The long awaited Greek deal is now a done deal...at least for today. The funds will be flowing to Greece with hope that the combination of more financial assistance and severe austerity programs will be able to right the ship that has been slowly sinking for the last several years. For the time being the EU leaders have decided to not let Greece enter into a disorderly default by approving the roughly $130 billion euro ($173 billion USD) bailout plan. Whether or not this second bailout plan will prevent Greece from default in the future is a big unknown. For now Greece and possibly all of the EU sovereign debt issues that have been front and center in most of the media outlets may move to the background. In my view I still view Greece as a major financial exposure as its economy is continuing to contract . With more austerity programs than must now be put in place the Greek economy is only going to contract even further going forward. Greece is far from over its exposure. For today a short term sigh of relief is emerging around Europe.

The main price driver for oil over the last several days has been the uptick in the war of words coming from Iran. As I have been saying each time the rhetoric from Iran ratchets up oil prices spike. Over the weekend Iran said they would stop selling oil to UK and French companies. Interestingly neither the UK nor France have been buying any Iranian oil over the last month or so. But that was enough to firm oil prices for the week (so far). There are also mixed signals evolving.

Iran sent a letter to the EU to resume negotiations... a bit of a conciliatory gesture while embargoing two European countries that are not even buying Iranian oil right now...a message seemingly meant for inside Iran. On the other hand they are conducting military exercises in Iran in and around their nuclear facilities while having moved a few of their naval vessels to the Mediterranean. While this is all going on in and around Iran the world continues to look closely at Israel and whether or not they will enter into a military fray with Iran. High level US and UK military personnel have been in and out of Israel trying to convince Israel to give the sanctions time to work. President Obama is scheduled to meet with Prime Minister Netanyahu on March 5th...with the main topic likely to be all about Iran.

For the moment there are no interruptions in oil supply related to Iran. The European system is continuing to rebalance its crude oil needs to meet the EU embargo deadline of July 1st. On the other hand Iran is continuing to look for outlets for its oil in other locations. They have just offered India more oil on favorable terms. According to the IEA China has bought an additional 200,000 bpd from Iran in recent months. Thus as I have been saying for weeks this is a logistics exercise with more Iranian oil flowing toward Asia instead of flowing to Europe. On the other hand we have to watch the Saudi's closely to see if they will increase exports in the near term. In addition the IEA said yesterday that they are ready to release oil from the vast Strategic Petroleum Reserves if and when it is needed. Barring a military conflict breaking out there does not seem to be a scenario that will result in a shortage of crude oil from everything going on with Iran in the short to medium term.

With Greece slowly moving to the background the market will now be switching its focus to look at global economic growth and the growing risk of inflation in many countries around the world. After bolstering global equity markets for the last week or so in anticipation of a Greek bailout deal we are getting a bit of sell the fact activity in the European equity markets this morning as shown in the EMI Global Equity Index table below. All of the European bourses are in negative territory today after a mixed performance in Asia last night. Currently US equity futures are pointing to a mixed opening on Wall Street. The EMI Index is still showing a 13.1% year to date gain with Germany, Hong Kong and Brazil holding the top spots in the Index. Now that Greece is out of the way (for the time being) market participants will be looking closely at the rate of growth in each of the main global economies as well as the rising inflation exposure that is growing as oil prices continue to rise due to the evolving geopolitical risk in the Middle East and West Africa. Equity prices have been a supportive price driver for oil prices as well as the broader commodity complex. That said global equity markets remain in an overbought state and are still susceptible to a modest round of profit taking selling in the short term. This week's oil inventory reports will be released a day late due to the holiday in the US on Monday. The API data will be released on Wednesday afternoon while the EIA data will hit the media airwaves at 11:00 AM EST on Thursday. At the moment oil prices are still being mostly driven by the tensions evolving in the Middle East between Iran and the West (as discussed above) and to a much lesser extent based on the direction of the euro and the US dollar. As such I am not sure many market participants are going to pay much attention to this week's round of oil inventory data suggesting that this week's oil inventory reports may not have a major impact on price direction. At the moment all market participants are continuing to follow the new snippets out of the Middle East and the tick by tick direction of equities and the US dollar (driven by Europe)... as they are both the primary price drivers for oil. Even with the fundamentals and geopolitics starting to impact price it is the macro trade that dominates at the moment. As such this week's oil inventory report could remain a secondary price driver at best and only impact price direction if the actual EIA data is noticeably outside of the range of market expectations for the report. My projections for this week's inventory reports are summarized in the following table. I am expecting an across the board draw in inventories this week with a modest decline in crude oil and gasoline stocks, a seasonal decline in distillate stocks along with a small decrease in refinery utilization rates. I am expecting a small draw in gasoline inventories and a seasonal draw in distillate fuel stocks as winter like weather did arrive for part of the report period in some parts of the US...in particular the east coast. I am expecting crude oil stocks to decrease by about 1.5 million barrels. If the actual numbers are in sync with my projections the year over year deficit of crude oil will come in around 9.2 million barrels while the overhang versus the five year average for the same week will narrow to around 3.9 million barrels.

With refinery runs expected to decrease by 0.2% I am still expecting a modest draw in gasoline stocks. Gasoline stocks are expected to decrease by about 0.9 million barrels which would result in the gasoline year over year deficit coming in around 7 million barrels while the surplus versus the five year average for the same week will come in around 3.8 million barrels.

Distillate fuel is projected to decrease by 1.5 million barrels on a combination of an increase in exports and a bit of winter like weather last week. If the actual EIA data is in sync with my distillate fuel projection inventories versus last year will likely now be about 17.7 million barrels below last year while the surplus versus the five year average will come in around 1.2 million barrels.

The following table compares my projections for this week's report (for the categories I am making projections) with the change in inventories for the same period last year. As you can see from the table last year for the same week was mostly in the same direction as the projections except for crude oil. As such if the actual data in line with the projections there will not be a major change in the year over year comparisons for most everything in the complex except for crude oil inventories.. WTI is now trading above its most recent resistance level of $104/bbl (now a support level with $110/bbl the next level of resistance. Brent has also breached its resistance level with a path that could possibly take it to the $120/bbl level. But as with WTI... Brent is also settling into a new short term trading range of around $116/bbl to $120/bbl. Oil continues to be driven by the evolving geopolitics of the Mideast...in particular Iran with just about all of the other normal prices drivers taking a secondary role...including fundamentals. I am keeping my view at cautiously bullish and keeping the caution flag flying to remind all that the market is still susceptible to a modest round of profit taking selling in the short term. I am still keeping my view at neutral and bias at bearish as once again there is not much supportive indications that Nat Gas is likely to embark on a major short covering rally anytime soon. The surplus is still building in inventory versus both last year and the five year average is going to get harder and harder to work off even it gets cold over a major portion of the US and as such for the medium to longer term I am still very skeptical as to whether NG will be able to muster a sustained upside rally over and above a short covering rally.

Currently markets are mixed as shown in the following table.

Best regards, Dominick A. Chirichella dchirichella@mailaec.com Follow my intraday comments on Twitter @dacenergy.