By Sarah Kent
LONDON (MarketWatch) -- The Organization of the Petroleum Exporting Countries boosted its closely watched forecast for oil demand growth for the second month in a row Wednesday, despite continuing to warn of possible emerging market headwinds.
In its monthly oil market report, the cartel of some of the world's biggest oil producers upgraded its forecast for demand growth this year by 50,000 barrels a day, after tweaking its expectations higher by the same amount last month. The producer group now expects oil demand to increase by 1.14 million barrels a day this year, largely as a result of higher consumption in North America, as well as improved demand in Europe and Africa. Total oil demand for 2014 is pegged 91.1 million barrels a day.
However "a key determinant for this increase in world oil demand will be the pace of growth in the emerging economies," OPEC said.
Concerns over slowing growth in emerging markets, particularly China, have hammered other commodities this week. Copper, often seen as a bellwether for the health of the global economy, slumped to its lowest level since July 2010, while iron ore prices fell to their lowest level since October 2012 on Monday.
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Settlement Date Short Interest Avg Daily Share Volume Days To Cover
2/14/2014 535,286 173,382 3.087322
1/31/2014 388,312 249,365 1.557203
1/15/2014 352,174 232,954 1.511775
12/31/2013 339,209 632,696 1.000000
12/13/2013 321,243 364,410 1.000000
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Rentech Nitrogen Partners, L.P. (NYSE: RNF) announced today that its Board of Directors has declared a cash distribution of $0.05 per common unit for the fourth quarter of 2013, payable on February 28, 2014 to holders of record as of February 24, 2014. This distribution will bring cumulative cash distributions for the twelve months ended December 31, 2013 to $1.67 per unit. The $0.05 per unit fourth quarter distribution compares to the Partnership's existing guidance of a distribution as low as zero.
The Partnership's results for 2013 were heavily affected by significant unanticipated declines in nitrogen prices, which ended the year 20% to 30% below price levels at the beginning of the year. Unusually high volumes of low-priced urea exports from China drove down prices of urea and of competing nitrogen products, and a very wet spring application period throughout our U.S. markets delayed and reduced demand for products. Several factors have improved the balance of global supply and demand, including the closing of China's low-tariff export window in late October, and strong urea demand from India. As a result, urea prices began to stabilize entering the 2013 fall application period, followed by increases in the prices of urea and other nitrogen products to their current levels.
Rentech Nitrogen's results for the fourth quarter were also affected by previously-disclosed production limitations at both of the Partnership's facilities, which resulted in lost revenue and increased costs. The Pasadena Facility was off-line for approximately 2.5 weeks in December 2013 to conduct scheduled debottlenecking and reliability improvement projects, which, when combined with several small unplanned disruptions in the quarter, contributed to lower production and higher per-unit cost of sales. The Partnership expects that the projects completed in December will increase production and improve on-stream factors in the future. The East Dubuque Facility operated at reduced rates following the scheduled 2013 bi-annual turnaround in early October after the discovery of the need for repairs to the foundation of one of its syngas compressors. In addition, production at the East Dubuque Facility was shut down in late November and much of December 2013 during repairs that followed a fire at the ammonia converter. All of these factors contributed to significantly negative net income and cash available for distribution in the fourth quarter.
The Partnership has completed all repairs relating to the East Dubuque Facility's compressor foundation and fire at lower cost and more quickly than the estimates disclosed when those problems occurred, and the Facility is currently running at nameplate capacity. The Partnership filed an insurance claim for approximately $3 million related to damage caused by the fire, and incurred the $1 million deductible under its property insurance policy in 2013. Rentech Nitrogen expects to receive full payment of $2 million for the claim in early 2014. The Board took all of these factors into account in determining the fourth quarter cash distribution of approximately $2 million.
Commentary on 2014
The Partnership believes that a number of factors may contribute to improved operating and financial results in 2014 compared to 2013. Capacity expansion projects have been completed that should increase production at both facilities, and projects to improve efficiency and reliability have been completed at the Pasadena Facility. Both facilities are forecasted to operate at upgraded capacity in 2014, with no scheduled down-time for East Dubuque and no scheduled interruptions to production of ammonium sulfate, other than normal scheduled maintenance for Pasadena. The Partnership currently expects positive EBITDA at the Pasadena Facility this year due to improved margins and operating rates.
Recent increases in prices for nitrogen products from lower levels experienced late in 2013 are encouraging. However, the current market environment is different this year relative to early 2013, with lower corn prices and somewhat lower, albeit strong, anticipated corn plantings. These factors and the dynamics that affect input prices could rapidly change based on weather patterns and other conditions, and could positively or negatively affect product prices, margins, deliveries and cash distributions. Cash distributions in 2014 may be significantly less than cash available for distribution if the Company elects to replenish working capital reserves that were diminished by the negative cash available for distribution in the fourth quarter of 2013.
To assist investors in assessing the impacts of possible changes in the pricing of key inputs and products on Rentech Nitrogen's results for 2014, the Partnership has provided a sensitivity matrix below. The matrix uses independent forecasts from Blue Johnson for average 2014 product prices and NYMEX Henry Hub natural gas futures contract pricing as reference points; the matrix is not intended to show the Company's forecast for 2014 prices or results. The high and low cases were constructed by changing only the prices for key products and raw materials by the amounts indicated in the table, with other important metrics such as fixed costs and product deliveries held constant. Product deliveries assumed in the matrix are those contained in the Partnership's guidance issued on November 7, 2013.
Due to the current uncertainty about spring sales, and about pricing of products and natural gas, Rentech Nitrogen anticipates providing guidance regarding expected results for 2014 later in the year, after the spring season has developed and the Partnership has greater visibility into forecast results than it does at this time. The following matrix is provided primarily to illustrate the incremental effects of changing prices for products and inputs, and does not represent the Partnership's forecast. Actual results may vary due to factors in addition to product and input pricing.
CVR Partners, LP (NYSE: UAN), a manufacturer of ammonia and urea ammonium nitrate (UAN) solution fertilizer products, today announced that it will release its 2013 fourth quarter results and announce its cash distribution on Thursday, Feb. 20, before the open of New York Stock Exchange trading. Chief Executive Officer Jack Lipinski and other executives will host a teleconference call for analysts and investors on Feb. 20 at 10 a.m. Eastern.