Table of Contents
Leaps Trader Commentary
After eleven days of selling the bears rested. From $147.90 to $120.42 it was the biggest dollar drop ever in the history of the futures contract. In the three days since the plunge ended there have been some serious bouts of volatility but $122 appears to be holding as support. This is where we expected support to appear but the sellers are still with us. Three times in three days the contract has rallied to $127 but all three times it was sold hard and pushed back to support.
The normal news items don't seem to be having the same impact as they did over the last three months. Violence in Nigeria has had no impact on prices even though Shell had to declare force majeure on August and September deliveries of Bonny light crude. Mexico told Valero it would be delivering 15% less crude to the Texas refinery for the rest of 2008 and probably even less for 2009 and nobody even blinked.
The one news event that is having an impact on prices is the increasing tensions surrounding Iran. Iran's president said on Saturday, the deadline for giving the U.S. group an answer on halting nuclear enrichment, that "Iran would not retreat one iota from its nuclear rights." Syrian president Bashar al-Assad arrived in Tehran on Saturday for talks with Ahmadinejad including a plea to halt the nuclear program.
Israel warned on Friday that Iran was reaching a critical point in the nuclear process where they could have weapons potential by 2010. The comments while the market was open on Friday caused a $5 spike in crude. As the U.N. deadline passed on Saturday several of the spokesmen for the P5 countries were quick to play down the missed deadline saying we don't care if they take a few more days, the important thing is that they agree to halt. I guess my question would be why give them a deadline if you are not going to stick by it? That just gives Iran more leeway to stall for time on future deadlines.
In the U.S. the "Stop War on Iran" coalition of activist groups staged rallies around the country in an effort to stop what they called was escalating moves by the Bush administration and Congress to promote war against Iran. One of the measures they want to block is House Resolution 362, which they claim would call on the president to blockade Iran by air and water to force them to halt enrichment without going to war. Nine cities were targeted by the group.
Protestors near Times Square on Saturday
The bottom line on Iran is the increasing news surrounding the latest U.N. deadline and the potential next move for the P5 group. One option being considered is a blockade of gasoline being imported into Iran. Iran imports a large portion of their gasoline due to a lack of refining capacity. If gasoline supplies were cutoff it would cause a significant problem very quickly. Iran may retaliate to any gasoline blockade by cutting off oil exports. Iran exports 2.4 million barrels per day. It remains to be seen if they can afford to lose the income from a halt in exports.
There were increasing comments in the news over the weekend about the coming OPEC meeting in September. Several OPEC member countries want OPEC to enforce the quotas and force those countries currently over producing to cut back on production. For countries that cannot meet their current quotas or are currently at their quota the excess production by others is forcing prices lower. Saudi Arabia would be the biggest offender and one of the biggest reasons for the recent drop in oil. I would be hostile if oil sales were my main source of revenue and I was limited in my production while other members of my elite group were flooding the market with excess oil to push prices lower. I can see where this could cause some hostility among the members. I would expect this to become a bigger story as we get closer to the September meeting and any story about enforcing quotas should support prices. Saudi has always said the current excess production was just temporary so I would expect it to be cut before the September meeting.
After researching the various views on the direction of oil next week I could build an equal case for either direction. When I look at the chart there is very strong support around $122 but it is also clear we have had a super spike in crude and even the $27 drop over the last two weeks may not have been enough to compensate for the gains. While I want to see support at $122 it may only be wishful thinking. Several analysts were calling for a dip to $110 soon with that level being a potential bottom. I believe if $122 breaks we will see $100 rather than stop at $110. As a consumer a drop to $100 would be great and I would love to see gasoline back at $3.50. As an investor I would not complain either because of the great entry points it would produce ahead of winter. It would stop us out of every play we own and that would be painful.
On the fundamental side we have seen a substantial decline in demand due to the high prices. This is to be expected as each price plateau is reached regardless of how high we go. We have seen in the past at levels a lot lower than $3.50 gasoline that consumers have pulled back on every price spike. Eventually they become accustomed to the higher prices and demand returns. It is just like a vaccination. Every spike followed by a dip inoculates consumers for the next spike.
Peak Oil analysts have long expected the peak to be more like a plateau rather than an inverted V. As ultimate production slows prices increase and demand slows. This lengthens the onset of the peak by diminishing demand at the same time production is slowing. People don't understand that peak oil is different from excess demand. We could still see oil production climb over the next two years but at a rate slower than that of increasing demand. If demand outstrips supply we could have peak oil conditions before production actually peaks. The closer demand is to supply the higher the price regardless of the reason.
The plateau crowd suggests that higher fuel prices will slow demand and create an "undulating plateau" where rising prices and rising demand are constantly changing as consumers come to grips with their fossil fuel future. Every price spike produces lower demand but increasing demand from other sources rapidly absorbs every dip in prices. Eventually it will all end the same. Once peak production passes the price spikes will become more severe and demand will begin a permanent decline due to rapidly rising prices. The ever-increasing demand cycle will be broken once and for all by price. John and Jane Doe will be forced to take public transportation or move closer to their jobs. Teenagers will no longer be able to afford the automobile as a right of passage. How much will you and your kids be driving if gasoline was double where it is today? It will double within months of reaching peak oil. The current target date for peak oil is 2010. Time is running out to make plans in advance of the event. Where will you live when gasoline is $10 a gallon? What and where will you be driving?
Fortunately for next week we don't have any of those worries. Our biggest concern will be support at $122. If the Fed does not raise rates at the Tuesday meeting the recent rise in the dollar should end and that would be bullish for oil prices. Conversely if they do raise rates the dollar should get stronger and could threaten the 74.0 level on the dollar index. A breakout there would severely pressure oil prices without a geopolitical event to provide support. Oil is seen as an inflation hedge against the dollar and that relationship has lasted since the dollar began its decline back in Nov-2005. I don't give as much weight to the oil/dollar relationship as most other analysts but without any other global event supporting prices it could make the difference between support holding and collapsing.
Lawmakers failed to pass any laws regarding speculative trading before leaving for the summer and that means anyone who exited large positions just in case are now free to start over again. According to the CFTC the majority of speculative traders and commercials are now short. That means the tide had turned for sentiment but I am wondering if that pendulum could be ready to swing back into the bulls favor given the Iran problem and the talk about enforcing OPEC quotas.
On the bearish side oil prices have fallen sharply with every recession since 1974. If the U.S. economy continues to weaken we can count on lower oil prices. However, we saw the GDP strengthen in Q2 and employment has remained out of recession levels. Greenspan said last week that a recession was still very likely but his recent mental lapses has made him far less accurate as an economic barometer.
I just can't seem to grasp the "critical support level $122" as it applies to a "we don't have enough of it to meet demand" commodity. If you say it would go to $110 due to demand destruction, and the data around the world shows that, I understand. Otherwise, it sounds like the speculators really are propping up the market artificially.
Now you know how I feel. The problem is always the timeline. Today there is enough light crude production to meet demand. The excess production is in the heavy, sour crude variety. This is confusing to almost everyone who does not fully understand the oil market. OPEC goes to great lengths to disguise this fact by never discussing the shortage of a particular grade. The market is always "well supplied" in their view.
The spike we saw this summer was artificial. I believe there was some market manipulation involved. However, when supply and demand are so close to equal it does not take much to manipulate prices. A little truth goes a long way in a manipulated market. Personally I believe the OPEC nations always have a hand in the futures market and could have "helped" the price along.
Baring any hurricanes the next month or two is typically a declining period for prices as peak gasoline demand ends and refineries switch over to winter blends and add more heating oil. As fall arrives the price of oil should again rise but I doubt it will hit the prior highs.
Everyone needs to remember that the next 18 months will see a large inflow of new crude production. In the Megaprojects Database below (http://en.wikipedia.org/wiki/Oil_megaprojects) you can see how much new oil came to market over the last five years and how much is scheduled to come to market over the next six years. Remember it takes 5-8 years for a large project to be completed and in may cases 8-10 years. The larger the project the longer the period before it goes into full production. There are always major delays in almost every planned project. A year ago the projections for 2009 were much higher than today's 4,636,000 bpd total. Many of those projects have slipped into 2010 and boosted that year to 5,330,000 bpd. Remember also those are just estimates of production. Actual production can differ greatly from estimates and normally it is lower.
If it takes 5-8 years for a planned project to come online then we know about those projects 5-8 years in advance. That means new discoveries known today will not come online until 2013 to 2018. Notice how drastically the new production estimates drop after 2010 because of the lack of any new discoveries.
Annual depletion is running about 4.5% per year according to the recent estimates by the IEA. With current production around 87 mbpd that equates to 3.915 mbpd day per year. That means we have to add more than 3.9 mbpd in new production every year to actually increase total production. In 2008, 2009 and 2010 we will add net production 1.6 mbpd, 721 kbpd and 1.4 mbpd respectively.
As of July 1st the IEA claims "Global demand for oil products will grow by an average of 1.6% per year to 2013, from 86.9 mb/d in 2008 to 94.1 mb/d. Contrary to supply trends, demand growth will be weakest in the first two years of the period, building as global GDP growth strengthens from 2010 on." That is roughly 1.4 mbpd of demand growth.
In the table below and using the IEA projections I extrapolated the ultimate demand and production for the next six years. The decline in demand growth due to prices has pushed the theoretical arrival of peak oil into 2012-2013. Unfortunately production growth is a very elusive target. Things happen every day to delay new production and accelerate production declines. For instance Mexico began declining at 12% per year two years ago and the North Sea jumped to 10%. Venezuela production is dropping sharply due to declines in technology, expertise and equipment after nationalizing the sector. Russia entered a decline phase in Q2 after 10 years of growth. Nigeria has lost 1.3 mbpd of production due to violence. These types of problems will continue to degrade actual production from the theoretical maximum. That could easily drag the peak date back into 2010.
Now remember that the majority of excess production is heavy sour crude that very few refineries can use. How much of that crude is represented in these numbers if unknown. It is obvious that just a very small portion of 2-3 mbpd would be enough to upset the apple cart and accelerate the peak event even closer.
IEA Demand and Production Chart
So, the short answer to your question is, Yes. The market was being propped up artificially to some extent BUT there was a strong underpinning of fundamental support. We are not at peak oil today but depending on the actual ratio of light to heavy crude we could be nearing Peak Light and that would be almost as damaging as total Peak. We will not know until it happens because nobody has the exact data for an industry that has a million moving parts.
(I am going to try and make this a weekly feature. Send me your email questions and I will try to answer. Jim @ OptionInvestor.com)
August Natural Gas Futures Chart - Daily
August Gasoline Futures Chart - RBOB Daily
Qcharts gasoline chart unavailable this weekend.
Changes in Portfolio
Portfolio Listing & Top Picks
If you are looking to add another position these are my top picks for this week. The target prices listed would be the ideal entry points for these stocks today. There is no assurance any stock will ever return to these support levels and you will need to make your own decision about an entry point above these levels. I believe these stocks have the best potential this week. The list will change from week to week based on technicals, fundamentals, crude prices and market action. The list is not sorted in any particular order.
Most Recent Plays
FLS $129.82 - Flowserve
Monster spike by Flowserve on excellent earnings triggered our breakout entry at $128. Unfortunately it gave back $15 of that spike on Friday. No change.
Flowserve Corporation (Flowserve) is a manufacturer and aftermarket service provider of flow control systems. The Company develops and manufactures precision-engineered flow control equipment, such as pumps, valves and seals, for critical service applications. Flowserve offers a range of aftermarket equipment services, such as installation, advanced diagnostics, repair and retrofitting. The Company sells its products and services to more than 10,000 companies, including engineering and construction firms, original equipment manufacturers (OEMs), distributors and end users. The Company operates through three business segments: Flowserve Pump Division (FPD) for engineered pumps, industrial pumps and related services; Flow Control Division (FCD) for engineered and industrial valves, control valves, actuators and controls and related services, and Flow Solutions Division (FSD) for precision mechanical seals and related products and services
Breakout trigger: $128, hit 7/29
Position: JAN $140 Call FLS-AH, $12.30
FWLT $56.07 - Foster Wheeler
FWLT imitated FLS with a spike on Thursday to trigger our entry at $60 just before it declined on Friday's weak market. Earnings are scheduled for next Wednesday.
Foster Wheeler Limited operates through two business groups, the Global Engineering & Construction Group (Global E&C Group) and the Global Power Group. The Global E&C Group, which operates globally, designs, engineers and constructs onshore and offshore upstream oil and gas processing facilities, natural gas liquefaction facilities and receiving terminals, gas-to-liquids facilities, oil refining, chemical and petrochemical, pharmaceutical and biotechnology facilities and related infrastructure, including power generation and distribution facilities, and gasification facilities. The Global Power Group designs, manufactures and erects steam generating and auxiliary equipment for electric power generating stations and industrial facilities globally. In February 2008, the Company completed the acquisition of Biokinetics. On April 7, 2006, the Company completed the purchase of the remaining 51% interest in MF Power.
Breakout trigger: $60, hit 7/30
Position: 2010 $70 LEAP Call LWM-AN $11.70
RIG $137.61 - Transocean
RIG spiked on general news in the oil patch on Wednesday to hit our breakout target. While I would rather have gotten the lower entry RIG has earnings this week and they should be strong.
Transocean Inc. (Transocean) is an international provider of offshore contract drilling services for oil and gas wells. As of February 20, 2008, the Company owned, had partial ownership interests in or operated 139 mobile offshore drilling units. Its fleet included 39 high-specification floaters (ultra-deepwater, deepwater and harsh environment semisubmersibles, and drillships), 29 midwater floaters, 10 high-specification jackups, 57 standard jackups and four other rigs. As of February 20, 2008, the Company also has eight ultra-deepwater floaters contracted for or under construction. The Companys primary business is to contract these drilling rigs, related equipment and work crews primarily on a day rate basis to drill oil and gas wells. In November 2007, the Company completed its merger transaction with GlobalSantaFe Corporation (GlobalSantaFe).
Breakout trigger: $140, hit 7/30
Position: 2010 $160 LEAP Call YDR-AL $22.40
CHK $49.22 +0.93 - Chesapeake Energy
CHK beat the street by a penny when they announced earnings last week but surprised everyone with a $3.4 billion loss due to hedging. They said the unbelievable rise in gas prices over the last quarter decimated their hedging program. However, the drop in prices since the quarter ended produced a $4.7 billion profit to the company. CHK said if gas prices close the third quarter where they are today the loss would be reversed into a sizeable gain.
Breakdown trigger: $51 hit 7/22
Position: 2010 $60 LEAP Call WZY-AL @ $8.90
BTU $64.77 -1.67 - Peabody Energy
Basically no change for the week. BTU continues to hold at support of $65 as the other coal companies line up to report earnings.
Earnings July 23rd, more than doubled Q2-2007.
Breakout trigger: $68 hit 7/21
Position: 2010 $80 LEAP Call LLW-AP, $14.80
USO $101.04 +1.67 - US Oil Fund
Definitely looks like a bottom forming. No change in this short term play.
I am not using LEAPS because I view this as a short-term trade.
Breakdown trigger: $101, hit 7/23
Position: OCT $110 Call IYS-JF, $6.30
MOS $122.69 +0.64 - Mosaic Industries
MOS rocketed higher on Wednesday after reporting blowout earnings but fell victim to some post earnings depression on the market drop.
Breakdown trigger: $125 hit 7/08
Position: 2010 $160 LEAP Call KCA-AL @ $27.45
COP $81.15 -.83 - ConocoPhillips
No change as the sector waits for oil to pick a direction.
Earnings July 23rd, $3.50 per share
Position: 2010 $90 LEAP YRO-AR @ $11.35
ENER - $68.41 +5.54 Energy Conversion Devices
Best gainer for the week! Credit Suisse initiated coverage with a Buy. Definitely no complaints here.
Breakout trigger: $68.50 hit 6/16
Position: 2010 $80 LEAP Call KYU-AP @ 23.10
CRR $55.20 +3.47 - Carbo Ceramics
Positive earnings and positive news finally broke the deadlock. No complaints!
Breakout trigger: $48 Hit 5/12
PPosition: Dec $50 Call CRR-LJ @ $5.80
Leaps Trader Watch List
Current Watch List
XLE - Energy Select SPDR
The XLE is a group of 36 companies in the energy sector. Exxon is the largest component and Tesoro the smallest. See the complete list here.
Energy Select Sector SPDR Fund (the Fund) seeks to provide investment results that correspond to the price and yield performance of the Energy Select Sector of the S&P 500 Index (the Index). The Index includes companies that primarily develop and produce crude oil and natural gas, and provide drilling and other energy-related services. The Fund utilizes a passive or indexing investment approach to invest in a portfolio of stocks that seek to replicate the Index. The Funds investment advisor is SSgA Funds Management, Inc.
Breakdown trigger: $72.00
Buy Dec $80 Call XTG-LB
Breakout trigger: $78.00
Buy Dec $85 Call XTG-LG
HP - Helmerich & Payne
Helmerich & Payne, Inc. is primarily engaged in contract drilling of oil and gas wells for others. The contract drilling business accounts for almost all of the Company's operating revenues. It is also engaged in the ownership, development and operation of commercial real estate. It is organized into two separate operating entities: contract drilling and real estate. The Company's contract drilling business consists of three business segments: U.S. land drilling, offshore platform drilling and international drilling. The Company's U.S. land drilling is conducted primarily in Oklahoma, California, Texas, Wyoming, Colorado, Louisiana, Mississippi, Alabama, Arkansas, New Mexico, and North Dakota, and offshore from platforms in the Gulf of Mexico, California, Trinidad and Equatorial Guinea. During the fiscal year ended September 30, 2007, the Company's international land segment operated in seven international locations: Venezuela, Ecuador, Colombia, Argentina, Bolivia, Tunisia and Chile.
Breakout trigger: $64
Buy 2010 $70 LEAP Call LQB-AN
Breakdown trigger: $50
Buy 2010 $60 LEAP Call LQB-AL
FLR - Fluor
Fluor Corporation is a holding company that, through its subsidiaries, provides engineering, procurement and construction management (EPCM) and project management services. Fluor serves a number of industries worldwide, including oil and gas, chemical and petrochemicals, transportation, mining and metals, power, life sciences and manufacturing. Fluor is also a primary service provider to the United States Federal Government. It performs operations and maintenance activities for major industrial clients, and also operates and maintains their equipment fleet. The Company is aligned into five principal operating segments: Oil and Gas, Industrial and Infrastructure, Government, Global Services and Power. Fluor Constructors International, Inc., which is organized and operates separately from its business segments, provides unionized management, construction and management services in the United States and Canada, both independently and as a subcontractor on projects to its segments.
Breakdown trigger: $76
Buy 2010 $90 LEAP Call LLF-AR
Breakout trigger: $90
Buy 2010 $100 LEAP Call LLF-AT
PBR - Petrobras
Petroleo Brasileiro SA - Petrobras (Petrobras) is a Brazil-based holding company is engaged in the exploration, exploitation and production of oil from reservoir wells, shale and other rocks, and in the refining, processing, trade and transport of oil and oil products, natural gas and other fluid hydrocarbons, in addition to other energy related activities. Petrobras has 109 production platforms and 15 refineries. It operates 31,089 kilometers of pipelines. The Company has various subsidiaries: Petrobras Distribuidora SA - BR, which is involved in the distribution and commercialization of oil products and natural gas, and Petrobras Netherlands BV - PNBV, which is active in the purchase, sale and rent of equipment and platforms for the production of oil and gas. Petrobras operates in Brazil, Argentina, Mexico, Portugal, the United States, Peru and Turkey, among others.
Breakdown trigger: $50
Buy 2010 $60 LEAP Call YMO-AL
Breakout trigger: $62
Buy 2010 $70 LEAP Call YMO-AN
EWZ - Ishares Brazil
Despite the strong performance over the last several years the ETF has declined on profit taking, inflation and the drop in oil prices. Petrobras is a major component along with RIO, BBD, ITU and 66 other companies in Brazil. You hear a lot about the strong growth in the BRIC countries. That B stands for Brazil.
Breakdown trigger: $73
Buy 2010 $80 LEAP Call WKB-AP
Breakout trigger: $85
Buy 2010 $100 LEAP Call WKB-AT
RIMM - Research in Motion
Research In Motion Limited (RIM) is a designer, manufacturer and marketer of wireless solutions for the worldwide mobile communications market. Through the development of integrated hardware, software and services that support multiple wireless network standards, RIM provides platforms and solutions for seamless access to time-sensitive information including email, phone, short message service (SMS) messaging, Internet and intranet-based applications. RIM technology also enables an array of third party developers and manufacturers to enhance their products and services with wireless connectivity to data. RIMs portfolio of products, services and embedded technologies are used by organizations worldwide and include the BlackBerry wireless solution, software development tools, and other software and hardware. RIM operates offices in North America, Europe and Asia Pacific.
Breakout trigger: $125
Buy 2010 $140 LEAP Call YKD-AH
UPL - Ultra Petroleum
Ultra Petroleum Corp. (Ultra) is an independent oil and gas company engaged in the development, production, operation, exploration and acquisition of oil and natural gas properties. The Companys operations are primarily in the Green River Basin of southwest Wyoming. The Company continually evaluates other opportunities for the acquisition, exploration and development of oil and natural gas properties. As of December 31, 2007, Ultra owns interests in approximately 121,652 gross (62,756 net) acres in Wyoming covering approximately 230 square miles. The Company owns an interest in approximately 676 gross producing wells in this area and is operator of approximately 50% of the 676 gross wells. The Company owns interests in 252,629 gross acres in Pennsylvania. On October 22, 2007, the Company sold Sino-American Energy Corporation (Sino-American), which owned its Bohai Bay assets in China.
Breakdown trigger: $65
BUY 2010 $80 LEAP WSS-AP
APC - Anadarko Petroleum
Anadarko Petroleum Corporation (Anadarko) is an oil and gas exploration and production company with 2.43 billion barrels of oil equivalent (BOE) of proved reserves as of December 31, 2007. The Companys major areas of operation are located onshore in the United States, the deepwater of the Gulf of Mexico and Algeria. Anadarko also has production in China and a development project in Brazil. It markets natural gas, oil and natural gas liquids (NGLs) and owns and operates gas gathering and processing systems. In addition, Anadarko has hard minerals properties that contribute operating income through non-operated joint ventures and royalty arrangements in several coal, trona (natural soda ash) and industrial mineral mines located on lands within and adjacent to its Land Grant holdings. The Land Grant is an eight million acre strip running through portions of Colorado, Wyoming and Utah where the Company owns most of its fee mineral rights.
Breakdown trigger: $55
Buy 2010 $70 LEAP Call YPC-AN
BHP - BHP Billiton
BHP Billiton Limited is a diversified resources group. The Company is a producer of energy-related products, such as energy coal, oil, gas, liquefied natural gas and uranium. Its customer sector groups (CGS) are organized into nine business units: petroleum, aluminium, base metals, diamonds and specialty products, stainless steel materials, iron ore, manganese, metallurgical coal and energy coal. The Company generally extracts and processes minerals, oil and gas in the southern hemisphere from its production operations in Australia, Latin America and southern Africa. Its sales are concentrated in the northern hemisphere. In August 2006, BHP Billiton plc completed the sale of its 45.5% interest in the Valesul Aluminio SA joint venture to its joint venture partner, Companhia Vale do Rio Doce. In April 2007, the Company acquired a 33.3% interest in Global Alumina's Sangaredi Refinery Project in Guinea, West Africa. In July 2008, the Company completed the acquisition of Anglo Potash Ltd.
Breakdown trigger: $65
Buy 2010 $80 LEAP Call LPH-AP
HES - Hess Corp
Hess Corporation (Hess) is a global integrated energy company that operates in two segments: Exploration and Production (E&P) and Marketing and Refining (M&R). The E&P segment explores for, develops, produces, purchases, transports and sells crude oil and natural gas. These exploration and production activities take place principally in Algeria, Australia, Azerbaijan, Brazil, Denmark, Egypt, Equatorial Guinea, Gabon, Ghana, Indonesia, Libya, Malaysia, Norway, Russia, Thailand, the United Kingdom and the United States. The M&R segment manufactures, purchases, transports, trades and markets refined petroleum products, natural gas and electricity. As of December 31, 2007, the Company owned a 50% interest in a refinery joint venture in the United States Virgin Islands, and another refining facility, terminals and retail gasoline stations located on the East Coast of the United States.
Breakdown trigger: $88
Buy 2010 $100 LEAP Call WHS-AT
VLO - Valero
Valero Energy Corporation (Valero) owns and operates 17 refineries located in the United States, Canada and Aruba that produce conventional gasolines, distillates, jet fuel, asphalt, petrochemicals, lubricants and other refined products. The Companys principal products include conventional and California Air Resources Board (CARB) gasolines, reformulated gasoline blendstock for oxygenate blending (RBOB), ultra-low-sulfur diesel, and oxygenates and other gasoline blendstocks. Valero also produces a substantial slate of middle distillates, jet fuel, and petrochemicals, in addition to lube oils and asphalt. Valero markets branded and unbranded refined products on a wholesale basis in the United States and Canada through a bulk and rack marketing network. It also sells refined products through a network of approximately 5,800 retail and wholesale branded outlets. Effective July 1, 2007, the Company completed the sale of the Lima, Ohio refinery to Husky Energy Inc.
Breakdown trigger: $30
Buy 2010 $40 LEAP Call YPY-AH
Breakout trigger: $37
Buy 2010 $50 LEAP Call YPY-AJ
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