Alaron Energy Comment

CHICAGO - Dec 11/07 - SNS -- Following is the energy futures comment from Alaron Trading Corp.

Hey Mr. Nose So Bright, how about a little help here. No, don't worry, I am not talking about Ben Bernanke but the one that will go down in history. Not that Ben won't or this decision by the Fed won't. But it's too bad that Rudolph the Red Nosed Reindeer is busy this time of year because with his nose so bright, he might be able to lead the ships safely though the Houston and Beaumont-Port Arthur  shipping channels.  

In a trading session that seemed to be lost in its own pre-Fed meeting fog, oil got a boost on reports the Beaumont-Port Arthur ship channel has been shut since Friday except for just about 4 hours or so and that the Houston shipping channel was shut down for three hours on Sunday. Getting oil supplies to the refineries that need them has been a bit of a challenge. If it isn't fog in the Gulf, it's the pipeline closure due to the Enbridge fire. The oil is out there but the problem is getting it from point A to point B. Run, run Rudolph.  \

The Fed meeting will be a major factor for oil today. Gold and silver soared yesterday in anticipation of an early Christmas present rate cut from the Fed. Based on the move in metals yesterday, it seems that metal traders are expecting perhaps a 50 basis point cut in interest rates to avoid a possible recession.  

Yet the oil market seemed less hopeful about the chances of an aggressive cut and rallied more  due to  the fog news than the move up in the metals. The dollar weakness was also at play but oil is betting on a quarter cut.  

For oil to make a sustained move higher  from the Fed announcement, it would take a 50 basis point cut in interest rates to sustain a rally. If the Fed does a quarter, then it's likely that oil will drop hard. That's assuming of course that the fog will lift either for real or figuratively with a change in the Fed statement. Still the key for oil is a close below $87.00 and if it does not happen soon the market may again try to rally.  

Natural gas rejected a test of below 700 and bounced back. Near term natural gas will have problems going below 700 because of fears that if we do, producers will stop producing. Still longer term gas will need some frosty temperatures to really get moving. For the near term, buy near 700 and play the range.  

If he can run an oil company do you think he can run a country? Not to worry, he really dose not have too. Worries that Russian President Vladimir Putin would declare himself a czar or supreme leader were lessened a bit when Mr. Putin chose to endorse First Deputy Prime Minister Dmitry Medvedev, Chairman of Gazprom, and his close ally as his successor. Still there are many that see Dmitry Medvedev as a Putin puppet that will allow Mr. Putin to pull the strings. Mr. Medvedev is 42 years old and was in charge when Gazprom cut off supplies of gas to the Ukraine. He basically did the bidding of master Putin who used Gazprom as his personal political pressure machine. Will Medvedev lead Russia forward into Democracy or closer to the authoritarian rule? He's not sure because Mr. Putin did not tell him what to say about that. What this means for oil is that Russia will continue to use its natural resources as a weapon when it sees fit and investment and production will be less than it would have been if Mr. Putin didn't take over control of Russia's private oil companies. Putin, we are told, will be an executive adviser for the future president on an unlimited range of issues, like who gets paid off or bumped off etc. Still the Moscow stock market seemed to like the choice as the RTS index rallied by 1.62 percent to 2,323.37 points. Mr. Medvedev's little state-owned gas company, Gazprom, went up three percent.  

Maybe Hugo Chavez is a bad loser after all. Fox News Channel cited a report that Mr. Chavez was going to overturn the results of the vote of the constitutional referendum on allowing him to run for President for life but was thwarted by the military that threatened a coupe if he did. Instead Mr. Chavez was allowed to make the vote look closer than it really was to save face. Why he would want to save that face is hard to explain.

What is even harder to explain is why you haven't signed up for your free trial of Alaron energies  and why you are not on the Phil Flynn Energy blast and why haven't you opened your trading account with me yet!  It's time to do it today! Just call me at 800-935-6487 or email me at pflynn@alaron.com.

We're short  January crude oil from apprx 8890 -  stop 9200.

Sell January heating oil at 25400 - stop 26000.

We're short  January RBOB  from apprx  229 - stop 236.

We're long  January natural Gas from apprx 710 - stop 680.

Have a GREAT day!  

Phil Flynn

Alaron Research Team

800.563.9510

pflynn@alaron.com

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