

     http://www.thedeal.com/dealscape/2009/04/banks_hold_200t_in_derivatives.php

146. Bossman — the only way I know is that someone my Head Trader knows in the pits, tells him. But GSCO has been right, enough of the time, that we pay attention anytime they are consistantly doing something.

     GSCO has been consistantly going long the SPX futures since Monday.

147. #145 Correction
     but since it’s NOT huge a large postion,

148. ZTRADES: $10KP both Puts

     (10) HAL April $15 Puts (HALPC) for $0.38.
     (5) BHI April $30 Puts (BHIPV) for $1.40.

     Estimates still coming down, potential for further pressure on numbers for the rest of the year remains high. They may or may not issue warning releases (my sense is its a coin toss and as Jat said above, why warn if you didn’t guide?)

149. #146 information wants to be free 🙂

150. Beerthirty!

151. thanks BOP for 146, thats what i was thinking but I thought maybe its possible some other way! good connections

152. Bossman — that is why we are always nice and speak in low tones to Head Trader. Want to keep on his good side. Just as in any business, it’s who you know, so much of the time, eh?

153. CLOSING Overview:

     · Equities end off highs (SPX +23pts to 834) as the USD (DXY -1.3%), Gold (-$22 to $905) and Treasuries (30yr price dn over a full point, 10yr off 26/32nds) were lower while crude ended higher (+$4 to $52). Credit was 3bps tighter (IG to ~198), lagging equities again but still outperforming YTD. After-hours, RIMM making big move higher after strong earnings report.

     · Very strong rally as stocks spurred higher by a series of positives….but some red flags amid the strength; Fri’s jobs report the next major catalyst really until earnings season kicks off. The morning def. saw a lot of short covering, but the desk saw real money long-onlys come in later in the afternoon, esp. in the early cyclicals (tech, industrials, consumer discretionary, and esp the transports). Financials are up on the day, but our desk seeing profit taking in the fins today as money is rotated elsewhere (financials peaked back on 3/23 and have been pretty tired since then). Some red flags amid the equities rally? 1) the financials peaked nearly 2 wks ago and haven’t been able to break to new highs; 2) MSFT, which has been a huge contributor to the tech rally, closed in the red (although off worst levels); 3) the VIX moved higher from its morning lows and ended higher on the day.

     · The positives helping today: 1) more encouraging eco news (esp. China PMI); 2) the G20 meeting was “better than expected” in that there was more agreement among participants than the press had been playing up; IMF funding gets bumped 3x, which was somewhat unexpected; 3) ECB cut less than anticipated, but Trichet talks about “unconventional measures” that will be discussed at the May meeting (first step to QE?); 4) FASB MTM rules; 5) encouraging news around hedge funds (Mar returns starting to come in for a bunch of major funds…..FT says flows are improving); 6) more sanguine comments from bank mgmt teams

154. Head trader has been wildly wrong lately, wouldn’t you say BOP ?

     I would have made the same comment though; today caught me off guard as well.

155. PackMan… actually, Head Trader has been more “right” than “wrong.” Thing is, when he says things like, “will bounce after morning sell off”… he doesn’t mean the market will close higher. A lot of times, I check back with the trading desk and he says “took my 4 points and am done [on the SPX].” The main thing I use his comments for are macro-directional help for the day. Like, if we are facing a major red opening, but his sense is we will bounce. Then I know I don’t have to sell the open.

     I’ve noticed that he is usually pretty good up until 1:30 or 2 pm. He’s about 50/50 from 2 pm to close (so, no help at all).

     But his call of “sell off after open” was clearly WRONG for today.

     Also, I always feel better when Head Trader and Tech Trader are on the same page. Tech Trader has been out…

     I’ll follow up with an interesting comment Head Trader had about 3 pm today… in the next note…

156. Comments from Head Trader at 2:30 this afternoon… meant to post as I thought there was some good information-content in them (some might be obvious… but, I will repeat them anyway).

     1) Tomorrow’s employment number is the true test to see if ths rally has legs.

     2) Hedge Funds are on the sidelines [talking to several HF friends, I’ll 2nd that comment]

     3) Who is buying? Mutual funds… I think it was elduque who pointed out that April seemed to be a month when mutual funds put cash to work. We are seeing this. Head Trader spoke to a friend at a mutual fund company… said the PM there was putting $300mm to work this week.

     4) If hedgies don’t believe this rally, why aren’t they shorting? They are afraid of the uptick rule meeting next week, April 8th. Plus, hedgies are afraid of the mutual fund guys… there is so much cash to put to work there, the HFs are scared if they short the market, they will get run over by the MFs.

     5) Mutual Fund managers are purposely targeting and going long, heavily-shorted companies.

     So, what does all this mean? If we didn’t have the Gorilla Govt roaming the room, I would say this market has probably made a bottom. But, with all the stuff on the table, our govt has the ability to de-rail confidence.

     Sidebar — The EPA’s ability to “regulate” CO2 emmissions will be looked back on as the turning point of govt control over private industry.

     But, for now, if the number tomorrow isn’t Night-of-the-Living-Dead Ugly, then we will rally.

157. Nicky, judging by the parade of guests on CNBC, I would say that not everybody knows that this is not the start of a new bull market.

     Really unbeleivable to listen to some of those folks.

158. BOP; don’t get me wrong, I appreciate the HT and TT color.

159. PackMan — nope. I didn’t misunderstand you in the least! Thanks for your comments. Cheers!

160. Z,

     Don’t know the HAL insiders, I’m a strike out on that one, I can dig up the poop on the other guys any day or time. Plus a lot of the ex’s who are CEO types.

     Some reading fun and one giggle:

     http://www.epmag.com/WebOnly2009/item33676.php

     http://blogs.epmag.com/rhonda/2009/03/26/is-the-bakken-just-an-urban-legend/

     http://www.epmag.com/WebOnly2009/item34160.php

     http://www.epmag.com/WebOnly2009/item33975.php

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