January 31, 2011

NYMEX settled above $92 while Brent settled at nearly $101 in today's trading. The uncertainties caused by the popular unrest in Egypt and the potential for problems with moving crude and product through the Suez Canal are on the minds of many analysts. Despite assurances of more supply from OPEC should the Canal closure cause disruption, there are extra time and costs associated with moving crude and product around the Horn of Africa. There is also the political problem because Mubarak has been a staunch ally of the U.S. and has stayed the course on peaceful relations with Israel for over 30 years. A government takeover by the Muslim Brotherhood or a political group closely aligned with Islamists would change the balance required for peace in the region.

Prior to the recognition of the escalation of protests in Egypt, prices had fallen to $85.63. The daily settlement price for the near future will represent the market's analysis of the Egyptian problem. For the month, crude +$2.34, $92.16; gasoline +9.94¢, $2.4906; distillage +26.23¢, $2.7468.

January 28, 2011

The unrest in Egypt overshadows all the economic and industry news today. The fall of the Tunisian government and the violent protests and the government's violent response in Egypt has the markets worried. Egypt exports very little crude but has the most refining capacity in Africa. But the Suez Canal is what makes Egypt important to world oil markets as crude and refined products from the Arabian Gulf go through the Canal into Europe. Any disruptions of the Canal traffic will affect world prices.

There is also fear that the unrest in Egypt will spread across the Red Sea into Saudi Arabia. There are rumors that Iran may be funding some of the protests. The Mubarak regime has fought the Muslim Brotherhood for years and they are now joining the protests. The markets are definitely worried about a worst case scenario about the flow of oil out of the Gulf.

For the week, crude +20¢, $89.31; gasoline -2.45¢, $2.4579; distillate +3.2¢, $2.691.

January 27, 2011

Higher than expected new jobless claim, lower than expected orders for durable goods, the Kuwaiti oil minister talking about increasing supply, and the continuing build in U.S. crude inventories led to the 3rd day in four of falling prices.

Also growing is the premium paid for Brent over WTI due to the the inventory build in Cushing. The premium is now over $12 with Brent closing at $97.34. The premium doesn't just reflect the inventory build but also reflects demand that seems to be growing outside the U.S. but does not seem to be increasing to any degree in the U.S. To accentuate stale U.S. demand, refinery utilization is down to 81.8%.

Today, crude -$1.62, $85.63; gasoline -4.94¢, $2.3811; -1.42¢, $2.6548.

January 26, 2011

The reasons for today's prices are hard to determine as the there were inventory builds for crude and product but the dollar fell against the basket of six currencies. However, trading volume for WTI is getting a lot lower because the Cushing terminals are holding so much product that refiners using the NYMEX bench mark are unable to price according to real market supply and demand. While NYMEX has been showing contango for WTI, Brent has been trending backwardation. The contrast between the two crude bench marks may be more about perceived demand in the U.S. vs. perceived demand in the rest of the world and the bearish news in the U.S. is skewing the world market.

Today, crude +96¢, $87.25; gasoline +8.99¢, $2.4304; distillate +7.51¢, $2.669.

January 24, 2011

Ali Al-Naimi not Ahmed Zaki Yamani is the Saudi oil minister now and so the Saudis are not talking about raising prices but about raising production to meet demand. Al-Naimi brought the fundamentals of Saudi production power into the discussion and there was no need to talk about the euro vs. the dollar or any other issue that normally affects oil prices. It is estimated that the Saudis can produce another 4 million barrels daily and keep prices from going much higher. Every analyst understood from Al-Naimi's statement today that Saudi Arabia does not necessarily want the price to go beyond $100 and that led to a 4th straight day of falling prices. The high inventory levels at Cushing is pushing NYMEX prices to be priced at a greater discount than Brent.

Today, crude -$1.26, $87.85; gasoline -6.94¢, $2.413; distillate -3.95¢, $2.6195.

January 21, 2011

The high inventory levels at Cushing and the drop in refinery utilization led to a small increase in crude settlement but there was a big jump for gasoline and a medium rise in distillate. Analysts can risk more money in Brent and products and they are shying away from NYMEX because WTI seems impervious to market movements. the stronger downward movement of crude this week when compared to the much more modest drops in product bear this out.

For the week, crude -$2.43, $89.11; -1.22¢, $2.4824; distillate +1.5¢, $2.659.

January 20, 2011

Crude, gasoline and distillate saw inventory builds last week as reported by the Energy Information Administration (EIA)today. These inventory builds together with reports that China's economy grew above predictions at nearly 10% last month caused crude and product prices to fall today despite the good news about an unexpected fall in new jobless claims and a12%+ increase in existing home sales. Compounding the analyses of the market's movements is the very large premium for Brent (or discount for NYMEX) because of the large, and seemingly growing crude, inventory in Cushing.

Today, crude -$2.02, $88.86; gasoline +5.78¢, $2.4238; distillate -3.38¢, $2.6226.

January 19, 2011

The high inventory levels at the Cushing, OK, terminals are paying a dividend for consumers in the U.S. There seems to be growing demand overseas and the other crude bench mark, Brent, is trading $6 to $7 higher than the NYMEX bench mark, WTI. The premium for Brent is attributed to the oversupply at Cushing that cushions U.S. prices from a lot of the volatility in the market. Today, as an example, WTI dropped 46¢, to $90.88 while Brent rose 37¢, to $98.17. The $7.29 premium for Brent is the highest this month when the premium has been most noticeable.

Today, prices were affected by a bigger than forecast drop in housing starts, a boost in the flow of the Trans-Alaska Pipeline, and the growing product inventory even as crude inventories draw down. Even the dollar's fall in today's trading did not push crude up.

Today crude -46¢, $90.88; gasoline +0.16¢, $2.4816; distillate +1.13¢, $2.6564.

January 18, 2011

A weakening dollar and a revived stock market are coinciding in economic calculations with a slight fall in crude. The Trans-Alaska Pipeline has re-started and the IEA is forecasting greater worldwide demand. Unlike Brent, the European crude benchmark, WTI and other crude held in supply at Cushing, OK, have maintain very high inventory levels and that has held back NYMEX pricing. The true market drivers this year have yet to reveal themselves but we should find out soon.

Today, crude -0.20¢, $91.34; gasoline -1.46¢, $@.48; distillate +0.11¢, $2.6451.

January 14, 2011

Analysts chose to believe that increased U.S. industrial production would raise prices after they had fallen because China's central bank announced for the fourth time in 2 months that reserve requirements would go up. There is another market issue and that is the growing premium for Brent which made me believe earlier there was a problem with supply in Europe. However, the high inventories in Cushing, OK, are helping to keep prices lower in the NYMEX while supplies in Europe are not doing the same thing for Brent on the ICE.

This past week has seen a tremendous leap in prices: crude +$3.51, $91.54; gasoline +8.15¢, $2.4946; distillate +15.77¢, $2.644. The dollar's weakness has overcome significant reservation about demand and supply. The TAP will be shut down over the weekend again. Analysts do expect crude to fall next week as refiners start to import crude and prepare crude slates for the spring and summer runs.

January 13, 2011

Crude fell after three straight days of increases while gasoline dropped for the second consecutive day and distillate decreased but its movements have been erratic. The Trans-Alaska Pipeline has resumed moving product allaying supply shortage fears for the West Coast. The early indications about the jobless report is a higher than expected number of new claims and this will likely be seen as a bearish indicator for the economy. The dollar was weaker today but other factors were seen as more important for today's trading. Something is going on in Europe as Brent is more than $6 higher than NYMEX.

Today, crude -53¢, $91.28; gasoline -1.75¢, $2.4451; distillate -0.99¢, $2.6079.

January 12, 2011

Crude settled higher today as crude inventories drew down and the dollar fell due to the euro's strengthening. Portugal was able to sell its bonds and reports on the German economy were very encouraging and these two news items led to the euro's rise. There also seems to be some unease about the Trans-Alaska Pipeline being down. However, gasoline inventories saw a bigger build than expected and thus gasoline prices fell. Crude's increase was not extraordinarily great but added to the previous day's jump of $1.84 and this is now leading to talk of crude going to $100.

Today, crude +71C, $91.81; gasoline 1.58¢, $2.4626; distillate +1.1¢, $2.6178.

January 10, 2011

The big news is the shut down of the Trans-Alaska Pipeline (TAP) after a leak was discovered. No timetable has been presented for the completion of repairs. Alaskan crude supplies 25% of West Coast needs. It is anticipated that prices will revert to the downward trend once the timetable has been communicated. High inventory levels worldwide and product availability from Alaskan storage are likely to minimize the effects of the pipeline closure.

Today, crude +$1.23, $89.26; gasoline +4.57¢, $2.4588; +7.08¢, $2.5571.

January 8, 2011

WTI fell for the second straight day yesterday despite the initial reports of 103,000 jobs created and the decline of the jobless rate to 9.4%. Inventories at the Cushing storage facilites have been increasing and the dollar rose yesterday against the euro. There are reports that a syncrude facility in Canada had a fire and has to close down and that has narrowed the differential between front month February and further out month March.

For the week, crude -$1.79, $88.03; gasoline +2.19¢, $2.4131; distillate +0.18¢, $2.4863.

January 6, 2011

We are supposed to beware of Greeks bearing gifts but today is the traditional feast of Three Kings whose gifts included gold. Is oil moving towards a golden future? Or are prices falling because of the strengthening dollar? Is crude too high priced and the market is now correcting itself? The price of crude has not been this low since December 17 when it settled at $88.02.

The economy seems to be improving globally and tomorrow's jobless report is supposed to further indicate that there is even improvement in the unemployment numbers in the U.S. The problem for traders assessing the global economy is how to figure what is happening in Europe with the PIGS. The dollar's rise seems to indicate that there may be problems lurking in Europe that are not common knowledge yet. Thus the rise of the dollar.

For all the talk about inventories being drawn down, the market is in contango and so traders believe that current prices will stay lower than future prices. This may just be the exuberance of a new year. The dollar's rise meant the normal fall of crude and the fundamentals may not have played a big role in crude's movements.

Today, crude -$1.96, $88.38; gasoline -0.27¢, $2.443; distillate -3.13¢, $2.5112.

1/5/11

The weekly inventory report showed a draw on crude of 4.2 million barrels but gasoline saw a build of of 3.3. millior barrels while distillate had a smaller build of 1.2 million barrels. Last week was the end of the year and refiners were still working out their inventory tax valuations. The reported increase in private sector jobs created last month, however, did lead to price increases for crude and both products. Refinery utilization rose 0.2% to 88%. Fuel demand was down 7.8% last week to 19.1 million barrels while gasoline fell 5.8% to 8.85 million barrels.

Today, crude +$1.12, $90.34; gasoline +3.64¢, $2.4457; distillate +3¢, $2.5425.