DISTILLATES - Declining inventories at a time when they should be building up in advance of winter.

Stuff We Care About Today -

Sector Snaps: Taking a quick look at the other stuff around here besides the E&P and oil service names.

Independent Refining:

• Sentiment: Mixed to cautiously optimistic near term, long term oversupply concerns in the international market. Estimates will be up coming up for the 3Q and 4Q periods but 2009 is still very much in question. I’ve been tentatively re-entering the group for the last 6 weeks.
• Valuation: Cheap but it has been all year so "cheap for a reason" as estimates have been sliding all year as well. The deceleration in earnings estimates reductions is getting some notice however as the group is trying to make at least a short term bottom.
• Names held here now: (VLO) and (TSO) calls.

Coal Producers:

• Sentiment: Hot group turned very, very cold. Stocks in China are always low, now exceedingly so although hard data is difficult to come by. Coal price advances far exceeded those of oil in 2008 and although they have come off with everything else margins for most producers, especially higher BTU operators, are healthy. The group however has been pummeled going from hedge fund darling to source of funds in the last 4 to 6 weeks. Getting ready to position here, waiting on a little sanity in the groups and market in general and see no need to catch a knife or the bottom 10% of a rebound.
• Valuation: As you can see from the second table below earnings estimates have not retreated while the shares have contracted sharply with the broad market sell down and a smaller decline in coal spot prices. Looking out to 20009/10 the group remains exceedingly cheap.
• Names held at present: None, but I’m leaning towards entries in (BTU), (WLT) and /or (PCX). As with everything these days, I’m waiting for the deleveraging storm to pass.

Dry Bulk Shipping

• Sentiment: pretty poor. Expected rebound in Chinese demand post Olympics has not yet materialized. Combine that with global economy downshifting and you have bulk rates that look like a double top.
• Valuation: Cheap but again, estimates are falling pretty quickly here so maybe not cheap enough. We have been absent bulk plays for the last couple of quarters and I see no reason to play now. You can’t wait on the global economy to recover before entering this group but I need to be able to see some sort of light at the end of the tunnel.

Solar: Will do for the Friday Post.

Odds & Ends

Analyst Watch: (PTR) upped to Outperform by Credit Suisse, (CEG) cut to hold at several firms, Goldman upped (HOC) to Buy, Merrill cuts (DNR) to neutral.