OptionsHouse Wednesday Market Observations: Bad News for Jobs, a Proposal to Open U.S. Oil Drilling, and Some Heavy Options Activity in Suncor (SU), Canada’s Energy Powerhouse
Still holding on, the markets are moving slightly lower following a disappointing ADP jobs report. The loss of 23,000 jobs reported by the payroll giant was a complete surprise to many. Economists predicted a gain of 40,000 in March ADP numbers. While the ADP indications can sometimes be way off in terms of predicting the non-farm payroll numbers that come in on Friday, they have gotten more accurate as of late due to a change in the way the ADP numbers are calculated. Regardless, the resiliency of the marketplace after that disappointing number is certainly something worth noting, since many believe this market is over-extended. Under these circumstances, many would assume a negative news item like the ADP announcement to have an extremely bearish effect.
On the energy front, President Obama proposed opening drilling along the Atlantic coastline, east of Gulf of Mexico, and in Alaska’s north coast. However, the Pacific coastline as well as Bristol Bay in southwest Alaska would remain closed to oil and gas drilling. Even if this proposal were to be approved, drilling and production would probably not begin for some time, 4-10 years maybe. So this proposal, while bullish for many companies in the sector, will likely have more of a long-term impact. Some more timely, and perhaps influential, data out today was the oil and distillate inventory numbers from the Department of Energy.
The estimated total change in crude oil inventories was 2500K barrels, the Actual Total Change in Crude was 2929K barrels, which means more inventory was added. The estimated total change in gasoline was for a reduction of 1850K barrels, The Actual Total Change in Gasoline was an addition of 313K Barrels
The US uses 20% of the world’s oil production, but only produces about 2%. Hopefully, this proposal as well as alternate energy investments and utilization can close that gap.
We saw some out of the money calls being bought in Suncor (SU), which is headquartered in Calgary, Alberta.
SU is Canada’s top integrated energy company. Their operations are focused in oil sands development and upgrading, conventional and offshore crude oil and gas production and petroleum refining. There was no news around this issue.
- April 34 calls, 4,000 bought vs. Open interest of 483
This trader could be taking a bullish position in SU or hedging an existing short stock or options position.
Remember there are a couple hours left in the trading day and the volume of these issues may continue to rise, but this is where we are seeing some heavy options activity today. Also remember that options can be bought or sold and volume does not indicate which.
These are a few of my team’s observations this morning. If you have others you would like to add to this list, please feel free to share them in the comments.
Photo Credit: swisscan
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