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Tomorrow the market is expecting the EIA to report a draw of around 25 Bcf for last week from underground storage. This compares with last years 89 Bcf draw and the five-year average 52 Bcf. Thus, a draw in-line with expectations will push the overhang to the five-year average out to over 700 Bcf. That’s better than 11% of NYMEX open interest and is equivalent to more than two weeks of aggregate U.S. daily production. To date, utilities have withdrawn 1.451 Tcf this season, which is about 30% below normal. The "cold" start to spring notwithstanding, it’s hard to see how we are not going to enter summer refills with record stock levels at a minimum of 1.6 Tcf. At the current pace, we are well on our way to seeing the first sub-1.7 Tcf draw season ever!
Despite closing the March 10th/13th gap at 6.810, bulls succeeded in rallying this market on apparent hype (believe it or not) associated with Monday’s AccuWeather forecast calling for a POTENTIAL active hurricane season in the NORTHEAST! Remind us again… how many rigs are located off of Block Island? After all, outside of Ted Kennedy’s Hyannisport home, there are not too many gas processing plants in the path of this potential storm. |  |
Regarding today’s DOEs and the market is expecting another large build for last week of around 2.5 MMbbls. Last Wednesday the DOE reported a massive 4.8 MMbbl increase. Current inventories of 339.9 MMbbls representa 45.4 MMbbl surplus to the five-year average. That equates to well more than eight days worth of typical first quarter crude oil production. Needless to say, the market is awash in crude oil… and that is not about to change in the near-term. The implied decrease in crude oil demand consequent of extant Katrina/Rita damage, plus ongoing turnarounds will allow inventories to build through the spring. In Cushing, Oklahoma alone, the delivery point for NYMEX WTI, supplies are 4.9 MMbbls or one quarter higher year-on-year. In other words, as we like to say around these parts… you can’t swing a dead cat without hitting a barrel of crude oil in the United States.
Post DOE selling below the bottom of yesterday’s pivot at 61.98 stalls yesterday’s rebound and alerts to weakness towards intra-day support at 61.47. Failure to hold here clears a path towards the March 08th low print at 61.00 and could encourage sellers to mount a run towards the |  |
After sliding the prior week, the West African Suezmax market found a floor. Consequently, transport ex West Africa (WA) for USGC/USAC discharge rose from around worldscale (ws) 120 back up to around ws 140. All in all, according to Bloomberg data, a total of 13 fixtures were reported for last week. That’s up from 4 the prior week. Meanwhile, it was another quiet week in the WA VLCC market with Bloomberg reporting one fixture, Conoco’s hiring of the double hulled Front Vanguard at ws 115 with a mid April laycan. Activity was exceptionally slack. One published report had only about 30 cargoes worldwide booked last week. As we head into the new week odds for a price rebound are slim. |  |
The market is looking for a draw of 1.0 MMbbls for today’s DOEs. Mogas stocks typically draw about 2½ MMbbls for this date. So a report in-line with the consensus will actually serve to expand the yearly surpluses, which currently stand at 2.5 MMbbls year-on-year and 16.9 MMbbls to the fiveyears. Post DOE trade below yesterday’s pivot range at 183.20 alerts to weakness and a move against intra-day support at 180.87. Failure to hold support here clears a path towards the March 13th/16th gap from 177.00 to 175.00. The 50-day pivot moving average is marked at 176.43. A close below this area will push our bias back in neutral.
Alternatively, strength above 185.88 sets the table for a run at last Wednesday’s DOE-induced 188.30 high. Above here we expect resistance inside the February 01st pivot range between 189.43 and 191.58. |  |
The market is expecting a draw of around 2.0 MMbbls for today’s DOEs. Temperatures in the East last week were about 10% warmer than normal, and 25% warmer weekon-week. On the other hand, wet barrels in New York Harbor surged last week and in the process narrowed to parity with the prompt screen. Post DOE trade above 178.76 can target the top of last Friday’s pivot area at 179.55 and clears a path towards last week’s 183.10 high print. Above here we do not show a lot of overhead resistance until our intra-day target at 183.33. On the other hand, failure to hold the area in between the 50 and 14-day pivot moving averages from 176.56 to 175.74 cautions for further weakness towards intra-day support at 174.30. Below here we expect support to come in the form of the March 13th pivot area from 173.07 to 171.65. |  | | Reserved for Subscribers |  | | Reserved for Subscribers |  | NAT-GAS…
As we said last week, exclusive of substitute Btus, there is no debating the bearish undertones to the disposition of nat-gas supplies. The "official" end to the Northern Hemisphere winter occurs this week, yet gas supplies are still more than halfway full as we head into the shoulder months. Yet, despite these facts, front-month gas rallied and closed above $7/Dh for the first time in three weeks. Failure this week to hold the line at the bottom of the three-week pivot range at 6.910 signals for a test of last weeks 6.830 low print. Selling interest below here clears a path towards intra-week support at 6.653 and alerts for yet another attempt to punch through support in the mid $6.00s and the recent 55-week low at 6.450. If the bears can get it this low then we next like support inside the pivot range for the week ended May 27th basing area between 6.322 and 6.258. On the other hand, our target for this week is 7.144, penetration here can target the top of the pivot area from February 10th at 7.379. Bids above this area set the table for a possible run at intra-week resistance at 7.701. Given the current discount to alternative Btus, and based on our models, we do not think a run towards this area is unreasonable.
CRUDE OIL… NYMEX WTI caught a bid last week as Operation Swarmer put the kibosh on end of week bearish designs. As we look ahead to the new week there is a ton of technical support beneath unchanged in the K’06 (64.20). Bears will have to overcome support beginning at last week’s pivot range from 64.02 to 63.65, and lasting until the area in between the 100-day at 61.36 and the 50-week pivot moving average at 59.82. Otherwise, the skew to this market remains to the upside. Our target this week in the K’06 is 65.39. Therefore, bids above unchanged alert for a test of the "box". Recall, said "box" is the 50/62% retracement area between 65.18 and 66.34. Our next line of intra-week resistance does not appear until 68.71, then the life-of-contract high at 70.33. | |  | 
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