Inventories turned out to be a surprise and biased to the bearish side. Both gasoline and distillate showed strong builds. Refinery runs increased again and are approaching the 90% utilization level. On the bullish side inventories showed a much larger decline in crude oil inventories than expected. The decline in crude oil is likely attributed to an increase in refinery runs and likely accounting adjustments (LIFO) by the refiners ahead of year end. We should expect to see crude oil stocks increasing over the coming weeks.
With the overall market sentiment switching to an upside bias the market is putting in an up week so far. As expected HO has led the way higher as many market participants have been concerned over the cold weather this week. However, that is quickly going to end as warmer than normal temperatures are set to hit most of the US over the next day or so and stay in place for at least a few weeks. Gasoline on the other hand has trailed the rest of the complex resulting in refiners seeing their gasoline cracks once again depreciate in value. On the week the closely watched 3-2-1 crack spread is lower (so far) primarily due to weakness from the gasoline crack.
| | | | | | | |
| | | Trading For the Week | | | ||
| | | | | | | |
| | Current | Change | Change | 28-Dec | Weekly | Range % of |
| | Price | From Thurs | For Week | Settle | Range | Fri Close |
| | 7:20 AM | | | | | |
| Feb WTI | $98.83 | ($0.35) | $2.56 | $96.27 | $5.36 | 5.57% |
| Feb HO | $2.7130 | ($0.0061) | $0.0701 | $2.6429 | $0.1251 | 4.73% |
| Feb RBOB | $2.5296 | ($0.0118) | $0.0406 | $2.4890 | $0.1062 | 4.27% |
| Feb NG | $7.670 | ($0.004) | $0.327 | $7.343 | $0.697 | 9.49% |
| | | | | | | |
| Feb 08 Cracks | | | | | | |
| RBOB Crack | $7.413 | ($0.15) | ($0.85) | $8.268 | $1.55 | 18.78% |
| HO Crack | $15.116 | $0.09 | $0.38 | $14.732 | $0.51 | 3.46% |
| 321 Crack | $9.955 | ($0.067) | ($0.45) | $10.401 | $1.209 | 11.62% |
| | | | | | | |
Although we have traded above the $100/bbl level for WTI twice this week the market has been unable to sustain the surge. With yesterday’s inventories decidedly bearish from the product perspective and warm weather on the way the market may have difficulty in staying above the triple digit level at the moment. We expect another week of high volatility and likely attempts to breach the $100 mark. However, we believe next week is more likely to experience a downside correction than another strong upside surge.
Currently prices are quietly lower.
| Current Expected Trading Range | | | ||
| | 1/4/08 | Change | Upper | Lower |
| | | From | Resistance | Support |
| | 7:21 AM | Yesterday | | |
| Feb WTI | $98.83 | ($0.35) | $100.00 | $90.00 |
| Feb HO | $2.7130 | ($0.0061) | $2.7500 | $2.5000 |
| Feb RBOB | $2.5296 | ($0.0118) | $2.6500 | $2.2000 |
| Feb NG | $7.660 | ($0.014) | $8.000 | $7.000 |
| | | | | |
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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