Thursday, May 12, 2016
Oil Outlooks and Opinions llc
www.oiloutlooks.com
Volume
7; Issue 2514
The Hamster Wheel
In the immortal words of Ratt, “Round and round, What comes around goes around, I’ll tell you why…”
I know that some of the teeming millions might not be all too familiar with some of the LA Hair Bands of my
youth, but this one had it’s day on the charts. I look back at the EIA stats and I feel like my days coming and I
might be able to open up for Poison at this rate. After extolling the virtues of being long gasoline in this market,
boom. We not only see a 1.2M barrel draw yesterday, but we saw production top 10M b/d. That marks the 3rd
time we’ve topped that number so far this year. Anyone care to guess the last time we ran over 10M b/d this
many times up until May? That’s right, the same number of times we’ve seen a friendly headline about Justin
Bieber...never.
Oh sure, gasoline stocks at 240M barrels are a high for this time of the year, but it’s a whole different driving experience out there in America. We’re running around in more fuel efficient cars and trucks, but we’re running the
highest YTD demand for gasoline (9.180M b/d). Take the last 5 weeks alone and we’re running a hot 9.5M b/d.
Think about that kiddies, we’re just scratching the month of May and we’re already pushing over 9.6M b/d. Normally we see a good bump up in demand by June, higher in July and then we like to top out in August. Last year
we tapped demand on this week at 8.7M b/d and found our way to August and 9.7M b/d. Of course I’m just pulling weeks out so let’s look at a bigger picture. Over the past three years we’ve started the YTD at an average of
8.6M b/d (yikes!) and ran through demand from June through August at an average of 9.2M b/d. So in some of
the worst times, we increased an average of 600K b/d. Holla.
I do hope you’re keeping up with me like the Kardashians, because I’m about to drop some Caitlyn on you. Going by a 3yr average, we’re expecting demand for gasoline to not only hit, but average 10.2M b/d. Booyakasha!
Respect. Now let’s get back to those production numbers. Back in 2014 we managed to average gasoline production at 10M b/d from May through August. Since then and since demand has risen, we’ve only averaged
9.7M b/d. So even with feedstock dropping significantly and demand much higher, refiners aren’t stepping up.
As I mentioned yesterday, something has to get them going because America is going strong. It’s going to be a
swift kick between the legs when we start to see gasoline prices rising and crude still struggling to get to $50.
But let’s think about this in a different way, maybe refiners are already jammed up. Maybe they aren’t able to
increase this gasoline production back up and above 10M b/d for that long anymore. Or maybe the demand for
distillate (4wk avg 4.1M b/d) is pulling too much production to allow refiners to yield more gasoline. No matter
how this all shakes out, there’s a definite gasoline shortage shaping up and I was the one who told you this tsunami was coming. So school’s about to let out. April showers are bringing May flowers. Baseball is only 30
games in and the Cubs are the best team in baseball. We have a few weeks to go before we hit a proper summer and demand is waiting to see $3/gal gasoline.
That’s Hot
That’s Not
 $50 oil (I’m usually not this patient
of a person)
 Brazil (when it takes this long to
build up, it usually pops all over the
place)
 Trump (with Sanders making it obvious Clinton isn’t a lock, anyone wondering about Trump’s oil plan)
 Justin Bieber (perhaps going the way
of Shia Labeouf and Amanda Bynes)
 IEA (All hail! Now the oil glut is
over by a divine miracle)
Take what you’re given...or just
take
 Kelly Ripa (I learned there are
shows people watch during the
morning, not CNBC)
Thursday, May 12, 2016
Oil Outlooks and Opinions llc
www.oiloutlooks.com
Crude:
Well things could be a lot different from here and I’ll be the first to tell everyone that we
saw this coming. We have a target above now and that’s going to play out on the
charts. Keeping an eye on the RSI, we’ve managed to cool it off and now we’re ready
to put it back on the burner. Remember we spent weeks in a weaker run and now
leaving it higher will come as a norm. We’ll be watching resistance above at 4734,
4855 and 4948. The support numbers fall in behind 4612, 4564 and 4488. The front
spread sees resistance at –36, -15 and+10. Support to –55, -70 and –84. Watching
the upside tested today and likely this week.
Gasoline:
We’re moving up with the RBM16 contract. We’re looking to resistance at 15840,
16045 and 16225. That will give us some room to look back down to support at
15660, 15475 and 15240. The front spread moves on with M16/N6. Resistance at –
66, -32 and +10. Support to –88, -124 and –180. The RBCL moves to M16 and gets
to resistance at 2012, 2060. Support down to 1965, 1912.
Volume
7; Issue 2514
Techies, some Trekkies
 200 Day MA 4371
 100 Day MA 3913
 13 Day MA 4489
 8 Day MA 4468
 14 Day RSI 63.48
Spread now; Roll later
 Here comes the rain again
Distillate:
 Key support: -68, -85, -104
We’re running ahead with the HOM16 contract. We’re looking at support to 13966,
13780 and 13555. The resistance looks above to 14135, 14360 and 14552. The front
spread is in M6/N6 with resistance at –85, -60. With the way it’s moving we may see
support tested and looking to –122, -150. The HO crack in M16 sees resistance at
1240, 1288. Support back to 1184, 1130.
 Key Rests: -44, -25, +05
Trends are only for the affected:
Well I finally have a chance to change this up. Believe me, the HFT has taken most of the fun out of
watching trends under 60min, but we still have some faith in that frame and definitely in the Daily. So
let’s start there and see how the Daily is shaping up after last week. We’ve pegged a nice double bottom
over the past few weeks and now 4000 is the target. If we can get up and above that, even in the slightest, we’re thinking we’re full blown reversal and the target moves up to the 5000 area.
Fundy you should mention:
I happen to also write a few notes about stocks in my spare time during the day and the ULSD demand
isn’t as surprising as everyone might think. The increase in online shopping has driven up ULSD demand
as much as Uber and Lyft have affected gasoline demand. More deliveries are on the road and in smaller trucks, but bigger fleets. Many might think there’s a urgency to switch to nat gas or hybrids, but infrastructure to keep them running is the biggest hole. We’ll keep an eye on the economic calendar today
with Jobless Claims (267K) and Import/Export Prices (0.6;0.0) at 8:30am EST.
Sorry, I am just physically attracted:
Just to show that I have love for all refined products, I’m giving this space up to distillates yet once again.
This high demand (4wk avg 4.1M b/d) has a lot of people scratching their heads. It’s been hard to pinpoint where it’s coming from, but most don’t think it’s in the US. During this past month, we’ve actually
seen our exports of disty drop under 1M b/d (949K) and well off the peak exports we were sending out in
March (1.3M b/d). The argument here is that the export numbers are usually adjusted at month’s end,
but it’s unlikely they are going to jump back up significantly. If this demand is domestic, we know disty
isn’t shy about raising prices no matter where crude prices are. Gasoline please take notes.
Thursday, May 12, 2016
Oil Outlooks and Opinions llc
www.oiloutlooks.com
Volume
7; Issue 2514
Carpe Diem (trade for today):
All I can do is all I can do.
Up is a good thing. I go LONG CLM6 above 4710. Well it’s been a good week so far and I’d like to keep it
that way. We’ve had some upside and some downside. Playing it safe isn’t the best way to a million dollars,
but in this economy, $100K is like a million. I’ll jump in here and see who’s on the train to 5000. I’ll ride it out
to the 4770 area because up is good.
Watch the closing doors. I go SHORT CLM6 under 4580. I don’t think WTI is going to pull an Icarus here, but
just in case. Let’s see how much pressure the weak length can take and if we’re down here, I’m thinking not
all that much. We’ll sweep lower to tap on the 4530 area, but I’m not waiting around for more.
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