Energy Market Updates

Yet again the early morning fake out had most running to the racks early in the day. Overnight action had both products up over four cents with the ongoing Libyan situation heading closer a full out Civil War. Depending on who and when you are watching the news, reports come in from both sides that both the rebels or loyalist have retaken key areas and the latest is the oil port of Ros Lanouf. The West is apparently satisfied at this time to wage a war of words, calling for an end of Gadhafi’s bombings. Also seeking to institute a no-fly zone, speculative money continues to flood the Crude pit. Crude finished higher on the day ending up $1.02 to $105.44. Meanwhile some late day profit taking occurred in RBOB and HEAT. As we mentioned last week, some key resistance on HEAT was pegged at $3.14. Today we got to $3.1372 before falling all the back to finish at 3.0657 down .0236. Not that one day makes a rally but the about face that took place at the 1:00 p.m. hour was impressive, either that or someone decided it was time to cash out. RBOB was the biggest loser on the day falling .0425 to $3.0039. It’s funny how giddy we get now even on the slightest of down days.

Futures soared higher again today as all eyes continue to be focused on the Mid East and Northern African Nations and the wave of civil unrest that has gripped that region.

Only a week ago it appeared that the Libyan crisis was cooling with a possible quick exit by its Leader. That was 7 days and 25 cents ago….  As Iran has been said to clamp down and imprison opposition leaders and with Algerian news outlets reporting some growing protest, the main fear is that demand will outpace the supply. With the Saudi’s announcing they will foot the bill for any excess barrels left on the table, who wouldn’t want to be investing in Saudi Arabian refineries right now! Crude goes up $2.66 today to $99.63, jackpot! From the “ No Duh” file, FED chairman Bernanke spoke today and did little for the cause as he declared rising commodity prices would hurt the economy, but not produce massive inflation. More likely a short term rise in consumer gas prices.

With Funds bow controlling roughly 23% of the long positions in the Market; it will be interesting to see where the selling will start, and yes, it will happen. It was interesting to note that a gasoline demand report by Mastercard showed a 3% increase in demand last week, but some of that can be attributed to panic buying as consumers tried to beat the next price increase.

At the close, HEAT jumped .0846 to $3.0235 and RBOB soared .0907 to 2.9834. Let’s hope to find some relief in Wednesday’s DOE report.

I have mentioned often that for many technical analysts the number “3” is significant. After three down days in the Heat pit, the notion of a downward trend was about to pick up some steam. Early this morning HEAT was down over .02 and RBOB was off over .03. With the Egyptian situation cooling off and news of a rate hike in China overnight, there were many taking profits and thus putting pressure on commodities. That all changed as RBOB roared higher with reports of yet another refiner issue at Valero’s massive Port Arthur facility. Refinery problems have been plentiful over the last several days which appear to be supporting gasoline numbers. With Inventories expected to show draws in distillates and builds in Crude and gasolines, a late day sell off cut away a good chunk of the earlier gains. Crude was able to finish negative to $86.94, down .54. RBOB jumped .0437 to $2.4942 and HEAT rose .0257 to $2.7318. To digress to the number 3, notice below that the last time we saw three consecutive down days was mid NOV. That was immediately followed by a 20 cent rise in values over the next fifteen days. With the short term forecast calling for nightly single digits across the region, the possibility exists for a short term run north of $2.80.

Futures skyrocketed higher today hitting fresh highs on the heels of optimistic feelings about the economy.  After the feel good State of the Union speech, a speculative rally ensued early on and never looked back.  All this amid a very bearish Inventory report that totally contradicted the API’s and most estimates. Crude supplies added 4.8mbls, gasolines rose 2.4mbls and distillates fell only 140k, a stark contrast to the 5mbls projected by the API’s.  The rally carried over into the equities as well that saw the DOW crest above the 12,000 mark for the first time in almost two years.  With the FED saying the economy needs a $600 billion bond buying program; it was somewhat surprising to see the rise.  Ultimately the pressure put on the dollar today appears to be the underlying fuel for the speculative run.  As New England braces for another round of snow and cold, I would not expect to see any decisive moves in either direction in the short term.  At the Close, Crude added $1.14 to $87.33, RBOB soared .0879 to $2.4306, erasing yesterdays losses and HEAT jumped .0769 to $2.6698.

As many New Englanders try to find meaning of our meager existence without any football to watch for the next month, reality got slightly worse as we all tried to commute this morning in snow, sleet and rain. The market reacted strongly early on in the session pushing values up over two cents. As the day progressed, eyes shifted towards this week inventories. While Crude is expected to show slight draws, the products are expected to show moderate builds. The news appeared to be just enough to keep values from soaring to 18 month highs. Somewhat surprising was that the reopening of the Alaskan pipeline did not have the same downward effect as the shutting down did to the upside. Bulls appear to be in control for the short term, as the 15 cent jump in value in the last week exemplifies. We thought we peaked out at the 2.55 level on HEAT, only to move higher. Is 2.75 in the cards? The mixed close suggest otherwise, but we heard that song before. Crude closed down .16 to $91.38, RBOB lost .0154 to $2.4792 and HEAT rose .0007 to $2.6459.

Last Friday we were all excited that the NYMEX appeared to be on the verge of its January thaw. Well, a small pipeline leak on the Alaskan north slope over the weekend turned that jubilation into disappointment. Based on reports, a 5 to 7 barrel leak (yes, that’s 210 to 294 gallons) leaked from the pipeline causing the entire line to be shut down. With normal flow rates expected in the next day or so, early morning action had profit takers pushing the pits down almost 2 cents in electronic trading. The forecast for a crippling mid week snow storm in the Northeast had buyers out in full force and turned the session around at the open. Bulls jumped on when reports of diesel demand surged in December, up over 2%. An indicator to some that our economy is moving in the right direction and business can afford the higher prices seen in the last few weeks. All that was lost in value last week was taken back, and then some, in the last two days. Look for Wednesday to be heavily influenced by the Inventories that again are expected to show Crude levels to fall and products to rise. At the end of the day, Crude jumped $1.86 to $91.11, RBOB added .0241 to $2.4784 and HEAT gained .0527 to $2.6088.

With much of the Industry expecting large draws in Crude and distillates due to year end and a relatively cold week across the nation, the surprise build in distillates put immediate pressure across the pits.  With the Trade looking for some short term direction, it came in the way of Inventories.  Crude fell 1.25mbl vs estimates of a draw of 2.85mbl (bearish) Gasolines fell 2.3mbl vs estimates of a build of 1.5mbl (bullish) and Distillates increase 245k barrels vs estimate of a draw of 625k barrels (bearish).  With Bears taking two out of three it was enough to sink the Heating oil pit far enough down  making comeback towards the end of the day almost impossible.  Interestingly enough,  RBOB did make a comeback, after trading down over 3 cents the Front month was able to finish the day marginal positive.  Gasoline gained support with the jump in demand figures as well as the drop in jobless claims last week.  It will be interesting to see how Friday will play out as the focus again shifts to the economy and how much of an impact the northeast storm had on the historically large shopping day of after Christmas returns and gift card redemptions.    At the close Crude fell below the $90 mark dropping $1.28 to $89.84, RBOB added .0014 to $2.3918 and HEAT slipped .0361 to $2.4854

Today’s NYMEX action could be characterized as being at a 4-way stop sign with every car staring at the other to see who is going to move first, and nobody moves.  What started out looking like a good down day after touching some yearly highs, and every news outlet letting us know, the market came back slightly and stayed relatively flat all day.  News was light today as the only market pushing piece was that December consumer confidence slipped slightly.  With Inventories set to report on Thursday due to the Holiday, expectations are again for draws in all products with support coming from colder weather across much of the nation and increase driving for the holiday.  Again, there is nothing earth shattering about this, just a simpletons answer.  The million dollar question remains do we move higher or lower from here.  Unfortunately most still have not forgotten December of 2007 when we were right around the same level before we skyrocketed $1.50 higher on HEAT to over $4.  At the close Crude fell .37 to $91.12, still above the psychological $90 line.   HEAT lost 28 points to $2.5215 and RBOB led the charge falling .0152 to $2.3904.  Remember Friday is a full trading day but expect little volume.

You know winter has arrived when it takes over 3 hours to travel 50 miles on the Mass Pike.  The cold snap and glancing blow of a Nor’easter to the New England area had buyers out today.  Looming out on the horizon is another round of Inventory stats that are expected to be a mirror image of the last two weeks, draws in Crude and small builds in products.  While it is tough to distinguish between Holiday exuberance or a real change in sentiment, many out there are pointing to signs of a better economic picture.  How that has changed in only two weeks, I have no idea.  With the large Hovensa refinery attempted to be restarted, this has also attributed to the higher close.  Crude settled at $89.82 up .45 (again just shy of the $90 mark that has held all year)  RBOB added .0207 to $2.3985 and HEAT added .0269 to $2.5164.  With a short week for most and the Inventory report tomorrow we should expect a volatile session or two ahead of us.

After yesterday’s downright balmy weather in the northeast, today brought us back to reality with temps in the low teens.  That cold air was a key factor in keeping HEAT pits positive today while gasoline values fell.  Front month HEAT gained .0027 to close at $2.4679 while RBOB lost .0220 to $2.2964.  Crude is still unwilling to move from its current range and settled at $88.28, down 33 cents.  The market continues to search for direction as Inventories are expected to show a draw in Crude supplies and builds in gasolines and distillates.  With gasoline demand reported to have fallen over 2% in the last week, but again those are credit card transactions which can be misleading, some sought to shed length.  On the flip side, Personal spending rose pointing to a better economic picture for some as hit the heart of the buying season for most Americans.  Based on the HEAT chart below, we are due for breakout in either direction, which way remains to be seen.  Interesting to note that it has been over two months since we saw this type of range bound trading.