Our projection remains on the money as the energy complex slide further on a bearish oil inventory report. The entire oil complex saw build much greater than expected with refinery run declines the only ray of support for the complex. Refinery runs are declining as a result of the poor economics. The widely followed 3-2-1 crack spread is down $2.60/bbl or 23.8% since the beginning of the year. The gasoline portion is leading the margins lower as the RBOB crack is down $3.75/bbl or about 43.4% year to date.
With the fundamentals becoming less supportive of a surge in prices and much of the to the normal oil catalysts’ relatively quiet the market remains focused on the daily ups and downs of the US economy of which is not doing too goo in terms of equity markets. The Down remains down about 6% year to date. Until either the economic news improves and/or the energy fundamentals or Geopolitics turn bullish the market is going to struggle with moving to higher levels. Currently we are hovering near the long term uptrend support levels. In fact we actually breached the WTI support level at one point during Wednesday’s trading session but the market was able to manage a settlement above this key level. The current support levels are shown in the following table.
We expect the market to remain in a defensive pattern with spurts of short covering as the weak shorts exit the market. In very early overnight trading oil is steady while NG is slightly lower ahead of NG inventories today. The market is expecting a withdrawal of about 65 BCF. At this level NG remains well supplied as it will still be almost 200 BCF above the 5 year average for the same week.
| Current Expected Trading Range | | | ||
| | 1/16/08 | Change | Upper | Lower |
| | | From | Resistance | Support |
| | 11:37 PM | Yesterday | | |
| Feb WTI | $91.02 | $0.18 | $100.00 | $90.00 |
| Feb HO | $2.5270 | $0.0086 | $2.7500 | $2.4500 |
| Feb RBOB | $2.2860 | $0.0077 | $2.6500 | $2.1800 |
| Feb NG | $8.053 | ($0.080) | $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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