Another bearish oil inventory report and yet another bullish market interpretation. As I said yesterday bearish inventory reports are usually discounted within 24 hours and prices reverse back to the upside. This morning we are already in positive territory across the board. The inventory situation has improved once again with crude oil & distillate narrowing eh year on year gap while gasoline still remains close to 15 million barrels above last year , Just two weeks before the start of the summer driving season. Refinery runs also increased and are now close to 87% utilization rate. With refinery margins improving and the normal scheduled maintenance season coming to an end we can expect to see runs increase and likely move above the 90% level over eh next several weeks. The result will be more gasoline & distillate being produced with eh extra distillate likely moving into inventory and the additional gasoline supply likely keeping the significant year on year inventory cushion.
Another major feature of yesterday’s report was the declining demand figures. Demand has been declining over the last month or so and is lower versus last year. Elasticity of demand may be finally starting to click in due to high prices. We do not see anything in this report that justifies any type of bullish reaction. The market does not agree with that view as prices are holding firm this morning.
| Oil Inventory | | 5/15/08 | | |
| Mil of Bbls | | | | |
| | Current | Change from | Change from | Change from |
| | Inv. | Last Week | Last Year | 5 Year |
| | | | | |
| Crude Oil | 325.8 | 0.2 | (16.5) | 5.1 |
| Gasoline | 210.2 | (1.7) | 14.9 | 4.9 |
| Distillate | 107.1 | 1.3 | (12.7) | (2.1) |
| Refinery % | 86.6% | 1.6% | -2.9% | -2.9% |
As we indicated in the beginning of the week the market sentiment remains strongly bullish and participants are not yet ready to throw in the long side towel. We have already made new highs this week and we still have two trading days left. We expect volatility to remain high with little prospects for any major correction in the complex this week.
So far the market is mostly higher as the dollar weakens slightly on overnight trading.
| Current Expected Trading Range | | | ||
| | 5/15/08 | Change | Upper | Lower |
| | | From | Resistance | Support |
| | 7:43 AM | Yesterday | | |
| June WTI | $124.74 | $0.52 | $130.00 | $99.20 |
| June HO | $3.6751 | $0.0573 | $4.0000 | $2.7100 |
| June RBOB | $3.1877 | $0.0073 | $3.2500 | $2.5200 |
| June NG | $11.565 | ($0.033) | $12.000 | $8.700 |
| | | | | |
| Euro/$ | 1.5454 | 0.0020 | 1.6000 | 1.5200 |
| Yen/$ | 0.9534 | 0.0021 | 1.0450 | 0.9000 |
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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