Wednesday Morning, August 20, 2008
As we have been warning the market continues to be susceptible to bouts of short covering. Tuesday was just one of those days as very light buying continues overnight. Tuesday's rally was primarily driven by a weak performance of the dollar. However, the dollar has reversed itself overnight and has now regained a good portion of what it lost on Tuesday. If the dollar continues to strengthen today oil will have a difficult time in remaining firm unless today's EIA & API oil inventory reports are bullish.
The market is expecting a mixed report as show by the projection for EIA's short term fundamental report. Crude and distillate are expected to show modest builds while gasoline is expected to show another large decline. Refined products inventories have been underperforming as a result of the US refining sector's strategy to keep runs at below normal levels (for this time of the year) as a result of persistent poor refinery margins.
| Projections | 8/20/08 | ||
| Current | Change from | Change from | |
| Projections | Last Year | 5 Year | |
| mmbls | vs. Proj. | vs Proj. | |
| Crude Oil | 0.9 | (39.7) | (14.7) |
| Gasoline | (3.0) | 3.6 | (0.1) |
| Distillate | 0.3 | 2.9 | 3.0 |
| Ref. Runs% | -0.1% | -5.8% | -7.8% |
| Change Level | 85.8% | 91.6% | 93.6% |
As has been the case for several months all eyes will once again focus on the demand side of the EIA report today. Demand has been on the defensive for most all of the oil products but the most visible and widely watched is gasoline. As shown in the seasonal chart of EIA implied demand 2008 gasoline consumption has been running below 2007 for almost all of 2008. Since May 2008 demand has also been below 2006 and the 5 year average. We are now approaching the time of the year when gasoline consumption normally starts to tail off strongly as the summer vacation season comes to an unfortunate end. We may see implied demand remain steady for another week or two but then it should track lower into early October and remain below last year and the 5 year average unless we see a precipitous drop in prices and the US consumer reverses back to their old consumption habits. Gasoline implied demand has been averaging about 1.4% below last year. As we have discussed several times in this report the future buying pattern of the consumer will be directly related to the level that prices ultimately stabilize at. We are currently on the downswing in prices with the US national average retail prices down about $0.40/gal from its peak in mid-July. Barring any unforeseen bullish events over the next several weeks we can expect retail prices to decline another $0.30 to 0.40/gal as retail catches up with the decline already seen at the Nymex wholesale level.
Today is likely to be all about the short term fundamental snapshots to be released at 10:35 Am EST. A close second will be the direction of the US dollar. Ongoing strength in the dollar will put downside pressure on energy prices. Our recommendations remain the same with a very big caution flag raised as the market is very susceptible to sudden reversals and bouts of short covering at any time.
Currently prices are firm across the board even as the dollar continues to move higher.
| Current Expected Trading Range | Expected Trading Range | |||
| 8/20/08 | Change | Low | High End | |
| From | End Support | Resistance | ||
| 7:42 AM | Yesterday | |||
| Sep WTI | $115.32 | $0.79 | $110.00 | $120.00 |
| Sep HO | $3.1450 | $0.0213 | $3.0700 | $3.3500 |
| Sep RBOB | $2.8775 | $0.0136 | $2.8100 | $3.0000 |
| Sep NG | $8.100 | $0.124 | $7.530 | $8.100 |
| Euro/$ | 1.4698 | (0.0047) | 1.5290 | 1.5550 |
| Yen/$ | 0.9101 | (0.0019) | 0.9200 | 0.9470 |
Best regards,
Dominick A. Chirichella
Energy Management Institute
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
To unsubscribe to this report please respond to this email with the word remove in the subject line.
Dominick A. Chirichella
Energy Management Institute
1324 Lexington Ave #322
New York, NY 10128
tel 646-202-1433
fax 801.383.7510
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.
1324 Lexington Ave #322, , New York, New York, 10128, USA
t: 646-202-1433 | f: 801-383-7510 e: dchirichella@emimail.org
No comments:
Post a Comment