Another new all time historical high for oil as Libya toys with the market indicating that they may cut production due to a lack of demand. Libya trumped Saudi Arabia with one statement on Thursday that offset the big meeting held in Saudi last Sunday along with all of the energy used to get the many, many participants to fly to the Mid-East. The Libyan comment resulted in a much larger reaction in the market than the entire week of anticipating the Saudi meeting and a few days of recycling the outcome (or lack thereof).
The market also received some assistance from a weakening dollar after the Fed held pat on interest rates on Wednesday and dollar watchers begin to raise their concerned over the action the European Central Bank will take on July 3rd. If they raise interest rates it will be the catalyst for another round of dollar selling and thus very bullish for oil.
The activity in the market is demonstrative of a market that is just not ready to throw in the towel. Once again we saw the market looking like it may be weakening and heading for a deeper correction and once again the shorts in the energy complex were punished as the bulls came roaring back. The market sentiment remains bullish and the market remains at the highest level of concern over the possibility of a supply shortfall. With the cushion of surplus capacity at the lowest level in history and with inventories hovering near the lower end of normal not only will statements like that of Libya impact the market it will impact the market in a big way.
The market has once again put in solid gains for the week with HO and WTI leading the way as shown in the following table. Gasoline & NG followed the rest of the complex higher. Crude oil was driven this week primarily by the weakening dollar and concern over possible supply disruptions…Nigeria, Iran & comments of cutbacks by Libya. On the other hand HO, also the surrogate for diesel on the Nymex, has been driven a bit by the lead of crude oil and by the opportunity to continue to export diesel as a weak dollar makes this move very favorable. Diesel has been a recipient of the weak dollar making the economics of exporting diesel fuel very favorable to markets like Europe. So far this year diesel exports have been running well over last year and the 5 year average. So each time the dollar gets hit or conditions present themselves indicating that the dollar may get another hit HO firms very strongly on the Nymex and in the physical markets in anticipation of export opportunities continuing.
Refiners did not fare so well this week as the gasoline crack dragged the whole complex down possibly contributing to the reason why refinery runs showed an unexpected drop of 0.7% this week.
| | | Trading For the Week | | | ||
| | | | | | | |
| | Current | Change | Change | % Change | Weekly | Range % of |
| | Price | From | for | For | Range | Fri Close |
| | 7:35 AM | Thurs | Week | Week | | |
| Aug WTI | $141.64 | $2.00 | $6.28 | 4.64% | $9.70 | 7.17% |
| July HO | $3.9489 | $0.0655 | $0.1772 | 4.70% | $0.2502 | 6.63% |
| Jul RBOB | $3.5575 | $0.0462 | $0.1183 | 3.44% | $0.2205 | 6.41% |
| Aug NG | $13.356 | $0.108 | $0.243 | 1.85% | $0.679 | 5.18% |
| Aug 08 Cracks | | | | | | |
| RBOB Crack | $8.023 | ($0.36) | ($1.38) | -14.66% | $1.02 | 10.85% |
| HO Crack | $25.016 | $0.46 | $0.67 | 2.74% | $0.78 | 3.20% |
| 321 Crack | $13.631 | ($0.089) | ($0.70) | -5.30% | $0.941 | 7.09% |
| | | | | | | |
| Euro/$ | 1.5683 | (0.0013) | $0.0126 | 0.81% | $0.0321 | 2.06% |
| Yen/$ | 0.9453 | 0.0036 | $0.0076 | 0.81% | $0.0208 | 2.22% |
What to expect next week? Likely more of the same as many participants shorten up their works week in the US due to the upcoming 4th of July holiday next Friday. As daily activity goes down markets are susceptible to larger than normal intraday moves. Larger than normal moves could pop up next week especially if any of the usual suspects raise their head in the media…Iran, Nigeria, the dollar, etc. Volatility will once again be very high and all signs indicate that the probability the market will make another new historical high next week is increasing. Many prognosticators have been forecasting that oil will hit the $150/bbl level in 2008. At the rate the emotions and money are flowing into the market this threshold is likely to be hit next week especially if the European Central Bank does raise interest rates resulting in a negative impact on the dollar. However, the market is very much ahead of itself as of this writing and it would not be a big surprise to see negative numbers on the screen before the end of today’s trading session.
Currently the market is continuing to make new all time historical highs as of this writing Even as the dollar is holding steady.
| Current Expected Trading Range | | | ||
| | 6/27/08 | Change | Upper | Lower |
| | | From | Resistance | Support |
| | 7:35 AM | Yesterday | | |
| Aug WTI | $141.66 | $2.02 | $150.00 | $130.00 |
| July HO | $3.9489 | $0.0655 | $4.0000 | $2.7100 |
| July RBOB | $3.5575 | $0.0462 | $3.7500 | $3.0000 |
| Aug NG | $13.366 | $0.118 | $13.500 | $11.000 |
| | | | | |
| Euro/$ | 1.5683 | (0.0013) | 1.6000 | 1.5200 |
| Yen/$ | 0.9453 | 0.0036 | 1.0450 | 0.9000 |
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