04
Jun

Thursday – Natural Gas Preview and Oil Review

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In Today’s Post:

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

 

Holdings Watch: Ouch.

  • $10KP: $30,000 / 41% Cash (note cash advanced as a % of total assets due to the whipping yesterday's equity action wrought) / The Wiki Tab is Updated.
  • PXD June $30 calls - added 40 more for an average cost of $0.53.

 

Commodity Watch:

Crude oil fell $2.43 to close at $66.12 yesterday due to the trifecta of a seemingly bearish EIA storage report, a bouncing dollar, and a weak equity market. This morning crude is trading up about a buck.

  • Goldman Ups Year End Oil Price Forecast: With Superspike a distant memory and unable to move the markets like way back yonder in 1H08, Goldman is updating its year end crude deck
    • 2009: Upped from $65 to $85
    • Next Twelve Months Target: Upped from $70 to $90
    • 2010: Initiated at $95
    • Quotes from the report:
      • "The recent rally in WTI (US crude) prices is likely to be but the first stage in the oil price rally that we expect will accompany a recovery in economic activity,"
      • "A likely return to energy shortages as dwindling OPEC spare capacity is likely (to be) unable to meet rising demand as Non-OPEC production growth is restricted by limited investment in oil production infrastructure."

Natural gas tumbled $0.35 (8.5%) to close at $3.77 yesterday. Blame crude, the equity market, or the fact that gas rallied 10% on Monday for no discernible reason. This morning gas is trading slightly higher before the release of the EIA's weekly storage report.

Natural Gas Preview

  • My number: 110 Bcf
    • History:
      • Last Week: 106
      • Last Year:102
      • 5 Year Average: 96
    • Weather: Last week came in at 30 vs 31 normal and 22 in the preceding week.
    • Imports Watch: Up 0.2 Bcfgpd from last week and down 0.8 Bcfgpd from last year.
      • Canada came in at 5.7 Bcfgpd: Weak. Still holding the low end of any range you want to pick, down 1.3 Bcfgpd from last year at this time.
      • LNG was 1.5 Bcfgpd last week: Just Not That Strong. Flat with last week and up 0.5 Bcfgpd from the comp week in 2008. 5 months into the year and so far the "LNG gas tsunami" is a no-show. I am sure it will arrive but I don’t think it will be as big as many think it will be.
  • Street Consensus: 117 Bcf

ZComment: Considering yesterday's bludgeoning, I'd guess than any number below 110 Bcf will result in a relief rally. The extreme volatility in the commodity is likely the result of traders who feel the near term short potential may have diminished and now want to take a shot at the most noticeably lagging commodity YTD. Most of the large cap E&P CEOs are on recent record saying think U.S. lower 48 gas production probably peaked in the second quarter and that production will be down 3 to 5 Bcfgpd from peak levels by year end with another 10% drop in  the cards for 2010 if gas rigs don't return to the gas fields pronto. However, given the fact that the data is lagged AND that industrial demand remains weak, gas will continue to trade in a volatile fashion with the weekly data release. Unitl  more noticeable summer sets in, this will likely result in sloppy trading with a bias to the downside whenever oil is not in rally mode a d thereby providing support.

EIA Oil Inventory Review


ZComment: Odd numbers yesterday out of EIA which occassionally happens. One week does not a trend make and while the demand numbers for products returned to pre holiday low levels my sense is that next week's gasoline number is going to be more important in supporting crude near current levels. Pricing sentiment seems to be oscillatating back towards a greater focus on near and medium term demand fundamentals and away from the dollar slump/commodity bounce that brought crude into the upper $60s, but it will be a grudging shift.

CRUDE OIL - Unexpected build in stocks attributable to a mysterious lack of increase in refinery inputs despite significantly higher utilization. This bit of oddness from EIA combined with higher imports led to a build in crude stocks ... except at Cushing. The Cushing decline actually makes sense as Mid-West refineries geared back up last week.

 



 

GASOLINE - Weird looking numbers. Given higher utilization at refiners and the time of year, you'd expect production to rally, not fall. Furthermore, the decline in demand is a bit suspicious.

 



 

 

 

DISTILLATES - Demand continues to run low, at present it's off 16% from year ago levels has been running in YoY double digit negative territory for the last consecutive 7 weeks. 

 

Stuff We Care About Today

APA Buys Assets:

  • $181 mm for Permian Basin assets
  • Reserves not given, on a cash flow basis using $60 oil and $5 gas this would not be a high price tag.
  • Good to see someone stepping up to the plate to pick off cheap reserves.

VLO Announces Secondary

  • A day after VLO warned of a coming 2Q loss, the company is on the tape with a secondary joining the ranks of the other independents (and just about everyone else) who has brough shares to the market place while the window is open so speak.
  • 46 mm shares or about 8% dilliton for capex and acquisitions
  • I continue to remain on the sidelines with regard to the refiners, and await a verifiable and sustained increase, even a small one in gasoline consumption. The stocks remain cheap ... cheap for a reason as the earnings picture remains highly suspect for 2009. 

SU May Production Ontrack

  • 296,000 bopd in May
  • YTD is 286,000 bopd
  • 2009 target remains 300,000 bopd
  • By the way, this is a go to name for Goldman, who has a $49 target.

 

Overnight Mailbag:

From MD ~ EIA weekly - The inexact science that it is…Does the following formula make sense: Refinery inputs Gasoline+ Gasoline imports-exports(not broken down)- product supplied= Stock change

Essentially, it breaks down as gasoline production + net imports - demand = change in gasoline stocks. The EIA has pretty has an OK handle on production and on change in stocks. The net imports is partially extrapolated and the demand number is a solve. Not the best system but its the one we've got.

From Jay Reynolds ~ Lots of talk about “record crude inventories”. Hasn’t the demand side changed considerably to the upside since the comparison high storage level dates? Don’t have the numbers in front of me but am guessing that we have significantly FEWER days of supply in storage than before.

Yes. 

Odds & Ends

Analyst Watch:

  • (FTI) upped to Outperform at FBR
  • (HK) initiated at Neutral with a $27 target at SunTrust
  • (PQ) cut to Neutral by UBS

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

  1. 1
    zman Says:

    BOP – thanks got your email. Saw that early. We’ve had these Goldman pop days for crude before. They seem to have less and less influence since last year but the near term bump is there. I’m sure it will be decried as manipulation but they have to issue targets as part of their job with analyzing the stocks. I did see that congress is looking into that practice which is pretty amazing/concerning.

  2. 2
    BirdsofpreyRcool Says:

    YESTERDAY’S TRADING

    · SP futures hold the 200dayMA and bounce into the close, but equities remained better for sale and credit underperformed for much of the session. Stocks opened weak and never looked back for much of the day as SPX ends down 13pts. Plenty of negative headlines on the tape today (inc. slew of eco releases coming in below expectations, a failed Latvian debt auction, somewhat cautious tone from the Fed chief), although none appeared fatal to the “green shoots” thesis or the broader rally and for the moment are more handy excuses to take some profits. All in, it felt like a slight reversal trade today; ie, equities, esp. the industrial/commodity complex that has been so hot of late, pull back hard while USD and Treasuries rally (helped by more cautious tone from Bernanke + flight-to-quality + stronger Fed purchase). On a negative note, credit underperformed (HY12 traded down nearly 2pts in the afternoon), and volumes did pick up into the sell-off throughout the day (things were very light for much of the morning but picked up this afternoon). However, an important technical level held (while Mon’s 930 break-out level was breached the sp500 managed to hold the 200day MA of 923) and the sp500 staged a strong mini rally into the bell (the sp500 bounced hard off the 200day MA @ 923 at 3:35pmET before rallying nearly 10 handles to end the day at 931).

    · Sectors: sp500 energy off 3.3% and sp500 materials dwn 3.5% as commodity-linked sectors led the market lower (industrials weren’t far behind dwn 2% on the day). Tech, health care, and staples outperformed (although all ended in the red, each dwn ~0.5%).

  3. 3
    BirdsofpreyRcool Says:

    Energy Morning Overview

    · OPEC is reviewing how to assess the group’s oil production data as some members complained that output ests provided by certain secondary sources are incorrect, Iran’s OPEC governor said. Bloomberg

    · Goldman raises ’09 WTI forecast to $85/bbl from $65, predicts further gains next year as demand recovers. Sets a 12-mo price tgt of $90/bbl (from $70) and introduces a 2010 forecast of $95. Bloomberg

    · FTI – reports $30MM contract w/ StatoilHydro

    · UDRL – announces 3MM shr secondary

    · BP – BNP upgrades to Outperform from Neutral

    · Novatek – RBS downgrades to Hold from Buy

    · Cnooc – Macquarie downgrades to Underperform from Neutral

    · HK – SunTrust Robinson initiates w/ a Neutral

    · NRG – Jefferies upgrades to Buy from Hold

    · China unveils stimulus plan for shipbuilding sector – Beijing announced a three-year stimulus plan to help domestic shipbuilders by encouraging eligible firms to list and sell bonds, and by hastening the establishment of shipbuilding-focused investment funds. DJ

    · DRYS – cancels $114MM acquisition of a ship now under construction in South Korea, will pay cancellation penalty of $42.8MM which will reduce ’09 capex by $71.2MM.

    · CNX – expects to resume production at Buchanan Mine in mid-July; sees 2009 production of 60MM tons vs prior 62MM tons

    · Climate bill – The Senate is likely to weaken climate-change legislation, so Obama will be better off going to int’l negotiations w/ a House-passed bill in hand, according to the chief of Public Service Enterprise Group. He says the Senate will make the target for emissions reductions “a maximum of 14%” to gain passage (vs the House’s version of 17%). Bloomberg

    · Oerlikon – secures financing w/ existing banks, shrs rise 9% overseas. Reuters

    · GU – temporarily suspends Fujian Gushan production; says results will be hurt.

  4. 4
    Sambone Says:

    By Lananh Nguyen
    Of Dow Jones Newswires

    LONDON (Dow Jones)–Crude oil futures rose above $67 a barrel in London
    Thursday as economic optimism spurred investor appetite – but bearish factors
    continued to weigh on sentiment.
    “I think we’re going to get a bit of a bounce after the…fall we had
    yesterday, as the optimists still see this as a buying opportunity,” said
    Kristi Jones, an analyst at JP Morgan in London.
    At 1140 GMT, the front-month July Brent contract on London’s ICE futures
    exchange was up $1.36 at $67.24 a barrel.
    The front-month July contract on the New York Mercantile Exchange was trading
    $1.03 higher at $67.15 a barrel.
    The ICE’s gasoil contract for June delivery was up $4.50 at $547.25 a metric
    ton, while Nymex gasoline for July delivery was up 220 points at 192.36 cents a
    gallon.
    Prices were also buoyed after influential analysts at Goldman Sachs hiked
    their crude oil price targets. The bank raised its three-month ahead forecast
    for West Texas Intermediate crude to $75 a barrel from $52 a barrel, and also
    lifted its 2009 WTI forecast to $85 a barrel from $65 a barrel.
    Goldman’s bullish view bolstered hopes that the global economic slowdown may
    be easing, and prompted some participants to cover their short positions.
    Oil prices were also held aloft Thursday by a weaker dollar and firmer
    equities – factors which have helped to boost prices over 57% higher since
    mid-April.
    But analysts and market participants questioned how long the price surge could
    continue, citing several factors that could undermine the market’s recent
    strength.
    “We think the recent optimism about an imminent rise in oil demand was
    overdone and that oil inventories remain at a very high level,” said Eugen
    Weinberg, an analyst at Commerzbank in Frankfurt, who flagged a potential
    correction to between $50 to $55 a barrel.
    Thursday’s rally followed a sharp $4 correction Wednesday, after the U.S.
    Department of Energy reported oil stockpiles in the country had risen 2.87
    million barrels in the week to May 29, to levels well above the seasonal
    average.
    “The reality is that U.S. oil consumption continues to contract,” said Antoine
    Halff, an analyst at Newedge Group in New York. “Continued demand destruction
    ultimately makes for a bearish big picture across the board, underscoring that
    recent price gains are not underpinned by market fundamentals,” he added.
    The data dampened hopes for a revival in economic activity in the U.S., the
    world’s largest oil consumer, and cast doubt on the optimism which has lifted
    financial markets in recent weeks.
    “The [U.S. DOE] stats were awful yesterday, the ADP [U.S. jobs] data was poor,
    and the market went down for all the right reasons,” said Jim Rintoul, analyst
    at London-based trade advisory TheOilTrader.com. “Fundamentally, yesterday just
    rammed it home that the backdrop is very poor” for the oil market, Rintoul
    added.
    An oil broker in London concurred, adding: “It seems clear that the economy
    has a long way to go before really showing signs of even the remotest
    recovery.”
    Looking ahead, the market would take cues from macroeconomic data including
    the European Central Bank meeting Thursday and the U.S. employment report
    Friday, said Brenda Sullivan, an analyst at Sucden Financial in London.
    -By Lananh Nguyen, Dow Jones Newswires (Nick Heath in London and Florence Tan in Singapore contributed to this
    report.)

    Dow Jones Newswires
    06-04-09 0753ET

  5. 5
    Sambone Says:

    By David Bird
    A DOW JONES NEWSWIRES COLUMN

    NEW YORK (Dow Jones)–The last time U.S. oil demand was as weak as it is now,
    crude oil was $18 a barrel.
    Oil consumption in the world’s biggest energy consumer dropped to a 10-year
    low of 17.679 million barrels a day in the latest week. That sparked the first
    sizable drop in prices in two weeks, with Nymex July crude futures down $2.43,
    or 3.5%, to $66.12 a barrel.
    Demand weakness was especially stinging as gasoline use was sluggish over the
    Memorial Day holiday, the kickoff to the peak summer demand season. Gasoline
    demand was below year-earlier levels, despite prices at the pump that are 40%
    lower. U.S. crude oil inventories have ballooned to a record level of more than
    20% above year-earlier levels, and, measured against demand, total commercial
    oil stockpiles are at a 17-year high.
    The data, as diplomats would say, should inform the talks underway in Riyadh
    between President Barack Obama and Saudi Arabia’s King Abdullah.

    $75-$80 Crude ‘Fair’ Price

    Oil prices barged their way onto the agenda of the meeting focused on Middle
    East peace. In a case of curious timing, the Saudi Cabinet on Monday endorsed
    $75-$80 a barrel the “fair” price of crude.
    Saudi Oil Minister Ali Naimi said at a meeting of the Organization of
    Petroleum Countries last week he hopes prices will hit the target level in the
    second half of the year, and said the Saudis were meeting increased oil demand
    from Asian customers.
    Meantime, in the U.S., oil demand is down some 2.6 million barrels a day, or
    nearly 13%, below the early June level a year ago.
    It was in this week a year ago that surging oil prices moved near $140 a
    barrel for the first time, spurring King Abdullah to call for an emergency
    meeting of oil producers consumers. He ordered the kingdom’s oil flow lifted to
    a 25-year high of 9.7 million barrels a day. The Saudis are now pumping close
    to 8 million barrels a day, and despite a clampdown on supply with fellow OPEC
    members, haven’t slashed a massive global inventory overhang.
    The kingdom wants higher prices to help discourage further stockbuilding by
    flattening out the back end of the futures price curve, which now rewards
    refiners who buy comparatively cheap oil and store it.

    Curve Starting To Flatten

    Since Naimi aired the price target and vowed to hold output tight until stock
    levels return to normal, the curve has flattened somewhat. Last week, crude
    futures weren’t priced above $75 a barrel until December 2013; on Tuesday crude
    for August 2010 delivery settled above $75.08.
    But the sputtering U.S. economic recovery suggests that it may respond better
    to prices nearer the $46.68 a barrel average that has prevailed since late
    November when the king first declared $75 as reasonable, than to a further
    near-term jump of about 17%.
    But the Saudis and others in OPEC warn that low prices now will starve off the
    necessary investments to meet oil demand down the road, leading to a return
    $150 a barrel or above.
    History shows that moderate prices will rise with demand. Back in May 1999,
    when U.S. oil consumption was last as weak as it is now, prices averaged below
    $18 for the month. They haven’t been that low since. By December 1999 prices
    averaged above $26, a 47% rise from May.
    Back then, though, prices didn’t rise by fiat, or hope, or on whims of coming
    economic recovery, but on a genuine jump in demand of nearly 10% by year end.
    (David Bird, senior energy correspondent for Dow Jones Newswires, has covered
    global oil markets for more than 20 years.)

    Dow Jones Newswires
    06-04-09 0735ET

  6. 6
    Sambone Says:

    “GS targets Oil to $85.”

    Guess they are long?

    http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aoVJ_WupIwGY

  7. 7
    Sambone Says:

    8:50 (Dow Jones) Crude is lifted more than $1/bbl, but remains below the
    week’s highs, as bullish sentiment persists in a market pressured by weak
    demand and high stockpiles. Goldman Sachs analysts late yesterday raised their
    end of ’09 WTI crude price forecast to $85/bbl from $65/bbl, eyeing “a cyclical
    bull market as the economy stabilizes and OPEC maintains cuts to draw
    inventories to 10-year average levels.” But US data showing demand at a decade
    low are a drag. “The latest US weekly data are very weak,” says Barclays,
    another historically bullish outfit, which keeps its year-end forecast at
    $76/bbl. Nymex July crude recently up $1.63 at $67.75/bbl. (HGM)

  8. 8
    zman Says:

    Crude up $2 to $68.15.

  9. 9
    TEXWS6 Says:

    What properties did APA buy in the Permian and from whom?

  10. 10
    zman Says:

    Tex –
    Lea County, NM (75% of the reserves are here, offsetting APA’s Northeast Drinkard unit)
    Other assets in Reagan, Howard, Sterling, Pecos counties, Tx

    All bought from MRO.

  11. 11
    zman Says:

    Tristone takes NFX target up $9 to $45. I imagine the NFX guys were a little dismayed about dropping 6% on the day they announce two deepwater GOMex discoveries, one of which has follow on drilling potential.

  12. 12
    VTZ Says:

    Ok… I’m going to go on a rant here for a sec. What the hell is the media doing reporting the 621,000 job loss figure as an improvement from the week before’s revised number of 625,000.

    ALSO (and even worse) the government has been downwards revising almost every number for the last 2 months so the headline number is better when it first comes out then revised down when people pay less attention to it.

  13. 13
    VTZ Says:

    I’m talking initial claims, not payrolls, but still.

  14. 14
    zman Says:

    V – they have a vested interest in the market going higher, not lower, as most viewers don’t short stocks. It is what it is.

  15. 15
    zman Says:

    BOP – end of june is soonest you expect KOG news, barring a little leakage of data?

  16. 16
    Nicky Says:

    Oh those Goldman crooks. When we are at $150 they make a call for $300. Then they don’t call the move down at all. When we hit $40 they call for $25. They clearly no nothing! But still they mmanipulate this market which make3s me sick. So I am guessing they saw the fall yesterday and thought whoops we didn’t exit our positions quick enough and need to ramp it out a bit to get out. Their calls are always at the end of the move.

  17. 17
    nifkin Says:

    anyone hear anything on a 1.5- 2M share distribution in CXO last night?

  18. 18
    Nicky Says:

    Oops sorry about all the typos. I couldn’t see what I was typing! They no nothing? They know nothing!!

  19. 19
    zman Says:

    Nicky – wow, cycnical, lol.

    Nifkin – I don’t see anything on CXO.

    Gotta step out for 15 minutes.

  20. 20
    Nicky Says:

    The jury is out on whether metals need one more leg up in a v and the $ one more leg down. And whether the indices need one more leg up.

  21. 21
    Dman Says:

    Nicky – I feel your pain if it was bad enough to cause typos!

    BTW, Goldman’s call on crude is literally meaningless without telling us where the $ will be at the same time.

  22. 22
    rseidman Says:

    Testing

  23. 23
    Nicky Says:

    Dman the $ hit the top of the downtrend channel this morning at 80 and turned down. Its backed off a bit but if it turns back up and blasts through the 80 level then the low is in. I am watching the British Pound – hard to see that going back to yesterdays highs right now. There was a rumor earlier that Gordon Brown was about to resign and the pound fell 300 points in under five minutes!

  24. 24
    Sambone Says:

    By Mark Peters
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Natural gas futures climbed slightly Thursday morning as
    traders awaited weekly government data that’s expected to show a
    larger-than-normal build in gas storage.
    Natural gas for July delivery on the New York Mercantile Exchange was trading
    2.7 cents higher, or 0.72%, at $3.793 a million British thermal units after
    opening floor trade 2.3 cent higher at $3.816/MMBtu.
    The uptick in morning trading was being fueled in part by traders covering
    position ahead of the data release by the U.S. Energy Information
    Administration, but any kind of sustained rally in prices will be difficult,
    said Mike Fitzpatrick, a broker with MF Global in New York.
    “As long as prices remain under $4, it is going to be difficult to push it
    back up,” he said.
    Natural gas slid below $4/MMBtu on Wednesday, and analysts say a rebound will
    require a pronounced change in market conditions such as hot weather, a
    hurricane or a sizable draw from storage. Natural gas prices continue to be
    weighed down by slumping demand and robust onshore production that remains
    strong even as drilling activity is being cut.
    “Although lower-than-expected (liquefied natural gas) imports, improving
    prospects for the health of the economy, and the sharp drop in rig counts
    should all help to tighten the balances later this year relative to prior
    expectations, a move higher for prices is somewhat premature,” Barclays Capital
    analysts wrote in a note to clients Thursday.
    The storage data is expected to show a larger-than-normal injection last week
    amid slumping demand, the Memorial Day holiday and mild weather in the major
    gas-consuming regions.
    The EIA is expected to report that 114 billion cubic feet of gas were added to
    storage during the week ended May 29, according to the average prediction of 16
    analysts and traders in a Dow Jones Newswires survey. The storage estimate
    surpasses last year’s 102 bcf build in storage and the five-year average
    injection, which was 94 bcf.
    If the estimate is correct, inventories as of May 29 will total 2.327 trillion
    cubic feet, 22% above the five-year average and 30% above last year’s level.
    The EIA is scheduled to release its storage data at 10:30 a.m. EDT (1430 GMT).
    Although a solid build is likely, Ed Kennedy, a broker with Hencorp Becstone
    Futures in Miami, said further additions to supply already are factored into
    prices and shouldn’t be a surprise.
    “It’s built into the market,” he said.

    -By Mark Peters, Dow Jones Newswires
    Dow Jones Newswires
    06-04-09 0959ET

  25. 25
    Nicky Says:

    Just looked at nat gas chart – looks to me as if it needs to go lower than the May lows. ie we have wave v in the making which can truncate (fall short of the previous low) or obviously just continue lower.

  26. 26
    Sambone Says:

    By Ayesha Rascoe
    WASHINGTON, June 4 (Reuters) – U.S. lawmakers expect to
    introduce legislation next week that would reverse a Bush era
    law exempting a controversial drilling practice from federal
    oversight, possibly driving up costs and curtailing the
    development of vast amounts of unconventional energy.
    Democratic Representatives Diana DeGette of Colorado and
    Maurice Hinchey of New York plan to offer a bill that would
    repeal a measure in a 2005 energy bill that excluded the method
    of hydraulic fracturing from regulation under the Safe Drinking
    Water Act.
    “This is a very serious issue. If it is not addressed,
    large numbers of people are very likely to suffer,” Hinchey
    told Reuters. “Their water will be contaminated. Their houses
    will no longer be livable.”
    Hydraulic fracturing, or “fracking,” injects a mixture of
    water, sand and chemicals into rock formations at high pressure
    to force out oil and natural gas. The practice has been used
    for decades to stimulate production in old wells, but is now
    also used to tap oil and gas trapped in sedimentary shale beds
    across North America.
    Fracking is essential to shale gas production, which has
    significantly boosted U.S. gas output. The Energy Information
    Administration estimates these unconventional resources could
    make the United States virtually self sufficient in natural gas
    supply by 2030.
    Removing the exemption for fracking would open the door
    to Environmental Protection Agency supervision of the practice.
    Industry groups are concerned the law will lead to a cumbersome
    federal standard that may require more permitting, higher water
    quality for fracking fluid and additional testing.
    Richard Ranger, senior policy advisor for the American
    Petroleum Institute, said new requirements could cost as much
    as $100,000 per well, a significant burden for drillers.
    In areas where companies are still exploring, Ranger said
    “that $100,000 price tag when added to other things can lead
    companies to say ‘No, we’re not going to drill here.'”
    Environmentalists and local groups say rampant fracking
    without a national safety standard is endangering human health
    by contaminating ground water. Residents in gas drilling areas
    have complained that their well water has become discolored or
    foul-smelling and that children have experienced diarrhea and
    vomiting.
    DeGette and Hinchey’s bill would also force companies such
    as Halliburton Co HAL and Schlumberger Ltd SLB to
    reveal what chemicals they use to produce hydraulic fracturing
    fluid, information protected by the companies as trade
    secrets.
    “When it comes to public health, it is not unreasonable to
    require companies to disclose the chemicals they use in our
    communities, especially near our water sources,” DeGette said.
    Industry groups say the criticisms are completely unfounded
    and that gas drilling is done thousands of feet below ground,
    much deeper than most water resources. Also, they say officials
    have not linked any public health incidents to hydraulic
    fracturing.
    “(Fracking critics) want to restrict our ability to produce
    natural gas, so they’ve created this sense of chaos and fear in
    order to produce that outcome,” said Lee Fuller of the
    Independent Petroleum Association of America.
    The stakes are high for U.S. shale producers, such as Range
    Resources Corp RRC, Chesapeake Energy Corp CHK and
    Anadarko Petroleum Corp APC. The 44-million-acre Marcellus
    shale located in the northeast may be able to supply the entire
    United States for 10 years.
    “Investors are watching it very closely because if something
    was to change meaningfully the deployment of the shales for
    natural gas, it has the potential to dramatically change market
    conditions,” said Christine Tezak, senior energy policy analyst
    at Robert W. Baird and Co.
    (Reporting by Ayesha Rascoe; Editing by Lisa Shumaker)

    Thu Jun 4 13:24:28 2009

  27. 27
    tater Says:

    Hey Nicky,
    Very nice call on the bounce at 924 yesterday!

    Question about the structure of the current wave up. Still looking for a 3 wave move? (S&P)

  28. 28
    Sambone Says:

    CARACAS (Dow Jones)–President Hugo Chavez announced late Wednesday the
    takeover of gas compression plants used for oil production, the latest in a
    string of asset takeovers.
    “We continue advancing and recuperating control and the handling of all these
    gas compression units,” Chavez said in televised remarks.
    The president said Petroleos de Venezuela SA, or PdVSA, was seizing 70 gas
    compression units, a continuation from a number of oil service industry
    takeovers that began last month.
    In a timetable for takeovers, the state oil company is expected to seize the
    gas compression units that serve western Venezuela on Thursday, others in the
    central region Friday and those serving oil joint venture companies Monday,
    according to a statement by the Ministry of Information.
    Venezuela’s congress last month passed a law opening the door for PdVSA to
    seize the assets of dozens of oil-service firms, including those offering
    logistical support in the oil operations of Lake Maracaibo as well as gas,
    steam and water injection technology used for oil extraction.

    -By Raul Gallegos; Dow Jones Newswires
    Dow Jones Newswires
    06-04-09 0959ET

  29. 29
    bill Says:

    26

    nice to know our leaders are doing their best to drive up prices..

  30. 30
    zman Says:

    Bill – yep, saw it earlier. Next they will ban the API so it doesn’t have a chance to respond.

    Stocks looking a little jittery here. PQ taking a downgrade on the chin, most other stuff just drifting pre gas numbers in 20 minutes.

  31. 31
    zman Says:

    RS – I see your test.

  32. 32
    Nicky Says:

    Morning Tater. If this is going up more then it needs to get going and take out 934, then 939 quickly. If that happens we are going to make new highs quickly. At the moment I am on the fence cos it needs to show its hand! I can still make the case for a v up already being in place but I can also see how yesterday was part of a wave iv correction and we have another high out there.

  33. 33
    zman Says:

    Nicky – thanks as always for the counts. The government is trying to outlaw or at least contain the likes of Goldman so you won’t be frustrated by them much longer.

  34. 34
    Nicky Says:

    Tater if the more bullish count is playing out then we are in ii down of v up and the 61.8% retracement is at 929.5 and the 76.4% retracement is at 927.5.

  35. 35
    tater Says:

    As always, thank you very much. I’m getting the feeling that we are going to waffle about today. Moves appear dramatic on the 5 min chart in the sense that they appear urgent, so urgent that they get countered. Looks like indecision/battle, therefore could be a good day for me to go enjoy a sunny day. Good luck to you today.

  36. 36
    Gtinvest Says:

    In case anyone who is interested House natural resources subcomittee discussing shale gas as we speak. link is http://resourcescommittee.house.gov/index.php?option=com_content&task=view&id=273&Itemid=

  37. 37
    zman Says:

    Thanks GT

    If anyone sees the RBC second day wrap up notes to their energy conf I would be appreciative.

  38. 38
    zman Says:

    GT – just tuned in, can you tell me who is speaking now, saying the reports of ground water contamination are not true.

  39. 39
    zman Says:

    Gas number: 124 Bcf

    Gas was down 1 cent before the release.

  40. 40
    Gtinvest Says:

    I do not know, some state regulatory official

  41. 41
    zman Says:

    That’s just an ugly number, no revisions.

  42. 42
    zman Says:

    Thanks GT, listening to CHK guy speak now.

    Stocks pulling back a bit on the NG number, NG down 17 cents now, going to test $3.50.

  43. 43
    1520sbroad Says:

    anyone follow NOV closely? any opinions?

  44. 44
    bill Says:

    wow 124

    thats a record high for a week

  45. 45
    zman Says:

    It’s a record high for this week in history, yes. The Eastern region saw a big build with very mild weather. We may get another big one like this next week. No way to spin that as bullish. I’m going to watch the reaction for a bit.

  46. 46
    BirdsofpreyRcool Says:

    z — #15. From the horse’s mouth… “end of June,” KOG will report results from wells 3 and 4. 4 is being completed first. It’s the 10k lateral with Peak. 3 completed next. The 4,500 lateral with XTO. HAL doing the completions. HAL had better not screw it up this time (like they did on well #1).

  47. 47
    zman Says:

    Thanks BOP

    Stocks took a hit on the NG number but not excessively so and seem to be recovering.

  48. 48
    zman Says:

    … best guess is they trend with the broad market unless gas sells off sharply.

    NG now down 12 cents so there looks to be a bit of a cover going on.

  49. 49
    zman Says:

    NG down about a dime now. Stocks have come back to mostly green, I was going to through out SWN and HK both as put ideas due to their high multiple but I’m not touching that concept just yet.

    Tree hugger ranting in front of the U.S. house committee. Basically said we shouldn’t frac gas wells, we shouldn’t drill for oil off brazil, we need to address global warming.

  50. 50
    zman Says:

    Citi on the tape recommending investors buy natural gas leveraged E&Ps

    Specifically cite: NFX, KWK, XTO, APA, SWN, FST.

  51. 51
    Nicky Says:

    When oil turns lower nat gas will move down considerably I think.

  52. 52
    zman Says:

    I hear ya Nicky, and then industry will respond by stacking even more rigs.

  53. 53
    Nicky Says:

    Yep there is going to be a great long opportunity coming up in nat gas in the not too distant future.

  54. 54
    Nicky Says:

    decision time for the indices….

  55. 55
    1520sbroad Says:

    #50 – i read that Gil Yang piece this morning. also mentions the canadian import situation falling dramatically. All of which has been mentioned here for quite some time – kudos to Z and everyone.

    some good charts in that report.

  56. 56
    Nicky Says:

    Joe Livorgnia on CNBC – the only guy arguing for a deflationary environment. Kudlow screaming at him of course. My money is on Joe.

  57. 57
    zman Says:

    Oklahoma rep saying people are losing jobs now, rigs and frac guys, says they are dems and reps, says the claims on ground water have been around for a long time, says nothing ever proven. Says he is sick and tired of uneducated congress members fighting against oil jobs.

    Now CHK is talking about how deep the reservoir is and how deep the aquifers are. Haynesville at 10,000 feet vs water at 200 to 300 feet. Its not coming up through 2 miles of rock folks.

  58. 58
    zman Says:

    Chairman called the last speaker “sounds like T Boone Pickens and then said annnyyywayyy”. I can’t stand the emotion and smugness with which these guys dismiss facts.

  59. 59
    zman Says:

    I should say, I don’t disagree with you Nicky. If crude gives back today’s gains, NG will be off a quarter.

    Looks like GS is backing up their call with actual dollars buying futures. Crude at HOD at $68.50.

  60. 60
    zman Says:

    WRES suddenly at $2.40 on this oil number. Interesting chart there.

  61. 61
    Nicky Says:

    Oil looking like its going to take out yesterdays highs – in which case now in v up. Ridiculous ramp.

  62. 62
    jiveyjr Says:

    very much liked your write up on WRES…makes a lot of sense

  63. 63
    zman Says:

    Jivey – I think the realization that we can stay in the 60 to 80 range in 2010 is key to that story recovering.

  64. 64
    Paul in Kansas City Says:

    Z; nice call on WRES!

  65. 65
    zman Says:

    Paul – I think it is a decent idea. Not a good call though until I actually sell it, lol.

  66. 66
    Nicky Says:

    Oil seems to be detaching from the $. The $ has pulled back (so far correctively) and not significantly enough to cause this push up in oil.

  67. 67
    zman Says:

    Nicky – Hear ya on that. Your buddy Joe T at CNBC sounded like he’d been short for days (flat as he put it), will be interesting to see if he gets re-bullish today, lol.

  68. 68
    Nicky Says:

    Oh Z he is so maddening – he is so smug. Truth is he has been telling everyone to buy oil. Then comes on and says its too high. I guess you could say he has been right but I pity anyone trying to follow him. He has a knack of making the call after the event almost.

  69. 69
    zman Says:

    NW LA – Haynesville shale impact:

    234 TCF potential (current estimates)

    $3.9 billion household income in 2008

    No ground water difficulties to date.

  70. 70
    Paul in Kansas City Says:

    Oh yeah; I hear you there! You do nice job modeling; your HGT also very helpful. If WRES shows cash flow improvement from capturing current higher oil prices we might see some money pile into this thing!

  71. 71
    zman Says:

    Nicky – you have pinned the SP here!

    BOP – any comments from HT and TT?

    Paul – I think so. Reserves are still here. Get rid of the bad hedges and this thing can generate nice cash flow. Right now, they are pretty shut down on activity but that will change here.

  72. 72
    zman Says:

    House chairman let the enviro guy run over, said “your time was more than expired but I enjoyed your response”… just nutty.

  73. 73
    zman Says:

    APA – CEO says O&G activity not yet bottomed out, carbon tax proposal gaining momentum in the House.

    APA also says they are looking for “tack on” acquisitions, these are what I call bolt ons and are like what they did last night with MRO. Easier/cheaper to drill n Wall Street than in the field.

  74. 74
    Wyoming Says:

    About surface water. Issue has been addressed many years ago. When we drill a well we set several casing strings;

    Conductor pipe – Used sometimes, mainly to give a support for a deep well and the Blow Out Equipment (Safety) and to make sure that the well starts off straight. You would be suprised about a couple of degrees off here.

    Surface pipe, dictated by the states O&G department. These are mandatory and guidelines are stringent . Why? Because many years ago, people water wells were messed up.

    Production string, Covers the Surface pipe from exposure. Usually what you frac down. Could be an Intermedidate string into a production liner but the gist is that the surface pipe is not exposed to the frac pressures and materials. If there is a failure in the productino string, guess what? There is the surface pipe.

    Anyway, this is my quick take, back to work for me.

  75. 75
    BirdsofpreyRcool Says:

    TT had nothing to say today. HT thought today would be “choppy.” But, he didn’t pick a direction. Everyone looking to see mrkt’s reaction to Jobs # tomorrow morning. Then, we should know how the rest of June will go.

  76. 76
    zman Says:

    Re 74. Thanks Wyoming. Its just, you see, that these guys want to put you out of business. Nothing personal you see. They just would rather see you putting blades on a wind turbine.

  77. 77
    Wyoming Says:

    Picture worth a thousand words

    http://www.glossary.oilfield.slb.com/DisplayImage.cfm?ID=481

  78. 78
    zman Says:

    Thanks BOP, that’s my sense as well, wait for the data tomorrow. Strong possibility of end of day shenanigans though to achieve certain levels.

  79. 79
    Wyoming Says:

    Meh, no problem. Gun show in FW this weekend. Will be prepared …

  80. 80
    zman Says:

    Wyoming- They should have you testify. The defense was basically stuck on the linear distance between the perf zone and the near surface aquifer. The offense was concerned about leakage from the casing and about fluids on the surface.

    Article yesterday cited 16 dead cows that may have drunk fluids at a Haynesville well site. Convenient timing that.

  81. 81
    zman Says:

    Paul – I plan to do more bullet point style pieces with the quick and dirty models attached in the future. Glad you like them.

  82. 82
    zman Says:

    EU says it will not help pay for Ukraine’s debt to Russia. Next stop, Russia turns off the taps. That could be somewhat price supportive as LNG heads to Europe. Not as big a deal in summer but the debt won’t just go away either as Russia is cash strapped.

  83. 83
    zman Says:

    Nicky – I hear what you are saying about the SP500 being at put up or shut levels, looks like we just drift about until jobs tomorrow.

    Looks like jobs estimates are 500 to 520K lost,

    Unemployment at 8.9 to 9.2%.

    DNR cut at Argus to Hold earlier.

  84. 84
    zman Says:

    Well crap:

    http://movies.yahoo.com/news/movies.ap.org/actor-david-carradine-found-dead-bangkok-ap

  85. 85
    Wyoming Says:

    Dead cows could be from flow back material, but it should not as that is contained to flow back tanks etc. Can’t stop human error, that is a different matter and should be reported as current law requires.

    Sure the dead cows weren’t just over seasoned? Cayenne pepper will do that to you. It is LA after all …

  86. 86
    zman Says:

    I was guessing some enviros over seasoned them …

  87. 87
    zman Says:

    Gas off 5 cents…gotta be some covering.

  88. 88
    reefguy Says:

    Gas green because… $68.88/$3.755 = 18.34 I cannot remember that level of BYU decoupling.

  89. 89
    reefguy Says:

    sorry, BTU decoupling

  90. 90
    zman Says:

    NG flat.

    Crude up 4% at $68.80, more than getting back all of yesterday’s losses. Stocks obviously not buying off on it until tomorrow as we commonly saw 5 to 15% down moves in the E&Ps yesterday. This is further evidence of hot money. It doesn’t know the stories well. It runs at the drop of a hat but is slower to get in. This is a reason in and of itself to bump up my cash position, especially into significant strength. Tomorrow may afford that opportunity.

  91. 91
    1520sbroad Says:

    #90 – very well said. Johnny Hotmoney running wild in front of tomorrow.

  92. 92
    zman Says:

    Reef – good point. I don’t normally buy off on the distance between the two being something can go to 6 to 1 as the heat equiv. would suggest but you are correct, that’s the biggest I recall. You guys with bloombergs can plot it. I do recall Cramer pounding the table for gas last year as we were at 10 saying that 14x was too much and the multiple should contract closer to 6x. He got his wish just not how he thought as oil tanked.

  93. 93
    zman Says:

    1520 – yep, I wish they guy would get out of my house. But he’s here and I’m happy to sell my options to him when he gets in a buying panic.

  94. 94
    reefguy Says:

    The widest I have seen is 16.5, the lowest is 3.8

  95. 95
    reefguy Says:

    Goldman $85 oil at 18 to 1 means gas is $4.72

  96. 96
    BirdsofpreyRcool Says:

    Early Cyclical Midday Update

    Industrials/Materials/Energy

    · Machinery – high beta theme back in fashion after the brief hiatus (which really lasted all of one day); names like JOYG/BUCY, DE, TEX and CMI are bouncing strong.. not a ton of news today as all eyes are on tomorrow’s jobs / unemployment #.

    · Multis – no major trends as news flow today was light.. TXT +3%, gives an update on Cessna but leaves any guidance revisions to earnings season.. IR bouncing back strong after underperforming y’day following reincorporation shrholder vote.. notable laggards include EMR and industrial distributors FAST and MSM..

    · Transports – TRAN up w/ the tape, led by rail strength.. seeing weakness in HUBG off of UTIW’s second consecutive disappointing quarterly result..

    · Airlines – the XAL is very weak on news of UAUA’s potentially large aircraft order (represents a liquidity issue), IATA saying the group’s new industry forecast for ’09 will be “substantially worse” than prior ests, and the bounce in crude prices..

    · Aerospace – BA and related suppliers strong today on United’s surprise aircraft order announcement..

    · Materials – the group is reversing from yesterday’s selloff, strength most prominent in the metal stocks re AA +4%, FCX +3%, AKS +4%..

    · Energy – Marginally better to buy the space today as crude reverses losses from yesterday and stocks follow. Still not seeing huge conviction on either side. Bit of a buyer’s strike recently but yesterday brought some out into the notable weakness. Mostly HFs participating today: two-ways but better to buy E&Ps, refiners, and services. EIA natgas number came out with much larger build than expected (124bcfe v 115bcfe consensus)…saw a knee jerk reaction in commodity, now trading dn around 3%. Stocks did not follow as much as might expect. Utilities: Space holds up decently well despite natgas selloff and decent performance of the market.

  97. 97
    1520sbroad Says:

    bingo – i’ve been selling him a lot of options.

  98. 98
    zman Says:

    Thanks Reef. Oil targeting $69 and $70s in the cards if the SP runs tomorrow. I’d have rather seen it hand in the mid 50s and let people digest for awhile what this means for valuations on the oil rich names. This way leads to the dark path of excessive spikes and slumps in the group.

  99. 99
    apbd Says:

    Dead cows help to lessen global warming.
    apbd

  100. 100
    zman Says:

    CHK making the good point to the House Committee that the shales are economic at much lower than prices than the unconventional plays. The Chair actually said he’d like to see more gas developed at these lower costs so that other fuels are not burned when gas prices spike back up. Chair is from Ca.

  101. 101
    zman Says:

    CHK also saying its Marcellus pad footprint is 5 acres which would accommodate 6 to 10 wells. This addresses a lot of concerns about tearing up the surface and dissolves the images these guys have of those old black and white photos of the early days in Tx, Ca, etc.

  102. 102
    Nicky Says:

    CNBC talking constantly about GS call of $85 oil – this smacks of a top in the making.

  103. 103
    zman Says:

    Nicky – let me know what Joe T says so I can do the opposite.

    Many E&Ps back to within 10% of their highs for this cycle set over the last 2 weeks.

  104. 104
    zman Says:

    APBD – it’s true.

    CL through $69 now, pure momentum. Stocks up but not buying off on this new high just yet.

  105. 105
    Nicky Says:

    I have lost track of the times we have seen GS calls do this to the market only to see them reversed in very short order. What amazes me is that anyone would ever listen to their calls as they are continually wrong.

  106. 106
    zman Says:

    Nicky – I hear ya. My guess is, given the size of this move, that they primed the market. Nothing has changed but the price in the last month, which has gone up, so really don’t see why they waited so long to reiterate their case. We all know spending is down on big projects overseas. The fact of the matter is that OPEC is sitting on a record or near record surplus to current production levels. Saudi is set to increase capacity above 12 mm bopd soon and Kuwait and Angola / Algeria will have increases next year. Canada should see an uptick 09 vs 08. Partial offsets exist as well to be sure with Mexico, Norway, probably Russia, Veneezuela being notably lower this year. But the surplus for Saudi will mean they can ease back prices when they choose. I don’t buy the trouble starts in 2010 with supply but think GS may be looking ahead at that time to 2011 and 2012 when a resumption of world per capita oil demand growth will likely cause some issues with enough supply. I don’t have a problem with their year end prices for 2009 or 2010 and would be surprised in ye 2010 was not triple digits with breaks above $100 well before that.

  107. 107
    Nicky Says:

    Oil looks like it is going to take the broader market with me. These moves in oil drive me nuts (as you can tell) because they are just so stupid and the wave count and shape tells me it is totally unsustainable.

  108. 108
    Nicky Says:

    Z – actually I think that we will hit $85 oil this year but not on this run. Which of course is typical of their calls. Whether people just think oh they have said $85 so we are going straight there I just don’t know.

  109. 109
    zman Says:

    Nicky – yep, re 108, I have no trouble with that. But, I always thought it was too low, so I don’t really care about what % it is off the bottom. This is an over-reaction to their call but I should say that maybe they had something in the report that was new. I have only seen snipits.

  110. 110
    Nicky Says:

    I would think their report isn’t worth the paper it is written on. Their calls are on based on fundamentals that really exist but rather on their own position and how they want to move the market. One day they will make a call to get short and then watch out! That could be our move down to $25.

  111. 111
    jat Says:

    Ask, and ye shall receive

  112. 112
    zman Says:

    Jat – thanks for the water closet read.

  113. 113
    zman Says:

    By the way, Jat, if you have access to RBC day 2 comments from their energy conference I’ll send you a prize.

  114. 114
    zman Says:

    Still looking for those RBC comments on the PXD presentation, probably nothing new but would like to hear their characterization.

  115. 115
    zman Says:

    Nicky – re SP at 940. So I guess they made their choice.

  116. 116
    jat Says:

    What, you have Zman t-shirts or something?

  117. 117
    Nicky Says:

    110 – that should have said fundamentals that ‘don’t’ really exist.

  118. 118
    zman Says:

    Tshirts, mugs, bumper stickers. They tell me I have too much energy so when I get bored …

  119. 119
    Nicky Says:

    Z – yes re 940 but move looks very weak and may not go far.

  120. 120
    zman Says:

    Thanks Jat, I used to work with Leo Mariani, smart kid, agree with his assessment of PXD as one of the “cheapest oil-weighted E&Ps”. No color on the well yet whcih I kind of figured given the lack of reaction. Like watching a toaster here.

  121. 121
    Sambone Says:

    By Brian Baskin
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–As oil prices have increased, so have concerns that the
    steady climb in energy prices will snuff out an economic recovery.
    The price of crude is double what it was in February, as more and more
    investors have signed on to the idea that major economies will soon begin to
    pull out of their slump. The mere hint of promising developments in the U.S.
    housing market or Chinese manufacturing sector has been enough to send oil
    soaring in recent days.
    Crude futures recently traded nearly 5% higher, to $69.36 a barrel, on the New
    York Mercantile Exchange – close to a seven-month high.
    Goldman Sachs Group Inc. (GS) analysts said Wednesday they see the oil market
    returning to an “energy crisis” footing once economies are well on the path to
    recovery, with shortages by the second half of next year and prices hitting $95
    a barrel at the end of 2010. The bank also increased its end-of-2009 price
    forecast by 31% to $85 a barrel.
    The amount of spare production capacity that’s available to meet rising demand
    is hotly debated. But the oil rally over the last few months has already led to
    higher prices at the pump, at a time when fewer drivers can afford it. The more
    consumers pay to fill their tanks, particularly in the U.S., the less they have
    to spend on other goods that would resuscitate the wider economy. Some analysts
    worry that a price spike could kill any chance of the economy bouncing back
    well before Goldman’s scenario plays out.
    That talk is likely premature. The average U.S. gasoline price last week
    topped $2.50 a gallon for the first time since October, but it’s still well
    below what fuel cost this time last year. And while U.S. consumers may find
    their budgets stretched by rising prices, their counterparts in many developing
    countries can still rely on government price controls to keep down energy
    costs.
    “I would get seriously concerned if we were back toward $100,” said David
    Wyss, chief economist at Standard & Poor’s. “It’s not like there’s a cliff out
    there to drop over, this is just a slippery slope.”

    From Pump To Pocketbook

    Oil’s plunge from a record high above $145 a barrel last summer to the low
    $30s in early 2009 restored about $250 billion in U.S. household purchasing
    power, Wyss said. The latest rally has taken about $50 billion back out of
    consumers’ pockets.
    Developing economies are operating under a different math, however. While fuel
    prices are set by the market in the U.S., China’s government sets a cap on
    diesel prices. The limit is only 11% higher than it was on Jan. 15, even though
    oil prices jumped about 90% over the same period, according to Paul Ting,
    president of Paul Ting Energy Vision LLC, a consultancy.
    The danger is that refiners will cut back on production if forced by price
    controls to sell fuel below cost. The resulting shortages could slow economic
    growth, though China hasn’t reached that point yet, Ting wrote.
    “At what point of the price increase will demand be impeded is unknown, but is
    an area of concern,” he wrote.
    U.S. consumers also haven’t been spending every penny saved on gasoline,
    blunting the beneficial effects of lower oil prices. The savings rate, which
    was negligible during last year’s oil rally, is now at its highest point in 14
    years according to the Commerce Department.
    Some sectors of the global economy could even see an upside to higher prices,
    as more-expensive crude replenishes the coffers of oil-producing nations, which
    are still spending like the U.S. was last year, said Aaron Gurwitz, head of
    global investment strategy for Barclays Wealth.
    As spending by oil producers and consumers balances out, oil prices lose their
    potency to impact the economy, Gurwitz said.
    “(Oil producing nations) are spending every nickel they get and more … and
    we’re increasing our savings right now,” he said, adding that “a lower oil
    price is not necessarily a global macro plus, or not a very big one.”
    Just as the prospect of a recovery sparked an oil rally, prices are already
    showing signs of correcting on the first sign that energy is hindering the
    rebound. Crude futures tumbled Wednesday, for example, after the Department of
    Energy reported that gasoline demand was down from a year ago over the Memorial
    Day weekend, a holiday when consumption typically spikes.
    The next $10 a barrel increase might not come as easily as the last.
    “At $74 or $75 (a barrel), we’re going to get to that area and then wait to
    see how the economy has been affected,” said Phil Flynn, an analyst with Alaron
    Trading Corp. in Chicago.

    -By Brian Baskin, Dow Jones Newswires Dow Jones Newswires
    06-04-09 1330ET

  122. 122
    zman Says:

    Goldman does have some caveats in their outlook, not the least of which are bloated distillate inventories.

  123. 123
    Nicky Says:

    Hopefully they will spike oil hard now and then straight back down.

  124. 124
    zman Says:

    Speak for yourself, lol. I’d prefer much less volatility.

  125. 125
    zman Says:

    … and don’t forget to fill your tank today, a 7 cent move in UJ will probably lead to a 15 cent move at the pump by Saturday.

  126. 126
    zman Says:

    GS is throwing a 1 mm bopd growth number on 2010, still down in the U.S. but more than made up for by China and other developing countries. They are saying China demand has already recovered towards 2008 levels.

  127. 127
    elduque Says:

    10 yr tsy yields going higher. Crude higher. Consumer already tapped out. Where is the growth going to come from????

  128. 128
    Nicky Says:

    Agree Elduque. No way is the consumer gonna cope with $70 or higher oil. It was sending chills through the market two years ago and that was in supposedly good economic times. This will kill a recovery.

  129. 129
    zman Says:

    Senate Republicans plan to unveil a bill on Thursday that would redistribute the federal government’s share of stock in GM and Chrysler from the Treasury Department to individual taxpayers.

  130. 130
    Dman Says:

    SRS close to breaking down to new lows.

    Nicky, BOP, any thoughts ?

  131. 131
    Nicky Says:

    Dman I don’t follow it sorry.

    944 maybe all the spx can muster…would be bearish if we hit there then break back through 942.

  132. 132
    RMD Says:

    Can someone help me with the average monthly or quarterly maintenance cost of a low-tech well like a 25bbl/day Austin Chalk well?

  133. 133
    zman Says:

    Crude closed off highs but strong nontheless. Natural gas up 4 cents is just oil strength. That was truly a lousy number. Shorts in NG have to be thinking the easy money has been made and looking forward to each months end of month supply data with increasing trepidation.

  134. 134
    BirdsofpreyRcool Says:

    Dman — thanks for asking. But, i don’t know enough about what stocks are in the DJ Real Estate Index. That said, I haven’t been as bearish on the affects of declining commercial realestate as others. After seeing the TED Spread hit almost 500 bps on October 19th and the IG index hit almost 300 on Dec 5th, everything else seems mild by comparison.

    TED Spread is 48 bps now

    IG is 123 bps

    The bond/credit markets are functioning. Realestate has a bit more down to do… then we clack around on the bottom for a while. I think the time to short the financial sector (in it’s many forms) is past. I put BAC in my IRA after they did their 2ndary. Expect to just leave it there for 2-3 yrs. Steep yield curves have a wonderfully-soothing effect on bank earnings and balance sheets.

    NOT TO SAY it’s all shiny and good from here. Like yesterday. Lots of volatiliy. But, I sleep so much better at night, knowing TED is sub 50 and IG is sub 125.

    ok. that was a bit of a rant. apologies for going on and on. But “Not Scared” feels nice. (However, it is not to be confused with “Happy Days Are Here Again” either).

  135. 135
    ram Says:

    Not going to get growth from the unemployed. In fact, unemployed don’t contribute to taxes and get money from gov’t.

  136. 136
    BirdsofpreyRcool Says:

    #134… oops. mixed up “affect” and “effect” again. Got the definitions totally backward. Should be “effects of declining realestate”… and “affect on bank earnings…” Hate to sound more ignorant than i already am!

  137. 137
    zman Says:

    That’s ok BOP, I used hear instead of here in one of the charts above, adds character.

  138. 138
    BirdsofpreyRcool Says:

    ram — great point. And the huge caveat to what our economy does/is/becomes is what our government does/is/becomes. After what BHO & Friends did at Chrysler and GM, i have given up calling what Washington will or can do. GGG at work.

  139. 139
    BirdsofpreyRcool Says:

    z — hear here!! 😉

  140. 140
    ram Says:

    I wonder if ZMAN’s current regime in power would realize that by sleeping with the devil (E&P) and employing hundreds of thousands to drill and explore would ceate jobs and import less. I sort of feel better now.

  141. 141
    Nicky Says:

    Just a thought but anyone notice the US T Bond is back at its lows? If this starts to seriously tank I will hazard a guess it could bring down the stock market. However it could actually mean people will turn back to the $. Of course completely the opposite to what everyone is expecting!

  142. 142
    Dman Says:

    Thanks BOP.

    Nicky, I asked you about SRS because I recall you were a real-estate guru.

    But similar to BOP, I don’t know enough about what is actually in the DJ index that SRS is short. And I guess that probably matters in the real estate biz 🙂

  143. 143
    elduque Says:

    re SRS –

    Everything I know about commercial real estate, is you don’t want to be long it. Just take a walk around any of the shopping malls and look at the for rent signs. Also the same for comm. buildings. Seems to me that the comm. real estate cos. have somewhat of a delayed response to the recession. That is, they still have rents being paid on leases signed two years ago. Also, a lot the empty spaces have showed up in the last 3 months as retailer held on as long as they could.

    Take a look at the calculated risk blog. lots of info there.

    I am long the SRS

  144. 144
    Dman Says:

    Big pop in aluminum (JJU +8.4%) today. Alcoa also up 6% & is now more than a double from its lows.

    But the stuff itself (JJU) is only 21% up & is still less than 50% of its 2008 high.

    So it is competitive with NG in the “still beaten up commodity” stakes, but both are trumped by livestock (COW) which recently broke to new lows.

  145. 145
    occam Says:

    The industry needs to put out a clearer statement about why fracs don’t cause ground water contamination. I suggest something along the following line:

    The answer is: the natural gas occurs in tightly sealed formations. If it could escape, it would have long ago, and ground water is a very good path for its escape. The addition of very small amounts of water and propellant in order to fracture the shale in these tightly bound formations does not create any new path for the natural gas to escape, and it could escape much better than water could. If the water could get away, so could the gas, and the well would be useless. So by the nature of the situation, water will not migrate to the water table or aquifers.

    Though an engineer, I am not a specialist in this area. Those that are can improve on my statement above, or shoot it down. If the latter, a good explanation of why there will not be a problem is needed, and soon, and should get wide circulation.

  146. 146
    zman Says:

    I’ll do a WIOWIO (why I own, what I own) on a couple of names tomorrow and then daily until I cover the recent stuff. I plan on doing KWK tomorrow but I also plan on selling that one and repositioning very shortly.

  147. 147
    Dman Says:

    elD – yeah, that was/is my read on it too, but the SRS never seemed to react as if my view was right. Chart looks kinda tired on the downside though, volatility just about wrung out of it.

  148. 148
    zman Says:

    Occam – agreed. I know API has tried over and over. It does not seem to matter, falls on deaf ears.

  149. 149
    Dman Says:

    Z – I think back to how little I knew about what is involved in an oil/gas well before I joined up here. It would be very embarrassing if I told you what my mental picture of a well was. And bear in mind, I’m a physicist so I can understand this stuff, but I had simply never encountered the information.

    So I think the task of educating a typical member of congress is a fairly daunting one. Probably have to set up a rig in the House & start drilling thru the floor. They might not understand, but you would at least have their attention.

  150. 150
    zman Says:

    Nicky – your buddy Joe Terranova acted like his flat (short) comments never happened, said don’t wait on pullbacks to get long.

  151. 151
    zman Says:

    Dman – even better, we could have Tex or Wyoming take them out to a rig and tell them just where to stand.

  152. 152
    zman Says:

    Mad equity dash up into the close.

  153. 153
    tater Says:

    Just saw a bumper sticker on a little Smart Car of all vehicles

    Socialism is a great idea…until you run out of other people’s money.

    be still my beating heart, there really is hope

  154. 154
    zman Says:

    E&P stocks strong into the close again, with decent but not great volumes today. beerthirty.

  155. 155
    BirdsofpreyRcool Says:

    tater — i think Margaret Thatcher said that originally. But, to see it on a Smart Car… wow. Did you take a picture? That is encouraging!!

  156. 156
    Garyinhou Says:

    Hope and change Tater, hope and change.

  157. 157
    tater Says:

    My wife and I actually drew a small crowd laughing and pointing. There were about ten of us in the parking lot at the grocery store. Pretty funny stuff.

    Maggy Thatcher. She used to get my young loins stirring!

  158. 158
    BirdsofpreyRcool Says:

    Tomorrow’s eco-number —

    Change in Non-Farm Payrolls expected to be -520k. But, the “whispers” surrounding payrolls have been leaning toward a less-awful report (under -500k) and today’s better jobless claims fed that rumor beast.

    Sets expectations for tomorrow. So, anything less than 500k jobs lost will be pointed to as a “good” number.

  159. 159
    zman Says:

    Thanks for the advice re netbooks. Lenovo looked great but had a 4 week + wait time. Bought the Acer aspire one last night, sweet and cost less than my phone. Just doing my part to support consumer spending.

    I like those smart cars, always good for a laugh.

  160. 160
    BirdsofpreyRcool Says:

    “The trouble with socialism is that you eventually run out of other people’s money” –Margaret Thatcher.

    Same concept… different wording.

  161. 161
    zman Says:

    Bill – not ready on PXP thought yet, be next week.

  162. 162
    zman Says:

    Timmy underwater on his own house:

    http://finance.yahoo.com/news/Geithner-faces-sluggish-apf-15419661.html?.v=6

  163. 163
    BirdsofpreyRcool Says:

    TIMMY!!!!

    http://popculturespot.com/index.asp?PageAction=VIEWPROD&ProdID=634

  164. 164
    PackMan Says:

    It is actually “TIMMEH”

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