Wrap – Week Ended 2/19/10

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Wrap Comments:

1) Markets: Further Back From The Abyss. Market nerves have become jangled and many have called for a sharp correction in the last two weeks. Not so fast my friends. Despite troubles in Greece, China's willingness to slow down its red hot growth, and the Fed's attempt to look as if it is on the road to less of an easy money policy (see the Friday post for more comments on the discount window move), the market continues to recover.

2) Oil Recovered 8%, Probably A Bit Ahead of Itself. Surprising move on OK to somewhat bearish data over the last 2 weeks and in the face of a still rising dollar. I'm more comfortable in the center of a range from $65 to $80 for the time being. Until we see product demand pick up in the U.S. I think anything higher will be short lived.

3) Natural Gas Went The Other Way; Softening Into The Shoulder. A function of a warmer forecast and weekly withdrawal that was in line with the prior one on higher aggregate population weighted degree day data. I continue to look storage to trough at around 1.5 Tcf in the next 4 to 5 weeks. Gas has been range bound of late but I would expect some weakness into the $4s in the shoulder months. We should get another look at supply at the end of the coming week. 

4) Coal Prices Continue To Strengthen. Everything on the Q4 conference calls points to higher coal prices this year: falling inventories due to constrained production and a sense that while 2009 demand was weak, we have fallen probably about as far as we are going to for this cycle. With gas prices somewhat stabilized and off their lows, it's apparent there will be less switching to gas this year than last though we're in bubble there in some areas.

5) Shipping Rates Have Been Tumbling But May Have Bottomed. Mention that China is going to grow at a slower rate and drybulk rates dip. That' been happening (see the last kink down in these charts) and while it pulled the names slightly lower they have actually held of better than rates. Looking for a recovery in this group later in the year.



10 Responses to “Wrap – Week Ended 2/19/10”

  1. 1
    choices Says:

    Article on SD-mean estimate on 2010 cash flow $2-67 dollar question is what is the current debt service requirement for 2010-I have not been able to establish that amount.


    Z, have you seen debt service numbers?


  2. 2
    choices Says:

    CF estimate is approx $2/sh-garbled above.

  3. 3
    Jerome Blank Says:

    UNG…for folks following UNG, there was an interesting correlation improvment of UNG performace vs. futures in the last 60 days, I posted a new chart showing the flattening of the relative strength curve vs. futures…this correlation improvemnt should help make divergences between the two more actionable…


  4. 4
    zman Says:

    Choices – will look into it.

    SLB officially takes out SII for $11 B

    That’s $44.51 / sh on a close for SII of $37.70.


  5. 5
    zman Says:

    The Holdings tab has been updated for the $10 KP II spread and quick view. The quick view section has been improved to include some basic position reasoning.


    I’ll have the TAT piece out late tonight.

  6. 6
    skimo Says:

    SSN ?

  7. 7
    zman Says:

    SSN – yep, got back burned, presentation has been left open on one of my tabs for a week now. Will do this week.

  8. 8
    choices Says:


    This is not good news.

  9. 9
    baylor3217 Says:

    Was there BEXP news out after the bell on Friday? I’m showing up 4% AH…

  10. 10
    zman Says:

    Choices – I think very little will ultimately come of this. Its been in the works for quite some time now so and started heating up again in recent weeks so Waxman’s move was expected. I don’t see a chance that there will be a moratorium on fracking any time soon but that would be one heck of a way to get gas prices up.

    Baylor, nope, nothing that I see.

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