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Tomorrow the market is expecting the EIA to report the seventeenth injection of the 2006 refill-season – but only the third in the last five weeks – another below average 50 Bcf into underground storage.
This compares with last years 60 Bcf injection and the five-year average which is 64 Bcf. Thus, a draw in-line with expectations will serve to narrow the year-on-year surplus to around 275 Bcf, and the surplus to the five-year average to around 325 Bcf.
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Last Wednesday the DOE reported a third straight draw and the sixth draw in the last eight weeks in crude oil stocks, down 1.61 MMbbls or 0.5%. Total commercial stocks now stand at 331.0 MMbbls, 31.3 MMbbls (10%) above the fiveyear range. Inventories in Cushing, OK, -- the delivery hub for the NYMEX WTI contract -- moved up to 25.1 MMbbls.
In other words, per last Friday’s CFTC report, the Large Specs own more than three times as many "paper barrels" than actual physical barrels deliverable against the contract. As far as this morning’s report is concerned, market cognoscenti are expecting the DOE to report a draw in crude oil stocks of around 1.4 MMbbls. A move of this magnitude corresponds to seasonal parameters and will thus serve to sustain the five-year overage, which was 31.3 MMbbls (10.1%) as of the second week in August. Note, this will be the first (full) set of DOE/API numbers that will encompass the supply-side disruption from Prudhoe Bay.
Though it is still too early to register a material impact, all eyes will be on the disposition in PADD V. Regardless, the near-term supply-side outlook of this market remains comfortable… thanks to that contango. |  |
After a little Prudhoe Bay induced spike the week prior, transatlantic tonnage regressed somewhat, but still maintained a lofty return for owners. For instance, WA/USGC, which had jumped to ws 200, retreated, but still held around ws 190.
Meanwhile on Monday we referred to recent market chatter regarding storage capacity in Singapore. From two separate sources we have heard that upwards of 16 vessels are waiting to discharge, but are being held out for a lack of storage capacity and/or buyers. For those of you keeping score at home, the EIA estimates total storage capacity in Singapore of 100 million barrels, with 7/8ths of that storage held by the country’s major oil refineries… |
ExxonMobil’s Jurong/Pulau Ayer Chawan, Shell’s Pulau Bukom and Singapore Petroleum Company’s Pulau Merlimau facilities.
However, a shortage of storage facilities had led to a construction boom initiated by independent storage operators. An additional 6.8 million barrels of capacity is expected to be added by the end of the year, with another 39.6 million barrels that is either in the works or proposed over the next several years. Unfortunately for those vessels currently held out… that is of little comfort. |  |
Last Wednesday the DOE reported another "large" draw from storage, down 2.27 MMbbls or 1.1% on very strong demand. Nevertheless, from the 04th of July break we have "only" seen a 7.68 MMbbl draw, which is 2.64 MMbbls or 1.2 points below what we normally see this far into the season. As far as today looks, the market is expecting another "large" (but seasonable) draw of 2.0 MMbbls.
Thus, post DOE failure today to hold last week’s 191.50 low cautions to further bearish trade below the 190.00 critical point of reference, towards the 14-day pivot moving average, 187.83. Alternatively, a rebound above the Friday/Monday’s 197.00 "double top" allows bulls to refocus on the $2 critical point of reference. |  |
Last week the DOE reported the twelfth straight build in distillate fuels. Heating oil stocks in the New England and Mid-Atlantic market areas rose to 36.2 MMbbls or 21% above last year’s numbers. Meanwhile, diesel supplies increased for the first time in five weeks, up 1.02 MMbbls or 1.3%, while forward cover lengthened to 23.8 days. As far as today is concerned, the market is expecting a build of around 700 Mbbls.
Post DOE failure to support Monday’s 200.55 low clears a track back below 200.00, towards Friday’s pivot area between 198.82 and 198.55. Alternatively, another retrace back into the long-term pivot area between 204.28 and 207.85 cautions to further bullish trade towards the August 09th gap at 210.00. |  |
Fuel values came off last week in sympathy with the weakness on the NYMEX. The LSFO/WTI crack narrowed for a seventh consecutive week as a result. As of last Friday the crack was marked above minus $19, or minus $18.25, for the first time since last spring. What’s more, after topping out near minus $26 per barrel at the end of the second quarter, the crack has since contracted by almost 30% or by $7˝ a barrel. Meanwhile gas traders at the gate in New York (and elsewhere) saw values come in again on a lack of weather driven demand in most key gas market areas. Accordingly, gas went out trading at a discount to resid for a twenty-first consecutive week. |  |
NAT-GAS… Despite two separate attempts to push this market back above the 50% retracement, i.e. the "box top", 7.088, the bears ultimately prevailed. As far as this week is concerned failure to hold last week’s 6.450 low should find a path towards the July 24th gap at 6.360 and then into the July 21st pivot range between 6.207 and 6.125. Offers below here obviously caution to further weakness towards the $6 critical point of reference. Note, we estimate the market’s long-term mean at 5.927, thus selling below here cautions to further bearish momentum towards the year-todate extension, 5.597. Alternatively, a rebound above the 14-week pivot moving average, 6.941, alerts to yet another test of the 7.088 "box top" and a push to close the August 11th gap at 7.240. Bids above the 7.375 pivot area high from the week ended August 04th cautions to further corrective trade and an attempt to cross the 30-day pivot moving average, 7.470.
CRUDE OIL… This market ended last week courting the $70 psych-support. Offers this week below that critical point of reference in the Oct’06 alerts to further bearish momentum. First towards near-term support in between 68.42 and 67.56, and then into longer term support between 64.59 and 63.48. Alternatively, a rebound above the 14-week pivot moving average, 74.97 and the 30-week, 75.74, will then allow bulls to take aim at closing the "island reversal" between 76.80 and 77.35. | |  | 
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