As we predicted last week the market remains in a downside correction. The market has gotten ahead of itself and as a result we have moved noticeably below the highs made to start the New Year. As shown in the following chart the entire oil complex is down on the week with RBOB leading the way down. Gasoline fundamentals are weak as inventories have built 9 weeks in a row putting the level equal to last year at this time and in a position to continue building as the market readies for the spring & summer driving season. Refinery runs have also increased on the week indicating that stocks of oil products are likely to continue to build over the next few weeks at least. Within the oil complex gasoline was also the most volatile s measured by the percentage change in the weekly range.
Refiners also did not fare so well with the all of the cracks coming off strongly again being led down by RBOB. The widely watched 3-2-1 crack is down strongly on the week and is likely to deteriorate further as increased runs will put pressure on product prices.
Nat Gas fared a bit better than oil on the week as inventories declined greater than expected leaving a noticeable year on year deficit.
| | | | | | | |
| | | Trading For the Week | | | | |
| | | | | | | |
| | Current | Change | Change | 4-Jan | Weekly | Range % of |
| | Price | From Thurs | For Week | Settle | Range | Fri Close |
| | 12:25 AM | | | | | |
| Feb WTI | $94.46 | $0.75 | ($3.45) | $97.91 | $5.70 | 5.82% |
| Feb HO | $2.5775 | $0.0202 | ($0.1105) | $2.6880 | $0.1453 | 5.41% |
| Feb RBOB | $2.3690 | $0.0089 | ($0.1410) | $2.5100 | $0.1616 | 6.44% |
| Feb NG | $8.302 | $0.043 | $0.451 | $7.851 | $0.643 | 8.19% |
| | | | | | | |
| Feb 08 Cracks | | | | | | |
| RBOB Crack | $5.038 | ($0.38) | ($2.62) | $7.660 | $2.04 | 26.59% |
| HO Crack | $13.795 | $0.10 | ($1.33) | $15.130 | $0.97 | 6.41% |
| 321 Crack | $7.928 | ($0.220) | ($2.20) | $10.125 | $1.685 | 16.64% |
| | | | | | | |
We expect next week to trade in a similar pattern with prices likely to head a bit lower before reaching key uptrend support levels. WTI support is around $92/bbl, HO is at $2.5300 while RBOB support is near $2.300/gal. We do not expect prices to breach these levels however the big variable will be how the market views the evolving weakness in the US economy.
Currently prices are firm in very early trading as some of the weak shorts exit the market ahead of the weekend.
| Current Expected Trading Range | | | ||
| | 1/11/08 | Change | Upper | Lower |
| | | From | Resistance | Support |
| | 12:25 AM | Yesterday | | |
| Feb WTI | $94.46 | $0.75 | $100.00 | $92.00 |
| Feb HO | $2.5775 | $0.0202 | $2.7500 | $2.5300 |
| Feb RBOB | $2.3690 | $0.0089 | $2.6500 | $2.3000 |
| Feb NG | $8.302 | $0.043 | $8.750 | $8.000 |
| | | | | |
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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