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(April 30, 1997) ENERGY: Short term, supply may exceed demand. Inventories should rise. Wildcards remain U.S. refinery snags, Middle East tensions, strikes in Venezuela. The trading public has been too bearish on heating oil and crude oil. December crude oil shows a quadruple bottom at $19.50, and the weekly bar chart of crude oil is oversold. Technically, this should support the entire energy complex. With half the world's total oil supply coming out of the Persian Gulf, and Iran holding military maneuvers there, the risk on the energy complex is to the upside. OPEC meets in June... The short-term bottleneck is in U.S. refineries. Imported oil is 12 million barrels a day above last year's levels in the U.S. The Russian price of oil is $8 below the world price because Russia does not have the infrastructure to export it. In unleaded gas, the seasonal peak is approximately May 15. There are no signs of significant gas consumption increases. In heating oil, consumption is failing and the 1997 stock level is in good shape. The strongest member of this complex fundamentally should be natural gas...
RECOMMENDATION"Futures investors who purchased December 1997 $20 crude oil call options"hold. Futures investors may buy December crude oil on scaledown weakness with $19.44 open protective stops. (Support $19.75.)
R.E. McMaster, Jr.
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