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Corrective Action in Energies

CRUDE OIL

In addition to a significant overbought technical condition into the Thursday high, (gains for February are very significant at $7.00 per barrel) the bull camp has been dealt a definitive demand threat following chatter that Chinese refiners have balked at purchases because of expensive pricing. While the weather-related shutdown of US crude production has been a primary focus of the energy market press coverage over the past week, the fact that 31.4% of US refineries were off-line last week due to a lack of profitability and weather-related problems, and news that Russia also has a large amount of refinery capacity off-line should lend some support against further downside action today.

NATURAL GAS

The bull camp should come away from this week’s action extremely discouraged, as prices probed into new lows for the move despite a larger than expected draw from US storage. Clearly a trend of milder weather has been embraced by the trade (warm temp forecasts now reach out to March 11th) and that is also justified by seasonal warming patterns.

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