wmeubank@ocp.kcmo.com
THE REAPER
P.O. Box 84901, Phoenix, Arizona
(August 14, 1997) ENERGY COMPLEX: Steady U.S. refinery demand should draw inventories down further and lead to higher prices in crude oil. Crude oil imports will be necessary to offset. Gasoline has low primary supplies, with stronger than expected demand and a very tight gasoline supply/usage balance. Unleaded gas is the leader in the energy complex. Refinery outages have hurt. Natural gas demand has increased with the hot summer and heavy cooling demands. The trading public is too bullish on natural gas. Overall, the energy complex should be supported by increasing tensions in the Middle East. The big bull market in energy should be in 1998 and 1999. The trading public is too bullish on unleaded gas. The fact that energy prices surged after the approval of Iraqi oil-for-food deal by the U.N. is a bullish sign.
RECOMMENDATION–Futures investors who purchased December 1997 crude oil call options–hold. Futures investors profitably long December crude oil futures use $19.89 open protective stops.
R.E. McMaster, Jr.
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