01
Apr

Wrap – Week Ended 4/1/11 (In Progress)

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In progress ....

Year To Date Energy Has Been The Place To Be.   Of course that does not mean it will be without volatility in the near term or that you can expect to annualize the first quarter over the back three quarters of the year and become complacent. But my expectations are, in general, modestly higher oil prices for 2011 relative to 2011. I do think we see an end of the Libyan government relief drop in the near term ... assuming Ghaddafi loses. Natural gas is a little more complicated but I do expect it too to end the year higher than current levels after we see a near term pullback on slack shoulder season demand and continued too strong production. See the Friday post for more detailed thinking on both commodities.  

U.S. Gas Rig Count In Pre Cliff Dive Mode. Note that the U.S. gas directed rig count is only off 6% despite pervasively weak natural gas prices. It's a mad dash to get acreage held and then stack rigs or shift them to oily plays. To compete with oil wells, natural gas in the States would need to trade in excess of $10 / MMBTU (or $7 to $8 if you listened to Aubrey's most recent comments). The timing of the real decline in gas rigs is still thought to be mid year although some slippage could occur with the count not really tailing off until Fall. Horizontal rigs continue to punch through to new record levels and the associated gas from many of the liquids rich plays is going to come up the hole no matter economics.   

Alternative Fuels Get A Burst of Sunshine. After extreme under-performance in 2010 and the first part of 2011, the alternative energy plays, as exhibited in the third red circle in the Wrap table below, have been given a breath of fresh air with 1) the rebreaching of the $100 mark for oil prices, 2) the nuclear disaster in Japan, and 3) the President's newfound energy for energy policy. The only trouble with solar is economics. With a strong governmental breeze at your back both solar and wind can compete with more traditional fuels. Right now might not be the time for that with deficit debates in danger of overtaking reality shows. My sense is that there will be little in the way of increased subsidies for alt energy projects in the US or Europe in the near term and that the alternative energy group is the subject of more emotion than the fundamentals will bear out. 

Natural gas even received favorable mention in the President's bullet points if not positioning. Increasing domestic production was only mentioned after a bizarre comment about working with international partners to help them increase their supply. Secretary Chu really should send the White House a memo on just how bottom of the barrel LNG imports to the States are at present and perhaps why that is. And besides, isn't the play to get off foreign hydrocarbons? And create jobs in the U.S.? On a positive note, Chu has been tasked with making sure shale gas extraction in the States is safe. Chu is a scientist and my sense is that he will move with more alacrity on greenlighting the frac process than Salazar (holder of a BA in polysci, a JD, and a career politician) did on the moratorium. One would think that Chu should be able to connect the dots regarding the easiest way to transition to lower imported crude volumes and higher employment numbers as we approach 2012. 

 

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19 Responses to “Wrap – Week Ended 4/1/11 (In Progress)”

  1. 1
    crysball Says:

    Another  county's oil prodcution   is offline…….albeit  a small  one  with  only 220,000 bppd [vs. Libya's 1.5 to 1.6 million bopd].
    Gabon's oil workers  union  went on strike(nationwide) which   resulted  in the shut-in  of  most  of the nation's  oil production [on-shore & offshore].
    The apparent  issue  causing  the strike  is  the  proprotion of foreign  oil workers working  in Gabon.  Last  year  the government  agreeed  a program  to reduce  the %age…………but apparently the union  is not satisfied.    Since  Total  is by far  the largest operator and employer of oil workers  in Gabon  it  would seem  to be directed  at  them.
    Since  oil represents  the  primary source  of government revenue, the stike   is  not  expected  to  be prolonged………but  only time will tell.

  2. 2
    zman Says:

    Thanks much Crysball. If EGY takes a big hit I'll take another look, big year of change for those guys. On Gabon, small yes but all those pinch points matter again. I expect Nigeria to cause problems again in the near term and for markets to be paying attention. Cote d'Ivoire small at 60,000 bopd but a problem too with 800 reported deaths in their presidential struggle and U.S. companies suspending exploration for the time being.

    Anyone like their mid 2006 or newer landcruiser? 

  3. 3
    Zorgnak Says:

    Zorg had a great quarter. He'd like to thank everyone on the board who contributed trading ideas that  wouldn't have seen otherwise. In particular he'd like to thank Z who provides the "grist for the mill" on a daily basis. Also, much thanks to those who contributed market/sector concepts and context that taught me a lot along the way. Zorg also has to acknowledge the market in general and the energy sector more specifically. This quarter has been the best since 1998 for the S&P500 and the energy sector has been the strongest sector within that index. Zorg has to remind himself of the old saying "Don't confuse a bull market for brains" and not get sloppy and complacent here.
    http://finance.yahoo.com/echarts?s=XLE+Interactive#chart3:symbol=xle;range=3m;compare=xlf+xly+xlb+xlk+xli;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=off;source=undefined
    Best to all.
     

  4. 4
    crysball Says:

    EGY  was down  5.4%  on  the news [#1 above] on Friday.
    EGY  should  spud their  first  Buffalo Wallow [Granite Wash] well shortly [1-4 weeks], and while Horizontal completion  is subject to avialability, am told they paid $65 million  in 2010  for  OHGP  completion services  in 2010   in Gabon  and have been assured  they will  receive  preferrred scheduling…..if that means anything.
    While   a 640  arcre leasehold   seems  a  miniscule toehold [in the big  Granite Wash picture,] they allude  to closing on   largeer  leasehold's  soon.
    Could  someone  clarify  the downspacing in the Granite Wash…..in one presnetation heard  20 acres…………..is that real?   
    Also  hear  that 20 acre downspacing  plays into   the hands  of cash-rich companies [like EGY]  who have  to come up with  the front end money.

  5. 5
    Zorgnak Says:

    Re  Beer Thirty
    A man is sitting on the porch with his wife and he says, “I love you.”

    She asks, “Is that you or the beer talking?”

    He replies, “It’s me………talking to the beer.”

  6. 6
    David Says:

    Has anyone seen this yet on CIGX? BOP?
    Must read.
    http://xa.yimg.com/kq/groups/14511094/1089346374/name/%5E2011-03-18+Anatabine+Issue_noPortfolio.pdf

  7. 7
    zman Says:

    Zorg – glad it's working for you, thanks for the kind words, agree re caution and complacency thoughts.

    JB – voted, great charts, making a habit of going through them all each Sunday, opening page BEXP is constructive looking.

    You can vote for JB here:

    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3724280

  8. 8
    mimster90 Says:

    re 6 BOP that link here posted that several days ago.

  9. 9
    BirdsofpreyRcool Says:

    David and mim — thanks for the posting and comments.  That article is just mind-blowing, really.  Worth making sure everyone has a chance to read it.  Even if you are skeptical of the CigRx product (and who, in their right mind, wouldn't be?), it's an interesting read on some theories of the mechanics behind "aging."

  10. 10
    Zorgnak Says:

    JB..Thanks. Found a couple interesting things. Voted
     

  11. 11
    Jerome Blank Says:

    BOP, Zman, Zorg…thank you and others very much for the votes, always appreciated, will be interesting to see how futures open tonight…looking at setups going into next week…

  12. 12
    BirdsofpreyRcool Says:

    JB — my pleasure.  Really appreciate your work!

  13. 13
    David Says:

    Re CIGX
    This is fascinating old news. In 2003 Dr. Mullan (MD PhD) resigned as head of the Alzheimer's research facility at the University of South Florida to go full time to Roskamp. He took 40 people with him and "dozens of scientists."

    http://www.sptimes.com/2003/02/20/TampaBay/Alzheimer_s_research_.shtml
    Also see

    http://www.youtube.com/watch?v=ztPkv7wc3yU

  14. 14
    BirdsofpreyRcool Says:

    David — interesting stuff. 
     
    Yes… Robert Roskamp and the Roskamp Institute are the Real Thing… staffed by Real Scientists… working on a Real Solution to Alzheimer's.  Kind of exciting, isn't it?

  15. 15
    David Says:

    #14 It is exciting. Someday, maybe, this stock could be a life changer. More than that, anatabine could be a world changer.

  16. 16
    Jerome Blank Says:

    CHK closed on support Friday at $33.50, notice the double layer triangle support in a zone between $32.50 and $33.50, the 30 min should be helpful in dialing down to more specific areas of support for long entry consideration.  Charts updated….
        

  17. 17
    zman Says:

    Big thunderstorm, high winds, lots of lightning, may lose power here. 

  18. 18
    bill Says:

    cigx up 36 premarket over 5.15

  19. 19
    Zman’s Energy Brain ~ oil, gas, stocks, etc… » Blog Archive » Monday Morning And All Is Pretty Quiet Says:

    […] Comments bill on Wrap – Week Ended 4/1/11 (In Progress)zman on Wrap – Week Ended 4/1/11 (In Progress)Jerome Blank on Wrap – Week Ended 4/1/11 […]

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