February 26, 2010

There have been many revisions of economic news during the past year and I always wait a week or two for the revisions. I am therefore skeptical about the report of 5.9% GDP growth for 4Q 2009. I am less skeptical about the report that the number of vessels used for floating storage dropped 20% in January. That tells me there there's product movement and this normally flows from economic activity. Today's price increases were all about the improving economy and declining dollar.

For the week, crude +$0.13 to $79.64, gasoline 4.75 cents to $2.09, distillate +4.13 cents to $2.0241. Street price was $2.439.

February 26, 2010

Increased unemployment claims, lower than expected sales of new homes, falling durable goods sales, and high inventories overcame supply worries concerning the blizzard in the Northeast. Still crude is only $1 off last Thursday's price. The market is still trying to find a direction and it seems that prices above $80 are not sustainable.

Today, crude -$1.81 to $78.04, gasoline -5.64 cents to $2.0425, distillate -5.1 cents to $2.0425. Street prices are now $2.559.

February 23, 2010

Technical analysis pushed crude prices above $80 yesterday and the view was not as good at that price and so fundamental analysis led the price down today. Tomorrow the ultimate in fundamental analysis comes out with the publication of industry inventory.

The dollar did get stronger but the refinery worker strike in France is close to resolution. The release of the consumer confidence index led many traders to believe that demand will continue to be lower than expected.

Today, crude -$1.27 to $78.86, gasoline -5.3 cents to $2.065, distillate -4.99 cents to $2.0318.

February 22, 2010

The market is thinking short term and short term considerations are causing prices to rise. Demand continues at lower levels and refining utilization remains below 80%, 77.7%, at the end of January, but the ongoing strike at refineries and terminals in France is driving the price up. Normally when the dollar strengthens as it did today, oil falls. That was not true today as both dollar and oil rose.

Today, crude +$0.62 to $80.13, gasoline +3.29 cents to $2.118, distillate +1.91 cents to $2.118.

February 19, 2010

Demand is down so much that US fuel consumption in January was the lowest of the past 12 years. The raising of interest rates by the Federal Reserve today changed the dynamics of the market and crude stayed above $79. The French refinery strike was also worrying traders who are thinking that imports could be constricted.

Today, crude +$0.49 to $79.51, gasoline +1.51 cents to $2.0851, distillate +0.96 cents to $2.0626. Street gasoline price is up from a couple of days ago to $2.309.

February 18, 2010

This was one of those days when you could not understand why the market moved in a particular direction. Crude rose above $79 and both products made sizable gains but the inventory data was inconclusive. Gasoline and crude supplies showed a build but distillate showed a greater draw than expected. Refinery utilization was up 0.7% to 79.08%. This would seem to indicate that refineries were producing gasoline and consumers were buying less than expected. The cold weather the two weeks prior probably drew down the distillate inventory to explain the distillate draw.

Today, crude +$1.83 to $79.02, gasoline +6.78 cents to $2.07, distillate +6.78 cents. With all this volatility, street price was still at $2.239.

February 17, 2010

A sideways trading day as everyone is waiting for tomorrow's EIA inventory report.

Today, crude -$0.01 to $77.19, gasoline +0.32 cents to $2.0022, distillate -0.13 cents to $2.0022.

February 16, 2010

Having taken a long weekend, traders forgot fundamentals and noticed the dollar's weakness and so prices climbed big today. The euro traded strong as did commodities. The good feelings were further assisted by the normal postponement of the EIA inventory report until Thursday.

Today, crude +3.33 to $74.20, gasoline +7.35 cents to $1.999, distillate +8.94 to $2.003. Street -6 cents to $2.239.

February 12, 2010

Over the past 5 days there has been much discussion about what the Europeans were going to do with Greece, Portugal and other EU countries currently facing debt problems. On the other side of the world, China has increased bank reserve requirements. In the USA, weather has been absolutely brutal in the mid-Atlantic and now the Gulf Coast and parts of the deep South. Last Friday's inventory reports were released today because of the inclement weather and there were builds for crude and gasoline and a smaller than expected draw on distillate. Refinery utilization rose 1.4% to 79.1%, a positive sign,

There was so much volatility in the market this week, it is hard to remember that prices rose for the week even if they dropped from yesterday's closing. For the week, crude +$2.71 to $73.87, distillate +4.26 cents to $1.9136, gasoline +3.45 to $1.9165. Street rose 5 cents to $2.29.

February 11, 2010

Crude prices settled above $75 for the first time in 8 days. The Europeans are talking of an imminent deal to save Greece from its debt problems. However, there's considerable cautionary talk about prices as inventories rose according to the American Petroleum Institute report earlier in the week. If the EIA confirms that inventory rise tomorrow, prices will fall. Higher inventories will continue the economy's low demand message and traders will move out of oil.

Today, crude +$0.78 to $75.26, gasoline +1.34 cents to $1.9361, distillate +1.55 cents to $1.963. Street has risen 10 cents since February 9 to $2.329.

February 8, 2010

Slight increases for crude and product led to guarded optimism about the direction of futures. There was hope that the EU could somehow help Greece and this led to a fall in the dollar and a rise in commodities. Also helping crude's climb was the cold, stormy weather in the South and the mid-Atlantic. We don't use heating oil here in the mid-South but Jonesboro schools were closed today and will be closed tomorrow. The 12 inches we had 10 days ago had all but been washed away by rain and now we will probably accumulate about 8-10 inches today and tomorrow.

Spring and summer driving season is not that far off and refiners must begin planning production slates and plan on refining more gasoline but it is hard to determine how much gasoline sales to plan on when demand has been so weak. Crack spreads are bad and buying high now would make things worse. Inventory reports are due Wednesday but the storm may delay the release of the numbers.

Today crude +$0.65 to $71.81, gasoline + 1.25 cents to $1.8945, distillate +0.48 cents to $1.8819. Street prices dropped 2 cents from yesterday to $2.229.

February 6, 2010

Yesterday the thinking machines and their programs continued crude's fall from Wednesday's highs. The programs for buying and selling set resistance and support levels and automatically buy or sell based on prices piercing the preset levels. The support levels were pierced Thursday and Friday. Crude has been this low only twice since October 9.

The rise of the dollar and the economic problems of Spain, Greece, Portugal and Italy are causing the markets to rethink the direction of the world economy. There's very little talk about the demand for gasoline, the dropping rate of refinery utilization, and the large supply of crude. Brent, Europe's benchmark crude,has fallen even more dramatically and ended trading yesterday at $69.34 as the region's economic crisis continues to reveal more problems.

The high level of unemployment is a symptom of the lowered levels of economic activity and even the reduced rate of 9.7% is high. In the back of people's minds is whether this number will be revised upward at a later date.

This past week the news is not the fall from Friday to Friday but the volatility with prices being driven up and then falling even further down. The closing price yesterday was only -$1.79 at $71.16 but really -$9 from the week's highs. Gasoline was -2.62 cents at $1.882 but -16 cents from the week's highs. The stunner is the parallel descent of distillate. The heart of heating oil demand is the Northeast and just as a major snowstorm is set to drop one to two feet of snow distillate prices also tumbled -3.4 cents for the week at $1.871 but 15.8 cents from the high.

February 4, 2010

Yesterday I cautioned against over-interpretation of the initial economic and jobless news. There have been too many revisions of the initial reports such as the rosy economic report of 3.8% growth 2 quarters ago and the subsequent revision to 2.2%. The bad news came in today's revised numbers and the additional impetus of the rising dollar caused crude to jump 5.7% today, gasoline +5.1%, distillate +4.9% Underlying the dollar's rise was the bad news on European economies. This threatens global demand especially when you include China's latest moves to restrict bank lending. There has been talk of oil being overpriced and the large drop in price today indicates that this idea is not unknown.

Today crude -$4.41 to $72.61, gasoline -10.5 cents to $1.935, distillate -9.63 cents to $1.9225. Street prices were unchanged today but let's see how far they go down tomorrow.

February 3, 2010

The market moved sideways today because of the volatility of the sign posts used to decide buying strategy for the day. The jobs report seemed positive as did the service sector report. However, the crude build demonstrates weak demand and the fall in refinery utilization echoed the market weakness. Too often economic numbers and jobless numbers are revised and the market has to make a correction. The crude build and the falling product stocks due to reduced refinery operations is a sure indicator of weak demand.

Today crude +$0.16 to $77.02, gasoline +3 cents to $2.04, distillate -0.12 cents to $2.0188. Street price +6 cents to $2.369.

February 2, 2010

The market moved up significantly for crude and products today. The mix of good news and bad news together led traders to buy higher. The good news included a 1% increase in pending home sales and a 3.5% rise in manufacturing activity. The bad news were a refinery fire in Quebec and attacks on pipelines in Nigeria. For today, traders ignored the worldwide glut in crude. Tomorrow's EIA inventory report will determine market movement the rest of the week.

Today, crude +$2.42 to $76.86, gasoline +7 cents to $2.01, distillate +6 cents to $2.02.