In A New York Minute
Posted by Phil Flynn I PFG Best Research • Thursday, July 15. 2010 • Category: Rohstoffe
The Energy Report for Thursday, July 15, 2010
In a New York minute or is it minutes. That is how fast we can pop this economic earnings optimism bubble. The oil market that was previously caught up in the wave of good feelings generated by the Alcoa earnings in the beginning of the earning season started to get dragged down by the bummer reality thing. The first sigh of trouble was the American Petroleum Institute report and then a lousy retail sales report followed by a Energy Information Agency supply report that was less then spectacular. The final straw seemed to be the Fed Minutes that wiped away a slew of economic good feelings.
Now today you have a report of slower growth in China and a resurgent euro that makes oil traders wonder whether they should focus on weaker dollar or a weaker demand outlook for oil. Yet could big news out of China get oil rolling again? What was it about the Fed Minutes that seemed to take away from the market besides the statement that the economy has softened somewhat? Well more than anything it was the fact that the Fed feels that they should be ready to consider additional steps to boost the U.S. economy if the economy took another turn for the worse. The thought that the Fed is even contemplating the possibility of even more stimulus is a reminder that despite some good corporate earnings we are still not out the economic woods just yet. And despite a much bigger than expected drop in crude supplies, oil demand growth is not out of the economic woods just yet either.
Oh sure the EIA reported that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 5.1 million barrels from the previous week but at the same time we saw a very bearish build in gasoline and distillates. The EIA reported that total motor gasoline inventories increased by 1.6 million barrels last week as gasoline output hit a record high while demand fell back after the holiday. Distillates surged by 2.9 million barrels on surging refinery runs and impressive output. Yet demand fell flat. David Bird of Dow Jones says that U S total implied oil demand fell 4%, or 780,000 Million Barrels per day to 18.777 million barrels per day which is the lowest level since Apr 23 and the biggest drop since Mar 12. Demand for gasoline, the most widely used petroleum product, fell 3.9% in the week after the Jul 4 holiday, to 9.08 million barrels per day the lowest level since Apr 2. Demand for distillate fuel (diesel/heating oil) fell 422,000 barrels per day 10.7%, to the lowest level since Apr 16. The fall in distillate use was the biggest since Jan 9. And as Barbara Powell at Bloomberg points out despite the drop in crude supply the truth is that oil is still a whopping 7% above the five year average. For products, in a weakening demand environment, gasoline is 4.3% above the five year average and distillate a gigantic 23.6% above the five year average. Not a very bullish outlook. Even OPEC is saying that we are well supplied.
Dow Jones reports that Oil product markets are likely to remain well supplied throughout the summer driving season according to our friendly little oil cartel. "Given ample stocks for both distillates and gasoline, barring extensive unplanned supply disruptions, the risk of a product supply shortage during the upcoming peak season is very limited," OPEC said in its monthly oil market report. (Upcoming peak driving season?) "Additionally, by having 1.1 million barrels a day of new refinery capacity in 2011, it appears that spare capacity in the downstream sector remains relatively high in the short- to medium-term and the likelihood of produc market developments lifting crude pieces in the future is very marginal."
Of course I can almost hear them saying, what about China? What about China. Well China, as with the rest of the world, can chose to look at the barrel as half empty or half full yet new on their currency exchange rate may knock oil out of the doldrums. Bloomberg News reported that Chinese oil imports may decline from this month’s record high as waning energy demand reduces refining profits. China’s GDP fell more than expected which means slower demand. Right! Well hold everything! Now the Peoples Bank of China according its decision on June to end yuan's near two-year-long peg to the U.S. dollar--was an important step in reforming the country's foreign-exchange regime, and the current regime is in China's long-term and fundamental interests. Dow Jones says that the report suggested China must stick to its current exchange-rate regime even as it constrains monetary policy independence and flexibility. "Given the impossible trinity of achieving monetary policy independence, fixed exchange rate and free capital flow in an open economy, a managed floating exchange rate regime will help enhance the proactiveness and capability of macroeconomic management and the effectiveness of monetary policy, curb inflation and asset bubbles and contain macroeconomic risks," PBOC said. Oil is also getting support from a successful Spanish bond auction that gave the euro a boost and put pressure on the dollar.
My major point being that you can be bullish or bearish but you should trade like a mercenary. Who needs to be a hero over the long term when recently you would have more than likely been better off trading the range. We may break out to the upside at some point, yet I belive it will be to the downside and at the end of the day does it really matter? If you want to trade then take what the market is giving you. When the breakout comes there will be plenty of time to jump on the band wagon!
Make sure you get signed up for my daily energy report and a free trial to my day trade numbers for all the major markets as well as option plays. Just call me at 800-935-6487 or email me at pflynn@pfgbest.com to open your account. And above all make sure that you are watching the Fox Business Network where you can see me every day!
Phil Flynn
Senior Market Analyst
800-935-6487
312-563-8344
pflynn@pfgbest.com
Phil Flynn is Energy Analyst and General Market Analyst with PFGBEST (www.pfgbest.com). Phil is one of the world’s leading energy market analysts, providing individual investors, professional traders and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline and energy markets. Phil’s market commentary, fundamental and technical analysis, and long-term forecasts are sought by industry executives, traders and global media.
Because he has been available to media around the clock, even during some of the most turbulent market periods in history, and because he has built a solid reputation for accuracy in his market analysis and forecasts, through thousands of interviews and broadcast appearances for more than a decade, Phil Flynn has become a headline-making name even as he continues to provide expert advice and customer care to his proprietary trading account clients.
Media highlights include: CNN, CNBC, Bloomberg, ABC, CBS with Katie Couric, NBC’s “Today Show” and “Nightly News with Tom Brokaw”, FOX’s “O’Reilly Factor”, PBS’s “The Newshour with Jim Lehrer” and “Nightly Business Report”, MSNBC’s “The News with Brian Williams”, Wall Street Journal Report, The Wall Street Journal, Business Week, Investor’s Business Daily, The New York Times, The Los Angeles Times, Chicago Tribune, Associated Press, The Toronto Globe & Mail, Houston Chronicle, Futures Magazine, National Public Radio’s Marketplace, a chat with the President of the United States, and many more venues.
You can read Phil’s daily market analysis and blogs at www.pfgbest.com.
PFGBEST is among the largest non-clearing U.S. Futures Commission Merchants, with customers, affiliates and brokerage offices in more than 80 countries. The company is a leader in sustainable investing through diversified products including managed funds, futures, forex, options, full-service and discount brokerage, trader education, market research, and direct online futures trading through its BESTDirect™ platform, and numerous other platforms and applications.
Phil’s commitment to and experience in futures trading is documented in two books, The Mind of a Trader (Financial Times/Pitman,1997), and Trading Online (publisher, date), both by Alpesh B. Patel. Phil is a lifelong resident of Illinois. He attended DaleyCollege in Chicago before beginning his career on the trading floor of the Chicago Mercantile Exchange.
Disclaimer
There is a substantial risk of loss in trading futures and options.Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. PFGBEST, its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
In a New York minute or is it minutes. That is how fast we can pop this economic earnings optimism bubble. The oil market that was previously caught up in the wave of good feelings generated by the Alcoa earnings in the beginning of the earning season started to get dragged down by the bummer reality thing. The first sigh of trouble was the American Petroleum Institute report and then a lousy retail sales report followed by a Energy Information Agency supply report that was less then spectacular. The final straw seemed to be the Fed Minutes that wiped away a slew of economic good feelings.
Now today you have a report of slower growth in China and a resurgent euro that makes oil traders wonder whether they should focus on weaker dollar or a weaker demand outlook for oil. Yet could big news out of China get oil rolling again? What was it about the Fed Minutes that seemed to take away from the market besides the statement that the economy has softened somewhat? Well more than anything it was the fact that the Fed feels that they should be ready to consider additional steps to boost the U.S. economy if the economy took another turn for the worse. The thought that the Fed is even contemplating the possibility of even more stimulus is a reminder that despite some good corporate earnings we are still not out the economic woods just yet. And despite a much bigger than expected drop in crude supplies, oil demand growth is not out of the economic woods just yet either.
Oh sure the EIA reported that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 5.1 million barrels from the previous week but at the same time we saw a very bearish build in gasoline and distillates. The EIA reported that total motor gasoline inventories increased by 1.6 million barrels last week as gasoline output hit a record high while demand fell back after the holiday. Distillates surged by 2.9 million barrels on surging refinery runs and impressive output. Yet demand fell flat. David Bird of Dow Jones says that U S total implied oil demand fell 4%, or 780,000 Million Barrels per day to 18.777 million barrels per day which is the lowest level since Apr 23 and the biggest drop since Mar 12. Demand for gasoline, the most widely used petroleum product, fell 3.9% in the week after the Jul 4 holiday, to 9.08 million barrels per day the lowest level since Apr 2. Demand for distillate fuel (diesel/heating oil) fell 422,000 barrels per day 10.7%, to the lowest level since Apr 16. The fall in distillate use was the biggest since Jan 9. And as Barbara Powell at Bloomberg points out despite the drop in crude supply the truth is that oil is still a whopping 7% above the five year average. For products, in a weakening demand environment, gasoline is 4.3% above the five year average and distillate a gigantic 23.6% above the five year average. Not a very bullish outlook. Even OPEC is saying that we are well supplied.
Dow Jones reports that Oil product markets are likely to remain well supplied throughout the summer driving season according to our friendly little oil cartel. "Given ample stocks for both distillates and gasoline, barring extensive unplanned supply disruptions, the risk of a product supply shortage during the upcoming peak season is very limited," OPEC said in its monthly oil market report. (Upcoming peak driving season?) "Additionally, by having 1.1 million barrels a day of new refinery capacity in 2011, it appears that spare capacity in the downstream sector remains relatively high in the short- to medium-term and the likelihood of produc market developments lifting crude pieces in the future is very marginal."
Of course I can almost hear them saying, what about China? What about China. Well China, as with the rest of the world, can chose to look at the barrel as half empty or half full yet new on their currency exchange rate may knock oil out of the doldrums. Bloomberg News reported that Chinese oil imports may decline from this month’s record high as waning energy demand reduces refining profits. China’s GDP fell more than expected which means slower demand. Right! Well hold everything! Now the Peoples Bank of China according its decision on June to end yuan's near two-year-long peg to the U.S. dollar--was an important step in reforming the country's foreign-exchange regime, and the current regime is in China's long-term and fundamental interests. Dow Jones says that the report suggested China must stick to its current exchange-rate regime even as it constrains monetary policy independence and flexibility. "Given the impossible trinity of achieving monetary policy independence, fixed exchange rate and free capital flow in an open economy, a managed floating exchange rate regime will help enhance the proactiveness and capability of macroeconomic management and the effectiveness of monetary policy, curb inflation and asset bubbles and contain macroeconomic risks," PBOC said. Oil is also getting support from a successful Spanish bond auction that gave the euro a boost and put pressure on the dollar.
My major point being that you can be bullish or bearish but you should trade like a mercenary. Who needs to be a hero over the long term when recently you would have more than likely been better off trading the range. We may break out to the upside at some point, yet I belive it will be to the downside and at the end of the day does it really matter? If you want to trade then take what the market is giving you. When the breakout comes there will be plenty of time to jump on the band wagon!
Make sure you get signed up for my daily energy report and a free trial to my day trade numbers for all the major markets as well as option plays. Just call me at 800-935-6487 or email me at pflynn@pfgbest.com to open your account. And above all make sure that you are watching the Fox Business Network where you can see me every day!
Phil Flynn
Senior Market Analyst
800-935-6487
312-563-8344
pflynn@pfgbest.com
Phil Flynn is Energy Analyst and General Market Analyst with PFGBEST (www.pfgbest.com). Phil is one of the world’s leading energy market analysts, providing individual investors, professional traders and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline and energy markets. Phil’s market commentary, fundamental and technical analysis, and long-term forecasts are sought by industry executives, traders and global media.
Because he has been available to media around the clock, even during some of the most turbulent market periods in history, and because he has built a solid reputation for accuracy in his market analysis and forecasts, through thousands of interviews and broadcast appearances for more than a decade, Phil Flynn has become a headline-making name even as he continues to provide expert advice and customer care to his proprietary trading account clients.
Media highlights include: CNN, CNBC, Bloomberg, ABC, CBS with Katie Couric, NBC’s “Today Show” and “Nightly News with Tom Brokaw”, FOX’s “O’Reilly Factor”, PBS’s “The Newshour with Jim Lehrer” and “Nightly Business Report”, MSNBC’s “The News with Brian Williams”, Wall Street Journal Report, The Wall Street Journal, Business Week, Investor’s Business Daily, The New York Times, The Los Angeles Times, Chicago Tribune, Associated Press, The Toronto Globe & Mail, Houston Chronicle, Futures Magazine, National Public Radio’s Marketplace, a chat with the President of the United States, and many more venues.
You can read Phil’s daily market analysis and blogs at www.pfgbest.com.
PFGBEST is among the largest non-clearing U.S. Futures Commission Merchants, with customers, affiliates and brokerage offices in more than 80 countries. The company is a leader in sustainable investing through diversified products including managed funds, futures, forex, options, full-service and discount brokerage, trader education, market research, and direct online futures trading through its BESTDirect™ platform, and numerous other platforms and applications.
Phil’s commitment to and experience in futures trading is documented in two books, The Mind of a Trader (Financial Times/Pitman,1997), and Trading Online (publisher, date), both by Alpesh B. Patel. Phil is a lifelong resident of Illinois. He attended DaleyCollege in Chicago before beginning his career on the trading floor of the Chicago Mercantile Exchange.
Disclaimer
There is a substantial risk of loss in trading futures and options.Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. PFGBEST, its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
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