The complex has bounced off of its medium term lows starting late last week and extending the gains into Monday based on Chavez’s threat to embargo the US (due to Exxon freezing Venezuelan assets to protect themselves during negotiations), renewed problems in Nigeria, a return to more winter like weather in the Northeast and a stabilizing equities market. However, as we enter today’s session the market is already strongly lower as it starts to discount some of the above drivers and reverts to getting ready for tomorrow’s oil inventory report.
The fundamentals have been improving over the last few weeks and this week’s report is expected to show continued improvement in both crude oil and gasoline stocks. The market is expecting the 5 week in a row of builds for crude oil and another strong build in gasoline. The year on year surplus of gasoline is expected to widen again. Distillate is expected to show a modest decline as a result of some cold weather. Refinery runs should remain at current levels.
Overall the projected inventories compared to the same week for the 5 year average continues to show a modest surplus indicating the system is still well supplied. IF the numbers come in as expected we would view the reports as neutral to biased to eth bearish side.
| Projections | | 2/12/08 | |
| | | | |
| | Current | Change from | Change from |
| | Projections | Last Year | 5 Year |
| mmbls | | vs. Proj. | vs. Proj. |
| Crude Oil | 2.5 | (21.4) | 5.6 |
| Gasoline | 1.5 | 3.8 | 11.1 |
| Distillate | (1.4) | (7.6) | 5.3 |
| Ref. Runs% | 0.0% | -2.3% | -3.5% |
| Change Level | 84.3% | 86.6% | 87.8% |
| | BCF | BCF | BCF |
| NG, BCF | (150) | (176) | 85 |
We expect the market will continue to trade in the range shown in the table at the end of the report. We still do not think there is sufficient eternal forces to drive prices back to the all time highs. With the fundamentals improving (inventories building),the weather expected to once again moderate and the likelihood of Chavez cutting supplies to the US to be remote at best we would expect prices to drift lower once again. We expect volatility to remain high with sudden changes in direction (as we saw last week) on little new information.
Currently prices are lower across the board.
| Current Expected Trading Range | | | ||
| | 2/12/08 | Change | Upper | Lower |
| | | From | Resistance | Support |
| | 7:58 AM | Yesterday | | |
| Mar WTI | $92.34 | ($1.25) | $94.62 | $85.25 |
| Mar HO | $2.5790 | ($0.0254) | $2.6600 | $2.4000 |
| Mar RBOB | $2.3655 | ($0.0307) | $2.4900 | $2.2000 |
| Mar NG | $8.470 | ($0.061) | $8.690 | $7.500 |
| | | | | |
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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