Alaron Energy Comment

CHICAGO - Aug 11/08 - SNS -- Following is the energy futures comment from Alaron Trading Corp.

That is the way the commodity crumbles. Oil looks as if it was ready to fall back into oblivion in a massive revaluation of all assets across the commodity globe. What goes up must come down when demand destruction occurs and commodities rise for the wrong reasons.

Last week  made us just forget about   the bullish news and focus on the bearish. The question of course is whether or not this week we can do it again this week.  Sometimes it is important to note not only what the market is focusing on but more importantly what it is ignoring.

Last week the market ignored the story that the BTC pipeline was attacked by the PKK Kurdish rebel group. That was amazing because the pipeline carries roughly more than one percent of the world's oil supply. Also the promise of more attacks did little to inspire any end of the week buying. Yet when it comes to that key pipeline, what we have to remember is that the Kurdish rebels are not the only problem. Last week the market also  ignored the conflict between Russia and Georgia yet overnight that was the major oil market mover.

Yet with word of a cease-fire, the market may again focus on softening demand. Dow Jones Newswires reports that China's crude oil imports fell 7% on-year in July, despite a hike in the state-set price of gasoline, diesel and jet fuel in June offering encouragement to refiners to raise runs.  Dow says that China's crude oil imports in July totaled 13.79 million metric tons, equivalent to an average 3.26 million barrels per day, preliminary data from the General Administration of Customs showed Monday.  Import volumes vary greatly from month to month and the timing of cargoes arriving at China's ports can skew the data significantly. June volumes totaled 14.57 million tons, or 3.56 million barrels per day.  China raised oil product prices by 17%-18% on June 20 in response to fuel shortages and higher crude oil prices - a move that many analysts anticipated would encourage refiners to process more crude to meet pent-up demand

Dow also says that in addition, state refiners have been keeping back oil products to ensure supplies during the Olympic Games, which officially began on Friday and possibly in anticipation the government would be forced to raise domestic prices after crude futures rocketed past $140 a barrel.    

Sometimes it is important to note not only what the market is focusing on but more importantly what it is ignoring. We had to  look to pork bellies and the meat complex to find a futures contract that was higher as the massive liquidity shifts away from commodities and  back into other vehicles. There has been a significant change in the market as the world is revaluing assets based upon the perceived health of their own economies as it relates to the suddenly stronger US economy. And what was amazing was  how oil basically ignored stories that might have sent it soaring just weeks ago. The question this week is can they ignore them again.

More signs of softening demand. Dow Jones also reports that Pakistan has subsidized oil companies to the tune of PKR35 billion ($480 million) so far this fiscal year, which began July first.   Pakistan targeted a total subsidy payout to oil companies this fiscal year of PKR140 billion compared with more than PKR200 billion during the last fiscal year, said the official from the Ministry of Petroleum & Natural Resources, who didn't want to be identified.  "The government is paying PKR31.29 per liter as subsidy on high speed diesel, while on kerosene oil and light diesel oil it pays around PKR29.41/liter and PKR25.16/liter respectively, the official said.   On March 1, the government raised the price of regular gasoline by 47.6%, to PKR86.66 per liter. I t also hiked high-octane gasoline by 37.5%, to PKR96.06/liter and high-speed diesel by 64.6%, to PKR82.29 per liter.    The official said new oil product price hikes are due in order to ease the government's subsidy burden, which is averaging PKR7 billion per week.     Dow quotes the official as saying the recent rise of international oil prices is beyond the control of any government, the official added, noting that subsidies are meant to check inflation and reduce the burden of high fuel costs on local industry.  Pakistan's oil import bill touched an all-time high of $11.38 billion in the last fiscal year on high global oil prices and a surge in consumption.

Now for the good news! We have gas relief! My buddy Trilby Lundberg has some good news for all of us! Trilby is reporting that gas prices continue to fall across.  She says that the average price of a gallon of regular gasoline at self-serve stations was $3.85 Friday! That was down close to 15 cents from just two weeks ago. Mid-grade went for $3.98 and premium went for $4.10. That's according to the Lundberg Survey of 7,000 gas stations nationwide, released Sunday. Diesel was at $4.64. The cheapest gas was in Tulsa, Okla., where a gallon of regular cost $3.50. Anchorage, Alaska, was most expensive at $4.37. The California average was $4.10, down 22 cents from two weeks ago. The Western states were the only region in the U.S. where gas remained above $4 a gallon on average.

See me today and every day on the Fox Business Network! Also each week on Fox Chicago! And it is time for you to sign for your free trail of Alaronenergies and your copy of the Phil Flynn Energy Blast! Imagine the convenience of getting blasted by Phil Flynn every morning in your inbox! What a great way to start your day! And it is easy! All you have to do is call 800-935-6487 or email me at  pflynn@alaron.com  to open your account!

We're short September crude from apprx  12570 -  lower stop to 12040!

Sell September heating oil at 33000   -stop 34100.

Sell September RBOB at 31000 - stop 31300.

Stopped on  long Sept natural gas from  apprx 840  at apprx 820. Buy September natural gas at 770 -  stop 730.

Have a GREAT day!

Phil Flynn

Alaron Research Team

800.563.9510

pflynn@alaron.com

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