Yuck. That was less than fun. Market in full out fear and
loathing mode. On to the wrap (comments below table).
1) Misery Continues for Crack Spreads …. As It Does For The Refiners
- Gasoline. Though gasoline demand held fairly flat resulting
in an decrease in the year over year deficit to only 2% whole prices continue to
fall. Demand appears to be stabilizing with prices down 30% to year ago levels.
Imports fell sharply but one week does not a trend make so we will need to see
more of that and lower production as well if prices are to stabilize.
- Heating Oil. Prices have fared better than gasoline in this
falling crude environment due to the lingering strength of the exit market.
Refiners frequently opine, "if we could make only diesel." It’s a futile wish.
- Refiners. Estimates continue to fall and analysts appear to
have given up on calling a bottom for the sector until the new year. We are
seeing some insider buying, most notably in (SUN) but until the group takes a
time out (via more maintenance and lower utilization) or until the consumer
comes back a bit or more or a snap of extended cold weather hits its hard to get
excited about the group. A string of buyout rumors in group appear to be
completely unfounded yet somewhat effective exit strategies for hedge funds in
need of funds.
2) Rig Counts Show Broad Declines…More To Come. Often
analysts and fund managers look for an event and when it doesn’t happen that day
or week or month they start doubting their original prophecy to their own
detriment. They forget that the last time rigs were laid down it didn’t happen
over night. But it happening, from the big cap E&P’s down to and especially
including the mom and pop drillers, many of whom have either gone to 0 or will
soon be at 0 rigs.
Natural Gas Directed Rigs. E&P and service companies
looking for a big drop here. A month ago the range was 200 to 400 rigs off the
top of 1,600. Now estimates range from 300 to 800 rigs with CHK this past week
saying they are comfortably around the 600 number. One thing that’s not in many
E&P analyst’s models for 2009 is the significant expense reductions this
will cause as everything from steel to pressure pumping falls off.
Horizontal Rigs. We’re seeing a lot of activity move from
lower return conventional and in some cases resource plays (like the Barnett and
Woodford) to higher return plays like the Haynesville Shale.This week’s dip is
the first of size we have seen and is likely just a bauble in the numbers.
3) CFTC Shows Crude Speculators Went Net Long Last Week.
Shhhh, don’t tell congress, but the speculators are back on the long
side in oil. Despite all the cries from talking heads for $40 and lower oil the
non-commercial types are lining up on the other side of the trade. Hmmm.
4) Alternative Energy Not Feeling The
Love. The mantra over the last week has been that President-Elect
Obama’s long announced $150 billion, 5 million job alternative energy life
support plan will be back burnered due to falling oil, natural gas, and coal
prices (what short term memories we have) and the tsunami of funding needs
brought about about by the global financial meltdown. In his youtube
address this morning, PE Obama showcased the program again as a means to get
the economy rolling.
Holdings Watch: The $10KP ended the week at $13,300 with
37% cash.
