Oil inventory day and hardly anyone cares. What used to be the main event each and every week has turned out to be a sideshow and only of interest if it is bullish, even remotely bullish. In order for the bears to come out the inventory report will have to be extremely bearish and then some profit taking selling could emerge. At the moment the projections are not calling for an extremely bearish report rather the indications are calling for a neutral report with normal builds & declines for this time of the year expected.
As shown in the following table the market is expecting a modest build in crude oil and declines in refined products. Refinery runs are also expected to increase on the week as some refinery maintenance begins to unwind. When viewing the projections basis last year at this time the overall complex is slightly below normal (crude deficit is offset by gasoline surplus with distillate still in modest deficit). However, when viewing the projections basis the 5 year average for the same week the overall supply picture indicates inventories are well into the normal operating range with gasoline still the most oversupplied. In fact even with gasoline stocks expected to fall for the 6th week in a row the year on year surplus is expected to build the week while the surplus compared to the 5 year average is holding steady. All signs continue to point to a well supplied gasoline market at a time when many are projecting gasoline demand to begin to waiver in light of the high prices at the retail level.
We view today’s report as neutral at best (if the actual come in as expected). However, we believe the market will view the report as bullish since the market sentiment is very biased to the upside.
| Projections | | 4/23/08 | |
| | | | |
| | Current | Change from | Change from |
| | Projections | Last Year | 5 Year |
| mmbls | | vs. Proj. | vs Proj. |
| Crude Oil | 1.2 | (19.6) | (1.2) |
| Gasoline | (2.0) | 19.5 | 12.4 |
| Distillate | (0.3) | (11.6) | (1.4) |
| Ref. Runs% | 0.7% | -5.7% | -8.3% |
| Change Level | 82.1% | 87.8% | 90.4% |
On top of today’s inventory report the market remains concerned over a potential refinery strike in Scotland at the end of the week that could result in a temporary shut-in of the North Seas Forties field, a 24 hour port strike in France and all of the normal Geopolitical hotspots like Nigeria and the Middle East. They are out there and will remain factors in the market throughout the remainder of this week. We do not expect any significant sell-off this week unless the oil inventories are extremely bearish (low probability).
Currently prices are retracing slightly as the dollar firms a bit in early trading.
| Current Expected Trading Range | | | ||
| | 4/23/08 | Change | Upper | Lower |
| | | From | Resistance | Support |
| | 7:33 AM | Yesterday | | |
| June WTI | $117.64 | ($0.43) | $115.00 | $99.20 |
| May HO | $3.3088 | ($0.0081) | $3.4000 | $2.7100 |
| May RBOB | $2.9995 | ($0.0169) | $3.0000 | $2.5200 |
| May NG | $10.520 | ($0.087) | $10.750 | $8.700 |
| | | | | |
| Euro/$ | 1.5941 | (0.0023) | 1.6000 | 1.5200 |
| Yen/$ | 0.9754 | 0.0003 | 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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