The market came within a few cents per barrel of making another new all time historical high on Wednesday after the market bulls were supported by a larger than expected decline in crude oil inventories and steady demand for gasoline. On the other hand the market also discounted the larger than expected build in both gasoline and distillate (HO & diesel). As we embark into the heart of the gasoline driving season stocks of gasoline are still almost 7 million barrels above last year at this time completely decreasing the likelihood of any type of gasoline supply problems this summer. The fundamentals remain comfortably balanced.
The decline of the dollar during yesterday’s trading also supported the rally in oil. However, the dollar is once again trading from the positive side overnight and has already recovered all it lost yesterday and then some. In fact the dollar (vs. the Euro) is approaching key upside resistance. If breached the dollar could easily firm another 3 to 5 % over the next month or so. This would be a huge blow to the oil bulls and one that could put the market back on the correction track that was interrupted in the middle of last week.
The market is continuing to trade in a very volatile pattern as participants not only look at the normal snippets circulating in the media but also the talk coming from governments around the world about reigning in the high price of oil (talk or pointing fingers will not do it…the world needs to use less and find more). Also the Saudi’s have called for a June 22nd meeting of producers and consumers to discuss the current surge in oil prices. Both the EIA and IEA will be attending along with the heads of major oil companies and several Wall Street Investment Banks. There is a very strong contingency coming from within OPEC and many governmental officials in consuming countries that believe the current surge has nothing to do with current or even projected fundamentals and more to do with speculation (I do not think it is either or rather a combination of tightening supply balances and a large influx of spec and investment dollars into the energy complex as oil remains the best returning investment on the block). Not sure what the meeting will conclude other than it is a good thing for both sides of the oil complex to be discussing current and future supply situations. The fact that the meeting is taking place may also serve to cap out the buying for the moment over concern that something very bearish comes out of the session (not sure what that would be).
For the moment oil is back to following the direction of the dollar. The dollar is much stronger this morning and oil is retracing a bit from yesterday’s above normal gains. Although we have been getting some down days throughout this surge the declines have continuously dwarfed the magnitude of the gains as the market sentiment remains decidedly bullish. The buyers remain clearly in control of the complex.
Currently oil is weaker while the dollar firms. We may have seen the highs for this week as long as the dollar remains firm for the next two days.
| Current Expected Trading Range | | | ||
| | 6/12/08 | Change | Upper | Lower |
| | | From | Resistance | Support |
| | 6:26 AM | Yesterday | | |
| Jul WTI | $134.41 | ($1.97) | $140.00 | $99.20 |
| July HO | $3.9246 | ($0.0502) | $4.0000 | $2.7100 |
| July RBOB | $3.4488 | ($0.0170) | $3.5000 | $2.5200 |
| July NG | $12.614 | ($0.046) | $13.000 | $11.000 |
| | | | | |
| Euro/$ | 1.543 | (0.0135) | 1.6000 | 1.5200 |
| Yen/$ | 0.9289 | (0.0063) | 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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