In my email from yesterday I used the phrase ‘barring any unforeseen surprise”. Yesterday was a surprise on several fronts. Crude oil built 7.4 million barrels or significantly higher than expected. Refiners are keeping runs down due to poor economics and the huge overhang in gasoline inventories. So although it was a surprise it should not be a surprise to see refiners reducing gasoline inventories. Gasoline stocks declined 4.5 million barrels as demand for gasoline remains lower than the same period last year. In spite of this surprise decline in gasoline stocks inventories for this year are still 21 million barrels above last year at this time.
Overall I believe yesterday’s reaction in the marketplace was extremely over blow. I have difficulty in seeing the justification for a $0.13/gal gain in gasoline…a commodity that has record high inventories, declining demand due to price and a refining system that is operating way under normal capacity and inventories are still very surplus. This coupled with the fact that crude oil stocks are now just 11 million barrels below last year and well above the so called normal comfort range.
Added to the above the IMF came out yesterday and reduced its global growth forecast, the US Fed chairman actually used the ‘R’ word when describing the US economy going forward and the US dollar has stopped falling and has actually firmed.
I must admit all of the above indicates the market should continue its downside correction as prices remain extremely overvalued, especially gasoline. AS we have been indicating the market will continue in a choppy trading pattern with reversals and large moves at anytime on little support. Keep the seat belt buckled as the market remains in a low predictability mode and will do so for at least the next week or so.
Currently oil prices are lower on a round of profit taking selling from yesterday’s gains and on a firming dollar.
| Current Expected Trading Range | | | ||
| | 4/3/08 | Change | Upper | Lower |
| | | From | Resistance | Support |
| | 6:38 AM | Yesterday | | |
| May WTI | $103.95 | ($0.88) | $112.50 | $99.20 |
| May HO | $2.9302 | ($0.0208) | $3.2500 | $2.7100 |
| May RBOB | $2.7335 | ($0.0401) | $2.9000 | $2.5200 |
| May NG | $9.842 | $0.010 | $10.250 | $8.700 |
| | | | | |
| Euro/$ | 1.5491 | (0.0119) | 1.5818 | 1.5200 |
| Yen/$ | 0.9770 | (0.0038) | 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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