ENERGY PRICES WERE MIXED ON WEDNESDAY… liquids markets tanked in knee-jerk fashion following yesterday’s DOE report. Don’t get us wrong, the market’s initial reaction was correct. That was a bearish report. Our only concern is the recovery towards the end of the pit session. Meanwhile, NYMEX natural gas traded down to another life-of-contract low.
DOE Recap: Apropos the two points raised in yesterday’s issue of The Schork Report, the DOE reported another sub 9.0 MMbbl/d of gasoline supplied for the week ended March 13th. As such, it appears that the DOE’s estimate from two reports ago (w/e February 27th) – which showed demand jumping to the highest level since last summer’s driving season – was indeed an outlier. In other words, contrary to some high profile media bullish touts, demand for gasoline is actually diverging (lower) from the seasonal curve. Yesterday’s number was rather bearish. Therefore, our recently acquired bullish daily bias is on notice. Meanwhile, the DOE reported a small uptick in crude oil imports. Over the last four weeks shipments have averaged 8.4 percent below a year ago for the corresponding timestep and 6.1 percent below the 2003-2007 timestep. Nevertheless, thanks to poor demand and strong domestic output, U.S. commercial stocks of crude oil surged to a 90-week high. For the reasons pointed out in yesterday’s report, we do not think it is reasonable to expect a material uptick in crude oil imports until U.S. refiners return from maintenance towards the end of next month.
Bottom line: yesterday’s report was bearish. So how come the market didn’t fall further?
If you cannot answer this question (we can’t) then you probably should not be selling against this market.
NATURAL GAS: Today’s whisper number for the EIA ranges from 5 Bcf
(Raymond James) to 50 Bcf (Wavelength) – how’s that for agreement amongst industry “experts”? – for an average delivery of 26 Bcf per a Bloomberg survey. The typical draw is around 44 Bcf. Last year the EIA reported an 85 Bcf delivery for the corresponding week (14-Mar-08). Nationwide implied weather demand for the report moderated. For instance, degree days in New York City were 38 percent lower than the week before and 24 percent below normal. In Chicago, degree days once again hung around the seasonal norm. Overall demand from the nation’s grid plunged by 5.1 percent to a four-month low of 70,591 GWhrs.
As far as today goes, offers through yesterday’s 3.672 low print alerts to follow through momentum towards our 3.577 inflection point. We will look for further weakness below here towards our 3.462 intraday. On the other hand, a rebound through yesterday’s 3.762 pivot-high clears a path towards our 3.791 inflection point.
We will look for further corrective momentum above here towards our 3.906 intraday.
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.