Quote of the Day
“The problem with facts is that there are so many of them.”
Samuel McCord Crothers
|
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 |
CBu |
CBu |
CBu |
CBu |
|
Global Equities |
CBu |
CBu |
CBu |
CBu |
|
Geopolitics |
CBu |
CBu |
CBu |
CBu |
|
Technicals |
N |
N |
N |
N |
|
Market Sentiment |
CBu |
CBu |
CBu |
CBu |
|
Overall View |
N |
N |
N |
N |
|
N - Neutral Bu - Bullish Br- Bearish CBu - Cautiously Bullish | ||||
|
CBr - Cautiously Bearish |
Another day of oil gains on the back of dollar losses and a mediocre day in the equity markets, although equities ended the day (in the US) a lot closer to unchanged versus where they were early on in the session. WTI ended the day up about 1.2% and at one point it traded within $0.53/bbl of the record 2009 high set on August 25th. As I have discussed continuously in this publication over the last 6 months oil prices are very much in sync with the externals and will likely remain in this pattern until the economic recovery takes hold and moves from the perception stage to the actual stage and oil demand begins a return to more historical levels. The meeting between perception and reality is slowly beginning to take place but will not really hit the moment of truth for at least another month or so.
Although the equity markets in the U.S. did not provide a positive backdrop for oil prices on Tuesday that was not the case for the emerging markets as shown in the EMI Global Equity Index table shown below. Over the last 24 hours the EMI Index is up 0.7% for the week. The biggest gainer on the board was China which increased by 1.4% and is now higher by 60% year to date. This week is a big week for corporate earnings and as described yesterday many in the market are looking for not only better than expected earnings but also a gain in revenues. Intel which reported their results late Tuesday afternoon came in better than expected and showed a gain in sales revenues, exactly what the market is looking for. If Intel type results are more the norm than the exception… over the next few two weeks equity markets will continue to gain and oil prices will follow.
|
EMI Global Equity Index | ||||
|
10/13/09 |
Change |
Change |
2009 YTD | |
|
From |
From |
Change | ||
|
9:07 PM |
Yesterday |
Yesterday % |
% | |
|
US/Dow Jones |
9,871 |
(15) |
-0.1% |
12.5% |
|
Can/S&P-TSX |
11,414 |
(23) |
-0.2% |
27.0% |
|
Lon/FTSE |
5,154 |
(56) |
-1.1% |
17.3% |
|
Paris/Cac 40 |
3,801 |
(44) |
-0.1% |
18.1% |
|
Germany/Dax |
5,776 |
(7) |
-0.1% |
20.1% |
|
Japan/Nikkei |
10,077 |
60 |
0.6% |
13.7% |
|
HongKong/HangSeng |
21,467 |
168 |
0.8% |
50.8% |
|
Aussie/SYDI |
4,790 |
44 |
0.9% |
33.4% |
|
China/Shanghai A |
3,081 |
44 |
1.4% |
60.1% |
|
Brazil/Bvspa |
64,646 |
575 |
0.9% |
72.2% |
|
EMI Global Equity Index |
14,008 |
74 |
0.3% |
45.4% |
Thursday the EIA will release their delayed weekly oil report along with their normally scheduled Nat Gas report. On Wednesday afternoon the less followed API report will also be released. As shown in the following table I am projecting builds across the board and a decline in refinery utilization rates. The crude build I am projecting is based mostly on the fact that refinery demand for crude oil should decline as a result of refiners lowering utilization run rates by about 0.5%. Crude oil stocks likely built about 700,000 barrels reducing the year over year overhang to 29.8 million barrels while the surplus versus the 5 year average for the same week will be down to 28.1 million barrels. The good news is this is the smallest year over year surplus in a long time while the bad news is each barrel of crude oil stocks that decline is winding up in refined product inventories as the economics to store refined products remains viable.
|
Projections |
10/13/09 | |||
|
API |
Current |
Change from |
Change from | |
|
Results |
Projections |
Last Year |
5 Year | |
|
mmbls |
vs. Proj. |
vs. Proj. | ||
|
Crude Oil |
0.7 |
29.8 |
28.1 | |
|
Gasoline |
1.0 |
21.6 |
16.8 | |
|
Distillate |
0.5 |
50.1 |
41.0 | |
|
Ref. Runs% |
-0.5% |
2.3% |
1.0% | |
|
Change Level |
84.5% |
82.2% |
83.5% |
This week I am expecting builds in both gasoline and distillate fuels even though I am expecting refinery runs too decline. The refined product builds will be the result of an increase in imports and another decline in demand. In fact total implied demand has diverged from the short term uptrend it has been in as shown in the following chart. As perception and reality are starting to converge (refer to description above) more and more market participants are looking for consistent gains in implied demand from week to week as a sign that the economy is truly in a recovery mode. This has not been the case over the last several weeks as such it has raised a question mark in the minds of the oil bulls.
This week I am expecting gasoline stocks to increase by 1 million barrels bringing the year on year surplus to 21.6 million barrels while the five-year overhang for the same week is expected to be at 16.8 million barrels. With gasoline stocks in a normal historical building pattern the likelihood that gasoline will end up in a glut (like distillate fuels) by early next year is becoming more and more likely. Distillate stocks likely increased about 500,000 barrels even though we saw what looked like early winter weather in parts of the country (mostly in areas not normally heated by heating oil) I am still expecting stocks to continue to inch closer and closer to maximum capacity for the commercial storage system in the US. Distillate stocks are expected to not only be well over the 170 million barrel mark the year over year surplus will be at 50.1 million barrels while the overhang versus the 5 year average for the same week will be at 41 million barrels.
Once again I do not see any major improvement in this week’s round of fundamentals as Thursday’s report is likely to be viewed from the bearish side if the actual data is in sync with the projections.
Natural Gas dropped 6% on Tuesday even though the externals were mostly supportive and oil also increased. Nat Gas fundamentals are bearish and this week’s EIA storage report is expected to show a build of about 55 BCF which will set another new all time record high storage level as NG stocks quickly approach the maximum U.S. storage capacity level of around 3.8 TCF. Further pressuring NG prices on Tuesday was word that the UNG ETF suggested they could move all of their NG positions out of the futures markets into other unregulated markets and still manage the risk of their ETF fund. This resulted in additional selling ahead of when UNG normally begins their monthly intermonth rolls (begins this Wednesday) out of the spot contract. As I have been forecasting for months Nat Gas is bearish and current prices which are based on the perception trade (much like in oil) are overvalued and currently susceptible to a downside correction.
The rest of the week will be filled with earnings reports and one or more could have a significant impact on the direction of equity prices and thus oil prices. In addition there will be some key economic reports hitting the street over the next few days anyone of which could also become a market mover for equities. Volatility will be high for the rest of the week and the both the externals and energy markets are all very susceptible to price reversals at any time and on very little supporting data.
My detailed views are shown in the table at the beginning of the newsletter. My recommendations remain the same for today. Caution is the single most important recommendation I can make for the rest of this week.
Currently (9 pm EST on Tuesday evening) prices are higher across the board except for the US dollar. I am publishing my report tonight as I will be tied up early on Wednesday making an early morning presentation at an industry conference.
|
Current Expected Trading Range |
Expected Trading Range | |||
|
10/13/09 |
Change |
Low |
High End | |
|
From |
End Support |
Resistance | ||
|
9:08 PM |
Yesterday | |||
|
Nov WTI |
$74.81 |
$0.66 |
$67.00 |
$74.95 |
|
Nov Brent |
$72.95 |
$0.55 |
$62.50 |
$74.50 |
|
Nov HO |
$1.9323 |
$0.0089 |
$1.6250 |
$1.9690 |
|
Nov RBOB |
$1.8450 |
$0.0132 |
$1.6000 |
$1.9600 |
|
Nov NG |
$4.628 |
$0.040 |
$4.750 |
$5.500 |
|
Dow Futures |
9,500 |
58 |
8,920 |
9,640 |
|
US Dollar Index |
76.04 |
(0.125) |
74.500 |
79.250 |
|
Euro/$ |
1.4842 |
0.0022 |
1.3750 |
1.5250 |
|
Yen/$ |
1.1152 |
0.0012 |
1.0600 |
1.1400 |
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 – November 2, 2009 11:00 am-12:30pm 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
