Friday TGIE – Mea Culpa
Posted by zmann on December 15, 2006
Opec did largely what was expected of them except a bit later than expected. They cut production quotas by 500,000 bopd beginning in February. Opec forecast global demand growth of 1.3 mm blpd in 2007 but non-Opec supply growth of 1.8 mm bopd (the biggest single year increase since 1994). Oil rose $1.14 to close at $62.51, bit it’s still within the down trend channel. I don’t think this rise is long lived but we may drift higher through inventories next week or to retest $65.
Natural gas inventories saw the first large withdrawal of the winter season. Gas prices closed off a dime as traders looked on in horror at forecasts calling for 60 dgree temps in New England.
Gas Long’s Worst Nightmare: Red Dawn In December
The DJIA made a new all time high closing up a hundo to 12,416 and the XOI paced these gains also hitting an all time high of 1,237 on the back of gains in the one stock both indexes share, XOM. Energy stocks were broadly higher.
For those of you keeping score, the Oil Stocks are at the top (outpacing even the DJIA) while oil is on the bottom.
The market as a whole continues to ignore signs of slowdown as it “climbs a wall of worry” and the energy sector continues to act as if $100 oil is just a trade away and “peak gas” is on the not too distant horizon.
Current Sentiment – Waiting and Watching: For the last 2 or so weeks I have characterized my positions as bearish on gas, neutral through this Opec meeting and then bearish on oil, and bearish on the stocks but largely from the sidelines. Yesterday I dipped a toe back into puts of several names and got it promptly chopped off. As Phil has repeatedly stated, the group is on the rise and although my fundamental views just won’t let me join the longs in rejoicing I do take the occasional long position to help offset the burden of those aforementioned doomed put positions. I see no reason to change these positions at this time although I get just a bit more bearish with each billion dollar day in XOM.
Brian. You’re absolutely correct. Brian pointed out that simply showing inventories for crude oil, gasoline, and distillates is not good enough. My excuse is not laziness. Oh no, not me. I was simply trying to calm a heckler who had said my data was bad. I was trying to keep it real simple since he has a problem with my gas numbers which also come from the EIA. I thought I’d start pretty simple and then build upon his jabs but not in a Michael Richards kind of way. But you are right and days of supply or days of forward demand cover is the better measure. I haven’t worked up my own charts yet but we have exactly 1 day more supply now than we did a year ago. I promise to get with it on this next week.
In the meantime here is the nice chart the EIA provides of Crude Days of Supply:
And here is the complete EIA page for those of you who want more details.
Analyst Watch: ECA goes from buy to sell at Citigroup in one of the boldest analyst moves of recent memory. Citi cited disappointing production growth cost run ups. I wonder if Citi covers anyone else because that’s going to be a universal theme and I could use more sell ratings on some my positions. PTEN drops from hold to sell PDC from buy to hold at Deutsche.
Odds and Ends
Tanker rates jumped 10% to $43,000 overnikght the Opec delayed cut but I would have expected a better rebound (we were over $53K/day just two weeks aog) .
I’ll be on a forced vacation from noon through Sunday.