As we have heard the saying many times before “It’s all about the economy”. The energy complex has been under pressure pretty much since the beginning of 2008…much like the equities markets. The last several weeks have seen oil pushing closer to the longer term uptrend support areas as weak economic stats have sent investors into a defensive mood.
All of the other normal energy market catalysts have been relatively neutral with the exception of the fundamentals which now appear to be turning into a building pattern (refined products). With refinery runs now over the 91% utilization mark we can expect to see further builds in products especially gasoline.
Since the beginning of the year Nat Gas is the only positive commodity in the energy complex. Crude Oil & HO are down over 3% while gasoline is down twice as much as everything else (6.48%). This has negatively impacted the refining sector narrowing crack spread margins with the widely followed 3-2-1 crack down almost $3/bbl since the beginning of the year or over 26%.
| | | | | |
| 2007 Performance of Nymex Energy Contracts | ||||
| | | | | |
| | 1/14/08 | 29-Dec | Change | % Change |
| | 2008 | 2007 | For YTD | YTD |
| | | | | |
| Feb WTI | $92.97 | $95.98 | ($3.01) | -3.14% |
| Feb HO | $2.5545 | $2.6494 | ($0.0949) | -3.58% |
| Feb RBOB | $2.3293 | $2.4908 | ($0.1615) | -6.48% |
| Feb NG | $8.399 | $7.483 | $0.916 | 12.24% |
| | | | | |
| HO Crack | $14.32 | $15.29 | ($0.98) | -6.38% |
| RBOB Crack | $4.86 | $8.63 | ($3.77) | -43.70% |
| 3-2-1 Crack | $8.06 | $10.94 | ($2.88) | -26.32% |
We do expect prices to remain on the defensive as long as the equities remain weak. We also expect volatility to remain above normal with the market susceptible to reversals at any time as we stat approaching key support areas especially since the market is now approaching short-term oversold conditions. Barring any major shifts in sentiment we could see WTI dipping down to the $90/bbl level, HO down to $2.44/gal and RBOB down to $2.24/gal.
Currently prices are all in positive territory in very light early overnight trading.
| Current Expected Trading Range | | | ||
| | 1/14/08 | Change | Upper | Lower |
| | | From | Resistance | Support |
| | 1:10 AM | Yesterday | | |
| Feb WTI | $92.98 | $0.29 | $100.00 | $92.00 |
| Feb HO | $2.5545 | $0.0186 | $2.7500 | $2.5300 |
| Feb RBOB | $2.3293 | $0.0090 | $2.6500 | $2.3000 |
| Feb NG | $8.399 | $0.189 | $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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