AS we indicated yesterday the inventories had little impact on the market. In fact the response from the marketplace was bullish in light of a neutral at best inventory report. The net result is oil made new highs once again. Actually we have seen new highs in the oil complex everyday this week so far. The market sentiment remains very bullish and the pattern of buying any dips has been the optimum strategy over the last several months.
The main drivers remain the upcoming refining strike in Scotland that is scheduled for Sunday. Normally a refinery strike is bearish for oil and bullish for refined products. In this case the problem is the huge 700,000 bpd Forties crude oil field gets its utilities from the refinery (steam, etc). The lack of the utilities will likely result in shutting in the Forties field for the length of the strike. This on top of the evolving situation in Nigeria and the Middle East continues to raise concerns that supply will be an issue.
Fortunately supply is not an issue and does not seem likely to be a problem anytime soon. This is especially true for gasoline. Even though gasoline stocks declined for the 6th week in a row (normal for this time of the year) inventories still remain over 18 million barrels above last year at this time. With most projecting a decline in gasoline consumption this year it is unlikely there will be any supply problems with gasoline as we enter the summer driving season. In fact gasoline is extremely over-valued based on its fundamentals and very susceptible to a significant downside price correction at any time.
The US dollar is also still maintain its hold on commodities and in particular the oil complex. The dollar has firmed a bit over the last few days, especially in relationship to the Yen. With the Fed ready to meet next week with another a rate cut most likely to be the outcome of the meeting the dollar has begun to show some very early signs of a bit of short covering since another rate cut is already priced into the market. How deep this turns out to be or if it in fact is truly a short covering rally at all is still up in the air. However, many economist are starting to think this could be the last rate cut until the fall. If so the dollar could be hit with a strong round of short covering with selling in oil and other commodities as the result.
While many in the market view oil as over-valued and out of sync with the fundamentals the investment flow into oil and other commodities continues and will continue until the US dollar gains its sea legs and begins to firm consistently, not just one day out of the week. For now the dollar trend is still downward but the downtrend is weakening. Stay tuned and remain buckled up as new highs in the oil complex are likely before we see a substantial correction to the downside.
Currently prices are retracing as the dollar firms a bit in overnight trading.
Dominick A. Chirichella
Energy Management Institute
tel 646-202-1433
tel 845.368.3904
fax 801.383.7510
dchirichella@mailaec.com
www.energyinstitution.org
www.advancedenergycommerce.com
Thursday, April 24, 2008
Latest As Of Thursday
AS we indicated yesterday the inventories had little impact on the market. In fact the response from the marketplace was bullish in light of a neutral at best inventory report. The net result is oil made new highs once again. Actually we have seen new highs in the oil complex everyday this week so far. The market sentiment remains very bullish and the pattern of buying any dips has been the optimum strategy over the last several months.
The main drivers remain the upcoming refining strike in Scotland that is scheduled for Sunday. Normally a refinery strike is bearish for oil and bullish for refined products. In this case the problem is the huge 700,000 bpd Forties crude oil field gets its utilities from the refinery (steam, etc). The lack of the utilities will likely result in shutting in the Forties field for the length of the strike. This on top of the evolving situation in Nigeria and the Middle East continues to raise concerns that supply will be an issue.
Fortunately supply is not an issue and does not seem likely to be a problem anytime soon. This is especially true for gasoline. Even though gasoline stocks declined for the 6th week in a row (normal for this time of the year) inventories still remain over 18 million barrels above last year at this time. With most projecting a decline in gasoline consumption this year it is unlikely there will be any supply problems with gasoline as we enter the summer driving season. In fact gasoline is extremely over-valued based on its fundamentals and very susceptible to a significant downside price correction at any time.
The US dollar is also still maintain its hold on commodities and in particular the oil complex. The dollar has firmed a bit over the last few days, especially in relationship to the Yen. With the Fed ready to meet next week with another a rate cut most likely to be the outcome of the meeting the dollar has begun to show some very early signs of a bit of short covering since another rate cut is already priced into the market. How deep this turns out to be or if it in fact is truly a short covering rally at all is still up in the air. However, many economist are starting to think this could be the last rate cut until the fall. If so the dollar could be hit with a strong round of short covering with selling in oil and other commodities as the result.
While many in the market view oil as over-valued and out of sync with the fundamentals the investment flow into oil and other commodities continues and will continue until the US dollar gains its sea legs and begins to firm consistently, not just one day out of the week. For now the dollar trend is still downward but the downtrend is weakening. Stay tuned and remain buckled up as new highs in the oil complex are likely before we see a substantial correction to the downside.
Currently prices are retracing as the dollar firms a bit in overnight trading.
| Current Expected Trading Range | | | ||
| | 4/24/08 | Change | Upper | Lower |
| | | From | Resistance | Support |
| | 7:22 AM | Yesterday | | |
| June WTI | $117.52 | ($0.78) | $120.00 | $99.20 |
| May HO | $3.3145 | ($0.0105) | $3.4000 | $2.7100 |
| May RBOB | $3.0303 | ($0.0204) | $3.1500 | $2.5200 |
| May NG | $10.778 | ($0.003) | $11.000 | $8.700 |
| | | | | |
| Euro/$ | 1.5715 | (0.0144) | 1.6000 | 1.5200 |
| Yen/$ | 0.9685 | (0.0008) | 1.0450 | 0.9900 |
Dominick A. Chirichella
Energy Management Institute
tel 646-202-1433
tel 845.368.3904
fax 801.383.7510
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 Thursday
AS we indicated yesterday the inventories had little impact on the market. In fact the response from the marketplace was bullish in light of a neutral at best inventory report. The net result is oil made new highs once again. Actually we have seen new highs in the oil complex everyday this week so far. The market sentiment remains very bullish and the pattern of buying any dips has been the optimum strategy over the last several months.
The main drivers remain the upcoming refining strike in Scotland that is scheduled for Sunday. Normally a refinery strike is bearish for oil and bullish for refined products. In this case the problem is the huge 700,000 bpd Forties crude oil field gets its utilities from the refinery (steam, etc). The lack of the utilities will likely result in shutting in the Forties field for the length of the strike. This on top of the evolving situation in Nigeria and the Middle East continues to raise concerns that supply will be an issue.
Fortunately supply is not an issue and does not seem likely to be a problem anytime soon. This is especially true for gasoline. Even though gasoline stocks declined for the 6th week in a row (normal for this time of the year) inventories still remain over 18 million barrels above last year at this time. With most projecting a decline in gasoline consumption this year it is unlikely there will be any supply problems with gasoline as we enter the summer driving season. In fact gasoline is extremely over-valued based on its fundamentals and very susceptible to a significant downside price correction at any time.
The US dollar is also still maintain its hold on commodities and in particular the oil complex. The dollar has firmed a bit over the last few days, especially in relationship to the Yen. With the Fed ready to meet next week with another a rate cut most likely to be the outcome of the meeting the dollar has begun to show some very early signs of a bit of short covering since another rate cut is already priced into the market. How deep this turns out to be or if it in fact is truly a short covering rally at all is still up in the air. However, many economist are starting to think this could be the last rate cut until the fall. If so the dollar could be hit with a strong round of short covering with selling in oil and other commodities as the result.
While many in the market view oil as over-valued and out of sync with the fundamentals the investment flow into oil and other commodities continues and will continue until the US dollar gains its sea legs and begins to firm consistently, not just one day out of the week. For now the dollar trend is still downward but the downtrend is weakening. Stay tuned and remain buckled up as new highs in the oil complex are likely before we see a substantial correction to the downside.
Currently prices are retracing as the dollar firms a bit in overnight trading.
| Current Expected Trading Range | | | ||
| | 4/24/08 | Change | Upper | Lower |
| | | From | Resistance | Support |
| | 7:22 AM | Yesterday | | |
| June WTI | $117.52 | ($0.78) | $120.00 | $99.20 |
| May HO | $3.3145 | ($0.0105) | $3.4000 | $2.7100 |
| May RBOB | $3.0303 | ($0.0204) | $3.1500 | $2.5200 |
| May NG | $10.778 | ($0.003) | $11.000 | $8.700 |
| | | | | |
| Euro/$ | 1.5715 | (0.0144) | 1.6000 | 1.5200 |
| Yen/$ | 0.9685 | (0.0008) | 1.0450 | 0.9900 |
Dominick A. Chirichella
Energy Management Institute
tel 646-202-1433
tel 845.368.3904
fax 801.383.7510
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.
Wednesday, April 23, 2008
EIA Inventories Neutral at Best
The inventories were just released. They showed a larger than expected build in crude oil and a larger than expected increase in refinery runs. On the other hand they showed larger than expected declines in refined products. The report is neutral at best with a bias toward slightly bearish as refinery runs were increased significantly and we still saw a big build in crude oil. Also the increase in runs will quickly start to translate to the production of more refined products and thus a likely end to the weekly declines on both gasoline and distillate.
With gasoline still over 18 million barrels above last year an increase in refinery runs is bearish at this point in time.
| Oil Inventory | | 4/23/08 | | |
| Mil of Bbls | | | | |
| | Current | Change from | Change from | Change from |
| | Inv. | Last Week | Last Year | 5 Year |
| | | | | |
| Crude Oil | 316.1 | 2.4 | (18.4) | 0.1 |
| Gasoline | 212.6 | (3.2) | 18.4 | 11.3 |
| Distillate | 104.7 | (1.4) | (12.6) | (2.8) |
| Refinery % | 85.6% | 4.2% | -2.2% | -2.2% |
For the moment the market is interpreting the report as slight bearish but we will have to wait and see if this sentiment hold. Over the last several months the inventories have been discounted within an hour or so of their release.
| Current Expected Trading Range | | | ||
| | 4/23/08 | Change | Upper | Lower |
| | | From | Resistance | Support |
| | 10:37 AM | Yesterday | | |
| June WTI | $117.20 | ($0.87) | $115.00 | $99.20 |
| May HO | $3.2977 | ($0.0192) | $3.4000 | $2.7100 |
| May RBOB | $3.0128 | ($0.0036) | $3.0000 | $2.5200 |
| May NG | $10.536 | ($0.071) | $10.750 | $8.700 |
| | | | | |
| Euro/$ | 1.5835 | (0.0129) | 1.6000 | 1.5200 |
| Yen/$ | 0.9690 | (0.0061) | 1.0450 | 0.9900 |
Dominick A. Chirichella
Energy Management Institute
tel 646-202-1433
tel 845.368.3904
fax 801.383.7510
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 Wednesday Morning
Oil inventory day and hardly anyone cares. What used to be the main event each and every week has turned out to be a sideshow and only of interest if it is bullish, even remotely bullish. In order for the bears to come out the inventory report will have to be extremely bearish and then some profit taking selling could emerge. At the moment the projections are not calling for an extremely bearish report rather the indications are calling for a neutral report with normal builds & declines for this time of the year expected.
As shown in the following table the market is expecting a modest build in crude oil and declines in refined products. Refinery runs are also expected to increase on the week as some refinery maintenance begins to unwind. When viewing the projections basis last year at this time the overall complex is slightly below normal (crude deficit is offset by gasoline surplus with distillate still in modest deficit). However, when viewing the projections basis the 5 year average for the same week the overall supply picture indicates inventories are well into the normal operating range with gasoline still the most oversupplied. In fact even with gasoline stocks expected to fall for the 6th week in a row the year on year surplus is expected to build the week while the surplus compared to the 5 year average is holding steady. All signs continue to point to a well supplied gasoline market at a time when many are projecting gasoline demand to begin to waiver in light of the high prices at the retail level.
We view today’s report as neutral at best (if the actual come in as expected). However, we believe the market will view the report as bullish since the market sentiment is very biased to the upside.
| Projections | | 4/23/08 | |
| | | | |
| | Current | Change from | Change from |
| | Projections | Last Year | 5 Year |
| mmbls | | vs. Proj. | vs Proj. |
| Crude Oil | 1.2 | (19.6) | (1.2) |
| Gasoline | (2.0) | 19.5 | 12.4 |
| Distillate | (0.3) | (11.6) | (1.4) |
| Ref. Runs% | 0.7% | -5.7% | -8.3% |
| Change Level | 82.1% | 87.8% | 90.4% |
On top of today’s inventory report the market remains concerned over a potential refinery strike in Scotland at the end of the week that could result in a temporary shut-in of the North Seas Forties field, a 24 hour port strike in France and all of the normal Geopolitical hotspots like Nigeria and the Middle East. They are out there and will remain factors in the market throughout the remainder of this week. We do not expect any significant sell-off this week unless the oil inventories are extremely bearish (low probability).
Currently prices are retracing slightly as the dollar firms a bit in early trading.
| Current Expected Trading Range | | | ||
| | 4/23/08 | Change | Upper | Lower |
| | | From | Resistance | Support |
| | 7:33 AM | Yesterday | | |
| June WTI | $117.64 | ($0.43) | $115.00 | $99.20 |
| May HO | $3.3088 | ($0.0081) | $3.4000 | $2.7100 |
| May RBOB | $2.9995 | ($0.0169) | $3.0000 | $2.5200 |
| May NG | $10.520 | ($0.087) | $10.750 | $8.700 |
| | | | | |
| Euro/$ | 1.5941 | (0.0023) | 1.6000 | 1.5200 |
| Yen/$ | 0.9754 | 0.0003 | 1.0450 | 0.9900 |
Dominick A. Chirichella
Energy Management Institute
tel 646-202-1433
tel 845.368.3904
fax 801.383.7510
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.
Subscribe to:
Posts (Atom)
