BP released their annual world energy review and reported that total world oil production and reserves fell for the first time in 5 years in 2007. Another strong indicator to keep the overall market sentiment strongly bullish. After moving lower on firm dollar trading on Tuesday the market is back on the upside after the BP report and a weaker dollar in overnight trading. With the way the market has traded over the last week or so it is clear that the downside moves we have seen have been just short and shallow corrections and the market remains concerned over potential shortfalls of supply going forward. IN addition the IEA reminded the market that supply balances are tight as they indicated that they stood ready to release the World’s Strategic Petroleum Reserves in the event of an event that results in a shortfall. The last time the IEA released Oil from the World’s stockpile was after Hurricanes Katrina & Rita. Not that there is an event looming but the statement by the IEA was enough to bring out some additional anxiety buying in the market.
The market remains biased to the upside as the industry awaits this morning’s weekly release of oil fundamentals by the EIA. The report is expected to show a drop in crude oil of about 1 million barrels as a result of an increase in refinery runs. On the other hand gasoline is expected to increase by about 1.2 million barrels widening the year on year surplus of gasoline. Distillate stocks are expected to increase also by about 1 million barrels. Demand figures should once again show a year on year decline with the demand decline trend continuing. Overall the repost is expected o be neutral to bearish but will likely be discounted by the marketplace in lieu of the aforementioned bullish news circulating in the media.
Short term the market is well supplied. Beyond that the market remains driven by the potential of an event (whatever that even may be) that could result in a supply shortfall and the short dollar/long oil trade. Trading activity in all of the energy trading venues is reflective of that mentality and will continue to be driven by that belief until proven otherwise. So far every time a short side viewpoint begins to emerge in the complex it is met by quick reversals punishing all those venturesome traders that attempt to go short. The buy side remains clearly in control of the market.
Based on the pattern of trading so far this week we still stand a good chance of making another new historical high especially if today’s EIA inventory report is even remotely bullish. Volatility will remain high. Currently oil is firm while the dollar is trading lower.
| Current Expected Trading Range | | | ||
| | 6/11/08 | Change | Upper | Lower |
| | | From | Resistance | Support |
| | 6:56 AM | Yesterday | | |
| Jul WTI | $133.01 | $1.70 | $140.00 | $99.20 |
| July HO | $3.8685 | $0.0561 | $4.0000 | $2.7100 |
| July RBOB | $3.3741 | $0.0548 | $3.5000 | $2.5200 |
| July NG | $12.484 | $0.049 | $13.000 | $11.000 |
| | | | | |
| Euro/$ | 1.5494 | 0.0051 | 1.6000 | 1.5200 |
| Yen/$ | 0.9317 | 0.0005 | 1.0450 | 0.9000 |
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