We finally began to see the effect of increasing demand and a couple of hiccups in the production of Crude by our friends in the Niger Delta and others abroad. As this past Wednesday’s DOE report was released, many of the Bulls could be heard in the background…
We finally began to see the effect of increasing demand and a couple of hiccups in the production of Crude by our friends in the Niger Delta and others abroad. As this past Wednesday’s DOE report was released, many of the Bulls could be heard in the background (and even a few on T.V.) with an ”I told you so”. No big surprise for many that the recent focus on seven year highs in inventory levels isn’t going to be enough to squash a rally on near record demand levels, terrorism, Iran, Nigeria, Iraq ad infinitum. The world is a different place today and as demand and geo-political concerns have blossomed over the past five years the balancing act between supply and demand has become more akin to the blind folded tight rope variety.
Fundamentally there are several other more quantifiable things taking place that should contribute to the recent rally. First I would point to the recent cold front moving through the Northeast just as refineries are in the middle of their seasonal change over and beginning to focus their efforts on Unleaded production ahead of the driving season instead of Heating Oil. Secondly I can’t discount the fact that Spring Break is upon us and demand for Unleaded seems to be very healthy, very early as refineries are struggling to keep pace during this transition period.
Now that we have some inventory concerns being raised by the DOE reports, I’m looking for a long awaited push through the top ($64.00) of Crude Oils recent range. Don’t be surprised to see a significant shake out to the downside just prior to this happening especially with the Bulls on the small spec side feeling quite bolstered by these recent turns of events. I am still holding our bullish call spread and Nat Gas spreads. Be on the lookout for an Unleaded trade in the middle of the week.
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