03
Jun

Jobless Friday

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Market Sentiment Watch: Ugly open on tap as payrolls disappoint at up 431,000 with the majority (411,000) of that figure being Census "jobs". The Street had been looking for numbers well over 500,000. The unemployment rate fell to 9.7% but the focus will and should be on the lack of real job creation and small negative revisions to past month's data. Ugh.

In energy land not much is going on aside from the continued 24/7 monitoring of spill vision. Yesterday wasn't that big a day in the broad markets but we received better than expected results from both of EIA's inventory reports (see slides below) and the land based E&Ps continued to make up lost ground for a second day. Adding to the gains, was one of Uncle Sam's minions from the MMS. About mid day yesterday, the Washington Post indicated an MMS employee had stated that the granting of all permits to drill in the Gulf of Mexico, regardless of water depth, had been suspended. Within an hour MMS said this was in fact not true but that all previously filed permits would need to be refiled under a new set of rules contained here. HAL and others have already said the new rules are subject to interpretation and will need further clarification. To me this means good luck getting new permits in a timely fashion and at the very least, a moratorium on new wells in the shallow waters for at least two months which is the minimum time in which I could see companies refiling and getting approval.

My comments from yesterday on the hydrocarbon importance of the Gulf of Mexico if you were to shut down the federal waters entirely:

As to oil: At present, the Gulf brings in 31% of oil produced in the U.S., excluding oil produced in the state waters (TX, LA). If you include them you get 32.5% of production and if you take into account offshore Alaska that takes the numbers up to 34%. 

As to natural gas: For natural gas, the entire Gulf represents 6.7 Bcfgpd or about 11% of U.S. production (3% Deep Water, 8% Shelf). The Shelf has trouble maintaining production levels in a good year where the weather is calm because of the fast decline rates (short reserve lives) of the targets. So you have to drill more just to replace production than you do in the deepwater where the targets are bigger.

And to the human factor: According to the Louisiana Oil and Gas Commission, the impact on the Louisiana economy of shuttering the deepwater coms to a rough grand total of $330 million .... per month. That's just Louisiana.

 

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Review
  4. EIA Oil Inventory Review
  5. Odds & Ends

 

Holdings Watch:

ZCAT (Zman Catalyst portfolio):

  • $7,500
  • 99% Cash
  • Positions are updated on the ZCAT, ZIM, ZLT page.
  • Yesterday’s Trades:
    • None

ZIM (Zman Inefficient Markets portfolio):

  • $11,600 (this comes from overweight positions in HK and BEXP which I will trim soon)
  • 1% Cash
  • Positions are updated on the ZCAT, ZIM, ZLT page.
  • Yesterday’s Trades:
    • None

 

Commodity Watch:

Crude oil rallied $1.75 to close at $74.61 yesterday, after the EIA released a bullish set of numbers (see below), overcoming a perpetually strong dollar. This morning crude is trading down $1+ following the payroll numbers.


Natural gas jumped another 6% to close at $4.69 yesterday. EIA reported a slightly smaller than Street expectation storage injection and the Washington Post article boosted sentiment further later in the day. The front month chart now looks constructive as seen here. However, I remain cautious on gas prices for now (see below). This morning gas is trading down five to ten cents.

Natural Gas Inventory Review

ZComments: Nice number indicating cooling load is already helping with demand but we remain severely over stored in the producing and west regions and in aggregate pretty well stored to the five year average so it's hard to get too excited. We need sustained heat to burn off inventory. I've included a trajectory chart which takes past injections and tacks them onto current storage levels in the first chart below and as you can see, the potential outcomes for mild summers could easily result in another record storage peak which would put a cap on prices unless there is a massive U.S. policy shift towards transportation (note that transportation still only accounts for well under 1% of U.S. annual consumption of natural gas). 

 

 

EIA Oil Inventory Review


ZComments: One report for the bulls ...

  • Good to see gasoline demand inching on up seasonally
  • Good to see distillate demand remain elevated for a 5th week; more trucks are rolling on the freeways again.
  • Good to see imports back off as expected after a rush to get to the LOOP of Louisiana
  • Odd to see such a large week to week dip in production levels.

Crude:


 



Gasoline:




Distillates:


 

 

 

 

Odds & Ends

Analyst Watch:

  • ---

 

180 Responses to “Jobless Friday”

  1. 1
    zman Says:

    Analyst Watch:

    Stifel raises ROSE, COG, PXD, BBG to Buy

    BEXP will be speaking at RBC Monday.

  2. 2
    Nicky Says:

    Good morning. On Wednesday I said I was looking for 1075 – 1080 on the pullback. Seeing it rather quickly!
    Playtowin – didn’t see your comment last night until this morning – but the answer is that I am just expecting that due to the configurations of the cycles. We have a cycle high due around 7 – 9th June.

  3. 3
    Nicky Says:

    The reality of the jobs report is very worrying…

    the birth death model added 215,000, the temp census workers added 411,000 for a total of 626,000 jobs that are not actual jobs. In other words we actually lost nearly 200,000 jobs.

  4. 4
    BirdsofpreyRcool Says:

    Quick comment out from XACS after the NFP # —

    Credit market spreads indicating that SPX futures should be in the -35 area, but lots of credit spread vol right now. My question is … what economists actually thought that 530k+ jobs was going to happen… and what was Obama talking about……. We recommended that investors be positoned for this type of outcome in yesterday’s report and a couple of intra-day notes ………. Nevertheless, some subtle but positive credit market developments are beginning to turn us into tactical bulls…not there yet….but getting real close

  5. 5
    zman Says:

    Nicky – yeah. Ugly.

    BOP – my questions exactly … in what world would this be considered a good report?

  6. 6
    BirdsofpreyRcool Says:

    Following up with XACS on what he is monitoring, got the following list —

    GS CDS curve back to being positively-sloped

    The new-issue calendar is coming back

    A couple of asset-backed issues got done recenty

    S redid their huge credit facility

    Prefered Mrkt is performing well

    Credit card portfolio performance is improving

    Consumer spending is creeping back

  7. 7
    Nicky Says:

    Major support is at 1070 and 1068 has to hold to keep the minor cycles pointing higher…..

  8. 8
    BirdsofpreyRcool Says:

    Nicky — there is no corner of the universe where this would be considered a “good employment report.” If people have not yet figured out that it’s not what our President says… but what he does/what the truth of the matter is… well… then I guess they just aren’t paying attention.

    XACS nailed it y’day, with his comments that BHO’s casual statement about the jobs number would set the mrkt up for a down-draft today. Based on XACS’s comments (and yours), I sold some stuff (non-energy) y’day, to redeploy today, monday, soon. This is still a “recovery”… albeit a jobless one for now.

  9. 9
    milepost_43 Says:

    HAL comment on proppants..
    However, the inventory of proppants and barite specialty chemicals used in the offshore Gulf market could be absorbed into other markets, particularly the U.S. land market. Proppants currently are in short supply in the U.S. land market, and the flow of this product from the offshore market to the land market will likely ease fears of cost increases in the land market, Halliburton officials said.

  10. 10
    zman Says:

    MP – yeah, saw that and I think TEX commented that really there isn’t much use of proppants offshore, so its a bit of a weird statement on HALs part.

  11. 11
    Nicky Says:

    Well combined with the news out of Europe this morning – Hungarian prime minister warning his country may default, Societe Generale in yet another derivatives blow up, HSBC downgrading Europe (excluding the UK) – it would be a miracle if this market could stage a bounce today…..

  12. 12
    BirdsofpreyRcool Says:

    Addendum to #8… HeadTrader saying that we were looking for a pull-back today… NOT a crash. So, don’t mean to get all “told-ya-so” about it. Just trying to read the tea leaves.

    TED has been telling us that things are fragile… TED doesn’t give speeches at Carnegie Mellon… TED just tells it like it is. Watch TED.

    Cash TED Spread at +40.5 bps

    IG Index +6 1/4 bps wider (but back from +7 1/4 right after the number)

    HY -15/16 pts

    Watch these numbers today… I’ll keep reporting them.

  13. 13
    Nicky Says:

    Support also at 1075/6

  14. 14
    Nicky Says:

    Re # 12 – I know exactly what HT means – was thinking the same a pullback and not a crash – we will see.
    BOP your comments regarding credit have been warning of this all week I would say – thank you for keeping us posted.

  15. 15
    Nicky Says:

    Forgot to mention that CNBC were reporting earlier that the Swiss National Bank have stopped supporting the euro….

  16. 16
    zman Says:

    Nicky – adding to the euro woes, reuters reporting Chinese exporters are dumping it.

  17. 17
    zman Says:

    President to speak on economy/jobs as the market opens.

  18. 18
    zman Says:

    HAL and RIG going green pre market.

    BP saying they hope to get 90% of oil produced by tonight. At last check, the riser was not attached to the top of the cap but the cap was seated.

  19. 19
    Nicky Says:

    Z – re #18 = that sounds like good news from BP considering.

  20. 20
    1520sbroad Says:

    does BP have one of those live feeds that shows the cap in place? I looked thru the links on their site and couldn’t find one that was on.

  21. 21
    zman Says:

    BP saying its hard to speculate on future dividend payments.

  22. 22
    zman Says:

    Yes, Enterprise Rov 2 has a good shot of it.

    http://www.bp.com/genericarticle.do?categoryId=9033572&contentId=7062605

    Right now you can see the cap and oil is just billowing around it as it is not hooked to anything. Also, the corexit is being pumped in in the foreground making it look even bigger now.

  23. 23
    zman Says:

    Obama late to speak on economy. I guess replacing half the speech would cause me a delay as well.

  24. 24
    BirdsofpreyRcool Says:

    IG +5bps… tightening here a bit… could see a bit of a bounce… but CDS desk saying they don’t want to do long over the w/e… monitoring

  25. 25
    zman Says:

    Energy doing very well considering the market.

  26. 26
    zman Says:

    SWN reiterated at Buy at Goldman.

  27. 27
    BirdsofpreyRcool Says:

    how do you replace “gloat, gloat, gloat”???

  28. 28
    BirdsofpreyRcool Says:

    (maybe with “goat, goat, goat”??)

  29. 29
    zman Says:

    Gassy stocks flattish, trending green.

    BOP = LOL.

    President “furious” over Gulf spill. ZMAN “furious” over jobs report.

  30. 30
    scoop006 Says:

    Z Isn’t it time to sell your HK $21 as you have a 3 bagger

  31. 31
    zman Says:

    Scoop – probably so, got the feeling the worm is turning there. Finally. I should cut it in half for sure.

  32. 32
    zman Says:

    “another month of private sector job growth” … wow.

    4 mm small biz got post cards telling them they are eligible for health care tax cuts. I am a small biz and did not get one. Can someone send me one because that would be greeeaaaatt.

  33. 33
    1520sbroad Says:

    thanks for 22 – i hadn’t made it that far down the list of feeds

  34. 34
    1520sbroad Says:

    27,28 – lol

  35. 35
    VTZ Says:

    Lots of people are looking for another big break down of the euro vs the dollar because it broke 1.215 and 1.2050.

  36. 36
    zman Says:

    Thanks for keeping up with that V.

    How’s the summer forecast up in your neck of the woods? They are calling for a hotter than normal one down here.

  37. 37
    zman Says:

    NG up 4 cents. Hello short covering rally.

  38. 38
    Nicky Says:

    Okay possible wave count scenario to fit the cycles. We are working on a 3 wave correction to the upside. So its either an abc or wxy. We are in the c or y wave. Within that wave we are in the b wave lower and we may need one more lower low to finish that wave before we move higher to finish either c or y at around the 1130 area.

  39. 39
    zman Says:

    BP updates analysts:

    “plenty of dollars” for the Gulf Coast and to spend on other things.

    Dividend – will meet obligations to shareholders but didn’t guarantee dividend stays in place.

    says they will probably lose 50,000 bopd in 2011 due to the moratorium, and if ongoing, 75,000 bopd by 2015.

    Can’t say yet what everything will costs but they have $5 b in cash and lots of credit lines, they don’t see it constraining their world wide spending.

    all procedures used on the well were standard industry practice and approved by the MMS. people will take issue with some of that comment.

  40. 40
    VTZ Says:

    I haven’t been following the long range weather predictions for the summer but so far it’s been warmer that usual for sure (minus the snow we received on the 28th of May, but it warmed up to ~20C 2 days later).

    Re: Rate hikes, Canada is probably going to be forced into another rate hike next time because we gained 25,000 jobs in May and are only 100,000 shy of the Oct 2008 peak. The GDP number was also indicative of a rate hike so I think the more hawkish language that accompanied the rate hike will need to be removed.

    My question is this: eventually other G7 rate hikes will be on the way, but we heard that back in mid-2009 and it keeps getting delayed. Even though they are trying to sounds hawkish, it sounds like a reach to me. I can’t fathom a rate hike for a long time. Am I reading this differently than others?

  41. 41
    zman Says:

    Thanks Nicky – you couldn’t have been more right over the last 3 weeks. Congrats.

  42. 42
    Nicky Says:

    Thanks Z. Its very challenging for sure. With the above count I will add that 1068 has to hold or something more bearish is going on.
    VTZ – euro is interesting. I think I have said on here before I am looking for 115 – 116 but was thinking it would be Oct/November. Now it looks like it could be here by Monday!

  43. 43
    zman Says:

    Gassy stocks off to the races, HK has more than made up for the slight lag to peers like SWN, RRC, UPL that started on Wednesday.

  44. 44
    andy Says:

    nicky – what number would make a lower low?

    z – am also overbought in HK , but can;t seem to hit the sell button, cause the stk is finally acting better than its peers. is that the same way u are feeling?

  45. 45
    bill Says:

    my # 55 on weds was a good dream/hope

    A congressman wants to sue bp for lost royalties

    all the upside and none of the risks

    if i was bp id say share the pain in cleanup “partner”

    I reentered mcf, waiting on that last well and a qtr of full production in the numbers

  46. 46
    zman Says:

    Andy, yes. But I have to sell it down soon to a more reasonable position.

  47. 47
    john11 Says:

    BOP, any feedback/color from KOG annual meeting? Nice stock action, great alert on that one JB. Voted as usual, thx.

  48. 48
    BirdsofpreyRcool Says:

    john — re: KOG, thx for asking. No feedback on KOG other than the weather has been working FOR them lately. Also, getting that $200mm (with $20mm avail) facility from WellsFargo was H-U-G-E. It just got lost in all the noise this last week. But, should have sent the stock back up to $4. Looks like someone is finally realizing that.

  49. 49
    West Says:

    Thanks JB for the great charts. There are only 16 votes for this month. Please remember to vote daily and support our local guru. Thanks again your charts are very helpful.

  50. 50
    zman Says:

    Wonder if the Administration has tallied the hit jobs are going to take from the deepwater moratorium. The spill is bad to be sure but it seems to have been caused by a number of things all going wrong and the record before this was very good. Seems unlikely that two asteroids would hit back to back.

  51. 51
    BirdsofpreyRcool Says:

    latest from XACS —

    Credit and Equity are in parity…and credit momentum is toward tightening..but tightening momentum is not enough of a discrepancy to warrant a trading re-evaluation either long or short…but it is enough of a difference to keep an eye on the trend and see if the a trade develops…

  52. 52
    BirdsofpreyRcool Says:

    Official publication from XACS today —

    http://www.capmarkets.com/ViewFile.asp?ID1=138127&ID2=420222533&ssid=1&directory=6571&bm=0&filename=06.04.10_Tactically_Bullish.pdf

  53. 53
    Pati Says:

    re #49, you can vote for JB every day to get him closer to a crown. He provides us with great charts!

  54. 54
    Wyoming Says:

    http://www.reuters.com/article/idUSN0410922820100604?type=marketsNews

  55. 55
    zman Says:

    LNG, the company, planning to add a liquefaction plant at its Sabine Pass import terminal. So planning to liquefy and export nat gas.

  56. 56
    BirdsofpreyRcool Says:

    so… do we get the Noon Swoon today??

  57. 57
    jy Says:

    Re todays post and #50:
    We now have the career bureaucrats in charge. NOTHING will be approved whilst the bureaucrats figure out how to apply the information in Salazar’s report to the President. These things take time to set up and write procedures and design new forms to fulfill the new requirements.

    The screaming from industry will begin soon as we see what sort of paperwork hoops we are being subjected to and when Oil & Gas realizes that permitting will proceed at a glacial pace with bureaucrats obfuscating and delaying every step of the way. But the rest of the country will pay no attention to that unless gasoline prices rise. After a sufficent number of oil and gas and service company bankruptcies plus layoffs because of bureaucratic delays, Gulf Coast congressional delegations will cry out, reporters will take note and the current administration will lean on the MMS to clean up their act and move things along.

  58. 58
    zman Says:

    JY – sad but probably true.

    BOP – thanks for the credit comments and for forwarding the cross asset stuff.

  59. 59
    BirdsofpreyRcool Says:

    TED has been speaking Truth to Power. He doesn’t cheer Census Worker Jobs… only the real kind.

  60. 60
    zman Says:

    Analyst Estimate Watch – from Johnson Rice

    HAL, SLB – hit to 2011 EPS over deep water moratorium, 12 cents and 9 cents respectively.

    This jives with what I gathered from HAL’s call the other day and what I’m seeing from others on the Street. My thought is that that is already well discounted in the names.

  61. 61
    BirdsofpreyRcool Says:

    XACS IM —

    credit tightening momentum was quickly crushed and is again indicating that equities will be biased to push lower…Parity in the -35 range

  62. 62
    zman Says:

    NG up 12 cents, continuing to defy the rest of the market. Gassy stocks barely clinging to gains as the S&P is down at the worst levels of the day, taking oil there too.

  63. 63
    elduque Says:

    kwk still climbing. Sold my position cheaper. Stock up 15% since yesterday morning.

  64. 64
    zman Says:

    Eld – one thought there would be that DVN, who has been selling things offshore would go ahead and pull the trigger. Lots of geographic overlap. Also, it would put them into the Alberta Bakken. So maybe people are thinking merger Monday there.

  65. 65
    zman Says:

    It would make some sense also from a timing perspective as people look at the onshore with new eyes relative to the offshore.

  66. 66
    zman Says:

    BEXP thoughts – some of the wells on the cat list could be announced Monday when they speak at RBC. The timing of at least two of them would work, maybe 3. They will not have the Rough Rider TFS test done or the Pale Rider test done yet though.

  67. 67
    VTZ Says:

    Total CEO says bid for BP “unethical” -report
    17 minutes ago – Reuters
    Total CEO says bid for BP “unethical” -reportPARIS, June 4 (Reuters) – French oil major Total TOTF.PA is not planning to take advantage of the plunging shares of BP BP.L to make a takeover bid, the group’s chief executive told Jeune Afrique magazine, adding such a move would be “unethical”.

    BP shares have lost more than a third of their value since an explosion on April 20 on one of their Deepwater Horizon offshore drilling rigs in the Gulf of Mexico killed 11 staff and caused the biggest oil spill in U.S. history.

    The U.S. government has estimated that as much as 19,000 barrels per day could have been flowing into the Gulf of Mexico off the coast of Louisiana since the explosion.

    Asked whether the weakness in BP’s share price could prompt other oil majors to consider acquiring the London-based group, Total Chief Executive Christophe de Margerie said:

    “It is out of the question to talk about this kind of thing, because taking advantage of the terrible situation they are in to carry out a deal is completely unethical.” “It’s just unthinkable,” he added.

    BP shares stood at 435.97 pence at 1510 GMT, down from 642.50 pence on April 19, on the eve of the Deepwater explosion. BP currently has a market capitalisation of $119 billion compared with just over $111 billion for Total. (Reporting by Muriel Boselli, editing by Will Waterman)

  68. 68
    zman Says:

    V – Thanks. There’s also the giant unknown liability that might be hard to get past one’s board of directors and shareholders.

  69. 69
    VTZ Says:

    Gold looking to make a strong close given all the nonsense trading the last few days. I see the action yesterday and today as very strong going forward, fwiw.

  70. 70
    VTZ Says:

    Also the euro where it is right now is confirmed breakdown, especially for a weekly close.

  71. 71
    tomdavis12 Says:

    Z: 55 Wasn’t the permitting for exporting LNG the roadblock?

  72. 72
    zman Says:

    Tom – That was roadblock 1 and they got that awhile back. They will still have to get FERC and EPA to buy off on the facility.

  73. 73
    zman Says:

    …and I’m sure some bright congressman will try to block it on the grounds that it’s un-American.

  74. 74
    Nicky Says:

    re # 44 – sorry Andy I went out for an hour. Just needed to take out the opening lows which we have now done. Now need this move to wrap up above 1068.
    Moving down with the euro again.

  75. 75
    BirdsofpreyRcool Says:

    Credit indices currently at wides of day.

  76. 76
    BirdsofpreyRcool Says:

    +8 3/4 on IG

  77. 77
    BirdsofpreyRcool Says:

    That should correspond to around yout 1068, Nicky.

  78. 78
    BirdsofpreyRcool Says:

    (yout?)

  79. 79
    Pati Says:

    Good news abounds dept: My brother has an appraisal company and says: “if the cap and tax passes this will make every sale update to current environmental standards and will also require a 3.5 federal tax on sales. This means all homes will have to have energy efficient appliances, earthquake retrofitting, dual pane windows, updated insulation, and pay a yearly license fee for homeownership.”

  80. 80
    zman Says:

    Pati – have heard all of those but the yearly license fee. I can’t see them getting that one passed. But it is true that remodel costs will go up as you will have to have pre and post remodel efficiency tests of your home.

  81. 81
    guru Says:

    BOP:

    You frequently post quotes of HY and IG credit spreads. How do you correlate this info to intraday market moves? What is the takeaway for an average investor from these frequent updates, especially in the intraday movements of the energy equities? Is there a long term chart available somewhere of these spreads which allows you draw some conclusions from the direction of these spreads? Thanks.

  82. 82
    BirdsofpreyRcool Says:

    guru — what a mouthful! Good questions, all.

    I rely on XACS’s model (which incorporates long term charts to come up with a predictive model) to translate moves in the IG index to moves on the SPX. That correlation changes with levels and volatility and time. But, for now, it’s been a good indicator (which just tells me that other professional investors are looking at the same thing). The frequent updates are for your use as directional indicators… and every time i get an update from XACS as to that the current credit level is pointing to in stocks, I post it.

    I just got an IM from him that says IG at +8bps is pointing to a down 35+ on SPX. So, watch for where we trade, above or below the +8 level. Lately, stocks haven’t always followed credit intraday, but have shown a tendency to pair up around closing. So, unless the IG index tightens from +8 bps (which is better; wider is worse), then I would expect the SPX to close down around 1067 or so. But stocks can also lift credit too… so, no surprise, it’s always a moving target (hence the frequent updates on days like this)

  83. 83
    tomdavis12 Says:

    Z: Report from MS on 6/2 calculates that risk to total company backlog at DO 10%, NE 10% and RIG 7%. Current price targets DO $103, NE $49 & RIG $98.

  84. 84
    zman Says:

    Which we do very much appreciate BOP.

  85. 85
    BirdsofpreyRcool Says:

    z — I know you do… but thx for saying it. 🙂

  86. 86
    BirdsofpreyRcool Says:

    Our little friend, TED, is looking a bit greener about the gills this afternoon too. I think this index (in it’s various forms and flavors) is being watched more by equity trading desks than credit spreads. Mainly b/c it’s 1,000 easier to access and follow. TED is wider, at +41.2 bps now. I don’t like this. But think it is more an indication of FEARS in Europe, than it is of another US Credit Crisis starting up.

  87. 87
    BirdsofpreyRcool Says:

    (1,000 times easier, i meant to say)

  88. 88
    zman Says:

    re 83, thanks Tom. I think he needs to recalibrate his targets for risk/reality though. Too far out there for people to pay attention to.

  89. 89
    Nicky Says:

    Just think out aloud – there is a gap at around 1065 from a week or so ago that remains unfilled. Maybe a potential target.

  90. 90
    zman Says:

    Analyst Watch – Both on ATPG

    Howard Weil took its target from $20 to $15, rating stays Market Perform.

    Moody’s lowered its outlook to Negative

  91. 91
    elduque Says:

    Thanks BOP for all your information.

  92. 92
    guru Says:

    BOP

    Thanks for the explanation. Is there a site which provides a closing price quote of TED, IG and HY spreads?

  93. 93
    elduque Says:

    z – I know you have a full plate already, but I would like to encourage you to add a few Canadian names. Like erf, pwe, cng, su.

    There are probably a few more, but I believe that the Can $ is going to be worth at least 10% more than where it is at today and in addition the Baaken doesn’t end at the border.

    Also, the shale plays become more valuable as the uncertainty of the Gulf increases.

    Please.

  94. 94
    BirdsofpreyRcool Says:

    elduque — thank you. I just hope you can use it to make $$. That makes me very happy.

  95. 95
    baylor3217 Says:

    Thoughts on initiaing a HAL posiion here?

  96. 96
    BirdsofpreyRcool Says:

    guru — JB might be able to help with TED… it’s one of the charts he has.

    I use a bloomberg funtion i programmed in to plot TED in the way i like to look at it. And I get a pretty constant stream of private transaction quotes off the institutional CDS trading desk of a NYC money center bank. So I don’t know how to access these levels other ways. Go to the Markit site and see what they let you look at. They are the firm who puts together the indices (like S&P puts together the SPX). There is probably some good info there.

  97. 97
    zman Says:

    Baylor – I have one now. I think it’s cheap and has been overly punished. I’d note that it was flattish yesterday and is flattish again today and would expect a pop, along with BP, when they get this thing more capped.

  98. 98
    elduque Says:

    In order to have another perspective on the market, I read Hussman’s weekly comment Sunday night. Can be found at http://www.hussmanfunds.com/

  99. 99
    zman Says:

    NG up 3% now. Gassy stocks have given back all gains. That’s OK in my book as they are more likely to outperform, at least back to today’s highs on a bounce in the market next week.

  100. 100
    BirdsofpreyRcool Says:

    z — have you heard “how capped” the well is yet?

  101. 101
    zman Says:

    Coast guard said 1,000 bopd earlier so not very.

    http://www.bp.com/liveassets/bp_internet/globalbp/globalbp_uk_english/incident_response/STAGING/local_assets/html/Enterprise_ROV_2.html

  102. 102
    BirdsofpreyRcool Says:

    seeing Noble (NE) headlines that they expect APC to terminate some drilling contracts due to “force majeure.” NE saying they don’t believe this falls under that definition.

    Frankly, I agree with APC… but NE has to defend it’s shareholders too. GGG is definitely a “force majeure” in my book.

  103. 103
    Nicky Says:

    VTZ – any thoughts on the divergence between gold and silver here. Silver continues to look very weak. Wondering if I can read something into it further out?

  104. 104
    zman Says:

    … their stated plan is to ramp it to 90% within the next 24 to 48 hours.

  105. 105
    BirdsofpreyRcool Says:

    My thoughts, prayers, and hopes are with those BP engineers !!

  106. 106
    BirdsofpreyRcool Says:

    …And ROV operators, and construction crews, and boat operators, and every one involved with this disaster.

  107. 107
    dij Says:

    Guru/BOP. Was this not posted yeterday? Yearly chart only. Is there a shorter term one?

    http://www.bloomberg.com/apps/quote?ticker=.tedsp%3Aind

  108. 108
    VTZ Says:

    RE 103: No thoughts in particular other than silver and the equities are the first things to show weakness when the shorts pile on. It’s a smaller market to push around (granted both gold and silver paper markets get pushed around easily because the amount of paper is so big).

    I think it’s still a result of the past couple days being relatively bearish although the shorts are going to be forced to cover next week and we should see a push up to test 1224 again and then silver will catch up disproportionately.

  109. 109
    zman Says:

    Grabbing coffee, back in 30.

  110. 110
    BirdsofpreyRcool Says:

    dij — thanks! looks like about the same way I measure TED. It’s not the exact level that is so important… just the direction… and some sense of what the longer-term “normal” should look like. I use +25bps as my “normal”… but it’s probably tighter than that…more like 20 or so. Anyway, thx for posting.

  111. 111
    VTZ Says:

    I think lots of shorts are getting trapped right now who were piling on in the past few days expecting gold to roll over when it did not break out above 1224. I think they are seeing more support than expected around and above 1200 and some covering likely caused the rally up to 1215.

  112. 112
    BirdsofpreyRcool Says:

    dij — if there isn’t a shorter-term chart avail, you can always just note the current quote… that’s what i throw out on this board anyway.

  113. 113
    Nicky Says:

    Well I agree with you that the move in gold looks very strong right now, especially that move off the low today. Worst way the chart looks like gold is in a large consolidation so downside would appear limited.

  114. 114
    BirdsofpreyRcool Says:

    IG quoted at +9 1/4 bps now. Yikes!! Wide of day…

    Liquidity all but dried up in CDS, so an enthusiastic Bear could push on this index and create the illusion that the world is coming to an end (it’s not really that bad, but you know Those Bears).

    I’m buying a financial stock at current levels, btw. But it’s one I intend to hold for a long time.

  115. 115
    Nicky Says:

    Another thought about 1065 – it would be a 62% retrace of the rally to 1104.

    Should it not hold and the bearish count is in play then I think we would have to be looking at a wave v down below the previous 1044 low.

  116. 116
    milepost_43 Says:

    Marcellus blowout..
    Wait till this gets on CNN…
    CLEARFIELD, Pa. —
    Natural gas and drilling fluids are spewing from an out-of-control well in Clearfield County.

    Emergency officials said a mile-wide area has been evacuated after an operation drilling into the Marcellus Shale ruptured on Friday.

    http://www.thepittsburghchannel.com/news/23793198/detail.html

  117. 117
    zman Says:

    Accidents do happen, hope the crew is OK.

    NG up 4% now. Stocks not failing to notice as they barely red instead of really red which would be the norm on a day like today.

  118. 118
    john11 Says:

    Any word as to who owns that well?

  119. 119
    BirdsofpreyRcool Says:

    #116 drat. Wonder how often that happens, tho.

    This could be like the Summer of “SHARK ATTACKS!!” Turns out, there were no more shark attacks than normal that year, but newpapers just focused on them… so people were terrified of going into the water.

    NOT to downplay AT ALL the seriousness of the Macondo blowout! But, that is just not in the same zip code.

  120. 120
    West Says:

    From RMOJ Carat rumored to be a good oil well for EOG.

  121. 121
    zman Says:

    S&P cuts BP one notch to AA-

  122. 122
    zman Says:

    West – thanks very much, was just mulling swapping some HK for a little more BEXP since BEXP is speaking next week and it’s getting flopped with oil at the moment.

  123. 123
    BirdsofpreyRcool Says:

    XACS IM —

    Parity exceeds -45 right now and credit is approaching 10bps of spread widening. This latest push wider in spreads makes us very leary about buying into the close unless we see another significant move lower in equities or a recovery in spreads.

  124. 124
    john11 Says:

    Natural gas and drilling fluids coming from the well in Clearfield County forced an evacuation of a mile-wide area and a FAA flight restriction in the immediate area. The Pennsylvania Emergency Management Agency reported that a wll which was in the frack process ruptured. A spokeswoman for the driller EOG Resources (EOG) says the well was brought under control just after noon ET, which was about 16 hours after the rupture. A state Department of Environmental Protection spokesman said no one was injured. Several names leveraged to Marcellus Shale have traded down in the past few minutes as the news has become more widely disseminated, such as EOG, REXX, and EQT.

  125. 125
    Nicky Says:

    FWIW – the astro has a positive turn now and again at 2.30est.

  126. 126
    BirdsofpreyRcool Says:

    IG at +9 1/8 on light volumes…

  127. 127
    zman Says:

    ZTRADE – ZIM – HK

    Sold 1/4 (25) June $21 calls for $0.72, up 146%. Position is just too large for the portfolio at present.

  128. 128
    BirdsofpreyRcool Says:

    +9 3/8

  129. 129
    zman Says:

    ZTRADE – ZIM – BEXP

    Added (50) more BEXP June $20 calls for $0.20 with the stock at $17.10, off nearly 8% on the day. The company speaks at a conference next week and could announce additional well results. Moreover, my sense is that onshore plays will assert themselves again in a more normal market environment as preferential to offshore plays in coming weeks.

  130. 130
    BirdsofpreyRcool Says:

    Midday Update

    Market Update – the futures were flat at 6:50amET this morning and investors were hoping to finally break up through the 200day MA (on sp cash) and end the week on a positive note. However, at 6:52amET a few headlines hit the tape, inc. 1) Reuters reporting that SocGen was trading off in Europe due to investor worries about derivatives and 2) Hungary officials telling Bloomberg that the country’s budgetary outlook was “grave”. Futures were hit further at 8:30amET following the release of a very poor jobs report (private sector adds came in well below forecast although wages and hours worked were both bright spots). For a lot of the morning session, the consensus view was that we would trend higher throughout the day, but as we head into the afternoon, the condition of the tape is pretty negative. Critical groups are being sold hard – the transports are off 3% (w/most rails down 4%), materials are down another 2% (w/steels down 4-5% on the price cuts out of Baosteel overnight in China), and the industrials are down ~3%+ (all these groups are the best proxies for the health of the macro economy – all are leading stocks lower). The head of GE Capital spoke at the Bernstein conf today and while he didn’t make any “new” comments, remarks like “commercial real estate is still not out of the woods” isn’t helping sentiment today and is being used as another excuse to sell. The euro is cracking to fresh lows for this move lower (4yr lows) for a lot of the same reasons stocks are getting hit (more worries about the health of Europe’s banks – SocGen is getting the most attention today but people remain very worried about Spanish banks too – as well as continued headlines about sovereigns – Hungary has been the focus point over the last two days). Heading into the weekend, investors don’t have much incentive to stay long (various press reports have signaled that the G20 event will be a relative non-event – i.e. there won’t be any specific action taken to stem the crisis in Europe) and technicals are breaking down (1080 is an important level). The 1040 test of last Tues (5/25) is still being viewed as an important interim support level, although if these poor trends persist into the afternoon it could undo a lot of the positives from the Wed/Thurs activity.

  131. 131
    mattlee Says:

    Got lucky and sold the HK June $21 calls for $1.29 earlier. Thanks Z (and everyone else) for the hard work. I’m new here and am really impressed with everyone’s depth of knowledge.

  132. 132
    zman Says:

    Great Matt, and Welcome to the site!

  133. 133
    dij Says:

    Thanks, BOP, for #112, and your wonderful and often wonderworking info!

    VIX approaching recent resistence at 34.7.

  134. 134
    BirdsofpreyRcool Says:

    dij — thank you. Hope it helps!

    Seeing IG make a weak stand here… clawing it’s way back to +8 1/2 bps. Nicer to see than amost 10.

    Still, +8 1/2 points to a down 35+ on SPX… so watching

  135. 135
    BirdsofpreyRcool Says:

    oh well… that was short-lived….

    +9 bps

  136. 136
    Nicky Says:

    oil closing on its lows of the deay is not exactly a positive here.

  137. 137
    zman Says:

    Nicky – not surprising as the close of NYMEX coincided with the LOD for the S&P as of yet.

  138. 138
    Nicky Says:

    Goldman Sachs still green. Cramer just says Dow is going to 9500 – lets hope this is a good contrarian call.

  139. 139
    Nicky Says:

    If the astro is going to give us the turn then it has about another 15 minutes to work. If it doesn’t then it would be very very bearish as the forces that should be turning the market up will turn it down!

  140. 140
    zman Says:

    We’re back to the flash crash lows.

  141. 141
    Nicky Says:

    BOP can I trouble you for an update on the credit market?

  142. 142
    BirdsofpreyRcool Says:

    Nicky — strangely, it’s trading at +8 1/2 now… CDS thinks stocks will bounce here

  143. 143
    BirdsofpreyRcool Says:

    “CDS Desk” = meant to say

  144. 144
    BirdsofpreyRcool Says:

    sorry +9 1/2 now

    “Flash Bounce”

  145. 145
    BirdsofpreyRcool Says:

    XACS IM —

    S&P was quickly approaching our -45 target. Given that the credit and equity are also approaching parity at these wider levels, we believe this is the push wider that investors should use to take short profits. Given the pricing relationships that have evolved over the past month, we now believe that the SPX has hit its intraday lows….

  146. 146
    BirdsofpreyRcool Says:

    stuck my knife-wounded paw out to catch some KOG at 3.22….

  147. 147
    BirdsofpreyRcool Says:

    … prolly means it’s headed back to $2.95… but, gotta do what you gotta do, sometimes

  148. 148
    DrLink Says:

    BOP we must be on same brain vibe,

    ditto that exactly!

  149. 149
    BirdsofpreyRcool Says:

    DrLink — let’s hope this party is fun, this time around. Tired of the gloomy faces…

    😉

  150. 150
    BirdsofpreyRcool Says:

    Now… if we can just get Our Friend TED to crack a smile… and BP to cap the well… i think the birds in the trees will start singing again.

  151. 151
    guru Says:

    DIJ:

    Ref 107 – Thanks for the chart on TED spread. Is this available on Bloomberg only to premium subscribers?

  152. 152
    dij Says:

    Guru: No, it is available to all us hoi poloi. Try the link

  153. 153
    BirdsofpreyRcool Says:

    +9 3/4 on the IG index… no rest for the weary, it seems

  154. 154
    Nicky Says:

    Coming up on your -45 points BOP

  155. 155
    BirdsofpreyRcool Says:

    Gotta give that call credit where it is due… XACS. He has been pretty spot on, these days.

    Between Nicky and XACS, I think we are nagivating this as well as one could. Thanks for all your help, Nicky!

  156. 156
    md Says:

    HK Many thanks

    What’s the downside risk on APC.
    Do they have any liability.
    They affirmed their guidance for 2010.
    Are they too dependent on deepwater.

  157. 157
    Nicky Says:

    Took out my 1065 level BOP. Not giving up on the bullish count until the 1041 low goes. Especially as this wave down today is full of overlapping waves which makes it look much more corrective than impulsive at this stage.

  158. 158
    zman Says:

    MD – APC should be stuck with 25% of the costs, they have insurance but it is limited by their working interest % cap off I think about $700 mm. So it really depends on how big the tab runs. I like Hackett a lot and I’ve already seen them say that APC was not involved in the well design, just a financial partner but I don’t see how that gets them off the hook. They have a slug of offshore, mostly deepwater production so this is definitely going to hurt but have not looked at that as a percent of their EBITDA. They do have a good chunk of debt as well left over from two large acquisitions a couple of years back (Kerr and Western on the same day) so they may be in for some rough seas.

  159. 159
    zman Says:

    Thanks guys. Here’s to them achieving 90% on the well. I’ll have the wrap out Sunday. Beerthirty.

  160. 160
    md Says:

    So on that basis BP can take their share of the hit better than APC.

  161. 161
    BirdsofpreyRcool Says:

    Nicky — please keep the comments and levels coming… the Playing Field keeps shifting. The sentiment keeps changing. The volatility is de-stablizing. But, the Big Picture is just not that bad. I think. I hope. I think. The bubble being blown right now is Govt Debt. And I hope we can pop that in November. Or least head in that direction.

    The world will like a lot better, when BP caps that well too.

  162. 162
    VTZ Says:

    dollar index up 1.17…

  163. 163
    BirdsofpreyRcool Says:

    (like = look)

  164. 164
    zman Says:

    Yes, that’s what I’m thinking. BP is operator with 65%, then APC at 25%, and Mitsui has the other 10%. APC should have Capex of about $6 B this year before spill costs, not far off their cash flow. BP spends $10B on the dividend if I remember correctly and has $5 B in cash at the moment. So yeah, much easier for them to swallow. Don’t know if APC will get saddled with the same % of clean up costs as the operator would or not.

  165. 165
    BirdsofpreyRcool Says:

    Spot-on comment just out after closing from the NYC CDS Trading desk… have to pass it on…

    “This is what happens when politics mix w/finances. I am not sure what the real purpose was for Obama to tell everyone about the job data when he didn’t know. The rally on Monday took a lot of shorts out of the mrkt, and today we are taking the longs out. Nothing but complete destruction of PnL and positions. It is very scary buying risk here, but given the flows it feels like the right trade. Have a good w/e”

    Well said, CDS Trader, well said.

  166. 166
    dij Says:

    BOP, “buying risk” means going long equities or something else? Sorry to be so naive!

    Thanks.

  167. 167
    Nicky Says:

    BOP – Its hard to see how Asia is not going to be under some pressure Sunday night. Also aside from BP I am not sure where we are likely to get any other good news over the weekend.
    However even with a bearish count we should be getting close to the end of a wave down and setting up for some sort of bounce.

  168. 168
    VTZ Says:

    I bet Sunday night Asia is down BAD, then we open low and rally from there depending on what we touch in futures or at the open.

  169. 169
    VTZ Says:

    dij – There are only two trades right now:

    Risk = Oil, any currency other than the yen and USD, commodities (sometimes including gold), equities in general, high yield debt, corporate debt, foreign debt, emerging markets

    No Risk = USD, UST Bonds, Yen, gold (to some)

  170. 170
    VTZ Says:

    There is also the one other trade:

    Less Risk – Large US multi-national consumer staples that pay lagre dividends and will benefit from the continued worldwide money printing

    This trade is only in play when the market is neutral, otherwise it’s 100% Risk or No Risk. This has been the case lately because of the volatily.

  171. 171
    Wyoming Says:

    158 – APC sues BP for negligence in operating?

  172. 172
    BirdsofpreyRcool Says:

    VTZ — I stepped out for a bit. But, you answered the “risk asset” question a lot bettern I could have. Thank you!

    The way that bond traders define “risk” is anything that isn’t a short-term US Treasury. All “risk” moves out from that center, in multiple directions. So “buying risk” is trader short-hand for going long anything that isn’t a UST. Or, in the case of the CDS traders, selling a naked CDS position.

  173. 173
    BirdsofpreyRcool Says:

    Nicky — #167… there is always M&A Monday to hope for. Also, equities are pretty cheap, unless earnings fall through the floor (and there are a number of reasons why we are not on the cusp of Fall 2008 right now). So, also expect to see some companies announce stock buy-backs.

    But, what I am really looking for (in addition to a tighter TED Spread) is a surge in corporate bond issuance. There were more than a few deals pulled in May. Would love to see them get done before the end of June.

    As an aside for dij = Buying corporate bonds is the 1st step away from USTreasuries and into “risky assets.” So, it’s one of the things we need to look for, to gauge the mrkt’s appetite to stick their paw out and grab their fave “risk asset.”

  174. 174
    mimster90 Says:

    Thanks JB
    –voted

  175. 175
    milepost_43 Says:

    Marcellus blowout…”serious incident that will be fully investigated by this agency with the appropriate and necessary actions taken quickly.”–don’t hold your breath..
    http://www.portal.state.pa.us/portal/server.pt/community/newsroom/14287?id=11864&typeid=1

  176. 176
    dij Says:

    VTZ (and BOP!), re. #169 and 170. Thank you both! Well, that clears thing up a great deal.

  177. 177
    RMD Says:

    15:50 BP BP: President Obama says BP’s ability to pay its dividend shows how much it makes (37.29 -1.98) :
    I don’t dismiss how bad being on the S-list is, let alone at the top.

  178. 178
    zman Says:

    BP says 6,000 bo collected first 24 hours.

    http://edition.cnn.com/2010/US/06/05/gulf.oil.spill/?hpt=Sbin

    They continue to close valves atop the cap to send more oil up to the drill ship.

  179. 179
    zman Says:

    Nice to see some actual positive news, they’ve got collection data on the side of the video feed now.

    http://www.bp.com/liveassets/bp_internet/globalbp/globalbp_uk_english/incident_response/STAGING/local_assets/html/Enterprise_ROV_2.html

  180. 180
    dij Says:

    Best summation so far of the origins of teh explosion:

    http://www.nytimes.com/2010/06/06/us/06rig.html?ref=global-home&pagewanted=all

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