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Aye Aye Captain we are going down

Thu, Jun 5 2008, 12:21 GMT
by Phil Flynn

Alaron

Running out of gas! No, not out of supply. There's absolutely no worries there. You can get all you want but it does look like finally this bull market is running out of gas. And it should be no wonder. It looks like if you took your date out for Memorial Day weekend you probably took her to the submarine races because it’s obvious you were saving on gas.

Out of gas parking cars! What else can you do? What, is every body staying home? Gas demand dropped as we started our traditional kickoff to the summer driving season. It seems to be the first time since adults actually knew what submarine races were that gas demand dropped at the beginning of summer. Gas prices really put a damper on the start of the holiday weekend as people said no to record high gas prices. This is Memorial Day remember? A day when we drive well everywhere.

The Department of Energy reported that motor gasoline demand was down by 1.4 percent from the same period last year. This is when demand normally increases by 1 or 2%. Who says that Americans are not sensitive to the price of gas as this is a sure sign of demand destruction and a sign that yes consumers are running out of gas. The good news is that after the submarine races you will be telling the truth when you say you ran out of gas.

That lack of demand and an increase in refining activity led to a much bigger than expected rise in petroleum products. The DOE reported gasoline inventories increased by a much more than expected 2.9 million barrels last week. Worries about distillate supply decreased as distillate fuel inventories increased by 2.3 million barrels.

Distillate fuel demand has averaged 4.1 million barrels per day over the last four weeks, up 1.6 percent from the same period last year. Jet fuel demand is 0.3 percent higher over the last four weeks compared to the same four-week period last year. More supply less demand, hmm.

Of course the bottom line on this report is demand is faltering. High prices are taking their toll and it should start bringing down prices at the pump. Crude supplies surprisingly fell as refineries upped operations to 89.7 percent of their operable capacity. Refineries increased gasoline production compared to the previous week, averaging 9.1 million barrels per day. Distillate fuel production increased last week, averaging 4.5 million barrels per day.

Crude supply fell on higher runs and lower imports than expected but raise at the NYMEX delivery point in Cushing Oklahoma. This fact let the trade focus on higher than expected supply of products.

U.S. crude oil imports were not up as much as expected and averaged about 9.8 million barrels per day last week. That was up only 827 thousand barrels per day from the previous week and still does not answer the question as to why we had so much trouble off loading supply in the Gulf Coast.

All and all a bearish report and with the dollar on the rise we should see even more pressure.

Unless...Well you know. Stuff! Stuff like...Oil got a scare overnight on an explosion at a Kuwait Petro Chemical plant. It shouldn’t hurt production but...

You can’t always get what you want. Well unless you are the Russian Billionaire shareholder of Russian joint venture TNK-BP. You see one week after trying to remove Robert Dudley as CEO he is called in by the Russian authorities about tax evasion! Is this YUKO’s revisited?

Have you got blasted lately? If you haven’t it probably means you aren’t on the Phil Flynn Energy blast! Fix that! It is almost the weekend and you can stay home and get blasted and you won’t have to drive anywhere! Just call Phil Flynn at 800-935-6487 or email me at pflynn@alron.com to open your account. I again want to thank all the loyal Energy Report readers for all of the calls and emails. I am getting caught up with responses. So many have sent comments and links to articles of interest and I have been overwhelmed with your kindness. Energy Report readers are the best. Now I know from the calls that a lot of you have caught a big piece of this downside move and are wondering why I have not lowered my stops and if they should book what they have. I know my stops have been left high but because of the potential size of the move I have been playing it loose as to avoid getting stopped out. I know that many of you prefer tighter stops and I try to accommodate most of you most of the time. Yet long term the potential for oil is to go below $100 a barrel and we are going to play for that move. Yet if you are sitting on a $10,000.00!!! one contract winner it is never a bad idea to take some profit. Profit is good and you always have to remember that this is a profit taking business. These trade recommendations are just a guide and you should always use your judgment and try to have it suit your needs and your risk tolerance. If you need help just call me or anyone on my team for guidance. That is what we are here for.

The Fox Business Network is here for being the best time in business. If you are not having a good time it’s because you are not getting the Fox Business Network. You can see Liz Clamen and David Asmen and Me wrap up the energy trading day! And while you are at it you can call me for a free trial of www.alaronenergies.com! Email me at pflynn@alaron.com or just pick up the phone and call me at 800-935-6487.

Ok, ok I will lower the stops already!

We're short July crude from apprx 13200 - lower stop to 12700!!!]

We're short July RBOB from apprx 34000 - lower stop to 32500!!!

Buy July heating oil at 35500 - stop 35300!!!

Buy July natural gas at 1220 stop 1170.

Have a GREAT day!

Published on  Thu, Jun 5 2008, 12:23 GMT