We shift back and fourth between a focus on supply versus the world situation. Today we are focused on supply because of tomorrow's report.
The real dichotomy in this market is that crude inventories are very high and that could make for some violent, back-and-forth price action. For the foreseeable future, the path of least resistance remains up until there is a significant structural economic or political shift.
Mild weather is supposed to continue across most of the northern third of the country until next week, .
Mild weather and growing stockpiles can't be ignored much longer.
Milder weather forecasts for this week and extraordinarily high stockpiles continued to weigh on sentiment.
Only if the news from the around the globe remains quiet will selling continue in earnest.
Certainly the current supply fundamentals make it difficult to bid up prices much further.
If injections from April through October match last year's pace, stocks could begin the next heating season with a record 3.6 trillion cubic feet in the ground.
I can't see the lost production being restored fast enough to reverse prices.
If the stock market were not making five- and six-year highs, Iran and the U.S. were fast friends and the Nigerian militants were stuffing flowers in the gun muzzles of the Nigerian army -- then we might be worried about a reversal, but not now.
It is apparently going to take more than growing inventories to turn prices seriously lower.
Last year began with a large surplus but an unusually hot summer ate up those reserves and soon thereafter the hurricanes hit. There is still some infrastructure that was damaged, which could be a problem.
Repairs are proceeding apace. Discretionary driving can be cut back but you have got to heat your house. Heating oil will soon lead the market.
Relatively moderate weather, ample supplies and an escalation in the dispute over Iran's nuclear program should make for another week of high volatility. Absent geopolitical uncertainty, prices should be moving lower.
While a late-winter cold snap or cool spring could whittle down some of the storage surplus, it is probably too late to prevent stocks from ending the heating season at record-high levels.
We are in a waiting pattern until the numbers are released. The conditions that brought us to these levels remain, so we may resume our move higher once the report is digested.
There has only been a month's reprieve granted in addressing Iran's nuclear ambitions.
We are starting to see a change in consumer behavior. Consumers are cutting back because of high prices, rising interest rates and signs that the housing bubble is ending. Prices have probably begun the long steady process of grinding lower.
While Iran seems to be going back and forth on the use of oil as a political weapon, that issue will probably remain in the forefront for the near term, at least.
With Iran indicating on Thursday that they would not stop enriching uranium, fears of sanctions surfaced which probably prompted fresh speculative buying.
The Governor of Nigeria doesn't think that militants are set to attack again soon and that has apparently prompted a little profit taking in front of tomorrow's reports.
Even in a bull market you get periods of a little relief, and this is one of them. Some of the Iranian words today were conciliatory. In reality nothing has changed and the market will soon rise again.
Crude oil will have to fall eventually because supplies are adequate and demand is not the greatest for this time of year. You can't justify crude oil at close to $60.
Crude is being held back by the apparent consensus that OPEC will keep pumping.
Crude inventories are at extraordinarily high levels, due in part to a steady flow of imports in recent months, giving the market a thick buffer against potential supply disruptions.
The UN-Iran conflict will recede a bit in coming sessions since the UN won't look back into the situation for 30 days. Iran now has 30 days to posture, it can issue some harsh words and in the end negotiate better terms when the deadline approaches.
The storm may lead to further evacuations. If the storm moves into the Gulf it will lead to a suspension of repairs and there may even be a contraction in production. We're taking no chances.
The surprising fall in gasoline stocks and the approach of the cold are sending us higher. Also, imports contracted and gasoline demand rose.
Temperatures in the Northeast and Midwest were expected to remain above normal for the next 10 days.
Prices have retreated unusually fast and there is still two months left for the thermometer to drop.
After a mild start to the week, temperatures in the Northeast and Midwest, key gas consuming markets, were expected to cool to below-normal later this week and next week.
Apparently, the market thinks that OPEC is set to simply roll over the existing production quota in the upcoming meeting. Even so, there will probably be provocative comments from both Iran and Venezuela.
The weekly inventory numbers caught the market by surprise again. The unanimous UN decision demanding Iran stop nuclear enrichment probably rekindled concern that Iran will use oil as a political weapon.
The weather will be more seasonal over the next week but it will take much more than that to put a dent in supplies.
The weather is cooperating and helping us replenish supplies. The speculative frenzy that followed the hurricanes has cooled down. Lower refinery operating rates have led to rising crude-oil stocks as products have arrived from elsewhere.
There was a lot of panic yesterday as we all thought about the worst possible scenarios. The likelihood is that the worst won't occur.
It's high noon at the Security Council. Prices will rise because tensions are high. Iran has said that it would not specifically use oil as a weapon but now they are changing their tune.
Despite a weekend blizzard in the Northeast and an oversold market after a 16% sliding the last six sessions, record high levels of gas in storage would temper any buying even if the weather stays cold.
Still, brimming stocks should keep any rally in check, late week cold notwithstanding.
The warm January has permitted a window of opportunity to stage an early refinery turnover, longer-term weather forecasts call for a warm conclusion to the heating season, and gasoline has been quickly rebuilding stockpiles in advance of summer.
The US is quickly skirting the winter period without a significant supply shock -- the next few days' drop below seasonal temperatures notwithstanding.
These two guys are never going to admit in a million years they killed anybody.
Once it gets back over the warm water of the Gulf it can gain strength and change direction. It doesn't look like it is headed for the big facilities in the Gulf, but we won't know for sure until the weekend when we can't do anything.
At this time of year, it is hard to imagine prices running to far away, particularly with the huge amount stored.
The mild weather and contracting demand are continuing to send us lower. Crude oil will soon test $56 and the products $1.50.
I'm expecting builds across the board. Imports should continue to arrive at a high rate, which will raise crude stocks, and refineries continue to return, which should do the same for the products.
Iran's oil minister has said that oil exports would not be used a s a bargaining chip, but that possibility must be considered, particularly if tensions escalate.
Gasoline has led the way lower. High imports and expectations of a switch to gasoline production have led to concerns that supplies will swell as we go into the summer driving season.
The market got ahead of itself earlier this week. With the world in its present state a move into hard assets makes complete sense. Any decline in oil should be looked at as a buying opportunity.
The uncertainty relative to Nigeria remains a front burner issue, with more attacks taking place on Monday, but apparently the attacks did not result in any lost production.
The effects of Katrina will be felt throughout the economy, reducing demand and keeping a lid on energy prices. The federal government is ready to release barrels from the Strategic Petroleum Reserve and there is significant help coming from abroad.
The current perception is that there is enough crude and heating oil around, thus the slide in prices.
The comments from OPEC officials are taking some of the froth off last week's rally. It looks like OPEC is set to roll over the existing production quota at the meeting this week.
The conclusion is probably being made that any surplus will be promptly sopped up as soon as seasonal demand kicks in.
All the elements that brought us to this level are still with us. The growing demand in China and India is not going away. Nor do I see geopolitical tensions diminishing. I'm not expecting an outbreak or reasonableness in the Middle East anytime soon.
The market is at a do-or-die moment. There now has to be a decisive move to take out the recent highs or the market will take its cue from the fundamentals, which are bearish.
The latest national Weather Service outlook is forecasting below-normal temperatures through February 21st, but an arctic cold blast is not expected.
