So far the last trading day of the week is starting out with a bit of position squaring ahead of the weekend. The dollar is on the weak side as some of the dollar bulls take some profits from this week’s firming while the opposite is happening on the oil & NG side after a strong down week. The energy complex has finally rewarded the bears over the last two weeks and now some of them are trading from the cautious side and as such we have a light short covering rally so far today in the energy complex.
This is the second week in a row of the downside correction in energy and the upside correction of the dollar. The biggest mover on the board this week has been NG which is now solidly trading in single digits after falling over $1/mmbtu so far on the week. NG inventories are very comfortable with mostly normal weather around the country.
On the oil side refined products (RBOB & HO) led the market lower after another larger than expected build in product inventories coupled with a further reduction in consumption. For once WTI followed the lead of refined products rather than the opposite. Although this week did not nearly experience the magnitude of the record decline we saw last week it was still a fairly strong down move and one that suggest that the correction is not yet over. Over the last two week WTI is down almost $20/bbl while products are down almost $0.50/gal.
On the currency side the US dollar has once again firmed versus most major currencies. As shown on the EMI weekly price board below the dollar gained a little over 0.5% on the week versus the Euro. The dollar has breached short term resistance levels suggesting further firming over the dollar over the short to medium term. If the dollar does in fact continue to firm we can expect to see further selling in the oil & commodity complex.
| | | EMI Weekly Price Board | | | ||
| | | | | | | |
| | Current | Change | Change | % Change | Weekly | Range % of |
| | Price | From | for | For | Range | Fri Close |
| | 7:57 AM | Thurs | Week | Week | | |
| Sep WTI | $126.23 | $0.74 | ($2.65) | -2.06% | $8.53 | 6.62% |
| Aug HO | $3.5966 | $0.0295 | ($0.0949) | -2.57% | $0.2495 | 6.76% |
| Aug RBOB | $3.0833 | $0.0239 | ($0.0876) | -2.76% | $0.2355 | 7.43% |
| Aug NG | $9.424 | $0.101 | ($1.146) | -10.84% | $1.910 | 18.07% |
| Sep 08 Cracks | | | | | | |
| RBOB Crack | $4.029 | $0.31 | ($0.50) | -10.99% | $0.88 | 19.44% |
| HO Crack | $25.961 | $0.48 | ($0.91) | -3.40% | $1.66 | 6.18% |
| 321 Crack | $11.266 | $0.365 | ($0.63) | -4.78% | $1.137 | 8.57% |
| | | | | | | |
| Euro/$ | 1.5696 | 0.0080 | ($0.0100) | -0.63% | $0.0316 | 2.00% |
| Yen/$ | 0.9338 | (0.0004) | ($0.0046) | -0.49% | $0.0173 | 1.84% |
Good week for the bears, another bad week for the bulls. However the energy bulls have had a great run so far this year. Even with a pretty decent price decline the oil complex is still the best show in town showing gains of over 30% year to date. There is no other class of investment vehicles that are showing year to date returns greater than the energy complex. With equities still down about 15% on the year the investor is still going to be looking at energy as a viable investment alternative and as such we may begin to see a new round of money flows coming into the complex as many begin to view the correction as another good buying opportunity.
Further adding to the cautiousness of the current declining trend is all of the problems that Hurricane Dolly caused this week in the Gulf. None of the problems were major or even significant but all coupled together they will probably result in a decline in both crude oil and refined product inventories when next Wednesday’s report is issued by the EIA. Also the numbers could be further skewed as a result of the closure of a major portion of the Mississippi River to barge traffic this week.
Also lets us not forget all of the normal Geopolitical hotspots. The Nigerian group MEND is once again threatening to disrupt supply over the next month or so as they warned they may interrupt some of the pipelines. An yes there is Iran. The saga continues as now the feisty Iranian President is once again insisting in the media that Iran will not stop its enrichment program. Both of these issues are likely to gain the attention of the oil bulls next week.
The market is in a short term downside correction. By no means is oil or NG poised to fall back to the levels from a few years ago. This is still a downside correction in a long term uptrend. All of the reasons why the market has been in a long term uptrend are still alive and well. We still believe the market has a bit lower to go but we are beginning to view the correction as starting to lose some momentum. We could see a bit of a relief rally next week as all of the above items begin to emerge with the oil & ng inventory reports likely to play a role in the direction of the market during the second half of the week.
The specs who are still on the short side should view the market with caution and work with very tight stops. The buy side hedgers should continue to look for forward hedging entry opportunities.
Currently prices are firm for energy and weaker and mixed for the dollar.
| Current Expected Trading Range | Expected Trading Range | |||
| | 7/25/08 | Change | Low | High End |
| | | From | End Support | Resistance |
| | 7:57 AM | Yesterday | | |
| Sep WTI | $126.24 | $0.75 | $121.00 | $128.00 |
| Aug HO | $3.5966 | $0.0295 | $3.5200 | $3.7000 |
| Aug RBOB | $3.0833 | $0.0239 | $3.0300 | $3.1700 |
| Aug NG | $9.424 | $0.101 | $9.200 | $10.300 |
| | | | | |
| Euro/$ | 1.5696 | 0.0080 | 1.5550 | 1.5750 |
| Yen/$ | 0.9337 | (0.0005) | 0.9200 | 0.9470 |
The Energy Management Institute operates a fleet of daily, weekly and biweekly energy publications covering various angles of the energy market, including over a decade of natural gas and power price indexing. In addition, EMI provides higher learning for energy professionals with comprehensive, fully accredited, energy education programs from basic to advanced level. It also provides critical business information services and thought leadership in the energy segments of Oil, Gas, Power, Alternative Fuels, soft commodities and metals.
For more info visit our website (www.energyinstitution.org), email EMI at info@energyinstituion.org or call 888-871-1207
Dominick A. Chirichella
Energy Management Institute
1324 Lexington Ave #322
New York, NY 10128
tel 646-202-1433
fax 801.383.7510
To unsubscribe to this report please respond to this email with the word remove in the subject line.
This message and any attachments relate to the official business of the Energy Management Institute ("EMI") and are proprietary to EMI. This e-mail transmission may contain information that is proprietary, privileged and/or confidential and is intended exclusively for the person(s) to whom it is addressed. Any use, copying, retention or disclosure by any person other than the intended recipient or the intended recipient's designees is strictly prohibited. If you are not the intended recipient, you are hereby notified that any disclosure, copying, distribution or the taking of any action in reliance on this information is strictly prohibited. If this message has come to you in error, please immediately notify the sender by telephone or return e-mail and delete the original transmission and its attachments without reading or saving in any manner. Thank you.
No comments:
Post a Comment