Energy Market Updates

While much of todays chatter centered around the wild cash blowout of gasoline on Friday, up some .24 in NY harbor, markets found a way to turn positive ahead of the close. Many are betting that a new round of Quantitative Easing, also known as QE3, will be announced after this weeks FED meeting. This bet was doubled down after Fridays disappointing payroll figures.While the stimulus plans are designed to boost economic activity, Commodity prices are often collateral damage and many agree that we might see higher prices with this round. Keeping the pits in check are the fundamentals which, even besides this weekends short term blowout, the nation is well supplied. Additionally there was a memo sent by the Saudi Oil Minister confirming the oversupply of product as well as the unsubstantiated value of the current marketplace. Look for the remainder of the week to be a wild one. At the Close, Crude finished up .12 to $96.54, HEAT gained .0179 to $3.1668 and RBOB .0044 to $3.0240

After last nights API data release that showed Crude suffering a massive 11.2 mbl draw, most were awaiting todays DOE numbers with one eye closed, hoping it was an aberration. For those watching the screens at precisely 10:30 this morning you saw Rbob spike 4 cents and HO jump 3. While not as horrific as an 11 million barrel draw, Crude still lost 6.5mbl according to the DOE. Gasolines fell 2.2mbl and distillates fell 974k. Still, far more than expectations. Other Bullish influences to the Market early were the Federal Reserve meetings that many had been betting on another round of stimulus. That gamble didn't pay off as a short time ago they announced that while the economic turn around has slowed, it doesn't warrant another round of stimulus... yet. The interesting note to the entire session is that Crude, at its peak today, was only up $1.50. In the last half hour of the trade, HO looked to be going negative as the air was let out of the balloon. RBOB inflated to much to peel off any of the gains and finished up .0599 to $2.8342, HO gained .0108 to 2.8588 and Crude added .85 to $88.91. Thursday sets up to be another exciting day with Jobless figures due out at 8:30.

Lets take a minute to put this month into perspective as we all recognize our short memories. On May 1, HO opened at 3.1783. Todays close of 2.7062 is an astounding .4721 cent retracement. For several weeks we spoke of a fall to the 2.75 level on prompt month Heat, and it has become a reality. With the majority of talk centered around the ongoing European crisis, today saw more length shed from Commodities on the heels of continued growing Crude stocks and some uninspiring job data. The delayed DOE report showed Crude adding 2.2mbbls against an expected build of 800k, yet gasolines fell 832k and a rather bullish distillate draw of 1.7mbbls, verses expectations of +200k and +500k respectively. Traders apparently feel that Crude levels are so robust, it far outweighs and week to week changes in refined products. Secondly, ADP's monthly report on new job growth fell short of expectations as it showed 133k unit gain. Support that figure was new jobless claims rose by roughly 10,000 this past month. All in all, the market continues to search for a bottom as the US dollar gains strength and length is pulled from Commodities. At the close, Crude fell 1.29 to $86.53, RBOB lost .0332 to $2.8250 and HEAT slipped another .0336 to $2.7062

For the second day in a row, early session losses were erased with strong closes. Todays bullish action came on the heals of a surprise increase in jobless claims and some cautiously upbeat comments the Federal Reserve. Commenting on the role of the Fed, Bernanke said ultra low rates would remain in effect through 2014 and did not rule out additional measures to pump up the economic situation. Commodities are the collateral damage of such news as the dollar again took a hit and caused the pits to show strong gains as the day wore on. Crude settled at $104.55 up .43, RBOB added .0276 to close at $3.1833 and HO took the lead gaining .0333 to $3.1944. Heat has come back with vengeance after touching 3.09 on the prompt month just over a week ago. There is fair amount of commentary out there that we should see substantially lower numbers in the coming sessions. Support for HO looks to be at the 3.15, then a 3.05 level.

Gasoline futures continued to sell off today after starting the early morning in the green. RBOB was up as much as 2 cents prior to the opening bell on news of Spain having a successful bond sell off to avoid yet another European debt scare. That bullishness turned however as Germany was said to be at odds with other Nations on how to proceed with the European Zone bailout plan. Simultaneously, Moodys was said to be ready to announce a downgrade of France's debt rating that caused the US dollar to push higher. A higher Dollar generally has a negative affect ( or positive affect from some viewpoints) on Commodities. Crude looks to be poised to fall below $100 for some time, getting as low as $101.67 before closing at $102.27, down .40. NatGas inventories were in line with estimates and on a whole remain roughly 700 bcf higher than the 5 year average. Even with the sessions slight bump in HO, finishing up .0069 to $3.1251, we are still roughly .15 less than two weeks ago. RBOB continues to be the dog falling another .0486(almost .25 in two weeks) to $3.1541. While it is nice to see the prices fall, realistically most think another .25 needs to be pulled off to get back to a "normal" state.

With the Heating oil pit tacking on over 15 cents in just under a week, many are scratching their heads as to why.  In a winter that has seen more 50 degree days than teens, most would assume the Heat pits to be tanking.  As with the case with these types of patterns, shifts in the jet stream have caused the Northeast to have a mild winter yet Europe is caught in a bitterly cold spell for some time.  Brent Crude has maintained its $20 premium to its cousin WTI, thus explaining the HO to WTI disconnect.  As shown below, that disconnect has been in place most of the year.   Longer term, you may start to see more US vessels head to European markets, signaling some shortfalls down the road.  Many are still on edge as Greece is continuing to try and find a way to pay off creditors and with Iran and Israel in a stare down, the tightening supplies across the pond are having nothing but bullish affects on the trade.  At the close, Crude added $1.50 to $98.41, RBOB slipped .0004 to $2.9275 and HO gained another .0343 to $3.1909.  Again we have touched the top of the 18 month range for HO, then next 30 days have typically seen a healthy pull back.  But again, what is typical anymore?

Last week we mentioned that it was going to be a sloppy back and forth week if a debt ceiling resolution was not passed.  As shown below, that was exactly what materialized.  Starting the week, HEAT was at 3.1280 and finished today at 3.0962 with all sorts of gyrations in between.  As traders are not willing to commit either way as a resolution  still looms and a tropical storm hitting the gulf region, it was somewhat surprising to see the market fall off as much as it did mid session.  Both products were down as much as 4 cents on the heals of GDP data being released which showed the economy was basically flat.  Furthermore, it notes that the recession  was deeper than first thought and the economy is obviously growing at a much slower rate.  There is growing sentiment that we will begin to encounter demand destruction at a growing rate if prices do not ease relatively quickly. At the close Crude fell $1.74 to $95.70, RBOB lost .0047 to $3.1129 and HEAT fell .0090 to $3.0962. This weekend will be critical as to how the Markets will shake out for the next few months, as a resolution should see lower prices