In Today’s Post:

1. Holdings Watch - I cut back on the CHK holdings after a 50% run in the first half of this week but continue to hold December and January calls.
2. Commodity Watch
3. Natural Gas Preview - a somewhat wordy look at this week’s storage number which I expect to best the Street estimate and which should be good for natural gas.
4. EIA Oil Inventory Review -  In a nutshell: an odd and somewhat bearish report.
5. Stuff We Care About Today - BEXP, GMXR
6. Odds & Ends

Holdings Watch:

• CHK - $10KP Trade - Sold 2 of the 3 CHK Dec. $10 calls CHKLV for $5.50, up 157%.

Commodity Watch:

Crude oil rallied hard closing up $1.45 at $43.52 yesterday despite what was universally perceived as a bearish EIA inventory report (see breakout below). The main point about that report was that products built at what would be an alarming rate for bulls as the refining industry lost its mind and sent utilization up to a four month high despite lackluster demand. Stranger things have happened and I would not expect them to continue this course of action, not given where cracks are (think somewhere under the cellar). This morning crude is trading up another $1 to $2.

• Saudi Watch: According to Reuters ~ Saudi Arabia told major customers yesterday it was reducing supplies substantially next month in a move that could bring the kingdom’s output below its implied Opec target of 8.47 million barrels per day. Also this morning, Saudi said it produced 8.493 mm bopd last month, much lower than traders had assumed.
  

Natural gas rose $0.11 to close at $5.69 yesterday on the back of higher if not more stable oil prices. This morning gas is trading up slightly ahead of storage data.

Natural Gas Preview

• My number: 90 Bcf withdrawal.
  • Weather: gas-weighted HDDs were 192 last week, the coldest yet of the season.
  • Imports: flat with last week and just under year ago levels so it shouldn’t be much of a factor week to week. 
• History:
  • Last week: 64 Bcf withdrawal with HDDs of 168.
  • Last year: 129 Bcf  "   " 
  • 5 year average: 108 Bcf withdrawal
• Street Consensus: 83 Bcf.

ZComment: Last week the Street overestimated demand calling for a season to date high withdrawal despite warmer weather in the reporting week. The result was that gas cracked into $5 handle territory plunging —% over three straight sessions. This week it looks like the analysts have their numbers more in line with reason.