zman’s Energy Brain

oil, gas, stocks, etc…

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Wednesday Morning – Waiting For Direction

Posted by zmann on November 15, 2006

Pretty quiet day as we await inventories: Not much company , weather, rebel or any other kind of news. Airline merger likely to life the transports and the Dow which in turn will left XOM and probably the oil and gas sector early. This could provide a few opportunities for entering a couple of favorite oily put plays (SU, HOC) but I’m waiting to see how inventories are received.

Oil & Gas: Both showing up slightly in pre market trading as inventory reports approach. Analysts are looking for a build of 900,000 barrels of crude but a draw of 1 mm barrels of distillate.

Opec Watch: OPEC expects 2006 world oil demand will average 84.3 mmbopd, unchanged since its last estimate. It has 2007 growth to 85.6 mmbopd, representing a slight upward revision due to increased demand from China (which the Russians are working on supplying). Opec sees Non-opec supply growth of 1.8 mm bopd in 2007, unchanged from last month’s estimate but you can see why they’re worried.  Kuwait and other members are looking to cut an additional 300,000 bopd at the December meeting.

It’s Still Hot. Though the blizzard in Colorado is getting all the press it’s still warmer than normal in most of the country which is depressing heating oil and gas demand .

German Oil Inventories Up. PVM Associates said German (Euroope’s largest oil consumer) heating oil inventories have advanced sharply in recent weeks.  I seen much the same out of Japan and we all know the story on this side of the pond (7% above the five year average for those of you who don’t).

Holding Watch: HAL – Cramer continues to pump this stock and the planned IPO of KBR so was up in AH.

Analyst Watch: Bernstein cuts GSF,EOG,APC to sell.

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26 Responses to “Wednesday Morning – Waiting For Direction”

  1. Soccer_F1 said

    Do you have a link to the German inventory numbers?

    US inventory data in 5 minutes

  2. Soccer_F1 said

    U.S crude supply up 1.3 mln brls last week: Energy Dept.

    U.S. distillate supply down 3.6 mln brls: Energy Dept.

    U.S. gasoline supply down 3.7 mln brls: Energy Dept.

    Dec. crude up 72 cents to $59/brl in NY

  3. zmann said

    No just saw a story commenting about them.

    Inventories show huge products draws. Bet refiners are still off line otherwise these numbers make no sense.

    Flipside to the initial response is that Opec will be less inclined to cut more and to stick with cuts already announced. We get a pretty good pullback from here once the initial excitement dies down.

  4. Attacking Mid said

    If you think oil might reverse and go down, DVN $70 puts are available for a quarter. Only two days, but I’m giving it a shot on a few.

    AM.

  5. zmann said

    AM,

    Not a bad call on the DVN although it is purely a gamble on the short term ones. I like the SU 80 Decembers here.

    What’s frustrating is that these builds are due to: 1) lower imports that have nothing to due with Opec cuts (it’s too early) and 2) yet another late season drop in refiner utilization (now at 87%). Of course product inventories are going to drop if you don’t bring much in and make less! How is this good for VLO/TSO/WNR/GI/SUN/MRO etc ???!!!

    Note also that crude is struggling with $59. This should sell off and the stocks with it as the only direction for refinery utilization is up either next week or the next. It’s as inevitable as winter coming. Instead we’ve got XOM hitting another all time high.

  6. 3.2M of the gasoline draw was in blending components. Refinery util down? Boy are they dragging their feet. Probally trying to increase their crack spreads.

    -SaneO

  7. zmann said

    No probably about it Sane. The Dec SU 80s can be had for $3.80. Very tempting with oil not able to break out on these indury manufactured big bad draws. Natural gas above $8 severely impacts the company’s ability to achieve that record sized cap ex budget announced yesterday.

  8. Attacking Mid said

    I held my Dec SU 75’s overnight as they are lower delta. Past two days, I’ve sold my Dec SU 80’s in the PM and rebought the next AM. I pulled the trigger a bit prematurely this AM, but I believe I’ll be fine.

    You’re right, the Nov DVN 70’s are 100% gamble. I don’t often buy this sort of thing, but once in awhile you get a situation where the stock price is close enough to the strike price that it’s feasible for the thing to flip ITM in a very short time. I only bought 30 contracts, so I won’t be going on welfare if it doesn’t work out.

    Best regards,

    AM.

  9. Little tidbit from the eia

    “Therefore, when stocks are high and demand slack, the refinery maintenance season is likely to be longer and deeper.”

    -SaneO

  10. zmann said

    Oil traders obviously aren’t convinced that cuts are going to happen now. OPEC countries just got another indication that it’s ok to cheat. On the one hand, inventories are approaching the 5 year average, although they’re still on the high side but on the other you’ve got the obvious fact that these numbers weren’t demand or supply based.

    I’m going to go for the VLO DEC 55 for $0.90 and the SU 80s for $3.70 now.

  11. zmann said

    Scratch that last on VLO, it’s breaking out and I’m feeling skittish and will let it run to its 200 day at $58.

  12. I agree on the manufactured draw. Gasoline demand dropped again this last week

    -SaneO

  13. zmann said

    Looking hard at SUN as an alternative to that SUN put
    Also adding a long CRR – Carbo ceramics, a propant company – used for fraccing all those wells in the shale plays as well as anything that doesn’t flow quick. Good for tight gas sands etc. Use will only increase with time. Anyway, nothing new there but the stock’s off way too much. Good growth expected. Breaking out today. Looks like a trend reversal and with decent earnings but little coverage on the street this could run quick.

  14. zmann said

    BTW, you guys can sign up at right for email notification of posts. I just started with this service so let me know if it works or if it’s just annoying. TIA

  15. Very cool
    -SaneO

  16. jon said

    zman

    E-mail works just fine. For some reason the RSS feed doesn’t update consistently, so the e-mail post is a good reminder to check.

    Jon

  17. zmann said

    Jon,

    Is it working for posts only or comments as well? Thanks.

  18. zmann said

    BTW, oil looking toppy here. Took some SUN NOV 70s on a gamble that today’s gains won’t hold. Need to get a recording of that sound that strikes you in the face when you walk into a casino from the slots to remind me not to do that kind of thing!

  19. zmann said

    CNBC reports that the LOOP has been closed again (for heavy rains). That explains a lot. It’s expected to reopen tomorrow. Funny how it didn’t used to be this subject to weather unless it was the violent swirly kind.

  20. jon said

    Only the posts.

  21. The LOOP again. Day late dollar short reporting.

    -SaneO

  22. zmann said

    Hey Sane, amazing that it looks to correspond to a pretty good sell off in crude though. Good job CNBC.

  23. True. I guess when a major port like that is closed we used to hear about it right away. Hell even the eia report would mention it in it’s summary.

    On the other hand this lack therefore of reporting on the closings has shown a weakness in crude.

    -SaneO

  24. zmann said

    USO just touched lowest level since inventory release.

    EIA postulating that demand is overstated! From the weekly petroleum status report published 30 minutes ago:

    …two reasons why the amount currently supplied into the market (which is actually what the “demand” data reported by EIA are measuring) may overstate actual U.S. consumption of distillate fuel.

    First, they (analysts) point to a possible surge in secondary and tertiary inventories resulting from high deliveries drawn from primary stocks. That is, distillate fuel retailers and consumers may be adding to their inventories by pulling from inventories from refiner and wholesaler inventories, the stock holders that EIA surveys. If so, one might expect a delay in additional primary inventory withdrawals once cold weather hits, as the secondary and tertiary levels would need to be drawn down before being replenished.

    Secondly, analysts know that EIA does not collect weekly data on exports and instead relies heavily on the latest monthly data to estimate exports. But there have been reports that exports have been elevated recently, with increased demand for diesel fuel in some regions, including Central and South American countries. If, indeed, exports are much higher now than they were in August (the latest monthly data currently available), this would mean that U.S. demand (or product supplied to domestic markets) is lower than currently estimated from weekly data.

    Take that CNBC!

  25. Soccer_F1 said

    Zmann, can you add the time stamp to each post?

  26. zmann said

    Sun Nov 70 puts in at $3.30, gone at $4.00.

    Soccer,

    I can see the time stamp when I go to manage comments but can’t seem to find a way to make them show up here. Can you tell me how?

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