Posted by zmann on February 26, 2007
No picks today. Stop reading if you want picks. I’m told that the first rule for writers is to never tell the reader to stop reading. Because they often do. But seriously, oil, gasoline, heating oil, and natural gas look extended to me. I’d like to let the week get rolling and exhaust some of last week’s exuberance before I make any picks but if I were to pick anything:
- I’d consider puts on a refiner (very possibly TSO which rallied 7% last week as crack spreads soared on higher gasoline (up 8%) and heating oil(up 5%)) but I’d wait until later in the week,
- I continue to hold smallish put positions in service companies: SLB and BHI but I’m waiting for further action until the OIH establishes a bit more direction — cover over 143, add to puts under 135,
- I hold puts on TK – which saw some pretty handsome estimate reductions last week 10% in 2008 and is near it’s 52 week high. VLCC rates continue to fall as seen here and they were a source of last quarter’s strength the company referred to in their 4Q press release.
- BP continues to recover following the resolution of the Texas refinery fire lawsuits but the company will remain plagued with low growth and operational / managerial problems and I’m considering adding on to my position on this small spike (I’ve got a 2/5ths position now).
Sentiment Watch: I remain bearish on the commodities but acknowledge that the after effects of a rash of refinery fires, pipeline breaks, geopolitcal tension crescendos in Iran and Nigeria will continue to be supportive of oil prices. Combine that with a late February snow storm that swept through the Midwest this past weekend and into the North East and both oil and gas find new floors in what was recent resistance: $60 per barrel and $7.50 per Mcf respectively. I think they break back through these levels, (potentially very quickly) as temperatures become more Spring-like.
Oil & Gas Early Indications: both slightly higher in pre market trading.
Opec Watch: Libya says Iran tensions already factored in, oil prices likely to trade around $60 through year end. Comment: Many analysts are guilty of only being able to see what is currently going on around them (pricewise) and then uttering something within a few dollars of that as their price target range. I expect more from an OPEC oil minister.
Analyst Watch: CAM from SB to B at Matrix.
Sorry for the short post: 1) not much going on in the oil patch, and 2) I’m working on a statistical post and didn’t get on the daily post until late.
NOTE to SA editor – Do not publish today’s post.