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.