Oil bulls were definitely back in full force today, pushing crude prices up nearly $5 once again to almost $106/barrel. The sharp drop in gasoline and distillate supplies and extended weakness in the dollar against the Euro and so many other currencies help fuel the surge not only in oil prices, but also products.
Gasoline supplies fell 3.3 million barrels, double most analysts' expectations, and distillate fuel supplies were down 500,000 barrels or greater than the average estimates.
The result was that wholesale gasoline prices for April and May delivery closed above the previous NYMEX record close for RBOB futures set just two weeks ago. (April RBOB and heating oil futures expire on Friday. May will become the front-month contract.) Heating oil, which settled at its lowest level in 3 weeks yesterday, surged 4 percent today.
Geopolitics is also in the mix, percolating on the back burner and propping up prices. Traders are worried that continued heavy fighting in Basra will disrupt oil supplies from southern Iraq oil hub. Keep in mind Iraq hold's the 3rd largest oil reserves in the world and 80 percent of the oil out of Basra was exported to international markets last month. No pipelines or export terminals have been attacked yet, but the market has a keen eye on this region.
The big focus tomorrow morning will be on natural gas. Some traders are concerned about storage levels--only 2 percent above the 5-year-average--as demand from power generators remains strong. Expectations are for a withdrawal from storage levels of 42 bcf, according to Reuters survey of analysts. That's basically in line with historical average.
But the other bullish factor in this market and in the oil market is Boone. In an interview on CNBC's "The Call" yesterday, Boone Pickens told us that he is "pretty bullish" natural gas. Prices rallied 1.5 percent to over $9.56, following the surge in crude prices. Pickens called for $100-plus oil for the rest of the year and says that could translate to $14 natural gas.