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CRUDE OIL MARKET FUNDAMENTALS: Crude oil exploded during the overnight session helped by a series of favorable weekend developments that countered the extreme flight to quality play from last week. Global finance leaders including the Fed, increased swap lines to the European Central Banks to boost liquidity along with the passage of a massive European debt stabilization fund (of close to 1 trillion $). However, an OPEC official speaking at energy gathering in DOHA, commented on the new Euro financial aid package, saying that it would lift crude back above $80 but cautioned over the prospect for extreme volatility as the global recovery will still need to eat through excess physical supplies. In addition, the OPEC secretary added that there remained abundant supplies of crude oil urging more compliance among members to come into line with 2008 production guidelines. Fresh trade data out of China overnight also bodes well for the demand side of the equation for crude oil, as does the US Non farm payroll reading from last Friday. In fact, Chinese crude imports were seen up 30.9% compared to this time during 2009 and they set a new record high level for daily consumption (5.15 mln bpd). Also stoking the “risk-on” attitude were results that Germany’s exports expanded by 10.7% to 79.0 billion, a bullish number supporting the recovering economic backdrop and the fastest rate of growth in that reading in about 18-years. The Commitments of Traders Futures and Options report as of May 4th for Crude Oil showed Non-Commercial traders were net long 190,691 contracts, an increase of 928 contracts. The Commercial traders were net short 213,372 contracts, a decrease of 7,057 contracts. The Non-reportable traders were net long 22,680 contracts, a decrease of 7,985 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 213,371 contracts. The primary weekly trend in crude oil should be up now, with support coming at the first retracement off the May slide seen at $82.35 in the July contract. The new Euro area aid package is a game changer for today’s trade and has provided the bulls with a clear edge. It is possible for prices to revisit pre-panic price levels up above $84 to $86 basis July Crude oil. BP made its first attempt to install a massive 98-ton containment apparatus over the oil leakage areas in the Gulf but the build up of ice crystals thwarted the original plan leaving engineers seeking alternative ways to stop the leaks.
PRODUCT MARKET FUNDAMENTALS: GASOLINE: July RBOB posts a gap higher open in response to a weekend financial aid package designed to stem the run on Euro area sovereign debt markets. The US dollar has erased over 61% of last weeks gains so far today and that cheapens gas prices on the world market and helped RBOB rebound over $0.07. On the retail level, the Lundberg survey showed average gas prices in the US rose during the last 2-weeks to $2.92 per gallon but those prices are expected to fall back because of last week’s action. The Commitments of Traders Futures and Options report as of May 4th for Gasoline (RBOB) showed Non-Commercial traders were net long 80,867 contracts, an increase of 6,322 contracts. The Commercial traders were net short 93,188 contracts, an increase of 8,636 contracts. The Non-reportable traders were net long 12,321 contracts, an increase of 2,313 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 93,188 contracts. This represents an increase of 8,635 contracts in the net long position held by these traders. A normal retracement of the May slide could allow the June RBOB contract to rise back to the $2.2274 level and perhaps even back to the 50% retracement level of $2.2682 level.
HEATING OIL: After the massive early May washout of 30 cents a gallon the partial all clear from the Euro zone should foster in a series of short covering rallies. A normal retracement off the May slide would seem to allow a recovery to the 1st retracement level of $2.1716 and perhaps even the 50% retracement level of $2.2070. The Commitments of Traders Futures and Options report as of May 4th for Heating Oil showed Non-Commercial traders were net long 34,705 contracts, a decrease of 52 contracts. The Commercial traders were net short 56,577 contracts, an increase of 854 contracts. The Non-reportable traders were net long 21,873 contracts, an increase of 906 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 56,578 contracts.
TODAY’S ENERGY MARKET GUIDANCE: Short covering and perhaps some fresh spec long interest should leave the bull camp with the edge today.
Energy Market Commentary – 2010.05.10
by Dave Hightower on May 10, 2010
Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
CRUDE OIL MARKET FUNDAMENTALS: Crude oil exploded during the overnight session helped by a series of favorable weekend developments that countered the extreme flight to quality play from last week. Global finance leaders including the Fed, increased swap lines to the European Central Banks to boost liquidity along with the passage of a massive European debt stabilization fund (of close to 1 trillion $). However, an OPEC official speaking at energy gathering in DOHA, commented on the new Euro financial aid package, saying that it would lift crude back above $80 but cautioned over the prospect for extreme volatility as the global recovery will still need to eat through excess physical supplies. In addition, the OPEC secretary added that there remained abundant supplies of crude oil urging more compliance among members to come into line with 2008 production guidelines. Fresh trade data out of China overnight also bodes well for the demand side of the equation for crude oil, as does the US Non farm payroll reading from last Friday. In fact, Chinese crude imports were seen up 30.9% compared to this time during 2009 and they set a new record high level for daily consumption (5.15 mln bpd). Also stoking the “risk-on” attitude were results that Germany’s exports expanded by 10.7% to 79.0 billion, a bullish number supporting the recovering economic backdrop and the fastest rate of growth in that reading in about 18-years. The Commitments of Traders Futures and Options report as of May 4th for Crude Oil showed Non-Commercial traders were net long 190,691 contracts, an increase of 928 contracts. The Commercial traders were net short 213,372 contracts, a decrease of 7,057 contracts. The Non-reportable traders were net long 22,680 contracts, a decrease of 7,985 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 213,371 contracts. The primary weekly trend in crude oil should be up now, with support coming at the first retracement off the May slide seen at $82.35 in the July contract. The new Euro area aid package is a game changer for today’s trade and has provided the bulls with a clear edge. It is possible for prices to revisit pre-panic price levels up above $84 to $86 basis July Crude oil. BP made its first attempt to install a massive 98-ton containment apparatus over the oil leakage areas in the Gulf but the build up of ice crystals thwarted the original plan leaving engineers seeking alternative ways to stop the leaks.
PRODUCT MARKET FUNDAMENTALS: GASOLINE: July RBOB posts a gap higher open in response to a weekend financial aid package designed to stem the run on Euro area sovereign debt markets. The US dollar has erased over 61% of last weeks gains so far today and that cheapens gas prices on the world market and helped RBOB rebound over $0.07. On the retail level, the Lundberg survey showed average gas prices in the US rose during the last 2-weeks to $2.92 per gallon but those prices are expected to fall back because of last week’s action. The Commitments of Traders Futures and Options report as of May 4th for Gasoline (RBOB) showed Non-Commercial traders were net long 80,867 contracts, an increase of 6,322 contracts. The Commercial traders were net short 93,188 contracts, an increase of 8,636 contracts. The Non-reportable traders were net long 12,321 contracts, an increase of 2,313 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 93,188 contracts. This represents an increase of 8,635 contracts in the net long position held by these traders. A normal retracement of the May slide could allow the June RBOB contract to rise back to the $2.2274 level and perhaps even back to the 50% retracement level of $2.2682 level.
HEATING OIL: After the massive early May washout of 30 cents a gallon the partial all clear from the Euro zone should foster in a series of short covering rallies. A normal retracement off the May slide would seem to allow a recovery to the 1st retracement level of $2.1716 and perhaps even the 50% retracement level of $2.2070. The Commitments of Traders Futures and Options report as of May 4th for Heating Oil showed Non-Commercial traders were net long 34,705 contracts, a decrease of 52 contracts. The Commercial traders were net short 56,577 contracts, an increase of 854 contracts. The Non-reportable traders were net long 21,873 contracts, an increase of 906 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 56,578 contracts.
TODAY’S ENERGY MARKET GUIDANCE: Short covering and perhaps some fresh spec long interest should leave the bull camp with the edge today.
Tags: Crude Oil, Energy, Gasoline, Heating Oil, Natural Gas
About Dave Hightower