Dean vs Pemex Watch: According to Reuters, two of three Gulf side export points are operations and Pemex expects production in the Gulf to be back to 80% of normal by early next week. They also indicated they have 10.5 million barrels in storage on hand and tankers have already loaded and set sail from the two open ports. Damage to platforms was assessed as minor. Comment: I'd expect a bigger draw in crude next week as we essentially lost a majority of Mexico's exports this week to the tune of 1.7 mm bopd.
Pemex Watch: Here's a new field for you peak oil types to learn to pronounce: Chicontepec. Think Cantarell offset…though not until 2014. But it does go to show you that just when you think you're at that peak (yet again) -- you're not. Pemex thinks the field, at last report producing 23,000 bopd, will increase to 470,000 bopd over the next 7 years.
OPEC Watch: Cheat, cheat, cheat. According to tanker tracker Oil Movements, OPEC deliveries are set to rise 610,000 bopd in the 4 weeks ended September 8. Oil Movements went on to say that roughly 2/3 of the increase would be headed to the U.S. with the balance going to Asia. Comment: so there's no need to hike quotas at the September meeting. One other thing, you can't have this kind of boost without the Saudis.
Stocks We Care About On A Boring Friday in August:
- Newfield Exploration Co. (NFX) - still languishing and our strike is too high in the current environment. No change to my liking of the story but I'm close to taking on the September $45 and punting the $50s.
- Southwestern Energy Company (SWN) - ditto the above comments, except here we're looking at the $40s. All this over a lot of bad home loans and the prospect of 2 million home foreclosures in the next 6 months? If anything, those empty new homes are the most efficient in the population, meaning those displaced poor souls who took on interest only mortgages will now be paying more to stay warm as they consume more gas in HUD housing
- Anadarko Petroleum Corp. (APC) - content with my $50 calls.
- Transocean Inc. (RIG) - should have bought more. The latest MMS lease sale was the most deepwater focused yet. Minor fluctuations in the price of crude and natural gas have little impact on the long-range plans of the E&P and majors, who are moving to deeper and deeper water. Business really couldn't be better here and the pending merger with GlobalSantaFe Corp. (GSF) only reinforces their leverage on long term contract rates. Some of the rigs out to 2010 are looking at the half million $ a day mark…just sick but if you gotta have it you gotta have it!
- Halliburton Co. (HAL) - Cramer's wrong. Improving fundamentals + the dirt cheap valuation (—x 2008 levels) + a hefty back say so. Also, I think gas is due a late Summer / early Fall rally or at worst a stabilization.
- Tesoro Corp. (TSO) / Valero Energy Corp. (VLO) - Doing well after my entry into calls 2 days ago. This falls into the enough is enough category. The stocks have been bashed since my negative call on the group July 12. Though gasoline got some support this week from a dearth of imports and "high demand" attention will soon shift to heating oil and, as many have already noticed, low levels on the high sulfur end of things. While some of this is legislated, some is due to balls-to-the-wall production of gasoline in lieu of HO. Winter is only 3 months away.
Natural Gas Review: What follows is the normal review charts of the numbers. I would add that this week's slightly smaller than expected injection was important for three reasons:
1) it produced draws in the western and producing regions, demonstrating that heat does still matter despite the high-volume growth being displayed in both regions,
2) it came after a massive Dean-disappointment downdraft in natural gas prices and was low enough to keep prices (at least yesterday) from plummeting still further despite talking heads who blithely claimed that traders were planning to sell whatever number was reported, and
3) with weather predicted to remain warmer than normal, it flies in the face of last year's numbers in advance of a rising tide of big injection numbers seen in the last half of August and September last year. This means that we could easily transition back to YoY deficit in the next 3 to 4 weeks, which should lend support to gas. (Of course, imports could wreck that theory but so far, so good.) The year-ago comparisons for the next 4 weeks are as follows in Bcf: 48, 71, 108, and 93.
On to the charts
Week Ended August 17, 2007: 23 Bcf Injection.
Gas Inventories Are Now 13% Above The Five Year Average, and 2% Above Last Year's Record Levels.
- Storage as of August 17, 2007: 2,926 Bcf (updated August 23, 2007).
- Max storage for this week in history: 2,857 Bcf (2006).
- We are now 2% (77 Bcf) higher than year ago levels, down from 4% two weeks ago.
- We remain 13% (333 Bcf) above the 5 year average which includes 2006's record levels (see third chart below).
Looking Ahead: 3.5 Tcf here we come. This is old news.
As you can see in the table, average injections from now through the end of the traditional injection season get us to "high" levels of storage. Even the minimum level of injections, which occurred last year and is therefore in both the 3 and 10 year scenarios gets us to a lofty 3.5 Tcf which by historic standards is more than "full".
Where we are now: