Oil down as dollar up ahead of G20

Yesterday the EIA released their latest Short Term Energy Outlook which I view as supportive. Some of the highlights of the report follow.

Crude Oil and Liquid Fuels Overview. Growth in global oil consumption remains strong. In the current Outlook, the projected growth in world real GDP (weighted by oil consumption) is 3.9 percent in 2010. Continued upward revisions this year's world oil consumption, particularly for Europe and China, have led to an expected world consumption growth of 2.0 million bbl/d for 2010. EIA expects this consumption growth to be met in almost equal parts by a 1.0 million bbl/d increase in production from Organization of the Petroleum Exporting Countries (OPEC) and 1.0 million bbl/d increase in non-OPEC supply. While commercial oil inventories in the Organization for Economic Cooperation and Development (OECD) countries remain high, floating oil storage has been declining. EIA believes that the projected gradual reduction in OECD oil inventories over the forecast period should lend support to firming oil prices.

Global Crude Oil and Liquid Fuels Consumption. EIA has revised world oil consumption growth in 2010 upward in response to stronger-than-expected growth in European oil demand during the second and third quarters of 2010, as well as continued strong growth in China. The non-OECD regions, especially China, the Middle East, and Brazil, represent most of the expected growth in world oil consumption in 2011. Among the OECD regions, EIA expects North America to show almost all the oil consumption growth in 2011, with a gain of nearly 0.4 million bbl/d. In 2011, EIA expects global oil consumption growth of 1.4 million bbl/d.

Non-OPEC Supply. Most of the 1.0 million bbl/d projected growth of non-OPEC supply in 2010 comes from the United States, Brazil, and the former Soviet Union. However, this growth in world supply is not sustained in the 2011 forecast. Total non-OPEC supply falls by 250,000 bbl/d in 2011, primarily because of declining total North American and North Sea production as well as decreasing supplies from Russia. This would be only the third time in the last 15 years that non-OPEC supplies fall year-over-year, following non-OPEC production declines in 2005 and 2008, which were primarily the result of supply disruptions in the Gulf of Mexico.

OPEC Supply. OPEC left its production targets unchanged at its October meeting, noting that global oil markets were well supplied. However, EIA projects that OPEC crude oil production will increase by 0.3 and 0.5 million bbl/d in 2010 and 2011, respectively. Projected OPEC non-crude petroleum liquids production, which is not subject to OPEC production quotas, increases by 0.7 million bbl/d in both 2010 and 2011. OPEC surplus capacity should remain near 5 million bbl/d, compared with 4.3 million in 2009 and 1.5 million in 2008 .

OECD Petroleum Inventories. Commercial oil inventories held by OECD countries stood at an estimated 2.76 billion barrels at the end of the third quarter of 2010, equivalent to about 60 days of forward cover, and roughly 70 million barrels more than the 5-year average for the corresponding time of year . OECD oil inventories decline through the forecast period, though days-forward-cover may remain relatively high by historical standards.

U.S. Liquid Fuels Consumption. Projected total U.S. liquid fuels consumption increases by 260,000 bbl/d (1.4 percent) in 2010, which is about 60,000 bbl/d higher than forecast in last month's Outlook. A year-over-year decline in total liquid fuels consumption averaging 40,000 bbl/d in the first quarter of 2010 was followed by a year-over-year rise averaging 520,000 bbl/d in the second and third quarters, led by increases in motor gasoline and distillate fuel oil consumption. During 2010 as a whole, projected gasoline consumption increases by 0.3 percent and distillate consumption increases by 3.4 percent. Total liquid fuels consumption increases by a further 120,000 bbl/d (0.6 percent) in 2011, as all of the major petroleum products register consumption growth. Gasoline, distillate fuel, and jet fuel consumption each increase by 0.7 percent in 2011.

My individual market views are detailed in the table at the beginning of the newsletter. I am maintaining my oil views as cautiously bullish. I do expect that oil prices will experience a few rounds of profit taking selling (work with protective trailing stops) but as it looks at the moment prices should remain in an uptrend with $90/bbl a possibility before the end of the year (possibly even higher depending on how low the US dollar eventually goes).

I am maintaining my view of Nat Gas at cautiously bullish with a lot of emphasis on the word cautiously even as the fundamentals continue to be bearish on all counts. Colder than normal weather is now engulfing parts of the North East with prices not only breaching the key technical support level of $4/mmbtu but blowing through this level and remaining above it.

Currently most risk assets are in negative territory as shown in the EMI Price Board table below.

Current Expected Trading Range

Expected Trading Range

11/10/10

Change

Low

High End

From

End Support

Resistance

6:20 AM

Yesterday

Dec WTI

$86.40

($0.32)

$83.25

$90.00

Dec Brent

$88.02

($0.31)

$83.00

$90.00

Dec HO

$2.4080

$0.0013

$2.3000

$2.5000

Dec RBOB

$2.1836

($0.0014)

$1.8000

$2.2000

Dec NYM NG

$4.221

$0.011

$3.500

$4.500

10 YR Treasuries

126.44

(0.09)

118.00

128.00

Dow Futures

11,315

2

11,000

11,500

US Dollar Index

77.77

0.186

75.000

77.000

Euro/$

1.3786

(0.0057)

1.3500

1.4500

Yen/$

1.2222

(0.0079)

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.

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.

<< Page 3 of 3
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.

Comments
comments powered by Disqus