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Oil: Giant build last week. Oil stocks now look like a moon shot.

US Crude stocks 26 06 2007

  • Imports -- the build was attributable to a spike in imports, not the drop in refinery utilization (more on that in a second).

Gasoline: What a rollercoaster! That looks like a double top, brought about by the crude rally which was brought about by noise, not fundamentals. I'm still content to bet against gasoline here.

  • Stocks -- UP 1.8 million barrels. Resuming the recovery.
  • Refinery utilization -- DOWN AGAIN, but no reason to panic because... this time off a whopping 1.6% to 87.6%. Not the direction you'd think is normal this time of year, but really an inconsequential number with production going the other direction.
  • Production -- UP again. That's yet another record for PADD1 (East Coast) and nearly a record for aggregate U.S. production. Too much focus on the utilization number and not enough on the simple fact that refiners have become much more efficient. You have to be more efficient when fewer barrels going in the front end yield more product at the tail pipe! If we get back to the 93-95% utilization level that is said to be typical for this time of year, there will be plenty of gasoline for everyone's favorite boat, plane and SUV.

Utility vs production 26 06 2007

  • Imports -- recovered slightly, 1.284 million bpd. Week-before-last I suggested that the sharp dip we saw in the prior week was anomalous and not the beginning of the end for the surge in imports. This week's number needs to rally again.
  • Demand -- UP to 9.591. That's a bit strong and a record for this week of the year but not an all-time record.

Natural Gas: 89 Bcf injection last week, on trend with the five-year average, and it continued the process of eroding the deficit to year-ago levels. Weakness in gas over the past week is attributable to:

1. A lull on the part of the hurricane cheerleading section due to an utter lack of, well, anything that even remotely resembles a rotating storm.
2. NOAA's statement that La Nina will miss the party, and it's subsequent downgrade of the "tropicalness" of the hurricane season.
3. Mild early summer weather, although that looks to be about to change.

That 19% SURPLUS to the five-year average has started to weigh on the commodity. I think we're closer to a near term bottom then we are to another big leg down, BUT the close below $7 is a major psychological blow to the longs (what few of them there are left). As such, I'm getting ready to be long gas and gassy stocks again (but not yet).

CFTC Watch: New record short position. I continue to see this as a near term bullish sign for natural gas, since once the first shout of hurricane in the theater is heard -- the doors won't accommodate the stampede to cover.

Petrohawk Watch: Petrohawk Energy Corp. (NYSE:HK) is setting up an MLP (told you this would be the "in" thing for 2007!) and punting their Gulf of Mexico assets to focus on Arkansas and Louisiana. Reaction has been favorable to the MLP, and I still like the name here, although I don't currently have a position.

Endeavor International Corp. (NYSE:END) Watch: Operational update conference call today. 9:30 EST. 1 (800) 811-7286. Here comes the increased production guidance. Slides and the call can be viewed/heard at endeavourcorp.com.

Continental Resources Inc. (NYSE:CLR) Vs Pinnacle Gas Resources (PINN), A Tale of Two IPOs: Back in mid May I wrote about two E&Ps that were just coming public. Oily Oklahoma headquartered Continental Resources was reviewed here with a very positive mention, and I took a position later that day. Gassy Pinnacle was reviewed the day before CLR, and I said I wait for coverage and then wait some more. Here's the checkup so far:

Continental 26 06 2007

Source: Energy Stock Trader: Tuesday Outlook