Overnight the market moved higher after news from OPEC saying they are leaving production unchanged. Once the market digested the news it reversed and started to move lower. OPEC said in its communiqué, OPEC said the first half of 2008 was likely to witness a crude inventory build, and supply/demand forecasts indicated that commercial oil stocks are in line with the seasonal trend. Stocks are expected to remain within their five-year average during the traditionally lower-demand season in 2008, it said. In view of the current situation along with a projected economic slowdown, OPEC members agreed production level are sufficient to meet expected demand during the first quarter of 2008. As we have mentioned the earliest OPEC will adjust production will be at the March meeting. However, this time we would expect OPEC to begin to think about supporting a price floor.
Worries of a continued economic slump in the U.S. and the possibility of energy demand decline are seen as keeping a lid on pricing action heading into the weekend. The latest economic data from the U.S. government continued to spell bad news for the economy and for energy markets in tandem. Employers cut 17,000 jobs in January - the first such reduction in more than four years. The Labor Department's report, released today, also showed that the unemployment rate dipped slightly to 4.9 percent, from 5 percent, as the civilian labor force shrank slightly. Job losses were widespread. Meanwhile, the Federal Reserve has ordered two big interest rate reductions in just over a week in an effort to improve consumer confidence. The efforts have thus far done little to secure steady confidence as worries of a possible recession continue though stock markets were headed for a rally Friday, with sentiment bolstered by a Microsoft Corp. bid for Internet company Yahoo Inc. and new hopes for a bond insurance rescue.
We expect prices will remain extremely volatile and continue to trading a wide trading range as we head into the weekend. Currently prices are lower.
| Current Expected Trading Range | Feb 1,2008 | |||
| | Friday | Change | Upper | Lower |
| | as of | From Prev. | Res. | Support |
| | 9:46 AM | | | |
| Mar WTI | $90.66 | ($1.09) | $92.50 | $86.00 |
| Mar Brent | $91.17 | ($1.04) | $95.50 | $86.50 |
| Feb HO | $2.5000 | ($0.0291) | $2.7500 | $2.4400 |
| Feb Gasoil | $804.25 | $7.25 | $840.00 | $750.00 |
| Feb RBOB | $2.3219 | ($0.0353) | $2.6500 | $2.1800 |
| Mar NG | $7.898 | ($0.176) | $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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