With little upside support the complex continues to trade from the negative side. So the oil complex is lower on the week following last week’s modest decline. As we said in the beginning of the week inventories and currencies were likely to play a large role in the outcome of trading this week. So far we saw a the result of the US dollar continuing to hold stay and firm a bit and today we get a snapshot of oil stocks & demand.
The market is expecting a build of crude and products an increase in refinery runs and a reduction in demand, especially gasoline demand. All eyes will be focused on the latest demand figures released today as many have been forecasting a reduction in demand due to high prices. Some retail based reports like Mastercard has reported demand shrinkage in both of the week surrounding the Memorial Day holiday weekend. As shown in the following chart gasoline demand has been gradually declining since peaking in early August of 2007. On a same week basis (last week) gasoline demand is down 1.2% or a little over 100,000 bbls per day versus the same week last year. IN addition total US oil demand is down week on week versus last year about 2% or a little over 400,000 bpd. This indicates that we are not only seeing elasticity of demand on the gasoline side but across the entire energy infrastructure. If all of the projections materialize we should expect to see this trend continue with minimal likelihood of a huge summer spike up in demand.
Today and the rest of the week will continue to be all about the EIA numbers and how the dollar trades for the remainder of the week. Yesterday some pretty strong statements emerged from the FED indicating that they were done cutting rates and the most lily next move will be higher rates. They also expressed their strong concern over eh weak dollar and the resulting exposure to inflation caused by the current dollar pattern. Sure sounds like another indication that higher rates and a firming dollar are more likely going forward than another strong round of dollar selling. All of this is bearish for oil.
Currently the market is mixed.
| Current Expected Trading Range | | | ||
| | 6/4/08 | Change | Upper | Lower |
| | | From | Resistance | Support |
| | 7:37 AM | Yesterday | | |
| Jul WTI | $123.80 | ($0.51) | $135.00 | $99.20 |
| July HO | $3.6300 | ($0.0096) | $4.0000 | $2.7100 |
| July RBOB | $3.3550 | $0.0025 | $3.5000 | $2.5200 |
| July NG | $12.117 | ($0.104) | $12.500 | $11.000 |
| | | | | |
| Euro/$ | 1.5454 | (0.0003) | 1.6000 | 1.5200 |
| Yen/$ | 0.9556 | 0.0015 | 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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