Quote of the Day
“The noblest worship is to make yourself as good and as just as you can.”
Isocrates
|
EMI QuickView Short Term Market Overview | ||||
|
Impact on Prices | ||||
|
Price Drivers |
Crude |
Gasoline |
HO/Diesel |
Nat Gas |
|
Supply |
Br |
Br |
Br |
Br |
|
Demand |
Br |
Br |
Br |
Br |
|
Inventories |
Br |
Br |
Br |
Br |
|
US Dollar |
N |
N |
N |
N |
|
Global Equities |
N |
N |
N |
N |
|
Geopolitics |
CBu |
CBu |
CBu |
CBu |
|
Technicals |
N |
N |
N |
Br |
|
Market Sentiment |
N |
N |
N |
Br |
|
Overall View |
N |
N |
N |
Br |
|
N - Neutral Bu - Bullish Br- Bearish CBu - Cautiously Bullish | ||||
|
CBr - Cautiously Bearish |
Tuesday was a relatively uninteresting day in the energy complex as oil hovered mostly around unchanged for the majority of the day with crude ending the day only slightly negative while Nat Gas ended the first day of the new spot contract slightly positive. Refined products were mixed with HO higher and gasoline lower. The externals were mostly neutral to marginally bearish as consumer confidence numbers came in lower than expected pushing U.S. equities into negative territory by the closing bell. The U.S. dollar held it’s own on the session gaining a bit of ground resulting in no support for oil prices and thus forcing energy market participants to focus on the fundamentals, which are more bearish than any other driver of oil prices.
Today should prove to be more interesting and likely a more active session as several key pieces of economic data hit the airwaves along with the weekly EIA snapshot of oil fundamentals. ADP will release their version of estimated jobs data for the month of September with the expectations calling for about a 10% improvement (less jobs losses) than their August report. In addition the final GDP number for the second quarter is expected to be revised downward by about 0.2% while the Purchasing Managers Index is expected to improve by about 2 points. Overall I would expect the economic data will be viewed as mostly neutral if the actual data is in agreement with the expectations. So as it stands at the moment I am not expecting any major support or negatives coming from the externals today.
On the other hand today we will also get the EIA inventory data with all eyes looking to see if last week’s very bearish numbers were a bit of an anomaly or a transition in the overall destocking trend with a return to further un-needed builds in stocks. The following table summarizes my projections along with the actual results that came out late Tuesday afternoon in the API inventory report. Before I discuss the data I again want to warn that the API data is more often than not out of sync with the wider sample, the more widely followed EIA report. That said the API report was mixed with builds in crude oil and distillate fuel with a modest decline in gasoline stocks.
Crude oil inventories increased by a surprising 2.8 million barrels in the API report versus forecasts that ranged from small declines to modest builds. Even though the refinery utilization level declined by just 0.1% crude oil imports increased and as I discussed in yesterday’s report the destocking of crude oil in floating storage has likely continued. The result was a greater than expected build in crude oil stocks. If the EIA data were to be in sync with the API report the year over year surplus would be approaching 44 million barrels while the overhang versus the five-year average would be nearing the 35 million barrel mark. No matter how you spin it crude oil is once again looking like the overhang will quickly become a burden as it was earlier in the year.
|
Projections |
9/29/09 | |||
|
API |
Current |
Change from |
Change from | |
|
Results |
Projections |
Last Year |
5 Year | |
|
mmbls |
vs. Proj. |
vs. Proj. | ||
|
Crude Oil |
2.8 |
0.8 |
41.9 |
32.5 |
|
Gasoline |
(1.7) |
0.5 |
34.0 |
16.9 |
|
Distillate |
2.3 |
1.0 |
48.7 |
36.9 |
|
Ref. Runs% |
0.1% |
-0.5% |
12.8% |
0.6% |
|
Change Level |
83.6% |
85.1% |
72.3% |
84.5% |
On the refined product front the API data showed a surprise decline of 1.7 million barrels of gasoline with a minimal change in refinery utilization rates. Obviously implied demand likely increased a bit while imports also must have declined resulting in the surprise inventory contraction. If the EIA and API data are in line with each other the year over year surplus of gasoline would narrow to about 31.8 million barrels while the overhang versus the five-year average would drop to 14.7 million barrels. As the saying goes if this turns out to be the outcome for gasoline this week it would be just what the doctor ordered as it slows the time frame when we would consider gasoline as being in a glut situation.
On the other hand distillate fuels just keep on building as the API reported a build that was about twice the expectations coming in at 2.3 million barrels. I continue to believe we are at a point in time where primary storage facilities are approaching maximum levels. If the EIA data comes in as reported by the API the year over year surplus would hit the 50 million barrels mark while the five-year average for the same week would hit 38.2 million barrels. Have I said the word glut yet today, if not distillate stocks are in a glut.
The refining sector is setting itself up for further margin deterioration as they need to cuts runs strongly and very quickly if they expect to be able to manage the oversupply situation and not let it get out of control while maintaining a margin from this normally challenging part of the oil supply chain. This week’s API report was overall bearish and if the economic data turns out to be neutral as I discussed above we could see the oil complex hit with a little bit of reality trading and every time that happens oil prices tend to fall.
On Thursday the EIA will release the latest snapshot of Nat Gas inventories. We are now just weeks away from U.S. Nat gas stocks breaking the all time storage record set in October of 2007. The market consensus is calling for a build of around 64 BCF. This would represent a larger build versus last year when the injection level was 54 BCF (likely low due to last year twin hurricanes). The five-year average build for the same week came in at 69 BCF or slightly lower than the current projection level.
With Nat Gas likely to continue to build for another 6 to 7 weeks when the dust settles the new all time record high is likely to be in the vicinity of the maximum storage capacity level of someplace between 3.8 to 3.9 TCF. Why anyone is getting excited over Nat Gas prices while were still in the shoulder season and with stocks expected to continue building for almost another two months is beyond my comprehension. Yes there is the perception of an economic recovery trade that has attracted the attention of the Nat Gas investor/traders but based on what we have seen from oil so far that trade which is centered on demand increasing as a result of the economic recovery is not yet materializing in the oil sector and all signs suggest it is not going to happen so quickly in the Nat gas sector either. I raise the caution flag and warn to not get too excited by the current NG price rally based on perception as reality may not be too kind.
The EMI Global Equity Index (table shown below) increased a bit over the last 24 hours even though the US market drifted lower on Tuesday and China continued its downward correction that is now approaching about 40%. Brazil is now clearly the number 1 player in the pack of 10 bourses in the EMI Index.
|
EMI Global Equity Index | ||||
|
9/29/09 |
Change |
Change |
2009 YTD | |
|
From |
From |
Change | ||
|
8:01 PM |
Yesterday |
Yesterday % |
% | |
|
US/Dow Jones |
9,742 |
(47) |
-0.5% |
11.0% |
|
Can/S&P-TSX |
11,395 |
56 |
0.5% |
26.8% |
|
Lon/FTSE |
5,160 |
(6) |
-0.1% |
17.5% |
|
Paris/Cac 40 |
3,814 |
5 |
-0.4% |
18.5% |
|
Germany/Dax |
5,714 |
(23) |
-0.4% |
18.8% |
|
Japan/Nikkei |
10,100 |
91 |
0.9% |
14.0% |
|
HongKong/HangSeng |
21,013 |
425 |
2.1% |
47.6% |
|
Aussie/SYDI |
4,747 |
70 |
1.5% |
32.2% |
|
China/Shanghai A |
2,891 |
(9) |
-0.3% |
50.2% |
|
Brazil/Bvspa |
61,235 |
(81) |
-0.1% |
63.1% |
|
EMI Global Equity Index |
13,581 |
48 |
0.3% |
41.0% |
My market views are as detailed in the table at the beginning of the newsletter. Both specs and hedgers should move with extreme caution today as I expect a strong reaction from the inventory data and a possible reaction from the economic data if it deviates from the forecast.
Currently oil prices are firmer as the U.S. dollar once again heads south while equities are modestly higher.
|
Current Expected Trading Range |
Expected Trading Range | |||
|
9/30/09 |
Change |
Low |
High End | |
|
From |
End Support |
Resistance | ||
|
5:41 AM |
Yesterday | |||
|
Nov WTI |
$67.56 |
$0.85 |
$67.00 |
$72.30 |
|
Nov Brent |
$66.32 |
$0.83 |
$62.50 |
$72.00 |
|
Oct HO |
$1.7070 |
$0.0064 |
$1.6250 |
$1.9690 |
|
Oct RBOB |
$1.6600 |
$0.0319 |
$1.6000 |
$1.9600 |
|
Nov NG |
$4.873 |
($0.002) |
$4.000 |
$5.000 |
|
Dow Futures |
9,500 |
38 |
8,920 |
9,640 |
|
US Dollar Index |
76.725 |
(0.635) |
74.500 |
79.250 |
|
Euro/$ |
1.4662 |
0.0094 |
1.3750 |
1.5250 |
|
Yen/$ |
1.1188 |
0.0094 |
1.0600 |
1.1200 |
Best Regards
Dominick A. Chirichella
Energy Market Analysis is published daily by the Energy Management Institute 1324 Lexington Avenue, # 322, New York, NY 10128. Copyright 2008. Reproduction without permission is strictly prohibited. Subscriptions: $129 for annual orders. Editor in Chief: Dominick Chirichella, Publisher: Stephen Gloyd, Editor Sal Umek.
EMA has authorized Futures to publish its report once a week on Wednesday prior to the EIA release. For information on how receive the report everyday look below.
PH: (888) 871-1207
Email info@energyinstitution.org
Subscribe here Free Trial Here
Information and opinions expressed in this publication are intended to provide general market awareness. The Energy Management Institute and the Energy Market Analysis are not responsible for any business actions, market transactions, or decisions made by its readers based on information published in this report. Readers of the Energy Market Analysis use this market information at their own risk.
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.
Check out the EMI’s 2009 Energy Training Calendar Energy Management Institute offers a full range of advanced learning courses for energy professionals. Visit for our current course listing. EMI courses are available nationwide
EMI Webinar Event – October 5th, 2009 2:00pm-3:30pm Eastern Geopolitics and its implications on the world of oil Join one of EMI’s Senior Analyst, Mr. Dominick Chirichella, who has taught Geopolitics of Energy to hundreds of global energy participants as he takes this opportunity to discuss why we should continue to care about Geopolitics if our business even remotely touches the energy complex. He’ll explore Iran’s Nuclear ambitions, Middle East peace, Nigerian oil production and the evolving North Korean situation. Join Dominick in what will be a mandatory seminar on a topic that will impact the price of oil as we enter 2010 and beyond.
Learn more and enroll using the following web link
