A last-minute agreement was reached to hold another two-day meeting in Moscow on June 18th and 19th, but the most positive thing anyone could find to say was that Iran was now talking about its nuclear program which the country has refused to do before.

The price of Brent crude is up this morning by about 0.6% at $107.17, partly in reaction to the failed talks and partly in response to more pressure on Germany from other EU nations to issue eurobonds. Some crude traders have said that the “fear premium” added about $5/barrel to crude prices due to Iranian threats to close the Strait of Hormuz. The impact of further sanctions against the Islamic Republic, set to take effect July 1st, would further isolate the country and its oil, and add even more to crude prices.

Paul Ausick

CME Group owns and operates the Comex and Nymex commodities exchanges as well as the Chicago Mercantile Exchange and the Chicago Board of Trade. The company pulled out of the bidding for the London Metals Exchange earlier this week.

CME stated the reason for the split:

We believe that splitting CME Group stock will appeal to a broader, more diverse mix of investor portfolios. By making our shares attractive to more people, we have potential to further expand the base of ownership.

In other words, liquidity. Shares closed yesterday at $256.16 and trade an average of about 600,000 a day. Lowering the share price to around $50 will, CME hopes, attract more investors. Over the past 12 months, CME shares are down about -14%.

CME, as well as the IntercontinentalExchange Inc. (NYSE: ICE), the Depository Trust and Clearing Corp., and Chicago-based OCC (formerly the Options Clearing Corp.) have been designated as systemically important financial institutions. The designation means more regulatory oversight and perhaps larger reserves to withstand a debacle similar to the MF Global implosion.

Paul Ausick

The United States Oil (AMEX: USO) ETN is currently down 1.7% at $34.53 and that nearly matches the low seen last Friday.  It has a 52-week range of $29.10 to $42.30.

AAA has a daily fuel report showing that the national average is $3.68 for a gallon of regular unleaded and $3.845 for a mid-grade gallon of unleaded.   GasBuddy lists the average price today for regular unleaded as $3.888 per gallon.

Gasbuddy even shows the lowest state average of $3.305 per gallon being in South Carolina, with California being the highest of the states (not counting Alaska and Hawaii) at $4.308 per gallon.

The long and short is that this may be tied at least some to currency appreciation of the U.S. Dollar, but the growing fears of a the cloud of recession is causing perhaps the greatest fear out there for oil and gasoline prices.

JON C. OGG

Earlier this month,Patriot Coal Corporation (PCX) announced that it entered into a commitment letter for a new revolving credit facility and new term loan facility for a total of $625 million from Citigroup Global Markets, Inc., Barclays Bank PLC and Natixis, New York Branch. Patriot Coal Corporation is continuing to work with these lenders to strengthen its finances, including the replacement of its current credit facilities well before certain of its debt obligations become due in March 2013. Patriot Coal Corporation has engaged The Blackstone Group and continues to work with Davis Polk & Wardwell LLP, its long-standing counsel, to achieve an optimal financing package.

We wrote earlier about a report that the company was seeking restructuring help. This release from Patriot Coal doesn’t deny that, rather choosing to answer a question that wasn’t asked. As for the $625 million in financing, the statement says nothing new about that either. The company announced that on May 8th when it released earnings. But is the commitment letter signed, sealed, and delivered? Doesn’t sound like it.

Patriot Coal shares hit a new 52-week low of $1.36, down -58% for recovering to -30% at $2.36 as this is written.

Paul Ausick

What do Alaska, Louisiana, North Dakota, and Texas have in common? Oil, and lots of it compared with the rest of the country. And except for Texas, the four states also have small populations. Texas makes up for having a large population by having low wages when compared with other big states.

The title of this article is the answer J. Paul Getty is reported to have given to this question: “What’s the secret to success?” Still good advice.

Paul Ausick

The New York Times Economix blog posted the following chart from the IHS Global Insight report:

Patriot Coal on Friday fielded informal pitches from restructuring advisors, said three sources familiar with the matter. The distressed coal miner aims to retain the professionals in the even[t] the company can’t satisfy its near-term financing needs.

The company failed to syndicate a $625 million bond offering last week after announcing that it lost a key customer. The situation is getting desperate and a bankruptcy filing is a real possibility at this point.

Other coal miners shares are also getting hit hard: Peabody Energy Corp. (NYSE: BTU), which spun-off Patriot in 2007, is down -5%, Arch Coal Inc. (NYSE: ACI) is down -10%, Consol Energy Inc. (NYSE: CNX) is down -3.8%, Alpha Natural Resources Inc. (NYSE: ANR) is down -5.5%, James River Coal Co. (NASDAQ: JRCC) is down -8.4%, Walter Energy Inc. (NYSE: WLT) is down -5.6%, Cloud Peak Energy Inc. (NYSE: CLD) is down -2.8%, and the Market Vectors Coal ETF (AMEX: KOL) is down -2.2%.

The weakness in domestic coal demand has absolutely clubbed the coal miners in the last year or so. Rising natural gas prices have led to some happy talk about coal, but there is nothing but bad news on the horizon for the industry.

Shares of Patriot Coal are down about -45% at $1.84 after posting a new 52-week low of $1.67 earlier today. Peabody also posted a new low of $23.30, as did Arch Coal at $6.84, James River at $3.12, Walter Energy at $48.35, and the Market Vectors ETF at $26.05. And except for Cloud Peak, the others came within pennies of posting new lows.

Paul Ausick

Refiners are no better off: Valero Energy Corp. (NYSE: VLO) is down -7.7% in the past month, Marathon Petroleum Corp. (NYSE: MPC) is down about -9.8%, while Tesoro Corp. (NYSE: TSO) is up a bare 0.4%. Refiners have been surviving off the wide differential between WTI and Brent crudes and as the differential narrows, profits are harder to come by.

For the integrated oil companies, the price of crude has been the determining factor in a company’s profit picture: the higher the price, the bigger the profit. That makes sense. For the services company, higher prices typically mean more work as producers want to get more oil to sell.

Because crude prices are at a seven-month low now, we thought it would be interesting to look for value in some of the big oil stocks. After all, low crude prices mean share sell-offs, so there ought to be some value left on the table.

With the exceptions of Exxon and Chevron, all the companies we looked at have implied gains exceeding 30% if analysts have gotten target prices right. That’s some pretty good value, but we thought we’d try to handicap the race a bit more closely.

Exxon Mobil Corp. (NYSE: XOM) traded at $82.21 and has a market value of $383 billion. The consensus target price from Thomson Reuters is $94.53 and the 52-week range is $67.03 to $87.94. Exxon has a dividend yield of 2.8%. The implied upside to the consensus target is 15%, but we would note that the target is above the 52-week high.

Chevron Corp. (NYSE: CVX) traded at $99.71 and has a market value of $196 billion. The consensus target price from Thomson Reuters is $124.88 and the 52-week range is $86.68 to $112.28. Chevron has a dividend yield of 3.7%. The implied upside to the consensus target is 25%, but we would note again that the target is above the 52-week high.

BP plc (NYSE: BP) traded at $38.26 and has a market value of $121 billion. The consensus target price from Thomson Reuters is $53.25 and the 52-week range is $33.62 to $48.34. BP has a dividend yield of 5.2%. The implied upside to the consensus target is 39%, but we would note again that the target is above the 52-week high.

Schlumberger Ltd. (NYSE: SLB) traded at $67.47 and has a market value of $89 billion. The consensus target price from Thomson Reuters is $89.20 and the 52-week range is $54.79 to $95.53. Schlumberger has a dividend yield of 1.7%. The implied upside to the consensus target is 32%, and the target price is lower than the 52-week high.

Halliburton Co. (NYSE: HAL) traded at $31.40 and has a market value of about $29 billion. The consensus target price from Thomson Reuters is $47.28 and the 52-week range is $27.21 to $57.77. Halliburton has a dividend yield of 1.2%. The implied upside to the consensus target is 51%, and again the target price is lower than the 52-week high.

Baker Hughes Inc. (NYSE: BHI) traded at $42.20 and has a market value of about $18 billion. The consensus target price from Thomson Reuters is $56.33 and the 52-week range is $39.40 to $81.00. Baker Hughes has a dividend yield of 1.5%. The implied upside to the consensus target is 33%, and again the target price is well below the 52-week high.

Valero Energy Co. (NYSE: VLO) traded at $22.17 and has a market value of about $12 billion. The consensus target price from Thomson Reuters is $30.15 and the 52-week range is $16.40 to $28.68. Valero has a dividend yield of 2.8%. The implied upside to the consensus target is 36%, and again the target price is above the 52-week high.

Marathon Petroleum Corp. (NYSE: MPC) traded at $36.38 and has a market value of about $12 billion. The consensus target price from Thomson Reuters is $52.50 and the 52-week range is $26.35 to $47.43. Marathon has a dividend yield of 2.9%. The implied upside to the consensus target is 44%, and again the target price is above the 52-week high.

Tesoro Corp. (NYSE: TSO) traded at $23.49 and has a market value of about $3 billion. The consensus target price from Thomson Reuters is $31.36 and the 52-week range is $17.43 to $30.15. Tesoro does not pay a dividend. The implied upside to the consensus target is 34%, and again the target price is above the 52-week high.

For comparison, The SPDR S&P Oil & Gas Exploration and Production ETF (AMEX: XOP) traded at $50.45 in a 52-week range of $37.67 to $65.58. That’s about 30% below the 52-week high. The Market Vectors Oil Services ETF (AMEX: OIH) traded at $37.47 in a 52-week range of $35.32 to $45.14, again about 30% below the 52-week high.

Target prices for the large integrated oil companies are above 52-week highs, as are target prices for the refiners. Unless the price of crude rises sharply, the targets are out of reach for the integrated companies. For refiners, they’re whipsawed if prices for WTI open a bigger gap versus Brent or if WTI rise and Brent falls. No chance at those targets either way.

Targets for the services companies are lower than 52-week highs, which improves the chances of hitting those targets. Schlumberger, the largest of the services companies, and Baker Hughes both look appear to have the best chance to boost their share prices.

Paul Ausick

At issue may be a stock market stabilization, or perhaps it is a stabilization aimed solely at the commodities and those companies which profit from either the rise of commodity prices or the rise of the demand for those commodities. It was just yesterday evening that Dennis Gartman of the Gartman Letter was talking up gold miners as his method of choice to play the current bounce in gold.

To show just how much implied upside there is we found some large cap gold stocks that have upside of about 100% and many of the big players have implied upside of well over 50%.  The key ETFs for these miners show just how widespread the damage was during the last sell-off.  The Market Vectors Gold Miners ETF (AMEX: GDX) trades at $43.35 against a 52-week trading range of $39.08 to $66.98 and that is down about 35% as a group from the highs.  The Global X Silver Miners ETF (AMEX: SIL) trades at $18.00 against a 52-week range of $16.54 to $29.05 and that is down almost 38% from its high in the last year.

We included the implied dividend yields but due to foreign issues and ADRs causing currency translations and due to some payouts not being quarter like U.S. companies do, we would urge you to only consider the dividend as a footnote and something you should be verifying on your own.  Besides that, who buys gold (and silver) miners because of their dividend yields only?

We have evaluated the following large-cap gold stocks: Barrick Gold Corporation (NYSE: ABX); Goldcorp Inc. (NYSE: GG); Newmont Mining Corp. (NYSE: NEM); AngloGold Ashanti Ltd. (NYSE: AU); Kinross Gold Corporation (NYSE: KGC); Agnico-Eagle Mines Ltd. (NYSE: AEM); Gold Fields Ltd. (NYSE: GFI); Yamana Gold, Inc. (NYSE: AUY); IAMGOLD Corp. (NYSE: IAG); Harmony Gold Mining Co. Ltd. (NYSE: HMY); Eldorado Gold Corp. (NYSE: EGO); and Royal Gold, Inc. (NASDAQ: RGLD). We have covered also two of the larger silver players of Silver Wheaton Corp. (NYSE: SLW) and Pan American Silver Corp. (NASDAQ: PAAS).

Barrick Gold Corporation (NYSE: ABX) traded at $37.60 and has a market value of $37.6 billion.  The consensus target price from Thomson Reuters is $59.10 and the 52-week range is $34.82 to $55.95.  Barrick has a dividend yield of 2.2%. The implied upside to the consensus target: 57% but we would note that the target is above the 52-week high.

Goldcorp Inc. (NYSE: GG) traded at $34.90 with a market value of $28.2 billion.  The consensus target price from Thomson Reuters is $60.42 and the 52-week trading range is $32.16 to $56.31.  Goldcorp’s most recent yield was listed as 1.6%. The implied upside to the consensus target is 73% but we would note that the consensus target is still above the 52-week high.

Natural gas producers like Exxon Mobil Corp. (NYSE: XOM), Chesapeake Energy Corp. (NYSE: CHK), and EOG Resources Inc. (NYSE: EOG) have slowed production in an effort to get gas prices to rise. Coal producers like Consol Energy Inc. (NYSE: CNX), Peabody Energy Corp. (NYSE: BTU), Alpha Natural Resources Inc. (NYSE: ANR), and Arch Coal Inc. (NYSE: ACI) have also cut production, but in their case the effort was to reduce costs.

Natural gas inventories remain high, though off by about 13% from their peak in March. Lower injections into storage have helped, as have warmer temperatures in some parts of the country. But temperatures are expected to moderate and the forecast for summer does not include long periods of high temperatures. That means that natural gas inventories will enter the traditional winter drawdown period beginning in October with above average inventories again. Inventories need to drop by more than 500 billion cubic feet by the end of summer or there won’t be any place to put new production. The early estimate for inventory growth this week calls for 67-88 billion cubic feet to be added to already bulging stocks.

As for the coal producers, they could continue to get squeezed at natural gas price below $3.00 because generation plants that have switched to gas won’t want to switch back until they are sure that gas prices are going to remain elevated. Utility companies will drive a hard bargain on coal pricing until it’s clear that gas prices are going to remain high.

The recent modest increase in natural gas prices is not going have much impact coal production unless the price hike gets above about $3/thousand cubic feet and stays there. That does not appear likely at this point.

Paul Ausick

Now that Iran has agreed to inspections by the IAEA, an agreement at the Baghdad meeting is far more likely. If the Baghdad meeting results in a further agreement between Iran and the P5+1, crude prices could fall another $5/barrel, perhaps even more. And Iran has plenty of incentive to negotiate this time.

Iran crude shipments are stalled, with an estimated 40 million barrels or so floating around in the Persian Gulf with nowhere to go. Tankers cannot buy insurance, and without insurance the crude stays put. Iran cannot cut production significantly because that could damage the country’s wells, so it continues to produce millions of barrels a day that it cannot sell.

The oil Iran does sell to India and China is paid for in rupees and yuan, neither of which can be spent outside the country of origin. Iran’s estimated unemployment rate approaches 35% and food prices have risen anywhere from 25%-125% in the last year. Brave words aside, Iran is suffering, the suffering is getting worse, and the sanctions due in July will make the country even more miserable.

Sanctions against Iran won’t miraculously disappear even if the Baghdad conferees reach an agreement. But a delay in imposing part or all of the tougher sanctions due in July is possible. Any movement toward freeing up some of Iran’s production will instantly cause the price of crude to fall, no matter how small the movement. That’s just the way the oil market works these days.

Both Iran and the P5+1 want to be able to claim victory from the coming meeting, and no one wants that victory more than President Obama who is just five months away from an election. Easing tensions with Iran will do more than anything else to lower pump prices, which in turn will be good for the US economy.

The next few days will figure heavily in the US elections, and those of us with long memories may see some parallels with the 1980 presidential election. Predicting what Iran will do is a fool’s game, but politicians in Iran, the US, and Western Europe have too much to lose to let an agreement slip away.

Brent crude prices are down about -0.5% in electronic trading this morning, at $109.77/barrel, while WTI is up about 1.2% at $92.57/barrel.

Paul Ausick