The energy complex is starting this shortened holiday week on a very positive note. Prices are firm across the board on very little new information. A combination of OPEC making noise that they could cut production at their March meeting and a major fire at the 67,000 bpd Alon Big Spring refinery in Texas have been enough to give the bulls a bit more momentum.
OPEC rhetoric is starting to hit the airwaves about the potential to cut production at their upcoming March 5th meeting. However, with prices now approaching the upper end of the trading range the likelihood of that happening is starting to recede. OPEC tends to intervene when oil stocks are at the upper end of normal and prices are on the defensive. Neither is the case at the current moment.
The Alon refinery has been completely shut down and the flow of crude oil into the refinery has been halted. At the moment there is no further information regarding the cause of the explosion and/or the magnitude of the damage. Although not a major refinery the shutdown of any US refinery tends to get the spec buyers out in full force. We do not believe this will translate to any potential shortfall of products as the market is currently well supplied with products especially gasoline.
Overall the market is still trading within the wide trading range we have been discussing for the last week or so. The market sentiment has decidedly moved into a buy mode for the moment albeit on little supporting information. The fundamentals are well supplied (in spite of the ALON problem) while the usual Geopolitical hotspots are relatively quiet (Venezuela will not stop supply to the US).
We expect prices will now likely move to the upper end of the trading range (we are just about there) but we do not believe there will be enough supporting reasons to keep process at these inflated levels for a sustained period of time.
Currently prices are firm across the board.
| Current Expected Trading Range | | | ||
| | 2/19/08 | Change | Upper | Lower |
| | | From | Resistance | Support |
| | 6:51 AM | Yesterday | | |
| Mar WTI | $97.57 | $2.07 | $100.00 | $85.25 |
| Mar HO | $2.7104 | $0.0635 | $2.7500 | $2.4000 |
| Mar RBOB | $2.5611 | $0.0673 | $2.6500 | $2.2000 |
| Mar NG | $8.883 | $0.223 | $9.000 | $8.000 |
| | | | | |
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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