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Published January 16, 2012, 01:23 PM

Signs point to higher energy prices

News from Tehran, Iran, motivated the early rally in energy prices as the Iranian Supreme Court sentenced the Iranian-American accused of espionage to death and also declared that they would not give in to sanction pressure from Western nations and would continue to enrich uranium.

News from Tehran, Iran, motivated the early rally in energy prices as the Iranian Supreme Court sentenced the Iranian-American accused of espionage to death and also declared that they would not give in to sanction pressure from Western nations and would continue to enrich uranium.

Now, word from Goldman Sachs is that Hess Corp. may shut down or sell off its 350,000-barrel-per-day oil refinery in St. Croix, U.S. Virgin Islands, this summer. They are not making money at that refinery. Shutting it down on top of those that Sunoco Inc. is shutting down on the East Coast should tighten the gasoline supply on the East Coast.

Word is that President Obama is going to put sanctions on Iran so foreign banks wanting to trade with the Fed cannot trade with Iran. This trade sanction against Iran is to go into effect Feb. 29.

Iran’s president traveling to South America to try to rally support. No. 1 on his list of people to visit is Venezuela President Hugo Chavez.

Venezuelan gasoline exports to the U.S. were halted on Jan. 10, but that may have had more to do with refinery issues than politics.

Now, when you look at the gasoline charts, the downtrend line was broken in the last part of December and the seasonal trend is for a rally into May.

Crude oil charts on continuation show an ascending trianglular pattern. The measurement of the triangle projects crude at $113 should the breakout be up (should be). It is my understanding that a $10 rally in crude accounts for 23 cents per gallon in products.

Basis the weekly heating oil, there has been a sideways range since April. Normally, after a prolonged bull move, a sideways range tends to be a resting point before moving higher (must admit that didn’t happen on the soybean charts).

My weekly timing indicators are turning positive. The quarterly data has been in positive mode from some time. It’s interesting that with all the unrest in the Middle East and North Africa and concern over Iran that prices haven’t escalated more. Perhaps the exit of American troops from Iraq has held the market back of late.

Furthermore, the daily heating oil chart has been ranging sideways for the past year. Coming through the top side should project gasoline to $3.20 to 3.60 per gallon.

Now, years ago I learned to watch vehicle sales for signs of economic change. In other words, if vehicle sales slowed one could anticipate a slowing economy/recession nine months later. However, after lots of bad rhetoric about the economy in the fourth quarter, we are now hearing more positive news (I believe to be true).

I may be too optimistic, but I think that the European sovereign debt issue will get settled down and it wouldn’t surprise me if Greece, Italy, maybe Spain and Portugal secede from the European Union.

Ford and Chrysler had record car sales to China last year. In fact, the Chinese government is considering putting restrictions on, or taxing, imported cars. China’s petroleum demand continues to expand, while U.S. refineries slow or close down. This should eventually lead to a contraction of fuel supplies. With seasonals strong for price increases into spring for gasoline and diesel (not to mention that the weather is awesome in the U.S. for traveling and moving products by truck) I would look for prices to move higher.

On the flip side, I would think this warmer than normal winter weather has led to less propane usage. Therefore, if you need to book fuel for spring planting, I would do that into June. I know prices seem high but I just wonder.

Martin of Ag & Investment Services Inc. in Webster City, Iowa, can be reached at 800-527-0051 or email ag_invest@wmtel.net.

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