Traders' Library

Oil Prices Back In Sync With the Externals

Tuesday Morning October 6, 2009
by Dominick A. Chirichella’s Energy Management Institute

Volatility was once again the order of the day on Monday...only this time energy prices ended mostly higher following the equity complex to higher ground and a weakening dollar. For the first time in a few days the externals were both in sync providing energy investor/participants with a diversion from last week’s bearish fundamentals.  So far this morning buyers are lined up in both equities and energy markets while the dollar is taking another hit. The perception of an economic recovery trade is still in place as the Australian Central Bank became the first  country to boost interest rates adding to the view that most countries are expecting an economic recovery.  Australia raised interest rates based on their view that it was time to begin to reduce the stimulus provided by low interest rates as the risk of a major contraction in the country was over. Higher interest rates in non-dollar denominated countries is bearish for the US dollar and thus bullish for oil.

Is it Correction Time Again for Energies & the Externals?

Is it Correction Time Again for Energies & the Externals?

Excerpts From Dominick’s Daily Energy Market Analysis Issued Each Morning

By Dominick A. Chirichella

Dominick A. Chirichella is a director and senior partner for the Energy Management Institute, http://www.energyinstitution.org , and has been involved in energy & commodities markets for almost 40 years. EMI provides higher learning for energy professionals with comprehensive, fully accredited, energy education programs from basic to advanced level. It also provides critical business information services and thought leadership in the energy segments of Oil,  Gas, Power, Alternative Fuels, soft commodities and metals.

For more info visit our website (www.energyinstitution.org) Contact him at dchirichella@emimail.org.

Thursday was a flat to mostly down day for the energy complex even as the dollar weakened a bit more but US equities drifted slightly lower on the day. I would categorize Thursday as pretty uneventful except for Nat Gas which shed some of the gains from earlier in the week even as this week’s EIA report showed an injection level of a little less than forecast. As I look around the world the vast majority of the economic data that has been hitting the airwaves all point to better economic times ahead. The perception of an economic recovery has been the driving force behind the meteoric rise in global equities since early March, the decline in the dollar and the impressive rally in oil (Nat Gas may be just getting started) even though energy fundamentals are months and months away from even approaching normal, balanced levels. So now as the economy moves beyond the perception of a recovery and into the actual recovery or what I like to call reality… the big meeting between perception and reality is quickly approaching. So now the big question in my mind is how will that meeting go? Will the expectation of the perception of the investor/traders be met or even exceeded or will it turn out to be a big disappointment?

Will the Summer Season End Quietly?

Tuesday Morning Sep 1, 2009
Will the Summer Season End Quietly?
Excerpts From Dominick’s Daily Energy Market Analysis Issued Each Morning
By Dominick A. Chirichella

Dominick A. Chirichella is a director and senior partner for the Energy Management Institute, http://www.energyinstitution.org , and has been involved in energy & commodities markets for almost 40 years. EMI provides higher learning for energy professionals with comprehensive, fully accredited, energy education programs from basic to advanced level. It also provides critical business information services and thought leadership in the energy segments of Oil,  Gas, Power, Alternative Fuels, soft commodities and metals. For more info visit our website (www.energyinstitution.org) Contact him at dchirichella@emimail.org.

The market was volatile with a wide trading range for many of the markets with the day ending lower…all initiated by a 6.7% decline in China’s Shanghai A Shares bringing the year to date return down to 45.5% or only about half of what it was when it peaked at the end of July. As I discussed on numerous occasions China’s equity market was in the midst of an unsustainable up trend that saw money flowing into the equity sector from all ends as borrowing at low interest rates was as easy as saying 1-2-3. The Government became worried that a bubble was in the midst of forming and tightened up credit. The result of the aggressive government action has been a massive sell-off that has slowed the uptrend in equities around the globe as well as commodity prices. How much further the China correction goes is still a question mark. Today Shanghai A shares held on to a small gain of about 0.1% but as we all know one day does not make a trend.  For what it is worth the Chinese government suggested yesterday that they will continue with the stimulus programs until they are convinced that their economy is on solid footing…possibly a sign that they went a bit too far and are concerned with the steep drop in equity prices.

Is the Correction Real of Just Memorex?

Excerpts From Dominick’s Daily Energy Market Analysis Issued Each Morning
By Dominick A. Chirichella

Dominick A. Chirichella is a director and senior partner for the Energy Management Institute, http://www.energyinstitution.org , and has been involved in energy & commodities markets for almost 40 years. EMI provides higher learning for energy professionals with comprehensive, fully accredited, energy education programs from basic to advanced level. It also provides critical business information services and thought leadership in the energy segments of Oil,  Gas, Power, Alternative Fuels, soft commodities and metals. For more info visit our website (www.energyinstitution.org)Contact him at dchirichella@emimail.org.

***The correction continued on Monday with the eye of the storm focused clearly in the global equity markets which then spread to the currency markets forcing energy participants to once again focus on the fundamentals and when they do that the only action they can take is selling action. The equity markets were rattled a bit by the latest consumer confidence number released in the US on Friday suggesting that the American consumer did not look like it was ready to go on a spending binge. The US economy has dug itself out of most economic downturns in the past on the back of consumer spending. In addition with the US is a major importer of almost everything many manufacturing centers around the globe (like China, Singapore, Japan, etc.) are also very dependent on the spending habits of the US consumer. This mentality started a much needed downside correction in everything that as of this writing seems to be subsiding and in fact this morning equities are higher, the dollar is on the defensive and oil and natural gas are in positive territory.

Oil Projections from the Energy Management Institute

By Dominick Chirichella of the Energy Management Institute

Tomorrow the EIA will release their latest snapshot of oil fundamentals with the API data released late this afternoon. As has been the case for months the impact of the inventory data on oil prices will be mostly dependent on what is happening in the external markets. That said I am expecting a mixed report with my projections shown in the following table along with a comparison versus last year and the 5 year average for the same week on the assumption that the actual numbers come in as projected.