Today’s energy report courtesy of Phil Flynn at PFG Best:
It’s time to play nuke and go seek. Ollie, Ollie, Oxen free it’s time for Iran to quit hiding. Of course when they have already found your hiding place haven’t you already lost? Mixed signals on whether or not Iran will allow weapons inspectors to tour the secret Qom nuclear facility are raising tensions and perhaps, to a small extent, petroleum prices as the world waits to see what the next step is going to be.
While British Intelligence Services are accusing Iran of secretly designing a nuclear war head the US intelligence services are not so sure. It seems they are erroring on the side of not making a mistake as opposed to making sure that Iran is nuclear free. In the mean time oil traders must assess whether or not this is bearish or bullish in the near term. There have been rumors for months that Israel might attack Iran’s nuclear facilities at anytime because it will not allow sit by and allow Iran to build a nuke. Yet Amy Teibel of the AP writes that, “It may seem counterintuitive, but the news that Iran has a second, clandestine uranium enrichment plant, and has just test-fired long-range missiles, could actually put off any plans for a quick Israeli strike.” She reasons that, “the latest developments are likely to push world powers to impose the tough sanctions than Israel has been seeking.” Giving Israel’s position a higher profile on the world stage may also make it less inclined to act unilaterally.
In the mean time the AFP reports that President Mahmoud Ahmadinejad “lashed out” at world leaders Wednesday for demanding access to Iran’s newly disclosed uranium enrichment plant being built near the central holy city of Qom. They quote him as saying that, “The leaders of these countries made a historic mistake with their comments about the new plant.” “Who are you to tell the agency [International Atomic Energy Agency] and Iran what to do?”
Yet it seemed like Iran went to the back burner as supplies and macro economics took center stage. Oil prices are making a valiant comeback overnight as the dollar lost ground and foreign stock markets rose. The market acts like we have hit a short term bottom and the somewhat bearish American Petroleum Institute report was not quite bearish enough to give traders confidence to defy dollar weakness and stronger European markets. It’s back to watching the dollar and the stock market unless the Department of Energy supply report can wow us with some spectacular bearishness.
Oh sure the headline number that the American Petroleum Institute released on crude was a bit bearish as they reported that crude supply fell by 2.3 million barrels. Yet the fact that supply in Cushing, Oklahoma the Nymex delivery point crude supplies actually fell by 1.2 million barrels. Had we seen a draw there that might have been enough for the bears to follow through on the downside but without help in the products it just was not enough. It did not help that gasoline supplies fell by 1.7 million barrels. Distillates had a bearish build of 2.3 million barrels.
Bottom line we still have plenty of supply. And supplies are not just high here they are even rising in China. Dow Jones is reporting that crude oil stockpiles in China rose to a 20 month high. China’s end of August crude oil stockpiles, including state reserves and commercial stocks, rose to a 20-month high at 39 million metric tons or 286 million barrels. Dow says that, “Higher domestic crude output and robust imports in August contributed to the slight 0.8% rise from the level of stocks a month earlier”, the report said. Stockpiles were up 17% from end-August last year. China produced 16.3 million tons of crude oil in August, the highest level so far this year and up 1.6% on year.
Sell November crude at 6850 – stop 7178.
Sell November heating oil at 17800 – stop 18000.
Sell November RBOB 16950 – stop 17200.
Sell November natural gas at 499 – stop 510.
Source: PFG Best
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.