zman’s Energy Brain

oil, gas, stocks, etc…

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Tuesday Wrap – Oil Fell A Buck & No One Noticed

Posted by zmann on October 17, 2006

People, We Remain Near 2006 Lows On Oil But No One Cares. Can you believe the USO is only $1.50 off it’s all time lows and that these lows were achieved last week? Can you believe USO fell $0.73 (1.33%) today to $53.99 given the halting, barely down day most of the energy stocks had?

–It’s hard to believe that the oil and gas group is up 9% in the last 2 weeks.

–Service stocks are up 8% for the same period.

–Heck, XOM is up 6% since then (that’s an added $25 billion in market cap!).

Go, Go Markets Prevails. The oil and gas stocks are still caught up in the go, go market despite continually weakening fundamentals. The DJI and Nasdaq saw big hits over higher than anticipated core PPI this morning but spent the late morning and all afternoon steadily rising as buyers swarmed to grab “bargains”. I guess inflation doesn’t really concern us anymore, nor does the increasing probability of further fed rate hikes. We get CPI tomorrow which is harder to ignore but this market has gotten pretty good at ignoring things for protracted periods. Go figure. On the whole, a disappointing day as energy stocks remain completely disconnected from funadmentals (other than the service guys who are still billing big oil for all it can afford, which is a lot).

–IBM’s beat and $4 AH rally probably means the oil stocks will have trouble falling again tomorrow as the Dow takes out 12,000.

–Unless core CPI forecasted at 0.2% come in too hot. Core PPI came in at 0.6% after also having had a 0.2% forecast.

Natural Gas Closes Up A Penny. After a brief jump up another $0.47 this morning, gas sold off going into the red by $26, before closing at $6.42. Next week may be cold but the week after taht sees warm weather retrun to a broad swath of the country and we should see a slight bump in injections a 2 weeks from Thursday, which should just about kill the recent rally.

Oil Inventories: Build Of 1.4 Million Expected; Draw of 1 Million Heating Oil. Consensus calls for a build of 1.4 million barrels (range of 0.2 to 2.4 mmbo). Platts survey is looking for a build of 450,000 barrels gasoline and a draw of 1 million barrels of heating oil (which I think could be light) given last week’s 2 mmbo draw on HO and lower refiner utilization this past week.
–More oil sensitive names like SU and ECA suffered a bit more than the group today but on the whole their charts remain undamaged. These guys both conume gas to produce heavy oil so the rise in gas prices, without a commensurate rise in oil prices hurts margins.

–SLB, which has earnings Friday sold off early but actually closed up almost a percent (best performance of the energy stocks I actively watch). I think they’ll at least meet and probably beat on Friday and the conference call will be a virtual love-in with Wall Street. They should get to the Q&A as the market opens Friday so if the stock start drifting higher, I may take some Nov. HAL calls as it will get pulled higher.

HOC underperformed its peers for the first time in recent memory falling 2%. They report 11/06 and a look at their estimates reveals recnet more stubstantial negative revisions than were apparent a week ago despite the recent strength in the stock. I’m just weatching this one for now but if they move towards 50 prior to earnings, I may get onboard with some puts.

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3 Responses to “Tuesday Wrap – Oil Fell A Buck & No One Noticed”

  1. SoccerF1 said

    Great summary again.

    Oxy reports earnings tomorrow. That should set the tone in terms of expectations going forward.

  2. zmann said

    Thanks Soccer. I missed that.

  3. ramana said

    Great summary zmann. Excellent.

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