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Quite frankly, we don’t care how hot it is out there. That hardly begins to explain yesterday’s run up on the NYMEX. Yes, AEP losing a nuke in ECAR was certainly bullish, but it hardly justifies a 14% daily spike.
After all, since 2000 a gain of this magnitude has occurred only eight times, i.e. the odds of yesterday’s event were about 204/1 or once every ten months. In other words, it was a long shot.
Now it has been hot all summer long. It was hot on Friday and everyone knew it was going to be hot today. Thus, it is impossible to believe that "heat" was the root behind yesterday’s strength. No, something else is afoot, what it is we don’t know yet. But we will figure it out. We will say however in passing that yesterday’s price action has all the tell-tale signs of a hedge fund implosion. But that remains to be heard.
Bids today above 8.231, the Ivan extenion alerts to further strength towards the April 24th/25th gap, from 8.370 to 8.450. Buyers above here can then target the next gap, from April 21st/24th between 8.690 and 8.750, and then the 52-week mean, 8.781. On the other had, |  |
NYMEX WTI caught a bid yesterday by virtue of the nat-gas pit. The contract also found strength on the UN Security Council’s August 31st deadline for Iran to accept a plan to suspend its nuclear program, and Tehran’s prompt (not to mention predictable) rejection of that deadline. Thus, the farce of bribing the mullahs with "incentives" continues. It would be comical… in a keystone cop sort of way, if it were not so darn tragic. Anyway, the HHub/Cushing ratio closed at 9.1/1, a three-and-a-half month low.
 | | Record cooling demand, both in the U.S. and in Europe, along with a "war premium" continues to foster a bid in the freight markets. Suezmax tonnage into the GoM finished Friday at/near ws 150 for a third straight week. 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 13.8 MMbbl/d, 1.29 MMbbl/d (10%) above the five-year normal. Add to this mix the looming Atlantic Basin hurricane season, and the recipe is set for continued strength lasting into the fall. Four and five-month deferred IMAREX VLCC forward freight agreements are trading around ws 195. |  | Unleaded RFG for Aug’06 deliver finished the month at 203.76. On the month the contract closed higher slightly more times than it closed lower. Nevertheless, the contract still managed to lose 490 ticks or $2,058 per lot.
As far as today goes, bids above intra-day resistance at 224.03 should find a path up towards the 14-week pivot moving average, 227.45 and last week’s 230.50 high print. A close here sets the table for further strength towards the 233.75 life-of-contract high. Otherwise, failure to support yesterday’s 218.25 low cautions to further weakness and a run to close the June 28th/July 10th gap at 215.80. |  |
Heating oil for Aug’06 deliver found a bid on yesterday’s expiry to settle at 196.79. On the month the contract closed lower slightly more times than it closed higher. As a result the Aug’06 lost 607 ticks or $2,549 per contract, while implied vol jumped by one-third.
As far as the Sep’06 is concerned, bids above yesterday’s 204.80 high print caution to further bullish momentum towards last Thursday’s pivot area from 205.57 to 206.25. Penetration here can then target last week’s 208.50 high print and then the May 12th pivot area between 209.65 and 211.05. Otherwise, failure to hold the July 18th pivot area low, 199.64 alerts to a possible attempt to close the July 21st/24th gap at 196.90. |  |
Fuel values found a bid last week despite the weakness in the NYMEX liquids complex. The LSFO/WTI crack continues to trade at a historically wide margin. As of last Friday the crack was marked around minus $21.86, but has come in by about $5/bbl since the start of the month. Meanwhile gas at the gate in New York found a bid towards the end of the week on increased weather-related demand. Nevertheless, next-day decatherms finished the week at a discount to fuel oil for a seventeenth straight week, albeit by the slightest of margins, 96½ cents on the dollar, virtual parity. |  |
NAT-GAS… NYMEX nat-gas found a bid last week, thus halting a downward trend extant since mid May. As far as this week is concerned bids above last week’s 7.290 high alert to follow through momentum towards the mid $7s. A close here sets the table for further strength towards the April 26th/May 11th gap from 7.90 to 7.980. Alternatively, sellers below last week’s 6.805 weekly pivot area low caution bearish momentum towards the weekly gap from July 14th/21st from 6.320 to 6.230.
CRUDE OIL… For a second straight week WTI prices retraced from all-time peaks. As such the front-month contract for Sep’06 delivery consolidated below our 73.55 critical point of reference as of last Friday. As far as this week goes… offers below the low from the week ended July 21st, 71.65 alert to follow through bearish momentum towards 70.58 and the 70.00 psych-support. We expect to see solid support here. Thus, penetration here cautions for a potential flush into the next ratchet of support towards the mid $60s. Alternatively, bids above 74.47, the 30-week pivot moving average signals renewed bullish momentum back up against the all-time spot peak, 77.95. | |  | 
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