As usual do not overreact to the API data as the EIA report is due out in a few hours and be cognizant that the API report is often not in line with the more widely followed EIA data. If the EIA report is within the projection, I would expect the market to view the results as mostly bearish as total commercial stocks of crude oil and refined products combined are likely to have increased marginally this week. However, whether or not the market reacts at all to the inventory report will be dependent on what is going on in the financial markets and how much the macro issues will offset any of the individual micro drivers like supply & demand.
My individual market view is detailed in the table at the beginning of the newsletter. I am maintaining my overall view and bias at neutral for oil as the market is currently trading around the evolving situation in the Middle East. Absent Egypt, oil prices are likely to have remained in a downside correction as they were earlier in the week.
As I suggested yesterday Mubarak now has one foot out of the door and some level of stability will come back to Egypt as the country sets it sights on new elections in September and possibly the beginning of a democratic state. Oil flow through Egypt (Suez Canal and Sumed Pipeline) has not been interrupted and I do not think it will be. We are clearly still in a technical and fundamentally driven longer term uptrend but the market is very susceptible for a downward correction in prices.
I am maintaining my Nat Gas view and bias at neutral as the market continues to struggle to hold onto any major gains. With supply still very robust, even the advent of another round of colder than normal winter weather conditions may not seem to be enough to send prices into surge mode, rather I am still expecting to see prices remaining in the trading range they have been for months for the foreseeable future. Weather is still the main driver of price direction but the oversupply situation continues to dampen any upside enthusiasm that may come from above normal heating fuel demand.
Currently most markets are lower as of Asian trading hours as shown in the EMI Price Board table below.
Dominick A. Chirichella
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