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The Schork Oil Outlook: Look For Seasonal Build

ENERGY PRICES WERE MIXED ON TUESDAY…As far as today’s DOE report is concerned, the crowd is expecting a net decline of around 0.5 MMbbls in the major products and an increase of 1.0 MMbbls in crude oil. As always, you should take the Street’s guestimate for what it is worth… not much.

OIL: Last week Uncle Sam reported that crude stocks drifted back towards a 21-month high. It was the twentieth weekly increase (out of 24) since Hurricanes Gustav and Ike disrupted GoM shipping channels back in September. The build was focused in the Gulf (PADD III) and on the West Coast (PADD V). Supplies in the East PADD I (turnarounds) fell sharply. At the same time the government shoehorned another 0.79 MMbbls into the Strategic Petroleum Reserve (SPR). As such, net U.S. supplies of crude oil (public & commercial) rose to an all-time high, 1.057x109 barrels. As far as today goes, the crowd is looking for a seasonal build of around 1.0 MMbbls. The API reported a large 4.7 MMbbls build.

On NYMEX, post DOE bids through the January 26th high at 50.88 alerts to follow through momentum towards our 52.02 inflection point. We will look for further strength above here towards our 52.47 intraday. On the other hand, a failure to hold trendline support at 48.12 cautions for further corrective momentum towards our 46.30 inflection point. Below here we will look for offers towards our 45.85 intraday and our drop-dead support (marked today at 45.85).

ICE Brent: Yesterday’s St. Patrick’s Day rally spanned the pond! In sync with US markets, London trading got off to a bullish start in the May contract, lifting through Monday’s 47.66 pivot-high and our 47.66 inflection point, but momentum did stall 21 cents short of our 48.86 intraday. Both Brent and WTI bulls appear to be striving for an upward thrust through the $50 critical point of reference. As far as today goes, post DOE bids through yesterday’s 48.65 high print alert to follow through momentum towards our 50.01 inflection point. We will look for further strength above here towards our 51.18 intraday. On the other hand, offers through Monday’s 46.94 pivot-low clear a path towards our 46.47 inflection point. Below here we will look for offers towards our 45.30 intraday.

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Stephen Schork is the Editor of, "The Schork Report" and has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.