Crude Oil Market Analysis (4/12/07)

Mea Culpa!

COMA was bullish and interpreted yesterday’s DOE report as “EXTREMELY bullish” and was seeking to enter the market on the long side by buying at a dip—at $60.40. As a result COMA focused on the forecast that today’s IEA report would revise down 2007 global oil demand--which was correct as the IEA revised down 2007 global demand by 250,000 barrels per day—but chose not to forecast that today’s IEA report would also warn a continued tightening of global oil supply due to OPEC production cut—from 26.77 million barrels per day in Feb. to 26.55 million barrels per day in March among the OPEC-10.

The market did not dip to provide a buying opportunity but instead took off on the bullish IEA report to break resistance at $62.30 and stayed comfortably above $62.50 until the news that ConocoPhillips shut several of its oil processing units in Wilmington, California gave the market another push in the last hour of trading to finish $1.84 higher at $63.85.

Fundamentally, the tightening of global oil supply leading up to the upcoming summer driving season and the uninterrupted refinery glitches will provide a solid support to the market.

Technically, now that the market trades above the resistance at $64.00, the gasoline’s breakaway from $2.1500 will lead the crude market to break away from $64.00 resistance until the gasoline market tests the next resistance at $2.2800.

Strategy: Buy at market at $64.12 with a stop at $63.15.

Dr. Chen

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