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.