zman’s Energy Brain

oil, gas, stocks, etc…

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Monday Morning – Turkey Week Expected To Be Quiet

Posted by zmann on November 20, 2006

Warning: Short holiday week to be highlighted by light volume so be care not to fall asleep and hit your head on your keyboard put too much faith into price fluctuations this week.

Oil – down another 1% this morning as the front month rolls to January. Opec says that it will definitely makes a decisive decision at its Dec 14 meeting. Aftere some sabre rattling induced volatility, I expect the January contract to close around $55 one month from now. Perceived excess OPEC surplus capacity is now as much or more in control of oil prices than bloated US crude inventory levels.  Even US crude production has shown a recent uptick!

Natural Gas – down $0.18 in early trading – after Friday’s highly unwarranted $0.42 rebound (no news) that drove the December contract to a three week high of $8.17. Cold weather has not really arrived yet and we remain at peak storage. Wtih the cooler weather last week (HDDs apparently rose to 114 vs 87 in the prior week) I expect traders to defend the $8 level. If we get another flattish gas storage report on Wednesday (holiday schedule) then look of $7.50 to become the new Maginot line of defense. If logic ruled gas prices we’d be well below $7 but don’t hold your breath, especially approaching a holiday that sees huge gasoline demand, and thus supports oil and to a lessor extent natural gas prices.

Analyst & Holdings Watch:

—BBG – Goldamn 13D this morning shows a reduction in their ownerships from 2.8 shares (6.5% of outstanding) to 2 million shares (4.5%) . Classic case of “do as I say, not as I do” or do E&P analyst and the fund managers at Goldman not talk?

REP downgraded to sell at Citigroup. UBS cut them to reduce on Friday. B of A cut them to sell in late October. What do these guys sell anyway, oil? This stock has had a better ride than XOM and sell ratings are almost unheard of among analysts so I’m officially taking notice. What’s up? Well not oil prices and not REP‘s production. They’re also facing oil worker strikes in Argentina that are small at present but which could spread. Anyway without the benefit of a giant buyback (like XOM) or being part of an exclusive, 30 stock index (also like XOM) these guys are ripe for a retracement of at least 10% from current levels.

CFTC Trend Could Signal Pending Gas Price Reveral. Both long and short positions were up slightly as of Friday’s report but the overall recently established trend of declining net long positions remains intact. If this trend continues, the liquidation of non commercial long positions could prove to be a turning point towards lower natural gas prices. So far this hasn’t happened yet but as hedge funds quietly siddle to the sidelines and increasingly go short they will begin to feed lines to CNBC and other mouthpieces, talking prices lower.

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7 Responses to “Monday Morning – Turkey Week Expected To Be Quiet”

  1. zmann said

    REP is acting exactly like I’d hope on a fresh sell rating. It’s going up. The spread on the near money and month puts is nasty ($0.65 x $0.90) at present and it’s proven next to impossible to split the spread. I’ll take some if I can get in the the 35s for under $0.75 but will 1)wait for topping action on the minute chart, and 2) watch XOM, VLO, SU, USO for signs of tiring.

  2. zmann said

    Took EOG 65P for $1.15 after a dolar bounce from lows

  3. zmann said

    Took an entry on VLO 50Ps at $0.75. Refiners looking played out despite approaching holiday demand. Maybe there’s more to the secondary demand story on the gasoline side than I thought.

  4. Attacking Mid said

    I used to play VLO options before the stock split, but there just doesn’t seem to be enough price movement ever since.

    I gambled and held all my SU puts over the weekend. Sold ’em when the stock price started to recover, then flipped into calls. As the price rise petered-out I kept the calls, but “straddled” by buying back the puts.

    Since I’m leaving town tomorrow for Thanksgiving, I thought an at-the-money straddle would be a good position to hold til next week.

    I keep looking at those HOC puts, but they’re a bit pricey it seems to me.

    I also checked out REP on your rec. The options aren’t very active, so I usually will shy away from a stock like that – you can get hosed on the spread.

    Have a great Thanksgiving,

    AM.

  5. zmann said

    Hear ya terrible spread on REP options. They didn’t hit my bid today and I’m not one to chase a stock like this…I’ll try again tomorrow. Same on the HOC but I like VLO lower and went they way instead. TSO also interesting here.

    With gas over $7 for most of the quarter to date, SU is all but sure of missing 4Q numbers. If we settle at this level on oil and gas going into 1Q, they’ll need to debt up or reign in their capex. It’s just that simple. The volatility is great for the options guys though. Have a good one

  6. walter said

    thanks for your comments on refiners- much appreciated!

    walter

  7. Great resource. keep it up!!Thanks a lot for interesting discussion, I found a lot of useful information!With the best regards!
    David

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