Alaron Energy Comment

CHICAGO - Feb 5/08 - SNS -- Following is the energy futures comment from Alaron Trading Corp.

You can call it a dead bull bounce. Oil bulls came charging back after being left for dead, driving prices  higher and grasping at every little bull story they could find.  It's dead bull walking because it's unlikely any of the stories have any long term staying power. Oh sure, the rebound was very impressive yet even with the charge, we were unable to charge up to the  Friday pre sell-off high.

Oil grabbed onto the first sign of positive economic news and it came in the form of the  Commerce Department's factory order number. The CD said  orders jumped 2.3% giving oil the confidence it needed  to jump start  itself. Oil seemed more impressed with the figure than the stock-market which struggled throughout the day. Yet oil bulls were able to shake some of that economic doom and gloom feeling that permeated the oil pits on Friday after the dismal jobs report.

Then the oil got more support on reports that once again the Houston shipping channel was shut down .Bloomberg News reported that the port was closed Sunday and quoted US Coast Guard Chief Petty Officer Jamie Rodriquez as saying that traffic was halted at 6.10 pm.   The Coast Guard says that there are 26 inbound vessels awaiting transit and 14 outbound vessels waiting to escape. Bloomberg also reminds us that Houston has the second biggest port of any kind by tonnage and that two of the nations four largest oil refineries are in the Houston area. They also remind us that it takes two to three days of a shutdown before it affects refinery operations.  The bulls are betting on the fog and that it might stick around  for days.

There were also reports of violence in Nigeria over the weekend raising fears once again that Nigerian violence may interrupt oil flow. There were also reports that oil shipments from Iraq's Kirkuk to Ceyhan oil fields were stopped again taking 1.5 million barrels out of the world equation.

Yet today we have  more evidence the US slowdown is affecting other parts of the globe making it more difficult   for oil to hang onto gains. For example retail sales in Europe fell 2% in December, the weakest its been  in at least 13 years. The European service industries expanded at their weakest level since 2003 and there are reports that in the UK home costs are stagnating  with fewer mortgages  being granted. The oil market today will be hard pressed to ignore those weak figures.

President Bush is bullish on oil. The White House announced a proposal  to spend  $584 billion  to add oil to the SPR. They want to fill the reserve to 1.5 billion barrels! But also there are reports that Canada may need to build a SPR.  I thought they had a reserve in the form of oil sands!

Now if you missed the move on gold how about the move in liquid gold? In the gasoline market there is also talks of a shortage of a gasoline additive called alkylate. John Wilen of the AP writes that some experts are predicting pump prices could drive prices to the national average of $3.50 a gallon because of the shortage of this gasoline additive.  John writes that, “it has become a must have ingredient since refiners stopped using MTBE two years ago when the potential cancer-causing additive was found to be seeping into ground water.â€� This additive is used to boost the oxygen content of summer gasoline to make it burn cleaner and more completely. Ethanol can also be used but it too has a high evaporation rate as well so John says refiners are more and more turning to that new fuel. John says that oil companies deny they are purposely limiting production of alkylate, which, like gasoline, jet fuel and asphalt, is a product of the oil refining process.

But John says that only recently have some started studying how they can boost output, and alkylate prices are more than 15% higher than they were a year ago.

But at the same time Dow Jones wrote that Ethanol production in the US rose 2.4% in November from October to a record high of 14.356 million barrels, for an increase of 338,000 that represents a 40% increase from 2006!

On the demand side ethanol demand also hit an all time high of 479,000 barrels!    

See me today on Fox's  Sky News Australia and tune in to the Fox Business News Network.

Don't forget to sign up for the Phil Flynn Energy Blast! Call me at 800-935-6487 or email me at pflynn@alaron.com  to open your account.

Stopped on  short March crude  from apprx  9090  at apprx 9050. Sell March crude at 9000 - stop 9200.

Stopped on short March RBOB from apprx 23300 at aprx  23100!!! Sell March RBOB at 22900 -  stop 23500.

Sell March heating oil at 250 - stop 255.

Stopped on short March natural gas from apprx 812 at apprx 798. Sell March natural gas at 812 -  stop 820.

Have a GREAT day!    

Phil Flynn

Alaron Research Team

800.563.9510

pflynn@alaron.com

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