zman’s Energy Brain

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Wednesday Morning – Dawn of the Democrats

Posted by zmann on November 8, 2006

Dems take House, Senate hangs on tight races in Virginia, Montana. Initial reaction: futures down. Perhaps more democrat and less grid lock than the markets wanted. And that’s all I’m going to say about that, what with a million million blogs making original political commentary this morning.

Analyst Watch:

HAL has been downgraded to prosecute by the US House of Representatives. Shares are off 2% bmo.

PTEN downgraded to neutral at Howard Weil.

California’s Proposition 87 Looks Dead. Early returns show a large margin against passage of the bill. Note to Hollywood: the save the planet routine doesn’t play in Orange County. Maybe if the use of proceeds had been less altruistic you’d have had a shot but I doubt it.

–Took a small put position in PBW (an alternative energy ETF) yesterday in comments. Got the expected results at the polls but this is a high risk play and likely won’t translate in a horsewhipping for the solar, wind, water, biodeisel firms etc that I need to move the ETF lower.  Here’s a guy from the Street.com that agrees with me this morning saying this is the worst ETF in the sector.

Oil Waffling Before Inventories. Analyst consensus for today’s inventory report is a build in crude of 800,000 barrels, a similar build in gasoline and a like-size draw in distillates.

— attempting to get this number right is ridiculous given that some of the VLCCs carry as much as 2 million barrels. Unless you’re standing on the shore watching them unload the ships how can you hope to get this number right. The “guesstimates” should be made in ranges so traders don’t freak out over oil missing a point estimate.

— some analysts are commenting that the Nov. 1 cut hasn’t effected inventories here much yet. Really? It takes six weeks for a tanker to get here so I can’t see how it would have effected inventories at all. Since sources indicate October shipments actually rose as Opecies scrambled for more dollars

–meanwhile, word is Nigeria hasn’t made concrete plans to cut production yet. How embarrassing for Opec that the presiding president’s home country is obviously going to be the number one cheater in this round of production cuts. Unless of course, you count the barrels cut by MEND (but then you’d have to admit that the rebels are on the payroll).

–refiner capacity utilization should breach 90% this report which should restart the build in gasoline and heating oil inventories, or at least begin to ameliorate the recent inventory declines.

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5 Responses to “Wednesday Morning – Dawn of the Democrats”

  1. zmann said

    Refine;ry utilization ran at 88%, down from last weeks 89% and a below my estimate of 90% which seemed like an easy bet as maintenance season winds down. That explaisn the big the than expected draw in distillates and may serve to mitigate some of the rally in products and crude as traders dig through the inventory press release for further support of their bullish bias.

  2. Looking at the report shows a demand drop of 200Kbpd+ on each gasoline and distillates. Lower imports on both, lower oil imports, lower refinery util.
    -SaneO

  3. Soccer_F1 said

    OPEC hasn’t cut the agreed to 1.2 mbpd yet they talk about new cuts.

    And analysts are buying it.

    Amazing!

  4. zmann said

    I’m buried (alive?) in oil puts so I know I’m a bit biased but this outperformance of XOM and company is getting to be unreal historically speaking. Then, when you consider that analysts have whacked 4Q and some other out quarter estimates with only the occasional downgrade you start to get a little jaded. Like maybe the chinese wall is still paper thin and that bankers are once again talking to analysts about steering clear of potential downgrades that could dry up deal flow. I nmean, you’ve got Cheney talking about how restrictions on companies and wall street have gone to far so what kind of message does that send?
    )

  5. walter said

    zman, wher do you see the refiners in the next 6 months? the cracks appear to be heading nowhere.

    thanks!

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