[MrBill]

$this->bbcode_second_pass_quote('', 'D')emand outlook weakens
Partially offsetting the uncertainty surrounding Iran's oil production, an International Energy Agency implied that demand for oil will head lower.
Overnight, the IEA revised its demand forecast for 2006, down to 1.49 million barrels of oil a day from 1.78 million, due to persistently high oil-product prices and increasing evidence of demand weakness in Southeast Asia.
"High oil-product prices are clearly having an impact on demand, most notably in Southeast Asia, which had been a key driver of global oil-demand growth," said the Paris-based agency.
"Initially it was thought that the region's oil product demand growth would rebound quickly following increases to administered product prices in several rapidly growing economies. It now appears that the impact of higher retail prices will extend well into 2006," it said

[MrBill]

DOE oil inventory numbers March 15th

Crude +4.8 mio bbls to 339.9 mio bbls
Gasoline -0.9 mio bbls to 223.9 mio bbls
Distillates -3.9 mio bbls to 127.5 mio bbls
Refinery Runs +2.7% to 85.7%
Imports -205k bpd to 9.94 mbpd

The knee jerk reaction was to sell crude/buy products, but now higher product prices are also buoying crude as well. I am not sure. May be a short squeeze and then we will move lower. But I am not sure how much ground crude can give up on the back of geopolitical concerns over Iran and Nigeria while the products are clearly rallying? We have certainly covered a lot of ground in the past 30-minutes, testing both sides, so now we need a major theme to re-emerge? Brent up on strong gasoil buying, especially in the front month.

[MrBill]

Had quite a push lower yesterday after a brief rally after the nos., but not a lot of follow through today. Seems to be consolidating, looking for new inputs. I am taking a bearish stance based on the fundamental builds, but it is ticking up here now after some weakness this morning. Likely just range trading ahead of NY. Take care.

In Other News from Reuters....
$this->bbcode_second_pass_quote('', '
')
* Royal Dutch Shell said this morning that it has shut in 25,200 bpd of North Sea crude following a electrical fire at its Tern Alpha platform northeast of Shetland. A spokeswoman said there was no estimate as to when production would be restored.

* The U.S. said it will send about 650 soldiers into Iraq that were on reserve in Kuwait to conduct joint operations with U.S.-trained Iraqi government security forces. The military said it is part of a plan
to reposition forces ahead of next week’s Shi’ite religious holidays.

* Nigerian militants said that they have separated three foreign oil workers they are holding for strategic reasons but do intend to kill them.

* Japan’s Nippon Oil said yesterday it would trim Iranian crude imports by 15 percent this year due to growing country risks, by buying less from Japanese trading houses who source from Iran, and not reduce its own requirements.

* NYMEX said yesterday that it will increase margins for its New York Harbor gasoline blendstock, futures contract by the close of business tomorrow. Margins for the first month of the New York Harbor
RBOB contract will increase to $5,500 from $4,500 for clearing members and to $7,425 from $6,075 for customers.

* U.S. natural gas storage levels are expected to fall by about 60 billion cubic feet when weekly EIA data is released later today. On average over the last five years, inventories have declined about 79 bcf in this report.

* Russian oil output rose to 90,000 bpd to 9.55 mbpd in the first 15 days of March, but is still below December’s levels by 100,000 bpd. Analysts have said that the extreme cold spell earlier this year may mean that Russia will not meet its planned 2% - 3% increase in output for 2006.

* Norway’s February oil exports fell 16% on the year to the lowest level in more than five years at 58.9 million barrels, or 2.1 mbpd. The fall was attributed to ageing oil fields and platforms.

* Pemex said yesterday that it would invest around $37.5 billion over the next 20 years to develop the massive Chicontepec on-shore oil field. President Fox said investments in the oil field should mean Chicontepec will be producing 1 million barrels per day in six years.

European North Sea crude oil quotes as reported by Reuters: Brent was heard trading at May minus 50 cents for March 28-30 loading, the equivalent of dated minus 10 cents. Oseberg sold for March 29-31 loading at Dated plus 65 cents. Statfjord was offered at dated plus 70 cents.

Reuters calculations show that refining margins fell yesterday, with refiners cracking Brent in Rotterdam earning $5.40 a barrel, down from $6.69 over the preceding five days. In the U.S. Gulf, Brent margins rose
to $12.84 from $11.92. U.S. gasoline/distillate quotes as reported by Reuters: In Gulf Coast trading, M2 conventional gasoline was down 1.00c at 8.00c over. Distillates were steady, with heating oil at 1.00/0.85c under. In New York Harbor, R2 premium gasoline was up 4.00c at 21.00c over. Prompt M4 gasoline was up at 0.50c under, with anymonth at 1.25c over. Distillates were unchanged.

EIA/DOE Inventories as of March 10th
Crude +4.8 MB (expected 2.7 MB) (API +2.2 MB)
Gasoline -.9 MB (expected -1.3 MB) (API +.2 MB)
Distillates -3.9 (expected -1.7 MB) (API -2.5 MB)(Mb) Current Previous Year Change from last
week week ago Week Year*

[drew]

I was debating whether to sell my Nexen yesterday, which is what I have been doing every time I feel like we are at a mini crest in the market. I have to agree, Mrbill, we seem to be well supplied of late. Fear must be keeping prices high.

So, this is my logic for holding on:

1: day trading is stressing me out a bit and I'm only right about half the time,

2: how likely is it that Iran will be sanctioned, or attacked,

3: how likely is it that Iraq will descend into anarchy,

4: any number of events like Nigeria, hurricanes, production or refinery outages happening/worsening.

As for gold?!?!?!? (I'm liking it way too much!)

Drew

[tugboat]

Does anyone have any experience with www.everbank.com ? they appear to have a wide range of options for metals and currency accounts. Any input would be appreciated.

[MrBill]

$this->bbcode_second_pass_quote('drew', 'I') was debating whether to sell my Nexen yesterday, which is what I have been doing every time I feel like we are at a mini crest in the market. I have to agree, Mrbill, we seem to be well supplied of late. Fear must be keeping prices high.

So, this is my logic for holding on:

1: day trading is stressing me out a bit and I'm only right about half the time,

2: how likely is it that Iran will be sanctioned, or attacked,

3: how likely is it that Iraq will descend into anarchy,

4: any number of events like Nigeria, hurricanes, production or refinery outages happening/worsening.

As for gold?!?!?!? (I'm liking it way too much!)

Drew

[rockdoc123]

I wonder if we are not in a new paradigm for oil trading...one where the old "rules of engagment" don't work as well all of the time. For instance I saw a plot the other day which showed 2004 to present percentage of shorts versus longs for oil. From 2004 to late 2005 there was quite a gap but right now the shorts and longs are pretty close. In "normal" times this would probably signal it is time to unload your long postions and head for sanctuary....oil prices headed lower. But I suspect we are not in "normal" times simply because during "normal" times there was substantial spare capacity....over the last few years spare capacity has been decreasing steadily and is not expected to increase until late in 2006 if Saudi can get their planned facilities expansion on line. With demand increasing in lockstep I can't see that the spare capacity issue will get sorted out. So if you are an oil buyer worried about potential interuptions of supply (i.e. hurricanes, terrorism, Iran etc.) you are likely going to want to stockpile more reserves than previously....hence prices stay high when "normally" they should be dropping. How long this situation will hold may have to do with how much padding in oil reserves buyers need to feel comfortable..perhaps once we've met that limit all hell will break loose.

Of course I am not a trader, nor do I play one on the television....so the experts here can slag me off if I am out to lunch.

[pup55]

What do you make of this whipsawing the last three days:

63 down to 62, 62 up to 63.5 in about 1 hour today.

This stuff is pretty crazy. No way for a little guy to make money in a market like this.

[drew]

Thanks, MrBill, you're just like my son-he recommended a similar approach a while back and is a smart guy too......

He doesn't have any insight into 70 day averages etc, he's just prudent.

Great for a kid though!

I need to hold a bit more energy to attempt your strategy though, since at present I only hold one board lot of NXY. (I don't like trading odd volumes due to liquidity and higher brokerage fees)

I am somewhat diversified at the moment, surprisingly, although mostly in commodities based equities.

I could have tried your strategy last summer when I had 400 shares of CNQ.

I'll try it soon, when I break 6 figures!

Drew

[MrBill]

$this->bbcode_second_pass_quote('pup55', 'W')hat do you make of this whipsawing the last three days:

63 down to 62, 62 up to 63.5 in about 1 hour today.

This stuff is pretty crazy. No way for a little guy to make money in a market like this.

[truecougarblue]

MrBill,

Just wanted to let you know I appreciate Trader's Corner. I recognize your consistent effort on a daily basis. Thanks a million.

[MrBill]

$this->bbcode_second_pass_quote('truecougarblue', 'M')rBill,

Just wanted to let you know I appreciate Trader's Corner. I recognize your consistent effort on a daily basis. Thanks a million.

[drew]

Hey Mrbill, my instincts were right leading up to Friday. Too bad I got greedy and put a limit price on my Nexen; I still have it.

I'm not really unhappy though since I noticed something I clued into later Friday. Nexen had traded 15 million $ in the first 5 minutes after opening; an institutional selloff I do beleive. I noticed the volume while I placed my order, but it didn't register in my brain as to 'why?' I'll know to pay attention to this next time around.

Wed, Thurs, Fri- you can't distrust your gut can you?

Ditto on Truecougarblue's comments btw!

Drew

[MrBill]

$this->bbcode_second_pass_quote('drew', 'H')ey Mrbill, my instincts were right leading up to Friday. Too bad I got greedy and put a limit price on my Nexen; I still have it.

I'm not really unhappy though since I noticed something I clued into later Friday. Nexen had traded 15 million $ in the first 5 minutes after opening; an institutional selloff I do beleive. I noticed the volume while I placed my order, but it didn't register in my brain as to 'why?' I'll know to pay attention to this next time around.

Wed, Thurs, Fri- you can't distrust your gut can you?

Ditto on Truecougarblue's comments btw!

Drew

[MrBill]

Basically, I was just too slow this morning to jump on this move, and now I just lost half of my morning commentary. Is that an unauspicious start to the week or what? Well, second try here. Since I missed the move lower, I have time.

Had a chance to sell early this morning at $63.40/50 in the May Brent, now it is $6280/90 as we speak. A relatively weak close on Friday has set us up for this move lower this morning as the only real news out over the weekend was about Nigeria. Needless to say it was not good news. It never is. The failed attempt last week to take our resistance at $6440/60, and coming back to fill that gap down at $6310 left by the April expiry, means that upward momentum is draining away here in the absence of fresh headlines about Iran or someone else who may disrupt supplies.

The daily and weekly charts are still in an upwards move, but the short term and hourly charts are pointing lower. Key support is likely to be tested today. I would see that as $62.25/10 in the April WTI leading to $61.60/55, which is another key support area. We cannot keep consolidating and consolidating into ever smaller ranges, so a breakout is inevitable and, I guess if the world does not blow-up on schedule, that would mean for me lower on the back of the fundamentals. Having said that, just talked to a friend in Texas this morning and they are already expecting their first weather event in Tornado Alley. Mighty early, but they say the weather has been warm/hot since November. Shades of things to come in 2006? Hmm?

Unleaded has been the leader, but its support is being undermined over this MTBE issue. The AIG commodity index have already said they would drop HU for the RBOB while the largest index the GSCI has not made their decision yet when to switch. Still with almost $80 billion invest in commodity indices the switch to the RBOB will be a big deal. RBOB is well bid. Support at 1.9100, 1.8736 and 1.7387 on the daily charts with resistance at the previous high at 1.9500. Still not enough liquidity to fully trust the technicals on that one yet.

The dollar is under pressure now. The euro is above key resistance and if it stays above $1.2090/1.2025 should re-test the $1.2325 previous high. There is an upside down head and shoulders on the daily chart. I do not usually trust upside down head and shoulders, but if the neckline at 1.2210 breaks then it sets us up for a test of 1.2410/15 area. The dollar is also under pressure against the yen. Good resistance at 117.40/117.80, and it looks like we may test suppurt at 115.45 on the way down to 113.40/113.60 eventually. That is one bullish factor for the energy and commodities. If the dollar weakens significantly in 2006 it will make commodities priced in dollars cheaper in either euro or yen not to mention yuan.

$this->bbcode_second_pass_quote('', ' ')NEW YORK (Reuters) - Wall Street will examine inflation data this week for any signal that an end to Federal Reserve interest-rate increases is in sight, and if it likes what it sees, stocks could climb to five-year highs.

Investors were cheered last week by a consumer prices report that showed tame inflation and bought up sectors sensitive to higher-interest rates like financial and home building stocks.

Tuesday's producer prices index report could solidify the notion that inflation is well under control, leaving the Fed to taper off its rate increases in the first half of the year, analysts said.

[MrBill]

Investors in commodity & energy markets, who are interested in Russia, and you should be, might be well served to keep an eye on Truth & Beauty by Sovlink Securities. No, Eric Kraus et al. are not paying me to plug their research, but if I have the chance I will buy them a beer for providing me with such thought provoking & entertaining views on Russia next time I am in Moscow for sure.

$this->bbcode_second_pass_quote('', ' ') T&B confesses to some perplexity as regards the current storms blowing through global capital markets, i.e. as regards whether or not this is the beginning of the Great Unwind, or simply another blip, a la October 2005. We tend strongly towards the former. That said, we think it only a matter of time before some blood and hair shall be spattered on the walls.

Having spoken with a reasonably wide range of fund managers and with our strategist peers, we are reassured to find ourselves in good company as regards our perplexity – although we have heard a number of intelligent and internally-coherent explanations, the problem is that they tend to be mutually-exclusive! The world is heading for inflation/deflation, treasury yields will soar/collapse, commodities are a one-way bet (but which way?), etc. This is not surprising – we are in truly uncharted waters – i.e. never have the global imbalances been as enormous nor the volume of credit as enormous – everyone is aware that we are living on the lip of a volcano, but no one knows when nor which way it will blow!

Anatomy of a Head-Fake?

Russian debt and equity markets were sent sprawling in on March 6, in sympathy with virtually every high-beta market on the planet – from Turkish and Brazilian equities to Iraqi bonds (which gratifyingly, have now begun to tank – with the yield to maturity rising to a generous 10% and a price of 68, i.e. just sixty-eight cents above our fair-value). The apparent cause for the havoc was an unwind of the “carry-trades”, i.e. trades where financial entities – in particular hedge-funds – borrow cheap to finance investment in higher yielding assets. With Japanese interest rates around zero, one of the principal sources of funding has been short yen. With Japan ending quantitative easing as a preliminary to normalizing rates, there has been considerable traffic coming out of this trade.

We seem to be witnessing a repeat of October 2005, when a backup in treasury yields and especially, concern that US rates would go far higher than had previously been expected (they have…) caused a momentary panic, with all the hedgies selling at the same time. Surprisingly enough, it all blew over in a matter of days, as the same carry trades were promptly put back on. We now seem to be seeing a repeat of this pattern.

[MrBill]

Good morning.

Yesterday turned into quite a rout. Much lower than I expected once the ball got rolling. Managed to turn a few of the daily & weekly signals negative, reinforcing the bearishness of the short-term indicators. The exception being the unleaded (HU/RBOB), which although weaker have not turned bearish, yet. However, think we may see some follow through selling here today on expectations that crude stockpiles will increase again this week, while draws in the products will be within seasonal limits. Normally after such a drop I would be more inclined to be a buyer for the correction, but at the moment I just do not see any reason to buck the trend lower?

Perhaps a strongly worded statement from the UN Security Council about Iran's nuclear enrichment activities may change the tone, but until that long awaited document is released we have the ever present amply supplied fundamentals overhanging the market. We can always rely on the 'Iranian Put' to add some risk premium to this market, but even President Mahmoud Ahmadinejad's comments yesterday that "no one can take away our nuclear technology. The Iranian nation has obtained it and will preserve it" has to be taken against a backdrop of statements by others that, yes, it would tighten supply and cause concerns, but the world can live at least for now without Iranian crude or Venezuelan crude for that matter. Especially as they traget favored customers, such as China and Asia, freeing-up supplies from others to supply western markets.

However, that is all speculation, first of all focus on the technical support beneath us here and see if there is any momentum to test lower?

IEA’s Mandil says oil prices should come down as the price of crude is currently much higher than the marginal cost of production, and that in 2-3 years that excess supply will increase from 2 to 3 mbpd above demand and that increased refining capacity will also reduce bottlenecks. That is all well and fine, but what do we do this summer and next winter? ; - )

DOE inventory forecasts for the week of March 14th

Crude f/c +2.5 mio bbls
Distillats f/c –2.2 mio bbls
Gasoline f/c –1.2 mio bbls
Refinery runs f/c +0.4% to 85.7%
US Gulf Coast stockpiles highest since 1990 FWIW

Take care and good luck.

[MrBill]

No comments this morning sorry. Was lucky enough to take back my shorts yesterday (several times), and was not caught short on the way up. I complain a lot but a little good luck never hurts.

A real mixed bag technically speaking. Need to see a bounce or a flop out of one titty or the udder? Would peg $62.05/00 as the pivot point today in the Brent and $61.80/62.30 as the range that needs to be violated in the WTI to start us in one direction. However, two things. Today are the numbers. Expect a build in crude, the only question being how nervous are traders over the supply of unleaded and how big the draw is there? Note unleaded actually looked more offered than the crude this morning, not well-supported like the commentaries summarized.

Also, I know you do not like gaps, but there is a gap to be filled down to the $61.00 area in the WTI after yesterday's April expiry. That would be a natural like last week in the Brent. Perhaps if there were more imports of unleaded from Europe than the market expects?

I started out short, but my model wants me to have a long bias (+45% total +60% ex-nat gas). I took back my short when Brent hit $6230 on the back of gasoil up +1250 points thinking we would test higher. I built a small long above $6205. I would add to it down near $6180, but stop myself out below that. I am really not married to my position today. Just go with the momentum after the numbers.

We are oscillating around the moving averages, so a bit whippy to say the least. Can only say the Iran Put is anywhere below $60.00 in the WTI right now, and with WTI back at a small discount in the May to the Brent I prefer to sell Brent rather than WTI despite understanding of why the market may see a well-supplied US market, but be nervous about supply interuptions at the sametime. That is pretty wishy washy, but so are the markets at the moment. Will touch base later. Maybe some news out of Russia and China over a UN resolution?

Cheers.

p.s. finally got my e-platform working. Now I can lose money faster and more efficiently than ever! ; - )

p.s.s. lot's & lot's of Sino-Soviet headlines out today over co-operation between these former allies/former foes, over future energy projects (who says, Bush is not a uniter?). Rosneft, Gazprom, Sibneft, Sinopec, CNPC and others are signing memorandums of understanding like crazy over pipelines, LNG imports, refineries and exploration projects. At the sametime $100 billion worth of the same sort of MOU's between China and Iran are coming unravelled because MOU's are just that. They are not contracts and the Devil is always in the detail of who gets to keep what as priorities change or collide.

[MrBill]

Obviously yesterday was a whippy day after the stockpiles came out. I got stopped out at the absolute high of the day. $6277/80 in the Brent. Tough luck for me, as I watched it drop to $6140 from home after that on the back of Unleaded, which just disintegrated. Down almost 5%. However, it really has not stayed down under for long. Came in this morning and most of the hourly and daily indicators are long with just the weekly averages in minus.

The model is about 40% long (+115/280 contracts), but to be fair with ever tighter ranges it can swing quite a bit from long to neutral to short within a short space of time as we oscillate around the moving averages. Took a small long this morning and already the model is starting to swing short on an hourly basis in the crude. This range trading is deadly if you're trying to take a longer view. Never the less I have seen no headlines this morning, so have to rely on the models or just stay out for the time being. That would be no fun. In any case, have a good day and will try to update later when the view becomes clearer.

Yesterday's DOE stocks summary:
Crude -1.3 mio bbls to 338.60 mio vs. a f/c +2.5 mio bbls
Distillates -800k bbls to 126.7 mio bbls vs. f/c -2.0 mio bbls
Gasoline -2.3 mio bbls to 221.6 mio bbls vs. f/c -1.0 mio bbls
Refinery runs +1.0% to 86.7% vs. f/c +0.5%
Imports 9.33 mbpd
Gasoline demand +1.6%
Distilllate demand +0.2%
Total demand -0.6%

[MrBill]

Believe or not what goes up can come down with a thump. Letting the air out of many bubble simulataneously and the implications.
$this->bbcode_second_pass_quote('', 'P')lease find attached the latest in a series of pirces from our economics teams looking at Asia and commodities.

Our latest Global Economics for Investors highlights the cracks that are beginning to appear in the synchronised Asian liquidity boom. We have argued before that the easy and expansive monetary policy in the US and G7 post the high-tech crash of 2000 sent a rush of capital Asia's way (as well as into other emerging markets). Part of this involved portfolio flows looking for higher yields and part of this involved direct investments by global multinationals in the search for growth (which they could consolidate into their global P&Ls).

Strong capital inflows and the resultant excess liquidity frothed up a wide range of sectors in these emerging markets from property and construction to autos, gold purchases and consumer durables, to overall capex. For example, the property markets in disparate economies such as Australia, New Zealand, Korea, India, China as well as in the US, UK and Canada all began booming around the same 2002-3 period. This drove up demand for metals and raw materials not just in China but right across Asia.

However, currently rising G7 bond yields and the concomitantly retreating emerging market liquidity could lead to a synchronised de-bubbling of these growth stories with particularly adverse implications for global commodity exporters who have found lucrative markets in Asia and China over the past four years.

Asian liquidity is not only retreating from higher G7 interest rates, it is also retreating because Asia's own high demand for commodities is now rapidly pushing domestic inflation rates higher in many key economies in the region. Rising energy and metal prices are pushing up CPI inflation in the likes of Hong Kong, Singapore, Taiwan and Thailand. As a result, central banks are tightening and money supply growth in these countries is falling fast. There is usually a 3-4 quarters' lag before this has an impact so as yet this has gone unnoticed. But the risks are clear.

Asia's recent bias to tighten has led to appreciation in Asian currencies in the current quarter putting pressure on Asian exports too. Asian exports are very vulnerable to currency strength as was amply demonstrated during the aftermath of the H2 2004 Asian currency rally (export and economic growth slowed sharply within six months).

The evidence for the reversal of the Asian liquidity wave is still patchy and some positive momentum may continue for a while longer - but evidence is mounting and needs to be monitored closely. Foreign capital inflows into China, Korea and especially Thailand have clearly peaked. Forex reserves in the likes of India and Malaysia appear to be peaking too and money supply, itself, is decelerating in a number of key regional economies.

Most importantly, the evidence that this is already dampening commodity demand is more widespread. Metal imports into China have been weak recently ( copper imports down 40% yoy in Jan- Feb.), metal import growth in Thailand and Korea have turned negative while metal imports, particularly gold imports, by India are falling sharply as well. We reiterate that global investors should be wary of playing exporters into China and Asia.