Alaron Energy Comment

CHICAGO - Apr 3/08 - SNS -- Following is the energy futures comment from Alaron Trading Corp.

I guess you can be an oil bear in the morning and then a bull at night. The Mighty Oil Bulls successfully defended support below $100  oil again with help from Mr. Bleak Bernanke. Oh yes, Ben was bleak as his graying beard seems to be getting a lot greyer. It is probably because as Ben said, the markets are still under considerable stress and so too might  Mr. Bernanke.

The stock market perhaps wasn't shaken with the Fed Chairman Bernanke statement acknowledging the possibility of a recession but commodities sure were. Commodity and sovereign wealth funds that exited commodities big time at the end of last quarter were given the green light by bleak Ben to come in and buy yet again. Perhaps bleak Ben is just trying to lower expectations so things look more cheery as we go forward but just to be safe, funds are going with the play that has worked best during the market turmoil and that is back in commodities.

It was an across the board commodity surge as sector such as metals, grains and energy did an about face as Big Ben spoke. Oil is still being used as a hedge against systemic risk and for commodity funds oil is as good as gold.  The oil bulls have got to be impressed with the market's failure to break through support just below $100 a barrel even with what you would say was a bearish oil inventory report and a whopping 7.4 million barrel increase in supply. Oh yes, we had a surprise up-tick in implied gas demand which differed from the drop shown by the MasterCard Spending Pulse report. And an eye opening drop of gasoline supply by a much more than expected 4.5 million barrels last week.  

Oil also got help from reports that the Houston Shipping Channel was shut yet again due to fog. That ongoing saga is partly why supply of crude raised so mightily. We got two weeks of builds for the price of one as we saw last week's supply that was stuck off shore get off loaded.  

Yet the truth is that demand for oil over all is weakening. In the month of March oil demand fell 1.3% below a year ago falling to 20.283 million barrels a day down from 27300 barrels from a year earlier. Gasoline demand at the best estimate was flat from a year ago indicating slow growth in the economy. Distillate demand was at the lowest level since 2004 and residual fuels that is used to make concrete and adhesives and such and is used in ships and electric plants plunged by 20.4% to what Dow Jones says was the weakest demand on record going all the way back to 1936. Jet fuel though did rise.  

As Reuter's Robert Campbell said,   “US energy markets have been focused on weakening gasoline demand as high prices and economic problems weigh on consumers, but slumping demand for distillate fuels and residual fuel accounts for most of the fall in total US implied oil demand.

Average US oil demand over the first 13 weeks of the year is down more than 479,000 barrels per day compared to a year ago. Of that decline, distillates, mainly heating oil and diesel, and fuel oil, heavy fuel used by ships and power plants, make up 63% of the drop. Gasoline only accounts for 17% of the decline.�

Yet whether or not demand matters right now is still the debate. We saw record highs hitting  just  as RBOB prices and oil rise.  We can  argued about global  demand and tight spare production capacity but whatever the reason the market is showing strength. Yet with the volatility you can be a bull in the morning and a bear at night and make or lose more money in an hour than it used to take a whole year to make. I can have a long term bearish outlook but I would be foolish to not try to take what the market is giving me. Now more than ever it is important to stay in touch with me for up to the minute trade recommendations. It is getting harder to just give trade recommendations on line when I have no idea when you are reading this. So please remember to call me for the latest updates. Call 800-935-6487 or email me at pflynn@alaron.com  to open your account.

Check out the Fox Business Network and sign up for a free trial of Alaronenergies. Just call Phil Flynn at 800-935-6487 or email me at pflynn@alaron.com  to open your trading account.

Sell May crude at 10770 -  stop 10850.

Sell May RBOB at 27850 - stop 28000.

Sell May heating oil at  31000 -  stop 31500.

We're long  May natural gas  from apprx  940 - stop 933.

Have a GREAT day!

Phil Flynn

Alaron Research Team

800.563.9510

pflynn@alaron.com

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