zman’s Energy Brain

oil, gas, stocks, etc…

  • Blog Stats

    • 101,690 hits
  • Seeking Alpha Certified
  • Hello and Welcome - I’ve created this blog for the purpose of discussing energy related topics - primarily but not limited to oil and natural gas - and their potential impact on stocks, options, and futures. I am an amateur investor/trader and make no assurances about the opinions expressed on this blog. Please consult your financial advisor before buying, selling, borrowing, or otherwise risking capital based upon ideas taken from this site. Any advice construed from this website is worth what you paid me for it.
  • RSS Subscribe with a reader

  • Subscribe via RSS with

    Powered by FeedBurner

  • pfblogs.org logo

Happy New Year! Energy Year In Review 2006 (1-3-07)

Posted by zmann on January 3, 2007

Sentiment and Forecast. First let me say I’m sorry, because I have no official forecast for expect YoY change in oil, gas or anything else. I process and sometimes even bother to analyze a lot of data on a daily basis so I don’t make predictions about what will happen over the course of a year.

  • I remain bearish on natural gas, oil, and coal and neutral to bearish on the stocks with a few minor exceptions. I’ll let you know if something changes but the commodity fundies rule here and the technicals don’t look so hot right now either.
  • As to the stocks I feel that the remaining strength in the group appears to be consolidating in a “more select” list of names. The safety stocks (XOM and the like) are either reaching new highs weekly or are at least maintaining a close hold on those levels. The broader group of energy stocks is starting to feel the weight of increasing downward pressure on the stuff they sell while their expense line (greedy service guys) keeps rising. What follows is quick, mostly statistical download of the year that was with some forward looking thoughts thrown in for good measure. I left a lot of stuff out and will keep adding to this post over time.

Energy Stocks Did Well XOI (up 20%) – oily big stocks; XNG (up 11%) – gassy big stocks; OIH (up 9%) – oil service; PBW (up 7%) – renewables and clean energy.

Energy Commodities Did NOT (some were more mixed than others). Here’s a look at the 12 month performance of the current front month contracts:

Crude Oil (YoY price down 5%). Crude inventories are down almost 1% from year ago levels. In terms of day of supply, we have 20.7 days versus 21.3 days one year ago but the recent drop has been brought on more by a logistical snafu (that foggy HSC) than by Opec or a jump in demand.

crude-days-010307.JPG

Gasoline (down 10%). Inventories are now 1.6% below year ago levels although the recent increase in production coupled with seasonally reduced demand has pulled inventories back up into the five year range as seen here:

gasoinv010307.JPG

Heating Oil (down 16%) and falling sharply at the moment as cold weather continues to vacation. As I’ve written several times in recent months, I believe secondary and tertiary demand was largely fulfilled during November when heating oil prices were low. This effect combined with the lack of cool temps now could lead inventories towards the upper boundary of the chart below. At present, inventories are 1.3% below year ago levels.

distinv010307.JPG

Natural Gas (down 47% – ouch!). See more detail below but if you can’t wait then just know that we have too much gas sitting around, at least if you produce the stuff. I’ll be watching gas closest of all this year looking for signs of firming in the fundamental market. This could come in the form of a return to more seasonal winter temperatures (although it would have to be one heck of a cold spell) but is more likely to brought reduced supply – I’ve got my eye on Canada which is chopping drillng cap ex and devoting more of the gas it still plans to produce to oil sands production and not to sending it south of the border. A long period of heavily reduced Canadian imports could right the natural gas supply demand picture rather quickly.

Coal (down 31% – double ouch for the nation’s dirtiest yet must abundant energy source). Production keeps rising year after year after year albeit to meet recent higher demand. Prices for all grades have coal used for electricity generation suffered in 2006 and the early part of 2007 should see more of the same but I wouldn’t expect them to fall completely out of bed. I’ll be adding more coal features as time passes.

Natural Gas Was (Is) Everywhere. Both in terms of price and in amount. Never before has there been this much gas in storage this late in the year.

storage-10307.JPG

  • Even the coldest winter (at least in terms of gas demand) would only reduce inventories to 14% ABOVE average.
  • The warmest would be a disaster leaving storage at levels not normally seen following winter until the months of June or July!

In 2006 Natural Gas Speculators went from very negative to very positive but just in the last 2 weeks they turned negative again. Even though the media and CNBC can only find increasingly beat up looking gas bulls I continue to point out that a majority of guys who trade gas for a living are moving into the short camp. If they were very short I’d probably be looking for an upturn in gas prices but right now, shorts are just tipping the scale in their favor as longs stampede for the exits:

cftc122606.JPG

In the new year I’ll be adding:

  • An acronym & definitions page so I can type in short hand more effectively
  • Valuations Tables: Historical and forward looking valuation metrics on the Majors and Large and Mid Cap E&Ps.
  • An Oil Inventories / Day of Oil Supply page

Thanks for reading and Happy New Year!

Advertisements

13 Responses to “Happy New Year! Energy Year In Review 2006 (1-3-07)”

  1. zmann said

    Deutshce downgraded SU, SUN on valuation, also higher costs at SU.

    Stocks looking weak this morning as oil shoots through $61 towards $60 on lack of Opec / rebel action or unrest over Saddam’s exit as winter continues to hide.

    On the short side liking BTU, MUR, MRO, APC, BHI and the refiners. Traqdes also good on CHK (although it can bite you), SWN, KWK, DVN, and COP…not playing XOM yet and steering clear of the tankers.

  2. zmann said

    Didn’t AM write last week about an unlocking of profits from the energy sector leading to a early 2007 downdraft? Could be…

  3. WDKING said

    ZMANN…

    Quite the shellacking today…biggest i’ve seen in a long time, just wanted to let you know my appreciation for your site, you and Phil are the best!

  4. zmann said

    Yep, it’s a pasting but it’s about time! Lowest level on USO since it was offered. Sectors seem to top when the number of ETFs start jumping. Thanks, glad you like the site.

  5. zmann said

    Man, I stopped watching SJT since the spread was so ugly. Should have just taken the bait. It’s getting wallopped as a straight play on gas.

  6. zmann said

    Also, KBR down 8%. Could it be fear of democrats? How long can majority owner HAL hold up here?

  7. Wow commodities in general are getting punched in the mouth.

    -SaneO

  8. zmann said

    Gas just won’t give up the ghost. I guess not too surprising given the fall of late but still on a day with oil off $2.50 and most of that owing to weather, you’d think gas would get popped.

    Still holding the big positions in MUR and BTU but considering lightening up in the latter.

    The XOI and XNG both look like they have another 3% to fall before they get support from their 200 dma. OIH looks even worse, below both 50 and 200 and weak looking support is another 6% below here!. HAL is going to get sacked along with BHI and GSF. There are going to be some very unhappy drillers in 2007 if prices don’t start firming soon.

    Canada is already starting to sound like a production trainwreck which over the course of the year may save US gas prices but it’ll kill those with exposure.

  9. zmann said

    CK…sure. Crude oil CFTC can be found here:

    http://www.cftc.gov/dea/options/deanymelof.htm

    crude in New York and WTI is here along with contracts on the products.

  10. gungagalonga said

    Z–

    Thanks for all you work on the site. Happy New Year!

    Sorry about the SJT miss, but hey, at least you don’t have to pay the divy while you wait.

  11. zmann said

    Thanks and Happy New Year to you Gunga,

    Don’t you think the site is missing something though. What else, besides dancing girls, should I add?

  12. gungagalonga said

    Hmmm, how about a shart tracking the oil production on the top 10 producing field in the world. Cantarell, Ghawar, etc…

    The data is so easy to find…

    On second thought, how about dancing girls carrying big pints of Guiness.

  13. walter said

    My vote goes to the dancing girls 🙂

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

 
%d bloggers like this: