Yesterday (Wednesday), Nymex crude oil closed higher. In reality, the market limped higher. Pulled up (begrudgingly, it seemed) by a Brent market in London that does not want to quit.
Phone calls and IMs to The Schork Report were fast and furious as clients and the media clamored to know — was this a dead cat bounce or something more?
In the wake of an absolutely massive, we repeat… massive, reported drawdown in gasoline supplies, the market in New York essentially meandered around unchanged, from the report’s release at 10:30am up until the final two minutes of the open outcry session at 2:28pm.
That can hardly be described as an impressive performance on the part of bulls. After all, it was one of the largest weekly draws in gasoline ever reported and the bulls waited until the last two minutes of trading to squeeze intra-day bears.
Granted, a seasonal purge of winter-grade product, compounded by an unplanned outage (that has since been resolved) at Sunoco’s Marcus Hook refinery were the likely main drivers behind last week’s draw in supply.
Now that Goldman has abandoned them, bullish rhetoric from the Street almost smacked of desperation yesterday. One bank was quoted in a media account warning that within the next three months, oil futures could (could being the operative helping verb) go to $140 a barrel.
We appreciate that no one wants to be left behind holding the bag of Goldman’s dung, but let’s try to maintain a level of comportment here.
It’s true… oil could go to $140 a barrel within the next three months. Jeez, we will even go as far to say that oil could (there’s that verb again) go to $140 in the next three weeks. It could happen.
By the same token, oil could retrace to $85 in the next three months (or three weeks) just as easily. As such, we are skeptical.
Analysts at The Schork Report appreciate that we are playing with fire here. We know oil in London is strong, we know the situation in North Africa and the Middle East is far, far from settled and we know that the draw last week in U.S. gasoline stocks was large.
We also know that yesterday’s price path in oil could have been a dead cat bounce.
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Stephen Schork is the Editor of The Schork Reportand has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.