12-31-2009: February Gasoline: Where Is the Energy Efficiency?
As the world economic recovery proceeds, especially in China, demand for crude oil expands, which will eventually hit gasoline again, especially in the driving season. It seems almost a "no-brainer." Current fuel price levels are still slightly below what they might have been save for the recent economic meltdown. Most government agencies and trade associations are projecting slightly higher gasoline prices for next year. It seems more a question of "when", not "if." What exactly has the "stimulus" program done for energy efficiency save to encourage Americans to buy more cars, and rebuild and repair bridges and highways? A dysfunctional Congress can't even pass the healthcare reform bill. What will happen when self-serving congresspeople encounter the big automobile manufacturing, oil, coal, and utility lobbies? It's about jobs, not energy efficiency. Meanwhile sympathies seem to want to help those poor Iranians being martyred, demonstrating for freedom against a thoroughly evil regime. But where will the freedom demonstrators sympathies turn after we sanction or possibly even bomb them? One Straits of Hormuz blockage is all it would take to send fuel prices skyrocketing. As always, energy efficiency will ultimately come through pricing. That's the easiest way to curb the SUV driving habit.
February Gasoline:
February Gasoline:
Latest API data shows a 1.4 million barrel drop in gasoline stocks when most were expecting a 1 million barrel rise. On charts there is strong resistance for February Gasoline near the $2.05 level. Retail gasoline sales were down 3% on the week last week but up 1.3% from a year ago (gasoline sales at the pump.) EIA figures may be released shortly that are very different. These figures from the DOE said that gasoline supplies were down 300,000 barrels and heating oil supplies down 1.9 million barrels. There appears to have been a jump in crude oil stocks, a 1.7 million barrel rise, going opposite to product stocks. The DOE said that refinery usage increase from 80.0% to 80.3% last week. They say gasoline demand was up 1.1% from a year ago, while distillate demand was down 2.8% from a year ago. China agreed to raise oil imports from Kuwait by 50% for next year. They also lifted import contracts with Saudi Arabia and Iraq. Global oil demand is starting to recover. Cold weather has been supportive to oil complex prices over the past few weeks. EIA projections in early December stated that regular-grade gasoline retail prices would increase from $2.35/gallon (national average) to $2.83 in 2010 during next year's driving season. Average household expenditures on heating oil are expectged to incrase to $1,911 from $1,864 last winter. But propane expenditures go the other way at $1,700 this year versus $1.950 last year. PetroChina is currently investing heavily in Canada oil sands. The financial crisis of 2008 took a lot out of the energy markets, but long-term energy challenges remain. Gasoline prices have risen with the world economy outlook and U.S. Dollar weakness. Gasoline supplies are up 3% from a year ago. This amounts to 216.3 million barrels versus 209.1 million barrels a year ago. Lower sugar and ethanol prices have provided significant foreign demand for Brazil's ethanol, which is now mixed with gasoline in some countries. Colorado "regular" fuel is 85 octane versus 87 octane elsewhere. Varying reasons are given for this, but the rationale for the different state standards is altitude. In Rocky Mountain states, a typical combustion engine draws in less air per cycle due to the reduced density of the atmosphere. This traslates to reduced absolute compression in the cylinder, deterring knock. The problem is that at sea level, Colorado's low grade gasoline may cause some damage to the engine. Iceland is the first country to try abandoning gasoline altogether. Hydrogen fuel is used there instead, something California has only dreamed about with Governor Schwartzenegger's proclaimed "hydrogen highways." AAA reported in the Carolinas that holiday travel was down and would be down for the rest of the coming year due to high unemployment and concern over economic recovery of the nation. Fuel costs this year are priced almost $1 over last year. Escalating air fares, smaller planes, fewer seats, and extra fees are pushing a lot of travelers toi seek other forms of transportation. Vacation drivers are expected to spend an average of around $1,000 on fuel and accomodations during holidays this year.
485.0I T 12/29
I NYM - Feb-10 Gasoline, Reform'd 420gal c/g Cm.=0.01 Lim.= 0.3
I
I
I
445.0I_________________________________________________________________________
I
I
I
I
405.0I_________________________________________________________________________
I
I
I
I X
365.0I__________XO_____________________________________________________________
I XO
I XO
I XO
I XO
325.0I__________XO_____________________________________________________________
I XO
I XO
I XO
I XO
285.0I__________XO_____________________________________________________________
I X XO
I X XOXO
IX X XO XOXO
IXOXOXO XOXO
245.0IXOXOXO__XO_O_____________________________________________________________
IXO O O X O
IX OX X O
IX OXOX O
IX OXOX O
205.0IX____OXO___O_____________________________________________________________
IX OX O X
IX OX OX X
I OX OX X
I OX OX X
165.0I_____OX____OXOX__________________________________________________________
I OX OXO
I O OX
I OX
I OX
125.0I___________OX____________________________________________________________
I OX
I OX
I OX
I O
85.0I_________________________________________________________________________
I
I
I
I
45.0I_________________________________________________________________________
I
I
I
I
5.0I----I----I----I----I----I----I----I----I----I----I----I----I----I----I---
256668289127177
110121222111003
775990810696661
The above point-and-figure chart is giving a conventional buy signal.
We are headed toward a cyclical high and a seasonal up period.
Our best-performing internal program is "WilderRT." It is giving a sell signal.
Results of "WilderRT" for Gasoline (blue lines = successful trades, red, unsuccessful): (Always in the market.)
Our third system has triggered a sell signal. (Note, disregard the year date on the chart. Our regular readers know this is not a Y2K-compliant system, but it still works.)
The point value is $420. Initial margin on a single contract is $12,285. Use of options is advised.
Scale traders are not a factor in this price range.
In the chart below, the yellow line is the futures price, read on the right axis. All other colors are read on the left axis. Red is small speculators. Green is large speculators. Blue is commercials. Large speculators with the best track record are getting increasingly-short.
The average volatility shown below suggests that an uptrend remains intact from the last volatility low point.
Our option trade recommendation is to Sell the Reformulated Gasoline April 2.20 Put @ 0.1616 or better.
Note: The decimals in the following printout have been shifted two places to the right because of our software limitation, whereas actual option prices are in $/gallon, not cents/gallon. What the Feb.-Apr. calendar spread suggests to us is that buying the near contract and selling the far one is at most times profitable, which we think is a sign that these futures may go up. The best time to enter or leave the above spread is when it is at -0.12 or narrower selling the near as prices are falling and then buying the far, and exiting or entering when it is at -0.16 or wider buying the near as prices are rising and then sellling the far.
Here's an intraday chart for the previous day ( 12/29 ).
Risk Versus Opportunity Report
________________________________
RBG0 February Gasoline
High Price: 2.24
Current Price: 2.02
Low Price: 1.92
Risk: 0.096
Opportunity: 0.212
(O/R) Ratio = 2.200
Level Table:
| Factors | Weighted Points |
|---|---|
| Parabolic Chart | + 1 |
| Nirvana Chart | + 1 |
| News | - 1 |
| Point & Figure | + 1 |
| Cyclicals | + 1 |
| Seasonals | + 1 |
| Internal System 1 | - 1 |
| Internal System 2 | 0 |
| Third System | - 1 |
| Commitment of Traders | - 1 |
| Historic Range | 0 |
| Range/Volatility | + 1 |
| Level Table | + 1 |
| Other Factors | + 1 |
| Total | + 4 |
Place 2 February Gasoline on a Buy Watch with stoploss @ -0.0757 below the get-in point (when price is represented in $/gal.)________________________________________________________________________________________________________R.S.
