Energy Market Updates

We have all been in this far too long to get overly excited when the pits fall a few cents - like New England weather, wait and it will change.  

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.

Although the market finished down, it was not until very late in the session that we felt somewhat comfortable that it was a certainty.  Early morning jobs data reported yet another increase in unemployment claims, up 2k to 414k, Commodities fought their way back into positive ground as investors rushed for a safe haven.  The new information will be a key tenet for tonights Presidential address on the state of the economy, which could shift the markets in either direction.  The White House is expected to announce yet another round of stimulus spending, roughly $300 billion, on infrastructure and tax cuts.  Additionally, reports of the European Central Bank reporting what they perceive as "significant downside risk" to the European Economy.  With the mixed DOE report of Crude losing 4mbl and Gas and Distillates adding 198k and 708k respectively, while surprising , kept any major losses in check.  I would expect next weeks numbers to have the full impact of the past weeks weather, specifically in the Northeast.  It has become increasingly more difficult to determine how news will be perceived in the eyes of  market participants, what was once a bullish news day has now turned to a cautiously bearish one.  At the close, Crude slipped .29 to $89.05, RBOB lost .0228 to $2.8852 and HEAT lost .0313 to $3.0443.

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

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.

If you were to ask me two weeks ago if I thought the HEAT pit would rebound 30 cents after falling 45, I would say its about as likely as a tornado in Massachusetts....  And so here we are!   With what has been an almost two week rally, todays moves looked to be a reaction to the indecisiveness of OPEC.  For that last few years, OPEC has lost much of their mojo and most discounted their pumping policies and mandates as rhetoric.  As with any slow news day, people needed something to jump onto and the report that OPEC was doing nothing had bulls run the table.  That coupled with the DOE report of Crude having a 4.8mbl draw simple let the gates open for a decisively higher session.  Jobless claims increase slightly last week still signaling a troubled economy.  Even the Natgas report that showed an unexpected injection of 80bcf could not derail the upside.  While many see the last several sessions as technical buy backs, it is difficult to maintain the notion that better days are to come as we pop 3 or 4 cents higher everyday.  At the close, Crude maintained above $100 and settled up $1.19 to $101.93, HEAT rose .0441 to $3.1378 and RBOB jumped .0611 to $3.0398.