As I said yesterday the bulls were not ready to throw in the towel and the market sentiment is still decidedly bullish. That was the case for Monday’s trading session as prices once again soared on news of the latest problems in Nigeria and a dollar that did not strengthen as the economic data from last week suggested it would. As a result of Friday & Monday’s trading session it is clear to say that the so called downside correction was once again very short and very shallow. Or better yet it is hard to call it a correction rather just another blip in the road to someplace higher.
Although the fundamentals are comfortable the market is just not comfortable with the outlook for oil supply. Spare capacity remains razor thin, demand in most places around the world have not slowed much (US possible exception) and Geopolitical events keep popping up (as evidenced in Nigeria). All of these has fueled the bullish market sentiment and is likely to continue to fuel it as move into the summer driving season. Whether or not he inventories grow over the next few weeks the market is likely to discount them as it has over the last few months.
Goldman Sacs is forecasting “super spike” in oil prices over the next 6 to 12 months to $150 to $200/bbl. They believe the energy crisis may be coming to a head, as a lack of adequate supply growth is becoming apparent and resulting in needed demand rationing in OECD area in particular the US. This forecast was released in one of their research notes on Monday. Remember Goldman was the first to forecast oil moving to $105/bbl about a year ago!
Where do we go from here? In the absence of anything strongly bearish I would have to say even high and more volatile. We will see some declines but as the last few months have shown us they will be short and shallow and likely better buying opportunities than selling opportunities. Currently prices are slightly lower with the dollar off to a mixed start.
| Current Expected Trading Range | | | ||
| | 5/6/08 | Change | Upper | Lower |
| | | From | Resistance | Support |
| | 6:59 AM | Yesterday | | |
| June WTI | $119.64 | ($0.33) | $120.00 | $99.20 |
| June HO | $3.2950 | ($0.0115) | $3.4000 | $2.7100 |
| June RBOB | $3.0466 | ($0.0063) | $3.1500 | $2.5200 |
| June NG | $11.150 | ($0.028) | $11.000 | $8.700 |
| | | | | |
| Euro/$ | 1.549 | 0.0022 | 1.6000 | 1.5200 |
| Yen/$ | 0.9561 | (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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