So much for the correction. Oil prices reversed overnight with WTI leading the way on news of another militant attack on a pipeline in Nigeria. However, most of the upside move is in crude oil so far and with the US dollar still firm it is uncertain if oil will be able to hold its gains today. The dollar has been firming (short covering rally) on a feeling the Fed may be making its last rate adjustment next week before staying pat until its gets a better feel on inflation risk in the US. In fact the dollar has put in its largest weekly gain on over a month versus the Euro.
On the week the energy complex gained slightly for everything other than HO which decline a tad over 1% on the week. The rest of the complex put in only minor gains suggesting that the uptrend may be running out of steam. On the refining side margins for the widely followed 3-2-1 crack was about unchanged on the week with the RBOB crack firming slightly and the HO crack weakening slightly. A neutral week for refiners but a better week that they have seen just a month ago when margins were falling across the board.
As mentioned above the US dollar firmed against most currencies this week with the dollar appreciating a little over 1% versus the Euro and about 0.68% versus the Yen. This has definitely contributed to putting a lid on oil prices for the week and if this pattern continues it will likely translate into further downside movement in the energy complex. See the chart of the $ (versus the Euro) and WTI prices.
| | | Trading For the Week | | | ||
| | | | | | | |
| | Current | Change | Change | % Change | Weekly | Range % of |
| | Price | From | for | For | Range | Fri Close |
| | 7:47 AM | Thurs | Week | Week | | |
| June WTI | $116.58 | $0.52 | $0.42 | 0.36% | $4.73 | 4.07% |
| May HO | $3.2590 | $0.0007 | ($0.0333) | -1.01% | $0.0694 | 2.11% |
| May RBOB | $3.0160 | ($0.0026) | $0.0267 | 0.89% | $0.0827 | 2.77% |
| May NG | $10.783 | ($0.007) | $0.196 | 1.85% | $0.449 | 4.24% |
| June 08 Cracks | | | | | | |
| RBOB Crack | $9.672 | ($0.66) | $0.72 | 8.08% | $1.48 | 16.49% |
| HO Crack | $19.878 | ($0.48) | ($0.80) | -3.88% | $1.44 | 6.96% |
| 321 Crack | $13.040 | ($0.600) | $0.22 | 1.71% | $1.464 | 11.42% |
| | | | | | | |
| Euro/$ | 1.5567 | (0.0084) | ($0.0200) | -1.27% | $0.0461 | 2.92% |
| Yen/$ | 0.9597 | (0.0016) | ($0.0066) | -0.68% | $0.0204 | 2.11% |
Energy prices remain over-valued. The fundamentals do not support the current price environment nor does the Geopolitical noise circulating in the market. The main driver is still the dollar and the huge investment flows that have been entering the commodity marketplace. With the dollar possibly bottoming out and setting-up for a directional change (will depend on the Fed move next week and beyond) we could be nearer a downside correction in oil and other commodities. Gold has been retracing to the downside over eh last few weeks as investors may be starting to believe the dollar rout may be over for the time being.
Next week we expect the high level of volatility to continue. We will be watching the movement of dollar to see if we are getting an early warning signal as to the direction of oil. Currently prices are mixed in the energy complex while the dollar firms slightly in early trading.
| Current Expected Trading Range | | | ||
| | 4/25/08 | Change | Upper | Lower |
| | | From | Resistance | Support |
| | 7:47 AM | Yesterday | | |
| June WTI | $116.58 | $0.52 | $120.00 | $99.20 |
| May HO | $3.2590 | $0.0007 | $3.4000 | $2.7100 |
| May RBOB | $3.0160 | ($0.0026) | $3.1500 | $2.5200 |
| May NG | $10.783 | ($0.007) | $11.000 | $8.700 |
| | | | | |
| Euro/$ | 1.5567 | (0.0084) | 1.6000 | 1.5200 |
| Yen/$ | 0.9597 | (0.0016) | 1.0450 | 0.9900 |
Dominick A. Chirichella
Energy Management Institute
tel 646-202-1433
tel 845.368.3904
fax 801.383.7510
www.advancedenergycommerce.com
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