omnium gatherum why the death of hugo is not as big a deal … · 2013-03-07 · why the death of...

Thursday, March 07, 2013 [email protected] © 2013 THE SCHORK GROUP, INC

ENERGY PRICES WERE SOFT ON WEDNESDAY… spot

NYMEX Henry Hub natural gas futures faded a six-week

high and sank back towards Monday’s 3.474 midpoint.

Today is EIA day, the market is looking for a delivery

from underground gas stocks of around 131 Bcf. On

the petroleum side, oily markets traded lower after the

DOE reported Feb/Mar crude oil supplies topping 380

MMbs for only the second time since the 1930s.

Omnium Gatherum

Why the death of Hugo is not as big a deal today, as it

would have been just a few short years ago.

Yesterday the DOE reported a large 3.8 MMb build in

commercial crude oil stocks for the week ended March 01st.

The build was well above the 750 Mb consensus, but it was

within the realm (albeit on the high side) of the seasonal

envelop. As noted yesterday, the typical movement for this

report ranged in between a 250 Mb draw and a 3.4 MMb build.

Thursday, March 07, 2013

[email protected]

www.schorkreport.com

TRADING BIAS DAILY

WTI: BEARISH a/o Feb 15 …S- 89.54 R- 91.32 BRN: BEARISH a/o Feb 15 …S- 110.3 R- 111.82 NG: BULLISH a/o Feb 25 …S- 3.399 R- 3.541 RB: BEARISH a/o Feb 21 …S- 308.51 R- 316.43 HO: BEARISH a/o Feb 15 …S- 294.68 R- 300.44

TRADING BIAS WEEKLY

WTI: BULLISH a/o Feb 26…S-80.35 R-86.13

BRN: BULLISH a/o Mar 05…S-82.87 R-89.11

NG: BEARISH a/o Feb 19…S-3.824 R-4.254

RB: BULLISH a/o Feb 19…S-218.32 R-237.08

HO: BULLISH a/o Mar 05…S-212.81 R-230.57

TRADING BIAS MONTHLY

WTI: NEUTRAL a/o Dec 2009…S-71.64 R-84.70

BRN: NEUTRAL a/o Oct 2009…S-71.15 R-84.03

NG: NEUTRAL a/o Feb 2010…S-3.947 R-5.723

RB: BULLISH a/o Dec 2009…S-186.22.70 R-229.54

HO: BULLISH a/o Dec 2009…S-185.99 R-218.99

TRADING BIAS WEEKLY

WTI: BEARISH a/o Mar 01 …S- 88.69 R- 92.67

BRN: BEARISH a/o Mar 01 …S- 108.05 R- 112.75

NG: BEARISH a/o Nov 30 …S- 3.289 R- 3.623 RB: BULLISH a/o Jan 25 …S- 303.52 R- 322.2

HO: BEARISH a/o Mar 01 …S- 285.4 R- 300.62

TRADING BIAS MONTHLY

WTI: BULLISH a/o Feb 2013 …S- 86.7 R- 97.73 BRN: BULLISH a/o Feb 2013 …S- 104.63 R- 118.56

NG: BEARISH a/o Feb 2013 …S- 3.196 R- 3.802 RB: BULLISH a/o Feb 2013 …S- 274.3 R- 309.69

HO: BULLISH a/o Dec 2012 …S- 280.74 R- 314.6

CRUDE AWAKENINGS

NOAA: L48 6-10 Day Outlook

http://www.schorkreport.com/


Commercial crude oil stocks now stand at 381.4 MMbs.

This is only the second time in the last 80 years (1981

being the other time) when stocks broke the 380 MMb

threshold in the February-March period.

As far as U.S. products go, refinery utilization rates

dropped by 290 bps to 82.2% of capacity. It was a sharp

drop, but not uncommon for turnaround season. DOE

gasoline stocks fell by a relatively modest 616 Mbs, but on

the other hand, stocks have fallen by a combined 6.2

MMbs over the last three weeks. Total U.S. mogas stocks

stand at 227.9 MMbs. The deficit to the five-year average

moved out by 26 bps to -0.43% or 605 Mbs.

As far as the NYMEX terminal complex is concerned,

stocks in PADD 1 rose by 651 Mbs to 60.5 MMbs. The

build was the fourteenth such increase of the last sixteen

reports. In fact, over the last four months, i.e. since the

aftermath of Sandy, gasoline supplies in the East have

risen by 15.4 MMbs. That build is the 7th largest of the

last 20 years (98.8th percentile). In the process, the

deficit to the five-year average has narrowed by 5.6 MMbs

or 944 bps to 999 Mbs (-1.62%) as of last week.

Up in the middle of the barrel the DOE had stocks of

distillate fuels falling by a heavy 3.8 MMbs to 120.4 MMbs.

The deficit to the five-year average moved out by 218 bps

to -15.4% or 21.9 MMbs. Stocks in PADD 1B Mid-Atlantic

(inclusive of the NYMEX delivery hub) fell by 257 Mbs to

20.2 MMbs; the deficit to the five-year average narrowed

by 42 bps to -30.9% or 9.0 MMbs.

Meanwhile, in a presentation earlier this week, Delta Air

Lines said it expects to produce 40 Mb/d of jet fuel at its

Trainer (Philadelphia) refinery by the end of 2013. The

new estimate is 12 Mb/d below its original target set a

year ago after Delta took over the facility.


The company lost $63 million in 2012 on Trainer, but

claims it expects to realize $300 million in fuel savings

this year. In the meantime, jet fuels stocks in the East

rose by 589 Mbs last week to 9.9 MMbs. Over the last

three weeks the disposition of East Coast jet stocks has

morphed from a 653 Mb (-6.6%) deficit to the five-year

average, to a 733 Mb (+7.4%) surplus.

Who Needs Whom More?

Finally, we would like to talk a little more about Hugo’s

legacy.

Venezuela ranks as one of the U.S.’ largest suppliers of

crude oil. However over the last ten years imports from

Venezuela have declined from 1.3 MMb/d to 0.9 MMb/d.

At the same time, the difference between U.S. crude oil

imports (total) and U.S. domestic crude oil production has

narrowed from a record 6.3 MMb/d to 0.2 MMb/d (see

chart on page 1). Furthermore, U.S. exports of refined

petroleum products have more than doubled (3.1 MMb/d)

over the last five years.

Mismanagement of the oil bonanza enjoyed under

Chavez’s time in office was squandered on ideological

white elephants. Thus, the irony of ironies… whereas the

U.S. has grown less dependent on Venezuelan supplies of

crude oil over the years, Venezuela has grown more

dependent on supplies of U.S. refined products. For

instance, U.S. exports of oil products to Venezuela have

increased from 6.6 kb/d in 2004 to 85 kb/d in 2012.

In other words, the U.S. buys crude oil from Venezuela

and then sells it back to them (refined) at a higher price.

Only a socialist could create a situation like that.

In this vein, this morning U.S. Trade Balance figures for

January will be published. According to the Census

Bureau’s numbers for December 2012, the U.S.’ trade

deficit with Venezuela was $1.31 billion. In July 2008, at

the height of the oil bubble, the deficit hit a record $5.35

billion.

To add insult to injury, U.S. imports of Venezuelan goods

(all imports, not just oil) were $3.03 billion, about where

they were in December 2005 ($2.98 billion). However,

the big difference between then and now… then

Venezuelan oil prices were $48.36/b, now prices are more

than double, $99.25/b. By the same token, U.S. exports

to Venezuela have climbed from $0.61 billion to $1.72

billion.

Bottom line, we are doubtful oil prices will be greatly

affected by Chavez’s passing… to quote from Animal

House... re Flounder: we need the dues! Venezuela needs

the dues or more to the point, the country needs oil

revenue and can ill afford a disruption in cash flow.

That is not to say potential civil instability (see Libya,

spring 2011 as a blueprint) could not create a “risk

premium”, but again, given how the state has mortgaged

its future on oil prices, it will have to figure a way to

maintain the status quo.

Down the road, should Chavez’s Bolivarian revolution ebb,

the country could once again attract foreign investment in

its vast oil resources… but that is a long way off. Should

it ever come to that, it would most definitely be bearish

for oil prices. After all, because of PdVSA’s incompetence,

the country is producing a fraction (<2.5 MMb/d) of its

capability.

But don’t expect the likes of Conoco and Exxon to come

rushing back into Venezuela. Just like Phibro learned the

hard way in the early 1990s (White Nights JV), it takes

more than political regime and the proverbial pot of

(black) gold at the end of the rainbow to earn a return on

your investment.


NATURAL GAS

NYMEX WTI for April delivery was soft yesterday, but there

is no doubt the bulls are trying (and succeeding) in

establishing a base around $90. For a fourth straight

session the market traded inside of the Fibonacci 62/76%

retracement range from 91.48 to 89.78. We are going to

hold onto our daily Bearish bias for another session,

but we are certainly troubled by the bear’s inability

to establish traction below $90. On the cash side of the

ledger, Canadian and Bakken crude maintained strong bids

against WTI, as did LLS in the Gulf.

One cannot help but acquire the sensation that NYMEX

natural gas bulls are choking. Yesterday morning bullish

momentum in the contract for April delivery faded inside

of January 24th’s Fibonacci 50/62% retracement area from

3.548 to 3.563. In the afternoon the market fell to within

3 ticks of our 3.459 lower inflection-point and settled the

day 4 ticks below Monday’s 3.474 midpoint.

As we have said over the last couple of days… a failure to

take out resistance in the mid-$3.50s in the days ahead

sets the table for corrective flush back to the “gap”

≈3.351.

Today is EIA day… assuming federal employees manage

to trudge through a few inches of snow to get to their

desks. The market is looking for a delivery from

underground storage for last week of 131 Bcf. The

average delivery for this report is 141 Bcf.

Heating degree days fell by 31 last week to 186, while the

EEI power generation figures fell 1.4% to 76,000 GWhs.

Weekly average nuke capacity fell another 0.5% to a

season-to-date low.

OIL

WTI J Open 90.83 High 91.17 Low 89.55 Close 90.43 Chng -0.39

5

NAT-GAS J Open 3.523 High 3.550 Low 3.462 Close 3.470 Chng -0.059

As for today, strength above yesterday's 3.506 midpoint

opens the door to our 3.541 inflection high. Above here

the bulls will potentially run towards our 3.613 intra-day.

Then again, weakness below yesterday's 3.462 low print

leads to our 3.399 inflection low. Below here we look for

offers to hit support at our 3.327 intra-day.

As far as today goes, weakness below the Fibonacci

76% retracement at 89.78 alerts to our 89.54

inflection low. Below here we will look towards our

88.66 intra-day. On the other hand, gains above

yesterday's 91.17 high print clear a path to our 91.32

inflection high. Through here the bulls could run to -

and into resistance at - our 92.20 intra-day high.


7

LIGHT ENDS

MIDDLE DISTILLATES HEATING OIL J Open 298.74 High 300.24 Low 295.50 Close 297.56 Chng +0.26

ICE Brent

NYMEX heating oil futures were weak on Wednesday. The

market for April delivery peaked late Tuesday night at 9 ticks

above our 300.15 upper inflection-point. The bulls managed a

dead-cat bounce yesterday morning around 8:00 a.m. Not

even the DOE’s 10:30 a.m. report, which showed a large

week-on-week draw in distillate stocks, could manage to stem

the bull’s bleeding.

As for today, strength above yesterday's 298.44 Fibonacci

62% retracement builds a bridge to our 300.44 inflection

point. Once crossed, the bulls should run towards our 303.31

intra-day high. Then again, weakness below channel support

at 295.97 signals momentum to our 294.68 inflection low.

Below here we will look for offers down to our 291.81 intra-

day low.

April RBOB on the NYMEX was soft yesterday. The contract peaked

(317.19) for the day at around 7:45 a.m. and was already coming off

hard prior to the 10:30 a.m. release of the DOE update. Cash markets

look very weak relative to the screen, that’s a good thing for

consumers. On the other hand, traders continued to shift focus to the

end of summer. Yesterday the front end of summer grade RBOB (J/K)

settled 1.34 cents below the 5-day average, while the backwardation on

the end of summer (Q/U) finished 2 ticks above its 5-day average.

As far as today goes, weakness below yesterday's 310.21 low print

alerts to weakness towards our 308.51 inflection low. Below here we

look for offers to our 304.56 intra-day. On the other hand, a rebound

above yesterday's 314.54 Fibonacci 62% retracement opens the door to

our 316.43 upper inflection point. Above here the bulls should bid

towards our 320.38 intra-day high.

Brent J Open 111.83 High 112.23 Low 110.46 Close 111.06 Chng -0.55

RBOB J Open 315.30 High 317.19 Low 310.21 Close 312.47 Chng -2.35

Brent crude oil futures on the ICE for April delivery were soft on

Wednesday as the UK’s Brent delivery system was shuttered for a fifth

day. Spot futures faded initial momentum 13 cents from the Fibonacci

62% retracement and moved lower through the remainder of the session.

The market finished the day 4 cents above Monday’s 111.02 midpoint.

Finally, April Brent’s premium to the corresponding WTI contract on the

NYMEX held below minus $20 for a second straight session.

As far as today goes, strength above yesterday's Fibonacci 62%

retracement at 111.56 opens the door to our 111.82 inflection point. If

crossed, we will look for bids to our 112.59 intra-day. On the other

hand, a drop below yesterday's 110.46 low print alerts momentum to our

110.30 inflection low. Below here we will look for offers towards our

109.53 intra-day.


ICE gasoil futures were weak on Wednesday. The market for

April delivery peaked around halfway in between our 935.00

upper inflection-point and our 942.50 upper limit. From there

the market fell to a 927.00 close. The spot H/J contango

narrowed 1 tick from the minus 2.75 life-of-contract high. The

spread finished the day at 94 cents below the minus 1.56 five-

day average.

As for today, offers through the Fibonacci 76% retracement at

926.75 alert to follow-through momentum towards our 921.75

inflection. We will look for weakness below here towards our

914.00 intra-day. On the other hand, continued strength above

yesterday's 933.50 midpoint clears a path towards our 937.25

upper inflection-point. Above here we will look for bids towards

our 945.00 intra-day.

ICE GASOIL Gasoil J Open 937.75 High 939.75 Low 927 Close 929.5 Chng +2

NOAA’s Three-Day Max Temp Anomaly Outlook

NOAA’s Seven-Day Max Temp Anomaly Outlook

Spot PJM West values were strong on Wednesday as

markets in the eastern RTOs braced for another shot of

winter. On-peak power for delivery today eased 5% off of

a five-week high, but was still firm at 47.34/MWh. Off-

peak power for today jumped 15% to 38.79/MWh. At the

same time, Tetco M3 gas fell 3% to $4.02/Dth. In turn,

7K spark spreads (on-peak) fell 9% to 19.20/MWh while

8K spreads fell 10% to 15.18/MWh.

PJM’s load forecast for yesterday's peak was raised from

an initial estimate of 109,434 MWs to 109,627 MWs. Last

night Genscape had estimated load 0.6% lower 109,029

MWs. Hour-ahead markets rose sharply for a second

straight day. In the eastern RTOs the market peaked at

$115.33 as of writing. That is ≈$28 (+32%) greater than

Tuesday’s peak. In the western zone the hour-ahead

market peaked thus far at $111.84 or ≈$10 (+10%)

above Tuesday’s max.

Over the next several days temperatures in the western

RTO market areas are forecast to linger around the

freezing mark, while eastern RTOs along the I95 corridor

(PSEG to Dominion) are forecast to hang around the

upper 30s°F area. PJM forecasted peak load for today is

106,053 MWs for the combined RTO.

From a PJM West LMP outlook, bids through 53.50 alerts

to follow through momentum towards our 59.25 intraday

upside target. On the other hand, a failure to hold

support around 41.75 clears a path towards our lower

inflection-point around 36.00.

PJM RECAP


Monday, March 04 -- For a third week in a row, ethanol

futures ended a Friday on a cheerful note, but unlike the

prior two weeks, where trading was lower heading into

Friday, last week the market traded with a bullish skew

through the entire week. However, ethanol pricing was

mixed relative to feedstocks. For a third straight week

the contract for April delivery rose against the

corresponding RBOB gasoline contract, while for an eighth

straight week the market for May delivery gained on the

corresponding market for New York sugar. On the other

hand, ethanol for May delivery lost ground on Chicago

corn for the first time in two months.

At the same time, 2013 ethanol RINs continued to surge.

Last week the market finished at a record $0.56/RIN for

corn-based ethanol. In the process, the differential

between 2013/12 RINs more than doubled to minus

$0.100/RIN. Finally, the average physical crush in Illinois

(prompt f.o.b. ethanol in Chicago and DDGs less the bid

for №2 yellow corn) jumped to an eight-month high of

$1.902/bu.

Cash markets were higher last week, with West Coast

ethanol posting the largest week-on-week gain in the

regional market areas. Ethanol out west bounced back by

6½ cents to average ≈$2.588 per gallon while the

Chicago market posted the smallest gain, up 3.44 cents to

a ≈$2.391 per gallon average.

The DOE data for the week ended February 22nd showed

production of conventional gasoline w/ethanol rising 0.6%

to 5.19 MMb/d with the amount of finished gasoline

required to supply the market rising 1.9% to 8.60 MMb/d.

The adjusted moving average for the March 2013 ethanol

futures market rose 0.8% to $2.368.

Meanwhile, last week CBOT corn for March delivery turned

sharply higher last week, thereby signaling a potential

bullish trend. As far as this week goes, we have turned

our focus onto the market for May delivery. In this

respect, bids through 713.25 alert to follow-through

momentum towards our 715.50 upper inflection-point.

Above here we will look for momentum towards out

722.50 weekly limit. On the other hand, offers through

703.75 alerts to further corrective weakness towards our

701.50 lower inflection-point. We will look for offers

below here towards our 694.75 lower weekly limit.

Finally, last week the NYBOT sugar contract for May 2013

delivery traded up to 6 ticks above our 18.53 initial

tipping point on Thursday, but then faded to finish the

week 3 ticks below our 17.78 lower tipping point. As far

as this week goes, offers through 17.57 alerts to follow-

through momentum towards our 17.40 weekly inflection-

point. Below here we will look for offers towards our

16.90 lower week limit. On the other hand, a rebound

through 18.26 clears a path towards our 18.42 upper

weekly inflection-point. We will look for momentum

above here towards our 18.92 upper limit.

COAL

BIOFUELS

WEEKLY OUTLOOK (Mar 04 to 08)

ICE BRENT… strength above the 30-day pivot moving average at 112.04 alerts to follow-through momentum towards our 112.75 weekly inflection point. We will look for bids above here towards our 115.10 weekly limit. On the other hand, offers through last week's 109.82 low print clears a path towards our 108.05 inflection-point. Below here we will look for momentum towards our 105.70 lower limit. NYMEX WTI… strength above last week's 94.46 high print alerts to follow-through momentum towards our 92.67 weekly inflection point. We will look for bids above here towards our 94.66 weekly limit. On the other hand, offers through the 200-day pivot moving average at 90.36 clear a path towards our 88.69 inflection-point. Below here we will look for momentum towards our 86.70 lower limit. NYMEX HEATING OIL… bids through last week's Fibonacci 24% retracement at 297.29 opens the door to our 300.62 weekly inflection point. Above here we look for bids to our 308.24 weekly limit. Then again, offers past 2012's

291.38 midpoint clears a path to our 285.40 lower inflection point. Below here the bears are in position to shoot for our 277.78 lower limit. NYMEX RBOB… strength above the midpoint from w/e 28-Sep at 316.26 alerts to follow-through strength towards our 322.20 weekly inflection point. Above here we will look for momentum towards our 331.53 weekly limit. On the other hand, offers through last week's 306.87 Fibonacci 76% retracement cautions for further weakness towards our 303.52 lower inflection point. Below here we look for offers towards our 294.19 lower limit. ICE GASOIL… a drop below the 901.00 low print from the w/e 14-Dec alerts to weakness towards our 893.5 inflection low. Below here we look to our 866.25 intra-week low. Then again, strength above channel resistance at 946.99 opens the door to our 947.5 inflection high. Through here the bulls look to our 974.75 intra-week high. NYMEX NATURAL GAS… bids through last week's 3.554 high print clear a path towards our 3.623 weekly inflection-point. Above here we will look for momentum towards our 3.790 upper limit. On the other hand, offers through last week's 3.320 low print alert to follow through weakness towards our 3.289 lower inflection point. We will look for weakness below here towards our 3.122 weekly limit.

A note about the Ibis: The Ibis folklore has it that other birds look to the Ibis for leadership. The Ibis uses its

instinct to detect danger. It is the last sign of wildlife to take shelter before a hurricane hits, giving warning that

danger is imminent. As the storm passes the Ibis is the first to reappear, a sign the clear skies are

approaching.

omnium gatherum why the death of hugo is not as big a deal … · 2013-03-07 · why the death of...

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