16
Jun

Tuesday Morning – What A Difference A Day Makes

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May housing starts, building permits and PPI all better than expected. We get Industrial production later this morning but the equity futures are taking a shine to the news and energy futures, already strong before the release on a re-weakening of the dollar continue to hover near 2009 high levels post data. There's not a huge amount of news out in the energy sector as we remain in the calm before the storm of Q2 earnings releases and pre Q2 operational updates but there seems to be a steady flow of small company and asset acquisitions that you didn't see just a few weeks back and which had been  largely absent since late last year. 

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Crack Spread Updated
  4. Stuff We Care About Today
  5. Odds & Ends


Holdings Watch: Ouch.

  • $10KP: $ 30,900 / 56% Cash

Yesterday's trades:

     

  • Added another (40) HK June $25 calls (HKFE) for an average costs of $0.48 bringing my average cost down to $0.71. This one will likely be a one to two day hold. High risk in the sense that these expire at the end of the week. Selling in the group and the market seems fairly light on light-ish summer volumes. I would expect bargain seekers to come into the group and name either later today or this week. We also have the slightly elevated potential for an operational update as we approach the shareholder’s meeting here later this Thursday. I'm not counting it but I think it could happen as they've strongly hinted they have news to share at presentations a few weeks back and with earings still probably a month plus away and their history of pre-earnings operations update, well, the timing just seems pretty good for one. But it could still be a week or two or three down the road.

Commodity Watch

Crude oil fell $1.42 to close at $70.62 due to a weak equity market and a stronger dollar. I don't see the dollar strength lasting and Nicky has pegged resistance at 81.60,  and 82,83 vs the current price of 81.13. This morning the dollar has backed off nearly a percent to just below 84.50 and crude is trading back above $72.

  • Early Read On Crude Inventories: (from the Bloomberg survey)
    • Crude: Down 2 million barrels
    • Gasoline: Up 550,000 barrels
    • Distillates: Up 1 million barrels
    • We get the API read on these numbers after the bell which has of late been an increasingly accurate preview of the EIA numbers tomorrow.
  • Dollar Watch:

 

Natural gas rallied 8% yesterday to close at $4.18 on a forecast of  a warmer weather. Last night on NBC nightly news the anchor asked the question, "what of all these stories we've been hearing about 'a summer without summer weather'?". NBC's answer: "bah humbug". They pointed to a CPC three month outlook which shows most of the U.S. summer period will be "normal to warmer than normal" with only the Dakotas staying cool. This morning gas is trading up a dime plus in an attempt at a rare two day winning streak. 

  • Shut In Well Watch: (ECA) said mid day yesterday that they have shut in some gas wells due to low prices adding that total volumes shut in were a couple of hundred MMcfgpd in the U.S. and Canada each. Encana said in some places they are getting below their lifting cost so you pretty much have to shut them down…statement runs counter to what some others have said but good to see someone else besides (CHK) stepping up to the plate.
  • Imports Watch:  Imports were essentially flat with year ago levels at 7.4 Bcfgpd and were slightly higher than last week's 7.2 Bcfgpd.
    • LNG was 1.6 Bcfgpd, up 0.1 from last week
    • Canada was 5.8 Bcfgpd, also up 0.1 from last week but still conspicuously low.

 

Crack Spread Updated - Better, not much to write home about, but firming.

 

Refining Multiple

 

Key Takeaways:

  1. Better cracks as product supply remains contrained .... but ....
  2. Still waiting on a pick up in demand, especially from the export distillate market
  3. On a current year basis, those multiples in the table above are not cheap
  4. 2010 will become the focus for investors sometime after Q2 numbers are released but suffice it to say that no one has any faith that the 2010 earnings estimates are within hand grenade accuracy levels.
  5. I sound like a broken record but my decision to like or dislike the group continues to be one of seeing an actual demand recovery. Unlike in E&P where higher crude prices predicated upon an assumed recovery at some point down the road will lead to higher stock prices now, refiners are in a more difficult position as they are squeezed by a products inventory issues and the inability of to ratchet volumes without hurting margins. When I see distillates demand begin to turn I will be in the refiners again and probably not before that.

 

Stuff We Care About Today


Asset Acquisition Watch:

  • BBG- good sized acquisition in the Rockies, no details on proved but they are saying 2 Tcfe probable and possible, that’s size for the $60 mm price tag. Bill Barrett still runs that company and he is one gas finding CEO.

Overnight Mailbag:

Re CLR - hedge % does not seem to provide substantial protection unless they are “banking” on the belief that the price of gas is headed higher in 2010. ~ Choices

ZComment: Given that it's about half of their expected gas production and that gas production should be about a quarter of total production that level of protection is better than a poke in the eye with a sharp stick. It's the prudent course of action and it gives them some upside if prices advance this summer (giving them a chance to average up on their hedges). Oil is the clear focus here but I don't blame them for locking in prices and thereby insuring a portion of their capital program. What I find interesting is that they remain one of the few 100% unhedged oil plays.

Odds & Ends

Analyst Watch:

  • (BBG) cut to Hold at Argus
  • (FTO) cut to Neutral at Credit Suisse
  • (FMC) initiated at Buy at KeyBanc with a $68 target

Housekeeping Watch: New subscriber, thanks and welcome! Please ask questions and check out the bios tab at upper left and if you feel like it, submit one your self to zmanadmin@gmail.com.

68 Responses to “Tuesday Morning – What A Difference A Day Makes”

  1. 1
    zman Says:

    Crude at 72.75, just short of the 2009 high of 77.23 set on 6/11.

  2. 2
    Sambone Says:

    By Nick Heath
    Of DOW JONES NEWSWIRES

    LONDON (Dow Jones)–Crude oil futures climbed more than a dollar to back above
    $72 a barrel after two days of falls Tuesday, tracking a fresh bout of
    weakening in the dollar and as German data boosted optimism over economic
    recovery.
    Crude prices continued to take much of their cue from the greenback Tuesday.
    The dollar lost ground after two days of strengthening as Russian officials
    again questioned its role as a reserve currency. A falling greenback makes
    commodities more attractive to investors seeking a currency and inflation
    hedge.
    Meanwhile German economic expectations rose in June as experts predicted a
    recovery in Europe’s largest economy will start by year-end, the Center for
    European Economic Research said Tuesday. The ZEW indicator in June rose to 44.8
    from 31.1 in May, it’s highest reading since May 2006. Earlier the Bank of
    Japan said the country’s economic slump was easing.
    At 1105 GMT, the front-month August Brent contract on London’s ICE futures
    exchange was up $1.47 at $71.71 a barrel.
    The front-month July light, sweet, crude contract on the New York Mercantile
    Exchange was trading $1.42 higher at $72.04 a barrel.
    The ICE’s gasoil contract for July delivery was up $17.00 at $587.50 a metric
    ton, while Nymex gasoline for July delivery was up 303 points at 208.33 cents a
    gallon.
    However, market participants retained an element of caution after the previous
    two days’ retracements. Prices could face a spell of consolidation without
    fresh news, many said, although Tuesday’s and Wednesday’s U.S. oil inventory
    data could provide the catalyst for subsequent moves.
    “For now, we expect there to be some consolidation after the ongoing
    correction is over and things could remain quiet until Wednesday afternoon when
    U.S. energy data is released,” said Andrey Kryuchenkov, vice president of
    commodities research at VTB Capital in London. In the meantime, investors
    should “keep watching the dollar” he added.
    The American Petroleum Institute releases its weekly data at 2030 GMT Tuesday,
    with the U.S. Energy information Administration releasing it’s more
    closely-watched numbers Wednesday.
    The average forecast of a preliminary Dow Jones Newswires survey of analysts
    suggests that U.S crude oil inventories fell 1.5 million barrels last week.
    However, inventories remain well above their seasonal averages, and, alongside
    similarly inflated stockpiles worldwide, represent an obstacle for prices to
    move beyond their recent seven-month highs above $73 a barrel, some said.
    “We think the sharp increase in prices over the past two months was too fast,
    and too steep given the fundamental environment,” said Andy Sommer, oil analyst
    at EGL in Dietikon, Switzerland. “Most of the major consuming countries are
    still in a recession and at the same time OPEC is already increasing its
    production. The drawdown of the extraordinarily high inventory position is
    going to be delayed and we think that should be a cap for oil prices.”
    Protests in Iran at the outcome of the Friday’s presidential elections have
    had little impact on prices. Iran’s electoral watchdog, the Guardians Council,
    said Tuesday it is ready to recount the presidential ballots if it finds
    irregularities in the vote count. However, Iranian crude oil supply – it is the
    second largest producer in the Organization of Petroleum Exporting Countries –
    was unlikely to be affected by the upheaval as things stood, analysts
    suggested.
    “We do not see an Iranian supply risk per se but if things do not rapidly calm
    down, there will be an increasing risk for a diversion to be created,” said
    Olivier Jakob of Swiss consultancy Petromatrix.
    -By Nick Heath; Dow Jones Newswires
    Dow Jones Newswires
    06-16-09 0742ET

  3. 3
    Sambone Says:

    By Felicia Loo and Luke Pachymuthu
    SINGAPORE/DUBAI, June 16 (Reuters) – The volume of refined
    oil stored on ships at sea has jumped by more than 20 million
    barrels since the end of May, and is enough to meet nearly three
    quarters of the world’s daily demand.
    Optimism over economic recovery drove crude prices close to
    eight-month high above $73 a barrel last week but rising storage
    indicates the world is still consuming less oil than it refines.
    About 62 million barrels of gas oil and jet fuel were stored
    in tankers mostly off Europe’s coast, up from around 41 million
    barrels in late May, shipbrokers and traders said on Tuesday.
    Global oil consumption is about 83 million barrels per day.
    “The market outlook is bearish, with increasing global
    supplies finding little place to go,” said Raja Kiwan of PFC
    Energy.
    Last week the International Energy Agency, which advises 28
    industrialised countries, revised its outlook on global oil
    demand higher to 83.3 million barrels per day (bpd). But global
    demand was still due to fall by the most since 1981.
    “Our latest report was translated to be bullish because we
    revised demand up slightly,” Eduardo Lopez, a senior analyst
    with the IEA, told Reuters.
    “The suggestion is that the fall in first-quarter demand was
    less horrible than expected, but it was nonetheless ugly.”
    Lopez said economic indicators were still “very weak” and
    evidence of green shoots remained inconclusive.
    “For example, in Europe unemployment is rising, and there
    are suggestions that we are about to enter into the second wave
    of the crisis, which will have damaging social consequences.”
    On Monday, the head of the International Monetary Fund,
    Dominique Strauss-Kahn, also sounded a cautious note saying the
    worst of the global crisis was not yet over. nLF328969.

    BUY NOW, SELL LATER
    Shipbrokers said the recent flurry to lock in floating
    storage capacity could have been spurred by U.S. investment bank
    JP Morgan Chase & Co’s JPM hiring of a brand new supertanker
    to store gas oil off the coast of Malta.
    Prices for fuel for delivery in future months is higher than
    for delivery now, encouraging oil traders and international oil
    firms to lease ships, store fuel and sell it later at profit.
    JP Morgan was the first investment bank to join those
    holding fuel, according to Reuters data. The bank has hired the
    tanker for 270 days. nL3650783
    “We have certainly seen more inquiries coming in for
    floating storage,” said a Singapore-based shipbroker.
    The main companies storing fuel on ships are European trader
    Vitol, Royal Dutch Shell Plc RDSA.L and Geneva-based Trafigura
    Beheer BV, industry sources said.
    Oil at sea could weigh on distillate prices for months to
    come, even when seasonal demand rises in winter, traders said.
    Asian gas oil margins traded at $8.30 a barrel on Tuesday,
    up from about $7.90 a barrel on Monday, but it still remains
    about 80 percent below the year-ago record above $45.
    The table below shows some of the fixtures on floating
    storages, as compiled by Reuters.
    =============================================================
    VOLUME VESSEL PERIOD PORT
    =============================================================
    *130,000T Minerva Vera June 15 Europe
    90,000T River Pride June 20 Europe
    90,000T Survetta June 30 Europe
    80,000T Ghibli June 10 Europe
    80,000T Kamari June 20 Europe
    90,000T Phoenix Ambition June 15 Europe
    260,000T Ghazal June Europe
    260,000T Front Queen June Europe
    260,000T Caesar June Europe
    80,000T OS Takamar June 15 Northwest Europe
    90,000T Riverside June 5 Northwest Europe
    90,000T Mindoro June 20 Northwest Europe
    90,000T DL Bellflower June West Africa
    90,000T Torm Margrethe June Northwest Europe
    90,000T Stealth Chios June Singapore
    90,000T Silvaplana May Singapore
    * latest fixtures
    (Editing by James Jukwey)

    Tue Jun 16 12:35:11 2009

  4. 4
    zman Says:

    BMO cuts EOG to Underperform. That’s just offbase.

    … raises PXD to Market Perform

    … cuts COG to MP

  5. 5
    jat Says:

    http://ftalphaville.ft.com/blog/2009/06/16/57241/inventories-ahead/

    We’ve managed to get our hands on this week’s Genscape Cushing report, which pre-empts the official Department of Energy inventory figures released on Wednesday by estimating volumes held at Cushing tank farms using infa-red technology.

    This week’s report sees a 530,000 barrel build at the Oklahoma site, which is the key delivery point for WTI Nymex crude. This compares to an overall inventory consensus for a 2m barrel drop in crude stocks in the week ending June 12th, according to Bloomberg and a 1.8m barrel drawdown according to Reuters.

  6. 6
    zman Says:

    BMO also cut SU to market perform, another cut I disagree with given elevated oil. They must not be buying into oil above $60 for that to really make sense.

  7. 7
    zman Says:

    Jat – interesting. You know that Cushing storage and total storage don’t always, but frequently do, move in the same direction. Have you heard anything about the accuracy of that report?

  8. 8
    zman Says:

    NG at $4.34 at a 1 month high.

  9. 9
    zman Says:

    Broad market feels like it just can’t get out of its own way. And that is putting the breaks on a move higher in the energy complex.

  10. 10
    jat Says:

    Nope, haven’t heard anything about it’s accuracy. Certainly agree on Cushing / total.

  11. 11
    zman Says:

    Thanks Jat

    If anyone gets a copy of reasoning, and I use the term loosely, for the EOG downgrade at BMO, I’d like to see it.

  12. 12
    Sambone Says:

    June 16 (Reuters) – Oil & Gas:
    * BMO cuts North American integrated oils sector to market perform from
    outperform
    * BMO recommends investors reduce exposure to oil & gas group to a
    neutral-to-slight underweight exposure
    * BMO cuts Cabot Oil & Gas COG Enerplus Resources Fund ERFUN.TO to market

    perform from outperform
    * BMO cuts Imperial Oil IMO.TO Progress Energy Resources Suncor
    Energy Inc SU.TO to market perform from outperform
    * BMO cuts EOG Resources Inc EOG and Husky Energy Inc HSE.TO to
    underperform from market perform
    * BMO raises Pioneer Natural Resources Co PXD to market perform from
    underperform

    U.S. +1 646 223 8780))

    Tue Jun 16 13:12:20 2009

  13. 13
    zman Says:

    For recent subscribers I find Tater’s site here:

    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2933882

    to be useful. Thanks for the recent updates T. When you get a chance could you take another look at HK, SWN, EOG. WRES as well but really not pressing on that one.

  14. 14
    zman Says:

    I’m just about flat on my total position in HK $25’s now for the Junes. The stock just jumped but if you look at the daily chart, it has done little since before earnings, mostly just a consolidation pattern. I’ll be pretty quick to pull these off the table and the $26s as well if the broad market looks likely to weaken. I will be taking at least some of this off the table before the close as we have API post close and the fundamentals, can always reassert themselves for a day when you least want them to.

  15. 15
    zman Says:

    In the post I jokingly described the rally in natural gas this morning as a rare two day streak. It has gone from up 15 cents to up 3 since the open and I would imagine that if gas breaks red we will see a sharp bit of profit taking that could test $4 again. A sustained rally at this point is just not supported by anything more than a swap out of the crude trade to the natural gas one.

  16. 16
    zman Says:

    Decent sized blocks trading HK.

  17. 17
    zman Says:

    NG back to even, industrial production to blame:

    http://www.marketwatch.com/story/industrial-production-slumps-11-in-may-200961691600

  18. 18
    zman Says:

    Still seeing block trades HK.

  19. 19
    1520sbroad Says:

    z- hk blocks on the equity or the options? Big volume in the june $25s is what i see. I’d like to see some big blocks on the equity too some day soon.

  20. 20
    zman Says:

    1520 – on the equity, decent sized pieces going through, nothing I’d call big blocks but it was obviously a natural buyer coming in, rang the bell for 120K shares in two separate minutes about 20 minutes part. Some fund is nibbling it seems. Not big, but nice to see 2 days before their annual meeting on a nothing day for the group and the market.

    I’m likely to take those $25s off the table today, more risk than I like with 3 days left to expiry and a very touchy broad market. I still have 26s, 28s (small, worthless at the moment) and then some July’s in the event they do get a PR out this week.

  21. 21
    isleworth Says:

    Z – re #15 – you’re almost getting negative enough on Nat Gas to perhaps mark a turn… 🙂

  22. 22
    zman Says:

    Isle – I hear ya but not really negative, I just think the attempts at a turn are early and destined to be easily reversed. We’ll get there but we need data, not “hope”.

    Glad you guys are in here. I know its summer but I was feeling suddenly wildly unpopular, lol.

  23. 23
    isleworth Says:

    Hadn’t noticed but indeed there is an unusually high ratio of Zman posts to total posts so far today. Don’t worry – be happy! You are The MAN, with the great thoughts and research that we all respect so very much!

  24. 24
    isleworth Says:

    Z- with nat gas rig count now down 54%, when do you expect we will begin to see real supply falloff?

  25. 25
    choices Says:

    Relatively slow day so I thought I would throw this into the fire-I just started reading Bailout Nation, which McGraw Hill would not publish because he insisted on calling the rating agencies “Pimps and Hos.” Probably relates to the fact that MCGraw owns S & P-heh.

    Our boys published this article yesterday in Wash Post. Not sure what the intent of the article was but it did not seem to add much.
    http://www.washingtonpost.com/wp-dyn/content/article/2009/06/14/AR2009061402443.html?hpid=opinionsbox1

    Seeking alpha critique:
    http://seekingalpha.com/article/143265-the-geithner-summers-proposal-today-s-foundation-tomorrow-s-crisis

    I believe that regulation must be tightened, probably obvious, to avoid Wall Street greed getting away again but not over regulation and not control-I am not optimistic with the armies of lobbyists and money being thrown at the politicians and the links current govt officials have with Wall Street.

  26. 26
    zman Says:

    Isle – production is undergoing a rounding top. I think we will see more evidence that we rolled over in this month end report and more in the next accelerating into the 4Q numbers. Offsetting the rig count or muting its impact are all the drilled but not completed wells which are dribbled out into the system adding flush production even as the rig count falls. Before that we have offsets from a continued recovery in the Gulf of Mexico from last seasons storms. That’s done now so the numbers should slide from here. Texas will be most obvious but then Ok, Wyoming, and “other states”.

  27. 27
    zman Says:

    Choices – thanks will have a look.

    One of my favorite market behaviors playing out today in HK. Tepid, waffling market and a stock that legs up each time the market waffles higher, only to hold the new high range when the market sinks back down. That generally gives one confidence to hang on a little longer in the name, especially if the market looks likely to continue to oscillate throughout the day. Here’s to Najarian being right about the market boucning this afternoon/tomorrow.

  28. 28
    tater Says:

    HK – Looks like it ran into the resistance that I had noted on the 60 min chart. Don’t know how strong that resistance (the red line) is, could get broken on a second try up into it. I just got back in, so I don’t have a quote on Natgas, but that line at 4.50ish appears to be pretty strong so I’m sure that will have a bearing on price.

    I’ll get on EOG and SWN.

  29. 29
    Dman Says:

    Z – your work is much appreciated, I assure ya.

    Looking at the daily UNG chart over the last few months, there are consecutive higher lows and todays high is a higher high. The MACD is just turning positive and the price has crossed above the 50 & 100 days averages (the latter occurred today, so it’s a bit early to count it, but …).

    (I use the UNG chart because my NG chart gets cluttered with a lot of bad prices, for some reason).

    So there is a lot of technical goodness there. In valuation terms, well, obviously NG is near the bottom of a multiyear range, whilst other commodities have run a fair way.

    Finally, money *is* moving into NG from crude.

    BTW, have gotten used to the thinkorswim platform for actual trading and very happy with it. Don’t know how I lived without it.

  30. 30
    zman Says:

    Thanks Tater, got a report the site is running slow and comments not showing up, anyone having that issue as I am not from here?

  31. 31
    zman Says:

    Thanks Dman. I have yet to make the effort on ToS to see if I need to jump over there. This broad market is a boat anchor.

  32. 32
    bill Says:

    >I believe that regulation must be tightened, probably obvious, to avoid Wall Street greed<

    I believe in term limitations to avoid politician greed

    Also, i believe that congressional budgets be cut 50 % until they balance the budget thru spending cuts and not tax increases

    Furthermore, I believe that the business of america is business and we need less impedimants in achieving said goal

    I believe current problems not caused by wall street greed but by politicians.

    What is the relevenace of a question to my ethicnicty in a mortgage loan application?

    That is all

  33. 33
    zman Says:

    At least for now, missed my shot at selling those HK calls, will be a little patient here as they came off fast with this ugly market but are still best performers in the group today.

  34. 34
    bill Says:

    aubrey is finding a new way to spend money

    http://finance.yahoo.com/news/American-Chopper-show-builds-apf-15537868.html?.v=1

  35. 35
    tater Says:

    Added daily views for EOG, SWN, and WRES

    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2933882

    I don’t think the 60 min charts are as controlling, at the present, as are the daily views.

    All appear to share support at the 20 EMA and are looking (failing?) at a breakout point.

  36. 36
    zman Says:

    re 34 – thanks for the laugh Bill.

    Tater – took a look at those, thanks much.

  37. 37
    PackMan Says:

    gonna pick up some PXD (stock) here ….

  38. 38
    zman Says:

    Went digging about on that Genscape cushing estimate. Looks like they have been right more often than not but the sample size of estimates I found was just a handful.

  39. 39
    zman Says:

    Anyone recall Nicky’s last support level on the SP?

  40. 40
    zman Says:

    Crude up 50 cents now, dollar pretty much unchanged down near 0.75% all day, the decline in oil is tied again to the broad market and little else. Largest looming question is the broad market at this point.

  41. 41
    elijahwc Says:

    FYI

    The open gap on HK is now fully filled

  42. 42
    VTZ Says:

    908 I thought.

  43. 43
    zman Says:

    Thanks Eli, I noticed that.

    Thanks VTZ, couldn’t remember if it was that or 912.

  44. 44
    zman Says:

    HK the only green on my screen now (barely).

  45. 45
    zman Says:

    ZTRADE:

    HK – Added (5) more July $25 Calls (HKGE) from $1.50 with the stock at 24.50 (after having been nearly a buck higher earlier).

  46. 46
    choices Says:

    Picked up some KOG at 1.08 just now.

  47. 47
    zman Says:

    emailed in from BOP whose on vacation:

    HeadTrader thinks the mrkt technicians called for a sell-off to thurs… so, that is what the mrkt is going to do. doesn’t really mean a whole lot. Govt Policy will continue to weigh on mrkts, tho. Doesn’t seem to be a lot of conviction that deficits are headed any way but wider.

  48. 48
    zman Says:

    FSLR starting to pull back into a range that is more interesting in front of the 2Q release and their analyst/investor day next week.

    Oil flat. NG down a dime and may still go for that test of $4 (knew 2 days up in a row was too good to be true).

    HK only thing green on the screen.

  49. 49
    choices Says:

    Dman-re: ThinkorSwim-As I understand it, Think is to be acquired by TD Ameritrade, to be completed by end of June. I have held off opening Think a/c to see how the acquisition goes because I have TD a/c-have you any recent info as to the status of the acquisition.

  50. 50
    zman Says:

    Oil trying to hold $70 as we approach the close of Nymex, looks like it will make it but a far cry from this morning’s rally. API after the close will be key to determining pricing if the broad market does not show some sign of a pulse soon.

    NG looking to hold $4.10 here as well, not too shabby considering the run yesterday. Looking at the forecast now it appears the CPC’s forecast is going to be outdone … pretty darn hot over much of the country compared to norms.

  51. 51
    isleworth Says:

    Thinkorswim acquisition was completed by TD on 6/11

  52. 52
    zman Says:

    Dollar rallied mid morning (still off 1/2% on the day) after Russia failed to follow up on their earlier comments about creating a supra-national currency basket to replace the dollar at the BRIC meeting.

  53. 53
    Denise Says:

    Good afternoon

    Question on all the chatter I have been reading on ung not having enough shares the last three days-wsj,bloomberg, ect…

    Cramer posted a piece today saying he thought ng could be easily manipulated upword (reminding us of Amaranth ) and suggesting a buy of dvn,swn, and chk

    Opinions? When I read the first peice a few days ago a simalar thought crossed my mind

  54. 54
    zman Says:

    Denise – I think we’re at that point in the natural gas cycle where we see increased volatility. The short position is large. They know the trade is getting long in the tooth but the fundamentals still are not making a hugely bullish case and so they hang on. I have noticed that gas is able to move quickly higher on relatively light volume on what I’d call neutral news of late. I might swap out RRC and KWK for CHK and DVN keeping SWN and adding HK to his list but they will all move higher if gas is able to get a foothold and force a real cover.

  55. 55
    Denise Says:

    Z-Sorry if I am being redundant and the board has discussed-(not been around much)
    would you agree that UNG can easily be manipulated up-if the day traders go for it?
    Have you looked at the underlying issues with it?

  56. 56
    zman Says:

    Denise – I have looked at it and as you know I don’t care for it as a trading vehicle. But it is essentially going to price off the front and second month futures contracts (so NG/N9 and NG/Q9 at present). Those are not that hard to move around either and UNG will stay within a 1% point of their moves (and underperform the futures over time as well which is part of my dislike for the ETF).

  57. 57
    Denise Says:

    I know-but a number of technicians have opined positively on the etf lately..
    I’m just thinking it’s worth a shot for a trade-

  58. 58
    zman Says:

    Denise – I read that Cramer article. I think he’s got some causal issues there. The ratio of oil to gas is not a driver for a break out in gas any more than it is a driver for oil to come down some to collapse the ratio. He argued the same thing last summer with NG at $13 + and the ratio did come down … as oil collapsed. He talks about the stocks to play it with being crushed and they are well off their highs but so is what they sell (Ng) so looking at their multiples of CF (a thing cramer does not mention in his article at least as I recall) they are more middle of the road on 2009 (due to hedges) and then more of a mixed bag in 2010 (due to a lack of hedges and much more variance in analyst’ price decks). He sounds like he’s talking about a fast trade for non-fundamental reasons which is not my bag … I at least like to have a catalyst of some kind and not simply the lemming effect at my back. With that being said, I do think we are near the lows on gas (somewhere between $4 and $3.50 or so) and that it is tradeable from a catalyst standpoint around each month end when the supply figures hit. Until then, much of the moves are noise.

  59. 59
    zman Says:

    re 57 – hear ya, just not my style of trade. I’m long enough gas constantly via SWN or HK (presently) that I’ll certainly catch it if it works, lol In the meantime, I get the possibility of company specific news catalysts counter-balanced with the risk that Floyd likes to print shares like the Treasury mints dollars.

  60. 60
    zman Says:

    Thanks for that second article Denise, didn’t know UNG had gotten into swaps. Just another reason to avoid them in my book. I mentioned the contango in gas yesterday. When they roll from August to September and October later this year it looks like the funds will woefully underperform gas.

  61. 61
    Sambone Says:

    By Jason Womack
    Of DOW JONES NEWSWIRES

    Natural gas futures ended lower Tuesday as traders sold off contracts amid
    ample natural gas supplies and weaker demand for the fuel resulting from the
    economic downturn.
    Natural gas for July delivery on the New York Mercantile Exchange closed 6.1
    cents lower, or 1.46%, at $4.121 a million British thermal units after a day of
    choppy trading. The contract climbed as high as $4.387/MMBtu in earlier
    trading, then surrendered those gains as traders booked profits.
    “I think there’s a little bit of profit-taking out there,” says Pax Saunders,
    an analyst with Gelber & Associates. “The market went up a little bit too fast
    yesterday on short covering.”
    Natural gas has had difficulty making sustained moves higher because storage
    levels have continued to swell despite the brisk pullback in domestic drilling.
    “The fundamental reality may be weighing down the market,” said Stephen
    Schork, editor of the energy advisory newsletter The Schork Report.
    Natural gas in U.S. storage is on pace to reach record levels by the end of
    October – which marks the conclusion of the summer injection season, when
    natural gas stocks are replenished to meet winter heating demand.
    Storage levels stand at 2.443 trillion cubic feet – 30% higher than last year
    and 22% above the five-year average.
    The relative surplus has eased concerns about supply and contributed to a
    steep decline in natural gas prices. Natural gas prices have plunged about 70%
    since last summer, when prices peaked above $13/MMBtu.
    However, natural gas producers have responded to lower prices by idling rigs
    and trimming production to curb the flow of gas into what has become an
    oversupplied gas market. The number of rigs drilling for natural gas has fallen
    by more than half since September.
    “In order to sustain a move higher, the market may have to look beyond the
    near-term storage to what should be a tighter future,” Tim Evans, an analyst
    with Citi Futures Perspective wrote in a note to clients on Tuesday.
    Meanwhile, weather forecasts for above-normal temperatures were helping
    support natural gas prices.
    The National Weather Service forecast for June 21 to June 25 is calling for
    warmer-than-normal temperatures in Texas and in the Midwest. Both areas rely
    heavily on natural gas-fired power to meet demand to cool homes and businesses.
    Hot temperatures can spur demand for the fuel and also slow the rate that
    natural gas is injected into storage.
    -By Jason Womack, Dow Jones Newswires (Christine Buurma contributed to this report.)

    Dow Jones Newswires
    06-16-09 1503ET

  62. 62
    Dman Says:

    choices, yep the ToS-AMTD deal has closed:

    Dear Swimmer!

    Today TD AMERITRADE announces the close of the acquisition of thinkorswim. You’ve probably seen a few changes since the deal was first announced five months ago.

    Four software releases packed with enhancements including single-click complex order routing for active traders, complete flexibility on chart windows, over 10 new futures and futures options products, spreads for futures options, new risk vs return analytics, myTrade Twitter and order routing integration, fast tab access, and lots, lots more, with more coming soon.

    Then thinkorswim Advisors introduced live trading sessions in the Red Option swimCoach online seminars, taught thousands of students at 50+ free seminars around the country, and have standing-room only presentations at trade shows.

    Does that sound like a company that’s “disappearing”? Didn’t think so.

    The bottom line is that what thinkorswim is best at-delivering powerful, user-friendly trading technology, supporting active traders over a wide range of products, and teaching the world a smarter way to seek risk management and spot potential opportunities-isn’t going anywhere. In fact, we’re pushing further and faster than we ever have.

    What TD AMERITRADE brings to the table are great account management tools, strong customer service skills, and some features that help fill in the “gaps” of the thinkorswim platforms. The goal of the acquisition is to redefine and set a new standard for the online brokerage industry. That’s what thinkorswim has always been about.

    The plan is that you’ll continue to trade on your favorite thinkorswim platform, at your current commission rates, and talk to the same people (some new ones, too) when you need help. All you have to do is find your next trade.

    Sincerely,

    Tom Sosnoff
    Founder, thinkorswim
    Scott Sheridan
    Founder, thinkorswim

  63. 63
    zman Says:

    Stepping out for the close; someone feel free to post the API #s when they hit, thanks.

  64. 64
    Dman Says:

    Denise, I’ve been using UNG for a few trades lately, based mainly on a technical approach, & it has worked well.

    The main thing you need to remember is the contract roll dates (a 4-day period every month) which are published on the ETF website. There is a roll period currently which ends June 17.

    This one didn’t seem to cause much underperformance but they have done so before & will do again. So you need to be aware of those dates & of the roll process.

  65. 65
    Denise Says:

    Dman -and anyone else good article on UNG
    and it’s issues right now

    http://ftalphaville.ft.com/blog/2009/06/11/56933/the-problem-with-commodity-etfs/

  66. 66
    1520sbroad Says:

    gmxr h-ville well results out – look like some decent IP’s high 8’s low 9’s

  67. 67
    Denise Says:

    A suggestion from D Dion that Cramer has been quoting today on CNBC
    buy FCG ise-revere natural gas fund. I looked up the expense ratio 77bpts as opposed to UNG’s 60 bpts.

    Z’s strategy of buy direct is good advice

    Dion says “FCG is a natural-gas fund that tracks an underlying basket of companies in the business of natural gas — not underlying futures or swaps. While FCG is not as “pure” a play as UNG, it is a safer one for individual investors who want to track the natural gas phenomenon without getting tangled in the problems that have hounded products like United States Oil (USO) . ”

    Here are the fund’s top 10 holdings:

    Quicksilver Resources (KWK)
    W&T Offshore (WTI)
    Mariner Energy (ME)
    SandRidge Energy (SD)
    Cimarex Energy (XEC)
    Pioneer Natural Resources (PXD)
    Goodrich Petroleum (GDP)
    St. Mary Land & Exploration (SM)
    Newfield Exploration (NFX)
    McMoRan Exploration (MMR)

  68. 68
    zman Says:

    API Watch:

    Crude Down 1.3 million barrels
    Gasoline stocks up 2.14 million barrels
    Distillates up 900,000 barrels

    That gasoline number is a bit troubling. Looks like production increased with flattish demand. Also looks like crude imports probably were up a bit.

    Jat, did you get imports and utilization?

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