wmeubank@ocp.kcmo.com
IRA EPSTEIN & COMPANY
626 West Jackson, Chicago, Illinois
(November 11, 1997) ENERGY COMPLEX: CRUDE OIL–HIGHLIGHTS OF THE ENERGY MARKETS–Almost every day energy markets opened higher and sold off, closing with very little change. Traders continue to watch for headlines in the UN-Iraq standoff.
Very recently, Saudi Arabia announced that it wants to increase the oil production to increase its revenue and at the same time OPEC announced its intent to increase production ceiling during its upcoming meeting on November 26.
Analysts contacted by FWN, are thinking that, if Iraq is cut off from oil sale against the `Oil-for-Food' program, the effect of OPEC's announcement will be neutral. However, increasing demand from Asian countries will keep up the prices in stable zone.
The API report was delayed by one day due to the Veterans' Day holiday. After the market closed on Wednesday, API reported in its latest weekly report that U.S. crude oil stocks fell 2,294,000 barrels, U.S. gasoline stocks declined 1,550,000 barrels, U.S. distillates stocks rose 252,000 barrels and U.S. refinery operating rate was down 1.5% at 92.6%.
A decline of 2.294 million barrels in crude oil stocks is not only friendly for crude oil contracts but the lower refinery operating rate is also supporting for the products. I think the API data is overall more bullish than bearish.
The National Weather Service Corporation forecasts above normal temperatures over most of the Central U.S. and Northeast U.S. for next 6 to 10 days.
TECHNICALS–Technically, the energy markets could continue to trade between 2000 to 2100 for the near term. If you look at the December crude oil chart, the market appears ready to sell off but I think of it, as a good opportunity to buy.
I still believe December crude oil will be supported between 2020 to 2060, December heating oil supported between 5700 to 5780 and December unleaded gasoline between 5800 and 5900 due to a seasonal upward tendency. If these support zones are broken, crude oil prices could drop down to 1950. I think this decline will be an opportunity for new bargain hunters.
I see resistance points in December crude oil between 2120 to 2140 near term, and 2290 to 2340 mid-term. Near-term resistance in December heating oil ranges from 6040 to 6140 and from 6350 to 6390 in December unleaded gasoline.
TRADING IDEAS–I suggest traders buy and hold January heating oil 6000 or 6200 calls at current levels, i.e., 220 or 150.
Kanu Rana
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