Jobless claims disappointed at 627,000 so look for a bumpy opening as the market continues to focus on the 600,000 level (right or wrong, meaningful or not) as the go / no go point for equities. 

In Today’s Post:

1. Holdings Watch
2. Commodity Watch
3. Natural Gas Preview
4. EIA Oil Inventory Review
5. Stuff We Care About Today - Eagle Ford Shale update, SM thoughts
6. Odds & Ends

Holdings Watch:

• $10KP: $19,100 / 56% Cash

Yesterday’s Trades:

• HK - $23 July Calls (HKGT) for $0.60 on the mid, with the stock at $21.25. Just adding a little more leverage in the event they have a PR in store in the next 3 weeks.

Commodity Watch:

Crude oil fell $0.57 to close at $68.67 yesterday. The fall did not come as a result of the EIA’s inventory report (see details on that below) but was instead prompted by a late day rally in the dollar which itself was prompted by the FOMC statement that was somewhat poorly received by everyone but the bond market once the Fed failed to expand its Treasury purchase program. This morning crude was trading up as much as $0.80 but sold down to the $69 level following the jobs number.

• Nigeria Watch: MEND claims to have attacked another pipeline in Rivers state putting 3 flow stations "effectively out of service". Shell has still not confirmed the damage, if any from, three attacks last weekend.

Natural gas fell $0.12 to close at $3.76 yesterday. The August contract, which takes over as the front month contract on Friday was trading at $3.91. I think it is still early, in the bottoming phase for gas and that gas will not be able to maintain its footing around the $4 mark without injections of less than 100 Bcf in the very near future (including today’s report - see below). This morning gas is trading up a penny with the slight move in oil.

• LNG Watch: LNG tanker tracker "Waterborne" says Asian LNG demand was off again in May, a fifth consecutive month for Asian LNG to dip below 2008 levels. They point to this as the reason for U.S. imports being up 36% year to date. Waterborne adds that Chinese demand was not down but up 59% in May as they took advantage of cheap pricing. ZComment: I have to point out that this increase in LNG imports is attributable to very low volumes imported to the U.S. in 2008 that this increment is only about 0.3 to 0.4 Bcfgpd and that volumes are well off the record pace of 2007. I’d also point out that liquefaction capacity is up again in 2009 (see yesterday’s LNG comments) and yet it does not seem to be showing up anywhere. My suspicion is that Asia is taking more volumes than trackers are accounting for. 

Natural Gas Preview

• My number: 95 to 106 Bcf. 
  • History:
    • Last Week: 114 Bcf
    • Last Year: 85 Bcf
    • 5 Year Average: 86 Bcf
  • Weather:
    • Pretty warm, CDDs were essentially normal in aggregate but the distribution is out of whack with the northeast not sharing in the heat wave. While we definitely are seeing cooling load increase, the won’t shy away from bigger than normal without some more heat in the East consuming region (of which the northeast is a big part)
    • EEI reports electricity generation was up 4.6% vs the prior week but was also down a whopping 14.6% from year ago levels. 
  • Imports:7.5 Bcfgpd, in line with the previous week, not really enough to notice.

• Street Consensus: 101 Bcf.

EIA Oil Inventory Review

ZComment: Bigger than expected drawdown on crude stocks due to higher demand from refineries. First time in awhile I can say that’s a pretty good draw for a good reason (not imports which actually ticked up a notch). Trouble is, you refine more in a low demand environment and finished goods inventories tend to rise faster which is what happened yesterday. On the distillate side, this isn’t as much of a problem as we are already bloated on stocks and this time of year we expect to see distillates rally. But gasoline demand is erratic and can’t seem to find its seasonal footing. We are now "in line" with year ago and five year average levels on gasoline.