ENERGY PRICES WERE MIXED ON WEDNESDAY… as such, it’s do-or-die for the bears. If they are going to defend the range, than it will have to be here. If they fail, the path to $75, $80, $85… etc will be wide open. Meanwhile, Henry Hub gas is in the toilet, but that didn't prevent someone from coming into the market last Friday and buying $9 million worth of Jan and Feb 2010 $10 calls!
The draw in crude oil was massive, but it was a function of seasonal anomalies – the unexplained disappearance of 10 MMbbls of foreign oil and the 1.0 MMbbl increase in refinery demand – rather than a structural shift in the market. Obviously, the crude oil draw was the number the market wanted to focus on yesterday. In the weeks ahead, demand for refinery inputs (i.e. imports) will wane along cyclical patterns. In the meantime, supplies of gasoline and distillate fuels are comfortable.
Yesterday Uncle Sam reported that commercial stocks of oil fell hard, down 8.4 MMbbls or 2.4%. With the exception of a small build in the East (PADD I), draws were recorded in every market area, the largest occurring in the GoM (PADD III), down 6.7 MMbbls. For the same week a year ago the DOE reported a 9.4 MMbbl build. Thus, inside of one report the year-on-year disposition narrowed by 17.8 MMbbls.
ICE BRENT: Initial bearish momentum stalled halfway in between Tuesday’s 71.33 pivot-low and our 71.02 inflection-point. From there the market spiked, on heavy volume, in the post DOE spasm.
As far as today goes, bids through last week’s 75.15 high print alerts to follow through momentum towards our 76.02 inflection-point. Here at The Schork Report we will look for further strength above here towards our 77.09 intra-day. On the other hand, offers through yesterday’s 73.55 pivot clear a path towards our 73.16 inflection-point. Below here we will look for offers towards our 72.09 intra-day.
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.