3SOF

Wednesday, January 19, 2011...

•   February crude oil prices this morning are trading up +58 cents a barrel and February gasoline is +1.75 cents per gallon. Crude oil and gasoline prices yesterday fluctuated on either side of unchanged and finally settled lower after the IEA said that global crude supplies are ample: CLG11 -0.16, RBG11 -1.54. Feb gasoline climbed to a 2-1/3 nearest-futures high but erased its gains and finished lower.

                Bearish factors included (1) comments from the IEA that global oil supplies in the most developed economies still "looks relatively comfortable," with North American inventories "well above" the 5-year average, (2) IEA data that shows OPEC compliance with its late 2008 crude oil production cuts fell to 45% in Dec from 51% in Nov as the recent rise in prices encouraged OPEC members to cheat and overproduce from their quotas.

               Bullish factors included (1) the slide in the dollar index to a 1-3/4 month low, which boosts investment demand for commodities, and (2) the action by the IEA to raise their 2011 global oil demand forecast for a fourth month after they hiked their global oil consumption estimate for 2011 to 89.1 million barrels a day, up 360,000 barrels a day from last month's forecast.

Thursday, January 20, 2011...

•   February crude oil prices this morning are trading down -66 cents a barrel and February gasoline is -2.28 cents per gallon. Crude oil and gasoline prices yesterday gyrated on both sides of unchanged throughout the day and finally settled mixed as a weaker dollar offset economic concerns from a plunge in housing starts: CLG11 -0.52, RBG11 +0.24.

                Bearish factors included (1) concerns the US economy may be slowing after Dec US housing starts fell more than expected and matched a 2-month low, and (2) the fall in equity prices, which erodes confidence in the economic outlook and energy demand.

                Bullish factors included (1) the drop in the dollar index to a 1-3/4 month low, which boosts investment demand for commodities, and (2) the outlook for weekly crude oil inventories to fall for the seventh consecutive week when the DOE inventory report is released on Thu. Expectations for the weekly DOE inventory report are for crude oil stockpiles to fall -500,000 bbl, gasoline supp lies to increase +2.5 million bbl, distillate inventories to gain +1.0 million bbl and the refinery capacity rate to fall -0.5 to 85.9%.

Friday, January 21, 2011...

•   March crude oil prices this morning are trading up +36 cents a barrel and March gasoline is +1.02 cents per gallon. Crude oil and gasoline prices yesterday both plunged to 1-1/2 week lows on a stronger dollar, an unexpected increase in weekly crude inventories, and Chinese rate hike concerns: CLH11 -2.22, RBH11 -5.42.

                Bearish factors included (1) concerns that China may raise interest rates further after its Q4 GDP was stronger-than-expected, (2) the rally in the dollar, and (3) the unexpected increase in weekly DOE crude oil inventories which rose for the first time in seven weeks (+2.62 million bbl versus expectations of -500,000 bbl), and the larger-than-expected build in weekly gasoline inventories (+4.44 million bbl versus expectations of +2.5 million bbl).

                Bullish factors included (1) the rise in Dec China crude oil processing by +2.2% m/m to a record 9.16 million barrels a day, and (2) the larger-than-expected decline in the refinery capacity rate which tumbled to a 2-month low (-3.4 to 83.0% versus expectations of -0.5 to 85.9%) and indicates reduced amounts of gasoline and distillate products in the weeks ahead.

Crude Oil & Commodities...
Brent Crude is rising strongly, indicating an accelerating up-trend. There is no sign of any slowing on Twiggs Momentum (21-day), holding well above zero to indicate a healthy up-trend; but expect some resistance at the psychological barrier of 100.

* Target calculation: 88 + ( 88 - 68 ) = 108

Monday, January 24, 2011...

•   March crude oil prices this morning are trading down -71 cents a barrel and March gasoline is +0.12 of a cent per gallon. Crude oil prices fell in overnight electronic trade after Saudi Arabian Oil Minister Ali al-Naimi said OPEC might boost oil supply this year to meet growing demand in China and India. Crude oil and gasoline prices last Friday fluctuated on either side of unchanged and settled mixed as concern over further Chinese interest rate hikes outweighed a jump in German business confidence: CLH11 -0.48, RBH11 +3.64.

                Bearish factors included (1) concerns that China may raise interest rates further to curb inflation, which may slow its economy and demand for fuel, and (2) the recommendation from JPMorgan Chase for investors to "pare risk and take some profits" in crude oil on the prospects that OPEC may increase production.

                Bullish factors included (1) the slump in the dollar index to a 2-month low, which boosts investment demand for commodities, (2 ) the unexpected increase in the Jan German IFO business climate to its highest level since records for a reunified Germany began in 1991, which may lead to further economic expansion and increased energy demand, and (3) data from the API that showed US fuel consumption in 2010 climbed +2.3% y/y to 19.2 million barrels a day, a 6-year high.

Tuesday, January 25, 2011...

•   March crude oil prices this morning are trading down -$1.30 a barrel at a 1-3/4 month low and March gasoline is -3.20 cents per gallon as a stronger dollar and the unexpected contraction in the UK economy uncercuts commodity prices. Crude oil and gasoline prices slipped yesterday after Saudi Arabia's Oil Minister hinted at OPEC increasing crude output: CLH11 -1.24, RBH11 -4.06. Mar crude fell to a 3-week low.

                Bearish factors included (1) comments from Saudi Arabian Oil Minister Ali al-Naimi who said OPEC might boost oil supply this year to meet growing demand in China and India, and (2) weakness in gasoline as forecasts for a cold snap in the US Northeast signal less driving and reduced gasoline demand.

                Bullish factors included (1) the fall in the dollar index to a 2-1/4 month low, which boosts investment demand for commodities, (2) the unexpected increase in the Jan Euro-Zone PMI composite index which expanded at its fastest level in 6 months and signals increased e nergy consumption in Europe, and (3) the prediction from Saudi Arabian Oil Minister Ali al-Naimi that global oil demand may increase in 2011 by as much as 1.8 million barrels a day, or 2%.

Wednesday, January 26, 2011...

•   March crude oil prices this morning are trading up +69 cents a barrel and March gasoline is +2.74 cents per gallon. Crude oil and gasoline prices weakened yesterday after England's Q4 GDP unexpectedly contracted: CLH11 -1.68, RBH11 -6.73. Mar crude sank to a 1-3/4 month low and Mar gasoline fell to a 3-week low.

                Bearish factors included (1) the unexpected decline in Q4 UK GDP, which signals a weak economy and energy demand, and (2) the outlook for increases in weekly crude oil and gasoline supplies when the DOE reports weekly inventories on Wed.

                Bullish factors included (1) the larger-than-expected increase in Jan US consumer confidence to its best level in 8 months, which may lead to improved consumer spending and fuel demand, and (2) the unexpected increase in the Feb German GfK consumer confidence survey to a 3-year high, which may also lead to increased fuel demand. Expectations for Wednesday's weekly inventory report from the DOE are for crude oil stockpiles to increase +1.35 million bbl, gasoline supplies to rise 2.5 million bbl, distillate inventories to fall -500,000 bbl and the refinery capacity rate to remain unchanged at 83.0%.

Thursday, January 27, 2011...

•   March crude oil prices this morning are trading down -51 cents a barrel and March gasoline is -0.98 of a cent per gallon. Crude oil and gasoline prices closed higher after the dollar weakened and after Dec US new home sales surged: CLH11 +1.14, RBH11 +8.60. Mar crude rebounded from a 1-3/4 month low and closed higher.

                Bullish factors included (1) the slump in the dollar index to a 2-1/2 month low, which boosts investment demand for commodities, (2) the prediction from the China Petroleum and Chemical Industry Association that China's crude-processing volume may rise +7.5% this year, a sign of strong demand, (3) comments from OPEC Secretary-General El-Badri who said that oil prices are in a "comfortable zone," which suggests OPEC has no intention of boosting crude output anytime soon, and (4) the larger-than-expected increase in Dec US new home sales to an 8-month high, which bolstered optimism in the economy and energy demand.

                Bearish factors included (1) t he larger-than-expected increase in weekly crude oil inventories (+4.84 million bbl versus expectations of +1.35 million bbl), and (2) the larger-than-expected increase in weekly gasoline inventories, which climbed to an 11-month high (+2.40 million bbl to 230.1 million bbl versus expectations of +2.3 million bbl).

January 28, 2011...

•   March crude oil prices this morning are trading up +23 cents a barrel and March gasoline is +1.44 cents per gallon. Crude oil and gasoline prices moved lower yesterday after US weekly unemployment claims rose to a 2-3/4 month high and bolstered concern that the US economy and energy demand may be slow to recover: CLH11 -1.69, RBH11 -4.34. Mar crude tumbled to a 1-3/4 month low.

                Bearish factors included (1) the weaker than expected Dec durable goods orders along with the larger-than-expected increase in weekly US unemployment claims to a 2-3/4 month high, which indicates an uneven recovery that may limit fuel demand, and (2) carry-over weakness from a drop in demand after total US fuel demand last week fell -1.6% w/w to a 2-month low of 18.9 million barrels a day.

                Bullish factors included (1) the fall in the dollar index to a 2-1/2 month low, which boosts investment demand in commodities, (2) carry-over support from a jump in heating oil prices to a 2-1/4 year high af ter the National Weather Service predicted below-normal temperatures in the US Northeast from Feb 1 through Feb 9, and (3) the larger-than-expected increase in Dec US pending home sales, which boosts confidence in the economic outlook and energy demand.

Crude Oil...

Brent Crude broke its rising trendline, suggesting a correction to test support at $90/barrel. Twiggs Momentum (21-day) holding well above zero indicates a healthy primary up-trend.

* Target calculation: 88 + ( 88 - 68 ) = 108

Monday, January 31, 2011...

•   March crude oil prices this morning are trading down -3 cents a barrel and March gasoline is -1.85 cents per gallon. Crude oil and gasoline prices last Friday recovered from early losses and settled sharply higher on concern that civil unrest in Egypt might spread to major oil-producing parts of the Middle East: CLH11 +3.70, RBH11 +7.27. Mar crude fell to a 1-3/4 month low early in the session but rebounded and finished the day sharply higher.

                Bullish factors included (1) concerns that civil unrest in the Middle East will spread to oil-producing areas of the region or force a closure of the Suez Canal, which would disrupt global crude supplies, and (2) the +4.4% increase in Q4 US personal consumption, a 4-1/2 year high which shows strong consumer spending that may lead to increased fuel demand.

                Bearish factors included (1) the rally in the dollar, which discourages investment in commodities, (2) the weaker than expected US Q4 GDP, and (3) Bloomberg data that shows OP EC crude output in Jan climbed 210,000 barrels to a 2-year high of 29.395 million barrels a day.

Tuesday, February 1, 2011...

                 March crude oil prices this morning are trading down -70 cents a barrel and March gasoline is -0.69 of a cent per gallon. Crude oil fell in overnight trade on an easing of Egyptian concens after Suez Canal officials said traffic is moving normally through the canal and the Egyptian military said it won't fire on protestors. Crude oil and gasoline prices yesterday settled sharply higher for a second day due to a weak dollar and concern that unrest in Egypt may disrupt crude supplies: CLH11 +2.85, RBH11 +1.42. Mar crude posted a 2-1/4 year nearest-futures high and Mar gasoline climbed to a 1-week high.

                Bullish factors included (1) concern that the civil protests in Egypt will spread to major oil-producing parts of the Middle East or lead to a closure of the Suez Canal, (2) the slump in the dollar index to a 2-1/2 month low, which boosts investment demand for commodities, and (3) strong US economic data as Dec personal spending was stronger than expected and the Jan Chicago purchasing managers index unexpectedly expanded at its fastest pace in 22-1/4 years, which signals strong fuel consumption.

                Bearish factors included (1) speculation that forecasted winter storms for the central and eastern US will reduce gasoline demand, and (2) comments from OPEC Secretary-General Abdalla el-Badri who said that OPEC would increase its crude output if current unrest in Egypt disrupts oil supplies from the Middle East.

Wednesday, February 2, 2011...

•   March crude oil prices this morning are trading up +4 cents a barrel and March gasoline is -0.97 of a cent per gallon. Crude oil and gasoline prices yesterday fluctuated on either side of unchanged and settled mixed as strong global economic data was offset by reduced concerns from the Egyptian crisis: CLH11 -1.42, RBH11 +1.90.

                Bearish factors included (1) reduced concern that the civil unrest in Egypt will disrupt global oil supplies after Suez Canal officials said traffic is moving normally through the canal and the Egyptian military said it won't fire on protesters, and (2) the outlook that US crude inventories increased for a third week when the DOE releases its weekly figures on Wed.

                Bullish factors included (1) the slump in the dollar index to a 2-1/2 month low, which boosts investment demand in commodities, (2) the unexpected increase in the Jan ISM manufacturing index which expanded at its best level in 6-1/2 years and indicates strong energy consumption, and (3) strong European economic data that points to strong fuel consumption after German unemployment fell to an 18-year low in Jan and the Jan UK PMI manufacturing index unexpectedly expanded at its best level since data began in 1992. Expectations for Wednesday's weekly inventory report from the DOE are for crude oil supplies to increase +2.5 million bbl, gasoline stockpiles to gain +2.0 million bbl, distillate inventories to slip -1.0 million bbl and the refinery utilization rate to fall -0.3 to 81.5%.

Thursday, February 3, 2011...

•   March crude oil prices this morning are trading up +73 cents a barrel and March gasoline is +1,62 cents per gallon. Crude oil and gasoline prices yesterday traded on both sides of unchanged and settled mixed as soaring gasoline supplies undercut gasoline prices and riots in Egypt lifted crude: CLH11 +0.09, RBH11 -0.82.

                Bullish factors included (1) concern that protests in Egypt will spread throughout the Middle East and disrupt global oil supplies after riots broke out between anti-government protesters and people loyal to President Mubarak, and (2) optimism that expanding global economic growth will boost energy demand.

                Bearish factors included (1) the rebound in the dollar after the dollar index recovered from a 2-3/4 month low and closed higher, which may reduce investment demand in commodities, (2) weakness in gasoline after the larger-than-expected increase in weekly gasoline inventories which surged to their highest level in 17-3/4 years (+6.15 million bbl to 2 36.2 million bbl versus expectations of a +2.0 million bbl build), and (3) a severe winter storm that shut down much of the central US, which reduces jet fuel and gasoline consumption and demand.

Friday, February 4, 2011...

•   March crude oil prices this morning are trading up +29 cents a barrel and March gasoline is +0.69 of a cent per gallon. Crude oil and gasoline prices yesterday fluctuated on either sides of unchanged and settled mixed as a strong dollar offset violent political protests in Egypt: CLH11 -0.32, RBH11 +0.17. Mar gasoline posted a contract high.

                Bearish factors included (1) dollar strength, which may curtail investment demand for commodities, and (2) the prediction from tanker tracker Oil Movements that OPEC crude oil shipments will rise +1.7% to 24.16 million barrels a day in the four weeks to Feb 19.

                Bullish factors included (1) concern that violent political protests in Egypt will escalate throughout the Middle East and disrupt fuel supplies, and (2) the larger-than-expected increase in the Jan ISM non-manufacturing index to its best level in 5-1/3 years, which indicates strong fuel demand and consumption.