September 10, 2009

A week in review, The Energy Market. The much anticipated OPEC meeting turned out to be nothing more than a nice vacation for attendees. Early week press releases indicated production would be kept as status quo and they did not disappoint. It appears OPEC is happy with 65-75 dollar crude. One thing to keep an eye on is OPEC compliance. Countries like Iran and Angola have had trouble in the past holding to the daily limits, OPEC is reporting compliance has fallen from about 80% to 70%. Apparently its hard for some to stop milking the cash cow. The Department of Energy weekly report is in and no fireworks have been spotted. While the news is note worthy, the market has yet to digest what the report means. The crude inventory numbers read bullish, with a draw of about 5.9 million bpd, but the 2 million bpd build in both gasoline and distillates could slow the market. A hopeful outlook could be a jump in crude prices causing other commodities to gain momentum, all the while a tapping of the breaks on the diesel product that goes in the tractor. Breakdown:
Distillate
The short term out look is slightly bearish. With a 2 million bpd build and demand over the past four weeks down 5.6% from last year, there is still room for down side in the market.
Gasoline
Gasoline inventories came in slightly higher at 2.1 million bpd sending the market down about .02 cents throughout the day. Like diesel, gasoline demand is down over the four week spread from last year by about 2.2%. I wouldn't look for much change until next weeks early API inventories are reported.
Crude
The short term looks bullish. With draws near 5.9 million bpd, the only thing that could slow the market will be the large builds in product and a strengthen in the dollar. As for now the market seems content to trade crude in the 70-75 dollar range. We closed under $72, but watch for overnight trade to test mid $70's.

Do not forget this weekend is Sandwich Fair, take the kids out and get a corndog.

Zach Winter