Energy Stock Trader: Tuesday Outlook

Feb.27.07 | About: VanEck Vectors (OIH)

We're still fence sitting but getting closer to squeezing the trigger.

Of the items mentioned yesterday morning:

  • Teekay Shipping Corp. (NYSE:TK) trickled 1.4% lower as VLCC [very large crude carrier] rates continued to come in, and the hang over from the Bear Sterns downgrade made itself more widely felt.
  • Tesoro Corp. (NYSE:TSO) closed off a whopping $0.30, after a 7% run last week started to cool ever so slightly.
  • BP plc (NYSE:BP) jumped for a second day over giddiness in settling with plaintiffs from their deadly Texas refinery blast.
  • Baker Hughes Inc. (NYSE:BHI) and Schlumberger Ltd. (NYSE:SLB) posted slight gains along with most of the Oil Service HOLDRs ETF (NYSEARCA:OIH) (more on that ETF in a bit) despite my long held put positions.
  • I continue to watch Nexen Inc. (NXY) closely for a breakdown, and Hess Corp. (NYSE:HES) to see if anyone will notice the deluge of shares coming out of management. Otherwise, I continue to watch, listen, and wait for the right time to head back into bigger positions (on either side of the fence).
  • One last thing, PTSG re-rallied 15% to $1.42 and I can’t stress enough how quickly I’d recover my cost on this if further gains take place.

Mother Nature is still supportive of prices

I’m still concerned about this last blast of cold weather, and now we’ve got fog in the Houston Ship Channel. Maybe they should build an elongated dome over it. Billions of dollars for sure, but the guys sending the crude put islands in the ocean, so how hard can it be to build a several mile long dome in the name of national oil supply security?

HDDs [heating degree days] for last week came in higher than expected (194 instead of the 166 predicted by the Climate Prediction Center [CPC] a week ago). We can kiss a sub 100 Bcf withdrawal for Thursday goodbye on that news, and I’ll have a new, slightly higher estimate in tomorrow’s post.

Houston is queued up with no where to go

Fog. As of Friday 55 tankers were parked outside the Houston Ship Channel waiting to offload. For a more detailed list of infrastructure issues affecting the price of oil, see the section entitled Snafu Watch later in this post.

Odds & Ends

Coal stocks down over cancelled plants: Should have seen this coming. Nine planned coal-fired generation plants in Texas get cancelled, and it’s a bloodbath for the coal miners. Peabody Energy Corp. (BTU) took the worst of it, but they all had a good run of late on what can only be called meager gains in coal futures prices. I’ll have an update on coal inventories soon (government data willing), but coal production continues to surge. This probably isn’t good news for CSX Corp. (NYSE:CSX) and the other coal intensive rails either. Trust me, I’m kicking myself over this, since I gave up on coal puts two weeks ago.

Energy Snafu Watch: I’ve taken to googling the refiners and energy sites every time oil spikes of late, which is not the best of habits, but what can you do when things are so jump of late? The latest list of snafus with their expected TTR (time ’til resolution):

  • Valero Energy Corp. (NYSE:VLO) refinery: McKee, TX 158,000 bopd refinery still “several weeks away from restart.”
  • Imperial refinery outage: Expects to run it’s 118,000 bopd capacity Ontario refinery at reduced rates through mid March. Serious shortages and the closure of several filling stations have been reported in the greater Toronto area.
  • BP plc's (BP) Northstar Field In Alaska: 47,000 bopd offline since around Feb 17th and won’t be up for a few weeks as far as I can tell. If it’s not one BP field it’s another. Statements like that are unfair, since they have so many fields, but then you read stories like this one where management opted to cut costs by substituting water for corrosion inhibiting chemicals and I gotta yell come on!
  • TEPPCO refined products pipeline reopened -- down a good bit of last week this 240,000 bopd refined products line was coming back up towards full pressure last Friday.
  • Houston Ship Channel: The Channel was shut due to fog last Thursday. If you’ve ever driven into Houston at high speed before dawn, you know fog there is no joke. No word yet as to when it will or if it has indeed reopened. This could easily prompt a draw in crude inventories this week, and a bigger one next week if the waterway is not quickly reopened.
  • Elk Hills is slowly returning to normal capacity of 120,000 bopd after a 20-day outage due to a natural gas explosion in the field.

I’m sure I missed one or two so please feel free to jump in there with those or anything new.