Posted by zmann on February 20, 2007
Oil: It’s All About The Rising Temps. Crude fell $0.89 to $58.50 in electronic trading yesterday. This morning oil is indicated down another $0.37 as the first real forecast break in the weather in five weeks materializes.
First Taste Of Spring – It will be brief but very warm.
Natural Gas: The Last of the 200+ Bcf Withdrawals (of the season). I’ll go out on a limb here and say we get another 200 Bcf withdrawal this week and then that the season is essentially over. We’ll probably enter the injection season with a little over 1.4 Tcf in the can which is near 400 Bcf over normal.
- The Over/Under Is 200 Bcf This Week. My best educated guess is that prices will decline towards $7 this week and then either plung below it on a <200 Bcf report or surge back to that top of $7.50 I mentioned last Friday.
- Next week I expect a high double digits withdrawal (around 90) as the warmth of Spring slowly spreads to the northeast. gas-weighted heating degree days (GWHDDs) came in at 246 down from 267 last week and 258 the week before that.
Here’s what that will look like on a YoY storage deficit basis.
This Week’s Degree Day Tally Should Fall Off A Cliff So Next Week’s Storage Report Should Be Cut In Half (At Worst)
Odds & Ends
Rig Counts Remain High. Baker Hughes rig count increased 13 last week (all oil). Gas rigs remain at all time high. Note also the rapid growth in horizontal drilling. This is primarily gas and of that primarily shale. The slight downturn at the end of the horizontal chart may reflect maturation of the core Barnett properties and a reluctance to maintain capital programs at recent levels given last years slide in gas prices.
- Opec Says Market Is Fine For Now. According to the new Opec Secretary General, production cuts in March are unlikely and he added: “Supply and demand are running neck-to-neck,” at around 86 million barrels a day. “Adherence to the cuts is excellent at 66%.” Comment: Normally I think of 66% as a D but it gives you a good idea of how to discount any future cut claims these guys make.
- CNN reported Iranian vessels have strayed into Iraqi waters at least twice over the last week near an Iraqi oil export terminal. They left after Iraqi patrol boats asked them to. Comment: “This business will get out of control. It will get out of control and we’ll be lucky to live through it” ~ Tom Clancy.
- Russia Cuts Oil Price Forecast. From Bloomberg, Russia, the world’s largest oil producer after Saudi Arabia, cut its forecast for crude prices this year and next, Deputy Finance Minister Tatiana Golikova told parliament today, according to local news services. The ministry cut its forecast for 2007 to $55 a barrel from $61 a barrel and the 2008 estimate to $53 a barrel from $56. Comment: They won’t be #2 for long and they know it.
- Nigeria. Another day another three hostages taken.
Analyst Watch: RBC and Jefferies initiate with buys on RAME after its secondary (priced in the hole) earlier this month (Do a deal, win a prize!), SUN upped to Buy at DB, XCO (the guys buying a lot of APC‘s castoffs) cut to hold at AG Edwards. UPL upped to buy at Goldman.
And lastly…from a Bloomberg survey, 21 of 42 analysts, traders and brokers, said [oil] prices will decline this week, 10 expected an increase and 11 forecast little change. The week before, 35 percent of respondents expected futures to fall. Comment: I continue to see $55 as the next test followed by a small bounce as we head towards the lower $50s. We remain extremely well stocked for crude and products.
Stocks Of Interest This Week:
AXC – this really reminds of TLM in its infancy with bigger growth and large, near term catalysts off the coast of Nigeria and, in of all places, Iraq,
PTSG – high potential, high risk Barnett Shale play,
CRZO – lots of shale exposure (not just the Barnett) in a little package could yield big growth,
CRR – frac business is booming while the frac mapping and reservoir diagnostics business is hitting on all cylinders as well.
BHI – waiting for the other shoes (Goldman & Lehman) to drop,
ACI / BTU – coal is backing off with gas and recent production runs show continued increases in production,
Refiners (HOC, TSO, and VLO) after we get some clarity on the latest VLO fire (that’s 3 in 2 weeks!),
Others: BP, HES, MUR, PBR, PTR, SU (buyout rumor is overplayed here and recent high gas and low oil make SU a dull boy), COP (gassiest major of the all will slide if gas goes sub $7).