zman’s Energy Brain

oil, gas, stocks, etc…

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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

red-dawn.JPG

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.

stock-comp.JPG

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:

dayssupply1.JPG

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.

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9 Responses to “Friday TGIE – Mea Culpa”

  1. zmann said

    ING cut REP to sell from hold. About time!

  2. gungagalonga said

    Forced vacation, huh. Congrats. Give me a ring if you’re this way.

    NG is continuing to breakdown this morning. Both Feb and Mar are down another ~$0.10 this am. It will be interesting to see where support comes in. I need to look at what the largest and average cumulative draw is from Jan 1 to mid March. If we end ’06 with over 3.0 Tcf, I think we have a decent shot at ending the draw season around 2.0 Tcf.

  3. zmann said

    Jan 1 to Mar 30

    max 1635 in 2002
    min 873 in 2000

    5 yr avg: 1341
    10 yr avg: 1243

  4. gungagalonga said

    Thanks.

    You’re such a stat geek.

    I guess ending at 2.0 Tcf would be a stretch unless it’s abnormally warm in Jan and Feb. 1.7-1.8 is possible though.

  5. zmann said

    yup…record high mar 30 was 1695 in 2006 so we could be looking at a do over. I’m thinking of sub $5 gas if we go 1,600+ on Apr 1. I’m going to be in Austin for the weekend.

  6. walter said

    Good call on ECA Zman. Nice work:)

  7. zmann said

    SJT getting torn down now. Nice. CRR up 2% – the industry will need their services more and more, even if activity slows down…which I don’t really see happening any time soon.

  8. gungagalonga said

    Z- Ever look at Teton Energy? It’s no Spinnaker, but it has potential… maybe…

  9. Its like you read my mind! You appear to know a lot about this,
    like you wrote the book in it or something.

    I think that you could do with a few pics to drive the message
    home a bit, but other than that, this is great blog. A great read.
    I’ll certainly be back.

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