Alaron Energy Comment

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

Did you wonder why oil spiked big before the EIA number yesterday? It was kind of like oil inventory bingo when they call out your number only to take it back.

The American Petroleum Institute yesterday proved that it is not just the Department of Energy's Energy Information Agency that can make a mistake. The API made a mistake by releasing their version of the weekly oil stats 5 minutes earlier than expected. And the API number caused the market to rally because it had actually showed that crude oil inventories fell. That little boo boo caused some   confusion and of course that was diametrically opposed to what the EIA would say 5 minutes later. Of course that did not matter if you happened to be short and possibly stopped out. So for those of you who didn't know, that's why  oil spiked like crazy ahead of the now normal release time of 9.35 am central.

We all should remember why the reports are released at 9.35 am central time instead of the 9.30 am time frame is because the EIA had a glitch that  had released the oil report early in error in the past. So they made this 5 minute adjustment thinking there'd be no more glitches. Oops.

For old timers like me it was kind of nostalgic having the API report come out before the EIA stats. The API used to release their report a day ahead of the EIA. That was always great to trade off of because instead of having one big report to play you would have two. If you guessed wrong on one you might get the second one right. Of course back then we knew when the report was coming out. It was sometimes a bit frustrating especially if you had a long term position and the API would come out with some crazy number. It would be maddening because the API was usually always different than the EIA. Now most traders assumed that the EIA was the more accurate report because it includes mandatory reporting where the API is voluntary. Still the day traders and short term traders loved having the extra report for the action.  Some did get  angry with the API because sometimes it seemed their numbers where way out there in left field and after a lot of heat they decided to coordinate their release of the numbers with the EIA.  For traders the API then became extinct and was basically ignored.

Well at least until yesterday. The API caused a spike after reporting that crude oil supply actually fell. Still it was just five minutes until the DOE had their say. And say they did! The EIA   reported that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.7 million barrels from the previous week. That puts our total at 296.9 million barrels which the EIA says are in the lower half of the average range for this time of year.     Why store and buy crude if you are not going to use it? The EIA reported that U.S. crude oil refinery inputs only averaged 15.0 million barrels per day during the week down 123,000 barrels per day from the previous week's average. Refineries run  a slow at 87.0 percent.

The bullish part based on pre-report expectations, if there was one, was in the gasoline side of the equation. The EIA reported that gasoline inventories fell by 4.4 million barrels last week. Yet even with the drop, gasoline inventories are still in the middle of the average range for this time of year. Not only is there plenty of supply but at the same time demand is bad. The EIA reported that over the last four weeks gasoline demand averaged a paltry 9.4 million barrels per day. That is down a whopping 2.3 percent from the same period last year. Americans are parking their SUV's. The New York Times says that total S.U.V. sales were down 43.3 percent this July from a year ago, according to Autodata, an automotive information services company in Woodcliff Lake, N.J. Demand destruction is happening.

 As for distillates the EIA says that fuel demand has averaged 4.1 million barrels per day over the last four weeks, up by 3.5 percent from the same period last year. And a shocking number on jet fuel showing demand is 7.1 percent lower over the last four weeks compared to the same four-week period last year.

Oil today seems to be dollar dependent. The oil in the overnight session rallied as the dollar broke ahead of the ECB and Bank of England rate decisions. Oil seems to want to defend the $117.00 a barrel area which many think is the official area that declares oil to be in a bear market. Long term it looks like oil is headed back to double digits. Still be on the outlook for a little bounce from this area. Multiple shorts can lighten up and small guys have the option to get out or protect profit with an option. Call me at 800-935-6487  if you need help deciding what to do and to open your account.

Dow Jones reports that Royal Dutch Shell PLC Thursday denied it had repaired Nigeria pipelines that were attacked last month and said their deliveries were still under force majeure. Dow quoted a spokesman for Shell, which operates the pipelines, as saying, "we have not completed all the repair activities" on the Nembe Creek and Trans-Niger pipelines after an attack cut 150,000 barrels a day of oil deliveries. Media reports Wednesday said the pipelines had been repaired.  "Production is still affected."

The markets are rocking! Are you rolling? If you are not it is because you do not have the Fox Business Network on! Don't be square! Call your cable operator today. And you should be calling me for the latest updates and day-trade numbers! All you have to do is pick up the phone and call me at  800-935-6487 or email me at pflynn@alaron.com to open your account.

Thanks to all of you that have written! You are the best!

We're short September crude from apprx 12570 -  stop 12870.

Sell September heating oil at 34500 -  stop 35300.

Sell September RBOB at 32020 -  stop 32700.

 Buy September natural gas at 840 -  stop 820.

Have a GREAT day!    

Phil Flynn

Alaron Research Team

800.563.9510

pflynn@alaron.com

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