Waiting for Energy Stocks Report

July 31, 2007

This, from Zman's Energy Brain:


"Bullish factors include continued problems with Iran (production and otherwise), North Sea (CATS) and Mexico (Cantarell) production, Venezuelan labor difficulties and general mismanagement, rebels, terrorists and countries run by terrorists, hedge funds, potential world power leaders who want to steal oil company profits, the EIA, the IEA, OPEC etc.

"Bearish factors include a whole lot of oil in storage in the U.S., rising Angolan production, rising Canadian production (see yesterday’s post for an important caveat), the fact that Kuwait says they have double the reserves previously thought (100 billion barrels in my best Mike Meyers voice), deepwater GOM growth on the way, rising production from Iraq (fingers crossed on that one) and OPEC who never made their curtailment quotas, continues to slip in terms of sticking with them and has made dovish statements of late regarding their upcoming meeting in September (but seem to waffling on those comments this week).

"Early Read On Wednesday’s Inventory Report from Reuters and Bloomberg:
Crude: DOWN 1.1 million barrels,
Gasoline UP 1.3 million barrels. This would put us within a hair of the lower end of the five year band, a region we have not entered since early April.
Distillate UP 0.7 million barrels
Refinery Utilization: up 0.6% to 92.3% "

We're remaining short-term bearish on Crude, and still see is coming down to the $70 level within the next 30 days. Our strategy would be to wait for the Inventory Report. If Crude starts tanking, jump in on buying the 70 Puts, which are trading in the 90-cent range. If Crude takes off, we'll wait it out, and perhaps look for a new strike price when Crude eventually comes back down to earth.

OJ Watch
OJ's back to trading sideways. No tropical storm worries yet to give the market any jitters. We're going to keep watching this set-up.