Commodities Today: Precious Metals Rebound And Movement In The Oil Patch

 |  Includes: CHK, EVEP, LINE, NUGT
by: Matthew Smith

With news that Europe is turning around a bit we continue to watch vehicle sales and palladium prices, and although vehicle sales are reportedly getting healthier, the fact remains that they are at multi-year lows (not a few years, but decades) and that is not good for palladium. The chart for palladium remains troubling too with the metal unable to break higher but we find the metal in a good old fashion tug of war game between bears and bulls as neither party can push the metal in the direction they would like. This still deserves watching and good news from Europe over the next few weeks could really help the bulls.

Chart of the Day:

Source: Kitco

Commodity prices this morning are as follows:

  • Gold: $1333.10/ounce, down by $1.10/ounce
  • Silver: $21.57/ounce, up by $0.231/ounce
  • Oil: $106.61/barrel, up by $0.50/barrel
  • RBOB Gas: $2.9352/gallon, up by $0.0311/gallon
  • Natural Gas: $3.294/MMbtu, down by $0.016/MMbtu
  • Copper: $3.3105/pound, up by $0.0075/pound
  • Platinum: $1506.60/ounce, up by $7.90/ounce

Oil & Natural Gas

We were disappointed to see the price action in EV Energy Partners, LP (NASDAQ:EVEP) units yesterday. The units lost $2.16 (5.53%) to close at $36.88/unit after a downgrade was received from Oppenheimer. We do not view the downgrade as that big of a deal right now as Oppenheimer was adjusting their rating on the stock from their initial recommendation and we think that the analyst was more displeased with the size of the Utica transaction rather than with the price (on a per acre basis). Currently we are not adding to our position here other than with distributions being reinvested via our retirement accounts, although we do remain optimistic that management will find a way to monetize the Utica assets.

Linn Energy (NASDAQ:LINE) continues to see its units trade lower but we suspect that has more to do with Barron's piling on with more negative comments than anything new which is ailing the stock. The shares have been volatile since many made a fuss about the company's accounting and how they book some of their hedging expenses. We have recommended staying away from the name as it is simply too easy of a target, but after having looked at the situation we think that the real issue here is not the accounting but the actual operating results and whether the company will be able to get its deal for Berry Petroleum (BRY) closed. That deal is key for moving forward, and if it were not closed we would have serious doubts about the continuation of distributions in their current amount.

After the bounce it appears we are headed lower as Barron's has once again gone on the offensive with the stock.

Click to enlarge
(Click to enlarge)

Source: Yahoo Finance

It seems that a bunch of Aubrey McClendon's old brain trust is leaving Chesapeake Energy (NYSE:CHK) now that the new CEO is in place and we would expect many of them to end up with whatever entity Mr. McClendon ends up forming in the next few months. Obviously non-competes will play a role in when they can team up with him, but these guys were always present at company presentations and conference calls and our understanding was that Aubrey relied on them heavily. A Bloomberg article is available here for those wanting to read more into the departures.

Precious Metals

Generally we dislike leveraged ETFs, but when it comes to trading they serve a purpose, but we would not want to hold these for long periods of time as they do not always track the underlying securities like they should.

Click to enlarge
(Click to enlarge)

Source: Yahoo Finance

As we stated yesterday when we saw gold rallying, the leveraged miners would do well, and along with that the leveraged ETFs did well yesterday too. Chief among them was the Direxion Daily Gold Miners Bull 3x Shares (NYSEARCA:NUGT) which saw shares rise by $1.09 (16.12%) to close at $7.85/share on abnormally large volume of 42.2 million shares. For traders the Direxion ETFs leveraged to the miners seem to be good ways to play short-term moves and we have highlighted the name a few times over the months during big moves in the industry. As long as one is not holding for over a few sessions, we see no problem trading in the gold miner leveraged ETF.

Disclosure: I am long EVEP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.