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Tomorrow the market is expecting the EIA to report another draw in gas inventories. If good, this will mark the second draw in the last three weeks, i.e. only the second draw ever posted in the summer, from underground storage. This compares with last years sub par 43 Bcf injection and the five-year average injection of 61 Bcf. Thus, a draw in-line with expectations will serve to shorten the year-on-year surplus to around 300 Bcf, and narrow the surplus to the five-year average to around 375 Bcf.
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Last Wednesday, the DOE reported the first draw in crude oil stocks in three weeks, down 1.77 MMbbls or 0.5%. Total commercial stocks now stand at 333.7 MMbbls, 15.7 MMbbls (5%) above the five-year range. Inventories in Cushing, OK, now stand at 25.6 MMbbls, a two-and-a-half year high, i.e. per Friday’s CFTC report, the Large Specs own 2.6 times more "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 oil stocks of around 1.0 MMbbls. A draw of this magnitude corresponds to seasonal parameters and will thus serve to sustain the five-year overage, which was 29.5 MMbbls (9.7%) at the end of July. However, keep in mind, over the last few weeks the industry went through a spell of unscheduled outages, including units at PdVSA’s Amuay facility, ConocoPhillips’s Roxana, Illinois, ExxonMobil’s Torrance, California and Valero’s Memphis, Tennessee refineries. Thus, with this implied crude oil demand sidelined, we could be in store for a smaller than expected draw. As such, Prudhoe Bay aside, the near-term supplyside disposition of this market remains comfortable. | As far as today is concerned, post DOE failure to hold Monday’s 76.05 low alerts to a move to close the gap at 75.40. A close today below here will stall bullish momentum and cautions to push against the weekly trendline, 73.43. Alternatively, bids above yesterday’s 77.45 high alerts to further bullish trade towards the July 14th all-time front-month peak, 77.95. Penetration here will then allow bulls to take aim at the Sep’06 life-ofcontract high, 79.45.
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West African suezmax tonnage continues to find a bid at/near ws 150 as strong seasonal demand, coupled with a "war premium" has charterers paying up for vessels. 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 14.1 MMbbl/d, 1.53 MMbbl/d (12%) 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 between ws 195 and 200. |  |
Last Wednesday the DOE reported a draw of 162 Mbbls in gasoline stocks. Furthermore, over the last three weeks the Street was expecting a cumulative draw of 2.6 MMbbls, and instead saw a combined draw of 1.78 MMbbls. As far as this morning’s report is concerned, the cognoscenti are looking for a 1.0 MMbbl draw, which is slightly below what we typically see for this week in the season.
As far as today goes, post DOE offers below last week’s 218.25 low print cautions to further bearish trade towards the June 28th/July 10th gap between 216.00 and 215.80. Otherwise, a rebound above last Friday’s 228.50 high print alerts to further bullish trade towards the 230.50 island-gap. Bids above here then alert to a potential run at last Wednesday’s 234.75 life-of-contract high. |  |
Last week the DOE reported an eleventh straight build in distillate fuel. Heating oil stocks in the New England and Mid-Atlantic market areas rose to 46% above the five-year average. Meanwhile, diesel fell to 76.2 MMbbls, as a result stocks fell into a year-on-year deficit for the first time this year while forward cover dropped to 23.8 days.
Regarding today’s session, post DOE sellers below the 14-day pivot moving average, 211.06, signals further corrective trade towards the August 02nd pivot range from 207.69 to 207.00. Failure here should find support at 205.94. Otherwise, a rebound above intra-day resistance, 214.03, alerts to further corrective trade back towards Monday’s 217.00 high print. Penetration here allows for a path towards the July 14th high, 218.40. |  | | Reserved for Subscribers |  |
NAT-GAS… Last week traders in the NYMEX Henry Hub pit lived up to the adage – with a little help from the funds – that what goes up, must come down. As far as this week is concerned offers below last week’s 7.120 low print should find a path into the "box", i.e. the 50/62% retracements between 7.088 and 6.744. Sellers below here can then gun for the weekly pivot area from June 23rd between 6.570 and 6.480. Alternatively, bids above last Thursday’s 7.540 high print alerts to further corrective trade and an attempt to close the gap at Wednesday’s low, 7.760. A close here sets the table for further strength towards the Katrina/Ivan extensions from 8.050 to 8.251.
CRUDE OIL… For the first time in three weeks WTI prices on the NYMEX found a bid. The contract for Sep’06 delivery finished last Friday at 74.76, up 1.52 per barrel; it was the first "up" week since the contract posted a life-of-contract high of 79.45 back on July 14th. As such, front-month WTI is presently tracking higher along a weekly trendline from March 24th. As far as this week goes… violation of the trend at 73.43, alerts to further weakness into the next ratchet of support in between the June 21st/26th pivot areas from 72.54 to 70.50. Further selling below the $70 critical point of reference signals to a potential flush towards long-term support from 65.78 to 65.09. Alternatively, penetration of the July 18th pivot area top, 76.50, the "double top" from the last two weeks cautions to further bullish momentum towards the all-time spot peak, 77.95 and the 79.45 life-of-contract high. | |  | 
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