The Obama-Tim Geithner plan to shock and awe the economy had two major features. It was it was both vague and nebulous. I mean at least it was both, you wouldn’t want vague without nebulous now would you?
As far as shock and awe at least the market was shocked that there were no more details and it was an awe inspiring stock market drop. Yet at the end of the day, what really matters to you, is how it affected oil.
Well the oil market was far from vague or nebulous the way it reacted to the report! It was down for the count. In fact it kind of looked like it had gone 15 rounds with Clubber Lange.
And you did not have to worry about the Department of Energy being vague or nebulous because they were far from it in their “Short Term Energy Outlook”. The DOE warned that U.S. real gross domestic product is expected to decline by 2.7 percent in 2009, triggering decreases in domestic energy consumption for all major fuels. This report showed that the DOE is seeing what the market has been seeing in terms of massive demand destruction. As far as world demand, the Department of Energy also predicts that world oil consumption will fall by 1.2 million barrels a day in 2009, a drop of 40,000 barrels a day from last month’s report.
Overnight the International Energy Agency echoed those sentiments by cutting 570,000 barrels a day off its 2009 world oil consumption forecast due to frail global economic activity. They warned that trade protectionism could hurt energy consumption. The IEA, in a downward revision, expects that world oil consumption will fall one million barrels to 84.7 million barrels a day. This is the biggest drop in demand in 27 years.
Yet despite this bearish news bulls got some hope when the American Petroleum Institute (API) released their weekly inventory report. You might be shocked to find out that crude supplies can actually fall in these reports. But that is what happened. The API reported that US crude supplies fell by 1.996 million barrels. That could have happened because they fixed a pipeline out of Cushing, Oklahoma or because they ran out of places to put crude.
But crude was not the only surprise. The API also showed that gasoline stockpiles were down by 2.923 million barrels. But before you get all excited about rebounding demand, the reason for it was a sharp drop in runs. Refinery runs fell 2 full percentage points to a near record low 81.9%. Distillates actually rose by 853,000. If the DOE agrees in today’s report, the complex should find support as long as the stock market does not get hammered.
We're short March crude from apprx 4354 on what is a quadruple rollover! Lower stop to 4900!
