Not that it will matter much but today oil inventories will be released. The market is continuing to make new highs principally based on spec and investor fund flow into commodities, especially oil as a hedge against a weak dollar and lack of returns in most other investment sectors. Most of the drivers from late last week and early this week seemed to have gone away….ports opening in Mexico, pipeline problem in US, Bahrain oil well fire, etc.. In essence the market is mostly being influenced by the dollar/commodity/oil relationship that has supported the surge in oil prices to new highs.
This morning the EIA will release the latest oil inventory report. As shown in the following table the projections are calling for a build in crude oil and declines in oil products. Refinery runs are expected to increase as refinery margins have improved and some maintenance starts to end. As shown even with gasoline expected to decline for the 5th week in a row the year on year surplus remains over 22 million barrels. With gasoline now the main focus of the complex it does not appear that there will be any supply problems as we head into the upcoming driving season. When compared to the longer term average the complex shows inventories are within the normal operating range.
| Projections | | 4/16/08 | |
| | | | |
| | Current | Change from | Change from |
| | Projections | Last Year | 5 Year |
| mmbls | | vs. Proj. | vs Proj. |
| Crude Oil | 1.5 | (14.9) | 3.3 |
| Gasoline | (2.0) | 22.3 | 16.9 |
| Distillate | (1.7) | (13.0) | (1.3) |
| Ref. Runs% | 0.9% | -6.5% | -5.8% |
| Change Level | 83.9% | 90.4% | 89.7% |
We would view this week’s numbers as neutral if the actual came in as expected. However, we do not believe the market will view it that way as the market sentiment is currently overly bullish and as such we would expect the market to discount the bearish aspects of today’s report and overly embrace the bullish aspects. The market will most likely interpret today’s report as bullish unless there are big surprises from the bearish side.
We expect the market to continue to remain form and not embark on a corrective move until the spec and investor flow stops. It will take a strong short covering rally in the US dollar to change the funds flow into oil and other commodities. We do not see that happening in the very near future.
Currently oil prices are firm as the market trades at new highs as the US dollar continues to weaken versus both eh Euro & the Yen.
| Current Expected Trading Range | | | ||
| | 4/16/08 | Change | Upper | Lower |
| | | From | Resistance | Support |
| | 7:18 AM | Yesterday | | |
| May WTI | $114.31 | $0.52 | $115.00 | $99.20 |
| May HO | $3.3047 | $0.0308 | $3.4000 | $2.7100 |
| May RBOB | $2.8920 | $0.0110 | $2.9000 | $2.5200 |
| May NG | $10.299 | $0.094 | $10.500 | $8.700 |
| | | | | |
| Euro/$ | 1.5887 | 0.0143 | 1.5818 | 1.5200 |
| Yen/$ | 0.9913 | 0.0022 | 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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