Posted by zmann on October 18, 2006
Dow 12,000 Reached. Yippee! Couldn’t hold it for more than an hour though even with oil down over a $1 and friendly CPI. Buy the rumor?
Oil Inventories: Whopping 5.1 MMbo Build, But Products Get Drawn. While crude inventories showed a sizeable build, heating oil and gasoline registered larger draws, not because of increased demand but due to a 3% drop in refinery utilization to 86%. Crude oil inventories in the U.S. now look like this:
As seen in the chart, we’ve gone off the reservation, so anytime refineries want to start back to work, there’ll be plent of oil for inputs.
Oil Closed Down Another $1.26 to $57.67; Stocks Close Modestly Lower. November crude is now resting just above its early October lows, an 8 month low. Despite continued oil weakness and the very real possiblitiy of another near term $5 / barrel retrenchment, the XOI and OIH continue to circle the drain but refuse to flush. See comparison chart
Natural Gas Propelled By Hedgies to 1 Month High. It’s pretty silly to consider that natural gas surged another $0.40 (6%) on the eve of breaking 3.4 Tcf in storage (we’re only 11 Bcf short of that mark now and we’ve got weeks to go in the injection season so 3.5 will happen as well). We’re now up a mind boggling 21% this week. As near as I can tell, traders boosted natural gas on the basis of the large HO pull this morning. Let me make this clear, heating oil inventories were drawn down by a shift to reduced output from refineries for maintenance season, not by cold weather. For proof of this look to heating oil which fell $0.038 today after the giant draw. So there.
— I’m sticking with my projection for an injection of 45-50 Bcf.
–Consensus is 48 Bcf (any # lower than 40 is the only thing that sustains the lunacy).
OXY Earnings. Not great but bested estimates by a penny. Top line was swollen by commodity prices but it didn’t filter through to the net income due to escalating operating costs. The stock was bid up 2% through the conference call but faded with the Dow rally to close down a nickel. No play here since I don’t like all the squirelly Chemical unit accounting, but its to note the continued rise in costs is offsetting high prices and now prices are falling. XOM will be the key next week.
Opec Watch: Tomorrow’s The Big Day. Given the weak close on oil the opecies might actually show some resolve and hit us with something bigger than the more than already anticipated, discounted and overly commented upon 1 mm bopd cut. Phil of Phil’s World somewhat cynical suggested that traders deliberately took a dive to prompt a more sizeable cut out of Opec in order to bail out their sizeable long positions. Shame on you Phil, no way, not them.