Another week and the market sentiment still remains biased to the upside. Last week’s plethora of bad news was not enough to turn the sentiment and follow through on what many thought was the beginning of the downside correction. The ingredients are in place. The fundamentals are well supplied and the dollar is still in a bottoming pattern with a much higher probability of firming rather than getting hit with a groundswell of selling. This all points toward a lowering of energy prices not another surge to the upside.
However, after declining strongly for most of last week the market interpreted Friday’s job report as bullish for oil demand. Interesting since jobs declined, but not as much as expected. IF jobs are declining and prices are very high the logic is demand will likely follow the projections of EIA and that is a decline this upcoming driving season. This was enough to move prices strongly on Friday. Interestingly the jobs report also suggest that the Fed may be done easing which is bullish for the dollar and thus bearish for oil. Many confusing and divergent interpretations of what the market is going to do going forward. The only certainty is higher volatility and at least coming into this morning the sentiment is still bullish and the market is not yet ready to allow for a correction.
The situation is changing continuously and it would not be surprising to see the current rally fizzle or surge higher. This morning prices are firm on news of more violence in Nigeria over the weekend and a dollar that is slightly weaker to start the day. The majority of the normal market drivers do suggest that the market has a higher probability of a correction than a surge higher. However, that has been the case for several weeks and the market has pretty much ignored those signals.
We see prices trading in a wide trading range until this week’s oil inventories are released and/or the dollar stars firming. Currently prices are mostly firmer.
| Current Expected Trading Range | | | ||
| | 5/5/08 | Change | Upper | Lower |
| | | From | Resistance | Support |
| | 6:49 AM | Yesterday | | |
| June WTI | $116.79 | $0.47 | $120.00 | $99.20 |
| June HO | $3.2200 | $0.0013 | $3.4000 | $2.7100 |
| June RBOB | $2.9572 | ($0.0092) | $3.1500 | $2.5200 |
| June NG | $10.823 | $0.046 | $11.000 | $8.700 |
| | | | | |
| Euro/$ | 1.5436 | 0.0050 | 1.6000 | 1.5200 |
| Yen/$ | 0.9528 | 0.0005 | 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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