Oil prices are completing the process a major break-up that could trade oil to $88 dollars, states Phil Flynn of the PRICE Futures Group.
The Feb Future contract is getting closer to a rollover and the shorts are caught with their back between the walls. Oil inventories are falling, and the dollar is looking weak as a sharp rise in inflation is raising confidence about the strength of the dollar. Oil also rose when the International Energy Agency’s Fatih Birol said demand is stronger than expected. Wow, so what you are saying is that the International Energy Agency underestimated demand! What a shock!
Oil is moving on to falling global oil inventories as well as the falling dollar. The Energy Information Administration status report was taken as bullish by the market despite the so-called market expectations. Crude oil stocks dropped by 4.6MB giving us draws eight out of the last nine weeks. US stockpiles fell to the lowest since October 2018, according to government data.
Overall commercial stocks fell 4.5MB. Gasoline looked bearish but the market seemed to look past the data. The EIA showed that ready to use “gasoline” stocks increased 6.1MB. Other blend stocks increased 1.8MB while total gasoline stocks increased 8MB though NYMEX spec RBOB stocks fell 1.6MB. The EIA said that gasoline demand fell 210k bpd. ULSD stocks increased 2.75MB.
Natural gas soared on LNG exports but mainly on frosty cold and freeze-offs. Bloomberg is reporting that Texas lost about 1.3 gigawatts of electrical generation in a cold snap at the start of January—about 1.5% of its winter capacity—as power-plant operators faced fuel problems tied to natural gas. Operators of gas-fired plants reported forced outages totaling 402 megawatts that started on Jan. 2 due to fuel limitations or lack of availability as temperatures plunged below freezing in some areas, according to data from the Electric Reliability Council of Texas, the state’s grid operator. Another 865 megawatts of gas-fired generation were lost to maintenance outages tied to fuel woes. Texas better hope it warms up. The Energy Information Administration (EIA) releases its weekly report, and we should see a withdrawal of 185 bcf s and if we do then natural gas could resume its meteoric rally.
Learn more about Phil Flynn by visiting Price Futures Group.