Oil and corn hit record prices on fuel costs
Crude oil and corn prices surged to record highs as the world's hunger for fuels continued to convulse the energy and agriculture markets

Corn shoots higher on US planting gloom
US corn prices hit record levels amid expectations that an update from the US Department of Agriculture would include downward revisions to production forecasts this year as planting in the Midwest has been hampered by bad weather

India moves to stem inflation with futures ban
In a bid to rein in soaring prices, India has extended its futures trading ban to four more food commodities despite warnings that such measures will do nothing to quell inflation

Mixed response to holding interest rate
The Bank of England's decision to hold interest rates at 5% disappoints the housing industry, but other business leaders welcome the move to keep inflation in check

Analyst warns of oil at $200 a barrel
Crude oil prices could surge to $200 a barrel in the next two years, according to the Goldman Sachs analyst who three years ago correctly predicted a price "super-spike" above $100 a barrel

Oil surges above $122 a barrel
Oil pushed above $122 a barrel, setting a record for a second consecutive session, supported by supply disruptions and optimism that the US economy might escape recession.

Oil moves above $120 mark
Oil prices hit a record of more than $120 a barrel, driven by fresh supply disruptions in Nigeria and a growing sense of optimism that the US economy might escape recession

Euro firmer on rate outlook
The euro rose against the dollar for the first time in three days as expectations grew that the European Central Bank would keep interest rates at a six-year high this week, continuing its efforts to curb inflation

Oil hits above $120 amid Nigeria concerns
Oil prices hit record levels above $120 a barrel amid growing hopes that the US economy might avoid recession and further supply disruptions in Nigeria.

Living in a world of $200 oil
Another doubling in oil prices is about conceivable. It would cause serious economic disruption, global tension and currency crises for some poor nations

India extends futures trading ban
Four more food commodities added to list despite warnings, including from the government-appointed market regulator, that such measures will do nothing to quell inflation

Call options bet on oil hitting $200
The number of financial bets on crude oil prices hitting $200 before the end of this year have spiked almost 40 per cent since the start of May, a further sign of growing concern that oil prices will continue to rise sharply in the near term

View of the day: Hot rocks
Diamond prices are strong and a premium is being placed on producers and explorers, writes Dex Kilalea at RBC Capital Markets

No silver lining as prices take a tumble
A greater role for ETFs may not be enough to prevent long-term falls in the value of the precious metal

The Short View: Euro and oil
John Authers on the relationship between the single currency and the price of crude oil

Valero deal hints at room for takeovers
Valero Energy's deal this week to sell a Louisiana refinery at a lukewarm price highlights the refining industry's margin troubles, but it also signals that financing may be more readily available for deals in the booming energy and commodities sector

Chevron to fire 1,100 people
Chevron it planned to fire up to 1,100 refining, marketing and transportation employees after reporting an 84 per cent drop in its quarterly refining profit

EDF adds to its UK nuclear options
EDF, Europe's biggest power company, has been buying land around nuclear sites in England and Wales

Living in a world of $200 oil
Another doubling in oil prices is about conceivable. It would cause serious economic disruption, global tension and currency crises for some poor nations

European prospectors cash in on new oil rush
Record prices are driving exploration companies to tap reserves across the continent, including old and small fields that have recently become economically attractive

Chinese assault on Australian resources
Chinese companies are becoming willing to use more aggressive tactics in their assault on Australian resource groups. But the ínvestment push has prompted complaints from China that its businesses are being treated unfairly

BHP could sell $50bn assets if it gets Rio
The world's largest mining company is looking at selling non-core assets in aluminium, copper and ferrous metals if it succeeds in taking over its rival

Court rules on BP blast victims' rights
A federal appeals court ruled that the rights of victims in BP's fatal Texas City explosion in March 2005 were violated by US prosecutors who reached a secret plea agreement with the UK oil group before consulting victims

Job growth continues in Australia
Australia recorded its 18th consecutive rise in monthly employment in April as companies operating in the country's booming mining sector hired new workers to help feed demand for resources from China

Tories put pressure over British Energy sale
The Conservatives want the government to issue a statement on the 'surreptitious auction' of British Energy, saying that 'energy security should be above party politics'

Carbon permits to cost £1.6bn
Businesses will spend about £1.6bn between now and 2012 on buying carbon permits, according to estimates from the CBI employers' body, which yesterday called for...

OMV chief still keen to pursue Mol bid
Wolfgang Ruttenstorfer says his group is committed in spite of the Hungarian oil company's success at deflecting OMV's moves to sway policy at the shareholders' meeting

Japanese to refine more Chinese oil
China National Petroleum Corporation is in talks to buy a 49 per cent stake in a Japanese oil refinery operated by Nippon Oil

Record oil prices boost Total to $5bn
French oil major Total posted higher-than-expected first quarter net profits as record oil prices made up for the weak dollar and a drop in refining margins

Reserves boost for Randgold
The mining group is planning to start activities at its Tongon project in the Ivory Coast following a successful exploration work that revealed 52% more gold

FORTUCAST FINANCIAL TIMER - Serving Futures Traders Since 1987
Complete analysis of futures markets - including trading recommendations, updated daily.

Cocoa Futures :: Friday, May 9, 07:02 (ET)
Cocoa:Nearby Cocoa futures are higher this morning extending the prior days gains. Trend indicators have turned from a neutral price pattern to a bullish bias. However the overall strength of the...

Coffee Futures :: Friday, May 9, 07:02 (ET)
Coffee:Nearby Coffee futures are higher this morning extending the prior days gains. Trend indicators are indicating a bearish market. However the overall strength of the trend, as indicated by the...

Copper Futures :: Friday, May 9, 07:02 (ET)
Copper:Copper trade on ACCESS is showing weaker prices in recent activity extending the prior sessions weaker close. Trend indicators are indicating a bearish market. However the overall strength of...

Cotton Futures :: Friday, May 9, 07:02 (ET)
Cotton:Nearby Cotton futures are higher this morning extending the prior days gains. Trend indicators are indicating a bearish market. However the overall strength of the trend, as indicated by the...

U.S. Debt Futures :: Friday, May 9, 07:02 (ET)
10-Year Note:The 10-Year Note is higher this morning extending the prior sessions gains. Trend indicators are indicating a bearish market. However the overall strength of the trend, as indicated by...

U.S. Energy Futures :: Friday, May 9, 07:01 (ET)
Crude Oil:Front month crude oil is higher in ACCESS trade this morning extending the prior sessions gains. Trend indicators are indicating a bullish market and the overall strength of the trend is...

Forex Futures :: Friday, May 9, 07:00 (ET)
Euro-FX:The euro is trading higher this morning extending the prior sessions gains. Trend indicators are indicating a bearish market. However the overall strength of the trend, as indicated by the...

U.S. Grain Futures :: Friday, May 9, 06:59 (ET)
Corn:Corn futures are higher on the E-CBOT this morning extending the prior sessions gains. Trend indicators are indicating a bullish market. However the overall strength of the trend, as indicated...

U.S. Livestock Futures :: Friday, May 9, 06:58 (ET)
Feeder Cattle:Nearby Feeder Cattle futures finished the previous session higher extending the prior days gains. Trend indicators are indicating a bearish market and the overall strength of the trend...

Precious Metals Futures :: Friday, May 9, 06:56 (ET)
COMEX Gold:Gold trading is higher in ACCESS trade this morning extending the prior sessions gains. Trend indicators are indicating a bearish market. However the overall strength of the trend, as...

U.S. Soybean Futures :: Friday, May 9, 06:56 (ET)
Soybean:Soybean futures at the E-CBOT are higher this morning extending the prior sessions gains. Trend indicators are indicating a bearish market. However the overall strength of the trend, as...

Stock Index Futures :: Friday, May 9, 06:55 (ET)
E-Mini S&P 500:E-Mini S&P 500 futures are weaker in pre-cash market action this morning extending the prior sessions weaker close. Trend indicators are indicating a bullish market. However the...

Sugar Futures :: Friday, May 9, 06:55 (ET)
Sugar:Nearby Sugar futures are higher this morning reversing the weaker tone seen during the prior session. Trend indicators are indicating a bearish market and the overall strength of the trend is...

Where's the Bursting Commodities Bubble?
Tim Iacono submits:

It seems odd to me that, after having already burst at least two times this year, the commodities bubble would look like this on a chart.

When the new inflation numbers come out next week, they will indeed be misleading. They will be artificially high.

Complete Story »

Rising Prices, Rising Crises
David Merkel submits:

Every now and then, my hyperactive mind runs the film of the Federal Reserve changing its policy, and an unexpected chain of events happens, triggering a war a long way away. Sound farfetched? US monetary policy with its unending bias toward stimulus, since we are the global reserve currency (for now), pushes inflation out into the countries that lend to us and into the commodity markets as well. (What do you expect from a negative real interest rate?) This has political impacts as the prices for energy, food and related goods rise.

Nigeria is a basket case because of the light sweet crude buried there. Venezuela gets its share of troubles because nationalized oil gives extra power to their government. Same for Russia, though the politics are different. Now there might be a movement for autonomy in the part of Bolivia where the natural gas is located. I sometimes think that Iran will have internal difficulties once their oil production falls to the degree that they can no longer subsidize their populace.

Complete Story »

Interview with Prieur du Plessis: Blogging, Investing and Global Markets
Prieur du Plessis submits:

I was recently interviewed by Mert Erkal (Search for Blogging) for the April 2008 edition of Bloghology. The questions and my answers are republished below:

Mert Erkal: Prieur, please tell us about an investment professional’s life especially when alarm bells are ringing for global economy.

Complete Story »

Wednesday Outlook: Commodities, Emerging Markets
David Fry (ETF Digest) submits: << Return to page 1 - The Bad News Is the Good News
















































Good earnings growth is still primary to investors. With earnings this season moving along better than expected, investors feel pretty good about things overall. They isolate oil as a speculative one-off event, financials have bottomed and housing woes aren’t a big deal overall.

To bears all this is selective spin. But, the tape is the reality and that’s the bottom line.

There will be no post tomorrow as I’ll be giving a talk in the early evening while in Boston and then we travel Thursday to Chicago arriving in the evening.

Have a pleasant day.

Disclaimer: The ETF Digest maintains positions in TLT, TBT, XLE, MOO, XLB and ILF.
Complete Story »

Commodities vs. REITS
Hard Assets Investor submits:

Investors have become increasingly interested in commodities and REITs (real estate investment trusts) for a similar reason. Both are "real asset" classes that tend to react to changing economic conditions in ways that are different from financial assets such as stocks and bonds. From an investor standpoint, the differences often play out in the form of low correlations to traditional asset classes.

As a quick primer, correlation ranges between -1 and +1. A correlation of +1 implies that as one security moves, the other security will move in lockstep. Alternatively, a correlation of -1 means that if one security moves, the other security will move by an equal amount in the opposite direction. If the correlation is 0, the movements of the securities are completely random.

Complete Story »

Do ETNs Belong in Your Portfolio?
Hard Assets Investor submits:

Hard Assets Investor Editor's Note: The recent growth of the exchange-traded note market has caught many market-watchers by surprise. Every day, it seems, a new batch of commodity-focused ETNs are launched onto the market. Last week, Deutsche Bank even launched ETNs that provide 200% and -200% of the monthly return of its broad-based DBC commodity index. It offers similar products tied to gold.

What are ETNs? In many ways, they are similar to ETFs: They track the performance of an index or an individual asset (like currencies), they trade like stocks and they charge investors fixed expenses. But there is one important difference: ETNs are actually debt notes. The issuing bank promises to pay investors an amount equal to the value of the target index. If the underwriting bank goes bankrupt, investors still holding the ETN in their brokerage accounts could be left holding the bag.

Complete Story »

Time to Think Like a Hedge Fund
David Enke submits:

Every three months, after the release of quarterly data, we start to hear Congress talk about how Big Oil is making too much money and how we need to initiate some kind of windfall profits tax. Of course, when you look at the data, you see that profit margins for oil companies on a percentage basis are not stellar, or at least not exceedingly high. Compared to other industries, they are quite average. To see the data, check out Mark Perry's blog at Carpe Diem, or do a simple sector/industry sort at Yahoo! Finance.

I do sometimes wonder how many of those talking about windfall profits are even looking at the data (or care to). I also wonder if they realize that when you tax something you tend to get less of it. The issue is obviously more complicated than this, but it is important to also make sure we consider the unintended consequences of our actions and decisions.

Complete Story »

Options Trader: Tuesday Outlook
Phil Davis submits:

Oh I love the smell of pullback in the morning.

We can blame UBS (UBS) for this one as Europe came back from a holiday weekend to find it already cut in half. UBS may not have been cut enough as the bank lost the $11Bn XOM found last week. Now we know what spurred last week’s coordinated Fed and ECB liquidity moves which I predicted on Friday. Like I always tell members, it’s not paranoia when they really are all conspiring to hide something!

Complete Story »

An Interview with Chad Geraigiri
Hard Assets Investor submits:

Chad Geraigiri is the president of Optimus Capital Management, a Florida-based commodity trading advisor. His trading systems incorporate technical analysis and aggressive entry/exit management in an attempt to deliver strong risk-adjusted returns.

He spoke with the editors of HardAssetsInvestor.com recently about why short-term trading makes sense in the commodities market, and about where he sees opportunities today.

Complete Story »

Why I'm Re-Establishing My Gold Position
Toro submits:

When I started my blog, it was not my intention to turn it into my personal trading journal. It was - and still is - my intention to bring market issues to the fore, stating my holdings in a position effected by the issue under discussion to fully disclose whatever conflict, and thus bias I may hold.

However, it has been my experience, when informing people of my profession, they would insist I proffer an opinion about the market or a particular stock or whatever I may like at the time. At first, I would freely offer my opinion because I love stocks and I love to talk about stocks. However, upon running into that person some time later when they would ask my opinion again, I would say something like "Oh, I blew out that position a while ago," usually at a substantial profit whilst the person to whom I had given advice had far less of a profit or a loss. As a result, I became hesitant to give my opinion to most everyone, and never to people I do not know or don't know very well.

Complete Story »

Inflationary Dreams and Recovery
Max Fraad Wolff submits:

Through the second half of 2007, to the collapse of Bear Stearns (BSC), US equity indexes were indicating a long hard fall. Selling pressure was relentless. As lagging assistance was offered by The Fed, there were short reversals. Selling became buying for a few weeks to a few days. It never took long for markets to fall after the euphoria and false promise were sniffed out. The Federal Reserve led the world in offering monetary policy accommodation. Rates were slashed, credit was pumped, soothing words were shouted in any and all directions. This failed until late March and again after the 30 April 2008 cuts. Bulls announced buying opportunity after buying opportunity, until Bear Stearns. Quickly tech, de-coupling and commodity plays came to dominate buy side recommendation.

A strange thing has taken shape ever since. We have seen the emergence of several mutually exclusive buying binges. In short, everything is up- if unevenly. Everything except the usual defensive plays that guard capital and return in recession. Shorts, gold, and many defensives have performed as you might expect in a recovery. What we actually have is a recession, no longer a possible recession but, a real one. Inflationary dreaming and valuation scheming have hidden this from view. Agricultural commodities (MOO), the broad commodity index (DJP), emerging markets MSCI (EEM), the S&P 500 (GSCI) and US financials (IYF) are all up since March 17.

Complete Story »

Playing the Economic Numbers
Hard Assets Investor submits:

by Brad Zigler

What if the president is right? George Bush proclaimed recently that the United States, while in an economic "slowdown," hasn't sunk into recession.

Complete Story »

Tuesday Outlook: Unremarkable Volume, Breadth
David Fry (ETF Digest) submits: Sharply higher energy prices, the Yahoo (YHOO)/Microsoft (MSFT) merger collapse and rumors of trouble with the BoA (BAC)/Countrywide (CFC) deal stopped bullish investors in their tracks Monday. But, bears were only able to do a little damage as volume and breadth were unremarkable.






















































































There was plenty of news to digest yesterday but I think many investors are scratching their heads and looking over their shoulders not quite sure what to make of things. This accounts for the light volume and uninspiring breadth.

It seems a little strange that we’ve rallied as high as we have with the onslaught of negative news continuing. But, the powers that be have the microphone and the big stack to play with. Stocks aren’t cheap based on PEs but there’s a lot of cash on the sidelines looking for a home and rationalizing investments.

We’re in Boston now and spent Monday with State Street going over some of their products and ideas about the future. Today I do some interviews and then give a talk Wednesday before heading to Chicago.

Disclaimer: The ETF Digest maintains positions in: IYR, TLT, TBT, XLE and ILF.
Complete Story »

John Hussman: Expect 2-4% Annual Returns from S&P500 in Coming Decade
Excerpt from fund manager John Hussman's weekly essay on the U.S. market:

Excerpt from the Hussman Funds' Weekly Market Comment (5/5/08):

Investors really have no sense of market dynamics if they believe that a recession-linked bear market comprises a single decline of less than 20% followed by a “V” shaped rebound into a new bull market. While I don't expect the market's losses to be nearly as severe as they were in the 2000-2002 bear market, the simple fact is that if the recent market low was indeed a final bear market trough, it occurred at the highest valuation level of any prior bear market trough in history.

Complete Story »

Seeking Alpha Commodities stocks
'Commodities' Tag RSS Syndication from SeekingAlpha.com

 

Options Trader: Friday Outlook
Phil Davis submits:

Well, we’re getting our $125 oil pre-market.

Karl Rove-style attacks on Hugo Chavez as they headline: "A cache of controversial computer files closely tying Venezuela’s President Hugo Chávez to communist rebels seeking to topple Colombia’s government appear to be authentic, U.S. intelligence officials say." Well, when have US Intelligence officials ever steered us wrong before? This is, by the way, something that has been going on since March, it’s only news today as they need a reason to take oil over $125 but this may be the Journal’s last chance to wave this flag as Interpol (at Columbia’s request) will release an independent analysis next week.

Complete Story »

A Look at Earnings from Transocean and Devon
Trader Mark submits:

I don't own these 2 names directly but do own peers, and these are bellweathers for their sectors so I thought I'd post them. One thing to note  - despite great numbers, the stocks are not reacting. Hence, we could be prone for a pullback shortly in these names. When stocks do not react to great news, that is a potential change in character, just like when stocks shake off bad news and go up. The charts in "commodities" despite some pullback, are still quite overextended and yesterday's call of Goldman $150-$200 oil [Goldman Sachs: Gasoline Not Driving Oil Price - Oil Going to $150-$200] would be the perfect catalyst to mark a near term top...

Despite my Kool Aid infusion I am still quite bearish, and I view this period akin to Sep/Oct 2007 when we partook in the foolishness to make money but realized there were more shoes to drop. I am sort of laughing at how the market goes up on $110, $115, $120, $125? oil ... as if it won't have any effect on profits or people across the globe. It is essentially a world tax on all productivity and profit. But oh well, it won't matter until it matters. If we cannot break through this 200 day moving average I would not be surprised to see a meaningful move downward - we have ignored the facts for about 6 weeks now since the "Fed put" was brought underneath the market via Bear Stearns. At some point ignorance must turn back to reality...

On to the earnings reports.

Deep sea oil driller Transocean (RIG) reports a doubling of profits

• Transocean Inc (RIG), the world's largest oil and gas drilling contractor, said on Wednesday quarterly profit more than doubled, beating Wall Street expectations, on higher rates for its deepwater rigs and lower-than-expected expenses.
• Record high crude oil prices have created a boom in demand for floating rigs and drill ships that operate in the deepest waters. Drilling contractors have benefited as tight supplies have pushed daily rig rates above $600,000 in some cases.
• First-quarter profit jumped to $1.19 billion, or $3.71 per share, from $553 million, or $2.62 per share, a year earlier. Excluding one-time items, the company earned $3.80 a share. Analysts, on average, had expected $3.32, according to Reuters Estimates.
• "The beat was mainly due to lower operating expenses," Mark Urness, oilfield service analyst at Calyon Securities, said. "It's probably deferred maintenance, so it will come back later in the year. Still it's still a good quarter."
• Average daily rental rates, or dayrates, for the Houston company's total fleet rose 15.6 percent to $229,000. The increase in average dayrate was seen in all categories, primarily due to rigs starting new contracts at the higher dayrates, Transocean said.
• Costs for the first quarter of 2008 benefited from the postponement of several shipyard and major maintenance projects to later in the year, according to the company.

Devon Energy (DVN) beats by $0.41

• Devon Energy Corp., the largest U.S.-based independent oil and natural gas exploration and production company, said Wednesday its first-quarter profit rose 15 percent as higher prices and production offset one-time charges and increased expenses.
• Excluding one-time charges -- including a $780 million loss on derivatives instruments due to rising natural gas prices -- the company posted earnings per share of $2.74.
• Analysts polled by Thomson Financial expected, on average, earnings per share of $2.33.
• Production rose 9 percent over the year-earlier quarter to 640,000 barrels of oil equivalent per day. The company's average price of natural gas rose to $8.03 per thousand cubic feet, from $6.77 per thousand cubic feet, and the average price of crude oil rose to $97.67 per 42-gallon barrel, from $58.33 per barrel.
• Combined, the company's average oil, gas and natural-gas liquids production from continuing operations was 640,000 oil-equivalent barrels a day, up 9%. The production growth was concentrated in onshore fields within the United States and Canada.
• Devon's net production from the Barnett Shale field in northern Texas averaged a record 995 million cubic feet of gas equivalent a day in the first quarter, up 36%. We can grow that for a long time to come. That's what's exciting," Devon CEO Larry Nichols said in a CNBC interview.

The main thing we want to see for exploration companies is a good replacement rate - that is, they can replace old production by either new finds or expanding current locations, and push production at a higher rate going forward. The inability to do this is a problem some of the larger players, i.e. Exxon (XOM) are now facing. And potentially an issue with some of the world's large state owned producers are facing (which would lend credence to the high energy prices being a permanent fixture in society)

Complete Story »

NYMEX: Speculators Aren't Driving Oil Market
Hard Assets Investor submits:

By Brad Zigler

Democrats in the U.S. Senate are looking beyond a summer gasoline tax holiday to focus on broader oil market fundamentals. Yesterday, Senate Majority leader Harry Reid [D-Nev.] unveiled the Consumer-First Energy Act, which calls for a revocation of tax breaks to big oil companies, a windfall profit tax and a cap on additions to the government's Strategic Petroleum Reserve.

Complete Story »

Stock Market Correlations and Media Muck
Ken Bell submits:

Here is just a sampling of the headlines I saw concerning Wednesday's stock market decline:

• "U.S. Stocks Slip on Crude Oil, Fall Hard" - TheStreet.com
• "Stocks Fall on Gushing Price of Oil" - Chicago Tribune
• "Stocks Decline as Oil Prices Creep Higher" - Associated Press
• "Stocks Skid on Record Oil Prices" - Seattle Times
• "Stocks Sink as Oil Soars" - BusinessWeek
• "Oil at $123 Hits Wall St." - Reuters
• "Stocks Retreat as Oil Prices Creep Higher" - Forbes

I've always been amused at how the press seems to think they can precisely explain just why the market goes up or down on a daily basis. Did oil prices rise Wednesday? Yep, by about 1.45%. Did the stock market fall? Yep, by about -1.80%. Isn't it logical to assume that the higher oil price led to the stock market decline?

Complete Story »

G-7 Central Bankers Stymied By 'Crude Oil Vigilantes'
Gary Dorsch (Global Money Trends) submits:

The “Group of Seven” central bankers, who control the money spigots in two-thirds of the world’s economy, huddled with their colleagues from China and Russia behind closed doors in Basel, Switzerland this week, haunted by the “Crude Oil Vigilantes” who threaten to unravel G-7 schemes to rescue troubled global banks. Yesterday, the price of West Texas Sweet traded as high as $124 /barrel, doubling from a year ago and guiding Chicago Corn futures to all-time highs.

European Central Bank chief, Jean Trichet, chaired a meeting of central bankers from the “Group of 10” industrialized nations on May 5^th, and acknowledged that:

Complete Story »

Is Oil Bubbling Over?
Paul Kedrosky submits:

My earlier post about the possible oil bubble seems to have touched a nerve, so here is more. The good people at Factset have out a fascinating new report on the same subject -- how energy markets are becoming awfully bubblish -- and it's worth a read in its entirety.

Here is one quick figure from the report showing how profits are growing so quickly that oil companies can't keep up by raising prices. It creates an interesting box for energy companies and is one sign of a crack in the market.(Click chart to enlarge.)

Complete Story »

Does Fuel Efficiency Drive the Auto Industry?
Compete submits:

On Monday, the Energy Information Association released its latest gas price data; the U.S. price at the pump (all grades) stood at $3.51 at the end of April, the highest price on record. The conversation surrounding oil prices and the economy has made the price of gas a hot topic across political debates and fuel economy a component of recent automotive campaigns.

Does the price of gas actually run the engine of automotive interest in the US? If you sell compact cars it sure does. Compete tracked monthly shopping, or demand, for the compact car segment and compared it to the monthly U.S. weighted average gasoline (all grades) prices over recent months. Compete measures in-market demand by looking across all popular 3rd-party sites and aggregates unique shopping behavior by observing how many people actually utilize shopping tools for every make and model.

Complete Story »

The Energy Department's Hat Trick of Misses
Hard Assets Investor submits:

By Brad Zigler

Betting on the accuracy of oil analysts' predictions has been a losing proposition recently. The Energy Department's inventory report alone spawned a hat trick of misses.

Crude oil stocks were expected to rise by 1.4 million barrels this week, according to the green eyeshade crew. Some moderation was expected after last week's 3.9 million-barrel uptick. That guesstimate turned out to be off by a factor of four. Crude stocks swelled by 5.7 million barrels instead.

Complete Story »

Record High Crude: Free Markets Meet the Cartel
Vikram Saxena submits:

Oil prices again reached an all-time high, reaching an intra-day high of $123.79 Wednesday. The weekly IEA report showed that crude oil and gasoline inventories had gone up significantly more than predicted. The crude oil inventory was up 5.65 million barrels, or 1.8 percent, to 325.6 million barrel, about four times more than what analysts had been predicting. Gasoline also showed a greater than expected increase, while distillates like diesel were lower.

Many analysts are surprised at the current spike in oil prices since many of the factors which were thought to contribute to the rise in oil prices had reversed. The US Dollar has rallied against the Euro over the past two weeks as the Fed has signaled an end to the current interest rate cuts. The supply situation has improved. Even the rebels in Nigeria signaled a willingness to end attacks if former President Jimmy Carter agrees to mediate.

Complete Story »

DCR Net Asset Value Now at Zero
Hickey and Walters (Bespoke) submit:

In early April, we pointed out the DCR/UCR trade to Bespoke readers, noting that if oil closed above $111 for three consecutive days, the two notes would hit termination at the end of the quarter at wherever their NAVs were trading. UCR is the "oil up" note and its NAV is calculated by dividing the price of oil by three. DCR is the "oil down" note and it is calculated by subtracting UCR's NAV from 40.

Once oil closed above $111 for three days in a row (seems so long ago), the termination triggered, so at the end of this quarter, the notes will be distributed to holders at their NAVs. But now that oil is trading above $120, DCR has no NAV [40-(120/3)=0]. Surprisingly, DCR's price is still trading at a premium to its NAV, and if oil is above $120 at the end of the quarter, owners will lose all of their money, effectively making it an option play on oil's decline at this point. UCR, on the other hand, will distribute $40 per share if oil is above $120, even though its price is trading at $37.26.

Complete Story »

Gas Is Actually a Bargain at $3.56
Mark J. Perry submits:

From an anonymous comment on this CD post about gas prices as a percentage of income:

"You should further adjust the data for increased fuel efficiency per mile travelled and average mile driven per auto. 1000 gallons of use in 2008 moves an auto at least 50% further than in 1980."

In response, the chart above shows the average annual miles per gallon for passenger cars, from 1949 to 2005 (EIA data available here). From a low of 13.4 m.p.g. in 1973, fuel efficiency increased by 71% to 22.9 m.p.g in 2005 (most recent year available), and by 43% since 1980 (14 m.p.g.).

Bottom Line: Adjusting for both increased fuel efficiency and the significant increases in income since 1980, gas today is a bargain, even at $3.56 per gallon (price I paid today in Michigan).

Gas Prices Could Be Worse - A LOT Worse

Complete Story »

Goldman Sachs: Gasoline Not Driving Oil Price
Trader Mark submits:

Normally, I don't care for predictions, but considering this was the fellow who in 2005 said there could be a "super spike" in crude,  let's see what he has to say (I am on record as saying a "World of Shortages" theme combined with Western governments flooding the world with fiat paper can only combine to ultimately create higher prices). These are the first people (along with Cramer - have to give him kudos) who finally are realizing that the world does not revolve around the United States of Subprime; a position I've been advocating for a long while. The quicker we move away from our country-centric views, the better.

• U.S. gasoline is no longer the leading fundamental driving oil markets, according to a report penned by Arjun Murti of Goldman Sachs Tuesday. Murti who famously predicted the dawn of the “super spike” back in March 2005, says this dramatic shift could have meaningful implications for the energy markets.
• As the world’s thirstiest oil market, the health of the U.S. gasoline consumer has traditionally always led oil markets up or down. But Murti’s team, which Tuesday raised oil price targets to between $150-$200 from a $120 for the next 6-24 months, now believes the relationship could be becoming unstuck.
• “Gasoline, at least in the short-run, has traded more like an annoying by-product of crude than as its core fundamental driver,” Goldman’s report said. “Weakness in U.S. gasoline margins is not the surprise… the surprise is that the weakness not only has not mattered to crude oil markets, but if anything, is helping to keep oil supply/demand in balance.”
• Meanwhile Murti says demand for middle distillates, like diesel, gasoil, heating oil and jet fuel and kerosene is racing up.
• Murti attributes that strength to resilient non-OECD demand growth as well as numerous global power problems, all of which have led to increased usage of diesel and gasoil-fired generators. Underpinning that pressure is a lack of adequate supply growth resulting in needed demand rationing in OECD areas and in particular the United States.
• But other oil traders agree with Murti’s analysis. It’s tightness in the so-called middle part of the barrel that is sending oil prices higher. U.S. gasoline consumption patterns are no longer relevant.
• “High crude oil prices despite weak U.S. gasoline cracks is sending the signal that global oil markets do not need or perhaps want the U.S. gasoline consumer to recover,” Goldman’s report writes.
• The soaring price of middle distillates meanwhile picture paints a bleak outlook for the airline industry. [Apr 8: Now on to Airline Inflation]

I say this almost every week - we are in a global competition for resources. Our leadership is too busy pointing fingers along political lines or coming up with "gas holidays" instead of treating the root cause. This is par for the course for leadership the past few decades... come up with short term "kick the can" ideas instead of meaningful solutions. It did not hurt so much in earlier eras when we were the sole superpower; but we have a lot of nations moving up in the world who care very little about our backward policies. We will rot in our own stew if we don't start figuring these things out... read Fareed [Weekend Reading]

As your dollar becomes more worthless, buy those meats now and freeze them, and get those airline tickets bought now before fares really take off, etc etc etc - inflation is not a problem... unless you live and breathe. This is one way to get the US consumer spending again - realizing his peso will be more worthless by the hour.
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Why Inflation Is Lower Than You Think
Felix Salmon submits:

In one of the smartest pieces of linkbait I've seen in a very long time, David Leonhardt today not only defends the CPI, but even says it's overstating inflation:

When the new inflation numbers come out next week, they will indeed be misleading. They will be artificially high.

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Rising Prices, Rising Crises
David Merkel submits:

Every now and then, my hyperactive mind runs the film of the Federal Reserve changing its policy, and an unexpected chain of events happens, triggering a war a long way away. Sound farfetched? US monetary policy with its unending bias toward stimulus, since we are the global reserve currency (for now), pushes inflation out into the countries that lend to us and into the commodity markets as well. (What do you expect from a negative real interest rate?) This has political impacts as the prices for energy, food and related goods rise.

Nigeria is a basket case because of the light sweet crude buried there. Venezuela gets its share of troubles because nationalized oil gives extra power to their government. Same for Russia, though the politics are different. Now there might be a movement for autonomy in the part of Bolivia where the natural gas is located. I sometimes think that Iran will have internal difficulties once their oil production falls to the degree that they can no longer subsidize their populace.

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Only the Oil Companies Win
Bill Cara submits:

Prices of equities did not back off on account of record oil prices, as I thought would be the case. To compound that, Talking Heads Tuesday were discussing the prospects of $200 oil, which I think is irresponsible chatter or paid infomercial – take your pick.

Whatever anybody says that the US economy can grow through further spikes in crude oil prices, I disagree. In effect the tax rebates in the US will just go to paying the higher cost at the fuel pumps for a few months. Who wins by that other than the already booming oil companies?

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Options Trader: Wednesday Outlook
Phil Davis submits:

Just another tricky day in the markets.

We covered up yesterday as the Dow slipped back below 13,000 and my comment to members was: "All you guys with the repositioning need to think ahead to how do you really want to be covered into the weekend with $120 oil, maybe $125 or $130 being the big topic of discussion and NEXT week we have a ton of data including Import/Export pricing for April with dollar at record lows and commodities at record highs, April Retail Sales, the CPI, Cap Utilization and Industrial Production, the ever-depressing Philly Fed, April Housing Starts (if any) and the May Michigan Sentiment numbers, so we’ll see how they like 4 straight months of job declines, $4 gas, rising food prices and record drops in auto sales (truck sales were off 30% - ya think people might be talking about that in Michigan?)…"

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How Much Worse Can It Get For Oil?
Paul Kedrosky submits:

Not to be hawkish on oil prices, but how much worse can it get for oil in the short run? Let's count the new-ish things currently pushing prices higher:

1. The U.S. economy is stronger than expected, pushing up demand expectations
2. Goldman Sachs is out with a major report predicting a possible oil super-spike to $200
3. The U.S. and Iran are fighting about nuclear energy
4. Rebel attacks last weekend further curbed supplies from Nigeria
5. Mexico has newly seen supplies from a major fall faster than expected
6. Venezuelan production is off on strikes and Hugo Chavez has fired 20,000 oil workers
7. The U.S. summer driving season is set to begin
8. There is goofy election-year posturing in the U.S. about a gas windfall tax, and about a tax amnesty for gasoline

Of course, we still have the weak U.S. dollar, speculative fondness oil, worries about Iraq production, etc.

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Time to Think Like a Hedge Fund
David Enke submits:

Every three months, after the release of quarterly data, we start to hear Congress talk about how Big Oil is making too much money and how we need to initiate some kind of windfall profits tax. Of course, when you look at the data, you see that profit margins for oil companies on a percentage basis are not stellar, or at least not exceedingly high. Compared to other industries, they are quite average. To see the data, check out Mark Perry's blog at Carpe Diem, or do a simple sector/industry sort at Yahoo! Finance.

I do sometimes wonder how many of those talking about windfall profits are even looking at the data (or care to). I also wonder if they realize that when you tax something you tend to get less of it. The issue is obviously more complicated than this, but it is important to also make sure we consider the unintended consequences of our actions and decisions.

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Options Trader: Tuesday Outlook
Phil Davis submits:

Oh I love the smell of pullback in the morning.

We can blame UBS (UBS) for this one as Europe came back from a holiday weekend to find it already cut in half. UBS may not have been cut enough as the bank lost the $11Bn XOM found last week. Now we know what spurred last week’s coordinated Fed and ECB liquidity moves which I predicted on Friday. Like I always tell members, it’s not paranoia when they really are all conspiring to hide something!

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That Was Fast: Oil Back to New Highs
Hickey and Walters (Bespoke) submit:

In just ten trading days, oil hit a high, corrected by more than 5%, and then rallied back to hit a new all-time high of $119.97 yesterday. Since its low in 2001 of $17.45, there have been only five other periods where oil hit a high, corrected by at least 5% and then rallied back to new highs in such a short period. In those five periods, the average one week and one month returns were losses of 3.9% and 4.5%, respectively.

click to enlarge

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Seeking Alpha Oil Price stocks
'Oil Price' Tag RSS Syndication from SeekingAlpha.com

 

Atwood Oceanics Inc. F2Q08 (Qtr End 03/31/08) Earnings Call Transcript

Atwood Oceanics Inc. (ATW)

F2Q08 (Qtr End 03/31/08) Earnings Call

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Rosetta Resources, Q1 2008 Earnings Call Transcript

Rosetta Resources (ROSE)

Q1 2008 Earnings Call

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Carbon Trading: Fast Growth But Key Vulnerabilities
Research Recap submits:

The carbon trading market is growing rapidly, but not fast enough to meet the commitments of the Kyoto protocol, especially among developing countries, according to a World Bank report, “The State and Trends of the Carbon Market 2008.”

The global carbon market doubled or tripled in value for all segments, except for projects in developing countries which saw a leveling off of market volumes transacted under the Clean Development Mechanisms.

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GM Investing in Mascoma's Cellulosic Ethanol

General Motors Corp (GM). and Mascoma Corp. today announced "a strategic relationship to develop cellulosic ethanol focused on Mascoma's single-step biochemical conversion of non-grain biomass into low-carbon alternative fuels to help address increasing energy demand."

Mascoma's single-step cellulose-to-ethanol method, called Consolidated Bioprocessing, or CBP, lowers costs by limiting additives and enzymes used in other biochemical processes.

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There's a Solar Shakeout Coming - Citigroup
Eric Savitz (Barron's) submits:

Citigroup’s Timothy Arcuri this morning launched coverage of the solar sector, starting First Solar (FSLR) with a Buy rating, SunPower (SPWR) with a Hold and Evergreen Solar (ESLR) with a Sell.

His broader position is that there’s a shakeout coming in the industry. He sees another few quarters of “benign pricing,” and then a decline of 20% in 2009 and even more in 2010. He sees risks to subsidy programs in Germany and Spain, and cautions that there will be a big ramp in solar supply starting in 2009, and worsening in 2010.

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Is Energy Conversion Devices Ready for a Comeback?
Trader Mark submits:

Energy Conversion Devices (ENER) is an interesting tale - this has been for many many years a "hope" stock i.e. more promise than execution - I remember the hoopla surrounding it at the turn of the century ... the last time people were all hyped up about alternative energies (at the time the big fuss was about new wave car batteries and the like).

his company has morphed over the years with a confusing array of business lines (trying to decide what it wanted to "be"), but recently has added a newer and more-business savvy executive team, and while they still have a few business lines .... the excitement is their solar business, which has turned into the dominant line at the company.

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A Look at Earnings from Transocean and Devon
Trader Mark submits:

I don't own these 2 names directly but do own peers, and these are bellweathers for their sectors so I thought I'd post them. One thing to note  - despite great numbers, the stocks are not reacting. Hence, we could be prone for a pullback shortly in these names. When stocks do not react to great news, that is a potential change in character, just like when stocks shake off bad news and go up. The charts in "commodities" despite some pullback, are still quite overextended and yesterday's call of Goldman $150-$200 oil [Goldman Sachs: Gasoline Not Driving Oil Price - Oil Going to $150-$200] would be the perfect catalyst to mark a near term top...

Despite my Kool Aid infusion I am still quite bearish, and I view this period akin to Sep/Oct 2007 when we partook in the foolishness to make money but realized there were more shoes to drop. I am sort of laughing at how the market goes up on $110, $115, $120, $125? oil ... as if it won't have any effect on profits or people across the globe. It is essentially a world tax on all productivity and profit. But oh well, it won't matter until it matters. If we cannot break through this 200 day moving average I would not be surprised to see a meaningful move downward - we have ignored the facts for about 6 weeks now since the "Fed put" was brought underneath the market via Bear Stearns. At some point ignorance must turn back to reality...

On to the earnings reports.

Deep sea oil driller Transocean (RIG) reports a doubling of profits

• Transocean Inc (RIG), the world's largest oil and gas drilling contractor, said on Wednesday quarterly profit more than doubled, beating Wall Street expectations, on higher rates for its deepwater rigs and lower-than-expected expenses.
• Record high crude oil prices have created a boom in demand for floating rigs and drill ships that operate in the deepest waters. Drilling contractors have benefited as tight supplies have pushed daily rig rates above $600,000 in some cases.
• First-quarter profit jumped to $1.19 billion, or $3.71 per share, from $553 million, or $2.62 per share, a year earlier. Excluding one-time items, the company earned $3.80 a share. Analysts, on average, had expected $3.32, according to Reuters Estimates.
• "The beat was mainly due to lower operating expenses," Mark Urness, oilfield service analyst at Calyon Securities, said. "It's probably deferred maintenance, so it will come back later in the year. Still it's still a good quarter."
• Average daily rental rates, or dayrates, for the Houston company's total fleet rose 15.6 percent to $229,000. The increase in average dayrate was seen in all categories, primarily due to rigs starting new contracts at the higher dayrates, Transocean said.
• Costs for the first quarter of 2008 benefited from the postponement of several shipyard and major maintenance projects to later in the year, according to the company.

Devon Energy (DVN) beats by $0.41

• Devon Energy Corp., the largest U.S.-based independent oil and natural gas exploration and production company, said Wednesday its first-quarter profit rose 15 percent as higher prices and production offset one-time charges and increased expenses.
• Excluding one-time charges -- including a $780 million loss on derivatives instruments due to rising natural gas prices -- the company posted earnings per share of $2.74.
• Analysts polled by Thomson Financial expected, on average, earnings per share of $2.33.
• Production rose 9 percent over the year-earlier quarter to 640,000 barrels of oil equivalent per day. The company's average price of natural gas rose to $8.03 per thousand cubic feet, from $6.77 per thousand cubic feet, and the average price of crude oil rose to $97.67 per 42-gallon barrel, from $58.33 per barrel.
• Combined, the company's average oil, gas and natural-gas liquids production from continuing operations was 640,000 oil-equivalent barrels a day, up 9%. The production growth was concentrated in onshore fields within the United States and Canada.
• Devon's net production from the Barnett Shale field in northern Texas averaged a record 995 million cubic feet of gas equivalent a day in the first quarter, up 36%. We can grow that for a long time to come. That's what's exciting," Devon CEO Larry Nichols said in a CNBC interview.

The main thing we want to see for exploration companies is a good replacement rate - that is, they can replace old production by either new finds or expanding current locations, and push production at a higher rate going forward. The inability to do this is a problem some of the larger players, i.e. Exxon (XOM) are now facing. And potentially an issue with some of the world's large state owned producers are facing (which would lend credence to the high energy prices being a permanent fixture in society)

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Uranium: Safely and Efficiently Powering the Future
Matthew Smith submits:

Uranium equities have continued their downturn after a period where it appeared we may have been flat-lining. Unfortunately for those still holding, many of these stocks dipped further in recent trading days resulting in a new all-time low for theinvestar's Canadian Uranium Average [TICUA]. We noticed during those down days that volume spiked on many of the smaller uranium stocks included in the average as well as those which we follow on the side. Some of these stocks reversed course during high volume days and finished up after being down 5-10% which brought to mind the word capitulation. Even if the uranium mining stocks have reached a bottom, it will take some time to achieve the highs set in previous years as many stocks would need to triple just to get back in the neighborhood of their old highs.

For all the good "spin" and taxpayer dollars funneled to ethanol and biofuel production over the past decade, it is time to seriously consider the ramifications of this policy on futures markets, the environment, and most of all our food supply. We here at theinvestar.com, LLC have continually argued against burning food rather than drilling for further oil supplies and are convinced that this is an issue which must be confronted sooner rather than later.

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EnergySolutions Should Blow Out Earnings
Michael Filloon submits: