The Energy Report for Monday, November 16, 2009

Oil prices rebound as the G-20 pledges to keep money rolling off the global printing presses and China warns of a carry trade bubble.

A big rebuke from the Chinese as Obama’s trip to Asia is not exactly looking like a success. Liu Mingkang, the chairman of the China Banking Regulatory Commission, warned that US Fed policy has led to massive speculation and endangers the global economic recovery. He says that the huge carry trade is having a massive impact on global asset prices and has lead to massive speculation, "that was inflating asset bubbles around the world. It has created unavoidable risks for the recovery of the global economy, especially emerging economies and the situation is seriously impacting global asset prices and encouraging speculation in stock and property markets as well."

The dollar weakened on weekend news and oil rallied. The market also has to remember that the aftermath of hurricane Ida will play havoc with supply. We should see crude supply fall by at least 4 million barrels and supplies of gasoline should fall by 2 million. Distillates should fall by 2 million and runs should fall as well.

Oil is still having a hard time breaking down. Every time the market looks like it will crack the dollar breaks and gives it strength. ExxonMobil Corp. Chief Executive Rex Tillerson stated the obvious when he said, "You could say oil is about $20 to $25 a barrel higher simply because it's priced in dollars and there's a weak dollar.” He said the weak dollar has created a "disconnection" between the price and supply and demand levels. Tillerson said that there has been little demand pickup as of yet. There's clearly been for some time a disconnection between the fundamentals of supply and demand and the current price for crude oil. Tillerson said the price of oil would probably be around $55 a barrel if the dollar hadn't depreciated against the euro during the last 18 months. So today again its about the dollar and the carry trade and the party goes on.

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Sell January crude at 8020 - stop 8230.

Sell January RBOB at 20300 - stop 20500.

We're short December heating oil from apprx 20750 - lower stop to 19900!!!

Buy January Natural gas at 467 - stop 450.