 |
Tomorrow the market is expecting the EIA to report the thirteenth injection of the 2006 refill-season into underground storage, another (well) below average 79 Bcf. This compares with last years 94 Bcf injection and the five-year average which is also 94 Bcf. Thus, a draw in-line with expectations will serve to narrow the yearon-year surplus to around 415 Bcf, and the surplus to the five-year average to around 560 Bcf.
We are now entering the "dog days", i.e. the period of the summer that typically marks the hottest and most humid weather of the cooling season. Therefore, as gasfired a/c load from the grid is set to increase, tomorrow’s report will likely be the last of "peak" injections. Normally we see the rate of injections diminish then plateau by late July to early August (by mid-September Utilities will make one final push to top off their winter burnstock requirements. As stocks approach capacity refills will trail off). Given the massive overhang, this process is about four to five weeks ahead of schedule as stocks are already fast approaching capacity. After all, stocks are nearly four-fifths of the way to the 2004 record peak of 3.327 Tcf! |  |
The market cognoscenti are expecting the DOE to report a draw in oil stocks of around 1.5 MMbbls. Beware, as closure of the Calcasieu ship channel disrupted vessel traffic into Lake Charles over the last two DOE reference periods, today’s report could be larger than expected. All told about 1 out of 26 barrels of U.S. refining capacity was vulnerable to reduced runs.
Last week Uncle Sam reported a (slightly) larger than expected 2.42 MMbbl draw in crude stocks. As one would reasonably expect, the bulk of the weekly inventory draws continue to accrue in PADD III (GoM) as market area downstream capacity ramps up for peak July/August gasoline demand. Both utilization rates and runs remain near post-Katrina highs. Yet, despite the increased apparent demand, and the prospects for even greater demand in the weeks ahead, crude oil stocks still enjoy a 32.5 MMbbl (10.5%) surplus to the five-year average.
What’s more, the five-year average draw for this week is 3.38 MMbbls. In other words, a draw in-line with the cognoscenti will serve to expand the surplus both to last year as well as the five-year average. |  |
Freight rates for shipping crude oil eased on slack demand associated with the 04th of July holiday in the United States. West African Suezmax tonnage into the Gulf Coast finished the abbreviated week trading around worldscale 150 on limited inquiry. U.S. refinery demand is strong. Per the latest EIA numbers imports for crude oil, finished products and blendstocks continue to surge, thus lending further support to freight markets. Over the last four weeks crude oil and petroleum products imports averaged 14.131 MMbbl/d, 1.51 MMbbl/d (12%) above the five-year normal. As such, freight should firm through the summer into fall. Five and six-month deferred IMAREX VLCC forward freight agreements are trading around ws 190. |  |
As far as the DOEs are concerned, the market is looking for a draw of around 250 Mbbls. Last week mogas traders were blindsided after a government report revealed an unexpected 727 Mbbl build. Total ending gasoline stocks now stand at 212.4 MMbbls, which represents a slight surplus to the five-year average.
As far as today is concerned, a post DOE failure to hold the bottom of Monday’s 218.11 pivot range alerts to follow through selling into the June 26th pivot range from 216.49 to 215.18. Penetration here should encounter light support until the 210.63 year-to-date mean and the March 28th extension at 208.61. Otherwise, a rebound above the 3- day pivot area high, 221.58, should enable bulls to take aim at the July 07th/10th gap from 222.50 to 223.55. |  |
Regarding today’s DOEs, the market is expecting a 1.5 MMbbl build in distillates. Last week the DOE reported the sixth increase in diesel stocks in the last seven weeks. As of a week ago Friday stocks increased 468 Mbbls to 75.7 MMbbls. More importantly, forward cover moved out to 23.7 days.
Post DOE bids today above the 50-day pivot moving average, 202.53 cautions to further corrective trade into the pivot range from last Friday’s plunge, between 202.19 and 204.50. Penetration here should find a path towards intra-day resistance around 207.04. Otherwise, sellers below Monday’s 197.02 pivot area low alert to further bearish momentum towards the March 28th extension at 193.17 and the year-to-date mean at 191.77. |  | | Comments Reserved for Subscribers |  | | Comments Reserved for Subscribers |  |
NAT-GAS… NYMEX nat-gas continues to sink. Since mid-April the front-month contract for Aug’06 delivery has closed lower in seven out of every ten sessions. As a result the contract has lost seven-tenths of its dollar value or $33,270 per contract! What’s more, on Friday the contract traded down to its lowest low in more than two years. Like we said… this market continues to sink. As far as this week is concerned the question holds… how low can we go? Failure to hold the year-to-date bearish extension at 5.260 alerts to a test of the $5 psych-support. Keep in mind, a front-month NYMEX Henry Hub futures contract has not traded with a $4-handle in more than 3 years, going all the way back to March 03rd, 2003. Thus, this "target" will appear very enticing to the bulls… and very worrisome to those 51,395 speculative shorts. Otherwise, a rebound above last week’s 5.676 pivot area high alerts to further corrective trade into the 3-week pivot range from 5.749 to 6.200. A close early in the week above the long-term bullish extension at 6.153 stalls last week’s selloff and sets the table for further strength towards the 14-week pivot moving average at 6.609.
CRUDE OIL… Prior to last week’s late weakness, front-month WTI closed higher for nine straight sessions. Over that time the contract surged $5.85 or 8.4%. Last Friday the Aug’06 peaked at 75.55, the highest price ever paid for prompt barrels on the NYMEX. Be that as it may, those prompt barrels are still the cheapest to be had on the NYMEX for the next 31 contracts, going all the way out to the March 2009 contract! In other words, the skew remains bullish. As far as this week goes… bids above last week’s 74.70 pivot area high should find a path for a test of that 75.55 peak. Penetration here will allow bulls to focus on the Aug’06 life-of-contract high at 76.85. Strength above here will be sailing into uncharted waters. Our next line of resistance is not expected until 79.24, then of course… $80. Alternatively, a failure to hold last week’s 72.51 pivot area low alerts to further weakness towards the 14-week pivot moving average at 71.33. Sellers here are then likely to encounter support around this market’s year-to-date mean, 70.18. | |  |  For more information on the Schork Report click here | |
