Dominick Chirichella's OilView: Latest As Of Wednesday Morning

Yes it is inventory day and no the oil market is still not paying much attention to any of the normal oil drivers, especially the fundamentals. WTI is now trading over $101/bbl and leading the complex higher (just look at the weakening crack spreads as oil products lag crude oil). When crude oil leads the way higher it is normally being driven by the spec side of the equation and for reasons not normally followed by the vast majority of the oil industry.

Overnight the USD hit another record low against over a dozen various currencies and as a result oil continues to nudge higher. The relationship between oil and the USD dollar are very much in sync again almost moving tick for tick. As new signs emerge (yesterday ) that the US economy is continuing to weaken the expectations are for additional interest cuts by the FED and thus a further weakening of the USD and resulting firmness in oil. The Euro/USD & WTI price chart at the end of the report shows the Euro breaking out to the upside (US dollar weakening) and WTI continuing to gain ground. For the moment the financials are the main drivers influencing oil prices.

Although they have been put to the side today is oil inventory day. As shown in the following table we are expecting another mixed report…builds for crude oil & gasoline and a seasonal decline for distillate & Ng (tomorrow’s report). This will be the 7^th week of builds for crude oil and the 10^th week of builds for gasoline. Versus the 5 year average for the same week we still have an across the board surplus. Gasoline is the most oversupplied showing year on year surplus of over 10 million barrels with inventories at the highest level since 1993.

If the numbers come in as expected the report would normally be viewed as biased to the bearish side. However, we are not sure the market is going to pay much attention to the numbers today for the reasons discussed above.

Projections		2/27/08

	Current	Change from	Change from
	Projections	Last Year	5 Year
mmbls		vs. Proj.	vs. Proj.
Crude Oil	2.5	(21.2)	7.3
Gasoline	0.3	10.4	14.4
Distillate	(2.0)	(4.0)	6.4
Ref. Runs%	-0.1%	-2.6%	-3.5%
Change Level	83.4%	86.0%	86.9%
	BCF	BCF	BCF
NG, BCF	(150)	(113)	100

As we have been projecting the market is likely to remain in the current trading pattern for the foreseeable future as we see rallies in most all commodities, especially as the USD weakens. It remains to be seen when the energy complex will re-couple itself back to the fundamentals and other normal market drivers.

Currently prices are steady for crude oil and slightly lower for everything else.

Current Expected Trading Range
	2/27/08	Change	Upper	Lower
		From	Resistance	Support
	8:01 AM	Yesterday
Apr WTI	$101.02	$0.14	$102.50	$85.25
Mar HO	$2.8130	($0.0020)	$2.8500	$2.4000
Mar RBOB	$2.5429	($0.0076)	$2.6500	$2.2000
Mar NG	$9.131	($0.075)	$9.250	$8.250