May 28, 2010

Crude futures fell $1.25 on news of Spain's credit downgrading as the euro fell and the dollar rose. The sovereign debt problem of Greece, Spain, Portugal and Italy is a problem for all of Europe and the euro. However, the fall was not deep and if viewed from a week ago, crude actually is higher. If viewed from the beginning of the month, the price is substantially lower showing a 15% decrease in four weeks.

For the week, crude +$3.28, $73.32, gasoline +5.05¢, $2.0136, distillate +5.05¢, $1.9755.

May 27, 2010

Talking about volatility, what do you think about a 4.3% rise in crude futures the day after a 4.4% increase the day after 2.5% decrease that was part of a 21% drop month-to-date. Is it the computer programs or do analysts and traders only live in the moment? U.S. GDP is up and jobless claims are down. The economy seems to be on the mend. China said it supports the euro and that helped the euro rise 1.7% against the dollar.

The markets may be a little bit more volatile tomorrow as the exchanges will be closed for the Memorial Day holiday on Monday. Traders and analysts will be second guessing every move because of the extra weekend day off.

Today, crude +$3.06. $74.57, gasoline +7.41¢, $2.0407, distillate +8.33¢, $2.0017.

May 26, 2010

A number of reasons for the 4.5% increase in crude futures today: demand has increased 0.6% in the trailing four weeks ending May 21 and there is an increase over last year and not just the previous reporting period; Cushing inventory had a slight decrease; the front end month versus the further out month premium has declined to $1.00 and this also portends increased demand; and, counter to how the markets correlate, the dollar rose and the euro fell. The latter outcome was overlooked today because on most Wednesdays the EIA releases the inventory report and all eyes were focused on industry statistics.

Today, crude +$3.07, $71.51, gasoline +4.22¢, $1.9666, distillate +5.39¢, $1.9184. Street starting to move down at $2.319.

May 25, 2010

After two days of climbing, the market went down today. The resurgence of the dollar and the continued uncertainty caused by the European sovereign debt crisis has led to a channel change of crude pricing. For the past two weeks, the market has a range of $68 to $77 rather than $77 to $87. This channel change is supported by the ongoing inventory build. The contango premium has slimmed down and that might mean that more demand is foreseen in the closest month.

Today, crude -$1.76, $68.44, gasoline -4.56¢, $1.9244, distillate -3.79¢, $1.8645.

May 24, 2010

Very modest increases in crude and products today. The dollar continues its advance against the euro and China said it is not sure what credit policies to follow allowing every body to think that China won't minimize credit risk with its future policies. As we approach Wednesday's EIA inventory report, international news may not be as important as US demand and supply and other economic fundamentals.

Today, crude +16¢, $70.20, gasoline +0.69¢, $1.97, distillate +0.58¢, $1.9024.

May 22, 2010

Eight is enough and so crude rose today after 8 consecutive decreases. The European sovereign debt crisis may be close to be solved, if temporarily, but the perception of the European economic condition and the continued inventory build have everyone thinking about lower prices. The high inventory levels are affecting crack spreads negatively as the summer driving season approaches. The discount for the nearer month from the further out month remains high and now that we are talking of July versus August it is obvious that demand may not reach earlier forecasts.

For the week, crude -$0.93, $70.04, gasoline -15.73¢, $1.9631, distillate -15.79¢, $1.8966.

May 20, 2010

17 days ago, 5/3/10, crude ended trading at $86.18. Today, crude ended trading 21.1% less than what now seems like a lofty peak beyond $86. The news keeps getting more and more bearish: more than expected unemployment claims, continued depressed demand, the strength of the dollar and the weakness of the euro, and Cushing approaching its holding capacity. The Contango premium between the front month and the further out month is nearly $3/bbl.

The news about gasoline reflects a similar plunge. Gasoline ended trading on 5/3 at $2.4309 and it is now 48.7¢ lower. Distillate is in the same downward spiral, $2.3455 on 5/3 and down 46.2¢. Since the beginning of the year, analysts and traders have been trading as if the economy would improve in the very near term and this pushed crude up to the mid $80s trading range. The summer driving season is upon us and the economy does not look robust enough to consume the growing inventory build.

Today, crude -$1.67, $67.91, gasoline -7.48¢, $!.9442, distillate -6.41¢, $1.884. Street price down 5¢ to $2.489.

May 19, 2010

Traders, analysts and the markets are trying to catch their breath and crude barely moved down and there were small decreases for gasoline and distillate today. Inventory continues to build and Cushing continues to break records with the amount of barrels it is storing. Demand remains weak and the political problems in SE Asia and southern Europe would seem to indicate weakening demand. Refinery runs are down to 87.9% from 88.4% as refiners are cutting back on production as they think demand may not be as robust as originally forecast.

BTW, the world is focused on the sovereign debt crisis in Southern Europe as depicted every day in the violence in Greece but there is great violence among the most peaceful people in Thailand that is somehow not shaking southeast Asia the way Greece is affecting Europe. The monarchy has not been able to assert itself and make the factions stop fighting. A true tragedy is unfolding.

Today, crude -$0.18, $69.58, gasoline -2.1¢, $2.019, distillate -1.71¢, $1.9481.

May 17, 2010

The European sovereign debt crisis exemplified by the predicament in Greece continues to drag the euro down and raises the dollar causing oil to decline in the market. Fundamental factors such as the high levels of inventory push the price down further and today crude's price almost ended below $70. Crude has now fallen 5 sessions consecutively. Already there are expectations of even more inventory build at the Cushing Terminal but the limit of 40 million barrels is already being approached as last week's inventory was over 37 million barrels.

The biggest worry is that there is no economic recovery is really occurring and therefore fuel demand will not rebound later this year. The $5 premium on contango is predicated on demand increase later this year due to improving economic activity.

Today, crude -$0.89, $70.08, gasoline -7.82¢, $2.0422, distillate -7.01¢, $2.0422. Street -6¢, $2.509.

May 14, 2010

The European sovereign debt crisis is making the euro fall and the dollar rise. The world economy still has not recovered and thus demand is down causing a record inventory build in the US. Crude is now down 5.6% from yesterday and 17.6% from the first of the month as prices ended at their lowest point since December 15. Products are now falling sharply in tandem with crude after trending up most of the past week.

For the week, crude -$4.34, $70.97, distillate -2.94 cents, $2.0545, gasoline -0.8 cents, $2.1204. Street unchanged at $2.569.

May 13, 2010

Crude continued to fall and both products followed the downward movement today. Yesterday's crude inventory level report for Cushing showed the highest levels ever for inventory and this is worrying traders. The dollar also continues to rise while the euro persists in its downward spiral as southern European countries try to come to grips with their respective deficits.

Refineries are trying to make the most of a bad situation and cut back on utilization 1.2% last week to 88.4%. This has led to an 9.3% increase in the crack spread to $16.45. The contango premium is now at $4.55 between front month and the further month caused by the extraordinarily large inventory.

Today, crude -$0.42, $74.97, gasoline -1.04 cents, $2.1955, distillate -1.19 cents, $2.1385. Street steady at $2.539.

May 10, 2010

Moderate gains in crude and product today as the markets reacted to the $1 trillion dollar bail out plan for Europe's financially strapped southern tier. The euro was up slightly and thus the dollar was down slightly. There's more optimism about the direction the economy is taking and this led to today's price increases.

The past couple of weeks have seen a number of "mood swings" as analysts and traders try to understand what is driving the market. There have been a number of indicators that have been spun to make them seem positive but the continued increase in US supply despite logistics problems in the Gulf is a worrying negative factor. The other is the talk of a jobless recovery. People who have no jobs don't have money and don't buy gasoline.

Today, crude +$1.19, $76.50, gasoline +4.4 cents, $2.1724, distillate +3.56 cents, $2.1195.

May 6, 2010

The dollar is surging against the euro and since the financial markets are so much bigger than the oil market, crude fell for a 3rd day and has fallen 10.8% in 3 trading days. The Greece debt problem foreshadows even bigger problems with Portugal, Spain and Italy and is punctuated by the continued violence in the streets. Today's stock market descent of almost 1,000 points was due to some kind of error but it has made all markets nervous. With the continuing inventory build and uncertain future demand, price really has no place to go but down.

Today, crude -$2.97, $76.90, gasoline -8.14 cents, $2.1424, distillate -7.92, $2.1035. Gasoline retailers are intent on making some margins while prices fall and street prices have remained unchanged at $2.699.

May 5, 2010

The psychology of the market has radically changed recently. All of the good economic news last week and the oil leak in the Gulf seemed to indicate that prices would go even higher perhaps to $90. Yesterday, the riots in Greece broke out and the euro began to fall again as the problems in Portugal, Spain and Italy are also under greater scrutiny. This has caused the dollar to rise and thus commodities fall as investors run to the dollar.

The size of the two day fall is also about the continuing increase of crude supply despite positive economic indicators. Crude has fallen the equivalent of 15 cents a gallon the past two days while gasoline has fallen 21 cents because of a significant build in inventory when a modest draw was expected. Refinery utilization rates have also increased to 89.6%. No one talked about contango today as so many had bought into an improving demand picture but there's considerable doubt about that now.

Today, crude -$2.76, $79.87, gasoline -9.71 cents, $2.2238, distillate -7.64 cents, $2.1827.

May 3, 2010

Crude moved sideways while product prices jumped as positive news on improved manufacturing results came in from the U.S., China and Europe. However, the dollar gained on the euro and the market remains in contango with the premium between front month and the farther out month expanding. No one yet knows what the effect of the BP oil spill in the Gulf will be.

Today, crude +$0.07, $86.18, gasoline +3.62 cents, $2.4309, distillate +5.85 cents, $2.3455, street $2.759.