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The whisper number for today’s EIA lottery ranges between 65 Bcf (Jefferies) up to an 85 Bcf injection (United Strategic Investors) for an average estimated injection of 78 Bcf per a Bloomberg survey. The NYMEX/ICAP EIA option settled at 78 Bcf as well. These forecasts compare with an average of 94 Bcf, and last year’s record low 75 Bcf. TSR’s forecast is 83 Bcf. A draw in-line with expectations will serve to maintain the year-on-year surplus around 440 Bcf but narrow the surplus to the five-year average to only 630 Bcf. The current year-on-year surplus translates into and extra two-and-a-half weeks of last summer’s record demand from the grid. As such, we expect the surplus to the five-year average to narrow by approximately 200 Bcf over the next ten-weeks. However, given last July and Augusts’ record heat we expect the year-on-year surplus to hover near 400 Bcf as we segue into peak hurricane season, this summer’s spike in fuel switching notwithstanding.
Meanwhile, wounded gas bulls managed to stem the bleeding yesterday, halting a three-day slide from last week’s dubious "strength". However, post EIA failure |  |
The DOE reported an unexpected 1.39 MMbbl/d build in crude stocks. For a second straight week the bulk of the week’s movement occurred out west in PADD V. In other words, crude oil stocks east of the Rockies fell 2.4 MMbbls last week. As you would expect, the majority of that draw occurred in PADD III (GoM). Both capacity and runs shot to a post Katrina highs. Despite the increased demand, the year-on-year overhang moved out for a fourth straight week and now stands at 19.7 MMbbls or 6.0%.
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Freight rates for shipping crude oil firmed for a second straight week with West African tonnage into the U.S. trading around worldscale 95. Finally back from turnarounds, U.S. refinery demand is strong. Per last this week’s 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 imports averaged 10.8 MMbbl/d, 856 Mbbl/d (8.6%) above the five-year normal. Also lending support to the market, particularly for Suezmax cargoes was the first loading of Azeri crude ex Azerbaijan at Ceyhan via the Baku/Tbilisi/Ceyhan pipeline, which now creates eastward demand as well. |  |
Since the end of turnarounds mogas stocks have climbed 12.85 MMbbls, which is about twice what we normally see at this point. As such a 10.8 MMbbl year-on-year deficit has since narrowed to 2.5 MMbbls. More importantly, forward cover continues to improve and now stands at 22.7 days. As we said above, we can not get too excited about yesterday’s weekly snapshot. But that does not mean we can afford to ignore yesterday’s action. Penetration today of the 14-day pivot moving average, 208.92 clears a path towards last week’s gap from 210.50 to 212.00. Above here bulls can take aim at last week’s 216.00 "double top".
Otherwise, failure to hold yesterday’s 203.75 pivot area lowcautions to further weakness towards support around 200.25. |  |
Yesterday the DOE reported the first draw in five weeks in diesel fuel inventories. As of last Friday stocks fell 970 Mbbls to 74.64 MMbbls and forward cover narrow to 23.3, which is still one full day ahead of last year’s pace. As far as today’s session is concerned, buying interest above yesterday’s 195.30 high print should create a path into last week’s gap from 196.25 to 198.60. Bids above here should encounter resistance up until the 50-day pivot moving average, 200.94. Otherwise, failure to hold the 3- day pivot area low, 192.00 alerts to renewed bearish momentum towards Monday’s 188.70 low. Failure here clears a path to the next ratchet of support in between the March 27th/28th gap from 183.00 to 182.70. |  |
Fuel oil in New York Harbor has been trading dear to gas since mid winter. Partially as a result of the attendant fuel switching, fuel oil consumption had been softening since the start of spring. Be that as it may, since Memorial Day, resid is the only fuel to see higher year-on-year demand. Over the last three weeks demand has averaged 773 Mbbl/d or 5 Mbbl/d (0.6%) ahead of last year’s pace.
Regardless, fuel oil stocks continue to build. As of last Friday inventories increased 616 Mbbls to 42.06 MMbbls, which is a 20-month high. As such, estimated forward cover is more than seven days ahead of last year’s pace. |  | | [Reserved for Subscribers] |  |
NAT-GAS… NYMEX nat-gas exploded to the upside last week on rumors that a "large" energy fund blew up. We have not been able to corroborate the story, but given last week’s 15% moon-shot, it would explain a lot. Anyway, bids above last week’s 7.250 high alerts to follow through strength for a push towards the 30-week pivot moving average around 7.819 and the $8 psych-level. Penetration above here should find a path towards the post Katrina mean around 8.132 and the 50-week pivot moving average at 8.195. Alternatively, failure to hold the year-to-date mean at 6.824 alerts to further weakness towards the bottom of the 3-week pivot range at 6.595. A close below this area coupled with further selling effectively negates last week’s runup.
CRUDE OIL… The skew in WTI remains to the downside with the front-month closing lower in five of the last eight weeks since positing an all-time high. Last Friday the contract closed below $70 for the first time in four weeks and for only the second time since mid-April. As far as the week is concerned, a failure to hold the pit’s year-to-date mean around 68.56 should find a quick path towards support in between last week’s 68.30 low print and the low from the week of May 26th at 67.55. Penetration here alerts to further weakness towards the next ratchet of support in the mid $60s, specifically the March 24th/28th gap from 66.55 to 66.00 and the 30-week pivot moving average at 65.54. Alternatively, bids above last week’s 71.90 high print alert to bullish trade towards a near-term trendline at 72.89 and the high from the week of June 09th at 73.40. A close above here sets the table for the bulls to mount an assault on the 75.35 front-month all-time peak and the Jul’06 life-of-contract high at 76.30. | |  | 
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