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CRUDE OIL MARKET FUNDAMENTALS: September crude oil grinded higher overnight and approached yesterday’s highs. A portion of the early strength comes from higher global stock markets and a weaker U.S. dollar that has broken down into new three month lows. Overall, recent economic data has highlighted doubts over a recovering global economy and challenges demand prospects. The latest supply figures out of Nigeria estimated the countries crude oil output to increase 0.96% in September, which easily surpasses OPEC production quota of 1.67 million barrels per day. The abundant supply theme was made more apparent with Wednesday’s EIA data that showed crude stocks rose 7.308 million barrels and are 12.924 million barrels above year ago levels. This provided quite a negative shock to September crude oil as the market was looking for a draw for the week and instead posted the largest weekly increase in inventories since October 2008 (94-weeks). Helping to explain this bearish supply dynamic was the 11.8% surge in weekly imports that approached levels not seen since August 2006. Crude oil imports for the week stood at 11.153 million barrels per day compared to 9.977 million barrels the previous week. The refinery operating rate was 90.60% down, 0.90% from last week compared to 84.57% last year and the five year average of 90.39%. Some analysts viewed the high capacity rates north of 90% indicative of lower crude oil prices ahead. September crude oil had to stretch in order to challenge support levels at $76 and experienced a dramatic reversal higher from those levels shortly after the inventory report. However, the short term trend is negative with resistance above at $77.75, which also represents a 50% retracement of this week’s $3.80 sell off. Negative short term price momentum has diverged from price, which favors the bull camp in the near term for a run back higher toward resistance. Longer term traders could use strength up to resistance as an opportunity to sell crude oil to position for a larger break in prices. While the short term trend points down, the overnight tone favors the bulls with the potential for a rally back toward $77.75.
PRODUCT MARKET FUNDAMENTALS: GASOLINE: September RBOB established a higher price high overnight and tries to correct the $0.12 break experienced over the last four sessions. Stronger outside markets and a much weaker U.S. dollar have helped bolster prices during the initial morning trade. Also providing some support was the favorable supply and demand data provided by the weekly EIA report. EIA gasoline stocks rose 91,000 barrels and are 9.169 million barrels above last year and 12.765 million above the five year average. This minor build compared to earlier estimates for a 300,000 to 500,000 barrel build, coupled with a huge jump in gasoline demand to the highest levels since August 2007 was seen contributing to the turn higher. Average total gasoline demand for the past four weeks was up 2.12% compared to last year. Gasoline imports came in at 1.082 million barrels per day compared to 1.175 million barrels the previous week. September RBOB appears short term oversold and likely to see further price appreciation back up to 2.0820, and perhaps 2.0900.
HEATING OIL: September heating oil tried to make the turn higher overnight and has fallen short of Wednesday’s highs just below 2.04. Heating oil received a boost after the EIA showed that heating oil stocks actually fell 34,000 barrels. However, supplies remain bountiful and stand 2.699 million barrels above last year and 5.008 million above the five year average. Distillate stocks at 167.513 million barrels are at a record high for this week. Previous record was in 2009. EIA distillate stocks rose 938,000 barrels and stand at 4.896 million barrels above last year and 31.614 million above the five year average. Distillate imports came in at 149,000 barrels per day compared to 174,000 barrels the previous week. Average total distillate demand for the past four weeks was up 9.33% compared to last year. September heating oil has upside potential in the day ahead to tackle 2.0475 with the potential of 2.0580. We doubt that September heating oil can overcome range resistance above at 2.0600 up to 2.0900. The short term trend in heating oil points up, and clearance above 2.04 has the potential to invite a quick rally in price to 2.07.
TODAY’S ENERGY MARKET GUIDANCE: Recent price action and a positive tilt overnight favors the bulls to start.
Energy Market Commentary – 2010.07.29
by Dave Hightower on July 29, 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: September crude oil grinded higher overnight and approached yesterday’s highs. A portion of the early strength comes from higher global stock markets and a weaker U.S. dollar that has broken down into new three month lows. Overall, recent economic data has highlighted doubts over a recovering global economy and challenges demand prospects. The latest supply figures out of Nigeria estimated the countries crude oil output to increase 0.96% in September, which easily surpasses OPEC production quota of 1.67 million barrels per day. The abundant supply theme was made more apparent with Wednesday’s EIA data that showed crude stocks rose 7.308 million barrels and are 12.924 million barrels above year ago levels. This provided quite a negative shock to September crude oil as the market was looking for a draw for the week and instead posted the largest weekly increase in inventories since October 2008 (94-weeks). Helping to explain this bearish supply dynamic was the 11.8% surge in weekly imports that approached levels not seen since August 2006. Crude oil imports for the week stood at 11.153 million barrels per day compared to 9.977 million barrels the previous week. The refinery operating rate was 90.60% down, 0.90% from last week compared to 84.57% last year and the five year average of 90.39%. Some analysts viewed the high capacity rates north of 90% indicative of lower crude oil prices ahead. September crude oil had to stretch in order to challenge support levels at $76 and experienced a dramatic reversal higher from those levels shortly after the inventory report. However, the short term trend is negative with resistance above at $77.75, which also represents a 50% retracement of this week’s $3.80 sell off. Negative short term price momentum has diverged from price, which favors the bull camp in the near term for a run back higher toward resistance. Longer term traders could use strength up to resistance as an opportunity to sell crude oil to position for a larger break in prices. While the short term trend points down, the overnight tone favors the bulls with the potential for a rally back toward $77.75.
PRODUCT MARKET FUNDAMENTALS: GASOLINE: September RBOB established a higher price high overnight and tries to correct the $0.12 break experienced over the last four sessions. Stronger outside markets and a much weaker U.S. dollar have helped bolster prices during the initial morning trade. Also providing some support was the favorable supply and demand data provided by the weekly EIA report. EIA gasoline stocks rose 91,000 barrels and are 9.169 million barrels above last year and 12.765 million above the five year average. This minor build compared to earlier estimates for a 300,000 to 500,000 barrel build, coupled with a huge jump in gasoline demand to the highest levels since August 2007 was seen contributing to the turn higher. Average total gasoline demand for the past four weeks was up 2.12% compared to last year. Gasoline imports came in at 1.082 million barrels per day compared to 1.175 million barrels the previous week. September RBOB appears short term oversold and likely to see further price appreciation back up to 2.0820, and perhaps 2.0900.
HEATING OIL: September heating oil tried to make the turn higher overnight and has fallen short of Wednesday’s highs just below 2.04. Heating oil received a boost after the EIA showed that heating oil stocks actually fell 34,000 barrels. However, supplies remain bountiful and stand 2.699 million barrels above last year and 5.008 million above the five year average. Distillate stocks at 167.513 million barrels are at a record high for this week. Previous record was in 2009. EIA distillate stocks rose 938,000 barrels and stand at 4.896 million barrels above last year and 31.614 million above the five year average. Distillate imports came in at 149,000 barrels per day compared to 174,000 barrels the previous week. Average total distillate demand for the past four weeks was up 9.33% compared to last year. September heating oil has upside potential in the day ahead to tackle 2.0475 with the potential of 2.0580. We doubt that September heating oil can overcome range resistance above at 2.0600 up to 2.0900. The short term trend in heating oil points up, and clearance above 2.04 has the potential to invite a quick rally in price to 2.07.
TODAY’S ENERGY MARKET GUIDANCE: Recent price action and a positive tilt overnight favors the bulls to start.
Tags: Crude, Energy, Gasoline, Heating Oil, RBOB
About Dave Hightower