Friday Afternoon - Alert - August 22, 2008
Oil sheds all of Thursday's Gains - Downside Correction Still in Place
As we thought and suggested in this morning's report the downside correction for energy and the upside correction for the US dollar are both alive and well. Both performed true to form with oil giving back all of Thursday's short covering gains and them some while the dollar recovered most all of Thursday's losses. Further helping oil was news that Russia is in fact starting to pull its troops out of Georgia and BP has restarted the 850,000 bpd BTC pipeline that supplies oil from Azerbaijan thru Georgia to the port of Ceyhan. The BTC pipeline was shut about 2 weeks ago due to a fire. US Fed Chairman Bernanke helped the dollar in comments he made on Friday about inflation still a concern.
All in all the week is now only showing marginal gains for oil, losses for NG and almost unchanged for the dollar. As of this afternoon the oil price increase on Thursday can be classified as simply short covering while the weakness in the dollar can be categorized as profit taking selling. Both seem to be solidly back in the patterns from pre-Thursday…downward for oil & ng , upward for the dollar.
As shown in the following table oil is back to being down over 20% across the board with HO leading the way lower declining almost 25% since its peak. The dollar is now firmer by over 8% since bottoming in mid-July. Finally as we approach the last big summer driving Labor Day weekend the US national average retail gasoline price is currently lower by $0.4220/gal or 11.4% since hitting its peak on 7/17. With the Nymex (a wholesale price) RBOB gasoline price down $0.7685/gal or almost $0.35/gal more than the retail price we can expect to see the national average retail price decline to about $3.25/gal over the next few weeks or so.
The $0.422/gal decline in retail since July 17 represents a huge savings to the American consumer of about $167 million dollars per day (based on this week's EIA daily implied demand of 9.423 million barrels per day). Over the last 36 days (since peaking) the American consumer has saved over $5 billion. These savings will go a long way to help get the economy moving in the right direction. A cut in gasoline prices like we have seen already should translate into similar benefits seen from previous tax cuts and stimulus checks. With prices likely to fall further the daily savings will increase further and this is not taking into consideration the savings associated with other oil products like Jet Fuel for airlines, diesel fuel for consumers & trasnportation companies, heating oil, and NG for teh commercial & industrial sector, etc.
| Downside Oil Correction | ||
| Decline Since Peak on 7/11/08 | ||
| Change | Change | |
| From | From | |
| Peak, 7/11/08 | Peak, 7/11/08 | |
| $/bbl | % | |
| WTI | ($30.54) | -21.05% |
| HO | ($1.0336) | -24.85% |
| RBOB | ($0.7670) | -21.12% |
| Bottom 7/15/08 | Bottom 7/15/08 | |
| $/Euro | $0.0519 | 8.30% |
| US Avg | Peak, 7/17/08 | Peak, 7/17/08 |
| Retail Gas | ($0.4220) | -11.43% |
Have a Great Weeend!
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.
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