Today will be a quiet day in the US with all of the exchanges closed for the Presidents Day holiday. Only electronic trading will be open in the US. In addition IP week gets underway in London today which should contribute to today being an even quieter and lower liquidity day than normal. The spot WTI contract is starting the week in negative territory while everything else in the oil complex is showing a small gain for the session so far. Asia is getting back to normal as China returns from its week long Lunar New Year Holiday.The April Brent/WTI spread is now hovering near it contract high resistance level after holding support last week. The combination of Saudi oil exports down to a level not seen since the third quarter of 2011 along with North Sea maintenance scheduled to get underway in March (Buzzard field) is keeping the Brent contract supported at the moment.Light week on the macroeconomic front with housing and inflation data hitting the media airwaves in the US along with the normal weekly jobless claims. The weekly oil inventory cycle will be postponed one day due to the Presidents Day holiday. The API oil inventory report will released on Wednesday afternoon with the EIA data hitting the airwaves at 11 AM on Thursday. The weekly Nat Gas inventory report will follow its normal time and schedule of Thursday at 10:30 am.The oil complex ended the week mixed... with the spot RBOB gasoline contract surging higher during the second half of the week as market participants became more concerned that supplies could be an issue down the road. Once again RBOB gasoline is largest gainer in the complex with HO declining after a warmer than normal period.WTI increased marginally on the week even as the Seaway pipeline remains constrained due to the bottleneck at the Jonas Creek terminal. The pipeline operator has not given any timetable for a return to normal operating capacity. The spot WTI contract increased by 0.15% or $0.14/bbl while Brent declined by about 0.16% or $0.19/bbl. Crude oil stocks in PADD 2 and Cushing were modestly lower even as the Seaway remains constrained and refinery maintenance season is getting underway.The April Brent/WTI spread was marginally lower on the week after widening by over $4/bbl the previous week. The April spread held support last week and is currently trading at life of contract highs (basis the April spread). The April spread is now within about $6/bbl of the all time high for the spread (basis the continuation chart).On the distillate fuel front the Nymex March HO contract decreased modestly by 0.86% or $0.0228/gal on the week even as distillate fuel inventories decreased modestly as temperatures were about normal over parts of the US during the report period. Gasoline prices increased strongly on the week after a draw in inventories. The March Nymex gasoline price increased by 2.47% or $0.0757/gal this past week.The March Nat Gas futures contract declined strong on the week by 3.64% or $0.1190/mmbtu on the week and has now solidly breached the lower support level of the $3.20 to $3.50/mmbtu trading range that has been in play since November of 2012. The market has now moved into a new, lower trading range of $3/mmbtu to $3.20/mmbtu.With precious little time left to the current winter heating season the bulls got another disappointment as the EIA weekly inventory report was bearish versus the market consensus and neutral at best versus the normal five year average net withdrawal for the same week. The spot Nat Gas futures price has breached the lower end ($3.20/mmbtu) of the trading range that has been in play since November.Thursday's EIA report was bearish from the perspective that the report showed a net withdrawal that was modestly lower than the expectations but around the five year average for the same week but above last year's draw... which of course was an extremely warm February. However, the number was bearish based on a miss to the downside versus the market consensus.The 157 BCF withdrawal (around normal for this time of the year) was below the market consensus calling for a withdrawal of around 162 BCF. The draw of 157 BCF was less than my model forecast (-170 BCF withdrawal) this week. The year over year inventory situation remains in a deficit position versus last year but still surplus versus the more normal five year average. The current inventory surplus narrowed slightly to 348 BCF above the five year average or about 16% above.Next week's EIA inventory report (will be issued on its regular schedule and time in spite of holiday on Monday) is likely to be bearish after a mild week along much of the east coast. The early projections are calling for a net withdrawal in a range of about 120 BCF to 155 BCF compared to last year's withdrawal of 155 BCF and versus the five year average for the same week of 145 BCF. Obviously the report will be bearish if the number falls within the range. I will issue my forecast in Tuesday's newsletter.On the financial front equity markets around the world were mostly lower for the week with two bourses now in negative territory for the year... Brazil and last year's leader Germany. Brazil is fighting inflation risk while export oriented Germany has been impacted by the stronger euro. The Index is now only showing a year to data gain of 0.4% after experiencing the largest one week loss of the year of 2.16%. Global equity markets have been on the defensive since peaking at the end of January and at least for the moment can still be categorized as being in a downward corrective pattern and not yet a change in the underlying trend. Equities were a negative price driver for the oil complex last week.The euro was lower on the week while the US dollar was higher driven mostly by concerns over a possible currency war. Last week the global equity markets were a negative price driver for oil and most commodity markets.I am maintaining my view of WTI at neutral to cautiously bearish and maintaining my view for Brent at neutral to cautiously bearish. That said I am continuing to fly the caution flag as any additional equity market corrections will impact oil prices in much the same way... a round of profit taking selling. Furthermore the spot Brent contract has breached its technical resistance level of about $118/bbl suggesting lower prices in the short term.I am maintaining my Nat Gas view and bias at cautiously bearish as the weather forecasts and nearby temperatures remain bearish. As I have been discussing for weeks the direction of Nat Gas prices are primarily dependent on the actual and forecasted weather pattern now that we are still in the heart of the winter heating season and currently those forecasts have turned a tad more bearish at the moment.Markets are mixed as shown in the following table.Best regards,Dominick A. Chirichelladchirichella@mailaec.comFollow my intraday comments on Twitter @dacenergy.
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