Energy Market Updates

Futures end mix as FED disappoints, Irene lurks

On Wednesday we suggested that todays market could be volatile as many investors were eagerly anticipating the FED chairman speech.  The consensus was that new measures would be put in place to spur growth.  It became clear early in the session that this was not going to happen and all pits sold off quickly and RBOB dropped as much as five cents.  Not to be outdone Crude was down over $2 as well.   However, as GDP numbers were released, the pits clawed their way back into positive ground.  GDP grew by only 1% for the second quarter, less than the expected 1.3%,  As the day wore on, pricing did not move all that much as it appeared many may have gotten out of Dodge ahead of Irene.  Currently it appears that the storm will hit the Northeast sometime Sunday as a hurricane and move rapidly through the Northeast over the course of the day, of course making a stop in Wilbraham, Ma.  With high winds and heavy flooding, power outages are expected.  Fear not folks, DKB world headquarters will be staffed and ready to assist.  At the close, Crude added.07 to $85.37, HEAT gained .0246 to $3.0101 and RBOB fell .0333 to $2.9346, while OCT RBOB only lost .0157.  Stay safe.

Heat map

RBOB CLOSE
                 CLOSE       CHANGE 
  
SEP    29346       -.0333
OCT    27860     -.0157
NOV    27358     -.0071
DEC   27141       -.0019
JAN    27120       -.0012
FEB    27191      -.0004
HEAT CLOSE
          CLOSE    CHANGE
SEP    30101    +.0246
OCT   30158     +.0226
NOV    30211      +.0220
DEC   30264     +.0216
JAN   30319      +.0205
FEB   30262      +.0189
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NYMEX sways with data and storm

A slew of data today had Futures up strong for much of the day while gasoline danced around the flat area as it decided how to digest all the news.  First and foremost, any hurricane premium added to the market kept prices lower as Irene appears to be slicing it's way towards New England.  Good for the Oil industry, not so good for our neck of the woods.  Landfall is now expected to be Sunday night or Monday morning with potential of a CAT 3 hurricane.  Inventories released today where also actually slightly bearish as compared to API's last night.  The Crude draw of 2.2 mbls was substantially less than the 5 mbl draw reported last night.  Gasoline and distillates also added 1.7mbl and 1.4mbl respectively.  As reports of Junes durable goods orders being a modest 4% increase hit the wires, a fresh round of buying hit the pits as this is a good sign of an improving economy, but muting that news was a weakening housing report that showed values dropping yet again.  All eyes will now be on Friday as the FED is expected to speak again.  At the close, Crude actually lost .28 to $85.16 while RBOB added a mere .0018 to $2.8784 and HEAT gained .0182 to $2.9607.
heat map
RBOB CLOSE
                 CLOSE       CHANGE 
  
SEP    27884       +.0018
OCT    27558     +.0086
NOV    27118     +.0113
DEC   26902       +.0121
JAN    26907       +.0129
FEB    27008      +.0133
HEAT CLOSE
          CLOSE    CHANGE
SEP    29607    +.0182
OCT   29690     +.0198
NOV    29761      +.0202
DEC   29825     +.0207
JAN   29901       +.0216
FEB   29876       +.0218
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Futures Plunge as Data shows Economy Soft

I feel like I have said this before, but what a difference a day makes!  With yesterday market making its own reality, today i would say it got kicked in the pants BY reality.   Futures started the session down hard and sold off heavily as a string of bearish data got reported.  First was the July Home sales report that showed sales fell by roughly 3.5%, second was the jobless report for last week which increased by 9000 new claims.  Generally not a good sign with an already weak economy.  Lastly, Morgan Stanley downgraded their outlook for the remainder of the year, and within the report noted that it was cutting GDP estimates by roughly .3%.  So what does all this mean?  "There is Gold in them there hills"...  Generally, news like this would push Commodities higher as equities would absorb the brunt of the sell off, but with values of Crude and products perceived to be overpriced, the selling carried over to the NYMEX.  Keep in mind what we mentioned a few weeks ago,  in order for things to start to improve, it has to start with cheaper fuel prices.  Where that level is, only time will tell.  At the close, Crude fell$5.20 to $82.38, RBOB lost .0871 to $2.7832 and HEAT shed .0868 to $2.8748

heat map

RBOB CLOSE
                 CLOSE       CHANGE 
  
SEP    27832       -.0871
OCT    26652      -.0750
NOV    26299      -.0770
DEC   26131       -.0784
JAN    26146       -.0791
FEB    26256      -.0795
HEAT CLOSE
          CLOSE    CHANGE
SEP    28748    -.0868
OCT   28836     -.0870
NOV    28948      -.0864
DEC   29049     -.0859
JAN   29153       -.0857
FEB   29149       -.0854
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Flat Demand and Gasoline draw push NYMEX

When the always suspect API's were released last night at around 4:30pm,  I couldn't contain myself when I saw the massive 5.2mbl draw announced for gasolines.  By in large, estimates were that we were only to expect a 1.2mbl draw down in stocks.  Obviously overnight markets reacted strongly to the pending news pumping up values almost .06 on all products ahead of the 10:30 announcement of today's DOE numbers.  And to much of my chagrin,  the inventory report confirmed the API gasoline read as a 3.5mbl draw was announced in gasolines.  Yet Crude showed a large 4.2mbl build vs estimates of a 500k draw and distillates grew by 2.5mbl while expectations were for only a 500k barrel increase.  While the draw in gas can be explained by a seasonal switch over, on relatively flat demand, it is difficult to explain away the builds in Crude and distillates.  Unfortunately the Market has a way of making its own reality and could never gather enough momentum to sell off hard enough to turn negative today.  Values still appear to be on the high end of the range as the HEAT low of 2.70 a few weeks ago may have been the seasonal low.  We have now added about 20 cents in value over the last five sessions.  At the close, WTI Crude rose .93 to $87.58, RBOB added .0165 to $2.8703 as outer months were about two cents stronger, and HEAT jumped .0290 to $2.9616.
RBOB CLOSE
                 CLOSE       CHANGE 
  
SEP    28703       +.0165
OCT    27402      +.0386
NOV    27069      +.0409
DEC   26915       +.0411
JAN    26937       +.0407
FEB    27051      +.0400
HEAT CLOSE
          CLOSE    CHANGE
SEP    29616     +0290
OCT   29706      +.0285
NOV    29812      +.0284
DEC   29908     +.0281
JAN   30010       +.0281
FEB   29906       +.0280
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NYMEX rebounds with Bullish Inventories

We continue the "new normal" roller coaster ride as NYMEX values once again turn sharply positive on the the heels of a very bullish Inventory report.  Not helping the cause was the FED announcing yesterday that they will hold rates very low for the next two years.  It was the first such comment that actually put a timeline on Interest rates.  Furthermore, the comments are a complete 180 degree turn in approach from the usually vague board.  With the greenback being pushed lower, Commodities surged higher beginning just after yesterdays close.  DOE numbers showed a staggering 5.2mbl draw in Crude, while most expected a 1.7mbl build.  Gas fell 1.6mbl vs a 700k expected build and distillates drew 737k while analysts expected a build of 1.25mbls.  All this while the DOW continues its own seesaw as our 401k's become 201e's!  Currently down over 300 points, the EIA just recently reported that it sees "significant downside risk" should current financial market concerns become more widespread.  Either way, we are above that magical $2.80 number again on HEAT as it closed up .1005 to $2.8653, RBOB gained .1149 to $2.7825 and CRUDE added $3.59 to $82.89. 
 
heat chart
RBOB CLOSE
                 CLOSE       CHANGE 
  
SEP    27825       +.1149
OCT    26312      +.1104
NOV    26022      +.1074
DEC   25902       +.1046
JAN    25946       +.1043
FEB    26076      +.1038
 
HEAT CLOSE
          CLOSE    CHANGE
SEP    28653     +.1005
OCT   28751      +.0988
NOV    28863      +.0960
DEC   28970     +.0933
JAN   29083       +.0909
FEB   29079       +.0886
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It's Deja Vu All Over Again - Commodities React to Downgrade

The levee broke once again as world markets reacted to S&P's decision to downgrade the US credit rating.  Commodities opened down over 7 cents on Sunday night and didn't look back.  Trading in negative territory all day and then banging the close with about 20 minutes left in the session.  HEAT fell as much as .1530 before clawing its way back to finish down .14 to 2.8017.  RBOB  coincidentally, was holding up for much of the day as it languished down around 4 cents before falling .1136 to $2.6916.   WTI  fell  a staggering $5.57 to $81.31.  The devil is in the details though, the 2.80 level on HEAT, while breached, held for the close, same can be said for the $80 mark on WTI.  Look for a buy back on Tuesday with further downside to come the remainder of the week as money continues to get pulled out of commodities.

heat chart

RBOB CLOSE
                 CLOSE       CHANGE 
  
SEP    26916       -.1136
OCT    25515      -.1353
NOV    25265      -.1399
DEC   25154       -.1413
JAN    25195       -.1422
FEB    25330      -.1425
HEAT CLOSE
          CLOSE    CHANGE
SEP    28017     -.1400
OCT   28114      -.1399
NOV    28241      -.1390
DEC   28365     -.1384
JAN   28498       -.1374
FEB   28509       -.1366
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Dollar Surges, Nymex and DOW plummet

The trend is definitely your friend!  As bearish tones continue to make tsunami like waves throughout the market, commodities took a beating along with the entire equity complex today.  The DOW fell a massive 3% on continued fears of a weaker than expected US economic picture.  The dollar soared higher today against the foreign basket as the European Central Bank bought bonds in an attempt to ward of a debt crisis taking over the region.  A weaker jobs outlook also played heavily into the mentality of traders today that had most running to book profits as quick a they could.  As fears of the dreaded double dip recession continue to make their way to the front page, Markets across all lines have taken huge hits.  I must say, from an end user perspective, this is OK.  The major hurdle for the Country to leap over  and to finally overcome the recession has been higher fuel prices.  Without a less expensive way for Americans to go from place to place, ship goods,  heat their homes, etc. etc. ,it is impossible to even think to believe we are in a better place.  It all starts with lower fuel pricing.  The key now is for these levels to maintain for a reasonable amount of time, if not fall further.  Demand will be a central player in the equation "where do we go from here" .  At the close, Crude fell $5.30 to $86.63, HEAT dropped .1250 to $2.8939 and RBOB lost a staggering .1941 to $2.7372.  Expect to see a buy back on Friday with Monday's action setting the tone for the remainder of the summer.

 

RBOB CLOSE
                 CLOSE       CHANGE 
  
SEP    27372       -.1941
OCT    26288      -.1763
NOV    26120      -.1659
DEC   26049       -.1605
JAN    26100       -.1593
FEB    26239      -.1587
HEAT CLOSE
          CLOSE    CHANGE
SEP    28939     -.1250
OCT   29048      -.1270
NOV    29169      -.1293
DEC   29293      -.1308
JAN   29416       -.1319
FEB   29424       -.1324
Read More

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