22
May
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:
- Holdings Watch
- Commodity Watch
- Natural Gas Storage Review
- 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.
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.
Creditworthiness
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.
May 22nd, 2009 at 8:25 amExxon, 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.”
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”
May 22nd, 2009 at 8:27 amCredit 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
May 22nd, 2009 at 8:29 amBOP – 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?
May 22nd, 2009 at 8:29 amcrr up 5 %– make no sense to me
May 22nd, 2009 at 8:31 amz — 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.
May 22nd, 2009 at 8:33 amCRR = short bashing. Thin stock, easy to pay whatever with a widespread to start a rally.
Large cap E&P all just went red.
May 22nd, 2009 at 8:33 amOdd action in PXD
May 22nd, 2009 at 8:34 amBy David Bird
Of DOW JONES NEWSWIRES
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 $1.5267 a gallon.
– By David Bird, Dow Jones Newswires
Dow Jones Newswires
May 22nd, 2009 at 8:35 am05-22-09 0931ET
Z – Most are already gone.
May 22nd, 2009 at 8:38 amOil down 40 cents now. The dollar is down another 0.6%, close to 80. My sense is that oil is anticipating a deadcat bounce in the US$.
May 22nd, 2009 at 8:42 amLatest Matt Simmons Presentation
http://www.simmonsco-intl.com/files/OTC%20Topical%20Luncheon.pdf
May 22nd, 2009 at 8:43 amUncle Phil
http://www.321energy.com/reports/flynn/current.html
May 22nd, 2009 at 8:45 amZ-
May 22nd, 2009 at 8:54 amOn 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?
Thanks.
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.
May 22nd, 2009 at 9:08 amTake 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.
May 22nd, 2009 at 9:11 amMS reiterated CRR again this am.
May 22nd, 2009 at 9:12 amCRR (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.
May 22nd, 2009 at 9:13 amRe 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.
May 22nd, 2009 at 9:14 amNicky, we are also running into the seasonals on gold-May is “usually” a key month with gold usually weakening on into August.
May 22nd, 2009 at 9:14 amThanks 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.
May 22nd, 2009 at 9:17 amFrom 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)
May 22nd, 2009 at 9:19 amJat – 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.
May 22nd, 2009 at 9:20 amNicky, 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!
May 22nd, 2009 at 9:21 amJohn – 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.
May 22nd, 2009 at 9:27 amZ-
May 22nd, 2009 at 9:27 amThanks for 19.
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.
May 22nd, 2009 at 9:29 amDollar 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.
May 22nd, 2009 at 9:34 amI 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.
May 22nd, 2009 at 9:34 amRE 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.
May 22nd, 2009 at 9:36 amDefinitely a fair point. I dare say we’re not in disagreement on the valuation range.
May 22nd, 2009 at 9:42 amWonder what a pound of ceramic proppant vs RCS vs beach sand is right now.
May 22nd, 2009 at 9:47 amNicky, 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.
May 22nd, 2009 at 9:56 amBy Spencer Swartz
Of DOW JONES NEWSWIRES
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
given.
“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
May 22nd, 2009 at 10:02 am05-22-09 1055ET
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
May 22nd, 2009 at 10:04 am05-22-09 1016ET
Thinking about WRES additional shares it comes back in any more.
May 22nd, 2009 at 10:12 amHoliday gasoline price story:
http://www.marketwatch.com/story//gasoline-rises-again-but-may-soon-level-off
May 22nd, 2009 at 10:43 amBDI +79 2786
May 22nd, 2009 at 10:44 amPLEASE SIR, MAY I HAVE ANOTHER
Obama will bankrupt GM next week.
Bondholders will have to bend over.
Why is the stock at 1.75?
May 22nd, 2009 at 10:46 ambill — 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.
May 22nd, 2009 at 10:54 amWhy $1.75? Day traders.
May 22nd, 2009 at 11:06 ambill — 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.
May 22nd, 2009 at 11:11 ami was hoping for a drop yesterday in kog
i will be patient
May 22nd, 2009 at 11:14 amRE Analyst upgrades on POT and MOS
Basically useless where were they when POT was at $50. Nothing has changed since then.
May 22nd, 2009 at 11:16 amgoes 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
May 22nd, 2009 at 11:20 amGot sent the Smithbits weekly saying gas rigs were off 13 last week, Baker Hughes not out yet.
May 22nd, 2009 at 11:22 amOut to lunch, will check back in later. Have a great, safe, and long Memorial Day weekend.
May 22nd, 2009 at 11:37 amCNBC 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?
May 22nd, 2009 at 11:40 amboth
either way he is not concerned
May 22nd, 2009 at 11:43 amyikes!
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.
May 22nd, 2009 at 11:50 amchoices — didn’t you buy TBT at the beginning of this year? Nice call.
May 22nd, 2009 at 12:00 pm12:55 05/22 *DJ White House: Doesn’t Believe US Credit Rating Will Be Cut
May 22nd, 2009 at 12:02 pmBaker Hughes Rig Count falls 2% to 900. Lowest since Feb 2003.
May 22nd, 2009 at 12:05 pmBaker Hughs said rigs declined by 18, or 2%, to 900. The rig count has fallen 55% from 1,992 on Nov 7th.
May 22nd, 2009 at 12:07 pmSam — #52 thanks. Funny, it’s the same thing that Rick Wagoner said about GM debt, at a bondholder meeting in 2002. Oh well…
May 22nd, 2009 at 12:10 pmGM $1 puts for 0.48… any trade there??
May 22nd, 2009 at 12:33 pmBOP – i’m still working on URKA – saw this piece today on them… it’s been an interesting month or so for them.
http://www.ibtimes.com/articles/20080523/steadying-the-potash-roller-coaster.htm
May 22nd, 2009 at 12:34 pmBOP – disregard that last post – i didn’t read the date at the top until after i copied it and hit submit.
May 22nd, 2009 at 12:36 pmMarket 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.
http://www.capmarkets.com/ViewFile.asp?ID1=298096&ID2=314130065&ssid=2&directory=11608&bm=0&filename=The_Decoupling_Intensifies_In_Front_Of_A_Potentially_Crazy_Week_5-22-09.pdf
May 22nd, 2009 at 12:39 pm1520s — thanks for keeping on this one. Really appreciate the assist!
May 22nd, 2009 at 12:41 pmBOP,
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.
May 22nd, 2009 at 12:41 pmNEW 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
week.
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
operations.
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
U.S. GULF COAST
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
Thursday.
Newly-prompt cycle 31 54-grade jet fuel was weaker at
2.00/1.25 cents under the July heating oil screen.
NEW YORK HARBOR
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.
MIDWEST
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
benchmark.
Chicago ultra-low sulfur diesel for cycle 3 was within
range, trading at 0.25 cent over the July heating oil
benchmark.
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
May 22nd, 2009 at 12:42 pmGary — 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.
May 22nd, 2009 at 12:44 pmBOP – i’ll put my thoughts in a post on monday or tuesday.
May 22nd, 2009 at 12:44 pm#22 – xom for hk strictly rumor?
May 22nd, 2009 at 12:46 pmThis 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
May 22nd, 2009 at 12:48 pm05-22-09 0003ET
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…
May 22nd, 2009 at 12:48 pmsomebody big in june HK 24 and 25 calls today may be behind that xom for hk
May 22nd, 2009 at 12:49 pm1520s — that would be great! But, hope you take Monday off… all day. Tues/Wed works too.
May 22nd, 2009 at 12:49 pmBOP,
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.
May 22nd, 2009 at 12:54 pmGibbs 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.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=a1EONlZXyE4s&refer=home
May 22nd, 2009 at 12:56 pmre #70, see http://www.reuters.com/article/mergersNews/idUSN1943363120090519
May 22nd, 2009 at 12:56 pmThanks BOP
May 22nd, 2009 at 1:04 pmAAA — 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%
May 22nd, 2009 at 1:04 pmUnsecured bondholders = 10%
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%
May 22nd, 2009 at 1:06 pmUnsecured bondholders = 10%
Just checking in … looks like I haven’t missed much in the stocks. Check out in 10 minutes.
May 22nd, 2009 at 1:07 pmHave a good one. I’m outa here!
May 22nd, 2009 at 1:08 pmJust noticed dollar at 79.835.
May 22nd, 2009 at 1:16 pmLINE – 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!
May 22nd, 2009 at 1:34 pmhave a great, long weekend, z!
May 22nd, 2009 at 1:48 pmBOP, 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.
May 22nd, 2009 at 2:01 pmDollar has to hold 78 or its a freefall to 72. Techies and banks to defend it as best they can.
May 22nd, 2009 at 2:02 pmGood afternoon-
anyone hear something on BJS? June calls are going crazy
May 22nd, 2009 at 2:33 pmdenise – not many people left here somebody sure buying the june
May 22nd, 2009 at 2:47 pmAAA — 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.
May 22nd, 2009 at 4:20 pmBOP,
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?
May 22nd, 2009 at 4:34 pmBOP-TBT-had to step out to the dentist to see if they wanted to do a root canal or simply replace a crown.
May 22nd, 2009 at 4:37 pmYes, 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.
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.
May 22nd, 2009 at 4:41 pmAAA 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.)
May 22nd, 2009 at 6:00 pmchoices — 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.
May 22nd, 2009 at 6:01 pmZ;
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:
http://www.usatoday.com/money/industries/travel/2009-05-20-oil-price-american-southwest_N.htm
Back to reading above.
May 22nd, 2009 at 10:05 pmLogical:
http://finance.yahoo.com/news/GOP-Alternative-energy-alone-apf-15336024.html?sec=topStories&pos=4&asset=&ccode=
Illogical (don’t raise oil prices so I can throw another tax on it);
http://finance.yahoo.com/news/US-Energy-Sec-World-wants-apf-15335992.html?sec=topStories&pos=1&asset=&ccode=
May 23rd, 2009 at 8:57 pm