Net result the US continues to remain well oversupplied of just about everything in the oil complex with supply expected to remain robust for the foreseeable future. The major wild card for distillate fuel over the next three to six months will be how much additional diesel fuel is going to be required by Japan. It is likely that Japan's import requirements for diesel fuel will increase strongly once the nuclear situation is stabilized and the country enters into the rebuilding and reconstruction phase especially with a large percentage of the refining capacity in Japan shut in.
As usual do not overreact to the API data as the EIA report will be released in a few hours. The API report more often than not it is 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 neutral as total commercial stocks of crude oil and refined products combined are likely to have decreased only marginally. However, if the EIA data is more in line with the API data the market will likely view it as bullish from am macro overview and a marginal positive for WTI versus Brent spread. Whether or not the market reacts at all to the inventory report will be dependent on what is going on in North Africa and the Middle East 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 bias at cautiously bullish as the market is still focused on the geopolitics of North Africa and the Middle East. I am leaving my view at neutral for the moment as I think we could see a bit of easing in oil prices in the short term but we are once again in the mode of buying the dips as a strategy that will likely have the highest probability of success.
I am maintaining my Nat Gas view and bias to cautiously bullish as Nat Gas prices broke out of the trading range it has been in since January. The price of Nat Gas surged higher on Thursday after a bullish inventory report and is now trading above the upper end of the trading range that has been in place since January. If prices remain above this level the next technical resistance level will be around the $4.30/mmbtu level.
Currently asset classes are mixed as shown in the EMI Price Board table below.
Dominick A. Chirichella
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