Thursday January 21st, 2010

It is said, "the essence of genius is to know what to overlook." As we look to see what is going to shape the future of the energy market, what do we overlook? Well...today it appears we are overlooking the DOE report. The energy market has fallen despite a 400,000 bbl draw on crude(early week estimates were builds of 2.4 million bbls bpd) and a 3.3 million bpd draw on heating oil/diesel. Apparently the market is reacting to the 3.9 million bpd build on gasoline and news that President Obama has put forth plans which would impose stricter limits on the financial institutions, including a ban on proprietary trading. Is the economy recovering? Are our banks more financially stable than a few short months ago? Questions seem to have filled reports today, keeping investors critical or is it cynical on the state of the economy.
While diesel had large draws overall, demand is still down 6.8% from last year and January 2009 demand was down 2.6% from 2008. But referring back to my opening statement, which suggests genius is in the ability to pick the data to follow. Warranted or unwarranted the energy market will most likely bounce moving into spring and summer. While downside potential in the energy market is still possible, it appears to be limited in the short term. Heating oil has pulled back about 62% of their holiday gains and could be looking to start its slow climb. Crude has pulled back 50% of its holiday gains. An intresting crude trend has been 62% short run dips before it bounces into its next technical position. Crude closed today at $76.08, support numbers to watch are $75.oo and $74.50 anything below could send it back to the $70 range, but most seem to believe its more likely to hit $80 in the next two months before it hits $70.
I will be keeping a close eye on the diesel market, today with bullish news it dropped .03 cents, if we can get back another .05 or so, it would be an ideal opportunity to lock-in spring gallons.
Thanks for reading, have great evening.
Zach