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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: John Pitera who wrote (6221)	5/31/2002 8:15:35 AM
From: Jon Koplik	Read Replies (1) \| Respond to of 33421

Comments on lack of demand for gasoline from 5/30/02 WSJ (after the close). (This is important if you believe that gasoline consumption is a reliable coincident indicator of the economy). (It sure was in the 1990 - 1993 period, by the way ...) Jon. ************************************************* COMMODITIES Oil Sputters on Gasoline Glut As Driving Season Gets in Gear By MARIE C. SANCHEZ DOW JONES NEWSWIRES NEW YORK -- Crude oil slid 4% on concerns that motorists may be swimming in gasoline supplies heading into peak summer driving season. Faltering demand for gasoline combined with rising stockpiles pressured prices for oil and refined products to their lowest levels in six weeks. July crude futures fell $1.09 to $24.67 a barrel at the New York Mercantile Exchange. June gasoline futures slipped 5%, or 3.85 cents, to 73.36 cents a gallon. "At this time of year, gasoline should be carrying the market, and gasoline demand is not that good, so they're carrying it out to the woodshed," said Bill O'Grady, analyst at brokerage AG Edwards in St. Louis. Weekly inventory data showed estimated demand for gasoline fell last week, while the 13-week average demand growth also slowed significantly. The result: a surprise increase in the gasoline supply. In the weeks before the expected heavy driving season, especially the three-day Memorial Day holiday weekend, gasoline is aggressively moved through supply channels to meet expected stepped-up needs of motorists. The weekly inventory data track disappearance of oil from primary storage locations, such as ports and refineries. The gasoline stores are moved into so-called secondary and tertiary storage, such as distribution racks and retail gasoline stations, measured by monthly data. The gasoline increase in primary storage ahead of the Memorial Day holiday surprised and disappointed traders. "The ability of gasoline to build and be well supplied at this time of year was a strong bearish signal to the market," said John Kilduff, senior vice president at brokerage Fimat USA Inc., New York. "The strength of the seasonal leader is in question and that's casting a shadow over the entire market." The decline in gasoline prices at the onset of summer comes after two summers of spikes in gasoline prices caused by tight supplies, refiners' difficulties in producing enough fuel, and pipeline disruptions. This year none of those events is likely, Messrs. Kilduff and O'Grady said. Gasoline stocks are 6%, or about a full day's supply, above last year's levels. The American Petroleum Institute reported a build in gasoline stocks of three million barrels while the Department of Energy reported stocks rose two million barrels. Both reports indicated gasoline supplies also increased on rising imports and a jump in refinery capacity, harbingers of excess supplies still to come. However, because volatility has been the hallmark of this market, most analysts aren't expecting calm to descend any time soon. Demand could pick up with stronger economic growth. And tensions in the oil-rich Middle East could again flare. "Given the relative ease [with which] rising temperatures in the Mideast can cause spikes in the market, these pullbacks present buying opportunities," Fimat's Mr. Kilduff said. Write to Marie C. Sanchez at marie.c.sanchez@dowjones.com Updated May 30, 2002 9:02 p.m. EDT Copyright © 2002 Dow Jones & Company, Inc. All Rights Reserved