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Schork Oil Outlook: Is This What the IEA Intended?

Energy prices were mixed yesterday….The DOE released disappointing storage data for both crude oil and natural gas, but Henry Hub gas futures were the only market to sell off. WTI rose, but lagged behind the products.

As for today, analysts at The Schork Report are closely watching the impact of the hurricane on GoM sweet/sour diffs.

The good news… oil volatility has dropped by more than 4 points since the IEA announced plans to release “strategic” reserves of oil onto the market. The bad news… the drop in volatility is a function of a steady (i.e. non-volatile) rise in values.

After the state-sponsored margin-squeeze on June 23rd, Nymex oil for August delivery has closed higher twice as many times as it has closed lower, more to the point, average winners outpaced losers by a 3½:1 margin for an average daily rate of return of $0.85/b!

Across the Atlantic, the returns are even more impressive… assuming you do not work for the IEA (or the White House). The spot Brent futures contract for August delivery has gained in seven of the nine sessions since June 23rd with winners outpacing losers by a 3.8:1 margin. As such, the average daily rate of return in Brent is $1.50/b!!

The same theme spills over into the product markets. ICE gasoil for August is 12% above its post IEA lows, Nymex heating oil is 14% above its lows and RBOB gasoline is 17% above.

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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.

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