Energy Futures Update

The main feature to President Bush's State of the Union speech, from a macro approach, was a "call for a diversification of the nation's energy supply".

US will expand its strategic Petroleum reserve from roughly 700 million barrels to 1.5 Billion, however note that this will be over 20 years. Purchasing of the additional supply is scheduled to begin in Spring, assuming market conditions remain unchanged. The Department would need to buy 100k barrels a day.

The market reaction for energy yesterday was bullish, however, today's weekly inventory data needs to be supportive, otherwise some downside could be seen again.
We do not anticipate the cold weather front to be factored into the weekly inventories quite yet, which could point to bearish data this afternoon.

Current levels are pivotal, as the market really is not illustrating any short term bias in either direction. We have elected a wait and see approach to short term trading.
A bullish number sets up for a move towards 58.65, whereas a bearish number could bring about losses targeting the lower end of the distribution at 51.75.