ISSUES....
Inside,
confidential, off the record
A roller-coaster ride
ENERGY PRICES HAVE FALLEN PRECIPITOUSLY IN THE PAST TWENTY FOUR
HOURS, with nat-gas and crude both down sharply. Some in the
market want to "
fundamentally" blame the weakness upon the notion that Nigeria's
MEND may reach an agreement with Exxon Mobil's
units there. We find this a bit hard to believe given
that nat-gas is not involved in Nigeria's problems. We suspect
instead that the energy market is simply in a liquidation mode;
that the long-only ETFs are too long of energy in all forms; that
strength in the US dollar is weighing upon commodities generally
and upon energy specifically and that prices are likely to weaken
materially for some while longer. We must remember that it was
only four weeks ago that WTI found support at "par" and
it was only two weeks later that it broke out to the upside as
it went up through $110. Certainly a test of $107-$110 is reasonable
as late longs are liquidate out and as latent bears become enthusiastic
once again. Today, or course, we shall see the weekly DOE inventory
data, and again we shall issue our admonition that those who trade
predicated upon these reports not to do so. The consensus is for
a small increase in crude inventories of less than 1.0 million
barrels. Again, given the sizeable backwardation in WTI crude,
we find it difficult to believe that inventories will rise and
instead look for inventories to fall... but slightly also. Thus
we are at odds with the consensus, but only by 1.5 million barrels...
within random noise. The consensus looks for gasoline inventories
to be down rather sharply... on the order of 2.8 million barrels.
Distillate inventories too shall be down, but by a modest 0.5 million
barrels. Our confidence in either the consensus or our own "
guess-timates?" Low and falling... like prices::
Jun WTI down 314 114.94-99
July WTI down 302 114.13-18
Aug WTI down 292 113.34-39
Sep WTI down 283 112.68-73
Oct WTI down 279 112.11-16
OPEC "Basket" $111.14 04/24
Henry Hub Nat-gas 10.92
- Dennis Garthman/The Gartman Letter/ 04 30 08
- For more on interesting comments, you can subscribe to The Gartman
Letter by contacting Dennis Garthman: Phone 757 238 9346, Fax 757
238 9346 or dennis@thegartmanletter.com
-
By the way, Mr. Gartman will be on CNBC's "
Fast Money" this evening with Dylan Rattigan to discuss the
Fed's decision regarding rates. The show promises to be a particularly
interesting one given the FOMC
meeting and its potential aftermath.
Petroleumworld
News 04/30/08
ISSUES....
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