Energy Market Updates

Nymex Futures close strong with optimism

  

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It appears that the last four sessions have completely erased the pessimistic view, or fear of the Sachs case that saw HEAT correct almost 10 cents in two days. We have now come all the way back to where we were on Thursday of last week. The quick correction had Bears beating their drums that $2 heat was on the horizon, and admittedly so, I was listening. The ability for the market to gain back what was lost on :

1. Very weak fundamentals (lots of supply…low demand)

2. Thousands of flights in Europe grounded (more demand loss)

3. Goldman Sachs investigation (more guys to fall)

Has to have one thinking …. “this thing has a mind of it’s own”. It does. The notion that we are on an economic upswing has participants rolling the dice that the US economy still has room to improve. At the close, Crude added $1.37 to $85.08, RBOB jumped higher in the last 30 minutes of the session adding .0529 to $2.3531 and HEAT gained .0355 to $2.2505. It’s like déjà vu all over again as we head into another weekend searching for direction and reason.

NYMEX slip as next move deliberated

  

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In what was a slow news day had the futures market bouncing between positive and negative territory for much of the morning session. With durable good orders on the rise in March, some might put another feather in the hat of bulls. But the inability of the pits to stay above some key resistance areas, HEAT was unable to stay above $2.25 and Crude fell below $85, has to play into the minds of players that another correction can be in the cards. We have discussed a number of times over the last few weeks that the market is searching for direction and fundamentals do not support current price levels. With many personalities at the Atlantic Region Energy Expo the next few days, I wouldn’t expect any wild swings in the market. Furthermore, speaking with some retail operators over the last few days, gasoline demand appears to still limping along. At the end of the day, Crude slipped 92 cents to $84.02, RBOB fell .0122 to $2.3409 and HEAT dropped .0134 to $2.2371.

Greece

  

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It was clear today that traders had no idea what they wanted from the session and were riding the emotional wave on any piece of news released.  The morning news was dominated that yet another build in supplies were expected therefore pushing values down.  As the bottom feeders were able to push the pits back into positive ground, wires reported that Greece will more than likely default on their loans.  That sent the entire complex south.  But the resiliency of RBOB and HEAT to maintain some value while Crude tumbled has, many scratching their heads. Crude tumbled $1.76 to $82.44 but HEAT lost only .0068 to $2.2303 and RBOB fell only .0141 to $2.3268.  Those types of drops on Crude typically produce a 4 or 5 cent drop in the products at these levels.  Goes to show that someone out there still wants to ride this wave higher and is willing to put their money where their mouth is.  As the Dow continues to get slammed right now, down over 100 points, look for some fear selling on Wednesday despite what inventory levels are.

DAILY HEATING CHART

Futures continue to baffle street

  

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What’s up is down, what’s white is black, cats sleeping with dogs.. Whats next? Big Papi hitting home runs! The market continues to perplex even the most astute observer. Today for instance, with Inventories showing large builds in distillates and Crude and modest draw in gasolines (again all in PADD2), one would have expected to see large drops across the board after yesterdays fear sale on Greece defaulting on loans. But no, instead it was snowing in Danvers in late April and Crude finished positive 78 cents closing at $83.22. RBOB added .0059 to $2.3327 and HEAT slipped marginally to $2.2290 losing .0013. Again the 1.9mbl build in Crude, 2.9mbl build in distillates and draw of 1.2mbl in gasolines were only a factor for about an hour when the market immediately sold off and the pits were down almost four cents. As the FED announced they were going to stay the course and keep short term rates close to 0%, investors took it as a buying opportunity and pushed all indexes positive. The rebound today has changed my tune slightly. I was screaming we were in for a correction, now it appears we may be in for some congestion before more defining news points us towards a long term trend.

Supplies rise and so does NYMEX??

  

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After last nights wildly bullish API report that had all products showing healthy draws, we were expecting the worse this morning. As DOE’s broke and showed builds across the board, the very bearish report did little to curb the enthusiasm of players. Initial reaction had all the pits shed early gains and prior to the lunch hour most were trading in the red. It was truly an odd day as investors appear to be looking at gasoline demand and how that will affect summer pricing. Psychologically, with MAY Crude falling off the board today, it firmly puts in our heads that summer is here. How much of todays move on HEAT was attributed to European flights resuming remains to be seen. At the Close, JUN Crude fell .17 to $83.68, RBOB added .0018 to $2.2827 and HEAT showed the most strength adding .0256 to $2.2058. However bizarre today was, I would have to think that if there was a little more time in the day all products would have closed negative. Outside influences have overtaken fundamentals currently and when that happens, we usually see a breakout in one direction or the other.

WEEKLY INVENTORY NUMBERS

Crude +1.894

Gasoline +3.587

Distillates +2.096

Utilization 0.3%