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.