Thursday, December 10th, 2009

Its has been a week since we last discussed Energy and it hasn't been pretty for those looking to make a buck on crude. Today recorded the 7th straight day of losses. While today's losses where mild at only .13 cents, the past week has cost the crude market about six dollars. This weeks DOE report showed large draws on crude at 3.8 million bpd, but sizable builds in gas of 2.2 million and 1.6 million on heating oil, which held the bulls at bay. The market has taken a dip and when that happens it tends to create a crossroads of such. The 100 day moving average on crude is about to cross the seven day moving average, which doesn't mean a hill of beans to end users like us, but to the technical investment folks it could mean one of two things:
1. Buy and create an end of year run back up to the $80 mark or 2. Sell, take profits and hold out for $60 to get back in. Time will tell which direction we head, but watch for the dollar to be the catalyst which sparks the move. It was relatively unchanged today, but a bounce could make option 2 look very tempting. As I mentioned last week it appears the market is going to make a move over the next month, so far it is still in its $10 range of 70-80 but it has given away all it cushion.
Product
Diesel
Over all demand is still down about 8% from this time last year and nothing seems to be changing anytime soon. The nationwide cold snap will draw on gallons, but over the road hauling and manufacturing are still down.
Gasoline
Over all demand is up 1.2% from last year over a four week average. This weeks DOE report showed builds of 2.2 million bpd on gas, helping confirm the past weeks dip in price. Refinery runs are up about 1.4%, so they are making more product as the year comes to a close, something about drawdowns on crude for tax purposes. It is safe to say this weeks losses of a dime provide a good buying opportunity, not say there still isn't downside potential.

Stay warm
Zach Winter