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The Energy Report for Thursday, January 18, 2007
Nifty fifty! Oil hit a 20 month low but failed on its first attempt to take the nifty $50.00 a barrel, psychological support out and closed back above $52.00. After the long extended bearish run the reversal could signal that perhaps finally the bottom is in. Of course to be sure of that we still have to get through today’s inventory reports which will not only give a glimpse of our petroleum supply but we'll get the added pleasure of the natural gas withdrawal number as well.
Oil traders perhaps realized that maybe OPEC's Ali Naimi’s comments were not really that bearish after all. Whether Mr. Naimi's comments were a veiled threat to the rest of the OPEC cartel, or perhaps he believes that oil prices will soon rally, or maybe he thinks we will see a coming conflict with Iran, the truth is that another production cut may not be needed.
The Bush Administration is taking a harder line with Iran and we have falling world crude oil inventories so traders who are short may lose some of their bearish aggressiveness.
The bears are also running out of time as temperatures fall and the threat level rises. Time is running out on the February contract. The oil expiration for crude is on Monday and short traders have to roll-over to March or cover and exit the market. And because of the contango, we will be starting the March contract off at a much higher price. The contango in the market means it will take a bigger effort by the market to actually close below the fifty dollar a barrel area. Yesterday the lead month February closed at 5224 and the March at 5313.
Etha-nomics corner. The market staying above $50.00 a barrel was good news for ethanol plant investors who also got bad news on the feedstock front. Corn surged to a ten year high before pulling back late in the session. Still the corn market made an attempt to touch the limit but pulled back before the close. Reuters reports that high corn prices may fall later in the year as farmers re-allocate some acres to corn which in turn sent soybeans prices flying.
The Wall Street Journal has a headline today, “Corns Rally sends Ripples and that ethanol boom cheers farmers, pinches food makers.” The article goes on to say, "The surge in corn prices ignited by the ethanol boom is rippling through the nations economy-from the Farm Belt to Wall Street to the office soda machine". The price of corn, the nations number one crop in total production, and an ingredient in products ranging from sugar syrups to chicken feed to tortillas has doubled since this time last year to $3.66 a bushel, despite an abundant harvest, and is inching toward the rarely breeched $4-a- bushel mark.”
Driving the run-up is an unprecedented demand for ethanol, a bio fuel typically made from corn, that many policy makers are counting on to help wean the nation away from foreign oil. President Bush is expected to intensify demand by calling for yet more production in his State of the Union address next week.
The new demand has much of the agricultural economy humming. As corn rallies, farmers, emboldened by the higher prices, are planning to switch to corn or expand their acreage and are buying new farm equipment. Check out this article in today's Wall Street Journal.
The IEA is lowering its demand outlook because, you guessed it, warm weather. Oh yeah and a slowing economy! Oh really?!
The Wall Street Journal is also reporting that the IEA is close to a pact with China under which Beijing would give notice before releasing oil from their strategic reserves. The hope is that it will increase transparency in the market and lower volatility! Hey Wait! What’s wrong with volatility?
See Me Today on MSNBC and also on CNBC Asia.
We're long February crude from apprx 5050 - raise stop to 4970! If not stopped, roll over to the March contract market on close.
We're long February RBOB from apprx 13500 - leave stop at 13300!!
Buy February heating oil at 14590 - stop 14480.
Stopped on the low of the day on long February natural gas from apprx 640 at apprx 620. Buy February natural gas at 605 - stop 585.
Have a GREAT day!
Nifty fifty! Oil hit a 20 month low but failed on its first attempt to take the nifty $50.00 a barrel, psychological support out and closed back above $52.00. After the long extended bearish run the reversal could signal that perhaps finally the bottom is in. Of course to be sure of that we still have to get through today’s inventory reports which will not only give a glimpse of our petroleum supply but we'll get the added pleasure of the natural gas withdrawal number as well.
Oil traders perhaps realized that maybe OPEC's Ali Naimi’s comments were not really that bearish after all. Whether Mr. Naimi's comments were a veiled threat to the rest of the OPEC cartel, or perhaps he believes that oil prices will soon rally, or maybe he thinks we will see a coming conflict with Iran, the truth is that another production cut may not be needed.
The Bush Administration is taking a harder line with Iran and we have falling world crude oil inventories so traders who are short may lose some of their bearish aggressiveness.
The bears are also running out of time as temperatures fall and the threat level rises. Time is running out on the February contract. The oil expiration for crude is on Monday and short traders have to roll-over to March or cover and exit the market. And because of the contango, we will be starting the March contract off at a much higher price. The contango in the market means it will take a bigger effort by the market to actually close below the fifty dollar a barrel area. Yesterday the lead month February closed at 5224 and the March at 5313.
Etha-nomics corner. The market staying above $50.00 a barrel was good news for ethanol plant investors who also got bad news on the feedstock front. Corn surged to a ten year high before pulling back late in the session. Still the corn market made an attempt to touch the limit but pulled back before the close. Reuters reports that high corn prices may fall later in the year as farmers re-allocate some acres to corn which in turn sent soybeans prices flying.
The Wall Street Journal has a headline today, “Corns Rally sends Ripples and that ethanol boom cheers farmers, pinches food makers.” The article goes on to say, "The surge in corn prices ignited by the ethanol boom is rippling through the nations economy-from the Farm Belt to Wall Street to the office soda machine". The price of corn, the nations number one crop in total production, and an ingredient in products ranging from sugar syrups to chicken feed to tortillas has doubled since this time last year to $3.66 a bushel, despite an abundant harvest, and is inching toward the rarely breeched $4-a- bushel mark.”
Driving the run-up is an unprecedented demand for ethanol, a bio fuel typically made from corn, that many policy makers are counting on to help wean the nation away from foreign oil. President Bush is expected to intensify demand by calling for yet more production in his State of the Union address next week.
The new demand has much of the agricultural economy humming. As corn rallies, farmers, emboldened by the higher prices, are planning to switch to corn or expand their acreage and are buying new farm equipment. Check out this article in today's Wall Street Journal.
The IEA is lowering its demand outlook because, you guessed it, warm weather. Oh yeah and a slowing economy! Oh really?!
The Wall Street Journal is also reporting that the IEA is close to a pact with China under which Beijing would give notice before releasing oil from their strategic reserves. The hope is that it will increase transparency in the market and lower volatility! Hey Wait! What’s wrong with volatility?
See Me Today on MSNBC and also on CNBC Asia.
We're long February crude from apprx 5050 - raise stop to 4970! If not stopped, roll over to the March contract market on close.
We're long February RBOB from apprx 13500 - leave stop at 13300!!
Buy February heating oil at 14590 - stop 14480.
Stopped on the low of the day on long February natural gas from apprx 640 at apprx 620. Buy February natural gas at 605 - stop 585.
Have a GREAT day!
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