The market has softened so far this week with no new highs at this point in trading. Possibly the market is starting to lose some of its momentum? Not much new overnight other than the release of the International Energy Agency’s (IEA) latest monthly Oil Report. The main point gleaned by many so far from the report is another reduction in Global oil demand due to high prices. Elasticity of demand may be finally starting to click in. The IEA reduced their demand forecast by almost 400,000 bpd to 86.8 million barrels per day for 2008. In addition the IEA is lowering their call on OPEC crude oil for OPEC crude oil for the remainder of 2008. Other major highlights follow:
Global oil product demand has been lowered for both 2007 and 2008, to 85.8 mb/d and 86.8 mb/d respectively. Slower economic growth, high prices and 2006 baseline adjustments suggest that OECD oil demand will contract for the third successive year in 2008. Non-OECD demand growth in 2008, led by China and the Middle East, remains strong at 3.7% or 1.4 mb/d, leaving growth for the world as a whole at 1.2% (+1.0 mb/d).
April global oil supply fell by 400 kb/d month-on-month to 86.8 mb/d, pulled lower by North Sea outages, lower FSU output and weaker OPEC supplies. Although 1Q08 non-OPEC supply (ex-Angola and Ecuador) was unchanged from a year ago, OPEC supply stood 1.7 mb/d higher. Non-OPEC output growth in 2008 is now seen averaging 680 kb/d, compared with 550 kb/d in 2007.
OPEC April crude supply averaged 31.9 mb/d, 255 kb/d below March. Strike action and pipeline sabotage cut Nigerian April supply by 150 kb/d to 1.9 mb/d. Effective OPEC spare capacity stands at 2.3 mb/d on paper, although refinery outages, crude quality and high prices mean much of this oil would be difficult to market under current conditions.
End-March OECD industry stocks dipped by 1.3 mb. Together with a 19.0 mb downward revision to distillate stocks in February, this draws 1Q08 stocks by 18.7 mb or 0.2 mb/d - slightly less than the 0.4 mb/d five-year average draw. Stock cover was broadly unchanged in March at 53.3 days.
April global refinery crude throughput 72.8 mb/d is seen as a seasonal trough, with output stifled by poor economics and maintenance. Runs should rise through the second quarter to meet driving season demand, however recent improvements in Atlantic Basin gasoline supply are expected to keep margins volatile.
Further keeping the lid on prices in overnight trading is the slight strengthening of the US dollar. AS we have been indicating we believe a firming dollar will ultimately be the primary driver for driving prices from their lofty , overvalued levels. Tomorrow we also get a snapshot of inventories with the market expecting a 2.5 million build in crude oil stocks the 4th week in a row of builds. IN addition the market is expecting builds in both gasoline and distillate. Gasoline is expected to increase about 500,000 barrels while distillate is expected to rise by 1 million barrels. Yet another bearish inventory report is expected on top of a mildly bearish IEA monthly report and the question remains will the market discount both of these reports? We will be watching the markets trading pattern over the next few days along with the direction of the US dollar to look for further clues as to the market topping out. As we said yesterday we believe the probability of a correction is increasing.
Currently prices are mixed.
| Current Expected Trading Range | | | ||
| | 5/13/08 | Change | Upper | Lower |
| | | From | Resistance | Support |
| | 7:21 AM | Yesterday | | |
| June WTI | $123.89 | ($0.34) | $130.00 | $99.20 |
| June HO | $3.6008 | $0.0410 | $3.4000 | $2.7100 |
| June RBOB | $3.1608 | ($0.0034) | $3.1500 | $2.5200 |
| June NG | $11.272 | ($0.029) | $11.500 | $8.700 |
| | | | | |
| Euro/$ | 1.5455 | (0.0057) | 1.6000 | 1.5200 |
| Yen/$ | 0.9655 | 0.0010 | 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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