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1) The Oil complex was buffeted mainly by surprises within the monthly Employment data that appeared to ignite a strengthening in both the dollar and the stock market. With the complex forced to decide whether to follow the dollar or equity strength, price follow through in either direction proved elusive.

2) For now, viewing the fresh highs in the stock market as capable of instilling additional consumer confidence in the process of keeping the oil market appealing as an asset class. More importantly, we viewed today’s dollar strength as corrective since it may well be followed by a renewed significant strengthening next week,

3) $76 mark per nearby crude as a reasonable upside possibility within about a one month time frame. Such an upside possibility would coincide with last November’s highs in the July futures and an approximate 38% retracement on the nearest futures chart. Potential price pullbacks into the $65-67 zone would provide attractive buying opportunities.
 
Goldman Raises Year-End Crude Forecast by 31% to $85
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aVKfXOUfVsTY

1) Goldman "closed" its trading recommendation to sell WTI July crude futures on Nymex, which was put in place on April 17 when the contract cost $54.66. The trade lost $11.56 a barrel, according to the report.

@IVNote: interesting , based on this news note , Goldman has SELL on oil at 54.66 on APR 17 and Goldman closed that SELL call only on June 4 at $66 level and initiated new year end forecast of 85

2) The bank recommends buying crude options for the right to buy oil at $85 by June 2010, while selling a contract for the right to buy at $100 a barrel in the same period.
 
Day outlook for oil

1) positive sentiment on oil is further strengthened by over night report of china improved car sales in the month of MAY indicating hopes for further oil demand.

2) economic calender is light this week

3) EIA (Europe based )expected to release newest short term energy outlook this week , if improved demand is projected this can provide some ammunition for bull camp.
 
1) However, crude inventories remain near 19-year highs and demand in the U.S., the world's largest consumer of oil, is sluggish.

"There continues to be some economic optimism out there," said Victor Shum, an energy analyst at consultancy Purvin & Gertz in Singapore. "Investors have brushed aside any near-term concerns about the weak oil market fundamentals."

2) Wednesday's release of petroleum inventory data from the Energy Department's Energy Information Administration could provide some insight about crude demand. Analysts expect a rise of 800,000 barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos. Stocks unexpectedly rose last week after dropping the previous three weeks.

"If the oil inventory report shows a crude draw, we're likely to test $70 again," Shum said.

3) Traders were also eyeing the U.S. dollar, as a weaker American currency would bolster prices and investors often look to commodities such as crude as a hedge against inflation.



Olivier Jakob of Petromatrix in Switzerland noted that oil prices had been unusually stable so far in June, with daily closing prices mostly within a narrow range around $68.50.

"Such extreme stability never stays for an extended period of time and is usually concluded by a volatility breakout from the range," Jakob said. "That would be either below $66 or above $70 a barrel ... and given the latest market dynamics we will have a bias towards the upside breakout."

4) The euro was up to $1.3960 on Tuesday from $1.3927 on Monday, while the dollar was worth 97.97 Japanese yen, from 98.40 yen.
 
1) Oil added appreciably to its overnight gains with the help of a weak US dollar. For now, the $1.40 level in the euro versus the dollar appears to be a trigger point in enticing speculative capital into the long side of the oil. And, as today’s price action would suggest, a weak dollar is easily capable of negating a listless stock market in propelling prices to higher levels.

2) even if tonight’s API data shows negligible change in crude supply, a significant draw of as much as 3 mb in tomorrow’s EIA report is still possible given last week’s differences between the two reporting agencies.
 
http://www.marketwatch.com/story/oil-extends-gains-on-globex-nears-71

Oil futures rally above $71 a barrel

"Crude prices have continued to climb higher boosted by better-than-expected industrial output data from China and amid expectations the EIA [Energy Information Administration] report will show larger than expected draw in crude stocks following yesterday's API [American Petroleum Institute] report," said Nimit Khamar, an analyst at Sucden Financial Research.

China's rekindled economic growth has raised hopes of a global economic recovery. Two Chinese newspapers reported that industrial production data for May, due to be officially released Friday, rose by 8.9% from a year ago. On Tuesday, new data showed Chinese car sales rose 34% last month.

The API reported late Tuesday that crude stocks fell by 6 million barrels last week, according to analyst notes.

The Energy Information Administration will release its more closely watched data at 10:30 a.m. Eastern time Wednesday.

Estimates for the data vary widely, ranging from a 3 million barrel-decline to a 2.2 million-barrel increase in crude inventories, said analysts at Commerzbank.

"Should oil inventories decline further, one can safely assume that the oil price will continue its upward trend," they said in a note to clients. "Obviously, market sentiment has a far greater impact on pricing at present than market fundamentals."

Analysts surveyed by Platts are looking for an increase of 800,000 barrels in U.S. commercial crude stockpiles for the week ended June 5.

They also project a 1.1-million-barrel buildup in gasoline supplies as well as an increase of 1.1 million barrels in distillate inventories, with slack demand allowing stockpiles to continue to increase, the Platts survey showed.
 
Oil extends gains as crude inventoreis fall

NEW YORK (MarketWatch) -- Crude-oil futures extended gains Wednesday after government data showed a surprising decline in last week's inventories as imports fell and gasoline demand picked up. Crude inventories fell by 4.4 million barrels in the week ended June 5, the Energy Information Administration reported. Analysts surveyed by energy information provider Platts had expected an increase of 800,000 barrels. After the data, July crude rose 2.4% to $71.69 a barrel. It was up less than 1.5% before the data. Imports fell 676,000 barrels a day from the previous week, while gasoline demand rose slightly from a week ago, the EIA report showed. The EIA also said gasoline inventories fell 1.6 million barrels and distillate stockpiles declined 300,000 barrels
 
http://www.marketwatch.com/story/oil-extends-gains-on-globex-nears-71

NEW YORK (MarketWatch) -- Crude-oil futures surpassed the $71-a-barrel level Wednesday after government data showed a surprising decline in last week's inventories, as imports fell and gasoline demand picked up.

Crude inventories fell by 4.4 million barrels in the week ended June 5, the Energy Information Administration reported. Analysts surveyed by energy information provider Platts had expected an increase of 800,000 barrels.

After the data, July crude rose 1.9% to $71.32 a barrel on the New York Mercantile Exchange. It was up less than 1.5% before the data were released.

Crude imports fell 676,000 barrels a day from the previous week, while gasoline demand increased slightly from a week ago, the EIA report showed.

Over the past four weeks, gasoline demand has averaged 9.2 million barrels a day, up 0.4% from the same period last year.

The EIA also said crude inventories at Cushing, Okla., the delivery point for Nymex futures, fell 900,000 barrels to 29 million. Meanwhile, gasoline inventories fell 1.6 million barrels, and distillate stockpiles declined 300,000 barrels.

Refineries operated at 85.9% of their operable capacity last week, slightly lower than a week ago.

"This is a clearly bullish report," said James Williams, an economist at energy research firm WTRG Economics. "The decline in crude, gasoline and distillate stocks should add to the current feeding frenzy in petroleum speculation."

Late Tuesday after crude's floor trading closed, the American Petroleum Institute reported crude inventories fell 5.96 million barrels to 357.9 million last week.

The Washington-based API, an industry trade group, uses different criteria for measuring changes in inventories.

"With a draw across the board and in Cushing we could see the price of crude to have an upward posture, but we feel it has already been priced in," said Tariq Zahir, managing member of futures trading firm Tyche Capital Advisors.

Also on the Nymex, July reformulated gasoline rose 3.02 cents, or 1.6%, to $1.9975 a gallon, and July heating oil added 2.28 cents, or 1.3%, to $1.8305 a gallon.

July natural-gas futures fell slightly to $3.724 per million British thermal units.
 
EIA report

The underlying strong tone to this complex was underscored again today by the oil market’s ability to ignore a significant weakening in the equities and a strengthening in the dollar in pushing into new high ground, presumably on its own merits.

This fundamental support took the form of a much larger than expected draw in crude stocks basis the weekly stats as well as an unexpected decline in gasoline supply per today’s EIA data.


While the crude stock draw garnered most of the headline space related to today’s report, we would note that the drop was similar in magnitude to last year’s draw and that supplies at almost 362 mb are still almost 37 mb surplus to the 5 year averages.

Much of the decrease related to a significant drop in imports, a development that should not have come as a surprise given the “see
saw” nature of recent import stats that are being affected to some degree by occasional release of floating storage.

A supportive aspect to the numbers was a drop in Cushing barrels of 900,000 bbls to lowest levels in a month.


We will look for some vindication in this regard within tomorrow’s monthly
International Energy Agency (IEA) report. By and large, while today’s bearish guidance from the financial markets provided a cautionary note to the oil complex as far as further upside price progress is concerned, we feel that momentum will remain sufficiently skewed to the upside to support additional crude price gains of as much as $4-5 during the coming 1-1½ weeks.
 
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