Daily Energy Review Newsletter

Energy Commodity Prices

21-Dec-04

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Energy Analysis from Phil Flynn at www.Alaron.com

Wednesday, December 22, 2004

You better watch out! You better not pout! And be good for goodness sake! Why? Santa is coming to town of course! Not only that but it looks like he got here early for some. We had an explosive Santa Claus rally yesterday in the stock market and sends a signal we may have a very jolly New Year. And what goes with a strong economy? Strong oil demand of course! And we have a hunch that with the way the coal market has gone this year, Santa must have found a bunch of naughty Democrats to give it to. And maybe if Iran gets some of that coal they won't need to pursue nuclear energy.

If the US economy stays hot, consuming will stay hot and if consuming stays hot, China is going to be a happy exporter for sure! And if China is a happy exporter, they'll be a big consumer of energy. Their energy usage is up over 40% this year and there's no sign it's slowing so we look for continued strong use and that will present a difficulty for oil producing nations to keep up with demand.

We have it on good authority that Santa is putting coal in Putin's stocking too. He has dismantled one of Russia's most successful and entrepreneurial companies. The Wall Sreet Journal reports that one of rival oil company's Surgut Neftgaz's mid level employees was a bidder of Yukos and they just happen to be a good ally of Putin.

We think more of that coal should go to Nigeria. Bloomberg News has reported a Senior member of the oil workers union has said that government workers of the petroleum department went on strike yesterday and according to Nigerian law, members of this union have to be present when ships are loaded with oil. The market is unconcerned because this is, after all, Nigeria and we've heard it all before.

More coal will be needed for the American Petroleum Institute. The API is a weekly reporting agency for energy stocks and they are very good at adding confusion to our supply situation. But both the Department of Energy and the API will give us their numbers today and they'll be the driving force in today's trade. After the release, we look for trading volume to disappear quicker than Frosty did in that flower hot house.

See me this morning on Bloomberg News for the GDP release and be ready for tomorrow's annual Night Before Christmas Energy Report. The kids will love it!

And if you've been nice, you can open your trading account with me! Call me at 800-935-6487 and ask for Phil Flynn!

We're long feb crude from apprx 4100 - stop 4507!!!

We're long feb heating oil from apprx 14000 - stop 13800.

We're long feb unleaded from apprx 11870 - stop 11770.

Buy feb natural gas at 680 - stop 673.

Have a GREAT day!

Open an account with Phil Flynn Today! Call 800-935-6487 or e-mail to pflynn@alaron.com

Phil Flynn is Vice President, Energy Analyst and General Market Analyst with Alaron Trading Corporation (www.alaron.com). Phil is one of the world's leading energy market analysts, providing individual investors, professional traders and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline and energy markets. Phil's market commentary, fundamental and technical analysis, and long-term forecasts are sought by industry executives, investors and media worldwide.

Energy Commentary from Jeremy Smith at Traders Exchange Corp.

Energies: Feb. Crude Oil had a fantastic rally going in to the expiration of Jan. futures. Expiration of Crude Oil futures yesterday was probably behind the recent upmove in futures as funds decide to roll the short futures in to the Feb. contract. A nice correction from the last large down move has been completed and look the market to break the $40 level on this next down leg. A lower top appears to have been established and look the market to begin heading south toward the recent lows and breaking them will target number in the high thirties per barrel. Traders should look to get positioned short Feb Crude at $44. or better. The last short we recommended got stopped out at $42.50 from being short at $49. Crude Oil prices are still holding above the $40 level and we would expect this number to get tested very soon and probably will set the stage for a further decline to atleast $38 per barrel. Traders that have not been working the futures contract should continue to purchase December Put Options. We are expecting to see the $35 level to get touched over the next month. The refineries have probably completed the seasonal turn around when they go from refining Crude Oil into Gasoline to refining Oil into Heating Oil. More large builds should be expected over the next 4 to 6 weeks to get inventories back up to the 5 year average. Winter Heating Oil top has already past and traders should be looking to Buy Puts on rallies. Unleaded Gasoline has now dropped about 32 cents from the peak in October and traders should expect the $1.00 level to be broken soon. Drilling and rig counts around the world are hitting record levels. OPEC producing at the highest level in 25 years. Producers are going all out and we would hope they use the futures markets to hedge against dropping prices. Crude Oil's long term target into 2005 is $25 per barrel.

Feb. Natural Gas broke through near term support at $7 and looks poised to test quickly the $6.50 support level. Traders should look for rallies to get short. The official start to winter begins today and bullish traders need to see a colder then normal winter to eat through the substantial surplus of supplies compared to the 5 year average. Traders should be working on Put options on rallies. Arctic cold blast came through quickly and became old news just as quick, futures have almost dropped a dollar in three days. The Bull's can continue to hang on too the hopes of an Ice age in the Northeast but that is simply not enough to stop the downtrend. Current supplies for Natural Gas are at record levels and we have the largest amount in storage ever in history going into winter. High prices have rig counts and field activity growing sharply watch out below. Weekly Inventory Data this morning.

Jeremy Smith is Ceo and Head of Market Research with Traders Exhange Corp. (www.TradersExchange.com). Jeremy has enjoyed about 8 years of trading and founded Traders Exchange Corp. in 2002. Trading styles consist of strong blend of fundamental and technical anaylsis.