Latest As Of Thursday Morning

Prices firmed on Wednesday in light volume trading on concern over the possibility of a supply disruption due to the ongoing military activity in Northern Iraq.  The Turkish military has been bombing PKK rebel sites in the mountains in Northern Iraq. The market has been interpreting this activity as a potential to disrupt the supplies of crude oil out of Iraq. We believe the market is overreacting as it is a low possibility that supplies will be disrupted. The market is putting more focus on this issue than warranted but little else is out there to drive prices.

 

So far this morning the market is drifting lower on a combination of possibly weaker economic data due to be released today and forecasts for warmer than normal winter weather for the next several weeks (at least). This morning we get a snapshot of oil inventories with NG stock data to be released tomorrow. As shown in the following table the expectations are mixed with crude & distillate expected to decline while gasoline is projected to build once again. A decline in crude oil stocks is expected as a result of another closing of the Houston Ship Channel due to fog last week. On the distillate front patches of cold weather last week is expected to have resulted in a draw in heating oil stocks while gasoline continues to build. As compared to last year crude is still showing a sizeable year on year deficit but when compared to the 5 year average the deficit is minimal. Distillate is showing a small year on year deficit but remains well within the comfort range compared to the 5 year average. Gasoline stocks have recovered strongly and are now showing both a year on year surplus and a surplus compared to the 5 year average. Overall if the actuals come in as projected we believe the market will interpret the data as neutral with a downside bias for gasoline.

 

NG inventories are being released a day late (Friday) due to the holiday. As shown in the table the market is projecting a withdrawal of about 140 BCF which would put the level marginally below last year at this time but still well above the 5 year average. With warmer than normal weather engulfing most of the US the market is likely to view tomorrow’s inventory data as neutral to bearish.

 

 

Projections		12/27/07
	Current	Change from	Change from
	Projections	Last Year	5 Year
mmbls		vs. Proj.	vs Proj.
Crude Oil	(1.5)	(25.5)	(4.7)
Gasoline	1.5	2.9	1.3
Distillate	(0.7)	(4.9)	2.8
Ref. Runs%	0.2%	-2.9%	-2.7%
Change Level	88.0%	90.9%	90.7%
	BCF	BCF	BCF
NG, BCF	(140)	(88)	263

 

Currently prices are drifting lower in light trading activity.

 

Current Expected Trading Range
	12/27/07	Change	Upper	Lower
		From	Resistance	Support
	7:20 AM	Yesterday
Feb WTI	$95.59	($0.38)	$97.50	$85.00
Jan HO	$2.6356	($0.0056)	$2.7500	$2.5000
Jan RBOB	$2.4449	($0.0077)	$2.5000	$2.2000
Jan NG	$6.991	($0.055)	$7.660	$6.640

 

 

 

 

Dominick A. Chirichella

Energy Management Institute

tel 646.202.1433

fax 801.383.7510

dchirichella@emimail.org

www.energyinstitution.org

www.advancedenergycommerce.com