Looking ahead to 2009 trading in energy just got a whole lot more interesting. Now we get two weekly supply reports for the price of one. The American Petroleum Institute has decided to take a big step into the past and try to become relevant again by releasing its weekly report on oil inventories and production on Tuesday afternoons next month. That is a day before the similar report by the U.S. Department of Energy. Why have they taken this step? Well I am not sure but it could be a desperate attempt to get noticed. No one really pays attention to the API supply report but now all that changes.
Old time traders will remember that before 2003 the API always used to release their report a day earlier than the DOE. The API gave that up after being criticized for their wild numbers. Under pressure, the API decided to coordinate its release with the DOE. It didn't take long for the report to become irrelevant and was basically ignored by the marketplace. Reporting data to the API for those in the industry is voluntary but reporting to the government is mandatory with penalties for knowingly providing false information. Now the API will release its information at about 3:30 p.m. central time starting Tuesday, Jan. 27. Now back in 2003 the API move to release the report at the same time as the DOE was in response to suggestions by some institute members that the reports would be more useful if published in conjunction with the government, but the reality is that their numbers were all over the board and people got tired of the discrepancies.
So now it looks like Tuesday is going to be a late night for traders that have to be there to react to the API data, which at times is totally different than the DOE and it can move the market. So now, even if the market believes that the API data might be totally wrong, it will have no choice but to react to it.
Last week for example the API reported that crude supplies fell by 4.20 million barrels. The EIA reported that they fell by 3.10 million barrels. Now that extra million barrels can be ignored because the truth is the API numbers are more volatile yet now that is all the market will have to go on and cannot dismiss them totally. Last week the API reported that gasoline inventories increased by 1.71 million barrels yet the EIA reported an increase of 3.34 million barrels, almost twice as much. The API reported that distillate inventories fell by 67,000 barrels while the DOE reported that they increased (that is right increased) by 1.81 million barrels. So as you can see we will have to deal with a trading alternative universe every Tuesday night until we come back to reality on Wednesday morning.
Oil is starting to show some life as we head towards the end of the year. A weak dollar and violence in the Gaza strip are contributing but mainly this is yearend short covering. Oil got a boost Friday on a Bloomberg Report that Abu Dhabi National Oil Co., the United Arab Emirates state-owned producer, will reduce crude-oil exports in January and February after OPEC agreed to lower output from January first. Abu Dhabi National, known as Adnoc, will cut the supply of the Murban grade by 15% and the Upper Zakum grade by 3% next month, according to a statement faxed to customers, mostly in Asia. In February, Adnoc will decrease the supply of Murban by 15%, Lower Zakum by 10%, Umm Shaif by 10% and Upper Zakum by 15%. The reduction comes after the Organization of Petroleum Exporting Countries, supplier of more than 40% of the world's oil, decided on Dec. 17 to cut production by a record 2.46 million barrels a day from next month. Adnoc had said earlier in December it would meet all oil obligations for January.
Oil falling is raising the pressure on oil producers. Dow Jones reported that Iran's governor to the Organization of Petroleum Exporting Countries said consumer countries do not want the price of oil to rise and efforts by OPEC to balance supply and demand have been ineffective because of Western media and market speculators (Specs get blamed for everything!).
“The current economic situation in the world has created a lot of problems for industrialized countries. The low price of oil is an advantage that they do not want to lose,” Mohammad Ali Khatibi said. (Well, no kidding). Khatibi added that OPEC measures can push prices higher and create a balance between supply and demand, but Western propaganda and market speculators have rendered such measures ineffective. So let me spread some Western propaganda to mess with this guy’s head! Unless the economy improves oil is still going lower! Russia is in turmoil. In Venezuela Chavez is taking over the mines so he can offset falling oil revenue. War is ready to break out in the Middle East!
We're short February crude on a triple rollover from approx. 4461 - stop 5100.
Sell February heating oil at 15000 - stop 15300
Sell February RBOB at 107 - stop 111.
Buy February natural gas at 510 - stop 470.
Have a GREAT day!
Phil Flynn, 800-935-6487; 312-563-8344
Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities.
