Alaron Energy Comment

CHICAGO - Apr 10/08 - SNS -- Following is the energy futures comment from Alaron Trading Corp.

Oil and gasoline made a run to new record highs but with demand falling dramatically, the big question is whether traders can see the light through the fog.

Oil surged after the Energy Information Agency reported bigger than expected draws across board  in crude oil, gasoline and distillate. EIA reported that  US crude supply fell last week by 3.2 million barrels, gasoline supplies by 3.4 million barrels and distillates down  by 3.7 million barrels. The market, as one might expect, had a bullish reaction to these numbers especially with the backdrop of a weak US dollar and anther fund induced commodity craze.

Now some might get the false impression that this happened due to some up-tick in demand. Oh Contraire. Demand had nothing at all to do with it. The reason supplies fell was another foggy mountain breakdown in Gulf Coast imports as they plummeted by 16.8% in the latest week or a whopping 944,000 barrels of oil a day. The reason for the drop was fog or maybe we should say “The Fog� as it has been terrorizing the supply side of the market for some time. In the latest reporting week, fog shut down shipping ports in Houston, Port Arthur and Corpus Christi, Lake Charles. Dow-Jones News wires said that this was the lowest amount into the region since September, 2005 when hurricanes slowed imports. And for the oil market, this overshadowed the unmistakable signs of price inspired demand destruction.

Just look at the dismal numbers. The EIA says that refinery inputs of oil fell to a paltry 14.3 million barrels of oil a day. Gas demand fell. Americans are cutting back on driving  as prices move higher. Airlines are going bankrupt, businesses are losing profits at a time when the world economy is slowing. This will lead to further demand destruction and add to supplies. Refiners may keep runs low but for gas and oil the path is getting ready for a big crash.

Despite the oil market's indomitable strength, the path of rising prices and dramatically weaker demand is on an unsustainable path. Oil can ignore falling demand and even soar as high as $120.00 perhaps, but as things are these markets cannot defy gravity forever. Anyone who says that oil will never fall again obviously does not understand the history of oil. For every boom in the history of oil, I will show you a bust. That's not to say that the current boom will bust today or tomorrow or even in the next six months, but I assure you it will bust.

There are those that will claim we are in a new era of peak oil and that oil supplies are being controlled by unfriendly countries and that oil has only one way to go but up. That oil is a finite resource and that we will never see prices be cheap for a sustained period again. Of course this argument is not one I am taking from today but back in the 1970's.

There is one part of the energy complex where the supply and demand fundamentals are bullish and that is the distillates. Worldwide those supplies remain tight and US supplies are being squeezed by clean air regulation and cold weather. This also is supportive for natural gas.

Natural gas rallied on news from Reuters that operations at the Independence Hub Platform in the Gulf of Mexico and associated platform was shut down.

Don't forget to sign up for your free trial of www.alaronenergies.com. Just call me at 800-935-6487 or email me at pflynn@alaron.com to open your account. Also check me out the new  Fox Business Network!!

We're short  May crude from apprx  11180 -  stop 11250!

Stopped on short  May RBOB  from apprx  27850  at apprx 27700! Sell May RBOB at 28500 - stop 28800.

Stopped on short  May heating oil from apprx 31000  at apprx 31500. Buy May heating oil at 30000 -  stop 29700.

We're long  May natural gas from  apprx 940 - raise stop 999!!!

Have a GREAT day!  

Phil Flynn

Alaron Research Team

800.563.9510

pflynn@alaron.com

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