08
Jul

Wednesday – Oil Inventory Preview

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Food For Thought Watch: from an interview with the head of API on CNBC this morning.

  • 6 million jobs in the U.S. tied to the oil and gas industry
  • Until 2008, Congress had 85% of U.S. oil and natural gas potential reserves placed off limits
  • Since 2000, $133 billion has been spent on green energy; 44% of that was spent by oil and gas companies developing on solar, wind, and geothermal.


In Today's Post:

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

Holdings Watch:

  • $10KP:

    • $14,300
    • 69% Cash

Yesterday's Trades:

  • HK - Added (10) HK July $20 calls (HKGD) for $0.50 and plan to double that if I can get more at $0.40 to $0.45 in the next day or so. Stock was at 19.25 at time of trade. Still expecting an operations update here but may not get it prior to expiry.
  • HK - Added a second set of $10 HK July $20 calls for $0.45.

Commodity Watch:

Crude oil fell $1.12 to close at 62.93, a fresh six week low. Crude has now fallen $9.30 or 13% in the last five consecutive trading sessions. The dollar has done nothing during this period. Part of the problem is the death of the term "green shoots" and part of the problem has been renewed fervor in hunting down and constraining "speculation". I'd also point that oil is in more of a healthy correction than a "tailspin" or as "continuing to crash" as the CNBC bobble heads keep offering. Again, oil is at a 6 week low, the markets are at a 10 week low and while the current direction of the market remains sketchy (to use a technical term) I don't hear them being described as "crashing". This morning crude is trading off a $0.80 to $1.20 on the back of weak looking API numbers (see below).

  • EIA STEO Watch: The EIA's monthly Short Term Energy Outlook was released yesterday. Key points are:
    • Oil price forecast for 2H09 upped to $70 from $67.

    • NG price is expected to stay below $4 until last year, no change from last month

    • Global oil consumption for 2009 seen down 1.6 mm bopd vs 1.8 mm bopd last month. This is the second consecutive bump in demand.

    • Non-OPEC supply seen rising 360,000 bopd in 2009 vs 400,000 bopd expected last month.

    • Natural gas production: 2009 now seen falling 0.6% vs 1.1% last month. 2010 seen down 2.9% vs 2.6% seen last month. I think that is going to be low.

  • API Watch:

    • Crude down 1.4 mm barrels (smaller than expected)

      • utilization flat at 85%
      • imports down 658,000 bopd (which would auger for a drop in oil stocks of 4.6 mm barrels all by itself). 
    • Gasoline up 767,000 barrels (in line to a little light depending on which survey you were looking at)
    • Distillates up 3.4 mm barrels (big but not surprising)

      Nuthshell: This is the third week in a row the API numbers seem out of kilter.  Somewhat bearish looking but would have been a lot worse to see a bigger gasoline build. I have not yet seen the utilization and imports numbers to see if these numbers even make sense. Crude is down from the close but flat since these were released, gasoline is flat since the release.

  • Nigeria Watch: MEND claims on Shell and AGIP pipelines.

Natural gas fell $0.06 to close at $3.43 and the chart has very weak near term support at $3.25 with better but long ago support close to $3. This morning gas is trading off  a nickel.

  • Early Read On Natural Gas Injection: Survey Says: 86 Bcf vs 70 Bcf last week (on much warmer weather) and 89 Bcf a year ago and a five year average of 95 Bcf. That looks about right, maybe a touch high.
  • Tropics Watch: Nothing probably worth noting; I do have my eye on a low south of Cancun but for now its just a swirl of clouds.

 

Oil Inventory Preview


 

ZComment: What do we want? Gas demand! When do we want it? Three or four weeks ago. Gasoline demand will be key to today's report.  We need to see a rebound to 9.3 to 9.4 mm bpd for gasoline demand with today's report for gasoline to be supportive of crude. Distillate demand continues to flag and I don't see any evidence of a pickup there. When that happens, and not just for one week at a time, it will be time to get a little more constructive on a potential move above recent prices for oil.

Stuff We Care About Today

Seismic Minnow Says 2Q Revenues Tumbled

  • Small seismic player Seitel sees 2Q revenue of $21.3 mm, down 52%
  • While it is a little player in the group it's results are probably going to foreshadow much of what we will see from the bigger players as some but not all seismic work is delayed (Veritas started a big shoot in the Haynesville just yesterday but that's a bit of an outlier).
  • I'm not a big seismic follower but it makes sense that these guys see a contraction in business and with non-conventional plays on the rise to the detriment of convention plays and with those plays often needing less seismic work.  That's debatable but you have to admit it's safer to drill the next well in a shale that's economic without the benefit of seismic than it is to go after the next exploration bright spot. 
  • Anecdotal evidence from the E&Ps points to a slow down in library seismic acquisition and a reduction in spending on new shoots about commensurate with their pullback  in spending in general.
  • The stocks have been beat up already, in some cases like (IO) extremely beat up, and I'm not necessarily thinking of shorts at this point but plan to listen to more seismic player conference calls this earnings season.

Drybulk Multiple Update - coming tomorrow. The group may get a boost today from two high profile upgrades (see below).

 

Odds & Ends

Analyst Watch:

  • (DRYS) goes from Underperform to Outperform at Credit Suisse.
  • (DSX) raised to Buy at Cantor

Interesting Reading Watch:

134 Responses to “Wednesday – Oil Inventory Preview”

  1. 1
    BirdsofpreyRcool Says:

    Good morning. Desk updates —

    Tech Trader says it’s a “60/40 short day.” Those odds are up a bit from yesterday’s call.

    Head Trader says he has to “go with the trend, which is down, it gets tricky around the MAs and support lines.”

    Credit Market is a tad weaker, both cash bonds and CDS this morning.

    Head Trader (again) would sit on his hands this week and take direction from reactions to earnings calls starting next week.

    Worth posting from TPH this morning —
    Energy stocks (OSX $146, E&P $357, XOI $859, XNG $379) – Time to take off shoes…so you can put toes in water. Crude/broad market pullback has energy stocks back to reasonable (not fantastic) levels where nibbling away at favorites makes sense. Downside now feels like 10-15%…upside 50%+ (valuation recap tomorrow). Reasonable risk/reward even though gas prices will get worse from here (and who knows about oil other than retrace to sub$40/bbl unlikely and speculators scared of more regulations).

    Worth posting from a NY Trading desk this morning —
    SP500 technicals update – S+P 500 Cash (881): Weak close below 893 “neckline”/885 200 day MA continues the three-step decline from the 956 June 11 top, and 932 July 1 high. Nears first support at the 879 May low, 875 Apr 17 high, 871 Jun CH, 864 Jun-Jul. Next is 847/846 Mar 6-Mar 30 dual retr’s, 830. May-Jun H+S top measures to 823. Max summer correction to 800. ST bears control vs 900. Closes above 942 on superb breadth would increase odds that summer low is in. The 666 March rally topped in 950-1000 primary targets. We expect another 950-1000 lift in 4Q per our “roadmap”. Long term ceiling stays 1100-1150.

  2. 2
    zman Says:

    Thanks BOP. Good stuff. Good to have you back.

  3. 3
    BirdsofpreyRcool Says:

    Update on Global Growth from IMF this morning pushed futures up premrkt…

    http://www.bloomberg.com/apps/news?pid=20601087&sid=aHDEXkWnZpA0

  4. 4
    zman Says:

    No trades from me until after EIA numbers

  5. 5
    zman Says:

    Tater – also seeing a lot of names that broke their 50 day two weeks ago, now just through their 200 day last Thursday. HK, CLR just below, trying to come back up through. SWN and XCO just a bit above and trying to move higher with the group today. I assume from your view you’d rather play (from a very short term perspective in the names that don’t break the 200 day but, what are your thoughts on the brief break below it, then the move back above it (if they get there))?

  6. 6
    zman Says:

    ZTRADE:

    CLR – Added (10) June $25 Calls (CLRGE) for $0.65. This unhedged, oily name has traded off from $33 to $23 in the last month and is probably due a bit of a bounce although its below its 200 day average since Thursday. Oil has been lower for 6 straight sessions and we get inventories at 10:30 EST which could provide a bounce or send it to $60. See post for inventory thoughts after an oddball API report last night. If oil bounces, CLR has been one of the goto names for exposure.

    I had this one set lower than I thought it would fire. Would have been smarter to have waited on the oil numbers so very risky until we get them.

  7. 7
    tater Says:

    In a word, choppy. Time to stand aside and let it play out. Only way to swing trade it is to either change time frame to very short (intra-day) or longer (Buffet type of analysis, “they’re having a sale today”). Day to day is almost impossible, sentiment changes overnight.
    Remember, the moving averages, no matter what the time frame, are trailing the price. So as they get near each other and start to cross back and forth it really is not much help any more to stare at them. I think the best use of them currently is to get a feel for their respective slopes. Is the 20 now sloping down? Is the 50? How about the 200?

    So to answer the question, it is kind of one of those things that become a case of being late to the party. Once you have a 50 sloping down and a 20 sloping down as well with the 20 below the 50, the trend is confirmed as down. That’s why I’m not a real big fan of using the MACD as a trading signal. By the time it crosses and gives you a buy or sell signal, the move might already be nearly over.
    Tough way to trade. Use them for helpful clues and be sure to analyze the history of the particular trend to see which MA has provided support/resistance for that particular name this time around. Chances are that on the reversal the name will respect that MA but from the other side.
    Hope that is of some use.

  8. 8
    zman Says:

    Tater – yes, thanks, so much easier than cracking my copy of Murphy.

  9. 9
    tater Says:

    Good example of the above is to look at CLR’s 60 min view. The middle Bollinger band is a 20 period MA. It seems to be respected as both support and resistance (not always). The thing to take note of though is that once price gets on one side of that line or the other it has a tendency to stay there the first couple times price runs into it.
    Currently the middle BB is acting as resistance to CLR’s attempts to rally.

  10. 10
    tater Says:

    I pretty much use the BB to time my trade entries. If I’m thinking rally time for some reason but there is an overhead BB that is coming screaming down towards price, it can sometimes be beneficial to let it act as resistance at least once before entering. You just did that so you get the big TA pat on the back. You’ve come over to the dark side!

  11. 11
    BirdsofpreyRcool Says:

    This is not a rant. This is just fact. The affect of the GGG… from an email I just received. And y’all wondered why I was apoplectic during the GM/Chrysler illegal private property grab by our own US Govt. Well… here are the consequences. You want to know why employment is going to continue down? Look no further than the GGG.

    Just talked to a small businessman who owns:

    -a high end homebuilding company that builds homes in Cleveland & in a high end western ski resort;
    -a commercial building repair business;
    -300 acres of farmland;
    -several other smaller businesses.

    He said “The 2nd half of 2009 is going to be a lot worse than people think based on what I’m hearing b/c people don’t understand what a huge deal it is that the fundamental trust in American business & contract law is gone. The Chrysler & GM moves (the judge apparently moved the assets in the GM bankruptcy & wiped out the debt/receivables).” “I am hearing all over with other businessmen, suppliers, customers that they aren’t sure how to run their business as a result.”

    “What the government has done with how they’ve handled this is break the fundamental trust of business & contract law – they’ve bailed out bad businesses that have made bad decisions. They don’t get it, & Wall Street doesn’t understand that this is happening either. But on main street, this lack of trust started about 3-4 months ago.”

    “For example – if i’m a manufacturer & i make a part for GM & the bankruptcy judge just wiped out my receivable, how do I get a loan? What happens to my payables to my suppliers? I stretch them out. I stretch out my landscaper, etc. And the ripple effect just goes on & on. ”

    “Businessmen just don’t know what the rules are, so they are doing nothing. Forget about planning out 5 years – I can’t plan my businesses out 1 year. I’m not buying new equipment. I don’t know if the rules will change.”

    “If GM can have their debt wiped out, or if I sell to California & don’t get paid, why should I trust that other customers I sell to will pay me in a timely fashion if they don’t have to, or that a judge won’t allow those to break their contract with me too?”

    “I have an acquaintance who tried to get into the development business – he owes a regional bank $500k on the land. He hasn’t paid on it in 18 months. The bank won’t foreclose on it – their lawyer started the process but stopped short of foreclosing. The bank instructed the lawyer not to. My friend tried to short sale the land from bank, but its in a state of limbo. What do you do? How do you invest in that bank’s stock or any bank’s stock knowing that they have loans like that on the books that they won’t take the writedown on?”

    “I have contractors who need cash advances to buy supplies for my houses b/c the banks won’t give them credit. I’m afraid to give them credit b/c I don’t know if they’ll pay me back.”

    “I have a customer who owns a manufacturing business – he is demanding some customers pay him COD b/c he doesn’t trust they’ll pay him. What does he do if GM comes to him with a big slug of business, when GM just walked away from the receivable to a competitor of his that used to make the same part? And GM wants him to make that part cheaper, on better financing terms than the supplier who got shafted on his receivable? It can’t happen.”

    “There is just no trust that the government won’t let your customers walk away from what they owe you.”

  12. 12
    zman Says:

    Tater – Hey, I’m just trying to stay out of trouble, lol. I’ll never be an aficionado of dark arts but that doesn’t mean I don’t think they have their place.

    Oil numbers in 10 minutes. E&P has already done one round of the pre report cha-chas but recovered with the market. I still think we get a bigger gasoline demand number this week which could lead to a surprise on the headline gasoline inventory number. Crude off $10 in 6 session: bad numbers and that will be $12, good and we have Nicky’s rebound.

  13. 13
    tater Says:

    Going to go sit on my tractor for a couple of days and contemplate the cave decor’. Good luck to everybody.

  14. 14
    zman Says:

    EIA Inventory Report (Oil just before the report: $62.07, down $0.86)

    Crude Down 2.9 mm barrels (in line with consunsus)

    Gasoline up 1.9 mm barrels (that’s too big)

    Distillates up 3.7 mm barrels (big #, not really that important now)

    Utilization 86.8% – just about flat with last week. This remains too high for the demand level out there for finished products.

    Imports – 9.2 mm bopd, still on the normal to slightly low side

    Gasoline demand: 9.229 mm bpd, that’s up but probably not enough to give support to gasoline or oil prices.
    Distillate demand: 3.039 – very ugly number, trucks still just not moving

    On the whole, modestly bearish numbers.

  15. 15
    zman Says:

    Hear ya Tater, thanks.

    BOP – don’t hold back, tell us how you really feel!

    Oil immediately sold off to down $1.30 to $1.50. Stocks not yet panicking but if whole number support of $61 falls look for oil to make a quick test of $60 which would send most energy names lower on fear alone. I’m sitting tight for now. The broad market will have a very tough time mounting any sort of a recovery without the energy names.

  16. 16
    zman Says:

    Inventories at Cushing rallied sharply, snapping a pretty good downtrend in storage at the NYMEX pricing point; midwest refiners taking a break due to margins. It doesn’t appear to be imports driven, perhaps higher Bakken volumes contributing as this is about the time frame that EOG and other N. Dakota players said they would be cranking production back up.

  17. 17
    BirdsofpreyRcool Says:

    z — you won’t hear this stuff from the Media… they are too busy promoting nationalized healthcare, cap-and-trade, and new taxes/regulations for us “Little People.” If you listen to NPR lately, you would think none of us can ever see a doctor. Amazing propaganda machine at work… using our own tax dollars.

    If that is a rant, then so be it. Look no further than Detroit’s own elected officials to see how well “govt” runs things. Or California, for that matter.

  18. 18
    BirdsofpreyRcool Says:

    Fair and Balanced… anecdotal news from the other side of the coin

    [From another colleague] — Last night while watching the hapless Charlotte Knights AAA baseball team struggle to a 8-4 loss I ran into a friend who is the one of the head accountants at a global battery manufacturer. About 80% of their car battery business is concentrated in the secondary market which tends to be highly inelastic….when a battery fails it can either be jumped or replaced…most people will replace a battery after 1 or 2 jumps….. I know – nothing earth-shattering yet……. Problem is…is that their manufacturing volumes have been significantly below normal market replacement levels for over 6 months as retailers have been running down inventory…..and this executive now believes that the supply chain is starved to the point that a steep recovery is coming and that any pick up in end user demand or a cold northern winter or a hot southern summer this year could provide a very lucrative operating environment. This same analysis works for tires, brakes, and air filters for cars. As he puts it…batteries are like gas…car does not run without it…..and they have to be replaced at regular intervals……some battery companies are also in line for DOE “green” energy financing….. We are not suggesting that companies like ABAT, CBAK, VLNC, or HEV are ready to rally…but if its true that the supply lines of manufacturing staples like batteries are starving…then a more sustained recovery may be in the cards for the 2H09 than the market is anticipating We also know there are still many people out there with the thought that the economy will get so bad that people will just abandon their cars instead of replacing a battery….we do not agree…and remembering the lengths I went through to keep my first car on the road…abandonment was never the option…..

  19. 19
    Dman Says:

    BOP – #11 seems to be consistent with recent numbers, especially transport, which are still in decline. A loss of confidence can be self-reinforcing & it seems that is happening. The contrast between the behavior of customers & suppliers versus govt happy talk wouldn’t inspire confidence that anyone is really in charge or dealing with the same reality.

    I thought it was obvious that Obama won what might be called an impaired presidency, meaning that he took office in the midst of an economic disaster and several unresolved (& enormously costly) wars. So it was obvious that he was being handed the proverbial poisoned chalice & if he wanted to succeed, he was going to have to do something pretty special.

    I thought that would have been obvious to him as well!

    But no, he just kept most of the revolving-door Goldman crew in charge of everything. Instead of tackling the laundry list of problems head on (the same ones he couldn’t stop mentioning in the campaign) he instead started to play down the problems & tried to reinstate a “business as usual” atmosphere. But it isn’t business as usual! It’s showtime & so far he hasn’t produced much.

  20. 20
    zman Says:

    BOP is back and he’s fired up. I like it. By the way, I like National Partisan Radio for the human interest stories and the car guys on Saturday’s. If you want to listen to news, try BBC.

  21. 21
    BirdsofpreyRcool Says:

    KOG — not hearing an “new” news… so not hearing any “bad” news either.

    Am i happy with the current price? No. Am i selling? NO. Does this stock trade like oil prices on steroids? Yes. Will i be happy i own KOG when oil prices stop falling and start heading back up? YES.

  22. 22
    zman Says:

    Oil refusing to fall out of bed so far, mounting little mini runs here and there.

    BOP – agreed re KOG pricing. Did you hear how well subscribed their secondary was? Any chance of follow on demand near the deal price from players who did not get full allocations? Probably wishful thinking but I think the stock action is noise/nervous hands contributing to an overly wide pricing band.

  23. 23
    Dman Says:

    BOP – glad to see the vacation didn’t mellow you out 🙂

  24. 24
    Dman Says:

    BOP – #18 Interesting. A few months ago I heard exactly the same supply-chain story for non-optional auto parts. The argument was that the stock market would rally ahead of the economic uptick the would be required to refill the supply chain. And rally it did, all the way to SPX 956.

    So my question is, did we spend that one already?

  25. 25
    BirdsofpreyRcool Says:

    This whole mrkt crisis was started by an expansion of credit that went beyond anyone’s wildest dreams. That credit bubble was handled ATROCIOUSLY by every govt official and rating agency involved (across more than just a few administrations). But, this is behind us now. The credit market — while not fully back to a reasonable sort of “normal” — is not frozen in a State of FEAR. It is functioning.

    So, the business cycle should be responding positively to this. But it can’t. As mentioned before, the affect of our own govt is the fly(or Gorilla)-in-the-ointment of the recovery here. Plain and simple. If we can stop or at least slow down the juggernaut of Stupid Govt Moves, you would see the market rally. The pieces are in place. We have already seen a rebound in the credit markets. We have stated the next phase of leveraging. This is good. This is healthy. This is what was supposed to happen. But govt uncertainty has stopped the recovery in its tracks.

  26. 26
    choices Says:

    And the beat goes on…

    http://www.cnbc.com/id/31798634

  27. 27
    BirdsofpreyRcool Says:

    Dman — #23 LOL… it did. For about 2 days. Then the soothing effect of all that wine (Somona Valley) wore off.

  28. 28
    Dman Says:

    BTW, I noted yesterday that all commodities were down (eg grains) and suggested this implied another bout of asset deflation. But it turned out the CFTC has making noises about new anti-speculator rules, so I suspect certain parties bolted from everything. Ag ETF (DBA) up 1.6% today.

  29. 29
    zman Says:

    Dman – I sent harassing emails to BOP the entire time just to make sure the mellow didn’t take.

  30. 30
    BirdsofpreyRcool Says:

    choices — to add to #26…

    http://news.yahoo.com/s/nm/20090708/ts_nm/us_mortgagefraud_fbi_2

  31. 31
    BirdsofpreyRcool Says:

    z — #29… i vaguely recall seeing something with your name on it… but the details are fuzzy now… 😉

  32. 32
    AAA Says:

    BOP, re #25, yes credit markets are somewhat better but the entire shadow banking system, eg securitized debt, is gone and not coming back. That has to leave a mark.

    Couldn’t agree more about unintended consequences of Obama-chavez’s crude intervention into BK law. Add inevitable union woes to the mix. This administration hates business and doesn’t understand the role of profit.

  33. 33
    BirdsofpreyRcool Says:

    AAA — suprisingly, the securitized debt mrkt is not vaporized. In the end, the really bad, awful, almost-criminal (well, actually it WAS criminal) part will be gone (sub-prime mortgages and credit cards come to mind). But the valid bits are still there and will — and are — come back. Just like i was SURE the junk bond market was killed dead in 1991 and then again 2002… it wasn’t. The securitized market fills a need. It’s not dead.

  34. 34
    Dman Says:

    A – I have to disagree with your last point. Plenty of people connected to the govt seem to be profiting quite handsomely, so they must know something about profit!

  35. 35
    BirdsofpreyRcool Says:

    Dman — the terms “graft, self-dealing, insider-trading, pay-offs, and outright-stealing” also come to mind…

  36. 36
    VTZ Says:

    Dman – Just like the government & friends in Atlas Shrugged.

  37. 37
    cargocult Says:

    Ideology on any side is a trap when it inserts predetermined answers into a dynamic economic crisis. This country’s fundamental strength has been its political and economic flexibility which enables govt to bend and not break at times like these. Why does taking sides often mean overlooking the idiotic activities of one’s chosen party until the bums are thrown out? And then railing against the other party for similar behavior. We are as citizens required to simultaneously be in support and opposition. Our job is to keep politicians honest, not necessarily correct. My rant!

  38. 38
    BirdsofpreyRcool Says:

    I vote for “honest AND correct.” No more than our own Govt expects from private business (ref: “Sarbanes-Oxley”).

  39. 39
    zman Says:

    Turning back to stocks …

    sea of energy hate underway yet again as the broad markets resume their downward glide path, sinking oil below $61 with an obvious target of $60. Continued radio silence out of the energy names. Two weeks from now we see a slew of service earnings and NFX (week of the 20th)

  40. 40
    jpntexas Says:

    added some KOG at 0.75

  41. 41
    Dman Says:

    Attempt to look on the bright side: several months of steadily rising energy stocks, followed by a rapid drop (now) suggests an overall bull-market in energy.

  42. 42
    BirdsofpreyRcool Says:

    Definition of “Patience Rewarded” — see “jpntexas”

    Unless you think oil goes to $50 and stays there, KOG is going higher on oil prices, no debt, proved-up acreage, ability to attract strong partners on favorable terms, support from current investors, improving production profile, and increasing economics of the Bakken play (lower drilling costs, in-fill drilling potential, multiple producing horizons, improving completion techniques, plans for piplines, oil vs. gas, just to name a few ways this play gets better and better).

  43. 43
    Dman Says:

    BOP – just would point out that honesty is verifiable. Correctness is tricky to verify when economists are still arguing about who did what in the *last* depression.

  44. 44
    BirdsofpreyRcool Says:

    Dman — yeah… that’s where that “common sense” thing comes in handy… 🙂

  45. 45
    Dman Says:

    BOP – have you put BRY’s finances under your debt-o-scope lately?

  46. 46
    zman Says:

    Anyone showing the dollar down 2% today, I show it as flat. CNBC just said it was down that much???

  47. 47
    BirdsofpreyRcool Says:

    Not saying it’s “good”… but, timely article on bloomberg… Summed up as basically — “The Securitization Market is Dead… LONG LIVE the Securitization Market!”

    http://www.bloomberg.com/apps/news?pid=20601087&sid=aeTzfvEedKpQ

    This market will continue to exist as long as there is greed and a desire to outperform your peers. And I don’t expect those to be expunged from human nature any time soon.

  48. 48
    zman Says:

    DRYS catching a small pop off the upgrade this morning. No love for DSX though. I think no one buys the macro recovery theme for the group just yet and with prices tumbling it is a bit counterintuitive to promote these names now.

  49. 49
    zman Says:

    ZTRADE: Adding EOG July $55 calls (EOGGK) for $6 with the stock at $60.70. Oil and the group and EOG have fallen into the “too far, too fast” decline camp. Am probably going to slowly build a position here.

  50. 50
    Dman Says:

    Z – don’t know which dollar CNBC were talking about. The usual one is flat (but up against commodity currencies).

  51. 51
    zman Says:

    Thanks D, thought my screen was broken.

  52. 52
    Dman Says:

    VTZ – you out there? ERf, PVX, PWE, PGH being hammered 7-8%. Any news or just energy feeling the hate?

  53. 53
    Dman Says:

    #51 Who you gonna believe: CNBC or your lyin’ eyes 🙂

  54. 54
    VTZ Says:

    I don’t have any news on them. Looks just like broad hating to me. One thing to keep in mind is there’s about at 75 cent CAD$ differential between AECO and Henry hub prices right now.

  55. 55
    zman Says:

    Just going through the oil inventory report, nothing much to add to the previous stuff other than gasoline imports surged by 33%. That is a spiky variable anyway but it added about 1.6 mm barrels to the gasoline inventory figure (imports went to 1.2 mm bpd from the 980 to 1.0 mm bpd level last 3 weeks). So I wasn’t crazy looking for the better number in gasoline stocks, just got blindsided by imports. Not that matters to anyone, but well, there you have it.

  56. 56
    VTZ Says:

    Any opinions on what’s going to be the catalyst to stop the dump everything energy?

  57. 57
    zman Says:

    VTZ – my sense is there will be a “too far, too fast” snap back in the broad market, that will give oil a break. The stocks started falling well before oil which is kind of common the last two years. With that in mind, they won’t stop falling until hold trades sideways. At that time, I would expect them to get a bit of a bounce. So, broad market bounce, then oil flat, then energy stocks bit of bounce. At least that’s my thought.

  58. 58
    zman Says:

    Oil is going for the test of $60 now.

  59. 59
    zman Says:

    Now they are saying down 3% on the dollar yen but the dollar index is unchanged.

  60. 60
    VTZ Says:

    Do you worry that lots of funds bought energy as an “early cyclical” and are going to purge it now that the recovery they are expecting is obviously not coming any time soon?

  61. 61
    zman Says:

    V – yes, it is a concern, same goes for the broad market. I think the move in the OIH was more of that, given its size, than the move in the producers. The Majors have done little all year, the E&Ps were up for a time but those gains are fading now. I don’t think it moves in a straight line either way. I’m moving pretty slow on buying into weakness right now, smallish trades and not a lot of them. E&Ps are not over-valued right now and many are cheap on CF and reserves.

  62. 62
    choices Says:

    http://www.nowandfutures.com/current.html

    Not sure what dollar CNBC is talking about-gold/silver and mining stks being dumped as well.

  63. 63
    choices Says:

    I noted a couple of weeks ago that the chatter was about a second wave of de-leveraging, ie fund dumps-not sure if that is what we are seeing now.

  64. 64
    VTZ Says:

    Gold Silver have hung in there the best out of anything. They are priming to bounce off 880 in gold!

  65. 65
    choices Says:

    currency quotes:

    http://www2.barchart.com/mktcom.asp?section=currencies

  66. 66
    BirdsofpreyRcool Says:

    OK… Head Trader weighing in here with a TechTrader comment for all you day-traders — “this color pattern day tends to reverse… so if you promise to keep a tight stop you can go long here.”

    Just FYI. I did. But, with a stop at the LOD.

  67. 67
    zman Says:

    Distillate demand last week was at the lowest level seen since 2000; down 29% YoY.

    Jet fuel demand has averaged down 12% all year, last week it was down 24% to 2008.

  68. 68
    zman Says:

    BOP – just thinking out loud but on this kind of paint drying day, if you are quick, the green names or not far off par names seem to catch a strong wind if there is HT’s reversal. Watching EOG and CLR in that light.

  69. 69
    BirdsofpreyRcool Says:

    z — totally agree. HT thinks that if mrkt reverses (for today), energy and financials are the beneficiaries.

  70. 70
    zman Says:

    BOP – and I’m saying, among other fairly useless things if you are not a day trader, that the best performers won’t be the most downs on the day but the most up or least downs. I’m personally willing EOG higher as I type this.

  71. 71
    zman Says:

    Close of NYMEX will be pretty important for oil today. We have fought off a couple of runs on $60 so far but the last five minutes are probably going to be wild.

  72. 72
    Nicky Says:

    Afternoon all. CNBC now talking $50 oil so we must be close to a low.

    SPX has support at 865. Why is it today feels like the Dow is down 300 when it was only down 50!

  73. 73
    BirdsofpreyRcool Says:

    z — get you. Good point. Agreed. Fewer people looking for an “exit bounce” in those sort of “less-down” names.

  74. 74
    Nicky Says:

    If you want to see something that is oversold take a look at corn – RSI at 11 yesterday and slow stochastics on the floor.

    Santellis gives the T Auction an A+. Positive comments on the economy out of the Chicago Fed governor.

  75. 75
    zman Says:

    Toying with opening my own network on the internet so I can declare prices to a broader audience. Sheesh.

    EOG up 1% now amongst a sea of less red red. No, I don’t think anything is up there. Probably an analyst pounding the table. That’s not a name that frequently releases news between conference calls. Volume ok for the time of day but nothing to shout about.

  76. 76
    zman Says:

    Corn chart:

    http://charts3.barchart.com/chart.asp?sym=ZCN9&data=A&jav=adv&vol=Y&divd=Y&evnt=adv&grid=Y&code=BSTK&org=stk&fix=

    Funny thing is, the “energy bill” favored ethanol production.

    Ethanol chart goes right with the corn one:

    http://charts3.barchart.com/chart.asp?sym=ZKQ9&data=A&jav=adv&vol=Y&divd=Y&evnt=adv&grid=Y&code=BSTK&org=stk&fix=

  77. 77
    zman Says:

    Gotta wonder how long China can maintain 7+% without the U.S. If the trucks aren’t rolling here it is because consumers are not buying and inventories at retail are shrinking due to extreme discounting.

  78. 78
    Nicky Says:

    There is a h and s on the indices which absolutely everyone is talking about including CNBC (every 5 minutes). Would target a move to 820 on spx if it plays out. I always worry when everyone sees the same thing as likely it won’t then happen. We could still be looking at a triple zig zag on the indices in which case at 865 C would equal A.

  79. 79
    Nicky Says:

    Don’t look now but oil moving up…..

  80. 80
    Nicky Says:

    Z – took another look at nat gas. There is a long term trend line that comes in at 3.0.

  81. 81
    zman Says:

    Nicky – is SP resistance now the 888 level?

    Saw the natural gas line, think I commented on $3 in the post. Really not looking forward to hat eating.

  82. 82
    Nicky Says:

    Corn still falling. Major support at 308.

  83. 83
    elduque Says:

    Nicky what is your take on the dollar. I am working under the assumption that it is going to go lower. Once this market turns which it did at 89.6 it takes one heck of a lot to get the direction turned again. It is the ultimate trending market.

    I welcome your comments.

  84. 84
    Nicky Says:

    resistance at 880 SPX, then 888, 903,912.

  85. 85
    Dman Says:

    Z – there is a lot of talk that China’s numbers aren’t real. US savings rate is up & that means less for Chinese products.

  86. 86
    zman Says:

    Dman – right, I just see the lack of Chinese made bobble head dolls moving about the country as further evidence of the fakeness.

  87. 87
    Nicky Says:

    Elduque -dollar has been tricky but I think its in a wave iv triangle and needs another shot to the downside to finish wave v. Then we should see a multi month move up. So the downside on the wave v I think will end between 76.50 and 78.

  88. 88
    zman Says:

    N – thanks for the levels in 84.

    Service names greening up, even a little action amongst the coals and 4 or 5 green E&Ps now. Would like a close over $61 on crude, may get it.

  89. 89
    elduque Says:

    Z did you ever come up with the NAV for GST?

  90. 90
    zman Says:

    No because I am lazy like everyone else right now. I still have something to add in, will try to go ahead and bird dog that for tomorrow.

  91. 91
    Nicky Says:

    Looks like we will be lucky to hold $60. 6 down days. must be like a 20% fall now off the top too.

  92. 92
    Nicky Says:

    This dive into the close is characteristic of a wave v. We have a clear v waves down from this mornings high at 42.50.

  93. 93
    Nicky Says:

    Sorry make that 62.50!

  94. 94
    Popeye Says:

    GMA this am if you missed it.

    Coming from a billionaire oilman, it is shocking advice. But T. Boone Pickens is warning Americans to use more natural gas and to start using wind power because the price of oil is never coming back down.

    http://abcnews.go.com/GMA/story?id=5330139&page=1

  95. 95
    DrLink Says:

    just my two cents about today….

    Isn’t it funny when “risk aversion” rises the $USD goes up?

    The safe play with California teetering on the brink and the government continues its billions/gadzillion in treasury auctions every other week.

    Safety holding something that can be printed on demand….and trillions are.

    Meanwhile stuff we need to live survive day to day is sold.
    I follow the UUP………..in essence I view it as the liquidity hammer…when it goes up, liquidity drys up and mkt goes down………..when it goes down, the opposite

  96. 96
    BirdsofpreyRcool Says:

    HeadTrader stopped out of our day-trade. No gain today. However, nothing ventured, nothing gained. Just keep a tight stop.

  97. 97
    Nicky Says:

    Alcoa reports after the bell. CNBC have crapped on about this all week telling us how bad it is going to be. Maybe it will be a case of buying the fact. When I last looked Alcoa was up on the day.

  98. 98
    PackMan Says:

    In general, our professional politicians are woefully unprepared to govern effectively.

    As it pertains to Obama, he is a radical wrapped in the veneer of smooth talking moderation. You would think more folks would have figured that out by now.

    He is hell bent on socially re-engineering america in a manner that the vast majority of Americans will not accept. Cap & Trade and ObamaCare are the looming next parts of this disaster in the making that he is committed to pushing through.

    And is foreign policy is misguided, naiive and weak. He is alienating allies and coddling tyrants.

    Obama is a celebrity president. He makes liberals feel good; appeals to the young who are idealistic and uninformed; and he sells on magazine covers and TV (only recently displaced by Michael Jackson).

  99. 99
    zman Says:

    Random thoughts at 2:45 EST watch:

    Re AA. Well, at least their natural gas costs will be down.

    EOG the last outlier of resort. Silly market.

    DrLink is going to fit in well around here.

    Crude held $60 barely. Whether or not it bounces from here will be up to an aluminum company’s earnings of all things. Crude now down 15% in the last 6 sessions.

    HAL in the line up before SLB this earnings season again. They are better spinmeisters for service.

  100. 100
    PackMan Says:

    cargocult … keeping the politicians “honest” is sadly an impossible task.

  101. 101
    Dman Says:

    BOP – did you see #45? No pressure or anything 🙂

  102. 102
    BirdsofpreyRcool Says:

    PackMan — I second your comment. Well said.

    Not to mention his complete bulldozing of contract law… which was “validated” by our court system. That is truly socialism and asset appropriation, Hugo Chavez-style (in the name of the workers! Forgetting who actually provides the jobs…).

  103. 103
    BirdsofpreyRcool Says:

    Dman — thanks for the reminder! Short answer: no. Doesn’t mean the bonds/equity don’t work.

    But, I only allow a highly-leveraged, micro-cap company to have about 3 balls in the air at once. BRY’s ball are energy prices, heavy oil, and expensive lifting costs. When a company has a lot of debt in a cyclical sector, one worries more about the downside than the upside. The downside for BRY is it’s exposure to the Moonbats (as Wyoming calls them) in the Calif legislature. That is one too many balls in the air for me.

  104. 104
    zman Says:

    BOP – I don’t think the high LOE hurts them until we see oil in the $40s as people expect the oilier names to have higher $/BOE costs, nature of business. I think the leverage to oil will hurt when oil is going down and vice-versa. On the California issue, they have been working with PXP ok on it so I don’t know if the Californians, who seems to be short of revenues, will be do much to hurt them now, maybe a higher production tax but the impact is generally small from the hike when it happens. They will see good upside on reserves with an end of year close of oil over $60 as well, like the WRES story.

  105. 105
    BirdsofpreyRcool Says:

    Dman — I hope that helps. In all honesty, I haven’t spent time looking at BRY in a long time… so I have probably missed something very important (which z will remind me of). That is just the conclusion I reached long ago.

    If i was to play BRY, I would buy the stock, as stocks can go up many multiples and only down 100%. Whereas, bonds can only go up to 112 or so, but also have 100% of the downside.

  106. 106
    BirdsofpreyRcool Says:

    z — #104, totally agree. The point here is that I don’t think the debt compensates you for the risk…. but the equity might well.

  107. 107
    zman Says:

    BOP, I defer to you on bonds and Eli in the land of busted converts.

  108. 108
    BirdsofpreyRcool Says:

    Dman — OK. Just plotted an interesting chart. Since Marcy 8, 2009, the nat gas kids (SWN, CRK, HK, CHK) haven’t done much compared to the small oily kids (WRES, BRY, KOG). But, the two groups (oily and gassy) seem to trade almost on top of each other. So, in the short-term, it doesn’t seem to make all that much difference if your oil is located in Calif or SoDakota. That would argue that one can buy the oily stock that has sold off the most. I’ll take a look at BRY’s cash flows and debt coverage stuff and get back to you, if you wish.

  109. 109
    PackMan Says:

    China : Had dinner last night w/ a friend who imports stuff from China … medical supplies like walkers, wheelchairs.

    Says his usually reliable Chinese suppliers have been shortchanging him on quality … using lower quality steel, rubber, etc. than they are supposed to … the Chinese trying to cut costs and improve margins / profitability.

    I wonder how pervasive this is for those dealing in Asia.

  110. 110
    ram Says:

    Moonbats?

  111. 111
    jpntexas Says:

    Petrohawk has posted a new presentation to their website if you are interested:
    http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MzQzMTg0fENoaWxkSUQ9MzI5NzUyfFR5cGU9MQ==&t=1

  112. 112
    BirdsofpreyRcool Says:

    ram — don’t you just love that term? I do. And I am a 3rd-generation Southern Californian!

    What state issues IOUs to real people?

  113. 113
    zman Says:

    So, if you are a wealthy nation you have to pollute less than a developing nation. Love things with targets some 40 years out, so incredibly unlikely to come close to being met but everyone leaves with a feeling they’ve accomplished great things.

    http://news.yahoo.com/s/ap/g8_summit

  114. 114
    john11 Says:

    Re 111 ..thanks for posting that. Quite the focus on eagle ford, added some HK here.

  115. 115
    zman Says:

    Thank you JPN

  116. 116
    Dman Says:

    Thanks BOP & Z on the BRY question. BOP, #108, I’m certainly interested in any analysis you’d like to do.

  117. 117
    zman Says:

    Re HK – slide 9 updated to show 3 more wells drilled, two listed as completed are the two big ones we are waiting on. Those should have IPs north of 10 MMcfepd, they may be trying to get a third well completed prior to press release.

  118. 118
    zman Says:

    More HK thoughts.

    Slide 11 is very interesting, knew they were spud to complete much faster these days but they are into the low 20 days range already. This means a 2 rig program which will be expanded will get more wells down than previously thought for less cost per well than thought. You are probably seeing part of the reason for an upcoming increase in production guidance.

  119. 119
    Dman Says:

    BOP, oily stock that is down the most: maybe WLL?

  120. 120
    zman Says:

    Slides 12 – 17 – fun for geo types.

    Slide 18 – big mark up on the low end of their thoughts on gas in place per section.

    Prior thinking was a broad range of 40 to 223 Bcfe per section, now thinking 180 to 210 Bcfe, better odds of a ubiquitous play.

  121. 121
    zman Says:

    Beerthirty – I have more HK slide comments in tomorrow’s post.

  122. 122
    AAA Says:

    BOP,

    Thanks to HT for reversal call.

  123. 123
    ram Says:

    Maybe it’s time to move to a more oil friendly state – like Florida!

  124. 124
    choices Says:

    SLB turned green in here with mkt bounce, HAL did not

    Good call on CLR, EOG, Z. Maybe we get a bounce in crude here off $60.

  125. 125
    BirdsofpreyRcool Says:

    ram — you gotta admit, “Moonbat” is funny!

    By the way, it applies to the pols in Sacramento… nothing personal… unless you’re really Rose Bird in disguise. 😉

  126. 126
    BirdsofpreyRcool Says:

    KOG — Yes… the current price SUCKS. I just don’t think it will stay there when energy/oil stablizes. Talkin’ my position, I know. But, I put my money where my mouth is.

  127. 127
    BirdsofpreyRcool Says:

    So far, so good… AA 2Q loss from cont’ ops ex-items at 26¢ vs exp’d loss of 38¢

    Now… if they can just say something nice on the conf call….

  128. 128
    zman Says:

    AA last 9.46, bid/ask 9.95/9.96

  129. 129
    Wyoming Says:

    See if this works, little bit of mB so it may take a little time to load.

    Canada Nabors crew drilling, look at pipe turning:

    http://screencast.com/t/pw1l5qcD

  130. 130
    zman Says:

    Wyoming – just watched that email. Dude has got the routine down pretty well.

  131. 131
    BirdsofpreyRcool Says:

    I’m sorry… the HUBRIS of these people to think they are in control of the global thermostat. I am speechless. Global temperatures change over periods of time. They always have, they always will. Even if man is contributing to the change — and everyone stops breathing immediately — the climate will still change. To say the following is mind-boggling!!

    US, Other Wealthy Nations Vow Global Warming Cuts
    2009-07-08 21:38:23.506 GMT

    L’AQUILA, Italy (AP) — Targeting global warming, President Barack Obama and other leaders of the world’s richest industrial countries pledged Wednesday to seek dramatic cuts in greenhouse gas emissions by 2050 to slow dangerous climate change. ***** Setting a marker for success, they agreed for the first time that worldwide temperatures must not rise more than a few degrees. *****
    However, their goals are nonbinding, and it’s far from clear they will be met. The wealthy nations failed to persuade the leaders of big developing countries to promise to cut their own fast-spreading pollution, unable to overcome arguments that the well-established industrial giants aren’t doing enough in the short term.
    Obama and the leaders of the other wealthy Group of Eight nations agreed that global temperatures should be kept from rising by more than 2 degrees Celsius, or 3.6 degrees Fahrenheit, in the fight against weather changes caused by mankind.
    The results left some Western leaders cheering. British Prime Minister Gordon Brown called the group’s statement a “historic agreement.” German Chancellor Angela Merkel said it was “a clear step forward.”
    Environmental groups said the effort fell far short in its bid to cut carbon emissions that come mainly from energy production and that trap heat in the atmosphere. Still, climate change experts said the measure on trying to limit temperature increases — with agreement by both the G-8 and a 17-member group of industrialized and developing nations meeting here this week — was an important step.
    An increase up to the limit the leaders set wouldn’t eliminate the risk of runaway climate change but would reduce it, experts said. Even a slight increase in average temperatures could wreak havoc on farmers around the globe, as seasons shift, crops fail and storms and droughts ravage fields.
    “After a long struggle, all of the G-8 nations have finally accepted the 2-degree goal,” said Merkel.
    The United States and other G-8 nations set a goal of reducing their greenhouse gas emissions by 80 percent or more by 2050. That’s part of a plan to have all such gases, from rich and poor nations alike, fall by 50 percent globally by that year.
    But developing countries feel the better-established nations aren’t doing enough in the shorter term. They also worry that major reduction commitments on their parts, even if below the 80 percent target of rich nations, would hamper economic growth in China, India, Mexico, Brazil and many other non G-8 countries.
    As for the target for limiting global temperatures, a summit statement said it reflected a “broad scientific view.”
    Until now, however, the U.S. had resisted embracing the target because it implied a commitment to dramatically change the way the world generates electricity, fuels its cars and builds its houses. U.S. businesses and the broader national economy could suffer badly under strict pollution limits, many argue.
    Environmentalists welcomed the shift in U.S. policy but criticized the G-8’s failure to agree on more immediate goals for the industrial countries. The long-term ambition “is too far off to matter — poor people are being hit today,” said Antonio Hill, of the nonprofit Oxfam International.
    The G-8 leaders also addressed the global recession and agreed economic conditions are still too shaky to begin rolling back massive fiscal stimulus plans.
    A statement said leaders “note some signs of stabilization,” but it stressed the difficult outlook instead of counter-concerns over debt and high spending.
    The leaders did commit to preparing exit strategies from the “unprecedented and concerted action” that has been taken to boost growth through government spending, low interest rates and expansive monetary policy. Germany, worried about running up crippling debt, has pressed for spending restraint, but other major economies including Britain, Japan and the United States won’t rule out the need to pump in more money.
    The leaders gathered Wednesday in the earthquake-devastated central Italian city of L’Aquila. Over dinner, they were discussing world security issues ranging from Iran to North Korea.
    Italian host Premier Silvio Berlusconi welcomed the leaders, many of whom arrived at the summit in electric cars bearing their nations’ flags. Obama is attending the first G-8 meeting of his presidency.
    The abrupt return home of Chinese President Hu Jintao after ethnic tensions soared in China’s western Xingjiang territory could weaken trust-building discussions on making further progress on climate change, though he left a national delegation behind.
    China is among five developing market economies — along with Brazil, India, Mexico and South Africa — that are participating in the summit for the fifth straight year, joining the talks on Thursday to discuss aid and development. Also joining are nine African nations.
    The summit is also including a discussion of ways to expand the G-8 even further amid growing sentiment that the world’s most-industrialized nations can no longer claim leadership on the global political and economic agenda.
    The G-8 document also calls for a rapid conclusion to the stalled Doha round of trade talks, but it doesn’t set a deadline. That will be up for discussion on Thursday.
    The group’s statement on the world economy calls for an “enhanced global framework for financial regulation” to help prevent future economic crises, but it fails to make any concrete proposals. Leaders say they will address issues such as executive pay, definition of capital, risk management and the regulation of hedge funds and credit rating agencies.

  132. 132
    tater Says:

    I’m a bit of a fair weather tractor pilot, started raining so I figured I’d check on the market.

    Did some speculation on the HK chart. Nothing that I’d bet the farm on, but there appears to possibly be some reason to approach the name with continued caution. 60 min chart has some things to consider
    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2933882&cmd=show%5Bs169851549%5D&disp=O

    BOP you are killing me! How can you possibly believe those dirty lying capitalist pig American businesspeoples??? Don’t you know that corporations are EVIL?! Shame on you for thinking. Please kindly submit another half of your income directly to Al Franken. He really really cares for you and is far far more capable of determining your better interests than you could ever be.

  133. 133
    BirdsofpreyRcool Says:

    Dman — i missed this note this morning. Helps the case for BRY.

    CA Democrats stop severance tax push ($62.93/bbl) – We’ve beaten severance tax issue to death (now you see it…now you don’t). Most recent legislative flip-flop reads positive for CA producers (BRY/PXP/NFG/OXY in this order) as state looks for another way to find $26B. Plans shift to reducing spending vs. more taxes, but issue won’t ever be completely off table as long as state hurting for money. Currently CA issuing IOUs, furloughing employees, debt is lowest-rated state in US and now only two notches away from junk status. Stay tuned.

  134. 134
    Wyoming Says:

    http://www.chron.com/disp/story.mpl/business/6519601.html

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