10
Mar

Wrap – Week Ended 3/9/12

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Much ado about nothing as far as equities went last week as Greekeurotrashdebtcontagion fears and an ever so slightly weaker growth expectation out of China early in the week were largely offset later in the week by stronger ecodata. Payroll data continues to edge higher and prior month data was revised up which is what you would expect in this L-shaped recovery. We added back some trading positions sold at the end of February on the early week weakness.  Energy equities are marking time post fourth quarter release which is normal and healthy. 

WTI remains ahead of itself for this time in my modeling calendar. However, given the ongoing support of Middle East tensions, not exactly collapsing European demand for refined products, very much collapsing UK North Sea production (see the Wednesday post for graphs) along with rising non developed country demand this year and next and the promise of further embargoing of Iran crude it's not surprising to see crude at current levels. I don't think it is sustainable and would expect prices to be lower given continued weak U.S. domestic demand were it not for continued record product exports. 

Natural gas storage remains at record highs for this time of year and will likely remain there until 4Q12. Look for almost 2 Bcfgpd of incremental gas demand from the gas fired generation segment to eat through a majority of the storage overhang by Fall as gas steals generation share from coal. Expect that to coincide with the first noticeable and significant rollover in U.S. supply since early 2009. Note the natural gas rig count below has that "this time they mean it" look to it but it will the ebb for supply will be a slow one as the drilled but not yet completed well count remains high in multiple gas basins.  

The ZEB Positions and ZEB Blotter tabs will be updated later this weekend. 

"The Week That Was" for last week will be in the Monday post as usual. 

 

24 Responses to “Wrap – Week Ended 3/9/12”

  1. 1
    zman Says:

    RIP Peter Beutel 

  2. 2
    BirdsofpreyRcool Says:

    Excellent reminder and good to read on days when we have triple-digit drops…
     
    http://online.wsj.com/article/SB10001424052970203961204577271670091239232.html?mod=WSJ_PersonalFinance_PF4

  3. 3
    choices Says:

    For gold watchers:  this is a fairly good site, Norcini collaberates w/Jim Sinclair-comments on USD are helpful for other commods:
    http://traderdannorcini.blogspot.com/
     
     

  4. 4
    choices Says:

    Z, data from EIA web site-continuing decline of gas and diesel for 3 months
    http://tinyurl.com/preview.php?num=7yptsny
    -does this portend any significant decline in demand or only affecting imports?
    Thanks-certainly no rush.

  5. 5
    Zorgnak Says:

    Homework..
    Chart study of POMO activity and crude oil futures.
    POMO data from   http://www.newyorkfed.org/markets/pomo/display/index.cfm
    Chart #1 Longer term.
    Top pane ………Crude Oil Futures from 2008 til present. Green
    Middle Pane …Number of POMO events  in a 5 day look back. Red
    Lower Pane …20 day moving average of $ amount of the POMO buy and sell events. Cyan
    You'll have to expand the chart to see it. I haven't found a decent way to share Trade Station Charts yet.
    http://i1223.photobucket.com/albums/dd503/zorgnak/POMO1.png
     Event clusters during liquidity expansion and contraction have been reliable short term indicators of Crude Oil strength and weakness since 2008.
    With the exception of a quick spike on 2/13/12
    March looks relatively flat of POMO expansion until 2/21/12. I'll post the data when it appears to be significant if anyone else thinks it's relevant.
    Schedule of future Fed  market buys/sells and amounts is available at the
    NY Fed site. http://www.newyorkfed.org/markets/tot_operation_schedule.html   Historical data  http://www.newyorkfed.org/markets/pomo/display/index.cfm?fuseaction=showSearchForm

  6. 6
    Zorgnak Says:

    Homework..
    Chart study of POMO activity and crude oil futures.
    POMO data from   http://www.newyorkfed.org/markets/pomo/display/index.cfm
    Chart #1 Longer term.
    Top pane ………Crude Oil Futures from 2008 til present. Green
    Middle Pane …Number of POMO events  in a 5 day look back. Red
    Lower Pane …20 day moving average of $ amount of the POMO buy and sell events. Cyan
    You'll have to expand the chart to see it. I haven't found a decent way to share Trade Station Charts yet.
    http://i1223.photobucket.com/albums/dd503/zorgnak/POMO1.png
     Event clusters during liquidity expansion and contraction have been reliable short term indicators of Crude Oil strength and weakness since 2008.
    With the exception of a quick spike on 2/13/12
    March looks relatively flat of POMO expansion until 2/21/12. I'll post the data when it appears to be significant if anyone else thinks it's relevant.

  7. 7
    Zorgnak Says:

    Schedule of future Fed  market events available at…
    NY Fed site. http://www.newyorkfed.org/markets/tot_operation_schedule.html  
    Historical data 
    http://www.newyorkfed.org/markets/pomo/display/index.cfm?fuseaction=showSearchForm

  8. 8
    Zorgnak Says:

    The chart  in #6 above was not correct. I made a mistake in the translation from Excel to the TradeStation format.
    Below are the correct charts.  I had to use USO for crude as the future's data server I use is down at the moment. I used XOP to test oil stock correlation to POMO
    http://i1223.photobucket.com/albums/dd503/zorgnak/POMO_USO1.png
    Here's the correlation between POMO and XOP
    http://i1223.photobucket.com/albums/dd503/zorgnak/POMO_XOP1.png
     
     
     

     

  9. 9
    Zorgnak Says:

    So, how is this POMO stuff useful? Since 12/22/08 it has paid to lean long either Crude or XOP when they are dipping while POMO buying events are in a cluster.  Even more so when the $ amount of the purchases is increasing.
    USO 19  Long Trades. 78.95% win rate. 3.44 Profit Factor
    XOP  16  Long Trades  93.75% win rate. 5.52 Profit Factor
    Not a suggestion to trade this way because correlations change all the time but it is for me, at least, a poor time to be selling.
    On the flip side the odds were against chasing crude or E&P stocks when they are short term overbought and POMO selling events dominate.
    USO  28 Short Trades  71.43% Wins  1.82 Profit Factor
    XOP  27 Short Trades   62.96% Wins  1.53 Profit Factor
    Again, I wouldn't short  this idea but buying doesn't look profitable for short term traders
    Here's a shorter term chart of XOP with POMO event clusters and POMO $ volume flow. I think this illustrates the idea a little better. I hope.
    http://i1223.photobucket.com/albums/dd503/zorgnak/POMO_l_S.png

  10. 10
    Wyoming Says:

    http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2012/02/China%20Crude%20Imports%20.jpg

  11. 11
    crysball Says:

    Z, 
    Am curious  if  the  expansion   (and filling) of  the  Chinese  Strategic Petroleum Reserve  is  abosrbing    some  of the growth   shown  in  Wyoming's  chart   of  Crude  Oil Imports…………since  this  would be  one  time  event even though they continue to expand  the size  of their SPR), and might    cause  the  slop  to  be  greater  than just  growth in consumption?

  12. 12
    Wyoming Says:

    C, that would be 6 years of expanding their SPR.  It might be part of it but consumption should factor in too IMO.
    With the decrease in demand from the US (down ~1.5mmbopd), I find it curious that we have increased the global consumption from 87mmbopd pre $147/bbl crash to today's ~88mmbopd+.
    Include in this thought that XOM had a higher reserve replacement loss (3% rather than the modeled 2%).  I don't think too many of the big boys are capable / able to increase or replace their depletion.

  13. 13
    Wyoming Says:

    A little back up;
    http://www.dispatch.com/content/stories/business/2012/03/11/opec-lowers-demand-estimate.html

  14. 14
    choices Says:

    SDRL-good summary on SDRL's debt situation:
    http://seekingalpha.com/article/425201-don-t-worry-about-the-debt-seadrill-is-financially-strong?source=email_authors_alerts&ifp=0

  15. 15
    Zorgnak Says:

    Weekly Chart Watch
    Last week S&P Futures Went straight up from oversold leaving three unfilled gaps in a row to close Friday at the 1365 upper acceptance area, just below the recent range highs. Whether this will be a pivot higher for the bulls remains to be seen.
    Bulls need to hold above minor support at 1360.25 early in the week to extend recent highs. Below 1360.25 the  Volume Range Pivot at 1353.75 comes in to play and if it gives way a test of the major
    low volume area at 1347 and the unfilled gaps below would be most likely. Volume demand and short term breadth are not extended at the moment but have begun to diverge a bit  from price action on several time frames.
    Divergences do seem to be an early event in advance of market turns but are very imprecise timing tools IMO, remaining divergent for weeks or months at times. Early signs only. The levels are my canaries.
    POMO buying events peak on Monday and then go flat until 3/21. OPEX studies are positive for March. 
    My plan for the week….Waiting for a better risk reward for any new longs and lightening up more into strength.

    S&P Futures Volume Profile
    http://www.charthub.com/images/2012/03/11/ES_Composite.png

    Market Volume and breadth not yet extended.
    http://i1223.photobucket.com/albums/dd503/zorgnak/OEX_Breadth.png

    ZLT E&P Portfolio Breadth Charts (E&P Stocks only)
    Volume and breadth not yet extended.
    http://i1223.photobucket.com/albums/dd503/zorgnak/ZLT_Breadth.png

  16. 16
    Zorgnak Says:

    Crude Futures Current range 104.50-110.50. Range acceptance 106.83. Major Acceptance at 99

    http://www.charthub.com/images/2012/03/11/CL_Weekly.png

  17. 17
    Zorgnak Says:

    Gregor on oil consumption
    http://gregor.us/oecd/oecd-gives-up-the-oil-to-the-developing-world/

  18. 18
    Zorgnak Says:

    Asia/Oil
    http://www.smartplanet.com/blog/energy-futurist/oil-demand-shift-asia-takes-over/400?tag=search-river

  19. 19
    nrgyman Says:

    RE 18:  Good information and analysis in the article.  Big argument if favor of the XL pipeline.  And natgas transportation.  And ZLT stocks.  The author didn't mention any of those.  He recommended railroads to replace autos.  Really?

  20. 20
    zman Says:

    ZEB Blotter Page

    http://zmansenergybrain.com/subscriber-data/zeb-zlt-blotter/

  21. 21
    Justin Says:

    Dig the blotter.  Thanks Z.

  22. 22
    zman Says:

    Thanks for the levels Zorg, good stuff.

    Same to you Wyoming on the China chart, was going to answer with the word "exactly" on Saturday but have been tied up with the crew this weekend. I'll respond to 4 in tomorrow's post. 

  23. 23
    nrgyman Says:

    CHK seeking more capital in Asia:  
    http://www.bloomberg.com/news/2012-03-12/chesapeake-ceo-courts-asians-for-100-billion-resource-energy.html
     

  24. 24
    nrgyman Says:

    Interesting slideshow of life today in Williston:
    http://www.businessinsider.com/youve-never-seen-anything-like-the-williston-oil-boom-2012-3#
     
    For those interested in CRR, check out slide 25.

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