zman’s Energy Brain

oil, gas, stocks, etc…

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Tuesday Morning – Waiting For More Data

Posted by zmann on March 13, 2007

I’ll be brief today as everything from yesterday still applies and I have some site maintenance issues to attend to.

Oil: Down nearly $3 in the last three days . This morning oil is getting a small bounce back above $59. The early read on Wednesday’s inventory report calls for:

  • Crude: up 1.9 million barrels. The alleviation of the supply bottleneck at the Houston Ship Channel should help bring this number back into positive territory after last week’s surprising withdrawal.
  • Gasoline: down 2.4 million barrels. Should this number come in as expected gasoline inventories would still above average for this time of year. A bigger than expected draw here would likely send crude back up over $60.
  • Distillate: down 1.8 million barrels.… And quickly receding into background as a current determinant of oil prices.

OPEC Watch: Waiting and Watching. Everyone expects OPEC to do nothing this week at their March 15 meeting in Vienna. Look for the words healthy and balanced to describe the current supply demand balance as long as oil remains above $57.50 through Friday.

Iran & Vladamir Watch: Russia scolded Iran for “abusing its goodwill” yesterday and announced “indefinite delays” in further technical assistance with Iran’s nuclear program. Vlad’s got them over a nuclear barrel.

IEA Maintains Annual Demand Numbers; Dumps The Front and Bumps The Tail. The International Energy Agency said it’s kept its global oil product demand forecasts virtually unchanged, at 84.5 million bpd in 2006 and 86 million bpd in 2007. World demand is estimated to have grown 1% in 2006 and estimated to rise 1.8% in 2007, the Paris-based energy agency said. The IEA revised lower first-quarter 2007 demand but revised higher fourth-quarter 2007 demand ~ from Marketwatch.  Comment: The manipulation of the quarters to maintain the full year number seems odd in light of Greenspan’s 1 in 3 R word comments.

Natural Gas: Warm Weather Melts Gas Prices. Gas has been trading lower with warmer weather, plain and simple.

  • Barring a serious cold snap this Thursday’s inventory report will probably be the last of the large gas withdrawals for the winter of 2006/07.
  • CFTC data shows swing back to net short position.


    • The net short position has fallen below May 2006 when gas traded at $6 and traders were beginning to accumulate a long position that would ultimately drive gas higher despite a large inventory overhang.
    • This position will ultimately become a source of support for gas prices when traders begin covering (probably all at once when they see the first tropical wave coming off the West African coast that looks like it have any chance of organizing into a storm).

cftc-031307.JPG

Holdings Watch: I’m sticking to my seasonal weakness guns and maintaining yesterday’s list of potential movers. Despite pretty good declines in crude and natural gas the stocks have been remarkably resilient and are more focused on the broader market’s ability to recover from it’s brief bought of Asian Flu.

Analyst Watch: RIG picked up as a buy at Matrix, EPL reiterated as an outperform but price target reduced from $30 to $24 at FBR.

Note to SA Editor: Let’s not publish today’s post. Thanks.

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22 Responses to “Tuesday Morning – Waiting For More Data”

  1. Dave said

    Oil going up today. Fog in houston again ?

  2. zmann said

    Morning Dave,

    It’s always foggy there but I haven’t heard of any ship channel delays.

    This is the IEA saying the S/D balance is getting increasingly tight. They’re calling on Opec to start producing more because OECD inventories have fallen sharply in the last two months.

  3. zmann said

    Wow…TSO…Wow.

    Brokerages are going to have to start either raising their price targets or cutting their ratings once this breaks $100.

  4. Jon said

    Hi Z,

    With crude below $60 and unleaded close to $3 (in the West anyway), isn’t the crack spread for TSO going to be huge?

    -Jon

  5. zmann said

    large yes. the stock is really on a quest for $100 right now.

  6. Seems to me crack spreads are going to be huge across the country. Last month when oil was at 58-59 I was paying 2.09 – 2.15 per gallon, but now at ~2.50. Just look at the market spread 1.90/gallon Vs. 59/Barrel. That is large.

    Read an interesting tidbit about current gasoline demand ( Now if I could only find that link, I know it was on Bloomberg ) about wholesalers buying on the cheap to sell in the coming months at a higher price, causing the demand increase. With prices being so bouncy anymore the wholesalers are trying to play the dips and peaks.

    -SaneO

  7. umagumm said

    News is a few hours old, but CVX is going to keep their Richmond refinery closed for 3 weeks longer than previously announced for fire repairs. Glad I don’t buy my gas in CA!

  8. nltd said

    Sane

    “causing the demand increase”

    “wholesalers are trying to play the dips and peaks”

    Add to that the pricing power to raise their price IMMEDIATELY (in our area anyway) upon any news…they rape the public repeatedly and often. Guess more of us need bicycles and the will to use them. Unless we choose to remove some of that pricing power we probably continue to be (or at least feel) victimized.

    N

  9. nltd,

    Oh I agree on the pricing power deal, It is like being assaulted on the street. Then the paramedics arrive and on the way to the hospital, they throw a couple of blows to the gut. Next when you arrive at the hospital the doctors start smacking you around. Finally the police come in and finnish it off with a couple of blows to the head.

    The upstream guys start getting a cut, so the refiners say hey I want a cut of that too, the the wholesalers figure they should get a cut if everybody else is, and finally the station manager says hey meee tooo meee toooo.

    I am thankful my family drives less in the summer than in the winter. I get to ride my oversized scooter that gets 65mpg during the summer, and my wife is a teacher, and when school lets out her commute ( which is the majority of the driving ) is taken out.

    -SaneO

  10. zmann said

    Thanks umagumm

    ——

    What’s really sad about the gasoline demand situation is the behavior of the Americna people. At $3 people cut back and buy Prius’. Six months later, when gasoline started to breach $2 / gallon retail, SUV sales reignited and Toyota announced incentives on the Prius.

    ——————-

    Didn’t Vespa go public? Might make a pretty good summer play. Honda has a little scooter out that looks like it’s built for combat as well but gets high mileage for about $2000.

  11. I got a Suzuki Burgman 400. It is the size of a motorcycle, but it has smaller tires, automatic transmission, better seating, and better gas mileage.

    Yeah, Honda has a scooter called the Ruckus, and yeah it does look like it was built for combat :P

    -SaneO

  12. nltd said

    Z

    EXACTLY. We continue (collectively) as Americans to perpetuate the market conditions to allow these guys to plumb the depths of our pocketbooks. Luckily we still remember how to bitch when they do it. Hah!

    Sane, be sure to watch out for those SUV’s. We’ll miss you if one of them runs over you on your Suzuki…
    N

  13. zmann said

    N. LOL. We do know how to bitch!

    Crikey…market’s getting firestormed and my C OP is flat. Did anybody see Buffet on CNBC this morning? Did he prop up the stock again.

    BTW.. this is a pretty major failure day for commodities. Oil coming close to $60 and then failing away, same for nat gas with the $7 level. Not too good. Seasonal weakness here we come. Those reoprts of Accuweather’s cold weekend forecast for New England got absorbed and discounted in record time.

  14. N, funny you mention that, on my way to work this morning almost got run over by an Escalade that blew through a stop sign, but it was OK because he had spinny wheels :P

    I agree with you guys about the demand situation and American mentality. It is truly sad if you think about it. If every American was to drive %10 percent less, it would send a numbing shockwave through the market, but the sad fact is most Americans would rather cut off their fingers than drive 10% less. I see a lot of simple things that can be done to help the situation, but heaven forbid having to make a sacrifice in driving habit no matter how small it is. I know I try to be part of the solution and not the problem, but I fear I am a small minority.

    BTW…. I am not a tree hugger, just economically driven.

    -SaneO

  15. zmann said

    If you haven’t been to the SNAFU page in a while don’t miss El D’s latest post. He makes some great points over there. Just when you thought you wree having deja vu while reading the headlines Diablo points out that little has changed from a ago even though the MSM paints every blurb as a new and potentially disasterous event.

  16. Oh god, just took a look at marketwatch and it looks terrible out there.

    -SaneO

  17. nltd said

    GOOG down 2+%
    AAPL down 1+%
    $BKX down almost 3%

    So, Tom, you got a 1-2-3 rule for GOAX? Just kidding of course! I know you’re busy, thought I’d try to get a laugh if you happen by later…

    N

  18. zmann said

    Alternative energy funds ECO and PBW getting shelled!

    Mainstream oil and service doing pretty well considering the market and oil and gas.

  19. Dave said

    What a day ! A 4pt swing in OIH. I really do not understand the oil service.

  20. nltd said

    Dave,

    What a day ! I’m with you there. If the oil service is all you don’t understand, I wanna talk to you…we’re gonna make a fortune. Hah!

    Tom

    FWIW vis-a-vis “hidden gems” EXPE stayed green all day, and the following is the only news I found to support it:

    Expedia recently expanded and extended its multi-year partnership with Omni Hotels, with Expedia customers gaining access to Omni’s Hotels and Omni expected to use Expedia’s Connect technology for bookings through Expedia’s Web site.

    Doesn’t seem enough to hold them up alone…oil dropping might help them, but they were up MORE before oil started coming down.

    N

  21. Dave said

    Nltd lol I do not understand most of the markets. But at least if you play the sub-prime you can find little nitche trades like GM HOG MBI and mortgage insurance like PMI MTG and when sub-prime trends down it keeps it’s trend for awhile. But oil, jeepers its like a day trade. You can even run both edges in one day !

  22. Mercedes said

    Mercedes AMG

    2008 Mercedes-Benz C63 AMG

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