[houlbt]

Wikipedia options stuff

[MrBill]

Commentary compliments of Marex Financial

$this->bbcode_second_pass_quote('', 'N')ews:

· A deputy Russian foreign minister said it would be possible to create a joint venture with Iran to enrich uranium if Tehran resumes its moratorium on enrichment activities.

· Venezuelan president Hugo Chavez threatened to jail diplomats and close refineries in the US owned by Citgo if the US government breaks relations. Citgo processes 756,000-bpd in crude oil at four US refineries and has more than 13,500 retail outlets.

· IEA executive director Claude Mandil said he expects no downturn in global demand for OPEC crude oil in Q2.

Refinery news

· Pasadena Refining suffered a fire in a reformer unit at its 100,000-bpd TX refinery Saturday morning. The fire was extinguished in about 40 minutes. Petrobras will buy a 50% stake in the refinery and run more competitively priced crude there, specifically 70,000-bpd of Brazilian Marlim crude, within four years. Technology will be upgraded to process the Marlim.

· PDVSA denied rumours of a shutdown at its 300,000-bpd Cardon refinery Monday

· Preem Petroleum has cut crude runs at its oil refineries due to weak margins. It operates two Swedish plants, the 215,000-bpd Lysekil refinery and the 115,000-bpd Gothenburg refinery.

[MrBill]

Markets have dumped. They are now approacing oversold territory. I expect some sort of correction after the inventory numbers today. Perhaps not a reversal in trend as the fundamentals are still very bearish, but enough to take us out of the oversold area.

With regards to the inventory estimates, the market is setting itself up for a surprise. More so than I would have expected earlier this week. The concensus estimate for crude is a build of around +1.0 mio bbls and the distillates are forecast to be down about -1.0 mio bbls. However, it is in the unleaded estimates that a stark divergence of opinion emerges. The Reuters concensus is for a +1.9 mio bbl rise, but PruBache is calling for a draw of -1.0 mio bbls while rival Man Financial is expecting a whopping +2.3 +3.3 mio bbls increase in gasoline inventories. Needless to say, they cannot all be right, keeping in mind that unleaded futures have been unusualy harshly punished lately relative to the others despite gasoline inventories being more inline with historical averages while crude and heating oil are above trend.

This should be the most interesting number we have seen for quite a while given the differing opinions and as we are nearing oversold conditions, but the fundamentals still call for more sloppy trading ahead. Nothing worse than a spring thaw in February, when you know winter is still not over. Get out the gumboots, but keep your parka handy.

News & Commentary compliments of Marex Financial

$this->bbcode_second_pass_quote('', 'A')NALYSIS:
Energy prices tumbled to near-term lows amidst a broad commodities sell-off. Expectations of bearish DOEs, downward revisions in the EIA forecast of global oil demand growth and less supportive US weather forecasts also contributed to the slide. Crude gave up $2.00 while the products came off 5-7 cents. A report from a large investment bank overnight reallocated some commodities investments and traders cited that as a contributing factor. Also, the Iranian nuclear standoff appeared to be quieted down for the time being, taking out some of the risk premium. Ali Naimi made specific reference to “tension in the world” as part of the reason that oil is trading at $65 rather than $50. Russia’s deputy foreign minister said consultations on Feb 16 would address the proposed join venture with Iran to enrich uranium. The EIA monthly market outlook lowered the projection for Q1 global oil demand growth by 300,000-bpd from January’s report. DOE expectations were generally calling for across-the-board builds of up to a million barrels in crude, 1.5-2.5 million in gasoline and fractional gains in distillates. Mar crude also broke through technical support at $63.95 and $63.25. Mar heat did so at $1.7250, Mar unleaded on the open and at $1.6010.

News:
· Russian deputy foreign minister Sergei Kislyak said he expects “consultations with Iran Feb 16 on the proposed joint venture to enrich uranium.” This could allow for continued research for civilian purposes but not for military armament.
· Saudi oil minister Ali Naimi said predicting oil prices is “merely speculation” and the ability to predict is “limited and inconsistent.” Economic growth underlies expected strong demand and he backs government efforts to forecast demand because such forecasts will drive investment. The difference between $65 oil and $50 can’t be attributed to market fundamentals. The $15 is the result of “tension in the world” and speculative money. He foresees 1.4-mbpd-demand growth for the foreseeable future. There are a myriad of constraints on supply and tight capacity may cause price spikes. But the outlook for the oil industry is favorable. President Bush’s talk about limiting Middle East oil imports is “not a major bump” in the kingdom’s plans to raise output.
· EIA lowered its projection for Q1 global oil demand growth by 300,000-bpd from last month to 85.0-mbpd. Q2 demand was revised up by 200,000-bpd. US Q1 demand is lower by 220,000-bpd while Q2 is up 180,000-bpd. The global 2006 demand growth estimate is unchanged at 1.6-mbpd. But the US growth estimate for 2006 was revised down by 10,000-bpd. US Q1 gasoline demand growth was revised up by 10,000-bpd, Q2 revised down by 10,000-bpd. US Q1 distillate demand was revised down 90,000-bpd, Q2 revised down 10,000-bpd.
· US EIA forecasts Chinese 2006 oil demand growth of 500,000-bpd to 7.4-mbpd. Demand growth for Q1 is also seen at 500,000-bpd, to 7.2-mbpd.
· Petroecuador stopped pumping through its 380,000-bpd Sote Trans-Ecuadorian oil pipeline Tuesday due to protests at an oil plant near Quito.
· Russia will increase gas supplies to Europe following a dip in recent weeks due to a severe cold snap. Alternative delivery routes are also under study to prevent future interruptions.
· Kazakhstan will increase oil output by 1.1% this year or about a quarter the pace of 2005 due to export bottlenecks that have restrained growth at new fields. Output will be as high as 1.25-mbpd following a 4.2% rise in 2005 to 59.39 million tons of oil and gas condensate.
· The US will require fuel producers to sharply curtail sulfur content in diesel this year to improve air quality. The regulation requires diesel have less than 15 parts-per-million sulfur by October from a current limit of 500-ppm.
· Global oil demand rose by 1.4-mbpd or 1.7% in Jan over a year ago to 83.977-mbpd while global oil supply rose 2.2-mbpd to 85.95-mbpd according to Oil Market Intelligence. Demand was down 2.36-mbpd from December while supply was up 380,000-bpd. Most of the growth occurred in developing countries and the OECD added the rest.
· Alaskan Jan oil output fell 3,500-bpd to 875,000-bpd from December levels. · Reuters survey finds OPEC oil output fell 190,000-bpd to 29.54-mbpd in Jan, its lowest level since Feb 2005. OPEC-10 output fell 220,000-bpd to 28.03-mbpd on lower exports from the UAE and Nigeria. Saudi output was steady at 9.42-mbpd.
· Louisiana reports 124,030-bpd in oil production or 61% of daily output has been restored since last year’s storms. 3,214 wells have been restored, 54% of the total in operation.

Refinery News: ·
· Conoco Phillips will shut a sulfur recovery unit at its 156,000-bpd Borger, TX refinery for planned work. It will be shut Feb 24-Mar 4.

[MrBill]

The market has made some half-hearted attempts to rally after touching fresh lows after yesterday's numbers, but there is really nothing on the radar to get excited about, so the trend followers use any bounce to make new sales.

Iran says they will continue to pursue their nuclear agenda, but that headline is offset by China saying it welcomes Iran-Russia nuclear talks, which diffuses the issue again. The market is getting quite tired of the issue, given that all sides seem committed to a negotiated settlement and force is not on the table as an option.

More when I have the market news. Until then, keep the faith. We will more than likely see $60 before we see $65 again.

[Dukat_Reloaded]

If oil trades in the $55-$60 range again, I'm going to guy.

[MrBill]

$this->bbcode_second_pass_quote('Dukat_Reloaded', 'I')f oil trades in the $55-$60 range again, I'm going to guy.

[pup55]

$this->bbcode_second_pass_code('', 'EIA lowered its projection for Q1 global oil demand...last month to 85.0-mbpd')

$this->bbcode_second_pass_quote('', 'G')lobal oil demand rose by 1.4-mbpd or 1.7% in Jan over a year ago to 83.977-mbpd while global oil supply rose 2.2-mbpd to 85.95-mbpd according to Oil Market Intelligence.

[MrBill]

$this->bbcode_second_pass_quote('pup55', '[')code]EIA lowered its projection for Q1 global oil demand...last month to 85.0-mbpd[/code]

$this->bbcode_second_pass_quote('', 'G')lobal oil demand rose by 1.4-mbpd or 1.7% in Jan over a year ago to 83.977-mbpd while global oil supply rose 2.2-mbpd to 85.95-mbpd according to Oil Market Intelligence.

[cube]

$this->bbcode_second_pass_quote('Dukat_Reloaded', 'I')f oil trades in the $55-$60 range again, I'm going to guy.

[MrBill]

Yes, a bit frustrating. The worst is a buy or sell order below or above the current market where the market gets to your level, but does not trade through, so you go unfilled and then it moves a dollar in the other direction. But then again at every price there is a 50/50 percent chance of the market going up or down. Therefore, if you believe in your trade, you should just buy or sell at market and forget about it. At least put on half a position and then stick in an order for the other half.

I made money trading options today. Sold those puts in the WTI. Made money in the crude. Made money on the March/April unleaded. And got taken to the cleaners on the Unleaded/Heating oil spread. Despite nat gas and unleaded going down, heating oil staged a nice rally. Must be buyers of diesel vs. destined for the heating market? Dunno, but cost me dearly. Afterall 50/50 are not very good odds.

Good night. Better luck tomorrow. Cheers.

[Daryl]

$this->bbcode_second_pass_quote('MrBill', ' ')The worst is a buy or sell order below or above the current market where the market gets to your level, but does not trade through, so you go unfilled and then it moves a dollar in the other direction.

[MrBill]

$this->bbcode_second_pass_quote('Daryl', '')$this->bbcode_second_pass_quote('MrBill', ' ')The worst is a buy or sell order below or above the current market where the market gets to your level, but does not trade through, so you go unfilled and then it moves a dollar in the other direction.

[MrBill]

What little news there is compliments of Marex (yes, it really is that quiet)

$this->bbcode_second_pass_quote('', 'N')ews:
· Shell Nigeria began repair work on a damaged crude oil pipeline two days ago. Militant attacks on Shell’s operations caused the shut-in of 106,000-bpd in production and force majeure.

· Statoil will shut down its 140,000-bpd Heidrun platform next week to replace a gas flare unit.

· MMS director Johnnie Burton predicts oil and gas production in the Gulf will probably return to normal pre-hurricane levels and exceed them within 18 months. 25% of production is still shut-in but repairs to damaged pipelines and platforms may be completed by the end of the summer. But maybe 3-4% will remain offline due to outright destruction.

· Oil Movements report OPEC exports are up 180,000-bpd to 25.32-mbpd in the four weeks through Feb 25 vs. 25.14-mbpd in the prior four weeks.

· Dow Jones survey shows OPEC Jan output fell 220,000-bpd to 29.67-mbpd due to losses in Nigeria and the UAE, the former due to unrest and the latter due to maintenance.
Refinery news:

· Exxon Mobil says a small fire in a coker drum at its 154,600-bpd Torrance, CA refinery Tuesday night had no impact on operations. Fire response personnel on site quickly extinguished it.

[MicroHydro]

Just looking at the futures versus my other positions, the commodities would have been serious underachievers without the magic of leverage.


Stocks Purchased March 2005:
SolarWorld +349%
AngloPlatinum +111%

Now that is what I call a great performance! I'm still waiting for oil to get its act together and deliver the gains that Simmons believes in.

[MrBill]

$this->bbcode_second_pass_quote('MicroHydro', 'J')ust looking at the futures versus my other positions, the commodities would have been serious underachievers without the magic of leverage.

[drew]

$this->bbcode_second_pass_quote('MicroHydro', 'J')ust looking at the futures versus my other positions, the commodities would have been serious underachievers without the magic of leverage.


Stocks Purchased March 2005:
SolarWorld +349%
AngloPlatinum +111%

Now that is what I call a great performance! I'm still waiting for oil to get its act together and deliver the gains that Simmons believes in.

[DantesPeak]

This may be of interest to Mr. Bill and other US $ traders:

China is discussing selling $400 billion dollars.

$this->bbcode_second_pass_quote('', 'F')orex reserves should be cut by half: Chinese banker
--------------------------------------------------------------------------------
8/2/2006 10:05


The government should ideally cut its foreign exchange reserves by half at the end of last year, to help ward off risk and ease upward pressure on the yuan, a Bank of China official was quoted as saying yesterday.

China's foreign exchange reserves swelled 34 percent in 2005 to a record US$818.9 billion, signaling upward pressure on the yuan despite July's revaluation, setting off calls by some Chinese economists to find ways to slow down the growth.

"China's foreign exchange reserves should roughly be kept at a level between US$300 billion and US$400 billion, which will be appropriate," the Financial News quoted Wang Yuanlong, a director at Bank of China's Australian operations and former economist at the bank, as saying.

"China should use its interest rate policy and exchange rate policy to adjust the foreign exchange reserves," Wang said.

Wang said China needed adequate foreign exchange reserves to fend off risk as it was in transition between a planned and market-driven economy, but the current level of reserves had far exceeded conventional prudence.

[MrBill]

$this->bbcode_second_pass_quote('DantesPeak', 'T')his may be of interest to Mr. Bill and other US $ traders:

China is discussing selling $400 billion dollars.

$this->bbcode_second_pass_quote('', 'F')orex reserves should be cut by half: Chinese banker
--------------------------------------------------------------------------------
8/2/2006 10:05


The government should ideally cut its foreign exchange reserves by half at the end of last year, to help ward off risk and ease upward pressure on the yuan, a Bank of China official was quoted as saying yesterday.

China's foreign exchange reserves swelled 34 percent in 2005 to a record US$818.9 billion, signaling upward pressure on the yuan despite July's revaluation, setting off calls by some Chinese economists to find ways to slow down the growth.

"China's foreign exchange reserves should roughly be kept at a level between US$300 billion and US$400 billion, which will be appropriate," the Financial News quoted Wang Yuanlong, a director at Bank of China's Australian operations and former economist at the bank, as saying.

"China should use its interest rate policy and exchange rate policy to adjust the foreign exchange reserves," Wang said.

Wang said China needed adequate foreign exchange reserves to fend off risk as it was in transition between a planned and market-driven economy, but the current level of reserves had far exceeded conventional prudence.

[DantesPeak]

Mr. Bill - quite a response! Thanks.

That RGE monitor site is quite good.

Bloomberg has a story today that China will not allow an appreciation of more than 4% vs. the dollar this year. If so, they can may not be able to reduce their dollar exposure at all in the foreign exchange markets - as they are still accumulating dollars quite rapidly through the export market.

However they are now woefully behind in preparing for PO, and if they even casually read yesterday's WSJ pointing out that most of the major world oil fields are in decline, they would realize a SPR is desperartely needed.

Filling up a 1 billion barrel SPR, like the US plans, would cost maybe $100 billion by the time they are finished. That's only a small part of the forex reserves. Some of the rest will be used for their malfunctioning banking system.

While I don't claim to ever have a good handle on day to day oil trading, the fact that US has written into law that it will bring its SPR up to 1 billion barrels, and China and others will be following behind, it's hard for me to imagine oil going much lower. The $60 area seems like a good area of strong support.

[cube]

Maybe my observations are premature but it seems that the behavior of oil is different this year. The price swings are much more "robust".

Last year after hurricane Katrina, it took about 12 weeks for the price of oil to drop by $12. Currently this section seems to be moving down at twice the speed. Observing the "personality" change of oil is like observing the personality change of someone who went from drinking decafe coffee to triple shot espressos.

I wonder if this is just a fluke or if the rest of the year will be like this?

-- may the trend be with you --