April 30, 2010

The Commerce Department reported that the economy grew at 3.2% in the 1Q, the dollar dropped vs. the euro, and gasoline consumption in the trailing 4 week period ending last Friday, 4/23, surged 3.1%. This lead to another bullish trading session with a $0.94 increase over yesterday and a similar increase on a week to week basis.

Imports may be affected by the spill in the Gulf of Mexico but there is so much crude in the system that prices may not be affected. The market remains in contango because of the high inventory levels.

For the week, crude +$1.02, $86.11, gasoline +3.77 cents, $2.3947, distillate +3.4 cents, $2.287.

April 29, 2010

The rationale for today's major ascent in crude prices was rather brief. It boils down to a second day of contemplating lower interest rates added to the unemployment report coming in as expected. With contango still commanding the further months out, the market takes the current oversupply into consideration and is betting that the demand will be as expected in the summer. In 2010 so far, April has been the most optimistic in terms of economic expectations and the market reflects that. The range of closing prices of $81.51, April 19, to $86.81, April 6, is a higher range than the $78.80 to $84.41 of March, $71.16 to $80.13 of February, and $72.95 to $82.93 of January. Of special note is how much tighter the pricing band is for March and April when compared to January and February.

Today, crude +$2.45, $85.17, gasoline +3.65 cents, $2.357, distillate +3.27, $2.253.

April 28, 2010

The Fed announced today that interest rates would continue to be set low to spur economic growth. The market then ignored rising crude and product inventories and the continuing financial crisis in Greece that seems to also threaten Portugal and now Spain and crude and gasoline prices rose marginally while distillate fell. The probable future availability of cheaper funds for economic expansion led analysts to discount bearish fundamentals. Even refineries are in the expansion mode as the utilization rate is now at 89%.

Today, crude +$0.48, $82.72, gasoline +0.35 cents, $2.3205, distillate -0.4 cents, $2.2203.

April 27, 2010

Greece and Portugal's credit ratings fell, the dollar gained on the euro, and there's an oversupply of crude and product in the US market. All these factors led to decreases in crude and product futures. The market remains in contango which means that analysts believe that demand will improve in the future. The early inventory release from API is of continued inventory build but the market will wait for tomorrow's EIA inventory report before a definite direction is taken.

Today, crude -$1.73, $82.24, gasoline -2.25 cents, $2.317, distillate -1 cent, $2.2243.

April 26, 2010

A week's worth of exuberance for higher prices met the cold, hard facts today and prices fell for for the first time in five trading sessions. The dollar gained against the euro and amid reports that the Cushing, OK, storage was nearing inventory levels not seen in many years as well as reports of more crude floating storage being leased. Leasing floating storage means that there is significant oversupply and that it is profitable to hold on to inventory and wait out the market. One bit of good news is that crack spreads are now over $14/barrel.

Today, crude -$1.12, $83.97, gasoline -1.01 cents, $2.3395, distillate -1.4 cents, $2.2343.

April 23, 2010

Analysts, unsure of which economic and industry indicators to base their decisions on, decided on the rosy picture today. The dollar fell against the euro but sales of new homes are on the rise. There is an initial report that the economy grew 3.4% in the first quarter but the sale of durable goods fell. It was take your pick. The market picked up even though inventories are higher than expected and that leaves the market in contango. This inventory caution also includes Brent's premium over WTI.

Today, crude +$1.35, $85.09, gasoline +5.21 cents, $2.3496, distillate +2.97 cents, $2.2483.

April 22, 2010

Crude barely dropped even though there was good news from the housing market while the dollar rose against the euro because of problems with Greece's deficit financing. The market is still in contango and there's more talk of storing crude to wait for better prices in the future.

Today, crude -$0.02, $83.74, gasoline +1.04 cents, $2.2975, distillate +1.04 cents, @.2186.

April 21, 2010

The unexpected rise of crude and product inventory made the market go sideways today. The dollar strengthened against the euro but the higher than expected inventory increase led to crude rising minimally and no movement in gasoline while distillate rose because of the reopening of European airports. European traders seem to think that demand will pick up and Brent, normally selling at a discount off NYMEX, has been selling at a premium for the last 7 trading days. The market remains in contango with analysts expecting lower prices in the near term.

Today, crude +$0.38, $83.76, gasoline no change, $2.2871, distillate +2.29 cents, $2.2871.

April 20, 2010

Crude rose in trading today despite the continued grounding of airplanes in Europe that leaves airports awash in jet fuel. The dollar also climbed higher today and normally that would signal a fall for crude but both dollar and crude rose. And most telling about the bullish exuberance of today's trading, inventory reports are expected to show a build tomorrow but still crude fell. However, refinery utilization is expected to show an increase as refiners prepare for the summer driving season.

Today, crude +$1.87, $83.38, gasoline +3.2 cents, $2.287, distillate +2.73 cents, $2.1853. Street -6 cents, $2.589.

April 19, 2010

Friday's announcement of an SEC suit against Goldman Sachs weighed heavily on the market for a second straight trading day as crude and product prices fell. All of the other news was also bearish: the dollar rose against the euro, planes continue to be grounded because of the volcanic dust spewing from an Icelandic volcano, and probably most important, OPEC members are sensing that prices are headed for an extended period of descent and are cheating heavily and likely causing a glut in the market.

Today, crude -$1.79, $81.51, gasoline -1.95 cents, $2.255. distillate -5.7 cents, $2.158.

April 16, 2010

The Securities and Exchange Commission (SEC) charged Goldman Sachs with fraud today. Goldman is one of the oil market's largest traders and one of the biggest boosters of higher prices with the possible exception of OPEC. The SEC accuses Goldman Sachs of misleading investors about financial products connected to sub-prime mortgages. If this becomes a bigger story, there may be significant downward pressure on crude and products.

Early in 2008 Goldman forecast $100 crude. Later in 2008's first quarter, Goldman predicted $150 crude. These forecasts seem to be self-fulfilling as Goldman kept the pressure up with its buys during the first half of that year. Goldman is so far only charged with fraud in the sub-prime mortgage matter.

Refinery utilization is up and inventories are down and that should normally lead to price increases but with economic reports sending mixed messages it is hard to determine the profitable mix of refining and importation. Add to that the drop in equities and the rise of the dollar and there is more to consider than just supply and demand. The market continues in contango and despite or maybe because of the relative high price levels in the $80s, traders and analysts are wary of long positions.

Today, crude-$2.29, $83.30, gasoline -5.13 cents, $2.2745, distillate -3.49 cents, $$2.215.

Taxation Day, 2010

The respite from falling prices lasted a day. High than expected inventory reports led to yesterday's increase but today worries about increased unemployment and lower than expected manufacturing results led to a small decrease in crude and gasoline. Something is going on in Europe as Brent rose by nearly a dollar and passed the NYMEX price. The dollar rose and helped to move investors out of commodities and into dollar accounts. There is also a nagging worry that the economy will not improve enough to warrant current high pricing.

Today, crude -0.26 cents, $85.59, gasoline -0.68 cents, $2.3258, distillate +0.80 cents to $2.2499. Street still steady at $2.649.

April 14, 2010

Inventories saw a draw of 2.2 million barrels when a build of 1.3 million barrels was expected. Added to the dollar's drop, this led to a strong session for crude and products. Latest figures on demand were positive as was the report on refinery utilization and both of these would seem to lead to higher prices. This should confirm the move to $90 crude as more positive economic data is reported. Whether higher prices will lead to decreased demand is yet to be determined. After 5 down days, the market seemed to find a new road.

Today, crude +$1.84, $85.85, gasoline +2.46 cents, $2.3326, distillate -2.77 cents, $2.2419. Street steady at $2.649.

April 13, 2010

After hitting a high of $86.41 on the Tuesday after Easter, crude prices have fallen five consecutive days. The actual amounts the price has dropped is not significant, but cumulatively, $2.90 in five trading session may be dripping slowly but it is still a descent of prices. Lower demand and oversupply are still the reasons why prices have fallen. At $84 crude stands on the high side of the price range but now it is falling.

Tomorrow's government report on inventory will be market indicator that decides where prices will go the rest of the week.

Today, crude -$0.43, $84.01, gasoline +0.75 cents to $2.3080, distillate -0.82 cents, $2.2142. Street steady at $2.649.

April 12, 2010

Crude fell for the 4th consecutive session with the high levels of inventory and continuing decreased demand on analysts' and traders' minds. Today's fall of the dollar would normally signal an opportunity to buy but fundamentals of supply and demand were more top of the mind.

Today, crude -$0.33, $84.44, gasoline +1.49 cents, $2,3005, distillate, +0.19 cents, $2.2224. Street at $2.649.

April 9, 2010

The fall is small but for the third consecutive day, crude fell. With inventory increasing for three months and demand therefore not increasing, traders and analysts are reevaluating their market positions. Refiners have upped their production in anticipation of greater demand but gasoline futures prices although increasing are not rising at the level of crude. There is also concern that higher prices will dampen economic recovery and thus petroleum demand. The dollar was also stronger today as the euro fell due to the continuing financial meltdown in Greece.

For the week, crude -$0.13, to $84.77, gasoline -3.84 cents, to $2.2856, distillate -1.45 cents to $2.2205.

April 7, 2010

Inventories increased higher than expected for both crude and distillate while gasoline stocks rose higher than expected. Refinery utilization was up but not enough to overcome suspicion that demand remains weak.

There are numerous factors to consider at this point not just demand and inventory: the rise of the dollar and the decline of the euro, the switch of refineries to greater gasoline production versus distillate, and the drop of the crack spread. The market futures graph shows contango for pricing going into the outer months which normally means traders expect prices to fall in the near term.

Today, crude -$1.15, $85.76, gasoline -3.81 cents, $2.3129, distillate -2.71, $2.2415.

April 2, 2010

Prices for product and crude rose slightly but the significance is that they rose. There is news of the improving national and world economy that has been touted for months but there was no talk of the dollar's movement. Manufacturing activity is on the uptick. Demand for product remains weak and inventories continue to rise to levels not seen in four or five years. This causes analysts to be cautious because the fundamentals remain the same: lower demand than last year.

Market is closed today because of Good Friday. It should make Monday's trading activities fairly interesting.

Today, crude +$0.49, $84.90, gasoline +0.29 cents, $2.324, distillate +2.15, $2.1955.

April 1, 2010

Crude rose to its highest level in 18 months and it was all about the dollar. It was not about inventories as stocks rose but in the near term demand is not likely to increase greatly because 23,000 jobs were lost in March when 50,000 were supposed to be created. This was apparent when the figures for consumption showed a 2% fall from last year. It seems obvious that imports are increasing the crude inventory and refineries are betting that demand will increase and it is better to build product inventory now than produce higher cost product at a later date.

Prices are steadily moving up now as utilization remains around 80% while the refineries that are open are making money where as last year the expectations were that prices would continue to fall after rising so high in the spring and summer of 2008. The triggers for automated trading are looking at the numbers but don't seem to be looking at the underlying reasons for the inventory numbers. Of course the other reason is where do you invest if the dollar is falling and commodities are the better bet.

Yesterday, crude+$1.90, $84.51, gasoline +4.22, $2.3211, distillate +6.75, $2.1955. The distillate number is bad for the economy when you think about trucks and airplanes paying for higher priced product.