Oil Inventory Preview: Gasoline imports and utilization remain key to gasoline continuing its recent rally or falling below the critical $2 level.
Survey Expectations (from Bloomberg)
• Crude Oil: increase of 1.4 million barrels.
• Gasoline: decline of 350,000 barrels.
• Utilization is expected to tick up to 87.5%.
• Imports need to fall back from the 1 million barrels per day mark to support $2+ RBOB.
Iran Watch: Britain is calling for direct talks with Iran after the unexpected release of an Iranian diplomat, held in Iraq for the last two months. These guys keep playing nice, and we can have those troops home by the middle of next week (and oil back to testing $60).
Natural Gas -- down with oil yesterday. What a shock. May gas fell $0.25 to $7.42 yesterday. We've been hearing about a cold snap that will chill much of the country to near freezing temperatures over the long weekend and a mess of hurricanes this summer, but gas isn't really supported here by anything but lofty oil prices here.
Analyst Watch: Global Industries Ltd. (NASDAQ:GLBL-OLD) downgraded to hold at CapitalOne-Southcoast. Bank of America raised price targets on several majors and independent refiners, most noticeably raising its price target on Tesoro Corp. (NYSE:TSO) from $88 to $120. In a situation like this where the stock price has long ago outstripped the prior target on a buy-rated company, I always find it interesting that the Street will seize on an upgrade despite the fact that until yesterday the guy was officially saying, "Buy TSO -- I think it's going to $88." How busy (lazy) can the analyst be? The other price target increases came on buys as well that had seen the price target outstripped. Now he's doubly lazy as he simply raised the PTs, instead of having to downgrade based on valuation. Sheeesh.
Howard Weil Conference Gleanings:
• Baker Hughes Inc. (NYSE:BHI) says the recovery in Canadian drilling to be slower than rest of N. America, and that the slowdown that began last fall could last through year-end. Around the globe, Baker Hughes sees more strength and singled out Russia as being particularly active now.
• Santa Fe International Corp. (NYSE:GSF) says day rates and backlog remain high and growing respectively.
After the bell watch: Contango Oil and Gas (NYSEMKT:MCF) announced a sizeable second well at its Dutch discovery in the Gulf of Mexico.
• This brings net reserves in the prospect up to 45 Bcfe relative to the 34.2 Bcfe they had booked for the entire company as of year end 2006.
• MCF has a 29% net revenue interest in Dutch. The #1 well tested at 14 Mmcfepd in November and should have been online in January, and is now flowing 35 Mcfepd gross (10.15 Mmcfepd net to the company). The #2 could be online later this summer and the #3, a 2,200 foot stepout is set to spud in May.
• This is a very interesting company with huge plans in the deep shelf Gulf of Mexico, the Fayetteville Shale, and in an LNG terminal due onstream in 2008. Little debt and only seven employees and little apparent need for additional financing.
• Unfortunately it had fallen off my radar screen long ago, and was up >7% in after-hours yesterday by the time I "rediscovered" it. I won't chase anything in this market. Once things settle down a bit, I'll be looking to begin building a position here. Sorry options guys -- they don't have any.