Alaron Energy Commodity Comment

Following is the oil and ethnaol futures comment from Alaron Trading Corp.

Pipelines are a popping! If it isn’t Valero with a few refinery fires causing the market to come down with petroleum product jitters, now it is pipelines popping out. In what was a very bad day for pipelines actually turned out to be a very good day for energy bulls as crude oil closed above the $60 a barrel area for the first time in 2007. It started with BP in Alaska with another small leak and with their recent run of luck I am beginning to think some of those pipelines were made with Swiss cheese. Then a report that Teppco Partners shutdown a 60,000 barrel a day pipeline for a small leak they found in Indiana. The pipelines moved refined products from the US gulf coast to New York and as the word spread the products like gasoline and heating oil soared. Maybe these guys should hire that Dutch Boy to stick his fingers in theses pipes.

Oh sure the stunning development that Iran would continue to enrich uranium had something to do with the run up. (Alright, at least try too act stunned.) And Iran responded to the 60 day grace period that the UN gave them to think about how naughty they have been by saying that we will continue to enrich uranium and you can’t stop us, so there! Now it’s up to the UN to decide on what to do next. Perhaps they will get really serious this time and threaten to send Iranian President Ahmadinejad to bed without his supper.

Oh, sanctions you say, what sanctions? Will they put sanctions on oil? Well not if Russia and China has a say. Still Europe is starting to get a little angry. We will see if they have the courage to do anything about it.

This all came with a backdrop of rising commodity prices. The market was still in shock by the size of the Japanese interest rate increase as well as a hotter than expected CPI.

Precious metals soared and gold hit a nine month high. The grains rocked as corn reacted to higher oil price. Higher oil prices mean higher ethanol prices which in turn mean higher corn prices.

And OPEC is sitting back and enjoying all the fun as they realize all this intrigue will mean they can stand pat on production and still watch prices rise. And higher oil prices perhaps means higher overall commodity prices as well. If the PPI (Producer Price index) is hotter than expected look out for another big rally.

Of course that’s not the only report to keep an eye on. We get all the petroleum data from the Department of Energy as well as the natural gas data today. Distillates and gasoline should see larger than expected draws and natural gas should show a draw down of about 230 bcfs. I think its about time we get a bullish inventory report surprise.

With the drive to ethanol it is driving real estate as well. Bloomberg News says that corn farms have replaced New York lofts as the hottest properties going. Bloomberg says that, “farmland from Iowa to Argentina is rising faster in price than apartments in Manhattan and London for the first time in 30 years". Demand for ethanol has increased the value of crop land 16% in Indiana and 35% in Idaho and the price of a Soho loft only rose 11 percent. Remember in the eighties when they were practically giving farmland away? Those days are long gone.

And with the rising cost of corn and farmland real estate now we have to deal with rising retail gasoline prices as well. Gasoline prices have risen 3 weeks in a row and surged 5.5 cents per gallon to hit the highest level in about six weeks. The national average now stands according to the EIA at $2.30 a gallon.

We're long April crude on the roll-over from apprx 5835. Leave stop at 5700

We're long April RBOB from apprx 17160 on the roll. Leave stop at 16900.

Buy April heating oil at 15900 - stop 15700.

We're long April natural gas on the roll from apprx 762. Leave stop at 745.

Phil Flynn

Alaron Research Team

800.935.6487

pflynn@alaron.com

www.alaron.com

source article : agreport.com