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Who knew? What did they Know?
Phil Flynn I Alaron Research - ltfutures - 22.05.2008
Who knew? What did they know? And when did they know it? No, I am not talking about the Soviet style show trial in Washington with oil company executives being grilled. What I am talking about is who knew about the upcoming adjustments to the International Energy Agency’s long term supply forecast. It’s obvious, based on the market's quick dramatic move from backwardation to contango over the last two weeks, that someone had a very good idea that the IEA was about to make a major announcement.
This week I have been asking why the market, in just a few short weeks, had this sudden epiphany that the world was running out of oil. I have been asking why oil in the deferred contracts had an almost unprecedented gain of almost $8 a barrel on the front month contracts in just a few weeks. Now I think we all know why. Obviously some one knew about what is being reported on the front page of today’s Wall Street Journal. The Wall Street Journal reports a shocker that the International Energy Agency is lowering their long term oil supply forecast for oil production raising fears that oil production will not be able to keep up with future demand. The kicker is that the IEA says that oil companies will only produce 100 million barrels of oil a day in 2030 which is 16 million barrels a day lower than their previous forecast. The Wall Street Journal says that the IEA has been analyzing more than 400 oilfields that provide more than two thirds of crude today to determine how much they are likely to produce in the future. (I wonder if any of the politicians in Washington get the Journal.) The Journal says that “for several years, the IEA has predicted that supplies of crude and other liquid fuels will arc gently upward to keep pace with rising demand, topping 116 million barrels a day currently. Now the agency is worried that aging oil fields and diminished investment mean that companies could struggle to surpass 100 million barrels a day over the next two decades. That is why, Washington DC are you listening!, that oil companies need to make record profits. Because what this says that is oil companies are going to meet the oil demand needs of the future we will need record investment and much more than we originally thought. If oil companies are not making those profits investment dollars may end up going else ware leaving our national security and energy security more fragile. Of course yesterday it was the front end of the crude got the shock with the Department of Energy report. The bull's stars are still in alignment as another big drop in gulf coast supply helped almost knock us out of contango. Well at least for some back months. The DOE says that U.S. commercial crude oil inventories fell by a whopping by 5.4 million barrels! What the blazes is going on it the Gulf Coast? This should correct next week but at 320.4 million barrels, U.S. crude oil inventories are still in the middle of the average range for this time of year. Of course in our hurry to make distillate supply gasoline supplies may suffer. Total motor gasoline inventories decreased by 0.8 million barrels last week and have gone from way above average to the lower half of the average range. And as we focus on restocking global distillate inventories the DOE reports distillate fuel inventories increased by 0.7 million barrels and are still in the lower half of the average range for this time of year. U.S. crude oil refinery inputs are still signaling week demand and averaged only 15.1 million barrels per day. Refineries nudged higher operated at 87.9 percent of their operable capacity last week. Over the last four weeks, motor gasoline demand has averaged 9.3 million barrels per day, down by 0.4 percent from the same period last year. Very poor. Distillate fuel demand has averaged nearly 4.2 million barrels per day over the last four weeks, up 0.7 percent from the same period last year. Jet fuel demand is 5.6 percent lower over the last four weeks compared to the same four-week period last year. And even with that American Airlines has to start charging you for baggage! Who says high prices are not having an effect. Don’t forget to sign up for the Phil Flynn Energy Blast! Also get a free trial to alaronenergies.com! Call for your user name and password! Also check out the Fox Business Network! If you don’t get it you are missing the best show in town! And if you don’t get it you’re missing Liz Clamen and David Asmen and me today! That is too much to miss in one lifetime! And if you do not get the Fox Business Network people will start talking about you behind your back. Don’t let that happen! Call your cable operator a day. Thanks for all the great emails! Call me at 800-935-6487 for the daytrade and option trades and to open your account! Sold July apprx 12900 stopped at apprx13300!! Sell July Crude at 13500 - stop 13800. Stopped on short July heating oil from apprx 38700 at apprx 39000. Sell July heating oil at 410 - stop 415. Sell July RBOB at 34300 - stop 34600. Buy July natural gas at 1100 - stop 1070. Have a GREAT day! Phil Flynn
Alaron Research Team
800.935.6487
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Phil Flynn is Vice President, Energy Analyst and General Market Analyst with Alaron Trading Corporation (www.alaron.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, investors and media worldwide. Most recently, Phil and his energy team were one of the first to predict that global crude oil prices would exceed $30/barrel in the year 2000, a correctly-predicted market milestone which has highlighted the economic scene in the new millennium. Through hundreds of media interviews, Phil Flynn and Alaron Trading have become familiar names in living rooms and boardrooms worldwide. The world’s print, broadcast and online media have come to rely on Phil’s accurate and animated forecasts and analysis. Media highlights include: The President of the United States, Bloomberg, ABC, CBS, NBC’s “Today Show” and “Nightly News with Tom Brokaw”, CNBC, CNN/ CNNfn, 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 and National Public Radio. Phil’s daily market analysis can be viewed at www.alaron.com, the world’s leading futures Web site. He has been featured on MarketWatch.com, ino.com and FutureSource.com. 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 Daley College in Chicago before beginning his career on the trading floor of the Chicago Mercantile Exchange Disclaimer:
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