[drew]

$this->bbcode_second_pass_quote('MrBill', ' ')From my inside, secret sources, I understand there is a big untapped market for oil priced in euros. China, Norway, Russia, Iran and Venezuela are apparently very interested in just such a market.

[MrBill]

$this->bbcode_second_pass_quote('drew', '')$this->bbcode_second_pass_quote('MrBill', ' ')From my inside, secret sources, I understand there is a big untapped market for oil priced in euros. China, Norway, Russia, Iran and Venezuela are apparently very interested in just such a market.

[MrBill]

Not really keeping an eye on the markets today. But see some follow through selling from yesterday's weakness. Crude down 1% on the back of products giving up 1.5% overnight/today. Good to see some follow through in one direction, instead of that choppy type of behavior where it changes directions everyother day. Boy, would I hate to be an airline or commercial user trying to hedge my needs. Hardest act in the world to get right. May as well flip a coin and hope for the best. If there were no futures markets, we would have to invent them. Cheers, speak to you tomorrow.

[MrBill]

Very busy today wasting my time making a presentation, which due to the volume of charts and other images is way too large to send now, so have to find someway to compress the file.

But in the meantime, just for good order's sake. The numbers yesterday were quite bearish the crude +6.7 mio bbls versus larger than expected draws in the unleaded and the distillates causing unleaded at least to buck the trend and close higher yesterday. However, yesterday's down move was a good opportunity to sell my June $62 puts at a profit. I sold them because I looked at the draws in the products, and the geopolitical concerns over Iran, and imagined a product lead rally. Just better to take profit and not get greedy.

Today, I bought the correction on the way up and managed to get short near the top. Unfortunately, NY faked me out and I ended-up covering my Brent short with a WTI long. That is okay, I bought WTI, sold Brent at -50 cents, so a good chance that spread will eventually return to its normal positive spread again. Last week was -84 cents and returned to +50 cents. I would be happy to see flat to 37 cents. The ICE now accepts orders for the WTI/Brent spread.

Would be better to be short here, but such is life. Now, off to waste more time on my presentation. Eventually, will get ready to launch my own energy & commodities fund, but lot's and lot's of work in the meantime.

Good luck.

[MicroHydro]

Yes, it is really true, the US has oodles of oil in inventory. It has been so hard to store the 2 million bpd of excess global production, that my friends in the US are storing oil everywhere. The salt domes and tank farms filled up long ago. My friends in LA are storing crude in their swimming pools. In Marin, they have filled their hot tubs with crude. In Kentucky the hog troughs are full of crude. Even in Manhattan high rise apartments, people are storing crude in their bathtubs.

US inventory numbers should be treated with the same respect as US GDP, CPI, and unemployment figures. I can't believe that anyone takes these numbers seriously at all.

[MrBill]

$this->bbcode_second_pass_quote('MicroHydro', 'Y')es, it is really true, the US has oodles of oil in inventory. It has been so hard to store the 2 million bpd of excess global production, that my friends in the US are storing oil everywhere. The salt domes and tank farms filled up long ago. My friends in LA are storing crude in their swimming pools. In Marin, they have filled their hot tubs with crude. In Kentucky the hog troughs are full of crude. Even in Manhattan high rise apartments, people are storing crude in their bathtubs.

US inventory numbers should be treated with the same respect as US GDP, CPI, and unemployment figures. I can't believe that anyone takes these numbers seriously at all.

[MrBill]

Some interesting comments. Worth a read.
$this->bbcode_second_pass_quote('', 'O')il fell 5.7 percent in the first three sessions this week after the Organization of Petroleum Exporting Countries said it will maintain production at a two-decade high, and after a government report showed U.S. crude oil supplies jumped last week to their highest since May 1999.

Nigerian Violence

Kidnappings and attacks in Nigeria the past two months have forced Royal Dutch Shell Plc to idle 455,000 barrels a day of output. Four soldiers and a policeman were killed in a March 8 gun battle after militants tried to capture the tanker MV Spirit, a military spokesman said yesterday.

[cube]

*silly question*

Why is there a $2 difference between May and April crude oil on the NYMEX?

I understand we're in contango but damn $2...........!!!!

Isn't it usually more like $1?

[Marklar]

$this->bbcode_second_pass_quote('', '
')Yes, it is really true, the US has oodles of oil in inventory. It has been so hard to store the 2 million bpd of excess global production, that my friends in the US are storing oil everywhere. The salt domes and tank farms filled up long ago. My friends in LA are storing crude in their swimming pools. In Marin, they have filled their hot tubs with crude. In Kentucky the hog troughs are full of crude. Even in Manhattan high rise apartments, people are storing crude in their bathtubs.

US inventory numbers should be treated with the same respect as US GDP, CPI, and unemployment figures. I can't believe that anyone takes these numbers seriously at all.

[MrBill]

Kish Island indeed? Has anyone ever heard of them? Not me? , - )


Had a close in the Brent at $6083 and about 90 cents less in the WTI. Managed to improve my long WTI, short Brent on Friday to -97 cents by being short crude on the way down. Cannot think will get hurt at almost one dollar discount between the contracts, but we will see? In any case, the close at $6083 means that if Brent & WTI converge we are talking about the $6050 area. This is well below the support points on the daily charts at $6175 & $6110 and $6165 on the weekly chart. The only support I see is the 21 week moving ave at $5990 on the weekly chart, which we broke on Friday, and if we can move decisively through this area, it sets us up to re-test the upward channel support which has defined this uptrend in the crude. Against that we had weak closes in the heating oil and the unleaded on Friday. I am not very positive at this point. Profit taking and a stronger close should have taken place ahead of the weekend, so if it is a quiet one, we should see follow through selling on the fundamentals next week. No reason to get bullish now. Watch the news tomorrow night and if all is quiet then think we will test lower. Have a nice weekend. Cheers.


RE April/May discount. 6.7 mio bbls on top of consistant builds is a lot as we take seasonal maintenance to upgrade ahead of summer driving season and the switch to ethanol from MTBE and low sulfur diesel. Likelý to see further builds, too. No one paying up in the front month for immediate delivery.

[MrBill]

Some Sunday reading.
$this->bbcode_second_pass_quote('', 'I')ran's threat to the United States Wednesday, as well as a more than $3-a-barrel drop in crude prices since Friday, likely contributed to oil's strength Thursday, according to James Williams, an economist at WTRG Economics.
Iran said that it can cause "harm and pain" on America if Washington recommends that the United Nations tackle the Middle Eastern nation's nuclear issue, news reports said Wednesday.
"We can expect to hear news out of Iran that, on one hand, says they continue to produce, and on the other hand, threatens dire consequences," said Williams.
All in all, "this will have a very measured pace in the Security Council with no big surprise like a total embargo."
Even so, "the market will remain very volatile until the nuclear problem is resolved -- then we can start worrying about hurricanes again," he added.
The April crude contract fell to a low of $59.55 a barrel on the New York Mercantile Exchange Thursday, then bounced to a high of $60.90. It closed up 45 cents at $60.47 a barrel.
Among petroleum products, April unleaded gasoline gained 6.99 cents to close at $1.7201 a gallon, while April heating oil added 2.59 cent to finish at $1.72 a gallon.
On Wednesday, April crude fell to $59.25, touching its weakest intraday level since Feb. 15, on hefty U.S. crude-inventory levels and a decision by key oil producers to leave output limits unchanged.
The Energy Department reported that last week's crude inventories stood at 335.1 million barrels -- the highest level for U.S. stockpiles since the end of May 1999.
At the same time, the Organization of the Petroleum Exporting Countries passed up a chance to cut member production ahead of an expected second-quarter slowdown in oil demand. See full story.

[MrBill]

The morning got off to its start on the news of some 80 violent deaths in Iraq on Sunday, including 6 car blasts timed one after another that killed 46 and injured more than 200 Shi’ites in Sadr City. That country is rapidly sliding into civil war following Sunni attacks on the Shi’ite majority and the bombing on February 22nd of the Golden Mosque in Samarra.

Normally the market tends to take violence in Iraq in stride so long as exports are maintained despite frequent sabotage on oil infrastructure, but this is against a backdrop of rising rhetoric over Iran’s nuclear ambitions, and escalating hostile talk out of the talking heads in Washington about regime change in Tehran. Iran has withdrawn from Russian proposals to enrich uranium on Russian soil as the matter comes before the UN Security Council. Iran is banking on opposition from Russia and China against formal sanctions due to Iran’s non-compliance with the NPT treaty.

Also militants in the Niger Delta have managed to tie-up some 450.000 bpd of exports for the past 3-weeks with no end in sight. It seems that once again geopolitical concerns are trumping market fundamentals.

In essence we are in the mirror image of last Monday’s start to the week when we were 7% higher, but the market looked toppy. This week we start out in the same $60.00-64.00 range ($5950 was the low on Wednesday), but it looks like we might first test higher, despite a rather weak close on Friday. There is simply no news, one way or another, to break us out of this range, so we are trapped.

In the Brent $6100 looks to be support and the key pivot point, while WTI is supported at the $60.00 area. I had expected them to converge today near $60.50, but instead I would suggest now a move to resistance at $6175/80 in the Brent and for WTI to play catch-up and re-test $60.95/61.00.

The daily & weekly moving averages are still slightly bearish, but we are not showing a strong signal in either direction and markets are neither overbought nor oversold. Therefore the technicals do not offer much guidance until several key pivot points flip from down to up or make fresh lows in a continuation of the bearish moves on the longer dated charts.

The short-term indicators are pointing up in what may just be a good opportunity to sell again at higher levels or may indicate a move towards $64.00 again. I think at this point it is better to buy on dips than bet against a larger correction.

Natural gas looks like it has found a bottom at $6.464 and may now look to best $6.788. $6.724 is the key pivot point between correction higher and resumption of downward trend.

Wow, that is a long way of saying, it is a mixed technical picture and I do not have any good ideas this morning. Good luck in any case and have a good week. Cheers.

[MrBill]

$this->bbcode_second_pass_quote('', 'I')n essence we are in the mirror image of last Monday’s start to the week when we were 7% higher, but the market looked toppy. This week we start out in the same $60.00-64.00 range ($5950 was the low on Wednesday), but it looks like we might first test higher, despite a rather weak close on Friday. There is simply no news, one way or another, to break us out of this range, so we are trapped.

In the Brent $6100 looks to be support and the key pivot point, while WTI is supported at the $60.00 area. I had expected them to converge today near $60.50, but instead I would suggest now a move to resistance at $6175/80 in the Brent and for WTI to play catch-up and re-test $60.95/61.00.

The daily & weekly moving averages are still slightly bearish, but we are not showing a strong signal in either direction and markets are neither overbought nor oversold. Therefore the technicals do not offer much guidance until several key pivot points flip from down to up or make fresh lows in a continuation of the bearish moves on the longer dated charts.

The short-term indicators are pointing up in what may just be a good opportunity to sell again at higher levels or may indicate a move towards $64.00 again. I think at this point it is better to buy on dips than bet against a larger correction.

[MrBill]

Compliments of Goldman Sachs
$this->bbcode_second_pass_quote('', 'N')ot Over Yet: To say that last week was far from being "Planet Perfecto" for commodities is something of an understatement. On the week energy was the worst performer with prompt WTI down 5.8% vs the worst performer in base metals, aluminium, down 4.3% and gold (April) down 4.7%. The overall commodities outlook remains confusing and while other markets have more convincingly shrugged off the liquidity implications of potentially higher rates, the jury is still out in commodities, with questionable fundamentals in energy in particular. Amidst the energy complex, nat gas held in the best down only 2.1% (Apr), bolstering confidence that it may have found a bottom, finally. Gasoline (Apr) fell 3.15% on the week, while heating oil (Apr) dropped a whopping 7% from Friday to Friday close. As for Friday, the post BoJ relief rally of Thursday ran out of a bit of steam and saw the whole complex under pressure, with products notably weaker and despite a pop to $60.65 in April WTI about an hour into NYMEX trading, it wilted into the close going out below $60 at 59.96, 51c lighter.

Bites Da Dust: Technically the wild ride in gold on Friday showed signs of doing just that after a solid NFP number with April hitting lows of 534.50, with a decent amount of length flushed out by CTAs and discretionary funds alike into the hands of the shorts. As such, the support at 540 was regained and April closed at 541.30 well off the lows as the shorts were sated and value was found, although still $5.70 lower on the day. The rebound followed through on Tocom overnight, albeit tentatively, making highs this morning of 546.40. Technically the market looks vulnerable below the 552.40 (April) resistance and daily and monthly momentum indicators are bearish. The market is going to take some convincing (vols are back to recent lows of c.18.5 1month) that a re-launch towards the 576.80 February highs is on the cards. Would stay on the sidelines until more clarity emerges either way.


Bullet In A Gun: Well maybe not quite, but showing more signs of life than the above two sub-sectors of the commodities space on Friday. Zinc notably pulled up its socks after lagging copper and ally in the rebound on Thursday, closing at 2290, up $57 or 2.55% on the day vs copper up $15 at $4825 and ally up $6 at 2380, with all 3 exiting near the highs. Solid consumer buying in ally emerged and given it was the worst performer on the week this buoyed the rest of the space, where fundamentals are arguably more compelling particularly in zinc, with continued stock draws an ongoing theme. No change there today with another 1,250mt free stock draw in zinc, with a 7,000mt draw in copper and a 3,725 build in ally. As for today's performance, upward momentum has continued up to highs of CPL 4878; ALM 2410; ZIN 2300; NIK 15100 topping Friday's 4830, 2395, 2290 and 14950 respectively, although the market has come off these highs in the second AM rings. Lacking concerted direction like precious, but feeling a little perhaps a little less nervous, particularly with some out there of the view that the specs are now a 1-3 year record shorts in copper and ally, something we feel is very hard to ascertain given the hedging deals of late. Still in the range, copper needs to take out the 4880 area; ally 2413 (high 7th March) and zinc needs a close above 2300, to get the bulls revved up.

[MrBill]

Hmmph, from yesterday's $6100 pivot point in the April Brent the hourly technicals would have gotten you long when the spot futures price passed through the 13 hour moving average and the 21 hour moving average would have kept you long since then. Up +3% in the last 24-hours. Not too shabby. Don't ask, I have been working on some funding issues and therefore have largely absent since my luke warm performance yesterday. Still, nice to know the model works, even if the the trader sucks.

Today's follow through buying on the back of Iranian comments that they would review any signed oil contracts if referred to the UN security council for sanctions.

Some up to date news compliments of Man Financial

$this->bbcode_second_pass_quote('', 'I')n Other News from Reuters...
* Other IEA numbers of interest released this morning: Global oil demand growth will reach 1.49 million barrels per day in 2006, down from the previous forecast of 1.78 million bpd. World oil supply in February rose to 84.6 million bpd, up by 490,000 bpd from a revised January figure. OPEC supply reached 29.6 million bpd last month, up by 220,000 bpd from January. Non-OPEC supply growth for 2006 was cut by 155,000 bpd compared with the previous month’s figure of 51.3 million bpd.

* China imported 11.17 million tonnes of crude oil in February, implying a 7.9 percent rise from February of last year, this according to Reuters calculations. China imported 24.40 million tonnes of crude oil in the first two months of the year, up 34.3 percent from the same period of last year. This included a record 13.23 million tonnes in January. Imports of refined oil products fell 8.1 percent so far this year to 5.12 million tones. I

* Industry sources said Saudi Arabia will keep its crude oil supplies to customers in April steady at about 80% of contracted volumes, up from around 75 percent of contracted volumes in March.

* U.S. demand for heating fuels is expected to be about 5% below normal this week, according to the U.S. National Weather Service. Total heating oil demand is expected to be 10.1% below normal, with demand in the Northeast at 12.6% below normal.

* German consumer stocks of heating oil fell last month to 49% of storage capacity from 52.7% the month before, traders told Reuters yesterday. However, stocks are basically now at where they stood a year ago.

* U.S. Gulf coast refineries cracking Brent crude made $10.23 a barrel last week, compared with $7.96 in the previous week, according to Reuters. Plants running U.S. light crude saw margins increase to $9.50 from $7.34. In Rotterdam, refineries made $6.35 a barrel, up from $5.55 previously. In The Mediterranean, complex refineries cracking Urals crude saw margins rise to $6.66 a barrel from
$4.41. In Asia, complex units cracking Dubai crude saw margins rise to $5.73 from $5.10 a barrel.

* Nigeria’s oil output fell to 2.31 mbpd in January from a revised figure of 2.33 mbpd in December, this according to the central bank.

* Petroecuador said production climbed more than 25,000 barrels to 166,177 bpd yesterday as an agreement was reached with contract workers to end a strike. Petroecuador normally produces around 200,000 bpd.

European North Sea crude oil quotes as reported by Reuters: In the window, a March 25-31 Brent cargo was bid at May minus 95 cents, or the equivalent to around dated minus 25 cents. A March 28-30 Oseberg cargo was heard offered at plus 65 cents. A March 28-30 Statfjord cargo was heard offered at around dated plus 70 cents.
U.S. gasoline/distillate quotes as reported by Reuters: In Gulf Coast trading, M2 conventional was up 6.50c at 12.00c over. A grade reformulated was pegged at 8.00c over M2. On distillates, heating oil was down 0.25c at 1.50c under, and low sulfur diesel was flat at 11.75c over. In New York Harbor, M4 conventional was little changed at 3.25c under. Prompt RBOB was up 0.50c, at 2.50c under, and PBOB was steady at 6.75c over. A4 reformulated traded at a penny under. Heating oil was pegged at 0.35/0.30c under, low sulfur diesel at 13.25c over and jet fuel at 14.00c over.

[MrBill]

One factor affecting the value of the dollar and hence the value of crude
$this->bbcode_second_pass_quote('', 'T')he euro hit a one month high on Monday against the yen and its best in a week versus the dollar after the central bank of the United Arab Emirates said it was considering increasing its euro denominated reserves. The bank said on Sunday it was looking to switch 10 per cent of its reserves from dollars into euros. The reserves were estimated at $23bn in December and are almost entirely in dollars

[cube]

This section feels "different". I've noticed that most of the time, the news media tries to rationalize price movements by latching onto a single "dominate" theme:

"oil goes down because of a release of crude oil stocks"
"prices rise due to colder weather"
"crude tumbles because of a build up in inventories"

Such "themes" can carry enough momentum for an entire month, sometimes even more. Whether such price movements were due to a simple 1 variable explanation can be left for another debate but the point I'm making is this is how the news media likes to report things. A simple explanation with 1 "dominate" theme.

Now it seems everybody has a different story: weather, geopolitical tensions, inventories, "technical bounce", refinery maintenance etc..

Blah this is not how I like to trade. I'm going to take a little break.

[MrBill]

$this->bbcode_second_pass_quote('cube', 'T')his section feels "different". I've noticed that most of the time, the news media tries to rationalize price movements by latching onto a single "dominate" theme:

"oil goes down because of a release of crude oil stocks"
"prices rise due to colder weather"
"crude tumbles because of a build up in inventories"

Such "themes" can carry enough momentum for an entire month, sometimes even more. Whether such price movements were due to a simple 1 variable explanation can be left for another debate but the point I'm making is this is how the news media likes to report things. A simple explanation with 1 "dominate" theme.

Now it seems everybody has a different story: weather, geopolitical tensions, inventories, "technical bounce", refinery maintenance etc..

Blah this is not how I like to trade. I'm going to take a little break.

[Marklar]

$this->bbcode_second_pass_quote('', '
')This section feels "different". I've noticed that most of the time, the news media tries to rationalize price movements by latching onto a single "dominate" theme:

"oil goes down because of a release of crude oil stocks"
"prices rise due to colder weather"
"crude tumbles because of a build up in inventories"

Such "themes" can carry enough momentum for an entire month, sometimes even more. Whether such price movements were due to a simple 1 variable explanation can be left for another debate but the point I'm making is this is how the news media likes to report things. A simple explanation with 1 "dominate" theme.

Now it seems everybody has a different story: weather, geopolitical tensions, inventories, "technical bounce", refinery maintenance etc..

Blah this is not how I like to trade. I'm going to take a little break.

[MrBill]

Intuitively I predicted this move higher this week on Monday morning. However, in reality, I have not made any money from this move. That is the difference between writing about energy markets and trading them. At the end of the day analysts and journalists get paid to write about markets, so they have to find a story to write about or make one up.

In the short term, energy demand is very inelastic, so it is not surprising to have rather large moves based on any headline event that threatens to remove supply. It does not mean that traders are sheep or the market is irrational, but clearly we have risen from $15 per barrel to $60+ per barrel for a reason. All it would take would be one successful attack on Saudi oil infrastructure or the blocking of the Straits of Hormuz and oil would be $100. If you're a trader there is an asymmetrical risk to be short than there is to be long. Where is fundamental demand? $50 based on today's supply & demand? Where is the risk? $100? That is a 4:1 payoff for the bulls from $60.

Well, in any case, I know I can always get a job at Reuters. Write two stories every morning, wait to see if the price goes up or down 100 points, and then hand in the story that supports the current move. Kind of like the broker who tells half his clients to buy and half his clients to sell, and then calls the ones who made money to say he was right. The other ones he just says, hey, that is the market! ; - )

Unleaded gasoline was at $1.8600. Hard to believe I was sweating my long below $1.6000? What a difference a few weeks makes. Think we'll take a breather up here at $6375 in the Brent, $63.00 in the WTI, but the models are still long, so there is no technical reason for my view. Just a lack of supporting news out this morning. Good luck.