Crude Oil

[setravis]

Tuesday, December 28, 2010...

•   February crude oil prices this morning are trading up +34 cents a barrel and February gasoline is +0.22 of a cent per gallon. Crude oil and gasoline prices yesterday finished lower on speculation the action by China to raise interest rates for the second time in 2 months will slow its economic growth and energy demand: CLG11 -$0.51, RBG11 -1.94. Feb crude posted a 26-month high but shed its gains and finished lower.

                Bearish factors included (1) the action by China to raise interest rates, which may slow its economy and fuel consumption, and (2) the statement from Iraq's Oil Minister who said that Iraqi oil production will exceed 2.6 million bpd for the first time in 20 years, which should boost global oil supplies.

                Bullish factors included (1) the weaker dollar, which boosts investment demand for commodities, and (2) cold weather and snowstorms along the east coast of the US, which should increase demand for heating fuels.

[setravis]

Wednesday, December 29, 2010...

•   February crude oil prices this morning are trading down -68 cents a barrel and February gasoline is -1.01 cents per gallon. Crude oil and gasoline prices yesterday fluctuated on either side of unchanged and finally settled mixed as strength in retail sales offset a drop in consumer confidence: CLG11 +$0.49, RBG11 -0.90.

                Bullish factors included (1) the report from MasterCard Advisors' SpendingPulse, which measures retail sales by all payment forms, that showed US retailers' 2010 holiday sales jumped 5.5% y/y, the strongest pace of sales in 5 years and is bullish for US fuel demand, and (2) the larger-than-expected increase in the Dec Richmond Fed manufacturing index to its best level in 7 months, which signals strength in the US economy that may lead to increased energy demand.

                Bearish factors included (1) the rebound in the dollar which fell to a 1-week low but recovered to close higher, and (2) the unexpected decline in Dec US consumer confidence, which questions th e sustainability of the economic recovery and energy demand. Expectations for Thursday's weekly DOE inventory report (delayed 1 day because of the Christmas holiday) are for crude oil supplies to fall -3.0 million bbl, gasoline stockpiles to increase +1.83 million bbl, distillate inventories to fall -875,000 bbl and the refinery capacity rate to remain unchanged at 87.7%.

[setravis]

Thursday, December 30, 2010...

•   February crude oil prices this morning are trading down -40 cents a barrel and February gasoline is +0.85 of a cent per gallon. Crude oil and gasoline prices yesterday moved lower on speculation the US economic recovery isn't fast enough to increase energy demand: CLG11 -$0.37, RBG11 -0.93.

                Bearish factors included (1) concern that weakened US consumer confidence and still high unemployment will prevent energy demand from increasing, and (2) speculation that US crude supplies will increase once the new year begins next week as refiners delay crude deliveries until 2011 in order to reduce tax bills.

                Bullish factors included (1) the weaker dollar which encourages investment demand in commodities, and (2) the report from MasterCard that said US gasoline demand rose +4.6% last week to 9.613 million barrels a day from 9.19 million barrels a day the prior week. Expectations for Thursday's weekly DOE inventory report (delayed 1 day because of the Christmas holiday) are for crude oil supplies to fall -2.85 million bbl, gasoline stockpiles to increase +1.5 million bbl, distillate inventories to fall -625,000 bbl and the refinery capacity rate to rise +0.1 to 87.8%.

[setravis]

Friday, December 31, 2010...

•   February crude oil prices this morning are trading down -28 cents a barrel and February gasoline is -0.08 of a cent per gallon. Crude oil and gasoline prices yesterday fell to 1-week lows after DOE weekly crude supplies fell less than expected: CLG11 -$1.28, RBG11 -0.37.

                Bearish factors included (1) the smaller-than-expected decline in weekly crude oil inventories (-1.26 million bbl versus expectations of -2.85 million bbl), and (2) the unexpected increase in weekly distillate inventories (+243,000 bbl versus expectations of -625,000 bbl).

                Bullish factors included (1) the slump in the dollar index to a 2-week low which boosts investment demand in commodities, (2) the unexpected decline in weekly gasoline inventories (-2.32 million bbl versus expectations of +1.5 million bbl, and (3) strong US economic data after weekly initial unemployment claims fell to 2-1/3 year low and the Dec Chicago purchasing managers index expanded at its fastest level in 22 years, which signa ls strength in the economy and energy consumption.

[setravis]

Monday, January 3, 2011...

•   February crude oil prices this morning are trading +45 cents a barrel and February gasoline is 1.77 cents per gallon on this morning's overseas stock rallies and on expectations for strong US economic data this week. Crude oil and gasoline prices last Friday rebounded from early losses and closed higher as the dollar slumped: CLG11 +$1.54, RBG11 +4.55. Both Feb crude and Feb gasoline posted 26-month highs.

                Bullish factors included (1) the slump in the dollar index to a 5-week low which boosts investment demand in commodities, and (2) a halt to oil tanker travel in the Houston ship channel for a second day due to fog, which may cause supply disruptions to Gulf refiners and lead to gasoline shortages.

                Bearish factors included (1) year-end liquidation by commodity funds, and (2) increased supplies with OPEC crude production climbing +150,000 barrels in Dec to 29.185 million barrels a day, a 4-month high and about 2 million barrels above OPEC quotas.

[setravis]

Tuesday, January 4, 2011...

•   February crude oil prices this morning are trading +29 cents a barrel and February gasoline is up 1.34 cents per gallon on support from the slightly lower dollar and on general economic optimism. Crude oil and gasoline on Monday closed mixed: CLG11 +$0.17, RBG11 -.030. Both Feb crude and Feb gasoline posted 26-month highs.

                Bullish factors centered on (1) continued strong US and global economic data, (2) bad weather in the Gulf of Mexico that caused Pemex to close its export terminals in the Gulf, and (3) the forecasts for cold weather in the U.S. for the next two weeks, which is bullish for heating oil.

                Bearish factors for oil prices was the mild rally in the dollar index.

[setravis]

Wednesday, January 5, 2011...

•   February crude oil prices this morning are trading down -86 cents a barrel and February gasoline is -3.30 cents per gallon. Crude oil and gasoline prices on Tuesday sold off sharply: CLG11 -2.17, RBG11 -1.33.

                Bearish factors included the mild rally in the dollar and heavy long liquidation pressure after the sharp rally seen in December. The market is also expecting a rise in petroleum inventories in January after the drawdown seen in December in an effort to minimize taxes. The market consensus for today's weekly DOE report is for a 2 million decline in crude oil inventories, a 500,00 bbl rise in gasoline inventories, a 750,000 rise in distillate inventories, and an unchanged refinery operating rate of 87.8% of capacity.

[setravis]

Friday, January 7, 2011...

•   February crude oil prices this morning are trading up +65 cents a barrel and February gasoline is +0.33 of a cent per gallon. Crude oil and gasoline prices on Thursday sold off sharply and finished with large losses: CLG11 -1.92, RBG11 -0.21. Feb crude slid to a 2-week low and Feb gasoline rallied to a 27-month high but relinquished its gains and settled lower.

                Bearish factors included (1) the rally in the dollar index to a 1-month high, which reduces investment demand in commodities, and (2) concern that a slower recovery in some European nations will prolong the region's debt crisis and reduce its energy demand.

                Bullish factors included (2) early strength in gasoline which climbed to a 27-month high on optimism about the economic recovery and the potential for increased fuel demand, and (2) comments from the Kuwaiti Oil Minister who said a price of $75 a barrel for crude oil "is over now" and a higher price range of $80 to $100 a barrel is acceptable.

[setravis]

Monday, January 10, 2011...

•   February crude oil prices this morning are trading up +69 cents a barrel and February gasoline is +0.96 of a cent per gallon. Crude prices rallied in overnight trading after an Alaskan pipeline carrying about 15% of US crude output was shut on Saturday following a leak. Crude oil and gasoline prices last Friday erased early rallies and finished lower: CLG11 -0.35, RBG11 -2.99. Feb crude fell to a 3-week low.

                Bearish factors included (1) the rally in the dollar index to a 1-1/4 month high, which discourages investment demand in commodities, (2) the smaller-than-expected increase in Dec US nonfarm payrolls, which signals a struggling labor market that may crimp fuel demand, and (3) the slide in stock prices which decreases confidence in the economic outlook and energy demand.

                Bullish factors included (1) the larger-than-expected drop in the Dec US unemployment rate to a 19-month low of 9.4%, and (2) the action by Canadian Natural Resources to shut its 100,000 bpd Hori zon oil-sands project because of a fire, which may curtail crude supplies to the US.

[setravis]

Tuesday, January 11, 2011...

•   February crude oil prices this morning are trading up +43 cents a barrel and February gasoline is -0.55 of a cent per gallon. Crude oil and gasoline prices yesterday finished moderately higher: CLG11 +1.22, RBG11 +4.12.

                Bullish factors included (1) a reversal in the dollar after the dollar index closed lower after it had climbed to a 1-1/4 month high, (2) the closure of the Trans Alaska Pipeline System, which carries 15% of US crude output, after an oil leak in the pipeline prompted its closure over the weekend, and (3) the prediction from Morgan Stanley that crude will remain "high" this year and breach $100 a barrel "as OPEC spare capacity falls from elevated levels to 4.1 million barrels a day by year end."

                Bearish factors included (1) equity market weakness, which reduces optimism in the economic outlook and energy demand, and (2) concern that Europe's sovereign debt crisis may spread and slow the global economy and fuel demand.

[setravis]

Wednesday, January 12, 2011...

•   February crude oil prices this morning are trading unchanged and February gasoline is down -1.82 cents per gallon. Crude oil and gasoline prices yesterday closed higher for a second day: CLG11 +1.86, RBG11 +2.41. Feb gasoline posted a 27-month high.

                Bullish factors included (1) the continued shutdown of the Trans Alaska Pipeline System, which carries 15% of US crude output, after an oil leak in the pipeline prompted its closure over the weekend, (2) the report from the National Commission on the BP Deepwater Horizon Oil Spill that recommended that exploration in US deep waters be overseen by an independent agency in the Interior Department, which raises concern that it will become more difficult to drill for new crude supplies, (3) comments from the Kuwaiti Oil Minister who said that OPEC will not hold an emergency meeting if crude prices hit $100 a barrel, and (4) the action by the US Energy Department to increase its 2011 crude oil price forecast to average $93.42 a barrel, up from a Dec forecast of $86.08 and to hike its global crude consumption estimate for 2011 to 89.65 million barrels a day from 87.78 million estimated last month. Expectations for Wednesday's weekly inventory report from the DOE are for crude oil stockpiles to fall -1.2 million bbl, gasoline supplies to increase +2.13 million bbl, distillate inventories to rise +1.0 million bbl and the refinery capacity rate to remain unchanged at 88.0%.

[setravis]

Thursday, January 13, 2011...

•   February crude oil prices this morning are trading down -16 cents a barrel and February gasoline is +0.49 of a cent per gallon. Crude oil and gasoline prices yesterday finished mixed: CLG11 +0.75, RBG11 -1.53. Feb crude climbed to a 1-week high.

                Bullish factors included (1) the weaker dollar, which boosts investment demand in commodities, (2) the larger-than-expected decline in weekly crude inventories which dropped to their lowest level in 11 months (-2.15 million bbl to 333.1 million bbl versus expectations of -1.4 million bbl), and (3) the rally in the S&P 500 Index to a 2-1/3 year high, which boosts confidence in the economic outlook and energy demand.

                Bearish factors included (1) the restarting of the Trans Alaska pipeline, after it was closed for several days to repair a leak, (2) the larger-than-expected increases in weekly gasoline and distillate inventories (gasoline +5.08 million bbl versus expectations of +2.12 million bbl and distillate inventories +2 .65 million bbl versus expectations of +1.0 million bbl), and (3) reduced US gasoline demand after the 4-week average slipped -1.5% to 9.07 million barrels a day.

[setravis]

Friday, January 14, 2011...

•   February crude oil prices this morning are trading down -$1.26 a barrel and February gasoline is +0.68 of a cent per gallon. Crude oil and gasoline prices yesterday closed lower: CLG11 -0.46, RBG11 -1.72.

                Bearish factors included (1) the unexpected surge in weekly initial US unemployment claims to a 2-month high, which may limit US economic growth and energy demand, and (2) the prediction from the World Bank that China's economy will grow 8.7% in 2011, less than 10% in 2010, which may lead to a reduction in Chinese energy demand.

                Bullish factors included (1) the slide in the dollar index to a 1-week low, which boosts investment demand in commodities, and (2) the unexpected narrowing of the Nov US trade balance to a 10-month low as global demand boosted US exports to their highest level in more than 2 years, which shows strength in the global economy that may lead to an increase in fuel demand.

[setravis]

Crude Oil...
Brent Crude, however, appears unaffected by the stronger dollar, rising strongly off support at $88/barrel. Twiggs Momentum (21-day) holding above zero indicates a healthy up-trend.

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

[setravis]

Tuesday, January 18, 2011...

•   February crude oil prices this morning are trading down -17 cents a barrel and February gasoline -0.03 of a cent per gallon. Crude oil and gasoline prices last Friday settled higher on a weak dollar and on Royal Dutch Shell's action to shut a 340,000 barrel-a-day refinery in Texas for unscheduled repairs: CLG11 +0.14, RBG11 +4.87.

                Bullish factors included (1) the fall in the dollar index to a 2-week low, which boosts investment demand in commodities, (2) the bigger-than-expected increases in Dec US industrial production and capacity utilization, which signals strength in the economy that may lead to increased energy demand, and (3) strength in gasoline after Royal Dutch Shell Plc shut a 340,000 barrel-a-day refinery in Texas for unscheduled repairs, which may limit gasoline supplies.

                Bearish factors included (1) China's action to boost banks reserve ratio requirements for the fourth time in 2 months, which may slow its economy and energy demand, and (2) the weaker tha n expected Dec US retail sales along with an unexpected drop in Jan US University of Michigan consumer confidence, which signals a possible slowdown in consumer spending that may limit fuel demand.