Latest As of Wednesday Morning

Overnight prices are slightly higher on a round of light short covering ahead of today’s oil inventories. As we have been discussing the market sentiment remains biased to the downside as it has been pretty much since the beginning of the year. We have been predicting that the energy complex will likely test the medium term support levels prior to making any recovery to the upside. For the moment the main oil drivers are biased to lower prices but defiantly not a major sell-off from current levels.

 

This morning the market is expecting significant builds in crude oil and gasoline and a modest decline in distillate and Nat gas. This will be the 5^th week in a row that crude oil will have built after declining strongly at the end of the year for accounting and tax reasons. Although crude oil will still show a strong year on year deficit when compared to the 5 year average the shortfall is minimal. Gasoline seems to be on the exact same path as last year with the year on year deficit now just about gone  and with the comparison to the 5 year average now showing a significant surplus. We are once again on a path to hitting record high post winter inventories of gasoline.

 

Distillate stocks are once again expected to fall after moderate winter type weather last week. The year on year deficit is still running in the low double digit levels, however, when  compared to the 5 year average we are still modestly higher than normal. We see a similar pattern for NG.

 

Oil Inventory Projections		February 6, 2008
Millions of Barrels
	Current	Change from
	Projections	Last Yr
		If Actuals = Proj.
Crude Oil	2.2	(29.3)
Gasoline	2.0	(1.3)
Distillate	(1.7)	(11.0)
Ref. Runs%	-0.2%	-2.6%
Change Level	84.8%	87.3%
	BCF	BCF
NG	(170)	(205)

 

 

Currently prices are firm

 

Current Expected Trading Range				Feb 6,2008
	Wednesday	Change	Upper	Lower
	as of	From Prev.	Res.	Support
	8:02 AM
Mar WTI	$88.91	$0.50	$92.50	$85.25
Mar Brent	$88.69	($0.13)	$95.50	$86.50
Feb HO	$2.4647	$0.0182	$2.5600	$2.4000
Feb Gasoil	$785.75	$1.00	$840.00	$750.00
Feb RBOB	$2.2717	$0.0070	$2.3600	$2.2000
Mar NG	$8.010	$0.068	$8.000	$7.500

 

 

 

Salvatore Umek

Energy Management Institute

tel. 201.659.7410

cell. 201.697.5834

fax. 201.624.7164

Sal@energyinstitution.org

www.energyinstitution.org

 

 

_____________________________________________________________________________________________________

CONFIDENTIALITY NOTICE: 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.

 

Latest As Of Tuesday Morning

Once again we are starting the day on the defensive as we did Monday morning. On Monday we saw another event driven reversal (as we have been warning the market remains susceptible to these types of moves) on news of Turkish activity against the Kurdish rebels in Northern Iraq.

 

So far this morning the market is moving back to where it was prior to the news as the likelihood of the activity in Northern Iraq resulting in an oil supply disruption is rather remote. So we are once again back to looking at the economy and this week’s round of inventory reports starting with oil on Wednesday.

 

As shown in the following table the market is expecting significant builds in crude oil and gasoline and a modest decline in distillate and Nat gas. This will be the 5^th week in a row that crude oil will have built after declining strongly at the end of the year for accounting and tax reasons. Although crude oil will still show a strong year on year deficit when compared to the 5 year average the shortfall is minimal. Gasoline seems to be on the exact same path as last year with the year on year deficit now just about gone  and with the comparison to the 5 year average now showing a significant surplus. We are once again on a path to hitting record high post winter inventories of gasoline.

 

Distillate stocks are once again expected to fall after moderate winter type weather last week. The year on year deficit is still running in the low double digit levels, however, when  compared to the 5 year average we are still modestly higher than normal. We see a similar pattern for NG.

 

On the refining side with gasoline stocks building and refinery margins still on the defensive we are expecting the more aggressive refiners to throttle back refinery runs further. Over time this may prove to be a bullish signal as production of refined products begins to decline resulting in a reversal of any inventory building. We need to watch this pattern over the next several weeks.

 

If the actual inventories come in as expected we would interpret the repost as neutral to biased to the bearish side.

 

Projections		2/5/08
	Current	Change from	Change from
	Projections	Last Year	5 Year
mmbls		vs. Proj.	vs. Proj.
Crude Oil	2.2	(29.3)	(1.9)
Gasoline	2.0	(1.3)	9.4
Distillate	(1.7)	(11.0)	2.2
Ref. Runs%	-0.2%	-2.5%	-2.1%
Change Level	84.8%	87.3%	86.9%
	BCF	BCF	BCF
NG, BCF	(170)	(255)	98

 

 

As we said in yesterday’s report we still expect the market to test the longer term support levels (shown in the table at the end of the report) well before the market makes another attempt to surge higher (barring any significant event to markedly change the current sentiment).

 

Finally in the category of interesting but a little stretching it we find an old line NFL team (my favorite team) the Giants winning the Super Bowl. There has been a relatively decent relationship between an old line NFL team (like the Giants) winning the Super Bowl and the pattern of the US equity market. When this happens the Dow normally ends the year at a higher level than at the beginning of the year. A bullish signal. If we really stretch the pattern and say a turnaround in equities to a more bullish pattern is likely to result in a continuation of energy demand growth in the US and thus a positive outlook for oil prices. So as the story goes the Super Bowl pattern indicates the Giants winning the Super Bowl would be bullish for equities and thus bullish for oil. As a prudent trader and investor I would strongly encourage all to do their homework and rely on more traditional signals, especially in the difficult environment we are now facing with the economy and energy prices. However, a little light thought now and again starts the day with a smile.

 

Currently oil prices are back on the defensive in early trading.

 

Current Expected Trading Range
	2/5/08	Change	Upper	Lower
		From	Resistance	Support
	5:04 AM	Yesterday
Mar WTI	$89.22	($0.80)	$92.50	$85.25
Mar HO	$2.4617	($0.0216)	$2.5600	$2.4000
Mar RBOB	$2.2895	($0.0222)	$2.3600	$2.2000
Mar NG	$7.939	$0.070	$8.000	$7.500

 

 

Dominick A. Chirichella

Energy Management Institute

tel 646.202.1433

fax 801.383.7510

dchirichella@emimail.org

www.energyinstitution.org

www.advancedenergycommerce.com

 

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.

 

 

Latest As OF Monday Morning

After spending the better part of last week not the defensive the market is opening this week also not the defensive. It seems like the energy players are not as convinced as the equity players insofar as the economic slide being slowed by the aggressive intervention by the Fed & US Legislators. Even non-action by OPEC at the Friday meeting with talk of possible cuts at the March meeting was not enough to stop the current slide.

 

Last week we saw most of the World’s equity markets put in modest gains led by the US and see ongoing follow through already in key overnight markets in Asia & Europe. However, oil is still falling and back on its way to testing key medium term support levels as detailed in the table at the end of the email.

 

The market sentiment remains biased to the downside as it has been pretty much since the beginning of the year. We have been predicting that the energy complex will likely test the medium term support levels prior to making any recovery to the upside. For the moment the main oil drivers are biased to lower prices but defiantly not a major sell-off from current levels. Although we believe prices will likely test and possibly breach the support levels shown below we also believe that OPEC is poised to intervene. We do not know at what level they will act but we think it will be someplace into the vicinity of $80/bbl basis WTI. We also believe they will intervene in March at their next meeting.

 

So yes the market has further downside but it will be limited. Not the other hand we do not see any major conditions at the moment that will propel prices back into historic triple digit levels. The market will have to gain confidence that the US economy is not falling deeper and deeper into recession. We expect this week to drift between lower with the potential for reversals at any time, especially if we see a major recovery rally in US equities.

 

Currently prices are lower across the board.

 

Current Expected Trading Range
	2/4/08	Change	Upper	Lower
		From	Resistance	Support
	6:44 AM	Yesterday
Mar WTI	$88.45	($0.51)	$92.50	$85.25
Mar HO	$2.4370	($0.0119)	$2.5600	$2.4000
Mar RBOB	$2.2730	($0.0104)	$2.3600	$2.2000
Mar NG	$7.593	($0.147)	$8.000	$7.500

 

 

Dominick A. Chirichella

Energy Management Institute

tel 646.202.1433

fax 801.383.7510

dchirichella@emimail.org

www.energyinstitution.org

www.advancedenergycommerce.com

 

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.

 

 

Latest as of Friday

Overnight the market  moved higher after news from OPEC saying they are leaving production unchanged.  Once the market digested the news it reversed and started to move lower. OPEC said in its communiqué, OPEC said the first half of 2008 was likely to witness a crude inventory build, and supply/demand forecasts indicated that commercial oil stocks are in line with the seasonal trend. Stocks are expected to remain within their five-year average during the traditionally lower-demand season in 2008, it said. In view of the current situation along with a projected economic slowdown, OPEC members agreed production level are sufficient to meet expected demand during the first quarter of 2008. As we have mentioned the earliest OPEC will adjust production will be at the March meeting. However, this time we would expect OPEC to begin to think about supporting a price floor.

 

Worries of a continued economic slump in the U.S. and the possibility of energy demand decline are seen as keeping a lid on pricing action heading into the weekend. The latest economic data from the U.S. government continued to spell bad news for the economy and for energy markets in tandem. Employers cut 17,000 jobs in January - the first such reduction in more than four years. The Labor Department's report, released today, also showed that the unemployment rate dipped slightly to 4.9 percent, from 5 percent, as the civilian labor force shrank slightly. Job losses were widespread. Meanwhile, the Federal Reserve has ordered two big interest rate reductions in just over a week in an effort to improve consumer confidence. The efforts have thus far done little to secure steady confidence as worries of a possible recession continue though stock markets were headed for a rally Friday, with sentiment bolstered by a Microsoft Corp. bid for Internet company Yahoo Inc. and new hopes for a bond insurance rescue.

 

We expect prices will remain extremely volatile and continue to trading a wide trading range as we head into the weekend. Currently prices are lower.

 

 

Current Expected Trading Range				Feb 1,2008
	Friday	Change	Upper	Lower
	as of	From Prev.	Res.	Support
	9:46 AM
Mar WTI	$90.66	($1.09)	$92.50	$86.00
Mar Brent	$91.17	($1.04)	$95.50	$86.50
Feb HO	$2.5000	($0.0291)	$2.7500	$2.4400
Feb Gasoil	$804.25	$7.25	$840.00	$750.00
Feb RBOB	$2.3219	($0.0353)	$2.6500	$2.1800
Mar NG	$7.898	($0.176)	$8.000	$7.600

 

 

Salvatore Umek

Energy Management Institute

tel. 201.659.7410

cell. 201.697.5834

fax. 201.624.7164

Sal@energyinstitution.org

www.energyinstitution.org

 

 

_____________________________________________________________________________________________________

CONFIDENTIALITY NOTICE: 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.