The market is trading quietly so far this morning after another reversal day on Tuesday. Prices started out strongly only to decline by the end of the day. Turkish troops are in the process of leaving Northern Iraq and the strike on 5 Total refineries in France is now over. All of the normal drivers are uneventful as of this morning. Thus all eyes will be focused on this morning’s EIA oil inventory report at 10:30 am EST.
The expectations are for a mixed report. As shown in the table below the market is projecting a build in gasoline and declines in both crude oil and distillate. Refinery runs are expected to increase modestly. If the actuals come in as expected the market is likely to view the report as neutral to slightly bullish (due to yet another crude oil decline). However, most of the crude oil declines over the last few week shave been related to fog delays in the Houston Ship Channel. On the other hand inventories in Cushing (WTI hotspot) have been building. If this is the case again the market may view the report are more biased to the downside.
When viewing the expected results as compared to the 5 year average for the same week inventories overall look comfortable as everything is within the normal operating range. Also as shown in the table when compared to last year the only major year on year deficit is for crude oil which could change over the next few weeks as OPEC production increases started in early November start to arrive.
| Oil Inventory Projections | | December 19, 2007 | |
| Millions of Barrels | | | |
| | Current | Change from | Change from |
| | Projections | Last Year | 5 Year |
| | | vs. Projections | vs. projections = 5 Year |
| Crude Oil | (1.0) | (25.6) | 2.1 |
| Gasoline | 0.8 | 2.1 | (1.4) |
| Distillate | (0.4) | (2.0) | 4.8 |
| Ref. Runs% | 0.3% | -1.6% | -1.6% |
| Change Level | 89.1% | 90.7% | 90.7% |
| | BCF | BCF | BCF |
| NG | (135) | (8) | 263 |
We still see the market trading in the $85 to $95/bbl trading range as this week’s inventory report should not move the market in a major way while the rest of the normal market catalysts remain quiet. Finally liquidity is likely to begin to decline as more participants head to the sidelines for the long holiday period.
Currently prices are steady.
| Current Expected Trading Range | | | ||
| | 12/19/2007 | Change | Upper | Lower |
| | Electronic | From | Resistance | Support |
| | 6:44 AM | Yesterday | | |
| Feb WTI | $90.17 | $0.09 | $95.00 | $85.00 |
| Jan HO | $2.5555 | $0.0001 | $2.7500 | $2.5000 |
| Jan RBOB | $2.3150 | $0.0107 | $2.5000 | $2.2000 |
| Jan NG | $7.169 | $0.028 | $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
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