In a relatively quiet day of trading yesterday the seesawed in and out of positive territory to end the day slightly higher. Overnight prices continued to move higher on expectations the FED is going to cut interest rates once again by as much as 50 basis points which will bring the key interest rate 3%. As the market awaits an announcement from the Fed, focus is expected to remain on economies and equity market movement is likely to be the gauge for direction in the crude pit. Meanwhile, the most recent comments from OPEC members suggest the group will leave production unchanged at their meeting Feb. 1 in Vienna.
Tomorrow we get another snapshot of the fundamentals for the oils and early expectation are call for a build in crude of around 2 million barrels. Gasoline is expected show a build of around 2 million barrels while distillate is expected to show a draw of around 1.6 million barrels. If expectations come in as expected we expect the market to view the inventories as neutral.
| Oil Inventory Projections | January 29, 2008 | |
| Millions of Barrels | ||
| | Current | Change from |
| | Projections | Last Yr |
| | | If Actuals = Proj. |
| Crude Oil | 2.0 | (33.5) |
| Gasoline | 2.0 | (2.3) |
| Distillate | (1.6) | (13.0) |
| Ref. Runs% | -0.1% | -0.7% |
| Change Level | 86.4% | 87.1% |
| | BCF | BCF |
| NG | (100) | (135) |
As we discussed yesterday with a combination of warmer than normal temperatures expected in the majority of the US that consumes most of the heating fuels and a building of gasoline inventories we do expect prices to remain under pressure over the next several week (barring any major shift in the direction of the equities markets). As such we expect prices will once again retest the lower support levels shown in the table at the end of this report. Over the next week or so we believe the short side of the ledger will be the trade of choice for the spec community as we continue to recommend to the buy type hedgers to remain poised to buy but not just yet.
Currently prices are higher
| Current Expected Trading Range | Jan 29,2008 | |||
| | Tuesday | Change | Upper | Lower |
| | as of | From Prev. | Res. | Support |
| | 9:00 AM | | | |
| Mar WTI | $91.19 | $0.20 | $92.50 | $86.00 |
| Mar Brent | $91.70 | $0.32 | $95.50 | $86.50 |
| Feb HO | $2.5342 | $0.0077 | $2.7500 | $2.4400 |
| Feb Gasoil | $809.50 | $14.25 | $840.00 | $750.00 |
| Feb RBOB | $2.3300 | $0.0047 | $2.6500 | $2.1800 |
| Feb NG | $8.109 | $0.014 | $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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