06
Jul
Ugly Monday
Sentiment Watch: Blood red ugly. Green shoots have turned out to be weeds which are quickly withering as time goes by. Even the Vice President says so. While crude inventories have been declining for the last eight weeks, hot money that had come into commodities, oil among them, is now fleeing for the exits resulting in WTI falling away from just short of a 7 month high to a 6 week low in the last 4 trading sessions. Look for OPEC to step up the rhetoric regarding renewed efforts to stick with quotas and talks about "no production hikes" in September to defend $60 in coming days. I'm glad I'm half cash and I won't be quick to fish this dip since people are looking back to the 2008 3Q and thinking what a beast it was for energy and everything else.
The Week Ahead:
- Monday 7/6: ISM (forecast 46%)
- Tuesday 7/7: No U.S. eco data
- Wednesday 7/8: EIA Oil Inventory Report, consumer credit
- Thursday 7/9: EIA Natural Storage Report, initial jobless claims (forecast -584,000), May wholesale inventories
- Friday 7/10: June housing starts, May trade balance, June import prices, July consumer sentiment (forecast 71)
In Today's Post:
- Holdings Watch
- Commodity Watch
- E&P Bar Charts
- Stuff We Care About Today
- Odds & Ends
Holdings Watch:
- $10KP: $16,300 / 61% Cash
Commodity Watch:
Crude oil fell 4% last week to close at $66.28. The 12 month crude strip was trading at $70.44 before today but futures are indicating a sharply lower open this morning due to fears over a further delay in global recoveries (European GDP still very weak and U.S. job losses continuing to pile up). The dollar is making yet another effort to rebound off the lows as well with the combined effect of a $2.50 to $3 loss for crude before the open.
- Nigeria Watch: Another week, another set of attacks.
- MEND claims to have destroyed another Shell wellhead tied into the Bonny light export terminal and
- a Chevron oil manifold in Delta state.
- According to Reuters, Nigerian production has fallen 273,000 bopd in the last six weeks due to forced shut ins at Shell, Chevron, and AGIP.
- MEND also claims to have hijacked a Chemical tanker (the Siehem Peaces) overnight. So much for the amnesty offer.
Natural gas fell 11% last week to close at $3.66. The 12 month strip is now trading at $5.13. This morning gas is trading off nearly 20 cents with oil, a lack of tropical threat in the Gulf and a forecast that is something less than sweltering.
- Weather Watch: Cooling Degree Days (CDDs) compared to gas storage injections:
- Week Before Last: 76 CDDS which resulted in an injection of 70 Bcf.
- Last Week: 64 CDDs which is in line with normal and year ago levels. This should yield a bigger injection this Thursday.
- This Week's Forecast: 68 degree days,
- Week Before Last: 76 CDDS which resulted in an injection of 70 Bcf.
- Tropics Watch: Still pretty quiet. No development expected in the next 48 hours.
- Canada Watch: 6th pipeline bombing in recent weeks; these are smaller lines, not the big export ones but a concern nonetheless as sabotage activity seems to be picking up.
E&P Multiple Update
These charts are provided as a reference and will be archived on the E&P - Metrics tab.
Stuff We Care About Today
(GST) NAV coming tomorrow.
(EEE)'s Collins Quits
- Former CEO of EEE and former CFO of EVG quits the K-Fuel story, resigning from the board.
- I followed the KFX, then EEE clean coal story for nearly the last decade. Not good news for them to see him go.
Odds & Ends
Analyst Watch: Pretty quiet today on the energy front. I expect this to pick up in the next few days as the "mark to market" process for the second quarter
- (RDS.A) cut to Neutral at HSBC
- (CRZO) upped to Outperform at BMO
Great E&P update Z!!! Tks
July 6th, 2009 at 7:53 amIsle – I’ll add cash costs and 2010 growth to it and repost to the E&P metrics tab later this week. It’s a hand reference to have around.
July 6th, 2009 at 7:57 amAnalyst watch:
Caris cutting price targets on indie refiners.
July 6th, 2009 at 8:21 amWondering if we get low of day early and then watch for a better ISM. No better ISM and we sell off even harder. SPX close to last line of defense.
July 6th, 2009 at 8:31 amCHK down another 7.5% on open …
July 6th, 2009 at 8:33 amPack – they’re not alone. Won’t try to pick a bottom to add more positions in here until the dust settles a bit. If you look at the eco data this week there are only a couple of things that can really move the market, ISM being the first. Nicky pointed out that we are very close to a SPX right should break down.
July 6th, 2009 at 8:35 am63.97/3.45 = 18.54 Gas is oversold, and overreating to CL drop.
July 6th, 2009 at 8:47 amReef – roger that. Everything I see says gas demand is off 3 Bcfgpd from where it normally would be. I think that math is a bit stale as that’s what the Street has been using for months now. I think we see a big short cover on the first tropical weather and I still don’t think we see a $2 handle on natural gas.
One thing is certain, the E&Ps are going to be even more reluctant to put a lot of 2H09 planned rigs back to work with prices so low on the gas side and teetering on the oil side. I also think OPEC is going to start getting noisy here as $60 is not that far away (2 days trading at this rate).
July 6th, 2009 at 8:50 amSEA (drybulk ETF) down 3+%, in line with the commodity stocks drop. Group just can’t seem to get out of its own way.
SP below its 50 day.
July 6th, 2009 at 8:54 amISM at 47% vs 46% expected, 44% last month. Stocks, crude coming up a bit on that.
July 6th, 2009 at 9:01 amre: #9-Baltic Dry Index seems to be rolling over.
July 6th, 2009 at 9:13 amMahalo Z for all your work. Now if I could just convince you to come out to Maui and read it to me orally, I would have it made.
July 6th, 2009 at 9:17 amEld – with your eyes closed, swinging in a hammock? I check to see if wordpress has that option, lol.
Stocks tried to rally and then failed lower following ISM. Makes one wonder what they would have liked. Looking forward to a more news driven market in the coming days, still see no reason to get in the way of the fear that seems to be gripping the broad markets.
July 6th, 2009 at 9:20 amNicky’s “must hold” level for the SP500 is 888.
July 6th, 2009 at 9:25 amThe well known defects in UNG result in it making new lows while NG has not (yet) done so. This could pressure NG if fund managers react to the technical breakdown in UNG.
July 6th, 2009 at 9:26 amExcellent summary and charts this morning, Z.
Thanks.
Z. what is your view of the seasonality of Nat Gas-I see a lot of chatter that it usually bottoms end of July rallies and tests bottom in Aug and then “to the moon.” I think you make a good point that the drillers are not going to put rigs to work until they see a solid recovery in price-I think this rejects the seasonality theory.
July 6th, 2009 at 9:27 amDman – Agreed. I think regulators are going to take UNG and USO apart (or at least make them restructure how they operate), probably next year. The CFTC is considering position limits for commercial and non-commercial traders. I can’t see how UNG would get around that.
July 6th, 2009 at 9:28 amCRK now only 21% above its October 2008 panic low.
July 6th, 2009 at 9:30 amChoices – I call it roving seasonality. Aubrey at CHK has referred often to it in the past that the rally in gas seems to come a month earlier each year (although not at all last year). I think this cycle is pretty different than past ones, that we don’t see a rally to the 2008 highs for quite some time but instead to that $6 to $7 range (which from here is still a pretty good rally). Unlike in the broad markets and in crude however, it will be much more attenuated to a change in data (lower supply) than it will be to sentiment. That’s not to say that traders won’t cover a bit in front of each of the monthly numbers but I think it will take hard data showing declines to maintain the rally begun by covering. Storms really saved gas’ bacon last year, shutting in 7 Bcfgpd or some large portion thereof for months. That would help again this year. But we’re aways from the really busy part of the cane season now and what we really need is an industrial recovery and lots of heat.
July 6th, 2009 at 9:34 amHas anyone seen a Street based GST comment? Bought a little on Friday in a couple of family accounts. Stock not getting any follow through today but not crumbling either at $0.56. Much more interesting without the giant debt load and the distraction of a foreign subsidiary. Now focused on just E. Texas (deep Bossier – think deep, high pressure gas, costly but big IP and in a good area with CHK, ECA around and playing in the play and the Knowles Lime (less tested) and with more upside potential over in the Marcellus and some in the PRB in Wyoming. Australia deal on Friday wiped out there debt, interesting.
July 6th, 2009 at 9:39 amISM comments, services still contracting but best levels since last September:
http://www.marketwatch.com/story/ism-gauge-shows-service-sector-on-road-to-recovery
July 6th, 2009 at 9:47 amXCO gap filled
July 6th, 2009 at 9:47 amDman – lot of that going on. New gap creation too. See HK Thursday and again today.
July 6th, 2009 at 9:54 amNOV & OII have broken down thru lower line of ascending channels since March. In a sense this is positive: those channels were unsustainable. But both have monster sell signals on weekly MACD, so I’ll wait a while before looking at this as an opportunity.
By comparison, whilst many E&P charts have also just gone negative on weekly MACD, the signal doesn’t have the “monster” character that some of the service charts do.
July 6th, 2009 at 9:54 amHi Z, came across this natural gas article from 2006, I didn’t realize negative spot prices were possible?
July 6th, 2009 at 9:55 amhttp://news.bbc.co.uk/2/hi/business/5402370.stm?ls
Dman – I was early on my OIH shorts by about 6 weeks. Not going back in for now. My hedge is cash as this can turn when you least expect it.
July 6th, 2009 at 9:56 amBoss – yeah, I remember that, extremely rare though, has never happened this side of pond, no danger of it happening now. There’s a much smaller storage system with a lot less flexibility than the U.S. system, much more of a demand market than a storage market. The U.S., by contrast is seen as the world’s greatest salt cavern, taking excess supply off the high seas when need be.
July 6th, 2009 at 9:59 am#25 Who said markets have no sense of humor? The price was negative but no one could “buy” it because they had nowhere to put it.
July 6th, 2009 at 10:10 amZ- You were asking about oil sands CO2 the other day and I said I expected Alberta to give out funding. I didn’t see this until today due to vacation:
http://alberta.ca/home/NewsFrame.cfm?ReleaseID=/acn/200906/2638932A61D80-09C7-C9F7-CCD99F5E0113E39A.html
July 6th, 2009 at 10:30 amV – any idea how much capacity Scotford upgrade is of total? I’d like to get to a $/barrel figure at some point. At $2 billion it does not sound like a big cost so far, am I reading that right?
July 6th, 2009 at 10:34 amV – was thinking about SU and some other oily names when you send along 29. Just sitting on hands for now but they oilier names are getting whacked today. Same goes for oil dependent oil service, like RIG. Meanwhile, market seems frozen, like vacations are ongoing.
July 6th, 2009 at 10:36 amAnalyst Watch: Lazard takes CLNE target from $10 to $12.
July 6th, 2009 at 10:36 amLNG still running 1.3 Bcfgd, +0.2 YoY
Canada was 7.3 Bcfgpd last week, that’s a big uptick from recent weeks but still off 0.9 Bcfgpd. Guess they figure they better ship it south of the border while there is still room.
July 6th, 2009 at 10:43 amThe government is willing to fund 2 billion worth of CO2 infrastructure projects.
The Scotford project is applying for a portion of those dollars.
Scotford’s capacity is ~150,000 bpd today and ~250,000 bpd in early 2011 (post-expansion s/u).
At 150,000 bpd Scotford upgrader produces 1.5 million tonnes of CO2 per year. Their project is designed to capture and store 1.2 million tonnes of CO2 per year so they are eliminating 80% of CO2 from their current facility. The average industry cost is about 100-120 $/tonne so we have an annual cost of:
100*1200000$ / 365*150000 bbls = 2.20 $/bbl
July 6th, 2009 at 10:52 amor looking at it as a reduction of the 250,000 bpd facility (post 2011) then you have
100*1200000/365*250000 = 1.31 to offset 40% rather than 80%
July 6th, 2009 at 10:55 amThanks much V!
July 6th, 2009 at 10:56 amIs WRES the mini SLB?
July 6th, 2009 at 11:07 amAnd what was the name of the hurricane clean-up company? The one that always seems to go through the roof when weather is threatening.
July 6th, 2009 at 11:08 am#38 OII
#37 huh?
July 6th, 2009 at 11:10 am#37 I think you mean WFT
July 6th, 2009 at 11:11 amTater – that would be WFT
OII on the cleanup
July 6th, 2009 at 11:11 amDman – thanks for the assist, I was busy listening to the ongoing Jackson estate issue on CNBC and wondering, for the 15th time this month, how those guys at CNBC have come up with yet another topic that has absolutely 0 impact on my bottomline.
July 6th, 2009 at 11:12 amYes WFT. Thank you.
July 6th, 2009 at 11:13 amThanks on the OII as well. I always seem to read that as “Oil” whenever I see it and my eye just skips over it.
July 6th, 2009 at 11:14 amhttp://www.nytimes.com/2009/07/05/opinion/05rich.html?_r=1
Goldman seems to be in control:
1. Elimination of the weekly reporting on program trades-theory is Goldman major beneficiary;
2. Goldman alumni major component of the Geithner/Summers group;
3. Sheila Bair FDIC cut out of consumer finance review.
Fairly depressing news overall.
July 6th, 2009 at 11:15 amchoices … not all good for Goldman today …
http://zerohedge.blogspot.com/2009/07/is-case-of-quant-trading-industrial.html
July 6th, 2009 at 11:20 amInteresting, Pack. Thanks. Evidently the Matt Tiabbi article also sent Goldman into a fury-it would be less concerning to believe that they are not in total control but I do not think Geithner/Summers will stray too far from the reservation.
July 6th, 2009 at 11:25 amre #45-47, this is an interesting site:
http://www.goldmansachs666.com/
… pointed out by Wall Street Manna:
http://aaronandmoses.blogspot.com/2009/07/goldman-sachs-runs-with-its-tail.html
July 6th, 2009 at 11:44 amZ – BOP still out?
July 6th, 2009 at 11:57 amBOP’s busy with getting back from vacation.
July 6th, 2009 at 11:59 amz – #42
from James Kunstler:
“Like the United States, Michael Jackson was spectacularly bankrupt, reportedly in the range of $800-million, which is rather a lot for an individual. Had he lived on a few more years, he might have qualified for his own TARP program…”
http://kunstler.com/blog/2009/06/the-man-in-the-mirror.html#more
July 6th, 2009 at 12:05 pm#50 – thanks
Z – any guesses on why SWN is out front today?
July 6th, 2009 at 12:22 pmRe SWN. No, that is odd. Broke 200 earlier.
July 6th, 2009 at 12:23 pm200 day ema that is, then snapped back above it. A lot of the gassy stocks are at support, most of them in the lower half of the support range or breaking through it now. So it’s either time for a turn or a breakdown as we’ve had 3 weeks of slippage here.
July 6th, 2009 at 12:29 pmswn – looks like decent volume for this time of day too.
July 6th, 2009 at 12:30 pmKOG at 0.905 down 10% …
July 6th, 2009 at 12:39 pmGood afternoon to all.
Firstly apologies for that lousy call last week saying oil was heading higher! I had been quite bearish on oil until that rogue trade after hours last week which took oil back above 73 – it faked me out and I thought we were going to make new highs.
July 6th, 2009 at 12:46 pmI still do think we will go higher but likely this correction is not done. I think we are in a big wave iv correction and currently in C. I think it likely that we soon see a bounce back to the $66 area before heading most likely down to the early $60’s. We are now down five days in a row.
z – question about one of the bar charts in the post this morning – market implied value per MCFE – i think it is the 4th one from the top. the per MCFE portion – what type of reserves is that?
July 6th, 2009 at 12:46 pmBroader market – 888 got taken out earlier today and likely means we are heading lower after a correction to the 906 – 912 SPX region. If 878 gets taken out then we are looking at 810 – 850 in short order.
Could the top of the bear market rally be in . Yes its possible but not my preference. I think after this correction plays out we make another move to the upside before turning lower later in the summer.
July 6th, 2009 at 12:48 pmNicky – Can I get your thoughts on the SP chart?
1520 – those are proved reserves, the SEC definition. Not potentials. This is why some of them with tons of inventory to drill, like a SWN or an HK is going to look a bit pricey.
July 6th, 2009 at 12:49 pm#60 – got it – also answered my real question about those with a big drillable inventory.
July 6th, 2009 at 12:52 pmSPX Z?
July 6th, 2009 at 12:53 pm59 took care of it Nicky, thanks.
July 6th, 2009 at 12:55 pmre 56, yep, I see it. No big move after the recent wells, was close to a breakout last week. Would buy more but am sitting on hands with last summer’s “it really shouldn’t get much cheaper” thought in my head. I’m content for “them” to turn this and not pick bottoms.
July 6th, 2009 at 1:06 pmGold – looks to be in v down. Needs to stay under 935 and then we likely go down in v to the 880 – 886 level.
July 6th, 2009 at 1:15 pmWill have trucking short list in a minute, relayed from a pretty smart trucking analyst, don’t think he’s going to Cramer anyone on these.
HK trying to hold $19. Ugh.
July 6th, 2009 at 1:18 pmTrucking shorts from a hedge fund transport analyst/manager:
cvti, fwrd, saia, yrcw.
July 6th, 2009 at 1:30 pm64 – just pointing it out for those who might want it at that price..
HK ugh is right !
July 6th, 2009 at 2:13 pmclr getting crushed-ugh doesn’t do it for that one.
July 6th, 2009 at 2:25 pmRoger that Pack and thanks, good to point out the sales when they happen. Man, I thought I got a good price on it a couple of weeks ago at 0.92.
We have no eco-data in the U.S. tomorrow, for the last several weeks, the no eco days have been pretty ugly. Looking for a bounce of some kind soon here. On the HK, they have a predilection for Tuesday data releases in this general time frame, some Wednesdays but mostly Tuesday, so could be tomorrow, or next week, I don’t think they wait to release news until the Q in mid August.
July 6th, 2009 at 2:27 pmUnion calling on Geithner to force out Lewis.
http://www.nypost.com/seven/07062009/postopinion/opedcolumnists/the_ceo_hostage_crisis_at_bofa_177806.htm
July 6th, 2009 at 2:33 pmSWN, VLO standing in there amidst the carnage.
July 6th, 2009 at 2:54 pmI am starting to not like Mondays.
July 6th, 2009 at 3:01 pmZ – Today I show that HK saw very strong buying of Aug 21 calls (vol of almost 5800 vs. open interest of just 24), with many having traded on the offer. My options data tends to be suspect now and then, so I’d appreciate your confirming whether or not these figures are accurate. Thanks.
July 6th, 2009 at 5:23 pmrkbos, I show 5,240 August 21’s traded today.
July 6th, 2009 at 5:25 pmI show 5240 traded, with a prior open interest of 24.
HK 19.80 x 19.89 after hours.
July 6th, 2009 at 5:27 pmClosing price was 19.32.
Thank to the both of you.
July 6th, 2009 at 5:47 pm