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The Energy Report

Phil Flynn
pflynn@alaron.com


The Energy Report for Thursday, July 3, 2008.

The fireworks start early as oil is already exploding and the monthly jobs report comes today! The only thing that may stop crude now is a Yankee Doodle Dandy of a jobs report that seems less likely after a weak ADP employment report and a dismal outlook from the Challenger survey.

Speculators do not drive a bad jobs market nor do they drive inflation but they will reflect the fact of a poor jobs picture coupled with big financial banks are in trouble. A bad jobs report will send the dollar lower and have specs buy oil like it is the Fourth of July. Not to mention that crude technically broke of its grand ol’bull flag, it’s a high flying bull flag and had help with a bullish EIA inventory report.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 2.0 million barrels from the previous week. At 299.8 million barrels that according to the EIA puts U.S. crude oil inventories near the lower end of the average range for this time of year. Gasoline inventories increased by 2.1 million barrels last week and according to the EIA are in the lower half of the average range. Distillate fuel inventories increased by 1.3 million barrels, and are in the middle of the average range for this time of year. Of course you would not know it by the move that we had in heating oil. And for all of you barbeque aficionados that will be out in droves this weekend, just in case you were wondering propane/propylene inventories increased by 1.7 million barrels last week but remain below the lower limit of the average range so to save money stick to the charcoal.

Now let's face it, the report wasn’t that bullish for products but with Iran and Nigeria worries and new record highs, the charts look beautiful with spacious skies and bio-fuels rallying without those amber waves of grain.

And we hit the dusty trail the oil keeps rolling along. It’s hi, hi, hey but demand is going away as this Fourth of July summer driving weekend won’t exactly explode and really will be a dud. In a CNN opinion poll it was reported that 31 percent of Americans have canceled or shortened their holiday plans because of high gas prices. That coincides with what we saw in the EIA report that said over the last four weeks, motor gasoline demand has averaged 9.3 million barrels per day, down by 1.7 percent from the same period last year. Distillate fuel demand has averaged 4.1 million barrels per day over the last four weeks, down by 0.5 percent from the same period last year. Jet fuel demand is 3.5 percent lower over the last four weeks compared to the same four-week period last year. It is obvious that high prices will keep many closer to home. The CNN poll also said that of the more than 1,000 Americans surveyed said record g as prices have caused them to make changes in their daily lives. Even 21% those that make over $50,000 a year have said they are making changes. It looks like we won’t see as much driving from sea to shining sea.

That is why there was not much of a build up ahead of the holiday as the EIA reported that US crude oil refinery inputs averaged 15.4 million barrels per day during the week ending June 27, up 155,000 barrels per day from the previous week's average. Refineries operated at 89.2 percent of their operable capacity last week.

And going into the Fourth of July gasoline production actually fell last week, averaging 9.0 million barrels per day. Distillate fuel production also decreased last week, averaging about 4.6 million barrels per day. On the import side the EIA said that U.S. crude oil imports averaged about 10.2 million barrels per day last week, down 83,000 barrels per day from the previous week. Why import crude at $140 a barrel unless you are going to use it?

Bottom line is oil is being swept up in a massive buying wave as a hedge against inflation, the Fed, the stock market and everything else that ails us. The day trading opportunities have been golden. Day traders playing the swing within the bull flag that now targets near $150.

Dow Jones is reporting that shares in Swedish oil company Lund in Petroleum bucked widespread losses on the Swedish stock market on news that the company made a major oil discovery in Russia’s Caspian Sea! I wonder how long it will be before Gazprom takes it over?

If our Founding Fathers had the foresight and courage to sign the Declaration of Independence the least you could do is sign up for the Fox Business Network! If you don’t get it you are missing out! John Hancock would have done it! You can also sign up and put your John Hancock down and get your free trial of Alaronenergies!! Call me at 800-935-6487 or email me at pflynn@alaron.com to open your account!

Stopped on short August crude from apprx 14000 at apprx 14370. Buy August crude at 14300 - stop 13700.

Buy August RBOB at 34700 - stop 34400.

Buy August heating oil at 39000 - stop 38700.

Buy August natural gas at 1270 - stop 1202.

Have a GREAT Fourth of July holiday!

Past performance is not indicative of future results.

The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Alaron Trading Corp. its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

Phil Flynn is Vice President, Energy Analyst and General Market Analyst with Alaron Trading Corporation (www.alaron.com). Phil is one of the world's leading energy market analysts, providing individual investors, professional traders and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline and energy markets. Phil.s market commentary, fundamental and technical analysis, and long-term forecasts are sought by industry executives, investors and media worldwide.

PLACING CONTINGENT ORDERS SUCH AS "STOP LOSS" OR "STOP LIMIT" ORDERS WILL NOT NECESSARILY LIMIT YOUR LOSSES TO THE INTENDED AMOUNTS. SINCE MARKET CONDITIONS MAY MAKE IT IMPOSSIBLE TO EXECUTE SUCH ORDERS.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Alaron Trading Corp. its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

Contact Phil at 1.800.935.6487 or pflynn@alaron.com.