December 31, 2009

Refiners have been managing inventory so well that while crude was going up the equivalent of 4.2 cents, gasoline was up 7.3 cents and distillate was higher 8.35 cents. The cold winter has also helped to use up more distillate. OPEC increased production in December. Demand may be increasing in Asia, not necessarily in the USA, and that may cause prices to rise anyway while we look for good economic news here.

For the week crude +$1.78 to $79.83, gasoline +7.3 cents to $2.063, distillate +8.35 to $2.1235.

Happy New Year!

December 30, 2009

Concern about the demonstrations in Iran and the new EIA inventory reports that show draws for crude and product led to small increases futures for crude and product. Refiners have done a good job of anticipating demand and have continued to pare down inventory. Production was up for the week 0.7% while imports were up 4.2%. However, total product supplied was down 1.6% for the week and may indicate that demand is not really on the rise. The dollar's strengthening probably mitigated any greater upward movement.

For the day, crude +$0.56 to $79.47, gasoline +2.1 cents to $2.036, distillate 9.9 cents to $2.1142.

December 29, 2009

Even the slightest trading movements are a big deal this week as it is the lowest volume trading week. With this as background, any movements this week that contrast with the fundamentals of low demand and over supply can be changed very quickly next week. There are still two days of trading this week and they will be affected by the release of inventory numbers tomorrow. Draws are expected in crude and distillate and both futures have risen steadily for over a week. How much last minute LIFO moves will tend to drop futures prices these last couple of days also remains to be seen.

For the day, crude +$0.11 at $78.91, gasoline -0.33 cents at $2.0154, distillate +3.03 cents at $2.1043.

December 28, 2009

Crude ascended to heights not seen since November 18 as early retail numbers demonstrated growing consumer confidence in the economy by rising3.6 % over last year and China announced improved economic performance over expectations. The cold weather is also drawing down distillate supplies and should improve both distillate and crude futures performance. However, the report that 6% of the world's deadweight tonnage is storing crude is no small number. As the storage contracts end over the next year traders and other owners of floating inventory will be flowing crude into the market and applying downward price pressure.

Also assisting to move prices up are the violence in Iran and the Russian threat to cut off supply to the Ukraine, the Czech Republic, Slovakia and Hungary.

For the day, crude +$0.75 to $78.80, gasoline +3.4 cents to $2.074, distillate.

December 23, 2009

For the first time since 12/3 crude broke through the $76 barrier. In its regular week advice, EIA announced greater than expected draws on crude and products inventory and analysts took this to mean that economic activity was increasing. The inventory decrease has more to do with end of the year tax preparation by refiners as they work the LIFO layers of their inventories. Refiners have also been using up inventories and generating as much cash as possible because of the year's end only next week.

The low level of inventory and imports has nothing to do with supply disruptions as it has in other years and everything to do with year end tax prep and also with the depressed level of crack spreads. Refiners have cut back on utilization and imports, are layoffs not far off if spreads and demand don't start improving?

For the day, crude +$2.42, gasoline +7.33 cents, distillate +6.4 cents.

December 22, 2009

The dollar dropped today and crude rose. Trading is still low, less than 50% of normal volume and the traders still trading are playing it cautious. There is obviously lots of talk coming out of OPEC but it may not really matter because of the cheating. The market is poised for news of crude and product inventory draws when the EIA makes it weekly announcement tomorrow.

For the day, crude +$1.38 to $74.11, gasoline +1.69 cents to $1.8865, distillate +0.4 cents to $1.9415.

December 21, 2009

Lots of noise and static about where the market is headed. Today was one day where there was a lot of talk but the action turned out to be sideways and down and little. The dollar is trending stronger and there is still a tendency to try to forget that demand has not increased in any measurable way while huge inventories around the world are not being drawn down. Today, even the attack on Nigerian facilities, the closure of the Iraqi pipeline to Turkey and the continued bullish talk from OPEC could not raise prices. The true indication of how OPEC really feels comes from the quota compliance percentage. Compliance was at 58% last month, the lowest number in some time. It is also good to remember that many traders are out till after the holidays and trading might be light until the full crew returns.

For the day, crude -$0.41, gasoline - 2.42 cents, distillate 0.95 cents.

December 18, 2009

First the news was dire. the Iranians had seized an Iraqi oil well in a disputed border area. Prices immediately went up above $74. Facing a weekend where events could move prices even higher before the next trading session it was obvious that prices would go up. Then the news came out that the well had been seized a couple of weeks ago. Also traders noticed the dollar ascending. Thus crude settled only 45 cents higher than yesterday while gasoline was up 4.35 cents and distillate barely increased 0.3 cents.

As we are now approaching the end of the month with fewer trading days because of the Christmas and New Year holidays and likely slow trading on the eves of those two holidays, the contango effect of large inventory stock piles around the world has significantly lessened lately from more than $2 on the later month to less than $1.50 today.

It is interesting to note that crude made a moderate gain the past week of $3.46 or 8.23 cents a gallon while distillate in the coldest season only rose 4.9 cents to $1.955 as gasoline increased 6.24 cents to $1.8938.

December 15, 2009

The losing streak ended at 9 days as crude rebounded by the end of trading today on news of increased industrial production and OPEC jawboning about production and prices. Nothing has changed about the huge stock piles of crude all over the world including floating storage and no quota is safe with OPEC members. The dollar continues to strengthen and until demand actually rises, it will be hard to see prices go up much. Tomorrow's inventory will reveal all.

For the day, crude +$1.30 to $70.84, gasoline +2.41 cents to $1.8524, distillate +1.1 cents to $1.8524.

December 14, 2009

The headlines were all the same, "Crude falls for the 9th straight day". In fact it was the lowest close since the last days of September and for the 9 trading sessions crude has fallen 12%. The report on declining European industrial output accentuated the drum beat of huge crude stock piles around the world. This large inventory and the continued slow demand for oil products are also responsible for contango where near month futures are lower priced than months further out.

For the day, crude -14 cents to $69.54, gasoline -.31 cents to $1.8283, and distillate -.47 cents to $1.9014.

December 11, 2009

Early in the trading day IEA forecast higher demand and there was some upward movement but the dollar continued its upward rise and newly released retail sales also showed upward movement and crude and product fell for the 8th straight day to show a close for crude below $70 for the first time in over 7 months. Retail sales may have risen but demand for fuel did not no matter what IEA forecasts. The huge stock piles of crude in floating storage would probably more than make up for any increased demand in 2010. What is also worrying traders is the large inventory of distillate even amidst all of this cold winter weather. No one wants to be holding high cost futures contracts or above market physical product next year if demand remains weak.

For the week, crude -6% or -$6.06, gasoline -7.6% or -15.06 cents, distillate -6.6% or -13.51 cents.

December 10, 2009

The market did not correct itself today and crude futures fell for the 7th straight day to their lowest level since 10/07. The movements of the dollar did not matter today as the world's huge inventories are lurking out there and no one wants to be holding high priced product if the market starts to really reflect fundamentals. Cushing, OK, storage is holding 47% more product than a year ago and are near historic highs. Also, floating storage estimates are for a 3% growth by year's end. As we approach year end, statistics such as the 4.1% drop in demand, lowest in 12 years, are receiving greater recognition. This may lead to a greater sell-off of futures and a further drop in price beyond $65, perhaps beyond $60.

For the day, crude -23 cents to $70.17, gasoline -3.1 cents to $1. 8317, distillate -1.4 cents to $1.90.

December 9, 2009

Crude supplies along the Gulf Coast declined 3.8 million barrels which would normally trumpet price increases but the other fundamentals dictated that NYMEX futures fall and fall they did. Unexpectedly, gasoline stock piles grew 2.25 million barrels and distillate increased 1.62 million barrels. In a move to get rid of expensive inventory being held at refinery storage, refinery utilization rose to 81.1% but this is still historically low. This is because demand numbers again dropped by 3%. Utilization also went up despite crack spreads falling by 12%. Analysts are now saying that traders are betting on lower prices and are selling. One of the technical traders was quoted as saying that crude was on the way to $65. Crude certainly did not take long to get out of the $75 - $80 trading range. From the 438th anniversary of the Battle of Lepanto to 2 days after the 68th anniversary of Pearl Harbor are the lows for this period. We may reach another low tomorrow as this is now 6 straight days of decreases.

For the day, crude -$2.57 to $70.40, gasoline -6.8 cents to $1.8625, distillate -7.7 cents to $1.914 (think of all that snow and blizzards in the mid-West).

December 8, 2009

The dollar rose forcing traders to think fundamentals and crude and products futures prices fell. The most overbearing fundamental component is supply and the world is awash in crude and the US crude inventory is estimated to be higher by 500,000 barrels while gasoline supplies are also estimated to be 1,750,000 barrels higher, the gasoline number is the highest since mid-April. Since we are already in the winter cold temperature season distillate supplies were down 750,000 barrels. The other overbearing fundamental factor is demand and that remains weak.

The contango spread between January and February increased another 11 cents to $2.03 and this is indicative of the huge stockpiles of crude around the world.

For the day, crude -$0.90 to $72.97, gasoline -1.6 cents to $1.9305, distillate -1.9 cents to $1.9305.

Tomorrow is inventory report day.

December 7, 2009

For a 4th straight day day crude and products futures prices declined. The trend to watch is the expanding contango spread between front month and the next month. The difference between January and February is now almost $2 and growing. The reason for the swelling is the large amount of worldwide inventory. Refiners and other large users are cutting back on contracts and purchases in an attempt to prevent huge losses in owned inventory of crude and product. It did not help that Fed Chairman Ben Bernanke was talking down the economy today by saying that it faced "headwinds."

For today crude -$1.87 to $73.87, gasoline -3.55 cents to $1.9465, distillate -3.17 to $2.0095.

December 4, 2009

The market affirmed today that crude will move inverse to the dollar. The dollar moved up today and crude and products all fell to their lowest level since 10/14. Early on the infinitesimal downward movement of the unemployment rate led traders and analysts to buy crude and products up but the dollar improved and the supply and demand elephant in the room reversed the upward movement.

OPEC is making noise that production quotas will not be changed but Nigeria is said to be cheating significantly. No matter, the planet is awash in crude as ULCCs and VLCCs are said to be full and tethered to their moorings, Mediterranean and otherwise.

For the day, crude -$0.53, gasoline -1 cent, distillate .3 cents.

December 3, 2009

There was a lot of talk about the economy, the jobless rate and the dollar today but in the end crude and products barely moved. Traders and analysts forgot that there were only three reporting days during the Thanksgiving holiday week and made a big deal about the perceived fall in unemployment claims. The really important data were the increase in crude inventory and the continuing decrease in demand. Commodity traders keep talking the economy up but the fundamentals of supply and demand are the inconvenient truths at this point.

Crude closed -11 cents at $76.27, gasoline +.49 cents at $1.9911, distillate +1.35 cents at $1.9911.

December 2, 2009

Inventory levels surprised everyone by building 4.7% highlighted even as imports fell 6.1% and demand also dropping 3.2%. This only emphasizes the overabundant amount of worldwide inventory that continues to grow because producers are producing more to take advantage of the high prices for crude. Added to this is the decrease reported in the Index of Manufacturing Activity to 53.6 from 55.7 that contrasted greatly versus the positive China manufacturing report yesterday. Additional negative news included 169,000 jobs lost in November and refinery utilization down again 0.6%.

Crude fell $2.12 to $76.38, gasoline down 6.5 cents to $1.9862, and distillate dropping 5.2 cents to $2.0305.

December 1, 2009

Crude rose 1.2% or $0.90 as China's manufacturing purchasing index and US manufacturing output climbed and, more importantly, the dollar fell. The gorilla in the market is still very evident as there was talk of the high crude inventories world wide even though it is expected that tomorrow's inventory report will show a draw. With prices going up this year over last fall, it was not unexpected that OPEC showed an escalation in production.

In an announcement that affects price at the street level and commodity prices in general the EPA delayed the imposition of E15 regulations. Refiners and automakers are cautioning about the problems caused by any ethanol blend greater than 10%. There is also considerable customer worry about ethanol and there has been market resistance in certain markets.

Street prices continue in the $2.40 range. One can only be thankful in Jonesboro as I saw $3.10 prices in Chicago over the weekend and $2.70 in Chicago's southwestern suburbs.

For the day, crude closed at $78.50, amazingly Brent continued its climb to $79.67, gasoline ascended to $2.051 and distillate mounted to $2.0824.

November 30, 2009

The market was back almost to where it closed last Wednesday before it was reported that Dubai wanted a six month reprieve on paying on its $80 billion debt for building houses of sand in the emirate. After falling almost $2 on Friday, the markets were calmed about how Dubai was going about getting its debt problem resolved or did Abu Dhabi agree to fully back the debt? The other reason prices jumped today was that Iran seized some Britons but that only shows that the Iranians are making a statement about their nuclear program.

For the day, crude +$1.85 and Brent was up $1.74 after rising above NYMEX on Friday. Gasoline really was high flying today at 7.4 cents at $2.000 while distillate was +7.4 cents at $2.0175.

November 24, 2009

Fundamentals were weighing heavily on the market today. Producers, refiners and large users sold their futures to avoid holding on to high priced inventories in a market with continuing deteriorating demand. The speculative traders have been talking up the market with talk of the improving economy despite the continuing job losses and falling demand. Facing $80 in the near term, industry users decided to start selling so as not to have expensive product sitting in tanks or tankers. Then today the Commerce Department revised GDP downward 20% and overnight Shanghai stock market fell at news that China's banking regulators were admonishing banks to stick to credit requirements including capitalization. Industry traders had to protect their companies.

For the day , crude declined $1.62 to $75.82, gasoline fell 4 cents, and distillate was down 2.9 cents. Tomorrow is inventory day, real action in the markets will await the government's report.

November 23, 2009

After all the excitement last week, today's trading day went sideways. Crude rose $0.62, gasoline stayed the same, and distillate fell 0.2 cents. This happened despite the dollar's decline and the Iranian military exercises which are being conducted to make the West and Israel uncomfortable. Unless there is some really big news event this week, the Thanksgiving holiday will restrain trading action.

November 20, 2009

Valero announced it will premanently close the 210,000 barrel per day Delaware City refinery. This follows Sunoco's earlier closure of the Eagle Point refinery and Western Refining's shutting down the Bloomfield refinery. Some industry executives are now saying that US gasoline consumption will never reach 2007 levels again because of the push for alternative fuels and stricter fuel economy standards. The real reason that these refineries were closed, however, is deteriorating levels of demand, down 3.8% this year compared to last year. The reason that crude futures are even this high has to do with speculative demand and not fundamentals. This is why it is hard to believe that the economy is turning around when demand continues to crater.

The shuttering of the Delaware City refinery is instructive because it fits the Valero strategic plan in that it processes heavy sour crudes. Six years ago at an OPIS supply summit in Vegas, when I was struggling to find supply in the Rockies, then Valero CEO Bill Greehey boasted he was buying heavy sour crudes for a discount of $12-$16/bbl and that all Valero's refineries were configured to process the heavy sours. Today, the discount is not enough to make Delaware City profitable. And as an Indy Valero has no crude sources. Refinery utilization is now below 80%.

We may be looking at a return to $60 crude if the economy continues to falter no matter what the Government says about 3.5% growth in the 3Q. A quick count of the three refinery closings shows a loss of 1,050 jobs not including contractors and suppliers to the refineries.

For the day, Crude -$0.72, gasoline +1 cent, distillate, awash in inventory, -2.2 cents.

November 19, 2009

$80 seems to be the new ceiling for crude. Since October 19 there have been numerous sessions that ended near $80 including this past Tuesday and Wednesday. The inexorable down draught of supply, demand, inventory, and utilization collide daily with the stock market and the dollar. Fuel demand is down 4.1% from a year ago. Inventories are 5.3% higher than a year ago and 3.5% than the five year average. Distillate stocks in particular are the highest they have been in eleven years. Obviously one of the reasons for falling demand is the high jobless rate now above 10.2% with an estimated 17% if you take into consideration those no longer looking or those who are underemployed and working part time or for significantly less than they used to.

For the day crude closed -$2.04 at $77.44, gasoline -4.1 cents at $1.969 and, no surprise, distillate with such high stockpiles -5.1 cents at $1.969.

November 18, 2009

The dollar fell, imports slumped, inventories declined, and refinery utilization dropped again but prices barely rose today. Crude was +$0.34, gasoline +$0.005 and diesel actually shrank -$0.011. Traders figured that last week's storm was responsible for falling inventory and imports and since utilization was down, no matter what was being said about the growing economy, demand was down 2% for the year.

November 17, 2009

Crude ended Tuesday's trading $0.64/bbl higher at $79.14 led by stronger demand for distillate that rose 2.4 cents to $2.0584 while gasoline followed suit 1.9 cents closing $2.0052. This happened despite a strengthening dollar but with a forecast for declining inventories. OPEC now says that production will not increase but there will be greater emphasis on quota compliance.

All await tomorrow's inventory report.

November 16, 2009

NYMEX crude climbed 2.6% from Friday's close to Monday's close or $2/bbl. Japan's 5% GDP increase and improved US retail sales for October plus the fall of the dollar led to the largest rise in six weeks. Gasoline rose 6.6 cents and distillate was also up 6.5 cents. Fundamentals of supply and demand were not in evidence in the buying of futures today.

OPEC says it is happy with prices in the $75 - $78 range.

November 13, 2009

It may be Friday the 13th but the news was not scary on the futures front. The underlying reasons are somewhat daunting and if you do straight line extensions to next year it can be chilling but the market is at work and adjustments will be made long before then.

Crude descended today 25 cents from yesterday but only 36 cents from a week ago. All attention was focused on the highs of the week reached Wednesday and the monthly highs, $81.84/bbl, reached October 21st.

Distillate also dropped 1.4 cents from yesterday and last Friday while gasoline fell 1.8 cents from yesterday but actually rose 1.4 cents from last Friday's close. There is some concern that crude is more than double last year's price and gasoline is closing in on $3. However, gasoline prices are higher because crude is that high despite fundamentals and refinery utilization and imports are down.

November 12, 2009

Crude declined to its lowest level since October 14 at $76.84 as inventories were 1.76 million barrels more than expected and consumption fell 4.3%. Distillate also declined to its lowest since 10/14 to $1.9828 and gasoline dropped to $1.9383. Refinery utilization decreased 0.7% to 79.9%. In another sign that crude prices may stay in the new range of $75 -$80 range, OPEC announced that it would be increasing production at the next meeting. Fundamentals were all the story today but tomorrow is another day.

November 9, 2009

The threat of storm damage to Gulf facilities and the faltering dollar raised crude futures $2.77, gasoline 8.46 cents, and distillate 8.41 cents. Street prices dropped 10 cents over the weekend, with gasoline selling at $2.239.

OPEC announces increased production and this should bring prices crashing as no sustained demand growth can be found anywhere in the market despite talk of economic growth.

November 6, 2009

Looking back a week, crude really only declined $0.15/bbl even though it dropped $3 from yesterday. Gasoline dropped 8.46 cents/gallon from yesterday's close and 5.36 cents compared to a week ago. Distillate also decreased 7.72 cents one day and 2.24 cents one week.

10.2 % unemployment and even more discussion of further refinery shutdowns will likely lead to further falls in futures pricing despite all the talk of an improving economy.

November 5, 2009

Crude dropped for the first time in four trading sessions and products followed suit. The crude decline was a barely measurable $0.05/bbl while gasoline dropped $0.003/gal and distillate decreased $0.012/gal. The market seems unsteady at $80. Tomorrow's economic news will affect prices but how much remains to be seen.

November 4, 2009

Crude inventory fell 3.9 million barrels, distillate declined 400,000 barrels and and gasoline dropped 300,000 barrels. The tiny uptick in crude futures to $79.80 and the equally small decreases in gasoline, 0.75 cents, and distillate, 0.12 cents, actually demonstrates that traders and analysts are worried about the economy, unemployment and demand deterioration, but now knowing that refinery utilization fell 1.2%. Earlier in the day, upbeat economic data was released and the dollar weakened but it may be that supply and demand fundamentals are now foremost in people's awareness.

November 3, 2009

The market must not have read the report on falling gasoline sales and the highest gasoline prices in over a year as crude rose $1.57/bbl and distillate followed suit by 2.9 cents and gasoline was also up by 1.13 cents. Prices are up over last year even on a trailing 4 week basis and now leads to speculation about what price will lead to demand destruction, $3/gal or $3.5/gal or some number below $3/gal.

The government's inventory report is scheduled to be published tomorrow and that should decide the market's movement for the rest of the week.

So far nothing in the market suggests that the climate bills being discussed have affected the markets.

November 2, 2009

Manufacturing was up in the USA and China and this led to a muted upward movement for crude and product today. Crude was up $1.08, distillate increased 4 cents and gasoline rose 3 cents. Street fell 4 cents. Analysts cautioned that increased manufacturing activity was a a good sign but lower and overabundant supply would inevitably lead to falling prices.

OPEC meanwhile announced escalating production. Officially this is touted as being responsible for keeping prices within the $80 range. Another way to look at this increased production is that cheating might be rampant.

October 31, 2009

It is All Hallow's Eve and we should look not just at the daily movement but the week's and the month's movements as well to see the trends.

Crude fell $3.04 in one day, lost $3.34 over a week but rose $6.39 over the September 30 close. This looks like definite movement. There is much talk of macroeconomic trends such as the loss of consumer confidence but demand and supply fundamentals had a say with refinery cutbacks and lower imports.

Gasoline fell 5.9 cents Friday over Thursday, declined 8.2 cents from last Friday, and rocketed 23.4 cents for the month. That is 8 cents better than what crude increased for the month if you make the barrel to gallon adjustments. The refinery strategy of cutting back on utilization seems to be working.

Distillate had a one day fall of 5.4 cents, a one week loss of 6.3 cents, but also gained 16.4 cents for the month. Here the numbers say that distillate is following crude. I would have thought there would be greater increases here because winter is around the corner and colder weather is expected for this winter.

October 29, 2009

What the market takes, it gives back. Yesterday, crude fell $2.34 and today it rose $2.64. The catalyst for the upsurge was the economic report that announced a 3.5% growth in GDP. Jobless numbers were also down minimally. This may be a jobless recovery and, if so, it would also be a demand-less growth economy. People at work and confident about tomorrow spend money and some money will be spent on fuel. No job, why take the road trip? Since so much of driving is discretionary, how much will be cut back?

Gasoline rose 3.2 cents and distillate also rose 6.2 cents.

The announcement by Argus that its Sour Crude Index will be adopted by Saudi Aramco to set prices for oil sold in the US is a move against the NYMEX benchmark based on the Cushing, OK, barrels. Is this movement away from Cushing and following a Gulf benchmark going to be able to help measure risk against volatility?

What about NY Harbor pricing for heating oil that is used to index all distillate?

October 28, 2009

Crude dropped $2.34, gasoline fell 8.4 cents, distillate decreased 5.75 cents after gasoline supplies rose 1.62 million barrels and crude supplies grew 800,000 barrels. Distillate is following seasonal inventory trends and increased but followed crude and gasoline futures prices up. Capacity was up 0.7% and gasoline production was 4.5% higher. This inventory and demand trend is what is worrisome to analysts and traders and begins to dampen the movement towards higher prices.

October 27, 2009

$1.19 up for crude, 2 cent increase distillate, 3.7 cent rise gasoline. Street price went down 6 cents yesterday and back up 3 cents today. Don't understand why street moved the way it did.

API forecasts draw on crude and products. Market paid some attention but everyone awaits tomorrow's government inventory report as the market takes greater account for the government numbers.

October 23, 2009

Crude fell for the second straight day going in inverse direction to the dollar but still rose 3.2% over last week's ending price. Distillate also lost for the second straight day but still was 2.8% over last week's Friday close. Gasoline rose above yesterday's loss and is 4% above a week ago. It was the decline in gasoline inventory that helped to cement the rise of crude and gasoline. The inventory decrease is not due to increased demand but because of reduced supply due to lower refinery utilization.

Interesting article in today's WSJ concerning falling natural gas prices and drilling that leads to lower production prices for crude. This helps producing companies but not refiners. Crack spreads are still lower than profitable which is why refiners are reducing utilization.

October 22, 2009

Crude down 99 cents, distillate minus 4.2 cents, gasoline falls 4.4 cents. New unemployment figures were up and the dollar was down. No talk of fundamentals only market movements. Street prices also went up 4 cents. OPEC talking about increasing production.

October 21, 2009

The significant decline of gasoline inventory pushed crude and product futures higher. Gasoline inventories recorded a tripling of the expected draw while crude supplies rose and distillate experienced the estimated draw. The fall in gasoline inventory is not attributed to rising demand but rather the decrease in refinery production and lower imports. Demand actually fell 1.4% last week and was the lowest in 5 months. The falling dollar is also given consideration in crude's rise.

October 20, 2009

Lots of people wished but very few believed that crude would actually break the sideways track of $65-$75, especially with the kind of strong upward push as we've seen in the past 9 days. The 45 cent drop at settlement time was greeted with almost relief by analysts who don't quite believe the good economic news. Tomorrow's inventory report is forecast to be a crude build and a product draw.

As noted in an earlier post, there seems to be significant storage of crude in supertankers. However demand has not shown any real signs of positive movement and refiners are not yet showing any appetite for increasing capacity.

October 19, 2009

The trend is definitely upward. Just 2 weeks ago, crude was settling at $69.66 and could have been headed any way including sideways but 8 trading sessions later the price is $10 higher at $79.60 and finished the third straight day above the $75 line. Distillate, as expected, is also up significantly 24.62 cents in the same time period while gasoline has risen 22.11 cents. Locally, street prices have risen 25 cents in the past week including 10 cents over the weekend.

Some news affecting prices:

• more supertankers are being chartered, no word yet on whether these supertankers are slated to move cargo or to serve as floating storage.
• 3Q economic data including industrial production is positive.
• China claims 9% 3Q growth.
• Demand is still not robust. Inventories are low because of fewer imports and refinery shutdowns. Economic growth and falling unemployment are the keys for greater demand.
  

October 16, 2009

The 31 cent increase in crude to $77.83 solidified an 8.5% ascent the past week. Technical analysts are now talking about $85 crude. Gasoline rose 19.8 cents or 11.2% in the same time frame. The draw on gasoline inventory last week has energized the market for gasoline and driven crude and products up. Despite this being the middle of October distillate almost seems in slow motion and moving in tandem with crude rather than being the prime mover of the market the way it normally is at this season. The draw on distillate inventory was so much smaller than gasoline's that inventory levels are still higher than the average of the last 25. The market may be misreading fundamentals because demand remains weak and only supply has been cut.

Listening to Los Angeles radio announce the average gas price in America's second largest city is at $3.02 made me appreciate the best local price at $2.26. What a disparity between the Gulf and the West Coast.

October 15, 2009

A decline in gasoline stocks powered a 3.6% increase in crude futures to $77.52. The decrease could have been foreseen as refineries have been idled due to deteriorating demand and unprofitable crack spreads. Refinery utilization is at 80% and crude imports are also down. Cracks are just above $5.

Distillate stocks also decreased but remain at 25 year highs. Gasoline followed crude and jumped 9.2 cents while distillate was up 7.8 cents.

October 14, 2009

Apologize for stating that inventories would be revealed today. Columbus Day, Monday, was a holiday in New York and EIA must also have taken the day off. Inventory will be reported tomorrow. Anyway, no surprise as street prices here climbed up several rungs on the ladder by 15 cents. Talk about waking up with a vengeance.

Lots of talk about how technicals are now pointing up to $78 now and then they'll point to $80 and then $85. Crude reached $75+ before settling at $74.81. I am not sure that is the real path because of inventory but we'll know better tomorrow. This crude futures price is still in the $65 - $75 range but there is irrational exuberance from traders about where prices are headed.

Distillate climbed 2 cents and gasoline was up 2.3 cents.

October 13, 2009

The official jobless rate is 9.8% and if the underemployed and those no longer looking are included in the unemployment statistics the jobless rate would be over 17%. Refiners are shuttering refineries because demand is declining and somehow traders and analysts are talking about an improved economy and trading up futures prices. Crude reached a 7 week high of $73.79 and distillate ended at $1.9146 and gasoline closed at 1.8215.

OPEC is doing its part to raise prices and has once again revised upwards its demand forecast for 2010. Technical experts are talking about resistance at $76 if the $75 level is pierced. Tomorrow's inventory numbers should give us an idea of where prices are headed as the Energy Department is forecast to show increased inventories of crude and gasoline. Inventories of distillate are higher than they've been for over 26 years.

Interesting note on street prices here as there was no movement. With all the rainy weather I wonder if the USTs were filled up over the weekend and retailers haven't yet refilled. Cooler wet weather in the north may mean more distillate use but in the south it may mean just less driving.

October 12, 2009

Despite mixed economic signals, crude rose 3% to the highest level in almost 6 months at $73.25/bbl but still remains within the $65 - $75 range in which it has traded the past 3 months. The IEA is forecasting increased demand for the rest of the year and into next year. It is hard to understand this optimism when Valero and Sunoco are shutting down refineries because of decreased demand and uneconomic crack spreads. There are some industry experts predicting crack spreads of $5 - $5.50/gallon at the start of next year and those margins are not tenable. Independents will be especially hard hit.

Distillate futures increased 5 cents and gasoline was higher by 3 cents. Street prices in the area did not move over the weekend although my grocery store loyalty card enabled me to buy gasoline at $2.059 yesterday.

October 9, 2009

Today is the 1277th anniversary of the Battle of Tours. Charlemagne's grandfather, Charles the Hammer and an army he raised by confiscating church property, defeated the army of the Umayyad emir of Al-Andalus, Abdul Rahman. The Hammer followed up with two campaigns that drove the Umayyads out of the Frankish lands for good by 739. As with the battle of Lepanto that occurred 832 years later, the winning army was greatly outnumbered, perhaps 3 to 1.

Back to today's news, crude fell 85 cents or 1.2% from yesterday's close but still gained 2.1% over last Friday's close. Distillate dropped half a penny and gasoline decreased 2.21 cents. The dollar's strength was blamed for crude's slight decline. Street prices only fell 3 cents this week, likely reflecting the fact that prices are artificially low in this sub-market.

October 7, 2009

A historical diversion as today is the 438th anniversary of the Battle of Lepanto when the greatly outnumbered Spanish, Venetian and Genoese forces defeated the Ottoman fleet. The Spanish general Don Juan of Austria was actually German (his mother was Bavarian) and was only 24 years old, having been appointed to his post mostly because his half brother was the Spanish king, Felipe II. Following up on the unsuccessful siege of Malta where the last of the knights made their great stand, this meant that the Mediterranean would remain open to European commerce. However, the cross-Atlantic trade was already more valuable to Europe than the trade routes going through Asia.

Crude fell more than $1 while gasoline dropped 4 cents and distillate declined 3.25 cents. Crude inventories decreased significantly but gasoline inventories were triple the forecast and distillate stocks are higher than they have been for over 26 years. The fall was actually $2/bbl as the early trading drove prices up to $71.76.

Refinery utilization was up slightly and seemed to indicate that refiners thought demand would be greater than it was. Even the technical analysts were saying that the trends pointed downward. The contango situation also encourages holding on to stock but there is a cost to holding inventory.

Not sure if EIA is being optimistic or unrealistic as they issued an upward revision to the demand forecasts for the remainder of 2009 and for 2010.

October 6, 2009

Crude remains stuck in the $65 - $75 range that it has been in since early August. The remarkable thing about product though is that gasoline is now 30 cents cheaper for the same price of crude while distillate is 7 cents below what it was in early August. This must be the effect of high inventories and declining demand. The day to day movements are great and some people make money playing the market in its ups and downs but if retail prices are falling and crack spreads are not really rising, nobody is making money.

It should be very interesting to find out inventory levels tomorrow. Also, the markets reaction to those levels.

October 2, 2009

Crude dropped 70 cents, distillate fell 3.15 cents, and gasoline declined 1.70 cents on news that unemployment increased unexpectedly. The talk of high unemployment recovery is really talk of decreased economic activity because unemployed people ahve little if any discretionary money and therefore they are not spending money. The continuing fall of distillate is a bearish economic indicator especially as we approach winter months. Distillate power trucks, trains and planes that move people and goods.

Interesting counter comment from ExxonMobil CEO Rex Tillerson about OPEC not being in as much compliance as was reported yesterday. Tillerson says that rather than being 82% compliance OPEC is in the 65% neighborhood because as prices approach $75 the temptation to cheat increases. Cheating would seem to be counterintuitive as it inevitably leds to oversupply and falling prices.

October 1, 2009

Crude moved sideways today while both products rose around 3 cents. Crude fell because of anticipation of a bad unemployment report tomorrow. Gasoline rose since demand seems to be increasing. Distillate rose despite the news that demand is declining and inventory is higher than any time the past 25 years. It is possible that the distillate crack will be lower than anticipated and production will be lower to meet demand and not continue this high level of inventory.

Of greater concern should be the news that independent refiners may fail to meet their credit requirements because of slumping demand and low crack spreads. It was bad enough that profits for the 3rd quarter were down 85% from the same period a year ago.

OPEC lived within its quotas for the second straight month leading to speculation that OPEC members find $65 - $75 pricing amenable.

September 30, 2009

As this was the end of the month, traders did not really need an excuse to move prices up but the large decline in inventories made trading up a little easier. Analysts point not only to the big increase in inventories but also to the improving economy, including figures from China and Japan. If you remember last month the Chinese adjusted their previously announced economic results and so I remain unconvinced about the improving world economy. The improved economic numbers analysts are talking about are GDP negative nos. 6.4% in 1Q and 0.7% in 2Q. Demand for fuel is still down. Losing less is still losing and that is not necessarily good news.

Today's numbers: Crude +$4.06/bbl, gasoline +9.44 cents, distillate +10.3 cents. Street prices should follow the upwards movement soon but the lag may take longer as demand is down and most marketers will drain their tanks before raising prices.

September 29, 2009

NYMEX and Brent crudes hardly moved today from yesterday's close while distillate showed some seasonal activity by rising half a cent while gasoline dropped a quarter of a cent. Still lots of fear that tomorrow's release of inventory numbers are going to be further proof that demand is down and declining. Crack spreads are still ascending glacially and are now at $5.73. National price of gasoline is $2.478 but locally the best price is $2.089. $2.478 is the lowest level since July 4.

September 28, 2009

Crude rose 50 cents today and both gasoline and distillate increased one cent. Though prices increased, analysts and traders were more worried about high levels of inventory for crude and product. Bloomberg quoted a technical analyst who opined that if gasoline breaks through the current support level at $1.6053, the next level of support would be at $1.5823 but at that point who knows the real level of support. This is really a question of supply and demand and supply is plentiful while demand has declined. Only increased economic activity and the greater demand thus incurred would spur price increases.

Wednesday's inventory report and the market's reaction should be interesting.

September 25, 2009

There was a six dollar decline in futures prices the past week including three straight days of losses that cemented this downward trend. Following crude were weekly decreases of 15 cents for distillate and 20 cents for gasoline. Street prices here have not yet followed crude or RBOB to the extent they have fallen but we'll find out where street is headed over the weekend.

Strange thought of the day is Goldman Sachs predicting increased demand the rest of the year. Strange because demand continues to deteriorate and the latest report from the manufacturing sector also shows a slowdown. Technical analysts are now talking about support levels in the lower $60's. Is Goldman just trying to talk up the price?

September 23, 2009

If there is a lag between economic activity and fuel demand, this must be it. Economists still say that the economy is improving but fuel demand deterioration continues. Inventories of crude and products are at unexpectedly high levels but demand numbers have been down for over a year and continue lower even with lower imports and refinery utilization. The $3 drop in crude and the 9 cent fall in gasoline as well as the 5.5 cents decline in distillate are the real harbingers of where the economy. It wasn't that long ago that refineries were in the 90%+ utilization and imports were rising as were prices. However, it should be noted that prices are still in that $65 - $75 band. Fundamentals are in charge now but will they be reasons for further decreases or will there be reasons for the analysts and traders to get prices to go higher?

September 22, 2009

The dollar fell and stocks rose, therefore crude increased $2.21/bbl while gasoline rose 4.38 cents and distillate was up 6.33 cents. Crude imports are down and so are refinery runs but inventories are projected to be higher for crude and product.

Merrill Lynch has floated a balloon with a forecast of $10 crack spreads for heating oil despite current spreads around $4.65; wishful thinking or reality based? Meanwhile Saudi Aramco notes that 4 million barrels per day oil fields may remain idle. Crack spreads are going anywhere up unless even more fields are made idle.

Street prices did not move.

September 21, 2009

$2.84/bbl drop in crude today while distillate fell $0.0833/gal and gasoline was down $0.0912/gal. Three days of crude decreases and two days for product falling lower. Talk of the dollar's direction overlooks continued demand deterioration. 3% decrease week to week is significant and all the talk of the dollar and the economy diverts attention from the fundamental problem facing the refiners and marketers: how do you profitably replace lost demand?
Street prices fell over the weekend by 3 cents.

September 18, 2009

Futures are poised to go back down. Crude fell 37 cents, distillate dropped $0.008, and gasoline decreased $0.014. Gasoline street prices fell another three cents.

Ample supply is on traders' minds and even the scheduled refinery maintenance and decreased production will not overcome supply that is this long. For the moment the strengthening dollar does not help but it should still be noted that price levels are still $3+ higher than last Friday.

September 17, 2009

Crude barely rose today above yesterday's close, moving up thirty cents. Distillate rose two and a quarter cents while gasoline increased a penny and a half. Street went up eight cents.

Interesting market talk as as some technical traders talked about distillate going to $2.16 in October, not out of the realm of possibilities only because of the coming cold weather. The double bottom analysis points to two $1.70 price points in the last couple of weeks.

The real news is three days of upward movement even if the last day's increase is barely a move.

September 15, 2009

Lot of news today about oil. Bloomberg reports that inventories probably fell last week. This cannot be considered the final word until the government inventory report comes out tomorrow morning as early reporting has sometimes been contradicted by the actual inventory release by the Energy Department.

Analysts are also talking about the economic recovery but this does not seem to jibe with inventory news. Both gasoline and distillate inventories grew last week. It is hard to understand how gasoline inventory could grow immediately after the Labor Day weekend. Distillate inventory increases can be attributed to refineries building stock for the coming cold weather but inventory levels are the highest in 26 years. However, this product inventory growth also comes in the face of the fall in refinery utilization.

The extra news was that OPEC seems to be talking business up by raising global demand forecasts for 2010 and 2009. Although the added 2009 demand is about demand not quite decreasing as previously forecasted.

With all this news crude futures rose $2.21/bbl, distillate increased $0.047/gallon and gasoline jumped almost 5 cents.

September 14, 2009

China affected futures prices again today as the trade spat on tires started late last week. Crude dropped $0.40/bbl while gasoline dropped $0.007/gallon. Distillate rose two cents as we now enter the cooler seasons of the year.
Regular unleaded is as low as $2.089 in Jonesboro but my brother reports from Anaheim Hills, California, that the cheapest he can find is $2.919. The $0.83/gallon differential shows that CARBOB really works.

9/11/09

Many analysts saw China's earlier release of July's crude imports that showed considerable gains as a sign of an improved worldwide economy. Today China's August crude imports were released and there was a significant decrease. Was it timing of counting imports one month and not the next or did the Chinese government manipulate the numbers?
It doesn't really matter because the ongoing story about the economy and continued reduced worldwide demand is the real story. The China import story and the high inventory numbers caused crude to fall $3.02 or 4.2% from yesterday's closing. Gasoline fell 5.54 cents or 3.1% while heating oil also decreased 6.94 cents or 3.9%.
Refineries will be re-tooled for the winter formulations and that will mean less product in the market but inventories are so high, especially distillate, that prices may not rise as much as they normally would.
Remember the fallen of 9/11.

September 10, 2009

Interesting developments in the market as crude rose because of anticipated higher demand next year while heating oil and gasoline both dropped because both demand dropped and inventories rose. Crude has been operating in the $66 to $73 band all summer with no real impetus to go beyond $75 and no indication it can go below $64.
Gasoline reached a high of $2.07 August 3 and has seen a recent low of $1.78. It is also now higher priced than distillate.
Heating Oil's band is between $1.99 and 1.74. The fall should see increases as it gets colder.

September 9. 2009

Last week was about whether the futures price of crude would stop at $60 or whether it could go below that price. The falling dollar, talk of price stability from OPEC and expected inventory declines have led to steep increases over the past since last Wednesday and crude is now 5% over last week's low. Analysts are also talking about a falling dollar and an improving economy.

Tomorrow's inventory report should provide a better indication of demand as falling inventories will signal strengthening demand and could boost prices upwards.

September 5, 2009

The fall of crude futures prices is normally a good thing for the economy except when it is a signal of the trouble within the economy. Despite inventory decreases and rising demand, prices dropped significantly from mid-week on. The unexpected rise in unemployment to the highest levels in 25 years colored the market moves. Now traders and analysts are talking about price floors of $60 rather than ceilings of $75.

This makes me think of last night's Red Sox vs. White Sox at Comiskey (I'm vacationing at my daughter's in Chicagoland). We need to have decisive action on the economy or at least action like that taken by Red Sox manager Terry Francona as soon as the game was out of reach. He benched (rested) his starters when the score was 12 -1 in the 5th inning. No need to bang your head against the wall. Retreat and get a head start on tomorrow.

September 2, 2009

The focus was on the 2 cent increase in gasoline even though crude and heating oil both fell. Gasoline demand increased on a year to year basis for the first time in over a year. This and a small decrease in inventory led to the futures price rise. Street prices fell all over the country except the West Coast.

Septembe 1, 2009

Price decreases continued for crude and product despite problems with Venezuela production and a possible discontinuance of 7% of US crude supply, if only temporarily.

On to inventory day.

August 31, 2009

China was the news today as the tremors caused by the report that lending in China may slow down and thus slow down economic activity in the world's second largest energy user. More telling about where the economy is headed is the report on crack spreads. Crack spreads have fallen to $6.58 down 30% from this year's high and are not forecasted to go above $10. This is definitely the story on demand. It is not just national demand but international demand as the spot prices are most affected by the cost of the final 10% bought every day, If the international economy is hurting demand, prices will fall.

Crude and product both fell substantially today. Gasoline wasn't able to bring crude up for the summer. Will distillate demand for the winter be able to bring the price of crude up?

August 28, 2009

All price movements up but only gasoline moved significantly upwards at 4 cents. Crude briefly touched $73 but even though heating oil trading is moving to October, HO barely moved today.

August 27, 2009

Crude and product prices rose slightly over yesterday's futures prices at the very end of the trading session today. It is amazing when negative news such as a 1% GDP loss is considered good news because a drop of 1.5% was expected.

I wonder what is the significance of Brent trading a couple of dollars below WTI.

Also to be pondered is the effect of the closing of so many biodiesel and ethanol plants and the other biofuels plants that are on life support. Today's WSJ article on the biofuels brings the renewables issue to the forefront.

August 26, 2009

It's was inventory day and the bearish inventory news pulled prices down despite some wishful thinking by some traders looking at early economic news. The bearish inventory reports are significant because Labor Day weekend is only ten days away and crude, gasoline and diesel inventories are not only higher than expected they are growing when consumption should be at its highest. The actual decreases in futures prices were small but crude was flirting with $75 early in the day and fell once the market understood the nature and the size of the inventory build.

August 25, 2009

Back today from helping our college sophomore settle in her new digs.

All the talk last week about prices going up all went the other way today. Crude down $2.50, distillate fell almost 7 cents and gasoline dropped 4 cents. Interesting that Brent is now lower than Nymex. Street fell 2 cents.

Let's see what inventory does to the numbers tomorrow.

August 21, 2009

Highest crude futures price of the year at $73.89 due to unexpected housing starts announced early in the day may be followed by fierce drive downwards as the causes of greater than expected unemployment claims announced late today. Seems there is a lot of wishful thinking for an economic turnaround.

As this was the first day of the October contract Heating Oil rose 2 cents. Gasoline also rose 1.3 cents. Funny thing was street prices dropped 3 cents.

August 20,2009

Minimal drop in crude. 4 cent decrease in distillate and 5 cent fall in gas. Supposedly the new unemployment numbers caused the fall. The decreases do not seem related. Crude works off economic numbers but product is more likely related to supply and demand. What will be the reason for movement tomorrow? Street is starting to fall again in its typical lag.

August 19,2009

Today was full of surprises. Crude inventory down 8.4 million barrels and gasoline supplies down 2.2 million barrels. Heating oil is causing the gasoline increase even though refineries are producing at the 3:2:1 ratio for the driving season as distillate demand has fallen 9% and supplies are 23% higher. This fundamentals news caused WTI to rise 4% and gasoline also rose 4 cents. Probably with an eye towards the coming cold weather, heating oil increased 5 cents despite high supply levels. The other interesting news today was that gasoline demand was up, crack spreads were down, and refinery utilization was up. Last week all these signs foretold a falling economy. Are this week's signs predicting an improving economy?

August 18, 2009

How quickly the markets turn as two days of declines were followed today by a substantial 4% increase in crude prices while both heating oil increased 4 cents and RBOB rose by 5 cents. These increases occurred even though inventory estimates indicate that product is long and demand continues weaker than recent history. We'll see if fundamentals take over tomorrow especially if inventories prove greater than anticipated.

August 17,2009

Attending an all day meeting, I missed the market movements today but it's interesting to read the discussion on the continuing fall of crude, down $0.76. It is funny to talk about inventories at the beginning of the week but that seems to be the main explanation for the continuing price decline. The root cause of high inventories is, of course, continuing slow demand caused by decreased economic activity. Refinery output is also low. Tomorrow and Wednesday should have interesting numbers and the explanations should be the same.

RBOB rose 1.35 cents while heating oil dropped 1.45 cents. Street prices are up and following RBOB.

August 14, 2009

For two weeks crude and product moved within a small band. Today the floor had a big crack. Crude traded as low as $67.12 before settling at $67.45 while RBOB dropped to $1.92 and heating oil fell to $1.84. Also today the results of a survey of 40 traders revealed that 50% believe prices will continue to fall for at least another week. Despite all the rosy talk by the administration early in the week, consumer confidence fell and SEER opined that the US market was "grossly oversupplied". Good news for drivers looking ahead to the Labor Day weekend.

August 11, 2009

Interesting phenomenon when WTI, Brent and heating oil drop and the focus of the markets is on the fall of crude. RBOB rose and street gasoline rose again today but nobody seemed to notice. The falling stock market, high inventories, low demand, and the nice WSJ article on VLCCs full of product all point to falling futures prices. The markets are in contango and does that mean prices will drop again tomorrow? We'll see if the markets pay attention to tomorrow's inventory report.

August 10, 2009

The tiny movements (up and down) for crude and product today illuminates the uncertainty of the market. High inventories and perceived economic upturns are causing the market to be going sideways with no clear break from the mid-$70s and no real correction either. Showing its natural tendency to lag behind the futures markets, street prices fell over 10 cents in the mid-South over the weekend.

August 7, 2009

This was a week of sideways movement. Crude and product futures prices rose at the beginning of the week and fell the last two days. Street prices are also now coming down. Wednesday's inventory report did not bring crude prices down but the strength of the dollar kept them from going over the new hurdle of $76. Distillate still not showing strength vis-a-vis the coming winter.

August 5, 2009

Presenter at a webinar today on price responsiveness to fundmentals noted that data clearly stated that WTI is very responsive to inventory levels while Brent is less so. Despite bearish inventory news today, prices rallied after initial weakness. Street prices in Jonesboro and Memphis are catching up with the upward movement of crude and product. Discussion on "inside bar" seems to indicate that today's increases were technical driven.

August 3, 2009

Hope springs eternal as crude rose 4%, distillate is up almost 5%, and RBOB increased by 1.5%. All increases ascribed to perceived economic growth and in anticipation that demand will increase in the near future.

August 1, 2009

Yesterday traders ignored 19 year inventory highs, continued soft demand and the threat of new regulations. Instead they focused on "improving" signs in the economy. Investors are supposedly already looking at selling the market short next week as every trading signpost reads bearish. Street prices rose again yesterday.

July 30, 2009

Traders were quick to shrug off yesterday's bearish inventory numbers and continued soft demand and opt instead on hope of future economic recovery. Crude up $3.33 while gasoline was up 9.65 cents and distillate rose 9.1 cents. Street prices will really be confusing.

July 29,2009

Prices for product and crude dropped overnight and stayed below yesterday's closings after the inventory numbers were announced. Price decreases since last Friday's close are significant for crude and distillate, 7%, and barely noticeable for gasoline, 2%.

July 28,2009

The dollar led crude to fall almost a dollar while supply news caused product prices to fall. Street prices in Jonesboro rose 6 cents as the price increases of last week finally reached street level. Inventory report tomorrow should give a more definitive trend for the rest of the week.

Welcome to MacPetro

I am Jim McDonald. I have been a petroleum marketer for over twenty years in domestic and international markets. I have retail and wholesale experience.

My goal is to give a marketer's view of the petroleum markets and the greater energy questions.

Please check back frequently and feel free to contact me with any questions and comments.

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Sincerely,
Jim McDonald