Oil inventories higher than before summer

With runs expected to hold steady and demand slowly waning, I am expecting a small decline in gasoline stocks and a modest build in distillate fuel. Gasoline stocks are expected to decline by about 300,000 barrels as wholesalers likely moved gasoline into secondary inventories in preparation for the long holiday weekend in the US this week. However, the year over year overhang will still be around 17.9 million barrels while the surplus versus the five year average for the same week will be at 28.6 million barrels. As I have discussed in previous newsletters, not only is the industry plagued with a huge surplus of gasoline inventory but all signs point to the summer driving season ending with inventories above where they started the season at the end of May.

Distillate fuel likely built by about 600,000 barrels as economy sensitive diesel fuel implied demand continues to decrease and follow the slowly developing downtrend that has been in place since about May of this year, or around the same time the US economy began to slow down. Implied distillate demand peaked in mid- May at a tad over 4 million barrels per day and has declined about 10% since then. I would categorize this week’s oil inventory snapshot as biased to the bearish side if the EIA data is in sync with the projections. A

s usual do not overreact to the API data which will be released late this afternoon as more often than not it is not in line with the more widely followed EIA data.

The tropical weather situation is continuing to change but there is still nothing threatening the oil and Nat Gas producing region of the US Gulf Coast. There are now three events in play as of this writing as TS Herminie has already made landfall and completely out of harm’s way of any oil and Nat Gas supply operations. The remnants of TS Gaston is still a low probability event sitting in the Caribbean while the two Atlantic events are still evolving. One remains a low probability weather pattern, as of this time, while the one closer to West Africa has been upgraded to a high or 50% probability of strengthening into a tropical cyclone over the next forty eight hours. Although none of these events are a threat to energy operations (as of now) my concern with the tropics remains the rapidity with which new storms keep emerging out of the West Africa. However, so far the tropics have been a non-event as most of the storms have worked their way into the north Atlantic just as the two patterns sitting close to West Africa appear to be heading at this time. So nothing to warrant allocating any trading capital on but rather we need to only keep the tropics on our radar.

My individual market views are detailed in the table at the beginning of the newsletter and remain the same for today. Currently ,oil is lower while Nat Gas is showing a slight gain as this shortened trading week continues.

Current Expected Trading Range

Expected Trading Range

9/8/10

Change

Low

High End

From

End Support

Resistance

7:07 AM

Yesterday

OCt WTI

$73.90

($0.19)

$71.00

$84.50

Oct Brent

$77.24

($0.50)

$70.00

$76.00

Oct HO

$2.0671

($0.0072)

$1.9500

$2.0500

Oct RBOB

$1.9204

($0.0125)

$1.8000

$2.0000

Oct NG

$3.865

$0.013

$3.500

$3.855

10 YR Treasuries

125.83

0.00

118.00

128.00

Dow Futures

10,358

20

10,000

10,850

US Dollar Index

82.67

(0.174)

80.150

85.000

Euro/$

1.2717

0.0006

1.2400

1.2900

Yen/$

1.1936

0.0002

1.1400

1.2000

Best Regards

Dominick A. Chirichella

dchirichella@mailaec.com

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 to receive the report everyday look below.

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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.

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About the Author
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 to 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.

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