October 29, 2010

There seems to be a pall over the economy now that we've hit month's end and the economic reports start to come in. The first round of announcements about GDP revealed that GDP rose 2% in the 3rd quarter. This was already lower than expected and normally the follow up to this announcement is an adjustment downward. The rumors about the actions the Fed will take next week are also all about further stimulating the economy but the Fed has really run out of ideas for making the economic picture better.

The fall of the dollar did not raise crude and products today the way it normally sends it rising when dollar loses ground against other currencies. The unforeseen inventory build announced Wednesday leaves traders worried that they could be holding expensive product in a falling market.

The big news for Ocotober was the 9¢ jump in gasoline futures: crude +$1.20, $81.17; gasoline +8.87¢, $2.0822; distillate +2.7¢, $2.2175.

October 28, 2010

I return to my observations and analysis of the petroleum markets after taking time off to attend my daughter's wedding. A short historical digression before we get to the news of the day.

Today's importance is little recognized by modern commentators but Emperor Constantine the Great defeated the army of Maxentius at the Battle of the Milvian Bridge 1,698 years ago. Constantine later converted to Christianity and made Christianity a legal religion in the Roman Empire. Emperors often claim to have visions and hear voices but Eusebius claimed that Constantine himself told him he saw the sign of the cross cover the sun and he heard a voice say, "In hoc signis, vinces." Christianity took a big step nearly 1,700 years ago today.

Very few analysts totally trust the first economic report and today's release of lower than expected unemployment claims did not lead everyone to buy at higher prices. The dollar's weakness led the market to rise but that increase was stunted by yesterday's inventory report on supply builds.

Today, crude +26¢, $82.20; gasoline 1.9¢, $2.1139; distillate +0.59¢, $2.2442.

October 18, 2010

The dollar fell, the stock market rose and the strike at a major French port for oil imports went into its fourth week. These factors in combination with the API's report of an increase in oil consumption in September have the analysts thinking about a rising market for oil. There are major supply disruptions in France and this probably poses more of a psychological problem rather than a physical problem for the crude and product markets. Obviously the European supply system may be undergoing problems. If there is a bottleneck for bringing American products into France. There will be repercussions in the U.S.

Today, crude +$1.79, $83.09; gasoline +4.7¢, $2.1536; distillate +4.34¢, $2.2772.

October 15, 2010

The dollar is still driving the crude oil futures price as it gained 0.5% on the day while crude and both products fell. Every session in October has ended over $80 while all of the September closings were in the $70s as were most of the August closings.

Goldman Sachs is starting its game again about crude prices going above $100 and you would think that Eric Holder would bring them in for consultation or at least have Surgeon General Regina Benjamin take their temperature. After all, demand dropped 0.7% for the week ended 10/8 and inventories continue at near historically high levels. Until the economy improves appreciably and causing demand to significantly increase, supply will be abundant and prices should be lower than they are today.

For the week, crude -$1.36, $81.30; gasoline -4.31¢, $2.1066; distillate -4.88¢, $2.2338.

October 12, 2010

Oil traders played a wait and see game with the movement of the dollar and the price of crude still fell even though the dollar also dropped. The traders want to see prices go up but economic conditions and industry fundamentals also influence in which direction crude eventually goes each day. Now, traders will scrutinize the decisions of the OPEC meeting Thursday which is, incidentally, also the day that the government issues the inventory report.

Today, crude -54¢, $81.70; gasoline -4.22¢, $2.125; distillate -1.76¢, $2.2631.

October 11, 2010

The tail wagged the dog this Columbus Day as corn futures were seen to be bullish because of a less than expected corn crop yield and that meant that ethanol prices would rise and this caused an increase in gasoline futures. The opposite happened on the crude side as equities rose and the dollar gained leading to a slight crude decrease. The real issue is whether there will be greater future demand for fuel products and so far the supply and demand balance is tilted greatly towards supply.

Today, crude -44¢, $82.24; gasoline +1.75¢, @2.1672; distillate -0.19¢, $2.2807.

October 8, 2010

95,000 jobs were lost while unemployement somehow idled at 9.6%. Equities went up while the dollar went down. Crude rose and gasoline and distillate followed.

For the week, crude +$1.08, $82.66; gasoline +6.3¢, $2.1497; distillate -1.14¢, $2.2826.

October 7, 2010

The familiar refrain of strong dollar and falling commodity prices stayed true today. The dollar increased versus the euro while crude and equities fell. There are expectations that the jobless rate will fall but the government is being accused of padding the numbers with poll watchers (who have never been counted before). Demand remains low while suppliers are awash in inventory.

Today, crude -$1.68, $81.57; gasoline -3.82¢, $2.1179; distillate --5.56¢, $2.2517.

October 4, 2010

Oil moved sideways and a little down as the dollar strengthened while the stock market faltered. Distillate followed but gasoline went up. Concern about the fundamentals of abundant supply and anemic demand became evident as traders remembered the last time they were this exuberant about buying crude at higher prices and how much they lost within days. The financial markets may control how investors perceive commodities but it makes no sense to buy at higher prices when there is no economic underpinning of higher prices.

Today, crude -6¢, $81.58; gasoline +0.74¢, $2.0941; distillate -0.7¢, $2.287.