Latest As of Tuesday Morning

As we predicted the market has headed into a downside correction as a result of concerns over the US economy, the onset of warmer than normal weather over a major portion of the US and a general lack of any strong indications that a supply shortfall is imminent. The market is now ready to focus its attention to this week’s snapshot of inventories scheduled to be released at its normal time of Wednesday for oil & Thursday for NG.

 

As shown in the following table the market is projecting the 8^th straight decline in crude oil inventories, the 9^th straight build in gasoline inventories and a small decline in distillate stocks. Refinery runs are expected o increase again by 0.2%. Overall inventories are still expected o show a year on year deficit for the entire complex with the 5 year same week average deficit to narrow keeping inventories within the normal operating range. Refinery runs are still struggling to get back to utilization rates above the 90% level.

 

If the oil inventories come in as projected the market is likely to interpret them as neutral to slightly bearish as a result of the growing amount of gasoline and anticipation that distillate stocks will also begin to build as a result of the warm weather now in place.

 

On the NG front stocks are expected to show a slightly larger than normal withdrawal for this time of the year bringing the year on year deficit to a modest level. However, NG stocks remain very comfortable with the 5 year same week average surplus still hovering near the 200 BCF level. With warm weather in place we believe the market will interpret the NG inventories as neutral to slightly bearish.

 

 

Projections		1/8/08
	Current	Change from	Change from
	Projections	Last Year	5 Year
mmbls		vs. Proj.	vs. Proj.
Crude Oil	(0.3)	(25.4)	(4.7)
Gasoline	1.7	(3.8)	(1.0)
Distillate	(0.6)	(14.4)	(5.4)
Ref. Runs%	0.2%	-1.9%	-1.8%
Change Level	89.6%	91.5%	91.4%
	BCF	BCF	BCF
NG, BCF	(100)	(204)	190

 

The market is performing pretty much as we have expected and predicted. Prices have decline about 5% from the highs made last week. We expect the correction to continue unless this week’s inventories are decidedly bullish and/or any of the normal Geopolitical hotspots start to bubble up again. We expect volatility to remain high as the market shakes out some of the weak bulls. We must emphasize that the lower prices we have seen over the last few days is a result of a correction within a long term uptrend. Even though we expect the correction to bring prices lower from current levels we do not expect the absolute price level to breach any of the long term uptrend support levels.

 

Currently prices are slightly firmer after a strong push to the downside on Monday.

 

Current Expected Trading Range
	1/8/08	Change	Upper	Lower
		From	Resistance	Support
	1:41 AM	Yesterday
Feb WTI	$95.71	$0.62	$100.00	$90.00
Feb HO	$2.6090	$0.0155	$2.7500	$2.5000
Feb RBOB	$2.4400	$0.0102	$2.6500	$2.2000
Feb NG	$7.945	$0.066	$8.000	$7.000

 

 

 

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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