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.