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Stuff We Care About Watch

  • Newfield Exploration Co. (NYSE:NFX): Beat consensus; raised guidance; great quarter! Enough said? Actually no. They did remarkably well on cost control, and you can see my note issued last night. I added to my position yesterday (see holdings watch below), and I’ll have more notes in comments during the conference call. If it’s slow to react at the open (due to the XOM news), I’ll be adding to my August $50s position for a trade, and plan to hold yesterday’s $45s for some time, rolling longer on any weakness.
  • Tesoro Corp. (NYSE:TSO) bounced off $50 like a shot as expected. Not as enthusiastic about repositioning puts until we see some rationality return to the crude pits.
  • Oceaneering International Inc. (NYSE:OII) announces more contract wins. This is one I definitely like as a hurricane play but more for earnings on 8/1.
  • Exxon (NYSE:XOM) results miss estimates on weaker natural gas prices. The stock is trading off substantially pre-market, and this should have some spillover (warranted or otherwise) into names like Murphy Oil Corp. (NYSE:MUR), Marathon Oil Corp. (NYSE:MRO), and Chevron Corp. (NYSE:CVX).
  • Apache Corp. (NYSE:APA) just missed estimates but sees growth at top end of range. Watching.
  • SunPower Corp. (NASDAQ:SPWR) secondary priced. General rule: sell when they sell. Maybe it’s different this time, but with BP plc (NYSE:BP) deciding it’s serious about solar, the only thing holding these stocks at these levels are the prices of competing energy and hot money to make a buck off Al Gore’s party. While some run is justified given demand, this looks a bit bubbling. No action yet, as I’m just rambling, but I am thinking 'too far, too fast' for the solars.

Oil Shot The Moon Yesterday: September crude jumped $2.32 to $75.88 as everyone dismissed OPEC’s recent benevolence (that was so Monday!) and focused on news that four fewer loadings from the Bonny platform in Nigeria would occur next month and the EIA bullish global demand sentiment. That’s just silly. Globex crashed shortly after the report, and the market took off when it came back on line. There was little in the report you could call bullish, but crude drove gasoline higher as well with RBOB ending the day up $0.04 at $2.0879. The downtrend remains intact there, but crude seems determined to push on up for no other reason than traders want it to. Really silly action.

Headlines That Mattered Yesterday Watch

  • EIA Sees Larger Than Normal 2Q07 Crude Inventory Drawdowns Due To Rising Global Demand. Comment: next month they’ll cut demand back…again. I think this is a coordinated effort with the IEA to push OPEC towards raising production.
  • Large Explosions At Gas Facility In Dallas. Comment: Colorful but it was acetylene.
  • Explosion at fuel depot in Spokane. Comment: again, fiery photos and no substance.

Headlines That Didn’t Matter

  • June OPEC Production Up 100,000 Bopd in June.
  • McKee Hydrocracker back on line.
  • Ardmore FCCU back on line

And it steepened the backwardated market. Out months are falling further each month than just the 10 to 15 cents we had been seeing. That should be a sign that the market expects less demand, more supply, or more likely both. But again, really silly action.

Round two appear to be leaning in favor of hawkish EIA comments vs. dovish OPEC comments as the rally continues today. September crude is up another $0.86 pre-market, with RBOB trading over $0.03 higher as well.

Natural Gas Report Preview

  • Heat: Cooling degree days of 72. That’s down from 76 in the prior week. Just doesn’t feel like July yet (and it’s almost August).
  • Imports: 3.8 LNG, 9.4 Canada; up 1.9 Bcfgpd (12 Bcf) relative to the prior week (which would add 12 Bcf).

Taken together pipes and ships brought a whopping 13.2 Bcfgpd into the U.S. last week.

Combined NG imports 26 07 2007

My Number: 80 Bcf. I have not seen a consensus number, but anything over 65 puts us into record territory, which may or may not already be factored in and dismissed by the same guys who want $80 oil. Anything over 80 Bcf and I think gas comes under further pressure. The tropics continue to heat up, but nothing appears immediately threatening or even organized.

Oil Report Review

In summary, it was a bearish report:

  • Oil down 1.1 million barrels. This was a slightly smaller-than-expected draw (range was calling for a pull of 1.4 to 1.9). Let’s see, that’s not bullish…
  • Gasoline up 800,000 barrels. This was much bigger than most analysts and traders expected (range was a small draw to a build of 400,000). That’s not bullish either…hmmmm.
  • Imports rally to a record 1.65 million Bpd. With regard to gasoline imports yesterday I wrote:

It all depends on the imports. The change in imports last week resulted in a 3.5 mm barrel swing from the prior week, so it’s pretty important. Last week saw imports nosedive, and as I’ve said before, it’s a logistical glitch in timings. And not that no one wants to send finished product here anymore. I’d expect them to snap back half the distance to prior week’s report, or to about 1.2 mm bpd. This could knock that gasoline build back up to close to 1 million barrels.

Gas imports 26 07 2007

Utilization & Production: Utilization increased to 91.7% and production crept back up to just under 9.3 mm bpd.

Utilization and production 26 07 2007

Demand -- still very high at just under 9.7 mm bpd.

CALLS

NFX Bought the August $45s for $3.20 ahead of the quarterly results. Last bid $3.80.

PUTS

Frontier Oil Corp. (NYSE:FTO) -- bought some more of the August $40s for $1.95. Last bid $1.40 as the refiners mounted a small recovery. It’s an opener, but that stinks, and I’ll be looking to add more as I think RBOB (and crack spreads) resume their falling path in the near term.

Analyst Watch: First Albany takes it’s Apple Computer Inc. (NASDAQ:AAPL) price target up from $120 to $170! (just because I’m married to energy doesn’t mean I can’t look at the pretty girls). EnCana Corp. (NYSE:ECA) and Pogo Producing Company (NYSE:PPP) receive “upgrades” to neutral ratings.

Good Point Watch: Phil at PSW writes:

It’s all up to XOM tomorrow who will have to justify what is now a $522B market cap. XOM has gained over $50B in market cap since June 27th, more than the entire value of VLO ($38B), SU ($43B), OXY ($50B), the newly combined RIG ($33B) & GSF ($17.5B), or the total combination of Sunoco Inc. (NYSE:SUN) ($8.5B) + Tesoro Corp. (TSO) (7B) + Chesapeake Energy Corp. (NYSE:CHK) ($16B) + GSF ($17.5B), so it will be very interesting to see how they manage to justify this runaway valuation.

Have a great (busy) day and I’ll see you in comments!

Source: Energy Stock Trader: Thursday Outlook