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Petroleum Profit Taking Short Lived

CRUDE OIL

With the crude oil market continuing to scratch out higher highs and higher lows into the end of last week, trend signals still favor the bull camp. However, the bull camp will likely need several closes above $80.00 to discourage talk of a top at a psychological level. In supportive overnight developments it should be noted that crude oil in global floating storage fell by 3.7% over the last week, Libya has seen weather reduce exports further and US temperatures have been more supportive of heating demand. It should also be noted that the US EIA inventories of crude oil are at a 67-million-barrels deficit to year ago levels, with the net crude oil stocks of 417-million barrels, 54-million barrels below the lowest tally for this time of the year since 1999.

While the gasoline market also forged a higher high for the move last Friday, the higher high was incremental, and the February contract failed to hold the brunt of those gains. In a potential major negative development for gasoline and diesel prices, there were reports that Asian clean fuel flows toward the Americas in January are scheduled to exceed the flows seen in December.

NATURAL GAS

While it is difficult to determine which bullish fundamental story sparked the gap higher opening today, we assume that extreme cold in the US and reports that Gazprom has not booked any gas pipeline space this week are at the top of the list. In fact, reports overnight indicate that one critical Russian pipeline has documented 21 straight days of “reversed flow”.

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