[MrBill]

$this->bbcode_second_pass_quote('CB00097', 'A')ny idea what the equity sell-off was all about today?

My guess was that at least one hedge fund was playing Japan on margin got creamed overnight and had to dump their energy positions to cover.



Matthew.

[shakespear1]

Mr. Bill, Eastern Europe is enjoying Low Low temperatures now, and here in Poland set to go lower.

So if anyone wants to top up their reserves, now is not the good time for that. When will be the right time is the interesting question if Iran and/or Nigeria go down !!!

[MrBill]

Moscow and the Ukraine are cold at the moment. Around -25 C so I suppose you're under their influence right now and not the much milder Baltic climate?

I am not very scientific about it, I assume rightly or wrongly that temperatures between 0 and +30 C require very little energy in the form of heating or air conditioning and are therefore in my book mild.

Most of W. Europe and the US are between 0 and +10 C at the moment which for January is quite mild. Siberia and the Arctic are quite frosty. -25 to -40 C in places which if it swoops down might chill things quite a bit.

Never the less, we are about halfway through winter now and no matter how cold it gets now, April showers bring May flowers. That's good news if you live in Winterpeg, Manisnowba.

As for strategic reserves, obviously the Chinese have not let me in on their plans, but my feeling is this. I do not realistically see build-ups at these spot prices and I do not expect them to dip by much either. That means that when we see hurricane damage next summer/fall or some other natural or manmade disaster, and we will, there will be that much less of a cushion. Under such a scenario, the risks of being caught short are just that much higher.

OPEC have said that they would make up any Iranian caused shortage, but even the API doubts whether the Saudis would have enough excess capacity to fully make it up and warn of gasoline shortages if the public panics. I think that is a clear possibility.

Inventory numbers just out.

Crude +2.7 mio bbls
Dists. +0.9 mio bbls
Unl. +2.8 mio bbls
Refinery runs -3.3% to 86.5%
Mogas demand up 0.9%
Distillate demand down 0.9%

Forecast for NatGas Inventory is -46 bcf

[MrBill]

News & commentary compliments of Refco Overseas London/Marathon Asset Management

$this->bbcode_second_pass_quote('', 'N')ews:
· Venezuelan president Hugo Chavez said he doesn’t foresee OPEC cutting production quotas unless prices fall. Prices began the year high because of the cold. “There cannot be a production increase because almost all countries are producing at the maximum.”

· A senior OPEC delegate told Reuters producers stand ready to pump more oil to fill any supply gap from Nigeria. He said OPEC is unlikely to cut quotas right now and the Saudis and some OPEC producers are “capable and willing to increase production if there is an actual need for extra oil.”

· Iran warned Western nations of the risk of an oil crisis if economic sanctions are imposed over nuclear activities. However, AFP reports the economy minister did not raise the possibility of any suspension or restriction of oil supplies.

· Colonial Pipeline extended allocations for the 7th cycle on its main distillate line between Collins, MS and Greensboro, NC.

· Statoil said output at its 100,000-bpd Norne field is currently 6,500-bpd due to bad weather conditions. Unloading is unlikely before Saturday. The 35,000-bpd Visund oil and gas field was shut down late Wednesday night following discovery of a gas leak. However the 118,000-bpd Asgard B platform may restart Friday morning pending an inspection of its machinery.

· API reports US fuel demand fell in 2005 after hurricane damage pushed crude oil prices to record levels. Delivery of petroleum products fell by 0.6% to 20.6-mbpd, the first annual decline in four years. Gasoline supplies averaged 9.1-mbpd, up 0.4% on year. Diesel demand rose 2.1% to 3-mbpd though heating oil consumption fell 2.7% to 1.1-mbpd. US crude production fell 6.6% to 5.1-mbpd, the biggest decline and the lowest average since 1949.

· MMS reports the impact of hurricanes Katrina and Rita was profound, affecting 3,050 of the Gulf’s 4,000 platforms and 22,000 of the 33,000-miles of pipelines. The storms damaged 183 pipelines in federal waters. Katrina damaged 20 platforms, Rita 32. Katrina destroyed 46 platforms, Rita 69. A projected 255,000-bpd won’t be back online by the start of the 2006 hurricane season June 1.

· Oil Movements report OPEC exports rose 480,000-bpd to 25.17-mbpd in the four weeks to Feb 4 in a counter-seasonal flow.

Refinery news:
· Alon USA will take down the light distillate hydrotreater and gasoil hydrotreater at its 61,000-bpd Big Spring, TX refinery in the beginning of February. Feed will be taken out Feb 3 and reintroduced on Feb 12.

· Conoco Phillips is planning a six-week shutdown of its 180,000-bpd Trainer, PA refinery starting March 30.

[MrBill]

News compliments of Marex Financial Limited

$this->bbcode_second_pass_quote('', 'N')ews:·
OPEC cut its projection for 2006 world oil demand by 100,000-bpd to 84.83-mbpd while oil demand growth was raised to 1.62-mbpd over 2005 levels. Q2 oil demand is unchanged at 83.57-mbpd. The call on OPEC in Q2 is also unchanged at 27.74-mbpd and for the full year at 28.69-mbpd. 2006 non-OPEC supply was cut to 51.5-mbpd. Q2 demand has been historically underestimated and is seen at 83.57-mbpd. Chinese demand is seen near 6%. ·

Nigerian labor unions are threatening to walk off the job if oil companies fail to boost security at oil installations following militant attacks. ·

The US energy department opened the SPR Friday to help Total with a loan of 871,000-barrels of sour crude. Total’s 234,000-bpd Port Arthur, TX refinery had to reduce fuel production. The Coast Guard said crude oil tankers could resume four refineries as early as Saturday with the Sabine-Neches waterway seen reopening Saturday morning. ·

Iranian OPEC governor Hossein Kazempour Ardebili said OPEC should cut 1-mbpd from production quotas effective from April because markets are oversupplied by 2-mbpd, threatening a Q2 price collapse. ·

Northern Iraqi crude exports from Kirkuk were flowing steadily Friday for a second day at a rate of 200,000-bpd and were expected to rise. The goal is 500,000-bpd, possibly by the end of next week. ·

PEMEX’ Dec output rose to 3.39-mbpd from 3.31-mbpd in November but fell from 3.22-mbpd a year earlier. Full year output fell to 3.33-mbpd from 3.38-mbpd in 2004. ·

Baker Hughes weekly rig count up 5, up 209 year-on-year. Oil rigs up 6.

Refinery news:·

Total reduced fuel production at its 233,500-bpd Port Arthur, TX refinery due to a disruption in crude tanker movements following an accident on the Sabine-Neches channel. ·

Valero said there would be no impact on production at its 250,000-bpd Port Arthur, TX refinery if the Sabine-Neches waterway reopens over the weekend as planned. There was enough inventory on hand to operate at planned rates. ·

Motiva Enterprises plans to shut a gasoline-producing unit at its 275,000-bpd Port Arthur, TX refinery for six weeks starting Sunday. ·

Exxon Mobil plans to shut a hydrogen-generation unit at its 557,00-bpd Baytown, TX refinery Tuesday for work.

[MrBill]

News compliments of Marex Financial

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

Nigerian oil companies said there were no disruptions to operations over the weekend though Shell’s force majeure remained in effect. But the militant group MEND warned it would release rocket attacks on oil installations in the region. A union spokesman said the impasse had not yet reached the alarm stage.

· The US Coast Guard reopened the Sabine Waterway as planned on Saturday.

· Saudi oil minister Ali Naimi sees OPEC maintaining current output quotas at the Jan 31 meeting. He expects oil prices would trade around $40-$60 if volatility were eliminated. The kingdom is ready to provide more production if needed. He expects demand to rise in Q4. Saudi King Abdullah said current oil prices are damaging to developing countries and Arabia would like to meet India’s future needs.

· Nigerian oil minister Edmund Daukoru said there is no reason for OPEC to cut output at next week’s meeting. “The market will remain tight for the long term.” He added that nothing is cast in stone but prices’ rising toward $70 has to be a consideration.

· Louisiana reports 3,214 wells or 54% of the total have been restored. Estimated restored oil production is 124,030-bpd or 61% of daily output.

· Kuwait’s oil reserves may be less than half the claimed 100 billion barrels according to Petroleum Intelligence Weekly. Data circulated within Kuwait Oil Company estimate proven and nonproven oil reserves around 48 billion barrels.

[MrBill]

The market is nervous and unsure of herself and the NYMEX is a bully ready to take advantage of her weakness. The market was generally offered yesterday, as stocks are expected to build in light of mild weather overall, and the Iran nuclear issue was widely expected to take time to work its way out. However, the storming of the AGIP offices in Nigeria were of enough headline value to push the market up almost 100 pts. and stop out many of the weaker shorts before resuming its course lower in late NY trrading. Net/net, we are about 200 pts. under recent highs with a bearish stock report later today which should show builds in the crude and distillates and a slight draw in gasoline stocks. Under such a scenario, range trading with small positions and wider stops will likely be more successful than large, outright views.

Forecasts for today's inventory numbers are

Crude +2.5 mio to 324 mio bbls vs. 3 yr ave 278 mio
Distillates +1.3 mio to 136 mio bbls vs. 3 yr ave 125 mio
Gasoline -0.6 mio to 211 mio bbls vs. 3 yr ave 211 mio
Refinery runs unch'd at 86.5% vs. last yr at 91.0%

as refiners take much needed downtime for planned maintenance ahead of this summer's driving season

Tomorrow's nat gas storage numbers should show a draw of -55 bcf ave estimate vs. a 5-yr ave of -165 bcf and last yr's unusually high -211 bcf draw. Some private forecasters are expecting colder weather to swoop down from Siberia and the Arctic affecting a larger area than has been in a cold snap up to now. This has triggered some short covering in the nat gas market by commercial users.

As for me, I used yesterday's rally to buy some OTM May puts in the WTI. Cheap insurance and perhaps a better way to trade these choppy markets. On the flipside, stopped out near the highs after being in profit on my futures position. Discipline. But it still sucks.

[MrBill]

Compliments of Marex Financial

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

· Nigerian oil production hasn’t been impacted any further by the insurgency and workers returned to Agip’s Port Harcourt offices. However Exxon Mobil, Shell and other majors face a growing threat to their operations due to escalating attacks.

· Iraq has halted southern Basra oil exports due to bad weather and a lack of tugboats. Insurgents blew up at least two pipelines in the north, halting exports to Turkey just a week after they had resumed.

· Colonial Pipeline extended allocation on its main 2.3-mbpd-distillate line through Cycle 8 north of Collins, MS. Current nominations exceed the line’s ability to meet the demand.

· OPEC president Edmund Daukoru said there is no need for a cut in oil production quotas next week in the face of high oil prices.

· Indonesian energy minister Purnomo Yusgiantoro said he has sent letters to other OPEC members in support of rolling over the current production quotas based on concerns over rising oil prices.

· MMS reports 373,407-bpd in Gulf oil output still shut-in, or 24.89% of daily output. Cumulative lost output since 8/26/05 is 119.356 million barrels or 21.80% of annual output. Refinery news:

· Valero says there is no significant impact on production at its 250,000-bpd Port Arthur, TX refinery following a problem with the wet gas compressor.

[Dukat_Reloaded]

You have a fantastic non-bias view with excellent technical insights mrbill, keep up the good work.

[MrBill]

$this->bbcode_second_pass_quote('Gang', 'Y')ou have a fantastic non-bias view with excellent technical insights mrbill, keep up the good work.

[MrBill]

Nat gas storage nos. came out -81 bcf so pretty much as expected. Much more bearish than last year's -211 bcf draw and the -168 3 yr ave. In any case the nat gas and the heating oil all but collapsed ahead of the release so it came as little surprise and the market sold into it. Crude is following the heat complex lower as there is no support from unleaded as refining margins contract.

I stopped myself out with a smallish loss in the futures. The hourly now well below the 13/21 moving averages and that puts the bearish trend back in place to test previous lows from yesterday which may provide temporary support. None the less, not great trading so far this week on my part. Just a lot of small stops taken. Fortunately, the puts are getting closer to ITM while the vol remains high and there is plenty of time value left in 'em yet.

G'nite.

[Dukat_Reloaded]

I wouldn't short any markets, most markets over time usually are allways heading upward due to inflationary pressures, so I believe the best way to go about it is to allways go long on any dips with leverage, shorting your really going against the tide of continual upward prices.

[MrBill]

$this->bbcode_second_pass_quote('Gang', 'I') wouldn't short any markets, most markets over time usually are allways heading upward due to inflationary pressures, so I believe the best way to go about it is to allways go long on any dips with leverage, shorting your really going against the tide of continual upward prices.

[MrBill]

News from Marex Financial

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

· Nigeria’s army increased security in the Delta region to protect important oil installations. Shell said there would be extended delays to crude oil exports.

· Saudi oil minister Ali Naimi said oil supplies are “more than sufficient” to meet demand and he doubts “any organization will release additional crude.” He cited geopolitical reasons as the driver of oil prices as opposed to supply and demand. Aramco president Abdullah Jum’ah said the kingdom will meet its production capacity target of 12.5-mbpd by 2009.

· OPEC president Edmund Daukoru reiterated Thursday the lack of any need for a cut in oil production quotas with the price of oil above $60. He also said it is unlikely Iranian oil exports would be disrupted due to UN sanctions. OPEC spare capacity of 1.5-2-mbpd could pick up some of the slack. With respect to militant attacks in Nigeria, he said they were following up some leads and the government has a long-term plan to resolve the “isolated incidents.”

· Oil Movements forecast OPEC oil exports will fall by 100,000-bpd to 24.9-mbpd in the four weeks ending Feb 11 as demand declines following the winter buying season.

· TNK-BP oil output has fallen 4% due to cold weather in Russia and could remain low for 2-1/2 weeks. Production should recover when temperatures rise.

· Trinidad and Tobago crude oil production rose 19,000-bpd on month to 149,000-bpd in December, also 32,000-bpd higher then a year ago.

· The Iran Offshore Engineering and Construction Co has won a bid to develop an offshore oilfield in Mexico over the course of three years. The name and location of the field weren’t specified.

Refinery news:

· Total’s 155,000-bpd La Mede refinery in Provence, France will begin a partial shutdown Feb 1 that will last until April.

[shakespear1]

I think the answer is how do we see the world behaving when it becomes obvious that demand can not be balanced by supply.

We already have casualties in the US auto making industry. Those monster cars have to go and the consumers pocket has decided that via. the energy problems. This effect will ripple through the rest of the economy. From now on I think that the US consumer when buying a car will be looking at the MPG and will be "metering" his trips. I suspect that the words "energy, oil and gas" are more actively affecting the consumers choices. I would be curious how people are looking at their McMansions today to see how they can lower their electric or heating bills. It will take time but it will happen.

However there must be some level of oil/gas demand that can not in the short run be lowered without significant effect on the whole US economy.

What is interesting is how this will effect things in the developing economies of China and India and the rest of the worlds new car drivers who can not afford a Toyota wonder car.

So my bet is you will see a price that is higher than $67 soon and one that is lower only if the world economy gets shot in the foot. Bush may help here a bit as he has no better problem to work on than Iran and Iraq. In the mean time his house is burning.

And while all this is going on Mr. Bill we ARE emptying those reservoirs !!!!

[MrBill]

Well, all those points are true. I don't think anyone doubts that we will see $75, $100 or higher per barrel of oil. The question is when and will be see lower prices in between?

The issue of hydrocarbon depletion and competition for dwindling resources is what Peak Oil is all about. Personally, I am not too concerned about whether the US economy can cope with those realities or not. Clearly the future will be a rude awakening to those who bought McMansions, live 50-miles from their work, work in industries that are dependent on cheap oil and drive gas guzzling SUVs. There can be no soft landing for those people. However, it is their own fault and the fault of their government. There are other successful national economies who get by on less oil. That does not make them immune, but they use less per person, less in total and less per unit of economic output.

I think without beating this point to death, it is America/Canada/Australia and the others who use so much energy per person who need to adapt, not to manage world events or world prices down to their expectations, which are unsustainable in any case.

My interest in this forum is trading and what factors are affecting markets now and in the short run. I am more than happy to have philosophical discussions about what may happen in the longer term in other forums, but thanks for your comments. Points noted. Cheers.

[shakespear1]

I agree completely with you Mr. Bill. Mia culpa.

Ok, then the short term driver for higher price than $67 will be the Iran issue. Mr. Bush will find it hard to let loose of this one. He is putting the screws on India and Turkey. For sure he will have no luck with Russia and China. So what is he left with? Anyones guess but I am sure they are busy working on this and that wil keep the markets gittery. Hence we will not see the promised $40/bbl.

Turkey

India

[MrBill]

RE IRAN. Here is another prop to support Friday afternoon buying ahead of the weekend and FEB product expiries

$this->bbcode_second_pass_quote('', '
')Iran's top nuclear negotiator has described Russia's proposal to enrich uranium for the Islamic republic as insufficient for Iran's needs, while not ruling it out entirely.

Returning to Tehran on Friday after a one day visit to China, Ali Larijani told reporters the Russian proposal was "not sufficient for Iran's nuclear energy needs."

[shakespear1]

[code]As for Mr. Bush, the lighter moment of last year came when oil prices were just a touch north of $50 a barrel and good ol'Dubbya says with a straight face, "you know, I have been, uh, talking to oil companies, and they tell me that, uh, you know, $25 a barrel is a fair price, and that they, uh, expect oil to be in the $25 to $30 barrel range next year..." Right George. Whatever you say, George. Okay, time for your medication, George. [quote]

This is the best laugh I have had in a few days !!!

Silver/Gold are steadily rising

[MrBill]

Why do I love trading emerging markets? Let me count the ways. Earlier this week, Lukoil through their oil & gas discoveries/purchases in the Caspian Sea region became the world's largest private oil company, edging out ExxonMobile in terms of proven reserves. Today, Mittal, an Indian company with steel interests in CIS (Krivoroszhstal') cuts, yet another, world class deal to consolidate its place as the world's largest and in some ways most dynamic steel producer. Emerging markets can be heart breakers, but everyone loves an underdog and a happy ending. Go Team Go!

$this->bbcode_second_pass_quote('', ' ')LONDON (Reuters) - The world's biggest steelmaker, Mittal Steel (MT.N: Quote, Profile, Research) (ISPA.AS: Quote, Profile, Research), bid 18.6 billion euros ($22.8 billion) on Friday for its biggest rival, Arcelor, in its boldest move yet to consolidate the still-fragmented industry.

It also struck a deal to sell Canadian steelmaker Dofasco Inc. to Germany's ThyssenKrupp for C$68 per share if Arcelor succeeds with its pending bid for Dofasco.

Rotterdam-based Mittal, 88.6-percent owned by the Mittal family, said the unsolicited cash and shares offer for Arcelor would create a $40 billion company making more than 100 million tons of steel a year, more than three times closest rival Nippon Steel.