Friday Morning – Retrenchment Time
Posted by zmann on December 1, 2006
Oil Shot The Moon This Week. Oil launched itself higher early in the week on the first of what NOAA says will be fewer than normal “artic blasts” this winter. That was followed by Opec threats, more refinery shut downs, rebels (this time in Sudan), a new crop of Opec pledges, more worrisome weather, and draws in products inventories when for some reason analysts expected builds.
- January crude is up $3.23 (7%) to $63.13 in the last 4 days. Gasoline and heating oil are both up 5%.
- 3-2-1 Crack spreads are in the mid $9 per barrel range after touching $10.20 earlier in November. I’m looking for spreads to weaken by mid December as gasoline and heating oil production gears back up while crude remains firm through the Opec meeting.
- XOM is trading in lockstep with crude again and is making new all time highs every five minutes. XOM is even more expensive than the last time I wrote about them – simply little bang in terms of production growth versus the multiple. Use your imagination and trust me that everything I said about these guys is a little more inflated then when I said it last.
Gas has been on an unjustifiable march to $9. Now that the first winter weather to hit a wide swath of the country has arrived, futures are pulling back and forecasts are tipping higher after the weekend. See my latest comments about gas on the gas storage tab above.
Opec Watch: Now that the front month is a few bucks above $60 look for traders to start bouts of profit taking. Opec is less likely to act in December if crude settles down here and sentiment on a larger, more powerful Opec seems to be turning from bullish to bearish with many thinking that more cheating is likely among the older members once the additions. Also, look for Angola to pump every last drop prior to its induction next March. Note also that Angola’s growth is largely XOM‘s offshore developments so any restrictions there hurt mother Exxon as well as CVX and DVN.
Analyst Watch: CVX upped to neutral, SFY cut from buy to hold.
Holdings Watch. EOG slid on its downgrade and uninspiring analyst meeting. SU slid as well, possibly in anticipation of the release of its monthly production numbers for November.
I’ll be watching the ISM today at 10 am for more signs the US economy is slowing especially after the Chicago Purchasing Managers index dropped below 50 yesterday.