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ENERGY PRICES ARE TRYING TO STABILIZE after several days of extreme and
perhaps inordinate weakness, aided by the massive miss that The Street had regarding crude oil and product inventories. The Street had crude inventories
rising 1.5-2.0 million barrels, and instead they fell a shockingly large 3.888 million! The Street had gasoline inventories rising .75-1.25 million barrels, and instead they rose 1.985 million. Finally, The Street had distillate inventories falling 1.75-2.25 million barrels. They were instead up 0.358 million. Misses here are not as good as mile! In aggregate then The Street had inventories rising 0.75 million barrels… and we have learned to pay greater heed to the aggregated inventory than we have to the individual components… and they were instead -1.545 million barrels and thus quite bullish. Certainly they were sufficiently bullish tobring prices up from their lows yesterday.

For now, we shall blame the confusion over the blocking last week of the main shipping point in the Houston port facility, which remained closed until yesterday. This shall make for even more confusion in the DOE data next week. Over time this will all even out; in the short run it is far… very far… from even Moving on then, “They” will be paying a great deal of attention to energy prices, supplies, demand et al in Davos between martinis, television / newspaper / radio interviews and general hob-nobbing, but perhaps nothing shall be more important than the comments yesterday by Saudi Arabia’s Oil Minister, Mr. Alial-
Naimi, who said that crude oil prices between $70- $80/barrel “are almost perfect.” As he said

The investor is looking at that price; the
consumer is looking at this price; the producer
is looking at this price and everybody is saying
this is great. More importantly, economic
growth is not hampered. That is why I said it is
almost a perfect price…. The biggest
challenge for everybody is to watch for
investments in our business. This kind of a
price will help the decision to invest and keep
the world supplied with the energy they need
for their growth.

He’s right, of course. We find it hard… indeed almost impossible… to argue, and hence we won’t. The only question we have is which price does he mean? Does he mean the nearby WTI crude futures price, or does he mean nearby Brent futures, or does he mean the OPEC basket price. If he means the former, then
prices are spot on the middle of his range; but if he means Brent of the OPEC basket, then they are toward the “cheap” end of the range. Perhaps he’ll shed more light in the immediate future, but for now we cannot image crude falling more than $1-$2/barrel lower, nor rising more than $5-$7:

Mar WTI down 42 74.02-07

Apr WTI down 38 74.56-61

MayWTI down 36 75.16-21

Jun WTI down 35 75.73-78

JulyWTI down 34 76.30-35

AugWTI down 35 76.82-87

SepWTI n.a. 77.30-35

OPEC Basket $71.94 01/26

Henry Hub Nat-gas $5.42

Finally, we do tend to focus attention here upon Nigeria given its stature as an important source of high quality, low sulfur sweet crude to the US. The political
confusion there causes confusion in the energy markets too, and to that end we note that at least for as short while anyway the problematic nature of the Presidency has been laid to rest. As our readers know, President Yar’Adua has been in hospital in Saudi Arabia since mid-November, leaving behind a rather chaotic political situation, made all the worse by the recent tribal/religious strife in the city of Jos where at least 3-4 hundred people were killed. Some in the government wanted the President to cede power to Vice President Goodwill Jonathan, but for now those supporting the President have held sway and have defeated a motion put to the Cabinet that would have transferred power to Mr. Jonathan. How long this new sense of stability shall last is anyone’s guess, for this is, after all, Nigeria and anything is possible. But at least for now there is stability, “un-“stable though it may seem.

- Dennis Gartman/ The Gartman Letter 01/28 / 2010

- For more on interesting comments, you can subscribe to The Gartman Letter by contacting Dennis Garthman: Phone-Fax:or email: dennis@thegartmanletter

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