Thursday Wrap / Friday Morning
Posted by zmann on November 3, 2006
Nigeria to be top oil story at open. US embassy sees bombings soon ~ for details skip all the natural gas stuff which is much more important.
Gas Scores First Draw Of The Season- In aggregate we consumed 9 Bcf. All of it came from the very cold northeast while we continued to inject gas into storage in the producing and western regions (albeit small amounts). What can I say, I bricked. We may have a shot at an injection either in the next two weeks due to the slightly warmer weather, but either way they shouldn’t be of any size. After last week’s flop and this week’s draw I’m taking my peak storage down to last week’s number which I guess isn’t very daring.
What becomes more important from here on out is the rate of withdrawal and that’s simply a function of weather:
–Cold Winter. The coldest winter on record or at least biggest demand record in the last 16 years for winter is that of the 2002/2003 season which saw withdrawals of 2,477 Bcf. If this occurred, trough storage would fall to 975 Bcf which is slightly below the five year average 1, 024 and close to trough storage reached in 1997 when gas was $1.79 / mcf. Since that’s such a silly number, lets go with something more recent like the March 2004 trough of 1,014 when gas was $5.12. (did I mention gas is near $8 this morning?). This is your absolute best case bulls.
–Average Winter. If we follow the average of the last five year’s withdrawals between November and March we’d arrive at trough storage of about 1,466 Bcf, which is 43% above average trough storage.
— Global Warming Winter. Conversely, the most tropical winter on record saw withdrawals of only1,504 Bcf which would yield a new high for trough storage and be a disaster for gas prices. This weak demand occurred in the 2001/2002 period so its not some long long ago, far far away number and could happen again.–Repeat of Last Year’s Winter. Finally, (because you’re eyes are probably glazing over or you’re already asleep by now) I looked at a repeat of last year’s winter. That would leave storage just below last year’s record trough level- also not so good for gas prices.
How about a chart to sum up:
Oil got clobbered for $0.80 yesterday and is within as much of $57 which should serve as a psychological chopping block for the stocks. The day saw some pretty obvious attempts at rallies which failed on high volume. Come on guys, just sell it, you know Opec’s going to cheat. Iran tried its best to spook everyone with a pretty stunning fireworks displayyesterday but by days end everyone remembered that the only way for them to replace all those missiles is to keep selling oil.
Oil Tidbits: Oil prices are up on the Nigerian bombing thing this morning. With GDP, factory orders, inventories, and ISM out of the way, traders have to rely on rumors, technicals, and unrest until next Wednesday.
–US Embassy in Nigeria sees 10-20 oil facility bombings! Apparently this hasn’t happened yet but we expect it to (most analysts expect bombings to average 15 but I’m going with a smaller number). The embassy says they don’t know which facilities or when it will happen but it could be a matter of days. Is that really news? You guys are gettng used by the Nigerian government to prop up oil prices.
— Nigerian rebels take hostages. Petroleum geo-services has had 2 employees kidnapped. Here’s hoping they’re home before the weekend.
–Here’s a story which claims Opec is completely failing to cut output. Not a lot of sources cited for the claims but it sounds about right.
Stocks were mixed yesterday. Which is to say that everything fell in the morning and rallied with XOM and the DJIA in the afternoon. If I see this again today I’m daytrading XOM calls at 12 EST as failure to break $57 today could signal another micro bounce in the group. I don’t know what XOM sells but its obviously not oil or organic foods. Wow is WFMI getting treated like the red-headed-step-child of cellblock D this morning. $2 for a highly polished apple – ha, ha.
Stocks of Interest:
NAT missed by a penny, says tanker rates easing a bit. Good third quarter, a little more down time expected for 4Q. Rates have come off a September peak (suezmax) in the high $50K per day range to around $46 in Oct which is at the low side of 3Q levels. Worldwide, suezmax fleet grew 8% yoy and shipyards are expected to continue to operate at capacity for next 24 to 30 months with 99 more vessels on order.
–MRY went from Buy to neutral at First Albany.
–RIG and GSF caught big TP ups from FBR. With GSF at $50, you gotta love a guy who takes his target price from $80 to $85. That’s confidence.
–TK saw a 10% TP cut from Fortis.
—TSO cut to underweight at JP Morgan – says fundamentals are looking increasingly bleak compared to peers – ouch. SUN upgraded to neutral.