Friday, January 15, 2010

Transcription

1 Friday, January 15, EIA Estimated Underground Storage (Bcf) w/e 08-Jan-10 Region Stock Prev. Week Δ % Prev. Year Δ % Consuming East 1,532 1,678 (146) (8.7) 1, Consuming West (20) (4.6) Producing Region 906 1,006 (100) (9.9) Total U.S. 2,852 3,118 (266) (8.5) 2, Region Capacity Δ % 5Yr Avg Δ % Consuming East 2,178 (646) (0.3) 1, Consuming West 509 (95) (0.2) Producing Region 1,202 (296) (0.2) Total U.S. 3,889 2, National Weather Service 6-10 Day Forecast New England Middle Atlantic South Atlantic E.N. Central W.N. Central E.S. Central W.S. Central Mountain Pacific Below Normal Below Normal CRUDE AWAKENINGS TRADING BIAS DAILY WTI: BEARISH a/o Jan 12 S R BRN: BEARISH a/o Jan 12 S R NG: BEARISH a/o Jan 08 S R RB: BEARISH a/o Jan 12 S R HO: BEARISH a/o Jan 12 S R NYMEX Henry Hub gas sold off a full two minutes prior to the release of yesterday's EIA report. Someone was in the know. We don t know who that someone was but we have our suspicions TRADING BIAS WEEKLY WTI: BULLISH a/o Dec 31 S R BRN: BULLISH a/o Jan 08 S R NG: NEUTRAL a/o Dec 31 S R RB: BULLISH a/o Dec 31 S R HO: BULLISH a/o Dec 31 S R TRADING BIAS MONTHLY WTI: NEUTRAL a/o Dec 2009 S R BRN: NEUTRAL a/o Oct 2009 S R NG: BULLISH a/o Dec 2009 S R RB: BULLISH a/o Dec 2009 S R HO: BULLISH a/o Dec 2009 S R ENERGY PRICES WERE MIXED ON THURSDAY Natural gas plunged in the wake of a massive reported delivery of gas last week and the crude and heating oil markets closed lower as well. On the other hand, gasoline decoupled and finished the session higher. EIA Review Yesterday the EIA reported that working natural gas in underground storage in the U.S. plunged by 266 Bcf or 8½% to 2.82 Tcf for the week ended January 08 th. It was another large delivery from a seasonal perspective, one that the market had fully anticipated. In fact, there was an abnormally large uptick in pre-report chatter that the report would come in closer to 300 Bcf rather than 250 Bcf. The mean forecast per 23 analysts polled by Bloomberg ran as high as 279 Bcf, as low as 195 Bcf and averaged 256 Bcf. However, given the poor track record this heating season by Friday, January 15, 2010 contact@schorkreport.com 2010 THE SCHORK GROUP, INC Page 1

2 storage models to consistently gauge the proportion of weather-related gas furnace demand growth to the proportion of industry-wide supply destruction growth, the market has grown conspicuously skeptical of the weekly reports. To wit, the dispersion in yesterday's forecast. Skepticism was especially acute heading into yesterday's report. Doubts were fueled by the unknown impact from unprecedented demand in the GoM Producing Area. As noted yesterday, a sudden spike on the NYMEX in Wednesday s trading appeared to coincide with a Dow Jones wire report noting a 15% surge in demand from the Grid last week to 88,483 GWhrs. Demand in the southeast spiked 29% to 27,359 GWhrs. That is the largest amount of molecules ever transmitted over swamps from Louisiana to Florida, summer or winter! rises to 264 Bcf. The EIA reported a 266 Bcf injection, but, the EIA also revised up last week s delivery from 153 Bcf to 158 Bcf. With storage models for last week calibrated off a higher starting point, we would have had to see a 271 Bcf delivery (the high end of the consensus) to get us to the current estimate of Tcf. That said, we want to be clear on this, a 266 Bcf delivery, regardless of market expectations and revisions, is massive. Nevertheless, the fix was apparently in on the NYMEX. Let s also be clear that yesterday's price path in the Henry Hub futures was not a case of... buy the rumor, sell the fact Rather, it was a case of buy the rumor, sell the rumor (See Below). 13-Jan Jan-10 Easy go Easy come Temperatures last Friday in New Orleans averaged 31.1 F or 21.5 degrees below normal (-41%). In this light, there were legitimate concerns heading into yesterday's report regarding the market s ability to pull gas out of the ground to meet extraordinary demand from Houston down through Miami. These concerns have not gone away, i.e. demand in the GoM was extreme at the start of this week as well. Therefore, questions will linger up until next Thursday s report regarding the industry s ability to meet demand or just as important, accurately measure the gas coming out of the ground. As far as yesterday's estimate go, if we back out the five lowest estimates for the EIA report the average forecast Something squirrelly was going on in the Henry Hub pit yesterday morning. It almost smelled like the Dukes were up to something. Three minutes prior to the release of the EIA report, spot Henry Hub gas ranged between and with a closing tick. In the next minute bar at 10:28 am, the contract peaked at 5.714, but troughed at and closed at A whipsaw such as that is to be expected that is, in the first minute following the release of the EIA report at 10:30 am. It is not expected, nor is it accepted as reasonable, two minutes prior to the release of the report unless you think a 3% plunge inside of 60 seconds, sans headline, is somehow fundamentally justified. For instance, after the EIA released a revised, much-hyped, report yesterday, the NYMEX ranged from to over the next three hours and ticked marginally higher in the final hour of pit trading. Friday, January 15, 2010 contact@schorkreport.com 2010 THE SCHORK GROUP, INC Page 2

3 Therefore, either a very stupid bear got extremely lucky yesterday at 10:28 am or Randolph and Mortimer have moved on from trading frozen concentrated orange juice to trading natural gas. Either way, vol is surging, so if the Dukes want to partake, who could blame them? Gas is being delivered out of underground storage this season at an unsustainable pace. The only problem is, that pace is being sustained. Early word has it that next Thursday s report could be as high as 260 Bcf. Injection Delivery Injection Delivery Bcf Bcf 70 0 (70) (140) (210) (280) 25 0 (25) (50) (75) (100) EIA Weekly Natural Gas Storage Report Total U.S. Avg EIA Weekly Natural Gas Storage Report Producing Area Bcf/d. That is 75% above last year s pace and nearly double (97%) the 11.9 Bcf/d average pace from 2004 to Nowhere has the decline been greater this season than in the GoM Producing area. Last week we saw the first ever recorded triple digit delivery, 100 Bcf. Deliveries are averaging a blistering 7.5 Bcf/d. That is more than 4 last year s 1.8 Bcf/d average at this point and twice the average from 2004 to We are now at the crux of the season or as Zappa would say, the crux of the biscuit, but instead of apostrophes, we are talking about peak delivery season. Yesterday's report, along with the next four, out through the week ended February 05 th, tend to produce the largest injections of the season. Yesterday's report was almost twice (87%) the long-term average delivery and next Thursday s report will be as well. The report after that, week ended January 22 nd, is usually the largest of the season (one month after the winter solstice), 165 Bcf average, with a tight error, 17 Bcf. However, in light of the current forecasts, that report will be the first delivery this season to come in below the long-term mean. Regardless, the bears are far, far from out of the woods. Deliveries tend to trend lower beginning in mid February, however, after the current warm-up abates in the East, temps are forecast to drop in February. Yet, gas bulls cannot sustain $6 MMBtu on the NYMEX. Think about that, a year-on-year surplus which averaged 481 Bcf from last winter until the start of this winter evaporated in the last three reports and yet, the bulls still cannot get anything going above $6 an MMBtu. On the other hand, demand for crude oil is putrid, but Wall Street has a large swath of the market convinced that $14.24 an MMBtu ($80/bbl) crude oil is justified. Avg If that is the case, then a year-on-year surplus which was at 482 Bcf (14.6%) at the start of this belated heating season, December 04 th, is now down to only 32 Bcf (1.3%). Current deliveries are averaging a blistering 23.5 Friday, January 15, 2010 contact@schorkreport.com 2010 THE SCHORK GROUP, INC Page 3

4 NATURAL GAS NAT-GAS G Open High Low Close Chng As far as next week s EIA report goes, the typical delivery range is in between 128 Bcf and 160 Bcf. However, space-heating needs were strong for most of the week. Early forecasts for next week s report are calling for another massive delivery of around 250 Bcf yet, the bulls still can t get anything started over $6. EIA Deliveries From Underground Storage and Heating Degree Days NYMEX NG Feb'10 Daily Movement (Bcf) 75 0 (75) (150) (225) (300) HDD Avg Oct 20-Oct 26-Oct 5-Nov 11-Nov 17-Nov 23-Nov 4-Dec 10-Dec 16-Dec 22-Dec 29-Dec 5-Jan OIL WTI G Open High Low Close Chng NYMEX WTI fluctuated randomly yesterday, as lower than expected advance retail sales for December mixed with an upwards revision for November meant the bears came 38 cents within our lower inflection and the bulls rose 12 cents above our inflection high. With both sides cancelling each other out, prices settled 0.3% lower at NYMEX CL Feb'10 Daily Oct 20-Oct 26-Oct 5-Nov 11-Nov 17-Nov 23-Nov 4-Dec 10-Dec 16-Dec 22-Dec 29-Dec 5-Jan Avg. Degree Days As far as today goes, further weakness below yesterday s low print alerts to momentum towards our lower inflection point. Below here the floor falls through to our intra-day. On the other hand, a rebound above yesterday's pivot-high clears the path towards our inflection high. Above here the bulls will find resistance around our intra-day. As far as today goes, a breakthrough above our pivot high clears the path towards our upper inflection. Above here the bulls can run towards our intra-day. On the other hand, if the bears take control, offers below yesterday s low print alerts to our inflection point. Below here the floor falls through to our intra-day. Friday, January 15, 2010 contact@schorkreport.com 2010 THE SCHORK GROUP, INC Page 4

5 ICE Brent Brent H Open High Low Close Chng London crude oil followed New York lower yesterday. The contract for March delivery got as low as 77.92, 9 cents below our inflection-point and settled at an 11- session low, ICE Brent Mar'10 Daily As far as today goes, further weakness below yesterday s low print alerts towards our lower inflection point. Below here the bears should look towards our intra-day. On the other hand, a rebound past yesterday s pivot high builds a bridge towards our inflection high. Sustained support then points towards our intra-day Oct 10-Nov 19-Nov 9-Dec 18-Dec 30-Dec LIGHT ENDS RBOB G Open High Low Close Chng Strong gasoline station receipts in the advance retail sales release helped RBOB buck the complex s weakness and close 0.6% higher at It s not much, the bulls peaked well below our inflection point and prices are well below last week s highs, but it is the first gain RBOB has seen all week NYMEX RBOB Feb'10 Daily As far as today goes, bullish momentum past yesterday s high print opens the door to our upper inflection point. Above here we will look for bids towards our intra-day. Then again, a sell-off below yesterday's pivot-low alerts to offers towards our inflection point. Below here the floor falls through to our intra-day Oct 8-Oct 14-Oct 20-Oct 26-Oct 5-Nov 11-Nov 17-Nov 23-Nov 4-Dec 10-Dec 16-Dec 22-Dec 29-Dec 5-Jan MIDDLE DISTILLATES HEATING OIL G Open High Low Close Chng The lack of weather related demand or other fundamental drivers meant the heating oil pit trended lower for the fourth consecutive session. The bears couldn t break through our inflection low, coming as close as before the bulls stepped in to close prices at , down 0.6% for the day NYMEX HO Feb'10 Daily As far as today goes, further weakness past yesterday s low print alerts to momentum towards our inflection low. Below here watch out for our intraday. On the other hand, a recovery above yesterday s high print opens the door to our inflection point. Above here we look for bids towards our intra-day Oct 19-Oct 23-Oct 29-Oct 4-Nov 10-Nov 16-Nov 20-Nov 27-Nov 3-Dec 9-Dec 15-Dec 21-Dec 28-Dec 4-Jan 8-Jan 14-Jan Friday, January 15, 2010 contact@schorkreport.com 2010 THE SCHORK GROUP, INC Page 5

6 RESIDUAL FUEL OIL Monday, January 11, According to the DOE, for the week ended January 01 st, fuel oil stocks were virtually unchanged at 37.2 MMbbls. As a result, the surplus to the corresponding report from a year ago rose to 3.3 MMbbls or 9.7%. Regardless, the current level of supply will likely finish 2009, begin 2010 below the error bar of the seasonal average. Therefore, supplies remain seasonally low. NYMEX WTI vs. NYH 0.7% Source: Bloomberg Meantime, implied weather-related boiler demand in the East is forecast to remain strong through the first quarter. Last week the NYMEX crude oil market surged to open 2010, but NYH 0.7% fuel oil managed to keep pace. As such, the ratio to the NYMEX remains at the higher range of the seasonal norm (see attached). BIOFUELS Monday, January 11, The March 10 CBOT corn market opened 2010 where it finished 2009 moving higher. Chicago corn rallied into and closed inside of the June 19 th /26 th gap from 422 to 431. Meantime, ethanol found support once again in sympathy with the strong open to 2010 for the energy complex. As a result, the CBOT corn crush for March delivery rallied for a third straight week, up 2½% to 124% to the corresponding yield from a year ago. As far as this week goes in the Mar 10 corn market, bids through the midpoint of a bullish channel at 430½ and the June 19 th /26 th gap at 431 alerts to follow through towards our 440¾ weekly inflectionpoint. We will look for strength above here towards the June 12 th /19 th gap from 449¾ to 456 and then to our WEEKLY OUTLOOK (January 11 TH TO 15 TH ) 458½ intra-week. Otherwise, offers through last week s 413½ low print clears a path towards our 405¼ lower inflection-point. Below here we will look for offers towards our 387½ intra-week. Meanwhile, bullish pressure in the New York sugar market surged again last week. For a fourth straight week the contract for March 10 delivery set a new life-of-contract high, As far as this week goes, bids through last week s pivot-high alerts to follow through momentum towards our inflectionpoint. We will look for strength above here towards our intra-week. On the other hand, offers through last week s low print clears a path towards our lower inflection-point. Below here we will look for offers towards our intra-week. Henry Hub offers through the pivot-low from the week ended December 11 th at 5.559, alerts to follow through momentum towards our weekly inflection-point. We will look for weakness below here towards our intra-week. On the other hand, a rebound through the midpoint of a bullish channel at clears a path towards our upper inflection-point. Above here we will look for bids towards our intra-week. WTI bids through the midpoint of a bullish channel at alerts to follow through momentum towards our weekly inflection-point. We will look for strength above here towards our intra-week. On the other hand, offers through last week s pivot-low clear a path towards our lower inflection-point. Below here we will look for offers towards our intra-week. Brent bids through the midpoint of a bullish channel at alerts to follow through momentum towards our weekly inflection-point. We will look for strength above here towards our intra-week. On the other hand, offers through last week s pivot-low clear a path towards our lower inflection-point. Below here we will look for offers towards our intra-week. RBOB bids through the midpoint of a bullish channel at alerts to follow through momentum towards our weekly inflectionpoint. We will look for strength above here towards our intra-week. On the other hand, offers through last week s low print clear a path towards our lower inflection-point. Below here we will look for offers towards our intra-week. Heating Oil bids through the midpoint of a bullish channel at alerts to follow through momentum towards our weekly inflection-point. We will look for strength above here towards our intra-week. On the other hand, offers through last week s low print clear a path towards our lower inflection-point. Below here we will look for offers towards our intra-week. Friday, January 15, 2010 contact@schorkreport.com 2010 THE SCHORK GROUP, INC Page 6

7 SCORECARD BUY NATURAL GAS SELL NATURAL GAS Gas prices at/near historical lows compared with alternative Btus Weather outside is frightful U.S. manufacturing improving Policy in Washington (if T. Boones gets his way) will steer demand growth disproportionally towards gas Production rebound (per EIA-14 Survey) Spare capacity (nonconventional deferred production) Downward revision to Q3 GDP (velocity and the sustainability of recovery in question) Q1 heating demand forecast (IRI), 40% probability temps will fall into the warmest third of years through the largest residential gas market area in the U.S., Chicago BUY OIL U.S. dollar weak European recession over, U.S. recession likely over too SELL OIL Global futures markets in contango Crack market not corroborating the rise in crude oil Questionable economic recovery CRUDE OIL BULL BEAR NA NAT-GAS BULL BEAR NA API EIA DOE Weather PAD 1 & 2 Fuel Switching Imports Rig Count Production Imports - LNG NYMEX Cracks Imports - Canada OPEC Exports - Mexico ARB into USAC Nuclear Capacity ARB into USGC Hydro Capacity Transportation Transportation Momentum Momentum Economy Economy Interest Rates Interest Rates Outages Outages Season Season Market Sentiment Market Sentiment COT COT Total A note about the Ibis: The Ibis folklore has it that other birds look to the Ibis for leadership. The Ibis uses its instinct to detect danger. It is the last sign of wildlife to take shelter before a hurricane hits, giving warning that danger is imminent. As the storm passes the Ibis is the first to reappear, a sign the clear skies are approaching. Friday, January 15, 2010 contact@schorkreport.com 2010 THE SCHORK GROUP, INC Page 7