25
Nov
Wednesday – Oil and Natural Gas Inventory Previews
Market Sentiment Watch: The slowest day of the year will probably be Friday. Today will likely be the second slowest after an opening flurry. We get the oil numbers at the regular time (10:30am EST) and then the natural gas numbers at (12 pm EST and probably the last of the injections of 2009). On the economic front, a whole slew of data is out as the Fed's cram everything from the rest of the week into today. Early indications for Black Friday are mixed but Comscore says online shopping is up 2% vs last year.
FOMC minutes yesterday afternoon sparked a small rally in equiites. In a nutshell, the Fed sees a very slow recovery with high unemployment (ranging between 9.3 to 9.7%) next year before inching lower to 8.6% in 2011.
- Eco Data Watch:
- Jobless claims: 466K vs forecast of 495K, market has been looking for a number under 500K for months now,
- Durable goods: Down 0.6% vs forecast of 0.5%
- Personal incomes: Up 0.2% vs forecast of 0.1%
- Consumer spending: Up 0.4% vs forecast 0.6%
- Eco Data After the Bell Watch:
- Consumer sentiment: November forecast at 67.
- New Home Sales: October forecast of 390K
In Today's Post:
- Holdings Watch
- Commodity Watch
- Oil Inventory Preview
- Stuff We Care About Today - XCO, HAL, CLR, CHK
- Odds & Ends
Holdings Watch:
- $10KP II:
- $10,800
- 56% Cash
- $10,800
- Yesterday's Trades:
- None for the $10KP II. Hinky holiday market. Saw some high volume in a couple of names including HK where trading seemed to shift from "what a POS" to "what a bargain" over a 30 minute period on very strong volume.
- For the ZLT: EXXI – Added common at $2.37, small to start, see comments in yesterday’s post and more details from me in the Wednesday post.
- None for the $10KP II. Hinky holiday market. Saw some high volume in a couple of names including HK where trading seemed to shift from "what a POS" to "what a bargain" over a 30 minute period on very strong volume.
Commodity Watch:
Crude oil fell $1.54 to close at $76.02 yesterday on fears that China is preparing to slow its economy down via a hike in its capital adequacy ratio. Those fears are already ebbing . After the close, the API released a bearish report for crude and gasoline with higher demand for diesel. Once again, the API's data seemed in conflict with itself. My sense is that a large build in crude will be forgiven if it is entirely imports based AND if distillate demand jumps as per API's report last night (something I have been not too patiently waiting for for the last two months - see more below). This morning crude is trading up modestly (up 50 cents following this morning's eco data).
- Dollar Watch: Hitting Fresh Lows: Dollar index trading below 74.50 in overnight trading. Euro/dollar has broken through the much talked about 1.50 level... see that link above about China's capital ratios not going up yet, lingering effects from the FOMC minutes yesterday, and comments from India that they are looking to buy more Gold from the IMF.
Natural gas eased two pennies to close the day at $4.77 on the January contract which takes over as the front month contract today. The contract appears to be putting in a bottom at current levels. This morning gas is trading up a penny.
- China Gas Demand Watch: According to Upstream PetroChina is taking LNG volumes from CNOOC for the first time to meet demand in eastern and southern China. PTR has a number of LNG regas facilities under construction. Moreover, due to recent harsh weather, gas volmes on China's West-East pipeline are shipping at a rate of 17 BCM per year (about 1.6 Bcfpgd) vs design capacity of 12 BCM per year (about 1.15 Bcfgpd). PTR may add another pipeline to meet demand. I keep pointing to China as a blackhole for LNG shipments, wondering when the analyst community is going to notice that Chinese natural gas demand continues to run faster than expected.
Natural Gas Inventory Preview
- My Estimate: +/- 5 Bcf as heating degree days rise to their highest level of the season to date.
- Last Week: 20 Bcf Injection
- Last Year: 55 Bcf Withdrawal
- 5 Year Average: 32 Bcf Withdrawal
- 10 year Hi: 30 Bcf Injection
- 10 year Low: 148 Bcf Withdrawal
- Street Consensus: + 8 Bcf
Oil Inventory Preview
API Watch Mixed with ZComments:
- Crude: UP 3.347 MM barrels - driven largely by a pickup in imports. Last week API reported a 4.3 MM barrel dip in inventories, also with higher imports ... so go figure. Imports were apparently unaffected by the passage of Hurricane Ida which makes little sense. It's normal this time of year to see big swings in crude stocks due to imports and last year the EIA reported a 7 mm barrel inventory build meaning that anything short of that in today's report and we move close to average storage levels which will buoy crude prices.
- Gasoline: UP 1.707 MM barrels
- Distillates: DOWN 2.36 MM MM barrels - driven by a sharp increase in demand which makes sense on a seasonal basis. If this is born out in the EIA data it will be quite a bit more important than a big jump in crude caused by imports.
Stuff We Care About Today
HAL Updates Mexico Activities - "Major Reduction" Activity for Pemex
- Says Pemex has cut activity in Burgos, Veracruz and southern areas due to low natural gas prices.
- Says to hit 4Q09 by 2 cents, Street at $0.28 now.
- -see comments
XCO Announced 2010 Program; Asset Sale Completion
- 2010 Program:
- Planned spending of $471 mm
- $255 mm in East Texas and Louisiana with 138 wells planned - 13 rigs now going to 17 by 1Q and holding there for all of '10. They have a good carry here with their partner picking up 75% of the drilling costs in the Haynesville.
- $154 mm in Appalachia
- $29 mm in the Permian Basin
- vs about $500 mm this past year.
- $255 mm in East Texas and Louisiana with 138 wells planned - 13 rigs now going to 17 by 1Q and holding there for all of '10. They have a good carry here with their partner picking up 75% of the drilling costs in the Haynesville.
- Planned spending of $471 mm
- Asset Sale: (previously announced sale closing)
- Ohio and PA assets sold to (EVEP)
- $118.1 mm
- 84.5 Bcfe, 87% natural gas
- That comes to an acquired price of $1.40 / Mcfe; not a great sum.
- Perhaps the assets were low return, mostly developed acreage which may be the case despite the 15 year reserve life.
- Doesn't bode particularly well for asset sellers but likely a good deal for MLP's looking to add long lived assets on the cheap.
- The other explanation would be the low current strip price and again, the relative trickle of gas compared to the reserve size.
- Perhaps the assets were low return, mostly developed acreage which may be the case despite the 15 year reserve life.
- Note that they completed $530 mm in asset sales last week for an effection price of $2.10 per Mcfe.
- Ohio and PA assets sold to (EVEP)
- Nutshell: Program flat with last year although the direction the dollars are headed will likely make for a growthier track than this year's 3% number.
- Growth for 2010: Still not provided. I'd expect them to turn out guidance in the low double digit range for next year.
- Valuation: Not expensive, not cheap unless they wow with guidance.
- 2010 TEV/ EBITDA of 6.4x - not kind of middle of the range valuation
- 2010 P/CF of 5.6x
- Growth for 2010: Still not provided. I'd expect them to turn out guidance in the low double digit range for next year.
CLR Takes On An Oil Hedge
- 5,000 Bopd per month at $80.50 from January through June 2010
- This is about 6% of expected production for 2010 assuming they make their 10% growth target for 2010 (about 40,000 BOEpd)
- Haven't seen them lock in volumes before, curious to know what made them do it now, as they've been anti hedge in the past ... possibly they don't see much upside in oil and they wanted to appease investors.
CHK Enters Bid For Oil Exploration in South Africa
- CHK has entered into a bid with Sasol and STO
- Will take 12 months before approval
- They had mentioned their recent JV with STO in the U.S. as being a springboard to developing international shales, good to see its oil.
- No impact for now other than a bit of a psychology shift in play.
Odds & Ends
Analyst Watch:
- (EXXI) raised to Hold from Underperform at Jefferies, target upped from $1 to $2.
- (CXO) target raised to $40 from $31 at Barclays ... with the stock at $42. Once again proving that Barclays can hit a price target by waiting for the stock to go up and then raising the price target to match. Way to be on your game and add tons of value Barclays, Congrats!
Housekeeping Watch:
- The Orange Charts have been added to the E&P Metrics sub tab.
- A Catalyst sub tab has been added to the E&P tab.
- The Holdings sub tabs have been combined under the Holdings tab to simplify the left hand column.
- Subscribing on Twitter using keyword ZmansEnrgyBrain will give you a headsup on what I'm up to when the post isn't yet up in the morning. Comments from pre release this morning:
- Working up the Wednesday post, busy for the day before Turkey day with international news from CHK of all stocks, a new budget for XCO ...
... an oil hedge for CLR, and last night's dour news for HAL plus inventory previews for oil and natural gas inventories and a slew of ecodata ...
- ... and the dollar is collapsing...oil not yet moving due to inventories from EIA today and a bearish looking report from API last night
- Working up the Wednesday post, busy for the day before Turkey day with international news from CHK of all stocks, a new budget for XCO ...
As Z reported, Jefferies upgrades Energy XXI (EXXI 2.39) to Hold from Underperform and raises their tgt to $2 from $1, following announcement that EXXI is acquiring additional interests in 30 fields in the GOM shelf that will add ~45% to the co’s current proved reserves and production for $283mm (plus assumed abandonment liabilities of $47mm). Firm notes acquisition boosts EXXI’s free cashflow generation and improves its financial flexibility…
November 25th, 2009 at 9:28 amTechTrader is 60/40 SHORT today. He has been playing from the short side (for day trades in futures) all week… and he has made money.
HeadTrader is making no predictions. No volume means squirrely trading.
November 25th, 2009 at 9:28 amisle — got to give Jefferies a lot of credit… for REALLY going out on a LIMB with that BOLD call. ha!
November 25th, 2009 at 9:29 amCrude down a dime at the open, data in an hour.
Generally stronger energy open but on nothing volumes.
That Jefco call is not from their Senior E&P guy, usually the little names go to the junior guys. And he’s not going to go out on a limb on a name like that before knowing the dilution from the deal as its an institutional shop and their clients usually don’t have much use for the micro caps. I recall the phrase “Nice call, too small” being used on the box there.
November 25th, 2009 at 9:35 amOil service getting whacked over the HAL/Pemex news.
November 25th, 2009 at 9:36 amz — “nice call, too small”… LOL.
November 25th, 2009 at 9:42 amBOP – It’s only funny though when said about someone else’s work, lol. I hated hearing it.
Energy names sagging with the market which has gotten over any euphoria of a sub 500K jobless claims number. We get consumer sentiment and new home sales in 15 minutes and the oil data in 45 minutes. Volumes are beyond sub par for the open so the price action is meaningless.
November 25th, 2009 at 9:45 amMarket has no idea which way to drift. But I liked Nicky’s comment yesterday that they need it to close higher, so that everyone will hit the streets and open their wallet on Black Friday. So, i’m gonna go with the bet that we waft upwards.
November 25th, 2009 at 9:49 amGood Morning Z, I ran across this article http://seekingalpha.com/article/174735-time-to-bail-on-shale because the head line naturally caught my attention. After reading the piece there were some interesting comments of other possible plays. I’d be interested in your comments regarding the article and Ceradyne. Ceradyne (CRDN), was mentioned as being the possible mfg of a new ceramic drill bit used by Petrohawk (HK) The article quoted Petrohawk President Dick Stoneburner at his 11/5 earnings conference call http://seekingalpha.com/article/171655-petrohawk-energy-corp-q3-2009-earnings-conference-call?page=-1 as stating: “The use of rotary steerable systems in certain applications has shown benefit as well as rotating case in the bottom. However, the most single significant factor has been the development of a PDC bit by our staff-drilling engineers that to this point has only been utilized by Petrohawk that has shown to increase the rate of penetration in the lateral dramatically. An example of the improved penetration rate is evidenced by the number of days that we have drilled more than 800 feet in a lateral.
In June and July, we only had three days with greater than 800 feet drilled. But during August and September, we had 20 of those days. More recently a 4500-foot lateral was drilled in five days and over 3200-feet of lateral was drilled in three successive days”.
The article was some what interesting talking about the low prices of LG, hedging and rig counts.
November 25th, 2009 at 9:51 amtbone – I’ll have a look, if it has to do with that geologist’s comments on shales being straight line decliners and not parabolic I’ll just say that I think he’s wrong and leave it at that.
CRDN – don’t know if they make that bit, have heard HK hail their ability to make hole so quickly to that bit in the past and especially on the last CC. Should be an easy thing to track down who makes it. I had thought it was a SII or HAL bit.
November 25th, 2009 at 9:55 amtbone – skimmed that. Glaring things missing include any talk of what the 70% of conventional production is doing and what the mom and pop producers are doing in a capital constrained environment…. more in a second…
U. Mich Consumer Sentiment at 67.4 vs 67 expected and 66 last month.
November 25th, 2009 at 9:59 amTbone – back to that article, there are some things he left out, presumably to make his argument including some misleading statements about hedging, for instance stating that SWN is hedging just above the strip in 2011. Fails to mention they think gas goes higher and refuse to hedge much at all in 2010. The 2011 hedges are minor and more so considering the fact that they will see production growth of 30+% in both 2010 and 2011. Anyway, I’m not going to tear up another guy’s work as that’s rude and he and I might agree on some stuff were we in the same room, maybe he’d care to talk about the lack of rigs working the conventional (read base component of U.S. natural gas supply) plays and the impact that 30 to 35% annual declines on 70% of production must have on aggregate U.S. supply.
Stocks greening on the Sentiment data.
November 25th, 2009 at 10:04 amAnd I should add the stocks are greening on abysmal volume.
November 25th, 2009 at 10:07 amZ- thanks for your comments!
November 25th, 2009 at 10:08 amNew Home sales were 430K vs 390K expected,
http://www.marketwatch.com/story/october-new-home-sales-gain-on-strength-in-south-2009-11-25
November 25th, 2009 at 10:10 amtbone – I will do a little snooping on CRDN. Maybe TEXW or Wyoming know off the top of their heads about that HK bit?
November 25th, 2009 at 10:10 amIf my memory serves, CRDN is primarily a body armor play, kind of like AH before BAE acquired them? Only remembering that as I was an AH holder a few years ago when Iraq first kicked off.
November 25th, 2009 at 10:19 amJat – I owned AH too, a bit too long in fact, good company. Have a note in with someone who should be able to tell me re that bit.
Reading a Stephens Init of Coverage piece on Oil Service sector from last week. Interesting.
November 25th, 2009 at 10:24 amBOP -8. Where the market closes today will have no impact whatsoever on Black Friday or holiday sales.
As for useless predictions, I predict we close today slightly green, and if not, strong red.
November 25th, 2009 at 10:30 amEIA Oil Inventory Report:
Crude: UP 1 mm barrels
Gasoline: UP 1 mm barrels
Distillates: Down 0.5 mm barrels
Fairly benign report …
November 25th, 2009 at 10:33 amMore EIA Oil Inventory Comments
Gasoline demand: up slightly, strongish for this time of year.
Distillate demand: still no blast off, 3.661 mm bpd is good but only up slightly from 3.602 mm bpd last week and still down sharply from last year.
….
November 25th, 2009 at 10:35 amPackMan #19 — jeeeeezzzzz… you mean not everyone hangs onto Mr. Market’s every move?
I’m devastated!!
November 25th, 2009 at 10:36 amMore EIA Oil Inventory Comments
Crude imports were 9 mm bpd up 371Kbopd from last week, still lowish,
All in all a nothing of a report. This up 1 mm barrels on crude, combined with the big rally in crude inventories we saw a year ago (7+ mm barrels) means the YoY surplus contracted nicely.
November 25th, 2009 at 10:37 amZ: do you know any about GEOI (secondary today) and REN (IPO recently)?
November 25th, 2009 at 10:41 amOil could care less about those numbers, trading flat and slow. Honestly after yesterday’s fall on fears that crude demand was toast and with the dollar being at new lows, I would have expected a rally, the fact that the B-teams are in charge seems to be precluding one.
November 25th, 2009 at 10:41 amBSJ – GEOI sort of interesting, think I wrote something awhile back, that’s an RMD favorite I think.
REN – have not looked at them yet.
November 25th, 2009 at 10:44 amMMR poking its nose out of the den…
November 25th, 2009 at 10:52 amOT – credit scores – which is more important when getting car insurance, a good driving record or good credit score? A good credit score. This was brought home to me by a golfing partner. My friend just had his homeowners and auto insurance doubled. The problem is that he has NO credit score. He has never in his 61 years ever had a credit card or taken out any debt. He has paid EVERYTHING with CASH. Of course he has had investments and the like but NO DEBT. His driving record is spotless, and no claims on his homeowners insurance.
He cancelled his policy with Allstate, which he had for 20 years, and found an agent that found a company that did not depend on a credit score but it was a struggle.
November 25th, 2009 at 10:57 amLots of love for HK today……..
November 25th, 2009 at 11:03 amNatural Gas Inventory report in 1 hour.
Re HK, yep, volume picking up too.
WLL back to near the top end of the range at $64. CLR getting a bit more boost for taking on those hedges.
Crude flat, NG up a penny.
November 25th, 2009 at 11:06 amMorning all.
Z agree with you with regards a crude rally. Wonder if they may start to run it nearer the close. At the moment the move off this mornings’ low looks corrective – it needs to get going.
November 25th, 2009 at 11:19 amioc- uo $2.54 to $55.89
November 25th, 2009 at 11:19 amBOp – 22 – can you believe ? LOL
November 25th, 2009 at 11:22 amHK; sold some of my shares into this; recall Jerome saying 22.50 could be a strong resistance point. Still hold some w/ higher covered calls; will buy back if it retraces.
November 25th, 2009 at 11:23 amCrude suddenly noticing the numbers weren’t half bad. Up 50 cents. Or maybe its just the S&P thinking about challenging the recent high again. Group drifting nicely skyward.
November 25th, 2009 at 11:29 amBOP re #8. A big potential problem looming here is the $. Nikkei has been slaughtered the last week or so and it is not going to like the $ movements today. If Asia starts to really get going to the downside we are going to follow.
Packman re #19. A bit of me disagrees with that. I think Joe Public is on edge anyway, nobody believes in this bs rally. If we were to see a 200 point down day (which I believe they will believe at all costs) then I think sentiment could be unnerved. Things are pretty fragile out there in my view. Do I believe that the market move today will literally have an effect on how much people spend in the next few days then no I don’t. But as I believe the whole ‘recovery’ is pretty non existent then I think ‘their’ only hope is to continue to try and bolster the markets in the hope that people will start to believe. Of course the minute they do believe the rug will be pulled anyway!
November 25th, 2009 at 11:31 amWLT in recovery mode as well.
November 25th, 2009 at 11:32 amRe 36 – I hear your wall of worry and raise you Stimulus 3 or 4 or whatever it takes to keep things artificially moving. Saw 33 states are thinking about or are upping the unemployment tax because their unemployment insurance accounts are at $0. There’s 33 states where you will see employers either buy equipment or build cash but NOT add employees.
November 25th, 2009 at 11:35 amYikes that move in Gold. Seriously parabolic. At some stage we see at least a $50 dollar pullback.
November 25th, 2009 at 11:40 amre: # 37…that bar/candle on WLT was very strong yesterday…washed out a lot of folks and closed very high…somebody was taking all the suckers like me outta there on that weakness….great action on stock with strong fundies….
November 25th, 2009 at 11:43 amJill’s Shoe Peg Corn
3 11oz cans White Shoe Peg corn
8 oz cream cheese
1/4 cup butter
2 jalapenos – leave the seeds in if you like more heat.
3 tablespoons flour
Mix in order given, bake in covered casserole dish at 350 for 45 minutes.
Happy Thanksgiving.
November 25th, 2009 at 11:43 amI like the way that recipe sounds…for me it needs more jalopenos
November 25th, 2009 at 11:48 amWhere is upward resistance now for HK? I recall it being said it went on a sell signal with a print below around $22 the other day.
Pretty solid move today, but we’ve seen this act before the past few weeks. Up 5% one day, down many many % the next couple.
November 25th, 2009 at 11:48 amKOG not really participating in this mini rally in some gassy names.
November 25th, 2009 at 11:50 amNicky – 36 – Here is my view … Joe Sixpack Public is gone from the market. He doesn’t care. It doesn’t matter to him; if the market rises 50 or 100 points or falls that way, it has no affect on his psyche or spending habits.
We are skewed b/c we are players in the market, but most of the action is autobot machines; less and less is retail.
Retail is out.
November 25th, 2009 at 11:53 amI think KOG is just waiting for the official results of well #9. I think most people who want to own it, do. It’s not much of a trading vehicle and/or Hot Money Stock.
#9 results should be out around the first week in December… unless West hears something different.
November 25th, 2009 at 11:54 amI live to outsmart the Terminator !
November 25th, 2009 at 11:54 amIs there an argument against buying some short term puts on WLL on this recent move? Resistance is very close here.
Thoughts?
November 25th, 2009 at 11:54 amOr live to pick up his scraps !
November 25th, 2009 at 11:55 amPackMan — it’s what HeadTrader calls “market anomolies.” When the Machines get outta control, HT likes to pick ’em off. He lives for that. Makes his day.
November 25th, 2009 at 11:56 amNicky; you also hit on a key point; when will the people start to believe.
I think we are seeing the answer: They won’t; they are not buying it as the market powers higher on less and less volume and even the pros are not convinced.
In that respect, if that was a govt policy objective to shepard the sheep into the market; they have failed.
November 25th, 2009 at 11:57 amTheir ya go BOP !
November 25th, 2009 at 11:58 amWhat % of oils price rise is $ related and what is supply/demand related, iyho.
November 25th, 2009 at 11:58 amBaylor – Not, I name too cheap relative to its peers, plus they have catalytic news due out in December. Maybe if you are playing purely technical but for that, there are names with narrower spreads and much higher valuations.
November 25th, 2009 at 11:58 amPackMan — Near-zero interest rates will eventually herd people into the market. We are not Japan.
November 25th, 2009 at 12:00 pmBaylor, what would you do if WLL break out to a new high and not face any more resistance? I would much rather have short term puts on HK, which faces alot of resistance, than WLL which could be facing none.
November 25th, 2009 at 12:00 pmCargo – It’s inseparable since crude is priced in dollars. If you mean since a given point in time, that’s different. If you look at the recent move, oil has held flat while the dollar continues to decline, this would indicate that surplus capacity at OPEC and an anemic recovery in U.S. demand has led to capped pricing. Can’t really say how much of the flatness in crude is attributable to the dollar’s weakness but I’d bet crude would be close to $50 to $55 were the dollar index to move back to the mid 80s which was the middle of the range on the recent peak before it rolled over. Given the economy and policy moves in D.C., I don’t see anything but down for the dollar for awhile.
November 25th, 2009 at 12:03 pmPackman agree re Joe Public not participating in this rally except I presume they do see the results of the rally in their 401k. Do they care or pay attention to the markets? Yes I believe they do (never mind what they say). Taxi drivers are talking about gold and the dollar! I actually believe this rally will go on until they ‘do believe’. That is what wave 2’s do. They are relentless and will retrace on average 61.8% of the fall. Once everyone is sucked back in it will fall.
November 25th, 2009 at 12:04 pmTrust me I hate it as I am super bearish and this bs drives me nuts!
+2 bcf for nat gas this week
November 25th, 2009 at 12:04 pmZman – Do you recall if Jerome stated when HK goes back on a buy signal. Unfortunately I was blown out last month and did initiate anything thus far – maybe a gift to the rest of the group.
November 25th, 2009 at 12:06 pmGoing to go start on the Thanksgiving Day Cooking Marathon now… so, if I don’t catch y’all later, then have a Great and very Happy Thanksgiving!
cheers,
November 25th, 2009 at 12:07 pmBOP
Crude up a buck now, back into the prior elevated range. Watch for talk now to shift to lower highs and lower lows until the OPEC meeting. I don’t see a reason for crude to break down or up at the present time. On the resistance front, you’ve got improved OPEC production, “peace” in Nigeria, U.S. production that is inching higher, record Russian volumes, a flotilla of diesel on the high seas, and more on land in the U.S. plus general economic uncertainty.
On the support front you have the dwindling dollar, Mexico’s falling production, and improving demand (slow but improving) among other things.
November 25th, 2009 at 12:07 pmram – i think he said it has to print $24 to go back into a column of x’s
November 25th, 2009 at 12:08 pmThanks 1520, got busy, failed to notice. Gas soaring 6% to $5.05.
November 25th, 2009 at 12:08 pmRam – Re HK, pretty sure he said 3x achieved at $24, will check.
November 25th, 2009 at 12:09 pmNicky, when does wave 2 appear to top out timing or level on the S&P?
November 25th, 2009 at 12:09 pmHa, thanks again 1520.
Have a great vacation BOP, and thanks for running the site for me on Friday.
November 25th, 2009 at 12:10 pmThanks 1520.
November 25th, 2009 at 12:10 pmI think the SPX runs to mid 1200’s Ram. Spring time.
November 25th, 2009 at 12:11 pmIf we were to consider the purchasing power of the dollar relative to a barrel of oil, where would you rather be, in oil or dollars? I’m thinking oil. But given the fact that the Saudi’s can always pump more oil and the Govt can always print more dollars, it becomes complicated. I’m just not a gold bug.
November 25th, 2009 at 12:12 pmThat’ll most likely be the last of the injections for the season, should see a 30+ Bcf withdrawal next week and accelerating over the next month. Would like to see a colder forecast but the current one is pretty good.
November 25th, 2009 at 12:12 pmThanks Nicky.
November 25th, 2009 at 12:15 pmCargo – Oil. I think the Saudis do nothing next month. Quotas stay flat and they shout at a few of the more obvious cheaters. Maybe talk about the global economy being able to handle prices. And then they are going to talk about how the world is going to need to compensate them over carbon capture plans.
November 25th, 2009 at 12:16 pmNever invest in anything shaped like a palm tree sitting in an ocean…
http://www.bloomberg.com/apps/news?pid=20601087&sid=aHnilHOy65KE&pos=1
November 25th, 2009 at 12:18 pmWell I should have taken my own advice 2 days ago as I opined about purchasing CHK calls with the stock at 22.80.
Some fools never learn. It’s a country song and a motto. Nothing ventured, nothing gained.
November 25th, 2009 at 12:18 pmDid you see the CHK comment in the post? South Africa.
November 25th, 2009 at 12:20 pmBSJ – re puts on HK, maybe, if you playing from a technical perspective, not sure, thought it just went through resistance. Anyway, its gassy and 60% or so hedged next year so that’s probably more of a call on natural gas. The WLL would be the opposite, a play on oil. In that instance I’d come closer to puts on a CLR which is a much higher multiple stock and is still mostly unhedged, so to me, if oil falls, that one is going to be pulled down more dramatically than say, a WLL.
November 25th, 2009 at 12:28 pmNatural Gas up 33 cents or 7% now at $5.10. The 12 month strip is high as well by about 25 cents.
SWN has also been underperforming and should pop in here.
Storage: At 2 Bcf, this was better than the Street’s 8 Bcf injection estimate, and in line with my +/- 5 Bcf estimate. The East region saw a 2 Bcf withdrawal, first of the season and should quite a bit bigger withdrawal next week given the weather we’ve had this week.
November 25th, 2009 at 12:33 pmZ, 76, I didn’t see it as I skimmed the post this morning. Thanks for the info. Not a near term catalyst for sure with anything empiracal, but interesting nonetheless.
CHK is a long term position for me that I’ve been trading around for a year.
November 25th, 2009 at 12:35 pmNext week we have 2 more energy conferences which should provide opportunities for a few more end of year operations updates. I suspect BEXP and ROSE will have news sooner rather than later, with WLL news before Christmas.
November 25th, 2009 at 12:35 pmBaylor – hear ya on long term. I think Aubrey has heard the call of oil from investors and is trying to satisfy that call as cheaply as possible during 2010 which is a year he will need to spend capex on gas projects to hold acreage. I would not expect them to get significantly oiler (and I mean like 5% more oily) before 2012 although they have at least 5 oil non-conventional plays in the U.S. that they rarely talk about but are working on.
November 25th, 2009 at 12:38 pmHK – to my layman’s TA eye, needs to get through 23.10 and then its clear to $23.50 and then obvious resistance at $24. It can be a mo-mo name meaning it can slice levels either direction with ease. HK volume today is already above average of late which is pretty powerful on this pre holiday trading day.
November 25th, 2009 at 12:40 pmRe 82, I took the profits from my $22 Dec call trade and invested them in some $23 puts based on the trends the past few weeks.
Will continue to watch closely and hold the common DCA’d around $22.
November 25th, 2009 at 12:45 pmI been looking at the energy bullish % index…it rallied from 13% in July to 93% in mid-October…now at 59%…seems to have some support between 55% and 60%, the latter being the 200 day ma…maybe we have had enough stocks beaten down in this pullback to all have a Merry XMAS off a rebound in the group…
November 25th, 2009 at 12:46 pmHearing Bastardi calling for a violent change in the weather to the cold side following Thanksgiving, deep into the South, calling for a “December to Remember”
November 25th, 2009 at 12:47 pmJivey – what’s the ticker of that?
November 25th, 2009 at 12:54 pmin stockcharts.com it is $BPENER
November 25th, 2009 at 12:59 pmJivey – thanks, wonder how those are calculated.
November 25th, 2009 at 1:02 pmnot sure which stocks are in the index, but it is the % that are on point and figure buy signals
November 25th, 2009 at 1:03 pmokay, like a dumb dumb it says bullish percent index of stocks in SP energy sector…will look into that and see if I can get the list
November 25th, 2009 at 1:04 pm#88 – i think all of that bullish % stuff is based on point and figure charts in columns of x’s = bullish, in columns of o’s = bearish
dorsey wright and his shop was a big follower of bullish percent – i think they used to use thresholds of 30% (time to go buy) to 70% (time to go sell) – when looking at the broad market
November 25th, 2009 at 1:06 pmThinking about taking another look at PQ, big pullback of late, very gassy, very small, low P/CF, pretty leveraged but manageable. Thinking more stock than anything else and for a 3 month trade.
Also thinking about losing my stock in GMXR on the next upswing and taking calls before that upswing happens. Don’t really see a catalyst as much as a move based on a small bounce (after today) in natural gas prices. They are set to grow again, 25% in 2010 and can go mo-mo at a moments notice once the chart bottoms which is looks like it might have. Also, massive short interest here (>30% of float).
Nothing today but maybe next week.
On the gassy names, I plan on being ready to add exposure in SWN, RRC, and UPL with the release of the EIA 914 data at month end and won’t enter before then. I am likely to hold the HK through that release but will punt and re-access if the EIA data looks poor.
November 25th, 2009 at 1:18 pmThanks Jivey and 1520.
November 25th, 2009 at 1:19 pmDo any of y’all play leaps? With the research I’ve done on HK, it seems there may be huge potential upside here and some 3 or 4 baggers may exist for those that are patient by purchasing some leap contracts.
I don’t have much experience there but was curious of thoughts and reasons to or not to, with the underlying assumption that the stock will move in the next 12-18 months.
November 25th, 2009 at 1:20 pmI haven’t heard much EOG talk as of late with the recent 15% pullback. It’s run up the last couple of days from $85 and has had some huge upside revisions by the street in recent weeks.
November 25th, 2009 at 1:26 pmBaylor – I don’t do leaps often as I have had poor results there in the past, other than deep in the money ones. Not saying it can’t be done but its not my bag.
EOG – watching it, own the $100 Dec calls there now, will likely swap them to something closer in or double up after/on Nov 30th with that EIA data. Trust me, I like them, think they are cheap (for them), well run, and have the right type of story for 2010.
November 25th, 2009 at 1:33 pmmy conclusion, until someone corrects me, is that the BP index is the percentage of the 40 stocks that underly XLE that are on point and figure buy signals
November 25th, 2009 at 1:33 pmThanks Jivey.
November 25th, 2009 at 1:34 pmCrude up $1.30, NG at 5.10 up 7%.
Just tooling through the charts on the oil inventories, not a lot of movement this week, good to see a roll in inventories starting for distillates, should see a marked improvement in the next 4 weeks. Still way too much on hand but it will help to see it come down, from a psych standpoint for crude prices.
On gasoline, the make increased more than I’d like to see, could be blending up but the level of demand is ok so its not troubling and stocks are in line with where they have been for weeks at 5% over average.
I’m around if anyone needs me and if you don’t then Have a Happy and Safe Thanksgiving.
November 25th, 2009 at 1:46 pmHappy Thanksgiving to everyone. This is the only day of the year I enjoy wearing sweatpants.
See y’all Monday.
November 25th, 2009 at 1:48 pmThis is just a drive-by post, but RE 39 I will admit that gold could be considered overbought on short term indicators, but there is a wealth of reasons to own gold.
Also, I’ve been told gold was overbought since what? 960? then at 1034? then at 1100? then 1150? now at 1185? Probably next week above 1200?
The bottom line is the dollar is on the breaking point at 74.50 and it will drive gold higher in addition to the wealth of fundamentals.
I don’t want to be caught out of the market because gold could go to 1500 in a couple weeks if the dollar fails at 74.50 down to 72 and I wouldn’t think it was close to being overvalued.
I do expect a pullback at some point and will be loading up but I’m certainly not selling any, especially shares since they are fundamentally cheap relative to the gold price increase.
November 25th, 2009 at 2:00 pmMeleagris Gallopavo – hot commodity for the end of this week.
cheers – happy thanksgiving to all.
November 25th, 2009 at 2:02 pmZ -Cake Bread Syrah was the official recommendation you gave? I had to go to a meeting after i posted the wine request yesterday?
Isle – Yep.
November 25th, 2009 at 2:04 pmRe 101 – parabolic is an extremely dangerous chart pattern. When they hit the exits watch out below – think oil last year. I don’t doubt it can go higher but we have all seen this play out before and I actually don’t think this gold move is based on fundamentals at all to be honest.
We did get the break out I expect in oil. It should run to back to the highs now…..
Happy Thanksgiving to all.
November 25th, 2009 at 2:11 pmThere went my $23.10 level on HK. Last several sell downs have ended with this rapid recovery pattern.
November 25th, 2009 at 2:13 pmNice call on the dollar and gold V.
November 25th, 2009 at 2:15 pmgmxr – shorts look nervous
November 25th, 2009 at 2:15 pmRe 101 – VTZ
November 25th, 2009 at 2:19 pmWhat is your preferred vehicle for gold investing? Do you go for the ETFs like GLD, the miners like FCX, or the commodity itself?
Well I don’t consider GLD and SLV and they are actually counterproductive to the purposes of owning gold.
I prefer a basket of small & midcaps and some bullion.
November 25th, 2009 at 2:25 pmI meant to say I don’t consider GLD and SLV gold investments, but rather more leveraged paper.
Buy CEF if you want to actually own gold.
November 25th, 2009 at 2:26 pmAlso Nicky, the step and consolidation pattern in gold is very constructive technically. Only in the past week or so has it increased beyond the up channel.
Gold will not see <1000 again and if it does it will be short lived.
November 25th, 2009 at 2:28 pmThere… dollar just tanked as we spoke… there goes resistance… down to 72 we go I think.
November 25th, 2009 at 2:29 pmCrude up $2, that’s more like it given the data and given the dollar today.
Natural gas up 40 cents. 1520.
1520 – the GMXR shorts should be nervous with gas spiking up, even more so for the GDP shorts (38% of the float)
http://shortsqueeze.com/?symbol=gdp&submit=Short+Quote%E2%84%A2
November 25th, 2009 at 2:30 pmI’ve never really followed GDP – i’ll take a look tho based on that short interest.
I like nervous shorts.
November 25th, 2009 at 2:32 pmGDP – think Gulf Coast player went from explorationist to Haynesville focused this year,
kind of like CRK did,
gassy – ~95% gas,
middling level on market perception of their shale well results to date,
somewhat price on TEV/EBITDA next year at about 6x
pretty low cost producer ($1.75 Mcfe field level costs)
not really a lot of debt (34% debt to cap) so the total cash cost there would about $2 per Mcfe. Pretty good compared to most of their peers.
November 25th, 2009 at 2:40 pm1520 – let us know what u find re GDP/GMXR short pos sounds very high
November 25th, 2009 at 2:41 pmVTZ – thanks.
November 25th, 2009 at 2:41 pmadding to GDP
and about 20% hedged for 2010 with floors at $6.
November 25th, 2009 at 2:42 pmKyle – you can go here and enter the ticker:
http://shortsqueeze.com/?symbol=gdp&submit=Short+Quote%E2%84%A2
GDP – 39% of float, or 9 days to cover
November 25th, 2009 at 2:44 pmGMXR – 26% or 5 days
What a great day for HK…HK broke thru resistance easily at the daily 200 day SMA at around $22.50, it’s currently hanging up at the 20 day daily SMA but this probably due to intraday overbought conditions…the real test, is HK needs to perfect a “bear trap ” by printing $24 on good vol, this also corresponds with resistance at the daily 50 day SMA, points all watched by many technical traders, trading above $24 would be a significant bullish technical development for HK…
November 25th, 2009 at 3:00 pmgood to see you Jerome…made some comments earlier in #84 about the energy sector bullish percent…I hadn’t realized how high it had gotten in Oct. After this pullback and perhaps the prospects for a little weather I feel better about the prospects to make a little money the next month or two
November 25th, 2009 at 3:14 pmBSJ re GEOI: BOP and others have said mgt is savvy asset acquirers , and they are doing a deal at half the NAV the co. uses on their website. Capx funded from cash flow (give or take), so they have an acq. in their sights which makes mgt and big owners (who own 50% of stock) think some stock at this level is a sound long term idea. Also mentioned getting a bit more proactive toward Street rel’ns. Big demand for the offering so interest “nice call, too small” was eliminated for some. Presentation on their website.
November 25th, 2009 at 3:17 pmJerome – thanks.
Signing off, Have A Great Thanksgiving!
November 25th, 2009 at 3:23 pm#121, thanks Jivey…I find the bullish percents most helpful for a wide macro picture, especially in reference to the broad mkt…I especially keep an eye on $bpnyse and $bpspx, in reference to the S&P energy sector, in which the bullish percent is based, I watch bullish percents especially at extreme levels,notice that energy does not spend too much time above 86 or below 10, when the bp gets close to any of these levels, I’m on reversal alert…
November 25th, 2009 at 3:30 pmyou make your points so well. more or less I was thinking I’d watch that bullish percent index in energy and not play long side options again when it was so overbought like I did in late Oct. and Nov. There were warnings, I just paid them no attention whatsoever…blind greed is most often not such a beautiful thing
November 25th, 2009 at 3:34 pmRe 111 – I think this chart shows that clearly that statement is not true:
http://4.bp.blogspot.com/_P7en4o3WN38/Sw1mpXR_iPI/AAAAAAAAAzI/e7D6Q25WeAQ/s1600/gold.jpg
and this was before today’s move.
Even a move back to 1000 could kill some people so under no circumstances should anyone consider chasing this trade here and now in my opinion.
November 25th, 2009 at 4:00 pmThe move in gold is not trading on fundamentals. We are not in a deflationary environment and the dollar could hold support here. This is an asset bubble much the same as oil was last year. And we know how that ended.
There is some disconnect going on here. Eur/USD move is unstainable (250 points in 24 hours) and its not being confirmed by the US indices which should be much higher. VIX has also turned higher. Likely we are seeing a blow off top here and I doubt the US market rally goes beyond Monday.
November 25th, 2009 at 4:08 pmHK since yesterday … wow; strong move.
Have a happy T-giving everyone !
November 25th, 2009 at 4:10 pmEXXI – IR guy Lawrence Stewart bought 30,000 shares today at $2.43
November 25th, 2009 at 10:47 pmHappy Thanksgiving
Futures off large over Dubai, no doubt exaggerated by the fact that markets in the U.S. are close, Asia, then Europe taking it on the chin. Crude off $1.50 as the dollar gets a “safe haven” pop.
November 26th, 2009 at 10:15 amThat will be fun; along with what will be a lame Black Friday.
I can buy back some HK.
November 26th, 2009 at 1:27 pmMarkets being massacred – nothing spared including gold. Sorry but I can’t resist saying I told you so.
November 27th, 2009 at 3:05 amThe question is does Dubai and the risk of other Dubai’s warrant the selloff in the minds of markets by Monday. Dubai exposure for the world markets is $59 billion, not that big a deal and it was known they were in trouble. Seems like a holiday light trading over reaction to me. So are managers going to view the weakness as an opportunity to get long or lock in? That large depends on whether further emerging market troubles crop up in short order.
As one money manager in Australia put it
“Everyone has gone into panic mode but this is Dubai — it’s not going to send the world into a tailspin,”
November 27th, 2009 at 3:21 amBop – hear ya
November 27th, 2009 at 10:16 am