Submitted By Welcome Back To A Crappy Market. Along with the Dow, the S&P500, the Nasdaq, and Bernanke's newfound reputation as a guy who "gets it", energy stocks took a beating yesterday. I'm not a chart guy like Nicky but I play one on the internet. Actually she's not a guy either but you know what I mean. To me, these charts offer a mixed bag of a picture.
- (XOI) - Classic "Big Oil" Index. Technical Opinion: Not Altogether Horrible. It held it's 200 day average mid August and now it would need to hold 1,260 to due the same again. For those of you keeping score that's 45 more points of downside to that level which is just a little bit more than what it lost today.
- (XNG) - Gassier Stock Index. TO: Perilous. Forget the 200 day average. It can't seem to get a grip on that level with gas seeming to want to test $5. The index has chart pattern support at 450, or about 15 points or about 4% below current levels.
- (OIH) - Oil Service. TO: Better. Just bounced off it's 50 day from below and is way, way, way above its 200 day. Support looks to be nearby in the mid 160s and I'd only expect it to violate that if Congress does "seize those oil company profits" or Ben issues a statement saying the liquidity crisis doesn't matter. I know I harp on the "take those profits" bit (probably too often), but I'm fond of heating my house and driving my cars.
I'm always amazed as to both the quality of talent in the area of humor on and around Wall Street during trying times and with the apparent loads of free time some of these guys have to make up new acronyms, musings etc. Sambone contributed this link yesterday in comments which gives insights as well chuckles. Another friend of the site sent along a new investment product which I'm sure will sell like gangbusters:
Constant Obligation Leveraged Originated STructured Oscillating MoneY Bridged Asset GuaranteedS or COLOSTOMY BAGS. The details split my sides and I'll email it to anyone who wants it.
For my part I'm thinking about coming up with a color coded notice system like the one used by the Homeland Security folks for my daily read on investing in energy land. So far I know Code B would be brown for Bernanke and translates to "be afraid, be very afraid" while Code G, would be for Goldman, not Green, and mean that I've finally bought into their Super-Spike Theory and that I'm buying oil stocks hand over fist with money from multiple zero interest re-fis. By the way, I will never mention Code G again.
Now For Something Completely Different:
Oil Inventory Report Expectations (from a variety of surveys)
Take aways:
- Crude Oil: Could be a much bigger draw down. Especially after last week's Dean inspired week long Mexican siesta in the GOMEX. You had about 1.4 to 1.6 million bpd (the part that goes to the U.S.) not show up for processing along the Gulf Coast.
- Gasoline: In the driver's seat for at least one more week.
- Any build in gasoline would kill the recent rally in RBOB sending it well below $2 from its current level of $2.02 (possibly down to $1.90 if the build is material). In the event of a gasoline build I'll set tight stops and be ready to lose my calls in the refining sector for a couple of days.
- Conversely, we'll need a draw in excess of 1.5 mm barrels for gasoline to continue its run (and overcome fears that the economy is going to pot and we're all going to stop driving. I personally will never stop driving).
- Over 2 mm barrels and I'll immediately add to my (VLO) $65 calls unless the broader market is in yet another death spiral or the stock itself launches out of the report gate and I can't reasonably grab it in which case I'll go for a swim.
- Distillate: Overall stocks remain in line with historical averages. Higher sulfur stocks remain depressed and I'm not sure and would love to be enlightened as to just what it is that people in the northeast are going to heat their homes with this winter. I assume it's the more costly ULS (ultra-low sulfur) but am not sure if it's straight up or a blend. Either way, unless the change is in inventories is very sizable I don't see much of an impact from this report component just yet.
Refineries Utilization: Analysts, traders and whoever else they get input from on the surveys think utilization fell 0.25% last week to about 91.6%. Talking heads and their favorite over exposed commentators will tell you, with no embarrassment at all, that this is 3 to 4% light of "normal" without bothering to mention that U.S. refiners as a group have been making record amounts of finished product. This is another one of those guesstimates the Street puts value on that is often wrong by a magnitude of 8 to 10x. I'll stop griping when they start predicting product make and not utilization.
Crack Spread Update: Recovering after a nasty 3 month correction. While I expect oil to hold the high $60s (say $67.50) I expect products to fare ok as well (read that as less than 10% downside) in coming months which is why I've done a 180 in recent weeks on the more quality / value stories amongst the refiners.
Holdings Watch
CALLS:
(TSO) bought more September $50 calls, bringing my average cost to $1.45; last bid $1.20.
PUTS: No Action. Still holding my KWK puts which for now are treading water.
Odds & Ends
Analyst Watch: nada
- Given that we know that a little more nuclear capacity was off line in the last couple of week than had been the case earlier in the summer and those regions which felt the heat are also big consumers of gas for gas-fired power generation this may make it difficult for gas injections to rally meaningfully this Thursday.
- Then again, two week's ago saw what arguably was the largest ever imports number and there is sometimes a lag between imports and storage. This week's report may play a little catch up there.
Tropics Watch: Here's the latest from Accuweather. They're thinking we could have another named storm this week, as a disturbance roughly in the same area that Dean started out looks like it's about to get organized. Note that amidst all the red ink yesterday natural gas pulled out of its own death spiral rallying $0.21 to close at $5.59 on fears that this new storm (which will be named Felix if it develops) will not take such a peaceful path as far as hydro-carbon producing assets go as did its big brother Dean.
Injection Watch: ANR reported that it is restricting injections due to rising storage levels.
Cellulosic Ethanol Watch: (PBR) says it should have the first commercial plant running by 2011 with large scale production reached by 2015.
Pemex GOMEX Watch: Production still at around 80% and the state run company says the last 20% will be brought back on line more slowly. They did say they won't issue a statement until the end of the week and that they will issue one when they get back to 100%. Comment: kind of sounds like those are two different time frames.
August 29,2007
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