Alaron Energy Comment

CHICAGO - May 7/08 - SNS -- Following is the energy futures comment from Alaron Trading Corp.

The oil bears got knocked for an Enron Loophole as supply fears and good old fashion bullish momentum drove oil prices to yet another record high close.

The loss of Nigerian crude seems to be the main factor as continued attacks seem to suggest that those supplies can't be counted on as we head into the summer driving season.

This of course has not gone unnoticed by politicians on the campaign trail as the Presidential hopefuls look to cash in on your pain at the pump.  In a heated campaign on a very emotional issue it was only a matter of time before one of these politicians tried to appeal to your deep seated  fears and suspicions  playing that card. You know  card I am talking about, right? That's right. Senator Hillary Clinton is now playing the Enron card.

What is the Enron card? Well when ever a Democratic politician wants to paint a nasty picture about the evils of corporate America or energy traders specifically, they always raise the ghost of Enron.  Yes, use the Enron word and wink-wink its guilt by association. You'll see all of corporate America is bad and all energy companies and energy traders must be bad because of well, you know, Enron. In fact all capitalism is bad because of what Enron did and anyone that makes a lot of money must be doing something wrong (unless it's a  politician raising money for a campaign or selling a book or giving speeches) because of Enron.

Enron is no longer a company (only partly because they are bankrupt) but a buzz word that is meant as a signal to those that want to see a more even distribution of our corporate wealth. Take from the rich and give to the poor is a populist message that has served all politicians well since the days of rocking Robin Hood. Senator Clinton should think about getting a cool green hat with a feather in it.  

Clinton said that in response to high gas and oil prices one of the things she would do is repeal the Enron loophole. You know the one that excludes over the counter energy trading from federal regulation. Of course what the senator doesn't tell you is  that most of the trading in oil and gas futures are already traded on regulated exchanges and the getting rid of the Enron loophole would not have any impact on rising energy cost. But that does not matter as long as you mention the word Enron you can create the sense of fear and outrage and get voters to vote for you.  Senator Clinton's rants about trying to feed off the positive bump she got in the polls by proposing a gas tax holiday while Senator Obama opposes it.

Now I know what you're thinking. You are thinking I would dismiss out of hand any proposal that Hillary Clinton might propose but that is not all true. It's only  half true. I backed her 50% on her Federal gas tax rebate holiday. I am for the gas tax holiday but I am against her idea of making the oil companies pay for it. Senator Obama says he is against it even though he voted for a gas tax holiday when he was in Illinois because prices went up anyway.

Well that was then and this is now. The reason why prices went up the last time there was a gas tax holiday was strong demand and tight supply. When the tax was taken off it encouraged more demand leading to tighter supply and even higher prices. Now prices are going up as demand is weak because the dollar is getting its head handed to it. Even if consumers consume less it might not lead to lower prices. Now more than ever gas consumers need a tax break.

Yet why should the oil companies pay for it? Are they not already paying billions in taxes? Are not the products they sell already providing billions of dollars in revenue for our government ?

Senator Clinton also vowed to break up the OPEC cartel. She said she would move to pass legislation and filing price fixing complaint with the World Trade Organization.  Senator Clinton also said you would not catch her holding hands with the Saudis! Ok so she's trying tying to soften the blow of her trying to break up the cartel. Good move but I don't think it will work. I don't think blasting the Saudis, the world's largest oil producer, is going to be helpful when she may have to beg them for more oil like her husband's administration did.  It is also quite sanctimonious on her part to try to tell the Saudi's that they have to pump more oil when Senator Clinton has opposed more drilling for oil in this country. Mrs. Clinton's pump as I say not as I do diplomacy is more cowboy like and brash than anything President George W. Bush has done with the Saudi's. Talk about coming across as an Ugly American in the Middle Eastern world. Try insulting the swing producer in the cartel you are trying to break up. That will sure bring oil prices down. Not! At the same time Senator Clinton insults the Saudi's she is for  a  pause in filling the Strategic Petroleum Reserve. If Mrs. Clinton succeeds in getting some oil cut off from OPEC we may need every barrel of oil we can get.

Ryan is a loyal Energy Report  reader and  wants me to point out  two Bloomberg stories. Bloomberg reports that Iran, OPEC's second largest oil producer, more than doubled the amount stored in tankers idling in the Persian Gulf, sending ship prices higher as some of the demand for some of its crude fell, people familiar with the situation said.  The ten oil tankers hold at least 20 million barrels of oil equal to five days of the country's output. Also Bloomberg reports that Saudi Arabia lowered the prices on all its variety of crude relative to WTI. In other words, there is a glut of heavy crude. Hmmm. Bloomberg also is reporting that Brazil's new oil field could come on line faster than expected. Stay tuned.

The short term  key for oil is  a close over 120. A failure to do so will signal a correction back to 110 area. A close over 120 means a move to 125.

Don't forget to sign up for your free trial of Alaronenergies! And thanks for all the E-mail! Call me at 800-935-6487 or email me at pflynn@alaron.com to open your trading account.  Also check me out on the Fox Business network! Call your cable operator today if you don't already get the station!

Stopped on short  June crude from  apprx 11970 at apprx 12070. Sell June crude at 12070 - stop 12170.

Sell June heating oil at 33000 -  stop 33200.

Sell June RBOB at 30800 - stop 31000.

Buy June natural gas at 1060 -  stop 1030.

Have a GREAT day!            

Phil Flynn

Alaron Research Team

800.563.9510

pflynn@alaron.com

DISCLAIMER: Futures and options trading involve substantial risk. The valuation of futures and options may fluctuate, and as a result, clients may lose more then their original investment. In no event should the content of this website be construed as an express of an implied promise, guarantee or implication by of from the author(s) that you will profit or that losses can or will be limited in any manner whatsoever. Past performance is not necessarily indicative of future results. Information provided on this website is intended solely for informative purposes and is obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. Alaron Trading Corp. its officers, directors, employees and brokers may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report.

Information on this page is derived from third parties and is deemed to be reliable. STAT Communications Ltd. accepts no responsibility for errors, omissions or inaccuracies in any of the material presented on this web site. Opinions expressed on this web site are those of the respective individuals and/or institutions and do not represent the opinions of STAT Communications Ltd. and/or STAT Publishing or its staff and/or management.