Early Energy Update - 03/10/2010 12:00 AM - BAL 6:20 AM
*Crude resumes upside move
*API inventory mixed story
*China demand in February very strong
Crude is currently up .20. Distillate up 1 and gasoline up 1.4 cents. Nat gas is unchanged. The market had extended yesterday’s losses into early evening on an API inventory number that showed a 6.5 million barrel spike in crude oil inventory. Products, however, did show a 5.9 million barrel reduction in stocks and a small drop in refinery utilization so the report on balance was pretty neutral. This is not unusual for a spring gasoline led rally in this market. Overnight China released information that showed February was their second largest month ever for daily crude oil imports. My best guess is that they are dumping a large amount into their strategic reserves but none-the-less it is viewed as the emerging nations renewed appetite for energy by the market. The news should be dominated early today by the Dept of Energy weekly inventory number of which particular attention should be paid to the implied demand values. The dollar this morning is also higher and may be keeping the lid on energy values. World stocks were mostly higher as well. And finally, this from CNBC this morning…. Meanwhile, U.S. economists trimmed their growth forecast for next year, although they raised expectations for economic growth this year, a survey released Wednesday showed. But economist Nouriel Roubini, who predicted the 2007 financial crisis, said in a research note that the risk of a double-dip recession has risen because of poor economic data in the US and Europe's debt crisis.
Afternoon Energy Update - 03/10/2010 12:00 AM - BAL 3:00 PM EST
*After some profit taking energy market moves higher again
*Bullish inventory numbers
*OPEC forecasts higher demand for balance of year
*OPEC unlikely to change production when they meet next week
*China February imports very heavy on crude oil
*Fill your tank NOW if you haven’t already and other considerations….
*Iran and Nigeria likely aren’t going anywhere….
Crude is up .60 at 82.09 at this time. Emphasis at this time as it’s been a real roller coaster today. Both gasoline and distillate are up 2 ½ cents currently. Propane is up ¼ cent and nat gas up 4 cents. Following this morning’s pretty friendly inventory report crude soared to a new high (for this move) as the dollar slipped lower. After reaching a high of 83.03 rapid profit taking set in and the market traded negative by as much as 70 cents. By noon the market moved back into positive territory. The path to the upside and a target of $85 remains the path of least resistance. Beyond the inventory numbers this morning OPEC issued a forecast that raises oil demand for the remainder of this year by 190,000 barrels per day, a rather meager increase but still to the upside. I mentioned this morning China’s huge import numbers for the month of February. The only economic number today was wholesale inventories that were somewhat bearish by declining .2% in January. The market was looking for an increase. This likely had a role in the profit taking in energy markets that ensued late morning. A question we are getting a lot of now is if you did not contract fuel earlier this winter/spring what to do now? In general I think a couple points stand out. First, fill your tank now if you haven’t already done so. Cover any additional spring needs on a contract. Then consider your risk tolerance. At this time there appears to be a reasonably good chance we will see gasoline continue to lead this move higher by another 30-40 cents. Distillate may lag this somewhat but will generally follow. By seasonal norms we could see a major correction in early June and that might present the next best opportunity to view fall pricing and we may have a better view of economic recovery by then. However, if you are unable to tolerate much higher fuel prices you may want to consider covering the rest of calendar year 2010 now. The situation with a nuclear Iran doesn’t show much promise of improvement and Nigerian rebels are rearing their ugly heads. With China and India showing all appearances of a renewed energy appetite it probably won’t take much threat of supply disruption to send this market soaring to painful levels even though demand in the #1 energy consuming nation (US) is lagging.
Afternoon Energy Update - 03/09/2010 12:00 AM - BAL 3:20 PM EST
*Crude down .50 but first line support held today
*Dollar main driver most of the day
*How fragile will gasoline demand structure be?
*API inventory out this afternoon
Crude is down .50 at 81.37 this afternoon. Distillate is down 1.7 cents and gasoline having led the way up is also leading the way down…is off 2.9 cents. Propane is 1 ½ cents lower and nat gas is just a penny or two lower. We have basically the same story as this morning with the dollar gaining today and putting downward pressure on energy markets. Crude fell to a low today of 80.16 before we saw significant buying interest (at the nearest moving average on the charts)and we actually traded positive a short period before lunchtime as the dollar fell off it’s high mark. The consensus seems to be that inventories this week will show a significant build and that has contributed to the weakness today as well. Several analysts jumped into the camp yesterday that a we were ready for a significant correction in this market and played off a technical sell signal. The way we bounced off that support level today causes me to be doubtful about any huge move to the downside at this point. As gasoline approaches $3.00 per gallon many begin to question whether the economy is able to sustain these levels or if demand will weaken. It’s entirely possible we could see some weakness in late spring or early summer if demand does show signs of faltering. We’ll also have to keep a close eye on diesel demand as spring arrives.
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