As we have been indicating for the past several days the oil complex staged a short covering rally Thursday. Yesterday’s inventory reports for both the oils and NG was viewed as bearish with refinery runs continuing to decline due to poor economics. The oil complex continues to follow the equities markets which received a boost from Congress and the White House yesterday which confirmed $150 billion dollar stimulus package of tax rebates for families as well as incentives for business investment to help bolster the economy.
Yesterday’s oil inventory report showed crude stocks built 2.3 million barrels while distillate stocks declined 1.3 million barrels. Gasoline showed a massive build of 5 million barrels and refinery runs fell 0.6% to 86.5%. Also yesterday the EIA released NG inventories which showed 155 BCF withdrawal which was within expectations. As we mentioned yesterday when we view the 5 year average timeframe the deficit is narrowing and not so great with crude and refined products still well within the normal operating range.
We still believe from a traders perspective we are heading into a period of consolidation with the risk reward ratio moving more to risk/whipsaw side of the equation. From a hedgers perspective after analyzing yesterday’s inventory reports (which we viewed as bearish) we are going to remain on the sideline for the moment until we get a better signal of which direction the market is going to head in.
We expect the market to continue to trade in a wide trading range and remain susceptible to whipsawing on little or no news. Currently prices are firm across the board.
| Current Expected Trading Range | Jan 25,2008 | |||
| | Friday | Change | Upper | Lower |
| | as of | From Prev. | Res. | Support |
| | 7:00 AM | | | |
| Mar WTI | $88.02 | $1.03 | $92.50 | $86.00 |
| Mar Brent | $87.69 | $1.07 | $95.50 | $86.50 |
| Feb HO | $2.4565 | $0.0334 | $2.7500 | $2.4400 |
| Feb Gasoil | $777.25 | $6.50 | $840.00 | $750.00 |
| Feb RBOB | $2.2742 | $0.0234 | $2.6500 | $2.1800 |
| Feb NG | $7.705 | $0.084 | $8.000 | $7.600 |
Salvatore Umek
Energy Management Institute
tel. 201.659.7410
cell. 201.697.5834
fax. 201.624.7164
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