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.