zman’s Energy Brain

oil, gas, stocks, etc…

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Friday Morning

Posted by zmann on October 13, 2006

Norway Boat Crisis. Oil continues to reactive positively to the “Norway emergency boat crisis”. Did Norway join Opec and someone forget to tell me? These guys are perfect candidates. They produce 2.7 mm bopd but used to produce over 3.5. They suddenly “discover” some issues that must be “dealt with today” forcing the closure of nearly 10% of their production, potentially through the middle of November. BP couldn’t have timed it better.

Crude Up. Crude has topped $58.80 in early trading. Look for resistance at $59 and $60 with support at $58. If we break down through $58 the stocks might actually come in some. However, I doubt oil will close sub $58 going into another OPEC threatened weekend (I’m going with a $58.52 close).

– OPEC Remains Outwardly Quiet. A week ago when their president said that cuts were coming on Monday, I guess he meant next Monday.

— Analysts Say Oil To Fall Next Week. A Bloomburg survey of analysts called for oil to fall next week as everyone remains skeptical about production cuts. The survey has a 52% history of succcessfully predicting next week’s oil price. Wait, a minute, I know I’ve got a quarter here somewhere. Flip. Oh yes, oil prices are going down next week.

–12,000 Here We Come! GE made their numbers this morning and futures are holding close to unched. Without a negative surprise, this go, go market will probably advance into the weekend taking oil stocks with it.

Note to CNBC: As a long time watcher of your show, I’ve noticed an “up is good, down is bad” mentality in your reporting on the markets. I can hear the corks popping in the background everytime the DJIA makes a new high and guest after guest will proclaim even loftier levels. In three weeks, when the DJIA sinks 400 points over 3 days, those guest will disappear, to be replaced by your long faced, doom and gloom, naysayer guests. Wouldn’t it be prudent, as we make new highs and stretch valuations to the limit, to start scheduling interviews with those depressing folks? Just trying to help.

Natural Gas Down. Not that anyone cares but gas dropped 6% yesterday, erasing almost a third of the completely stupid rally its enjoyed in the last two weeks. Yesterday morning, I said a break of the critical $5.76 level was needed and while we got a test of it, we closed at $5.78. This morning electronic trading has gas off another nickel and support looks to me to be at $5.64.

—-I’m expecting injections of 45-50 Bcf next week. Anything above 50 should prompt a test of $5 on Thursday although analysts will throw out higher estimates they know we can’t make to “create a disappointment”. Sorry, feeling a bit cynical today after yesterday’s thrashing but that’s how the game is played.

—-The storage tab above is updated with lots of data and a new chart.

—-If I hear one more analyst or trader reference winter as a reason to buy gas I’m going to throw something harmless at my TV. The country saw a one day cold snap on Thursday and the weekend will be warmer just about everywhere. Get over it! Many of these guys have been very long gas, see CFTC tab, and should use this opportunity to exit.

Analyst Watch: nada, zip, nothing. can you blame them? I’d be quiet too, the stocks go if commodities rise, they go up if commodities fall. Why screw that up with some analysis. Yup, early indications are showing the E&P, service stocks, and refiners advancing across the board.

— ok here’s one. FBR cut their price target for SGY from $55 to $44 (the stock’s at $39.70 now) so I guess I feel somewhat vindicated on my comments yesterday that being twice a bridesmaid but never a bride is bad for Stone.

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6 Responses to “Friday Morning”

  1. zmann said

    CNBC reporting Opec has consensus on 1 mm barrel cut from production levels, not from quota levels. still nothing on the newswires.

  2. ramana said

    hi zmann

    is this ‘rally’ in your opinion survive the weekend ? or just a preemptive pump for later dump?

  3. zmann said

    hey ramana,

    The stocks remain decoupled from the commodities. The last 2 weeks push on natural gas looks dead and oil is having a lot of trouble with $58-59. That being said, the xoi is trading in lockstep with the dow are an initial jump this morning. I’m not taking new positions into the weekend, just the old ones. Still think gas gets killed next week and that oil won’t close above $60 but the stocks are just aren’t tracking.

  4. ramana said

    Thanks zman….

  5. zmann said

    Opec now says it may meet next Friday, Oct 20, for 1 or 2 days so nothing solid out of them next week. i’d expect prices to drift lower after bouncing off either $59 or $60.

  6. I bought a lot of puts on Friday!

    Given this trend at the pump
    http://66.70.86.46/test.gaschart?Country=Canada&Crude=f&Period=1&Areas=NewYorkState,,&Unit=US%20$/G
    oil companies cannot possibly make profits like in the last few quarters

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