Dominick Chirichella's OilView: Latest As Of Monday Morning

Last week was the first strong down week in a long time. The price surge may be coming to an end for now as the market sentiment seems to be changing. As shown in the following table prices in the energy complex are lower across the board with crude oil leading the way lower followed closely by heating oil. Although lower the winner for the week was RBOB gasoline which declined the least in the complex. This pattern should be of no surprise as crude oil, followed by heating oil have been leading the complex higher with gasoline lagging. Gasoline has been lagging due to the significant overhang of gasoline stocks.

On the positive side of the market the refiner’s margin recovered a bit on the week. The gasoline crack which has been under tremendous pressure over the last few months led the way higher and also exhibited the highest level of volatility as measured by the percentage change in the weekly range. We will need to see if gasoline prices hold fir relative to the rest of the complex as last week’s gasoline price activity appeared to be driven more by short covering rather than a structural change in the fundamentals of gasoline. Gasoline inventories still remain over 22 million barrels above last year and at the highest level since the early 90’s.


		Trading For the Week

	Current	Change	Change	14-Mar	Weekly	Range % of
	Price	From Thurs	For Week	Settle	Range	Fri Close
	7:29 AM
May WTI	$101.24	($0.60)	($7.50)	$108.74	$10.25	9.43%
Apr HO	$2.9750	($0.0022)	($0.1715)	$3.1465	$0.2905	9.23%
Apr RBOB	$2.6051	$0.0000	($0.0843)	$2.6894	$0.2700	10.04%
Apr NG	$9.117	$0.052	($0.751)	$9.868	$1.439	14.58%

May 08 Cracks
RBOB Crack	$8.502	$0.63	$3.47	$5.033	$6.56	130.36%
HO Crack	$20.371	$0.14	$1.43	$18.940	$1.39	7.34%
321 Crack	$12.419	$0.466	$2.80	$9.622	$4.855	50.45%

The market has changed its focus (at least for the moment) to the faltering US economy and the impact it may have on demand. In addition many players are once again looking to the energy fundamentals with all eyes looking at the most recent report that showed demand in the US is now lower than last year at this time by a little over 3%. This current view is changing the market sentiment to a more neutral to bearish bias. By all measures the energy complex is still very over valued even after last week’s push to the downside. The US dollar has gained some ground last week and is also contributing to the current change in sentiment.

This will prove to be a very interesting week. If prices move lower on the week it will bring more credence to the thought that the downside market correction is solidly in place. If not, last week will then be written off as just another short term move in a very strong uptrend. We do expect volatility to continue be at above normal levels with the market assimilating all of the many potential catalysts…economy, US dollar, this week’s inventories, equities markets, etc.

This is still a very difficult market to operate in and will continues to be difficult until a clear cut pattern emerges. Currently prices are mixed in quiet overnight trading.

Current Expected Trading Range
	3/24/08	Change	Upper	Lower
		From	Resistance	Support
	7:29 AM	Yesterday
May WTI	$101.24	($0.60)	$112.50	$99.20
Apr HO	$2.9750	($0.0022)	$3.2500	$2.7100
Apr RBOB	$2.6051	$0.0000	$2.9000	$2.5200
Apr NG	$9.117	$0.052	$10.250	$8.700