Con-tango

Greenpan’s conundrum I

I thought I had enough of Greenspan’s conundrum with all the litter
I spilled the other day at JD Hamilton’s excellent yield curve presentation.

But, I was drawn in once again by reading knzn’s CB bank bond and US
interest rates purchases presentation, at his well argued
blog: Economics and.

Continue reading…

New Home Sales, not

I stole this chart and comment from JD Hamilton’s post on the new home sales data – it’s that good!

" Another way to summarize the deviation from the usual seasonal pattern
is with a graph like the following. In an average year prior to this
one, June sales would be 36% above the December trough, whereas this
year they are up only 17% since December.

Only 4 years out of the last
41 years (which includes 6 recessions) saw as weak a December-to-June
gain." [my italics]

I’ve got nothing to add; a picture is worth a thousand words…

Nigeria’s production cut by 1/3

According to Marketwatch, the Nigerian Delta Militants have shut in a total of 715,000 bpd with their latest attack to the Ogbainbiri ENI flowstation. Further threats which include 
"shut down all export terminals this time around"  by one of their leaders appear to be deadly serious…

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CDO or collateral damage?

I was participating in JD Hamilton’s excellent presentation on the yield curve — I sure do recommend a visit, when I ran into the CDOs or Collateralized debt obligations.

All I can say this stuff is literally… dynamite; and the whole financial industry is sitting on top of them…

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Refinery disruptions

There we go again. It’s not enough to have the very complicated Mid East crises; additionaly, two refineries shut down, with the Venezuelan refinery shut in at 956,000 bpd for 7 months… that’s going to ignite gasoline prices and hold WTI/Brent oil prices in the face of rising oil inventories.

According to the Forbes feed:

The market was reacting to supply concerns after refinery shutdowns in Venezuela and the United States, said Mark Pervan, senior resources analyst at Daiwa Securities in Melbourne.

Cooling towers at a ConocoPhillips refinery at Wood River, Illinois, have been temporarily shut down after suffering storm damage.

Meanwhile the Amuay refinery in Venezuela, which exports fuel to the United States, is set to be shut down for up to seven months after a fire last week, trade sources said.

The fire occurred at the Paraguana oil complex which produces about 956,000 barrels of oil a day.

According to Reuters, although the Wood River refinery was hit by a second storm, Connoco Philips expects the refinery to be up and running next week:

NEW YORK, July 21 (Reuters) – ConocoPhillips (COP.N: Quote, Profile, Research) on Friday said preparations for a restart of its 306,000 barrel-per-day Wood River refinery in Roxana, Illinois, will not be completed until sometime next week.

Considering the 1.3 million barrels lost by Valero’s St. Charles refinery, and the 28 days lost at the SK Corp. refineries at 425,000 bpd, the refinery disruptions is potentially the main issue pushing oil and gasoline prices higher.

We all know that its been 30 years since the last refinery was built in the US; plenty of expansions though…

Could it be that oil companies have found a way to avoid the downturn in oil prices by resisting the temptation to build new refineries with the pretext of the NIMBY public policy?

Who gets what from oil?

I thought the following OPEC chart was enlightening and one more piece of the oil puzzle worth posting:

Is Japan’s low taxing fostering a higher cut for the oil industry?  …which would be very bad news for the average japanese.

And what are Italy and Germany doing to get those sweet breaks in industry margins?  There could be a lesson to learn there too…

BTW, according to a recent Reuter’s article dated July 17, OPEC forecasts a 1.3 million bpd increase in demand for 2007 to 85.9 mbpd, slightly less than the 1.4 mbpd increase expected for 2006.

OPEC further predicts a slower 4.2% world GDP growth for 2007, compared to an expected 4.7% growth for 2006.

Giant footprints

Chuck LeBeau

Chuck LeBeau, author of a few trading books and a trader I respect very much, sent this promo video of his MarketClub, which I find quite instructive and entertaining…

He describes step by step his "Great Footprints" trading method; which in essence looks at the quarterly, monthly, weekly and daily charts of a security to confirm its trend.
Continue reading…