Oil turns bullish on supply and election

With runs expected to increase by only 0.2% and demand waning I am expecting only a modest build in gasoline stocks. Gasoline stocks are expected to build by about 300,000 barrels as refiners continue to wind down from the higher demand summer driving season and turn their attention to the upcoming winter heating season. This week the gasoline year over year overhang is projected to hold at around the 7 million barrel level while the surplus versus the five year average for the same week will be between about 15.5 million barrels.

Distillate fuel likely drew by about 1.5 million barrels as economy sensitive diesel fuel implied demand also continues to remain steady with agriculture demand for the harvest along with distillate fuel exports which have increased as the arb is open and the US dollar is weak versus most major currencies that are likely recipients of US exports of distillate fuel. If the actual EIA data is in sync with my distillate fuel projection inventories versus last year will likely be about unchanged while the overhang versus the five year average will be still be under the 30 million barrel level. With the US dollar likely to remain on the defensive and with the situation in France likely to impact the balances in Europe for many months into the future demand for gasoil into Europe (from the US and elsewhere) should remain strong over the next several months further helping to reduce the overhang of distillate fuel heading into the winter heating season.

The tropical weather situation has become a bit less active over this week with just one storm evolving...Hurricane Tomas. Tomas is projected to be a major problem for several Caribbean nations but all of the projections are now expecting Tomas to work its way back into the Atlantic and not be a threat to the US oil and Nat Gas producing region of the Gulf of Mexico. Continue to watch but do not invest any trading capital associated with the activity in the tropics at this point in time. There are no other tropical events in the Atlantic as of this writing.

My individual market views are detailed in the table at the beginning of the newsletter. I am maintaining my oil views as neutral as the market is still trading with a high degree of uncertainty. In fact I remain very comfortable sitting on the sidelines until more definitive clarity emerges about the magnitude of QE2. However, as discussed yesterday I am looking for a window of opportunity to re-enter the market once the Fed announcement is digested as well as today’s EIA report has been issued. Although I have a neutral rating in the table above my bias is toward the bullish side for the medium term.

I have maintained my view for Nat Gas at neutral even as the fundamentals continue to be bearish on all counts. However, the market is still susceptible to some additional short covering before reality settles back into the mindset of the Nat Gas investor/traders. Although I feel less strongly about additional short covering after Monday’s strong sell-off and lack of recovery in yesterday’s trading session. If prices fail to re-breach the key technical resistance level of $4/mmbtu I will be leaning toward moving my view back to bearish.

Currently most risk asset prices are higher as shown in the EMI Price Board table below.

Current Expected Trading Range

Expected Trading Range

11/3/10

Change

Low

High End

From

End Support

Resistance

6:59 AM

Yesterday

Dec WTI

$84.69

$0.79

$71.00

$84.50

Dec Brent

$86.25

$0.84

$70.00

$85.50

Dec HO

$2.3167

$0.0231

$2.0500

$2.3500

Dec RBOB

$2.1250

$0.0154

$1.8000

$2.2000

Dec NYM NG

$3.869

($0.001)

$4.000

$4.500

10 YR Treasuries

126.78

0.25

118.00

128.00

Dow Futures

11,162

10

10,000

11,200

US Dollar Index

76.83

(0.062)

76.500

80.150

Euro/$

1.4032

0.0016

1.2750

1.4100

Yen/$

1.2391

(0.0020)

1.1400

1.2600

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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