zman’s Energy Brain

oil, gas, stocks, etc…

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Trendless Tuesday

Posted by zmann on December 12, 2006

Oil gets a minor bounce today ahead of Opec but no real news is driving this, it was just down a bit yesterday.

  1. Indonesia’s Opec oil minister claims that the group will cut 1 to 1.5 mm additional barrels from daily production when the group gets together on Thursday. Comment: 1) I really don’t think so since the last cuts only got 60% acceptance in the first month and maybe less now, and 2) that’s an easy statement for a guy who has no teeth in the game (he barely produces 1 mm bopd)  to make. Why not cut back 5 million barrels for all it would effect him? Of course, he’s a net importer and should want lower prices but then he’d have to think logically for a moment instead of just making statements to impress his friends.
  2. Angola Opec membership being fastracked. Originally slated for indoctrination next March, Opec wants everyone in for Thursday’s meeting (except pesky Sudan and tiny Ecuador who will have to wait). Unlike those other wannabe market manipulators, Angola is blessed with a rapidly growing production profile on the backs of foreign investors. In 2005 Angtola’s economy grew 18%. Why would you want to jeopardize this by making a squabbling group of greedy oil states your masters is beyond me but there I go thinking rationally/logically again.

Natural Gas. Ditto except for all the cartel stuff. We were due a bit of a bounce after the beating gas has taken. It’s not doing the stocks one bit of good though.

Tanker rates collapsing. Somebody believes Opec means business this time. VLCC have fallen another $4,000 per day to $41,000 this morning.  Again not good for FRO, OMM, NAT, TOPT, ALEX etc… Working to find historical data for rates but now except my word that this is pretty low for recent history.

Analyst Watch: GW upped to buy, DRQ cut to hold. ECA cut to hold at Tristone but price target upped 10% at R James.

Odd and Ends:

XOM appears to have restarted their buyback as it’s up over a percent on no news.

APC is giving back everything it gained off the Merrill upgrade and more despite announcing Mission Deep, another lower tertiary deepwater discovery with DVN and it’s intention to amputate Venezuelan ops next year.

Sorry about the delayed posted but I’ve had technical difficulties filling a large order of T-shirts for the a guy in Nigeria who says that if I send him my bank account number, he’ll send me some of the royal family inheritance. Sounds to good to be true really. Actually, meetings yesterday ran long and Gunga is closer to the mark. Rest assured I am back.

I remain bearish on both commodities but sidelined on the stocks this week as a surprisingly large “announced” cut from Opec and a frighteningly large withdrawal from gas storage could serve to drive their respective commodities and the stocks higher in the very near term. As always I’m scouting some Opex plays as well. Good luck.

9 Responses to “Trendless Tuesday”

  1. Jon said

    Zman,

    I’ve been looking for historical data as well, but not finding any. There are charts in FRO’s quarterly presentations, but no numbers. It looks like day rates for VLCCs were about 70K earlier this year after dipping below 40K in Q3’05

    http://www.frontmgt.no/reports/182/R/1090404/192033.pdf

    I also have trouble figuring out which rates are benchmarks, since day rates seem to be different for different routes.

  2. Jon said

    The 3Q presentation from VLCCF has a nice chart on page 7 showing the annual behavior of tanker rates:

    http://www.knightsbridgetankers.com/reports/132879/R/1088536/191133.pdf

  3. zmann said

    Thanks Jon, I saw the FRO presentation but not the VLCCF one. Check out FRO today, aauuuuggaaaa! aaauuuuggggaaaaa! dive! dive! LOL

  4. zmann said

    I’m going to eyeball my own chart out of that VLCCF data and start updating it as we go forward. It’s not very pretty for sure

  5. zmann said

    LNG (the company) starting to trade back in line with the movements in natural gas. The run up was a joke…the fall should be no surprise.

    For anyone wanting to trade the OIH but can’t stomach the premium, BHI is trading exactly in line but with much cheaper premiums.

  6. size123 said

    Regarding your posting at Phil’s about EEE, were you buying March calls, and at what strike price? Is there any sort of general cyclical nature to the coal stocks relative to the time of year? Thanks.

  7. bill fraser said

    I shorted NAT, vlccf, & dht. All are overpriced

    yes you are right. Tanker rates are down big time and earnings comparison will be lousy

    TOPT will lose money in q4 but its already down pretty hard so i would not do anything with that one

    OMM is buying back shares so id avoid that one on the short side

  8. walter said

    Good read- thanks!

  9. [...] So I’m not going to worry about oil today despite CNBC’s emergency pumping reports. ZMan points out that tanker rates are down 10%, possibly indicating OPEC is serious about some kind of cut but that brings me back to the main premise – we don’t need the amount of oil they can ship! If we needed the oil, we’d buy it and tankers would be busy. We bought too much (like 234M barrels for February) and it’s time to cut back. [...]

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