The Energy Report for Thursday, February 23, 2006 Bada-bing then bada-bang! Oil gives back its entire geo-political premium in one big bada-bang! Oil, without any real news out of hot-spot Nigeria, plummeted ahead of what traders anticipate will be a bearish supply report. Yet despite the action in oil it was really the move in unleaded gas that caught most of the markets attention. The wild swings in the unleaded gas market seems to suggest that this market is telling us something that is less about supply and demand more about the uncertainty of how to deal with the lame duck MTBE Spec Unleaded gasoline contract.
The uncertainty how hedgers are dealing with a contract that is becoming persona-non-gratis is becoming the topic of conversation and is examined by The Wall Street Journal reporter Masood Farivar. Mr. Farivar says that with the controversial additive on its way out because of liability concerns, the New York Mercantile Exchange is terminating its 22 year old MTBE based contract at the end of the year, leaving traders without an equally liquid hedging mechanism.
Mr. Farivar says that the Nymex launched a MTBE free contract last year known as RBOB which currently trades side by side with the current contract. Yet commercial users are reluctant to use the MTBE Contract because they are not sure if they can take delivery against it. And on the other hand the new RBOB lacks liquidity.
Yesterday's Energy Report was lost in cyberspace. It touched on Nigeria, Ecuador, and of course the big natural gas pipeline deals between Alaska and a group of large oil companies. Today the focus will be on the inventory reports. It’s obvious the market is looking for a bearish report.
Stopped on long April Crude from apprx 6000 at apprx 6100!!! Buy April Crude at 5930 - stop 5880. Buy April Heating oil at 16300 - stop 16200. Sell April Unleaded at 16700 - stop 16900. Stopped on long March Natural Gas from apprx 710 at apprx 730!!! Buy April natural gas at 710 - stop 690.
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