zman’s Energy Brain

oil, gas, stocks, etc…

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Archive for March 13th, 2007

Tuesday Morning – Waiting For More Data

Posted by zmann on March 13, 2007

I’ll be brief today as everything from yesterday still applies and I have some site maintenance issues to attend to.

Oil: Down nearly $3 in the last three days . This morning oil is getting a small bounce back above $59. The early read on Wednesday’s inventory report calls for:

  • Crude: up 1.9 million barrels. The alleviation of the supply bottleneck at the Houston Ship Channel should help bring this number back into positive territory after last week’s surprising withdrawal.
  • Gasoline: down 2.4 million barrels. Should this number come in as expected gasoline inventories would still above average for this time of year. A bigger than expected draw here would likely send crude back up over $60.
  • Distillate: down 1.8 million barrels.… And quickly receding into background as a current determinant of oil prices.

OPEC Watch: Waiting and Watching. Everyone expects OPEC to do nothing this week at their March 15 meeting in Vienna. Look for the words healthy and balanced to describe the current supply demand balance as long as oil remains above $57.50 through Friday.

Iran & Vladamir Watch: Russia scolded Iran for “abusing its goodwill” yesterday and announced “indefinite delays” in further technical assistance with Iran’s nuclear program. Vlad’s got them over a nuclear barrel.

IEA Maintains Annual Demand Numbers; Dumps The Front and Bumps The Tail. The International Energy Agency said it’s kept its global oil product demand forecasts virtually unchanged, at 84.5 million bpd in 2006 and 86 million bpd in 2007. World demand is estimated to have grown 1% in 2006 and estimated to rise 1.8% in 2007, the Paris-based energy agency said. The IEA revised lower first-quarter 2007 demand but revised higher fourth-quarter 2007 demand ~ from Marketwatch.  Comment: The manipulation of the quarters to maintain the full year number seems odd in light of Greenspan’s 1 in 3 R word comments.

Natural Gas: Warm Weather Melts Gas Prices. Gas has been trading lower with warmer weather, plain and simple.

  • Barring a serious cold snap this Thursday’s inventory report will probably be the last of the large gas withdrawals for the winter of 2006/07.
  • CFTC data shows swing back to net short position.

    • The net short position has fallen below May 2006 when gas traded at $6 and traders were beginning to accumulate a long position that would ultimately drive gas higher despite a large inventory overhang.
    • This position will ultimately become a source of support for gas prices when traders begin covering (probably all at once when they see the first tropical wave coming off the West African coast that looks like it have any chance of organizing into a storm).


Holdings Watch: I’m sticking to my seasonal weakness guns and maintaining yesterday’s list of potential movers. Despite pretty good declines in crude and natural gas the stocks have been remarkably resilient and are more focused on the broader market’s ability to recover from it’s brief bought of Asian Flu.

Analyst Watch: RIG picked up as a buy at Matrix, EPL reiterated as an outperform but price target reduced from $30 to $24 at FBR.

Note to SA Editor: Let’s not publish today’s post. Thanks.

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