Who knew Greek austerity would feel so darned good. Oil prices soared on the backs of a surging euro dollar as the market seems to want to put Greece's problems behind them. The euro became cool again at the expense of the greenback sending gold, silver and oil higher. Or maybe it was because the Justice Department was probing collusion among hedge funds betting against the Euro. No, not really. The truth is that with funds having a record short position in the euro, the Greek plan gave them reason to cover, leading to one right after another. I wouldn't exactly say that this is an endorsement of the Greece plan but an endorsement of Greece having any plan at all.
The crude oil market also had the Energy Information Agency inventory report that showed that oil demand was at a 14 moth high in February which seemed to have the market looking beyond a bearish headline crude number. The EIA tried to get oil traders to forget about that surging euro dollar when it reported that US oil inventories surged by a much higher than expected 4.1 million barrels. That caught traders off guard because after the previous American Petroleum Institute reports the market was looking to distillates for the big draw. Yet according to the EIA distillates only fell by 0.9 million barrels. Why does it seem that the EIA is from Mars and the API from Venus? Well really if you look at the big picture and average things out over the last few weeks, they are really not that far apart. The biggest discrepancy seems to be in crude oil mainly because of the EIA much larger than expected build. The EIA says that US crude supply stands at 341,571 million barrels where the API says that supply is at 337,090 million barrels. When you get beyond that and delve into the products you find that the numbers are very close. Take gasoline for example. The EIA says that gasoline supply stands at 231,934 million barrels where the API says that supply is at 232,924 million barrels. As far as heating oil the EIA says stand at 42,289 and 42,603. What I am getting at is that the market while it reacts to these different supply and demand numbers, is not taking one week of data too seriously and that the market already knows that supply is ample. The EIA says that in all major categories above are in the upper boundary of the average range for this time of year.
If you can't beat them on land try to beat them through the air. Environmentalists going after natural gas fracturing drilling in New York. They have scant evidence that natural gas drilling is causing any damage to ground water so they are now trying to prove that the act of drilling could add to ( are you ready for this?!) greenhouse gases. Christine Buurma from Dow Jones says that concerns about water contamination from natural-gas production in New York's Marcellus Shale has ignited a firestorm of controversy, but environmentalists also have reservations about air quality at drilling sites. Burma says that the Natural Resources Defense Council and other groups are urging New York's environmental regulator to impose restrictions on emissions from gas drilling sites. Aside from benzene, which the U.S. government has classified as a carcinogen, emissions from natural-gas well sites can include methane, fine particles and carbon monoxide, as well as carbon dioxide, a heat-trapping gas blamed for climate change. It seems to me the environmentalists are grasping for straws as it appears that they are losing the debate on the risks to the ground water. So why not try a different tactic and find another way to try to restrict the driller's activity.
With oil closing above $80, it keeps the bulls in control. Still with a jobs number looming and as well as major monetary policies looming the bulls are going to need all the support from the Euro that they can muster. The bulls have the technical momentum now to move to a new higher trading range in the 85 area. A close over $85 would negate a very bearish long term wave pattern. Still with demand entering a soft path and global inventories well above average, a change in the fortunes of the euro might take away some of the momentum that the bulls have regained. We still feel the best plan of attack is to play the daily ranges and until the pattern is broken use the current strength to enter into bearish option strategies.