Friday – Holiday Bounce

To you current servicemen and veterans, you have my humble appreciation. Have a safe and Happy Memorial Day. 

I expect today to be fairly dead as people head out of the office and off the trading floor early to stretch their Memorial Day weekend. While Asia ended lower on the heals of the slide in U.S. equities yesterday, Japan sounded a more positive note overnight and we should see a bounce in U.S. markets at least to start the day today. The dollar index is slumping yet again (see the mirror image chart of the dollar and oil below if you doubt the relationship) and looks to be headed to a key test of 80 this morning.

In Today's Brief Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Storage Review
  4. Odds & Ends

Holdings Watch: 10kp $25,800 / 68% cash


Commodity Watch

Crude oil fell $0.99 to close at $61.05 yesterday as a weak equity market overrode new lows in the dollar. Technicians are saying staying above $60 is important. Not sure why since we just got here on the front month contract but this morning crude is trading up $0.50+

  • Dollar Watch:  Mirror image.

  • Guess Who's Long Oil Again Watch: From Reuters ~ US investment bank Goldman Sachs said the rise in prices this week was due to real oil market fundamentals and not just hedging against a weak dollar and equity market rallies. "The oil market was shocked by disruptions in Nigeria, refinery problems in the US and a strong gasoline market," Reuters quoted Goldman saying in a research note. 
  • China Watch: April crude demand was up 3.9%, the first significant rise in imports since October 2008.
  • Mexico Watch: Production fell 4.2% year over year to 2.64 mm bopd in April. Exports fell 18% YoY.  Cantarell field production is down a stunning 35% YoY, much more than the government's target of a 15% annual slide.
  • Nigeria Watch: Nigeria's house of representatives is pushing President Yar 'Adua to expand the recent offensive on MEND camps to two more Nigerian states, basically meeting MEND's call for all out war toe to toe. Production in Nigeria is thought to be about 1.6 mm bopd, or half of its capacity. There are signs that production could be inching back up by July and the recent fighting has apparently not put a further dent in volumes. 

Natural gas plummeted $0.37 to close at $3.60 yesterday after the EIA announced a bigger than expected (by me and the tracking group of analysts) injection to gas storage (see next section for further commentary). This morning gas is trading off slightly, rapidly approaching a test of $3.50.

  • Russia /  Ukraine Gas Conflict Watch: They're at it again, with Russia saying Kiev can't pay its bills and threatening to shut off supplies. This usually impacts European supply which in turn lifts the national balancing point for natural gas and, if it continues for a time, sends more LNG to Europe and less elsewhere. By the way, the CME started trading a NBP contract last week (E2H/M9 would be the symbol for the June contract). This contract is not yet widely traded and the front month works out to a gas price of only $1.65. This moves up in the out month and has been rising daily as the market finds a price for this theoretical, international trading point.

Natural Gas Storage Review

ZComment: Yesterday saw a bigger than expected number and the first of the season to reach triple digits. Not surprised at all by the reaction. Notably, gassy stocks traded higher from their pre-report lows into the end of the day suggesting equity trading in the energy complex has already discounted much of the bumpiness we will see in gas as we move closer to being able to actually see the declines in production show up in the weekly numbers. Not to beat a dead horse but we've been at higher inventories at this time of year before. In 2006, storage stood at 2,163 Bcf this week; that year also had a higher  start point. Gas prices at that time were $6.25 and while the economy was not weak like it is now which depresses demand, natural gas did not enjoy as much generation share as it does now.

The Build Has Been Quicker Than Normal. This is to be expected as we are going to get full fast this year. The important thing to watch is the change in the slope of the 2009 line as the summer progresses. It should be begin to angle back to towards the average trend with time. 




Odds & Ends

Analyst Watch:

  • Deutsche Bank ups (ESV), (RDC) and (NE) to Buy; cuts (DO) to Hold.
  • Citi ups fertilizer names: (POT) and (MOS) upped to Buy, (AGU) upped to Hold.

92 Responses to “Friday – Holiday Bounce”

  1. 1
    BirdsofpreyRcool Says:

    Good morning. Who’d of thought that SEARS would set the opening tone today:

    U.S. Stock Futures Advance After Sears Posts Unexpected Profit
    2009-05-22 12:29:05.29 GMT

    By Sarah Jones and Rita Nazareth
    May 22 (Bloomberg) — U.S. stock futures rose, indicating the Standard & Poor’s 500 Index will extend its weekly advance, as better-than-estimated earnings at Sears Holdings Corp. offset concern the nation may lose its AAA credit rating.
    Sears, the largest U.S. department-store chain, soared 23 percent as the retailer also said it amended a credit agreement.
    Alcoa Inc., Exxon Mobil Corp. and ConocoPhillips climbed as metals and oil prices increased. Autodesk Inc., the biggest maker of engineering-design software, climbed 16 percent after forecasting profit will beat analysts’ estimates in the current quarter.
    S&P 500 Index futures expiring in June added 0.6 percent to
    894.3 at 8:26 a.m. in New York. Dow Jones Industrial Average futures rose 0.6 percent. Europe’s Dow Jones Stoxx 600 Index gained 0.5 percent.
    “People are optimistic on the market at the moment,” said Peter Jankovskis, who helps manage $1.2 billion at OakBrook Investments in Lisle, Illinois. “Anytime you get news from a retailer that sales are good is a sign that the consumer is well and the economy will continue moving forward.”
    U.S. stocks yesterday declined for a third session as jobless claims topped economists’ forecasts and S&P said the U.K. may lose its AAA credit rating. Speculation America’s ranking will be reduced dragged the dollar to a more than four- month low against the euro today and weakened the currency versus the yen.


    Treasury Secretary Timothy Geithner committed to cutting the budget deficit as concern about deteriorating U.S.
    creditworthiness deepened, and ascribed a sell-off in Treasuries to prospects for an economic recovery.
    “It’s very important that this Congress and this president put in place policies that will bring those deficits down to a sustainable level over the medium term,” Geithner said in an interview with Bloomberg Television yesterday.
    The S&P 500 has surged 31 percent since March 9 on speculation the global recession is easing and as earnings at companies from Ford Motor Co. to Europe’s Credit Suisse Group AG topped analysts’ estimates.
    Sears, acquired by Edward Lampert-led Kmart Holding Corp.
    for $12.3 billion in 2005, jumped 23 percent to $61.76 after posting an unexpected first-quarter profit, helped by cuts to advertising and payroll expenses. Excluding some items, Sears had a profit of 38 cents a share. Analysts predicted a per-share loss of 87 cents, according to the average estimate in a Bloomberg survey.

    Record Copper Imports

    Alcoa, the largest U.S. aluminum producer, added 2.2 percent to $9.30 after China, the world’s biggest metals consumer, increased imports of copper and aluminum to a record in April and metal prices advanced in London.
    Exxon, the world’s biggest oil company, added 0.7 percent to $68.90. ConocoPhillips gained 1.3 percent to $45.25. Oil rose in New York as the drop in the dollar drew investors to crude as an inflation hedge. Oil for July delivery rose as much as 77 cents, or 1.3 percent, to $61.82 a barrel in electronic trading on the New York Mercantile Exchange.
    Autodesk rose 16 percent to $21.80. The company forecast profit, excluding some items, will be at least 15 cents a share in the second quarter. Analysts on average expected Autodesk to earn 14 cents, according to a Bloomberg survey.
    Federal Reserve Bank of Boston President Eric Rosengren said in a speech in Worcester, Massachusetts that the world’s largest economy will probably be slow to recover.
    “We have seen some slight evidence of economic improvement, which is helping sentiment,” said Nick Skiming, who helps oversee about $2 billion at Ashburton Ltd. in Jersey, Channel Islands. “The fact that commentators are divided on whether we make further progress means that the bottoming process is still underway.”

  2. 2
    BirdsofpreyRcool Says:

    Tech Trader comments — choppy trading today with 50/50 odds… “not worth trading unless you work at NITE and have to…”

    Head Trader — “if we sell off in the morning, I would be a buyer into close for weekend covering”

  3. 3
    BirdsofpreyRcool Says:

    Credit Market Update — slightly better than yesterday… but, volumes light light light and not a lot of conviction behind them.

    The long weekend started early in the Bond Market.

    IG 146

    HY 79 7/8

  4. 4
    zman Says:

    BOP – hear ya on 2. Very light volume day, makes for jumpy/dumpy trading. I have a lunch and am mulling taking the afternoon off. Nice weather + senseless trading = why bother?

  5. 5
    bill Says:

    crr up 5 %– make no sense to me

  6. 6
    BirdsofpreyRcool Says:

    z — most DEFINITELY take the afternoon off. Can’t image there is much to do after 11:30. Just traders, playing ping-pong with each other.

  7. 7
    zman Says:

    CRR = short bashing. Thin stock, easy to pay whatever with a widespread to start a rally.

    Large cap E&P all just went red.

  8. 8
    zman Says:

    Odd action in PXD

  9. 9
    Sambone Says:

    By David Bird

    NEW YORK (Dow Jones)–Crude oil futures prices held modest gains early Friday,
    as gasoline showed futures showed continued strength ahead of the Memorial Day
    holiday Monday, the start of the U.S. summer driving season.
    Strength in overseas equities and weakness in the dollar helped crude rebound
    from a selloff Thursday, the first decline in three days.
    Market interest focuses on gasoline, as inventories of the most-widely used
    petroleum product in the biggest energy consuming nation have tightened in
    recent weeks. U.S. gasoline stocks, when measured against sluggish demand, are
    near five-year average levels, while inventories for crude and other petroleum
    products show massive overhangs.
    Gasoline may have further to climb next week ahead of the May 29 expiration of
    the June contract, trader said. Gains couldbe fleeting, if imports or
    stepped-up output from refineries boost supplies, or demand continues to lag
    year-earlier levels.
    Jim Ritterbusch of Ritterbusch and Assoc. in Galena, Ill. said June gasoline
    futures could climb to the $1.88 a gallon level, last seen in October, before
    the contract expires. That could lift crude to highs near $64-$65 a barrel,
    last seen in November.
    “However, sustaining price advances will prove difficult given decidedly
    bearish crude and distillate fundamentals amidst a substantial amount of unused
    refinery capacity,” he said.
    Goldman Sachs noted that while oil price moves in recent weeks have been
    linked to the dollar and equities, a tightening U.S. gasoline market and output
    disruptions in Nigeria gave impetus to the latest gains. Nigeria said this week
    that civil unrest has cut crude output to about half of its 3.2 million barrels
    a day capacity. Still, gains could be short-lived gasoline supply data return
    to more typical levels after the spike in shipments to retailers ahead of the
    holiday weekend.
    At 9:25 a.m. EDT, July crude was up 13 cents at $61.18 a barrel, near the low
    of a $61.05-$61.98 trading range.
    June gasoline futures were 83 points higher, at $1.8080 a gallon, while June
    heating oil was off 27 points at $1.5267 a gallon.
    – By David Bird, Dow Jones Newswires

    Dow Jones Newswires
    05-22-09 0931ET

  10. 10
    Sambone Says:

    Z – Most are already gone.

  11. 11
    zman Says:

    Oil down 40 cents now. The dollar is down another 0.6%, close to 80. My sense is that oil is anticipating a deadcat bounce in the US$.

  12. 12
    isleworth Says:

    Latest Matt Simmons Presentation


  13. 13
    Sambone Says:

    Uncle Phil


  14. 14
    Allen060 Says:

    On a slow day some basic questions:
    – What do you think might happen to NG pricing when and if storage is full (realizing that different storage sites might get full at different times and therefor pricing might vary at different hubs), and that production might be declining by that time (market is forward looking)? How might these factors interact and impact pricing over the summer and into the early fall?
    – For those that are hedged (i.e., LINE), where does the actual gas go if there is no place to put it? Are there risks of counterparty defaults on the hedges because of full storage?

  15. 15
    Nicky Says:

    Morning all.

    BOP my charts tend to agree with your Head Trader – higher later in the day. We need to at least correct yesterday’s fall. Unless something more bullish is going on then likely we get to about 902 on SPX before turning down again. Only a move above 910 would have me looking at the more bullish count.

    Metals – I know I am beating my head against a brick wall on here but the move up is not impulsive it is corrective. I can see the same move in the British Pound and the Euro. Yes we can challenge the highs for gold in a b wave although I think we likely fall short. We really only need to make a blip over 967 but there is further resistance at 980. Silver is into the first target area at 14.58 – 14.89. Next target for a top is 15.15 – 15.68. We are currently in 3 of v up. The next move of significance is going to be a big down. I am not backing down from this call and every time CNBC wheels out yet someone else telling us we have to buy gold and we are going to the mooon I see the bubble forming and the inevitable.

  16. 16
    choices Says:

    Take the afternoon off, Z-you have certainly earned it.

    I hope everyone salutes the FAMILIES of military and veterans, some did not come back or came back maimed in body and/or mind. The families are bearing or bore a huge burden for their service members’ committment and are usually forgotten when the parades and politicos speeches begin.

  17. 17
    jat Says:

    MS reiterated CRR again this am.

  18. 18
    jat Says:

    CRR (Ole Slorer) – Ole believes the market is concerned about uncertainty around ceramic’s role in the Haynesville after E&Ps posted decent IPs with cheaper substitutes, but Ole does not think this debate is key for Carbo’s 2009 numbers. 2009 consensus EPS has come down to ~$2/shr, a number that Ole thinks Carbo could hit even without significant sales into the Haynesville this year. The real debate, in Ole’s view, is whether ceramic proppant will become a large part of the Haynesville completion “formula” when the shale play moves into development. Ole sees very good odds that ceramic will build considerable market share in the area once producers start to shift their focus from initial production (IP) to maximizing economics over the life of the well. Thus, Ole is raising his ‘09e EPS from $1.97 to $2.03, his ‘10e EPS from $2.31 to $2.53, and his PT from $60 to $70.

  19. 19
    zman Says:

    Re 14

    1) We are going to get full. The current thinking is we reach between 3.5 and 3.6 Tcf by October. Many think that LNG will flood to the U.S. forcing summer prices down into the mid to low $2s. I happen to disagree. Couple of things are important here.

    First, LNG supply growth has continued for several years but last year was the lowest for LNG in the last 5. LNG will not simply come to the U.S. because Asia and Europe don’t want it. Many of the countries that produce LNG are OPEC members. I think they have experience with oil that will be transferred to gas and are unlikely to produce flat out and simply flood a global market at a time when a weak global economy can’t take that gas. LNG volumes going to the U.S. will be up this but not to the level that the companies who have built massive amounts of regas capacity would have you or their bondholders believe. I find it more than a little ironic that the guys who added the recent and un-needed regas capacity are all applying for licenses to export gas now. They were going to make their hay by importing gas. Hmmph.

    Production is likely to be down between 3 and 5 Bcfgpd, no doubt it will be down, swing comes from drilled but not yet completed well base which is large (600+) and which will serve to accelerate the declines in overall production early and then moderate them later as they are completed.

    Pricing and storage levels actually don’t correlate well. The futures market is, after all, forward looking. So while it has been accepted for months that gas will be full, the news items that will drive price will be 1) the economy and industrial demand for gas 2) weather (summer heat and tropical action, 3) LNG imports / Canadian imports, and 4) the monthly read on natural gas supply which is lagged by 3 months by the time you get it.

    On the hedges, they are financial transactions and for the most part I expect them to hold up well. A lot has changed in the last year in terms of spreading risk over multiple parties and those parties further laying off some of that risk. Counterparties are looking to avoid the big hits of the past. We should be seeing a bit of a recovery by Fall in the industrial sector (my opinion) as chemical stockpiles become depleted and purchasers of gas start taking advantage of low gas prices to rebuild stocks on the cheap for an economic recovery in 2010.

  20. 20
    choices Says:

    Nicky, we are also running into the seasonals on gold-May is “usually” a key month with gold usually weakening on into August.

  21. 21
    zman Says:

    Thanks choices.

    Jat – I hear E&P managements saying they don’t need it right now, same from completion engineers. There are at least 2 in here that I think agree with that sentiment, at least now, its a luxury. I think all of the service guys are missing the boat on a rebound in drilling in 2010. They really should pay attention to the lack of hedging in 2010 by many in E&P land. If prices go to $5 or $6 that simply is not going to inspire “business as usual” in the Haynesville or anywhere else, not when you only spent what you spent in 2009 because you had good hedges then.

  22. 22
    john11 Says:

    From Briefing.com…
    22-May-09 10:18 ET

    Petrohawk Energy pushing to new early session highs; hearing strength attributed to XOM-for-HK chatter (23.43 +0.48)

  23. 23
    zman Says:

    Jat – do you listen to SMH? BOP turned me on to their research and so far pretty impressed. Comments today about the utter decline of pressure pumping in a piece they have out. Equipment auctions, cut rate prices… not good for the pumpers and yet those stocks have shot the moon of late.

  24. 24
    jat Says:

    Nicky, I’m curious, what are your TA thoughts on crude?

    As an aside, there was a pretty interesting piece out from Bernstein this morning saying that a lot of the positive Chinese trade data you’re seeing with regard to crude is due to SPR restocking, with tanker traffic into SPR ports up like 400k bpd. This isn’t a huge surprise, but good confirmation. Bernstein uses that to argue for continued crude support in the short term, but, IMO, surely we need equity/currency support for crude at $60.00 if gasoline demand stays this poor!

  25. 25
    zman Says:

    John – Thanks. Don’t know if I’d believe it if I saw it. That would mean XOM has a liking for natural gas in the U.S. Their recent statements and actions of the last several years would indicate otherwise. I find it much more likely that they go to BP or STO or even DVN.

  26. 26
    Allen060 Says:

    Thanks for 19.

  27. 27
    Nicky Says:

    Agree Choices – the stars are aligning as they say.
    By the way some fib target areas I am looking at on Euro are 141.65 and British Pound 1.60.

    Jat – I think we are in the final wave up for the first part of the correction which is likely to be like the indices – a zig zag or double zig zag so an abc. So we are in the final wave up for a, with a correction down in b to come. That said this can run higher – nothing to say we don’t run closer to 70.

  28. 28
    zman Says:

    Dollar teetering at 80.02. I’m not a TA guy but on pre-holiday sessions I play one on the internet. I would be that oil ignites if the dollar does not hold 80.

  29. 29
    jat Says:

    I was reading SMH for a while, have fallen off I think. Will check. I wouldn’t be surprised at all about cut rate prices; all the big boys are trying to regain the market share they’ve lost over the past few years to Frac Tec and the like.

    Yes, all the pumpers have shot the moon as of late, and I don’t know why you don’t sellBJS/HAL, especially if you’re around the levels you were on the morning of the 7th or the morning of the 20th. Actually, I do– basically BJS’s beta will rip your face in any upward market move and then you get worried about crude/ridiculously high trough multiples on everything else, so those are the obvious fears.

    As for the Morgan Stanley piece, I don’t use Ole for target prices ever, but when I first sold CRR in late ’08 ago in the mid forties (have since been out for some time) I was guessing at a low $2.00 EPS and eventually worked my way down to $1.80 in a disaster scenario. So I do agree with Ole that ’09 is there, and right now the high short interest for CRR scares me away.

  30. 30
    zman Says:

    RE CRR – Hear ya on the short interest. Just wondering if you hold the $1.80 level this year and next if this thing is worth a 20x fwd PE when the rest of the group is not.

  31. 31
    jat Says:

    Definitely a fair point. I dare say we’re not in disagreement on the valuation range.

  32. 32
    zman Says:

    Wonder what a pound of ceramic proppant vs RCS vs beach sand is right now.

  33. 33
    VTZ Says:

    Nicky, for the record. I’m not saying gold is going straight up but it depends on what time frame you are looking at.

    You could be right that it pulls back a bit but the trend is up not down ie its going to >1200 not <700. Really, I hope youre right that it goes down because I’m backing up the truck next time.

  34. 34
    Sambone Says:

    By Spencer Swartz

    LONDON (Dow Jones)–Global oil markets have turned in OPEC’s favor after
    months of drilling a hole in the cartel’s coffers, but internal wrangling in
    the producer group could still cap recent oil-price gains.
    The Organization of Petroleum Exporting Countries’ deep production cuts over
    the past five months are beginning to whittle down a mountain of excess supply.
    World crude demand appears to be stabilizing and will get a top-up with the
    start of the summer driving season in the U.S. and Europe after plunging for
    much of the past year.
    Economic recession has slashed drilling investment in non-OPEC nations like
    Canada, fanning a “fear-of-the-future” mentality among many traders that crude
    supply will once again tighten as the economy recovers. Fewer non-OPEC barrels
    down the road will bump up the world’s reliance on OPEC crude, which currently
    supplies about four in 10 barrels consumed daily worldwide.
    All those factors give OPEC ministers something to crow about when they meet
    Thursday in Vienna: Although still relatively weak, oil prices are up about 35%
    since their last meeting two months ago. With such price increases a threat to
    the fragile global economy, OPEC seems set to keep its oil spigots steady at
    its meeting, OPEC delegates and officials said.
    Crude traded Friday in New York around $61 a barrel, near a recent six-month
    high, although prices remain well below a record high of $147 a barrel hit last
    July. Beyond the fillip from OPEC output cuts, oil prices have also gained
    support from speculative froth, refining glitches and new Nigerian militant
    attacks on energy infrastructure.
    “Prices are higher than OPEC could have hoped for and expected. Had OPEC not
    cut the way it did, prices would have fallen to $20 (a barrel) or less,” said
    Leo Drollas, deputy executive director and chief economist at the Centre for
    Global Energy Studies in London.
    Saudi Arabia, the cartel’s largest producer and the only OPEC nation in the
    G20, has added incentive to keep production steady because it doesn’t want to
    be seen spoiling the G20’s big stimulus plan for the ailing world economy,
    announced in April, by backing measures that could sock consumers with higher
    oil prices.
    Millions of consumers globally are still struggling with sharp reductions in
    personal wealth, large debts and rising job losses that have yet to bottom out
    in many nations.
    “With the current and more optimistic economic indicators, and prevailing oil
    prices, I think OPEC will preach compliance” with the group’s past output
    reductions, said one senior Gulf OPEC delegate.
    That sentiment is echoed by other OPEC officials for additional reasons.
    Irritation has grown among Gulf OPEC producers that less disciplined members –
    namely Iran and Venezuela – still aren’t pulling their weight with OPEC cuts
    totaling 4.2 million barrels a day announced in late 2008.
    Adherence to those reductions, divvied up in output quotas for each member,
    had been at just over 80% in past months – good by historical comparison – but
    it’s now slipping.
    OPEC said earlier this month that the group’s 11 quota-bound members had
    raised production in April by around 200,000 barrels a day, the first rise in
    nine months. Most of that increase was driven by Angola, Iran and Venezuela,
    according to OPEC data.
    Although wanting to see oil prices north of $70 a barrel, OPEC states have
    been hit hard by weak crude prices and financial pressures from the downturn.
    To ease the pain, some members are trying to capitalize on the recent price
    upside by leaking more barrels into the market.
    The lack of compliance angers members like Saudi Arabia, which has cut its
    output by slightly more than its OPEC quota requires. The added production from
    the likes of Iran hampers OPEC efforts to mop up excess supply in the global
    system – and could keep a lid on prices or even push them lower.
    Recent OPEC laxity is just part of the reason some analysts say the group
    isn’t out of the woods yet and why continued price increases are far from a
    “OPEC has cut a lot of production, but the near-term fundamentals are not good
    and we still haven’t a clue how and when demand recovers,” said Antoine Halff,
    deputy head of research at Newedge USA in New York.
    Bloated oil inventory in the U.S., the world’s biggest oil consumer, has
    started to ease from a two-decade high level, but will take many more months to
    drain off to more normal levels.
    While some broad data points from the U.S. and China – the world’s second
    biggest oil consumer – suggest economic activity isn’t as bad as it’s been,
    many energy analysts still expect global oil demand this year to contract by at
    least 2%, one of the steepest drops in 30 years, and to grow at a snail’s pace
    next year.
    There are other reasons there won’t be much backslapping Thursday. OPEC’s
    effective spare production capacity, a critical backup supply cushion for
    global consumers, is expected to rise by about 1 million barrels a day to
    roughly 6.5 million barrels a day by the end of 2009. That’s at least three
    times higher than OPEC’s preferred level.
    The added pumping capacity, most of it held by Saudi Arabia, is a function of
    OPEC producing fewer barrels and new oil projects entering service. The kingdom
    is scheduled next month to start up its giant $10 billion Khurais project,
    which will eventually pump 1.2 million barrels a day of high-quality crude.
    So far, many traders have looked beyond the thicker supply cushion – the
    biggest in seven years – and focused on how expected growth in emerging market
    demand will be fully slaked down the road.

    -By Spencer Swartz, Dow Jones Newswires

    Dow Jones Newswires
    05-22-09 1055ET

  35. 35
    Sambone Says:

    By Spencer Swartz

    The economic recovery may yet tarry, and oil demand is still anemic, but there
    might be a solid reason crude oil has perched above $60 a barrel. Energy
    analysts at Sanford Bernstein say eye-in-the-sky satellite images from Google
    show the Chinese are packing away a rising amount of crude in storage tanks.
    “Our analysis confirms that tanker capacity arrivals into China have spiked up
    in recent months, in line with imports, but more importantly, tanker arrivals
    into Strategic Petroleum Reserve ports have increased materially,” Bernstein
    says Friday in a research report.
    Just as satellite imaging has helped fuel debate over the true state of oil
    supplies – especially in Saudi Arabia – the new technology promises to give
    oil-market watchers a chance to crack the demand side of the puzzle too.
    Bernstein estimates that the amount of crude entering the SPR ports in China –
    the world’s second biggest oil consumer after the U.S. – has increased by
    around 400,000 barrels a day since November, based on its assessment using the
    satellite imaging services of Google, the search engine company.
    Those barrels are tiny in the overall scheme of the global oil market, but
    when crude consumption has gone negative in the U.S. and elsewhere, those added
    barrels do matter.
    “While overall demand in China has slowed, the effort to increase crude
    storage levels, while oil prices are low, has added some incremental support to
    the global oil market,” Bernstein says. Crude traded Friday up around 50 cents
    at about $61.50 a barrel, near a six-month peak.
    There’s likely more to come. Bernstein says satellite images show a marked
    increase in oil-storage construction over the past few years and estimates that
    China’s number of days of forward demand-a gauge of oil storage-amount to just
    28 days of imports and 14 days of total demand.
    China is targeting storage capacity that will hold demand cover of around 90
    days. (The U.S. currently has storage for about 62 days of oil imports.) In
    other words, there’s a lot more oil still to be packed away in China now and in
    the coming years as more facilities are built.
    And since China’s geology rules out underground oil storage, as in the U.S.,
    “any new crude tanker storage built in China should be clearly visible on a
    map/satellite image with sufficiently high resolution,” Bernstein says.

    Dow Jones Newswires
    05-22-09 1016ET

  36. 36
    zman Says:

    Thinking about WRES additional shares it comes back in any more.

  37. 37
    zman Says:

    Holiday gasoline price story:


  38. 38
    elduque Says:

    BDI +79 2786

  39. 39
    bill Says:


    Obama will bankrupt GM next week.
    Bondholders will have to bend over.

    Why is the stock at 1.75?

  40. 40
    BirdsofpreyRcool Says:

    bill — Obama didn’t BK GM… GM bankrupted GM. Bush/Obama just made the massive mistake of keeping it walking… with taxpayer money… long after it should have BK’d. There was an avalanche of mis-information about what a BK meant, swirling around last Fall. But, Chapter 11 is set up to precisely handle the sort of re-org that needs to go on at GM.

    Also, I think BHO is going to get a surprise on the push-back from GM bondholders here. It is entirely different from Chrysler. You have Moms and Pops and Widows and Orphans that hold GM bonds. If BHO tries to steal from bondholders to give to the UAW again, there are going to be more voices raised about the completely unethical behavior going on here.

    That said, why the heck is the stock at $1.75???? The stock is worth ZERO. At best, current stockholders will get warrants. But stock is toast.

  41. 41
    zman Says:

    Why $1.75? Day traders.

  42. 42
    BirdsofpreyRcool Says:

    bill — by the way… i’m still hoping for a sub-$1 on KOG shares. Would love to see you jump in. Plus, I want to buy more there.

    So far, stock not cooperating.

  43. 43
    bill Says:

    i was hoping for a drop yesterday in kog

    i will be patient

  44. 44
    elduque Says:

    RE Analyst upgrades on POT and MOS

    Basically useless where were they when POT was at $50. Nothing has changed since then.

  45. 45
    BirdsofpreyRcool Says:

    goes without saying… but, what the heck, will say anyway…

    patience is rewarded in this mrkt… i think we will get a shot at sub-$1 KOG shares

  46. 46
    zman Says:

    Got sent the Smithbits weekly saying gas rigs were off 13 last week, Baker Hughes not out yet.

  47. 47
    zman Says:

    Out to lunch, will check back in later. Have a great, safe, and long Memorial Day weekend.

  48. 48
    BirdsofpreyRcool Says:

    CNBC Headlines on bloomberg: “Obama not concerned about change in U.S. Credit Rating.”

    What was the context here? That he is not concerned that the US might be downgraded? Or that he thinks a downgrade is highly unlikely?

  49. 49
    bill Says:


    either way he is not concerned

  50. 50
    BirdsofpreyRcool Says:


    well…. he might not be concerned… but I’ll bet the Chinese are. Since 1994, all the growth in US Treasury buying has been by non-US entities.

    On the other hand, he is consistant. No regard for investors. I continue to be concerned about that pesky personality trait.

  51. 51
    BirdsofpreyRcool Says:

    choices — didn’t you buy TBT at the beginning of this year? Nice call.

  52. 52
    Sambone Says:

    12:55 05/22 *DJ White House: Doesn’t Believe US Credit Rating Will Be Cut

  53. 53
    BirdsofpreyRcool Says:

    Baker Hughes Rig Count falls 2% to 900. Lowest since Feb 2003.

  54. 54
    BirdsofpreyRcool Says:

    Baker Hughs said rigs declined by 18, or 2%, to 900. The rig count has fallen 55% from 1,992 on Nov 7th.

  55. 55
    BirdsofpreyRcool Says:

    Sam — #52 thanks. Funny, it’s the same thing that Rick Wagoner said about GM debt, at a bondholder meeting in 2002. Oh well…

  56. 56
    Garyinhou Says:

    GM $1 puts for 0.48… any trade there??

  57. 57
    1520sbroad Says:

    BOP – i’m still working on URKA – saw this piece today on them… it’s been an interesting month or so for them.


  58. 58
    1520sbroad Says:

    BOP – disregard that last post – i didn’t read the date at the top until after i copied it and hit submit.

  59. 59
    BirdsofpreyRcool Says:

    Market Strategy, from our fav cross-asset class analyst. Next week could be very volatile… just based on headlines coming out of the GM bank-robbery by the President and UAW.


  60. 60
    BirdsofpreyRcool Says:

    1520s — thanks for keeping on this one. Really appreciate the assist!

  61. 61
    AAA Says:


    Obama is not worried about rating agency downgrades for the same reason he wasn’t worried about TARP-banks agreeing to take a hosing on Chrysler. We have seen over and over that people will chose keeping their jobs over integrity.

  62. 62
    Sambone Says:

    NEW YORK, May 22 (Reuters) – Gasoline was mixed in thin
    trade ahead of Memorial Day, with many market players leaving
    early ahead of the holiday, traders said on Friday.
    “This weekend it is the so-called unofficial start to
    summer in the US with the long Memorial Day holiday weekend
    kicking off the driving season,” said Dominick Chirichella in
    his daily market analysis, noting that the average retail
    gasoline price is 38 percent lower than last year.
    “The market will be following this very important and
    evolving situation over the next several weeks to see if there
    is any pick up in gasoline demand.”
    Poor refinery profit margins have idled units, with
    Sunoco’s Philadelphia refinery still down despite the loss of
    production from its Marcus Hook plant due a fire earlier in the
    Trader talk of further economic run cuts swirled through
    the market, with Citgo’s massive 429,500 barrel per day
    refinery in Lake Charles, Louisiana touted as the latest
    refinery to cut back on production.
    A company spokesman said he was unable to comment on
    U.S. crude oil futures inched lower Friday in line with
    weaker equity markets as Wall Street declined on concerns about
    U.S. fiscal health. O/N
    Prompt cycle 31 M2 conventional gasoline differentials
    continued to slide, dropping 2 cents to 6.00/5.75 cents under
    the July RBOB screen benchmark.
    Prompt cycle 30 61-grade ultra-low sulfur diesel
    differentials move back into positive territory ahead of
    scheduling on the Colonial Pipeline, trading at 0.75 cent and
    several times at 0.50 cent before talking at 0.25/0.50 cent
    over the June heating oil screen.
    Same cycle 74-grade was bid at 2.75 cents under the screen
    with offers put at 2.00, three-quarters of a point higher than
    Newly-prompt cycle 31 54-grade jet fuel was weaker at
    2.00/1.25 cents under the July heating oil screen.

    M2 conventional regular gasoline fell over a penny to trade
    at 6.25 cents under the June RBOB futures, down from the 5.00
    cents under seen on Thursday.
    RBOB also fell a cent, talked at 0.25/0.75 cents over the
    June screen, from the 1.25/1.75 cents.
    Premium grades held earlier values with V2 premium grade
    pegged at 12.25/12.50 cents over the June RBOB screen and H2
    PBOB put at 16.00/16.50 cents over.
    Heating oil slipped a notch to talk at 1.00 cent under the
    June futures contract with ultra-low sulfur diesel flat at 3.00
    cents over. Low sulfur diesel was up a quarter point to 0.25
    cents under.
    Jet also held earlier ranges at 3.00 cents over the screen.

    Gasoline differentials for cycle 3 Chicago gasoline were
    steady at 11 cents over the July RBOB contract after gaining
    about 3 cents on Thursday.
    In Group Three, prompt gasoline moved up about 2 cents with
    bids at 1.75 and offers at 2.25 cents over the June RBOB
    Chicago ultra-low sulfur diesel for cycle 3 was within
    range, trading at 0.25 cent over the July heating oil
    Ultra-low sulfur diesel in Group Three was steady, pegged
    at 1.50 cents over the June heating oil print.
    (Reporting by Janet McGurty and Rebekah Kebede)

    Fri May 22 17:40:30 2009

  63. 63
    BirdsofpreyRcool Says:

    Gary — the totally weird, upsidedown, and parallel-universe thing about stocks of companies in BK… they should trade to ZERO (in 99 out of 100 times) but, astonishingly, they don’t. Enron stock traded up over $1, after the company went chapter 11. Amazing, eh? So, don’t expect GM stock to go to zero on a BK filing… even though that is eventually where it will end up.

  64. 64
    1520sbroad Says:

    BOP – i’ll put my thoughts in a post on monday or tuesday.

  65. 65
    1520sbroad Says:

    #22 – xom for hk strictly rumor?

  66. 66
    Sambone Says:

    This is for Z.

    CARACAS (AFP)–Venezuelan President Hugo Chavez announced Thursday the
    government would nationalize several iron and steel companies in the country to
    pave way for a large “socialist” state-run enterprise.
    “There is nothing to discuss. We’ve been on this for a long time,” Chavez said
    in a televised address, ordering the beginning of “a process of nationalization
    to create an industrial complex,” but without providing details of the venture.
    Chavez named Matesi, Consigua, Ceramicas Carabobo, steel tube maker Tavsa, as
    well as Orinoco Iron and Venprecar, subsidiaries of Venezuelan-owned
    International Briquettes Holding (IBHVF), which exports iron briquettes.
    The announcement is the start of a “transition” so that these companies can
    become the “solid platform of socialism,” he said.
    “Venezuelan workers are going to give a lesson to the world on how the working
    class has been resuscitated to make a revolution!” he told industry workers in
    the western state of Bolivar.
    The workers stood and sang the national anthem.
    Since 2007, the Venezuelan government has moved ahead with the nationalization
    of a wide range of companies from telecommunications, electricity, cement and
    oil sectors.
    Two weeks ago, the Chavez administration expropriated 39 oil service
    providers, some backed by foreign capital, after the government passed a law
    extending the state’s control over all activities related to the industry.
    According to the government’s official journal, Petroleos de Venezuela and
    affiliated firms took “control of operation and the immediate possession of
    institutions, documentation, goods and equipment” of the 39 firms.
    Many of the firms were subsidiaries of foreign businesses.
    Venezuela’s National Assembly passed a law on May 7 that “reserves for the
    state, the goods and services connected to primary hydrocarbon activities.”
    “We will start to recover assets that will now belong to the state, as they
    always should have,” Chavez said at the time.
    Chavez earlier Thursday pressed for his country’s energy industry to wrest
    free of outside interests, symbolically seizing an American gas facility
    appropriated by the government earlier this month.
    Chavez declared that “a new stage” had begun for his country as he strolled
    through the PIGAP II gas compression facility operated by the Oklahoma-based
    Williams Cos. (WMB).
    Latin America’s largest energy-producing nation, Venezuela announced it would
    take control of Williams’s operations in early May when the Chavez government
    seized the assets of 60 local and foreign-owned oil firms.

    Dow Jones Newswires
    05-22-09 0003ET

  67. 67
    BirdsofpreyRcool Says:

    AAA – #61. Funny thing is, with that stance, it just might cost him his job next time around. If foreign investors start to stay away from US debt auctions (or — worse yet — start selling their current US bond holdings), you will see a swift reaction by the Bond Vigilantes (as Bill Clinton used to call the bond market). At the very minimum, the cost of buying a house will go up… a lot. At worst, we all end up having to learn Chinese…

  68. 68
    1520sbroad Says:

    somebody big in june HK 24 and 25 calls today may be behind that xom for hk

  69. 69
    BirdsofpreyRcool Says:

    1520s — that would be great! But, hope you take Monday off… all day. Tues/Wed works too.

  70. 70
    AAA Says:


    I haven’t followed the details of the GM proposal, but I saw a news story this morning that said the secureds would be paid in full and the unsecureds would get the reaming. If true, that would seem to be far more acceptable than the Chrysler cramdown.

  71. 71
    Sambone Says:

    Gibbs Says He Doesn’t Believe U.S. Credit Rating Will Be Cut

    By Hans Nichols

    May 22 (Bloomberg) — White House Press Secretary Robert Gibbs said he doesn’t believe the U.S.’s AAA credit rating will be cut.

    In response to questions at his regular briefing, Gibbs said President Barack Obama isn’t concerned about “a change in our credit rating.” Asked if he expects a cut, he said, “I don’t believe they will be cut.”

    Investors sent U.S. bond and currency markets lower amid concern for the AAA rating after Standard & Poor’s lowered its outlook yesterday on the U.K.’s AAA rating to “negative” from “stable.”


  72. 72
    AAA Says:

    re #70, see http://www.reuters.com/article/mergersNews/idUSN1943363120090519

  73. 73
    Garyinhou Says:

    Thanks BOP

  74. 74
    BirdsofpreyRcool Says:

    AAA — there was no unsecured debt at Chrysler. So, it’s quite a bit different. Plus, there was a relatively small group of only-institutional holders at Chrysler (who could be pressured by threats to their reputations).

    Still here is a summary of the facts of the Gov’ts current offer to unsecured bondholders, the UAW, and themselves (assuming all claims are treated pari passu… which wouldn’t be the case, in a normal BK).

    UAW + US Govt unsecured claims = $20B. Unsecured bondholders claims = $27B.

    % equity ownership in reconstituted GM capital structure —

    UAW + US Govt = 89%
    Unsecured bondholders = 10%

  75. 75
    BirdsofpreyRcool Says:

    AAA — there was no unsecured debt at Chrysler. So, it’s quite a bit different. Plus, there was a relatively small group of only-institutional holders at Chrysler (who could be pressured by threats to their reputations).

    Still here is a summary of the facts of the Gov’ts current offer to unsecured bondholders, the UAW, and themselves (assuming all claims are treated pari passu… which wouldn’t be the case, in a normal BK).

    UAW + US Govt unsecured claims = $20B.
    Unsecured bondholders claims = $27B.

    % equity ownership in reconstituted GM capital structure –

    UAW + US Govt = 89%
    Unsecured bondholders = 10%

  76. 76
    zman Says:

    Just checking in … looks like I haven’t missed much in the stocks. Check out in 10 minutes.

  77. 77
    Sambone Says:

    Have a good one. I’m outa here!

  78. 78
    zman Says:

    Just noticed dollar at 79.835.

  79. 79
    zman Says:

    LINE – nice move.

    Oil finally deciding to move up with dollar below 80 but its on very light volume.

    I’m outta here. Have a great, safe weekend!

  80. 80
    BirdsofpreyRcool Says:

    have a great, long weekend, z!

  81. 81
    AAA Says:

    BOP, re 74, I thought the union claims at Chrysler were unsecured, not sure about any others. They took the collateral away from the secureds and gave it to the union. GM situation sounds a lot different, provided the secureds get paid off at par. The union may be getting a leg up on the other unsecureds, but if the government wasn’t invovled, the unsecureds would probably be bumpus anyway.

  82. 82
    VTZ Says:

    Dollar has to hold 78 or its a freefall to 72. Techies and banks to defend it as best they can.

  83. 83
    Denise Says:

    Good afternoon-

    anyone hear something on BJS? June calls are going crazy

  84. 84
    kyleandy Says:

    denise – not many people left here somebody sure buying the june

  85. 85
    BirdsofpreyRcool Says:

    AAA — you are correct. The pension claims are unsecured… both at Chrysler and GM.

    I think you might be missing the point on the GM “allocation” of value, tho. First of all, I don’t buy that GM couldn’t find a DIP lender (other than the US Govt)… but, even if that was true, “pari passu” means claims are treated equally. The UAW, US Govt, and bondholder claims are pari passu (although, in usual bankruptcies, only the portion considered equal to a PBGC-type pension plan would be a claimant… but, for simplicity, we will ignore that fairly-large nuance). One pari passu party can not be arbitrarily favored over other parties with equal claims. In “normal” bankruptcies, if that happens it is called (appropriately) “fraudulant conveyance” and that value is clawed back by the court.

    By allocating 89% of the equity value to claimants who represent 43% of the claims (UAW + US Govt), that value comes from some other party… in this case, the unsecured bondholders. The unsecureds are owed 57% of the equity (or value)… but they are only being “offered” 10% by our own Govt.

    It is a proposal that Tony Soprano would be proud to make.

    Personally, I don’t think the unsecured bondholders will rollover like they did at Chrysler. But, will be interesting (to say the least) to watch.

  86. 86
    AAA Says:


    Thanks for giving me the details on that. Don’t get me wrong–I totally agree with you that the unsec’s are getting reamed. I also agree that if the government stayed out, they could get DIP and probably a financially strong buyer for the good assets. It’s really a stunning example of why letting government get involved in allocating credit and thereby picking winners and losers is such a terrible idea. GM, shed of its onerous union contracts, should be a strong competitor in the global car market. With unions and Obama in charge, they will be a black hole for taxpayer money.

    PS. By what authority does Obama “forgive” those outstanding loans? How can that happen without an outcry? Did congress appropriate a gift to the UAW, and I am unaware of it?

  87. 87
    choices Says:

    BOP-TBT-had to step out to the dentist to see if they wanted to do a root canal or simply replace a crown.
    Yes, I did buy TBT and still own about half but it is still under water, altho going now in the right direction-I was waaay too early on the original buy.
    Thanks for the thought, however.

  88. 88
    choices Says:

    With respect to you both, AAA and BOP, most if not all of Obama’s financial advisors are from Wall Street, which seems to abide by the notion that greed is good and I will screw you before you screw me-that said, I fully agree that flouting the law is a horrible precident.

  89. 89
    BirdsofpreyRcool Says:

    AAA and choices — thank you for your continued interest in discussing the C/GM situation. Too many Americans just don’t give a donkey’s behind. Which is how societies get in trouble down the road… but, i digress.

    Obama has NO authority to forgive the debt. That is the Tony Soprano part of the equation. He induces the bondholders to “voluntarily” give up their rights — and this is key — BEFORE filing a Ch 11. “Voluntary” in this case is going on TV and calling bondholders “greedy and selfish” and then going behind closed doors and threatening worse. Imagine Rahm Emanuel calling you personally at Oppenheimer Funds and gently suggesting that you give up your rights so that the UAW can have your piece of the pie. That is what happened at C.

    It will be different at GM. I don’t think Rahm and Rattner can pull off the same heist this time. The bondholder group at GM is a horse of a different colour. (Sadly, I have met Rattner… he would sell his mother for the price of a postage stamp. So, I guess “greed is good” when wielded by the President himself for the UAW. Don’t get me wrong, I’m not against the UAW… people can ask for anything. It’s up to managements or courts to decide to give it to them. But in this case, it appears to be up to the President Himself.)

  90. 90
    BirdsofpreyRcool Says:

    choices — i thought you bought TBT around $29. anyway, that’s when you pointed it out… and i never forget a great investment recommendation! good one.

  91. 91
    Wyoming Says:


    CRR – remember I sent a note about Dave Gallager and Kolstad marketing a cheap ceramic for $0.02/ pound above the cost of resin coat. Adds roughly $50k to the completion costs in the Haynesville.

    BJS – bunk, friend of mine (big and blue) says they will let them go BK before the even think about acquiring. That is also the same FracTech. WFT has closed their Framington op’s and FracTech closed their Parachute facility.

    Life could be worse; could work for an airline:


    Back to reading above.

  92. 92
    Wyoming Says:



    Illogical (don’t raise oil prices so I can throw another tax on it);


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