With equities now in a bit of a short term recovery the energy complex will focus mostly on today’s EIA release of both oil & NG inventories. The equities markets demonstrated on Wednesday that oil is not the only volatile instrument. The Dow had a trading range of over 600 points on Wednesday ending in positive territory. This was enough to keep the energy complex off of its lows of the day (although not enough to push oil into positive territory on Wed) with carry through short covering in early morning electronic trading. As of this writing oil is up over $1/bbl as the market awaits the 10:30 am EST snapshot of fundamentals.
The following table shows the latest projections for today’s reports. As shown below the report is expected to show across the board builds in oil and a modest, seasonal withdrawal for NG. When viewing the projected oil inventories versus last year and the same week for the 5 year average the only glaring problem that still exists is the year on year deficit of crude oil. However, when viewed in the 5 year average timeframe the deficit is not so great with crude and refined products still well within the normal operating range. If the actuals come in as expected we would interpret the oil report as neutral to slightly bearish.
NG is projected to show a modest withdrawal but still show a sizeable surplus versus the 5 year average. With another round of warmer than normal weather projected for most of the eastern half of the Us through Feb 6th we would expect NG to likely move into a defensive trading pattern.
| Projections | | 1/24/08 | |
| | | | |
| | Current | Change from | Change from |
| | Projections | Last Year | 5 Year |
| mmbls | | vs. Proj. | vs. Proj. |
| Crude Oil | 1.5 | (33.6) | (6.6) |
| Gasoline | 1.6 | (3.9) | 1.7 |
| Distillate | 0.1 | (12.7) | (3.2) |
| Ref. Runs% | -0.1% | -0.4% | -1.5% |
| Change Level | 87.0% | 87.4% | 88.5% |
| | BCF | BCF | BCF |
| NG, BCF | (155) | (221) | 224 |
As we have been indicating for the last several days the complex is susceptible to a round of short covering. It seems that the short covering has started during the overnight trading period after oils failed to solidly breach the long term support areas (see the last table below) along with a recovery rally in equities. We expect the price rally to extend a bit more unless the inventory reports are more bearish than the expectations are indicating. From a trading perspective we believe we are heading into a period of consolidation with the risk reward ratio moving more to the risk/whipsaw side of the equation. From a buy hedging perspective we may be getting closer to entry levels, however, we will comment more on the hedging side in tomorrow’s report after we have had an opportunity to analyze today’s inventory reports.
Currently prices are firm across the board as many of the world’s equities markets are also staging a bit of a recovery on the back of yesterday’s gains in NY.
| Current Expected Trading Range | | | ||
| | 1/24/08 | Change | Upper | Lower |
| | | From | Resistance | Support |
| | 7:29 AM | Yesterday | | |
| Mar WTI | $88.53 | $1.54 | $92.50 | $86.00 |
| Feb HO | $2.4644 | $0.0413 | $2.7500 | $2.4400 |
| Feb RBOB | $2.2865 | $0.0357 | $2.6500 | $2.1800 |
| Feb NG | $7.693 | $0.072 | $8.000 | $7.600 |
| | | | | |
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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