July 29, 2011

There was a lot bearish talk today about the debt ceiling impasse, less than forecast economic growth, falling demand, technical suppor level breaches, and an over-supplied market but the facts when examined from a month-to-month view point reveal something quite different. WTI barely moved up 0.3% reflecting the large inventories carried in the U.S. Brent jumped up 4% indicating that markets outside of the U.S. are facing supply shortages. The shocker is that gasoline rose 3% while distillate, the harbinger of the economy, climbed 6%.

There is concern that Tropical Storm Don may cause some damage on refineries and rigs in the Gulf of Mexico but the threat seems to be dissipating. For the month, WTI+28¢, $95.70; Brent+$4.26,$116.74; RBOB+8.13¢,$3.1129; HO+16.35¢,$3.0962.

July 27, 2011

Crude inventories saw a build when a draw was expected and gasoline and distillate inventories also saw increases and this surprised the market and there were decreases in crude and product pricing. Adding to the general unease is that durable goods orders were down significantly and that seems to confirm a stagnant economy and moribund fuel demand. Also adding to the bearish movement in the fuel markets was news that around 25% of the SPR crude has now entered the market. The effect of the SPR on market prices will be temporary but it will have some effect on price at least for a day.

Today, WTI-$2.59,$97.40; Brent-85¢,$117.43; RBOB-1.13¢,$3.1423; HO-3.08¢,$3.0826.

July 25, 2011

There is no real effect of the debt ceiling impasse noticeable in today's futures' trading. Although crude and products dropped, the fall was not precipitous but this may just be a down payment of a bigger fall depending on how analysts view the debt ceiling and deficit reduction talks with the bigger euphemism, increase revenues.

There is a lot of talk about a market reaction but neither equities nor commodities had much a reaction today. However, the situation could become very volatile very quickly.

Today, WTI-67¢,$99.20; Brent-62¢,$117.90; RBOB-0.37¢,$3.1264; HO-1.02¢,$3.1078.

July 23, 2011

It is interesting to think how different the markets would feel today after last night's news of the break down of talks between Obama and Boehner and the manner in which Obama seemed to be demanding that the talks fall apart so that the markets would react negatively. The markets closed hours before this happened and they were heartened by the positive news about the Greek debt talks. However, the market viewed yesterday's moves mostly from the currency versus commodities view point and not from the fundamentals of oil demand and supply. U.S. demand for fuels remains weak but there is moderately strong demand for distillate overseas and it seems that U.S. refiners are finding a market for their distillate output. This seems to infer that the economies outside of the U.S. are doing better and thus showing more demand for distillate which is needed more for industrial and distribution uses than gasoline.

There was much movement during the week but at the end of the week, except for crude there was relatively little real movement. For the week, WTI+$2.63,$99.87; Brent+$1.26,$118.52; RBOB+0.08¢,$3.1301; HO+1¢, $3.128.

July 20, 2011

There's a lot of news affecting the markets and the markets were somewhat conflicted but slightly to moderately trending upwards. Crude inventories were down but gasoline and distillate inventories were up. Refinery utilization is up to 90.3 but demand is down. Crack spreads are now approaching $35 when hypotheticals say they should be at $32 and this points to growing demand but not in the U.S.

China seems to be slowing down as its manufacturing is significantly below the average of the last 12 months. As usual, there seems to be progress but not an agreement about what to do about Greece. AS far as the U.S. debt ceiling and deficit reduction talks go, it all depends on the news source.

Today, WTI+64¢,$98.14; Brent+$1.09,$118.15; RBOB+3.21¢,$3.147; HO+2.04¢,$3.1184.

July 18, 2011

Europe has a PIIGS problem and the market was worrying about the euro while the dollar gained strength throughout the day. Both WTI and Brent showed modest decreases as did gasoline and distillate. The European banks holding Greek debt did not do particularly well with the stress tests administered last week. Greece, Portugal and Ireland are small economies but Spain and Italy have much bigger economies and then there is the cumulative effect of five Euro zone countries with sovereign debt problems and thus the great concern for the Euro economy. Additionally, there are no replacements yet for Libyan crude and thus the high premium for Brent over WTI and this premium is now over $20.

There continues to be no solution to the debt ceiling question here in the U.S. and this is also putting a crimp on demand forecasts.

Today, WTI-$1.31,$97.24; Brent-$1.23,$116.03; RBOB-3.19¢,$3.0974; HO-4.03¢,$3.0777.

July 15, 2011 - 912th Anniversary of Jerusalem's Recapture

Deus Vult!

All the players in the market are confused. Earlier this week Fed Chairman Bernanke announces that QE3 and inflation are likely. Two days later he walks that statement back and says that the Fed is not likely to print money to buy bonds and print money. At the beginning of the week price spiked at $98.69 and fell the very next day to $95.69 and closed $1.55 higher today. From mid-June until after the July 4th holiday, crude was in a channel between $90 and $95; in July the channel is now $95 to $99.

As the debt ceiling talks deadlock, the dollar falls and its inverse dance partner, crude, rises. The more the deadline approaches without resolution, the more likely that the dollar is pressured downward. As the dollar falls, commodities are where investors place their bets. If there should be even greater failures of the PIIGS (Portugal, Ireland, Italy, Greece, Spain) and the euro falls while Washington is in gridlock then the market is in uncharted territory and no one quite knows where things are headed.

For the week, WTI+$2.09,$97.24; Brent+$1.16,$117.26; RBOB+5.88¢,$3.1293; HO+3.05¢,$3.1180.

July 14, 2011

Fed Chairman Bernanke, under the lights in a Senate committe room, walked back the inflationary proposal of another quantitative easing. The past two days of negative commentary has caused Mr. Bernanke to quickly change his mind. This news quickly led to a rise for the dollar and thus a fall of crude futures. Crude normally moves inversely to the dollar. What took second place as the cause for the fall was the fall of demand for gasoline and diesel in what is normally high fuel demand summer. Obviously this leads to a drop in crude demand.

Today, WTI-$2.36,$95.69; Brent-46¢,$118.32; RBOB-2.68¢,$3.1248; HO-1.48¢,$3.0849.

July 13, 2011 - Anniversary of Fr. Jesus Baza Duenas

Analysts may have misread the inventory reports especially for gasoline because even though inventories were down, so were imports. Today was the second day with buzz about Bernanke threatening even more inflationary actions via QE3. This caused the dollar to drop and therefore commodities rose but the big mover today was gasoline, over 5 cents higher.

The falling imports may have to do more with order timing than with demand or available supply. IEA reported that the Saudis are producing more than before in an attempt to keep the supply available. It is interesting to note that in these times of seeming transparency we can't seem to know what is really causing the fall in imports.

Today, WTI+62¢,$98.05; Brent+$1.54,$118.78; RBOB+5.34¢,$3.1516; HO+1.21¢,$3.0997.

July 11, 2011

Both crudes fell moderately today and products followed. The Greek sovereign debt problem continues to hang Damocles-like over the euro-zone and that caused the dollar to gain on the euro and thus commodities like crude fell as they followed the inverse dance of currency vs. commodity. There is also an uneasy feeling about Chinese oil demand as Chinese oil imports fell in June. Together with the worries about the U.S. economy these factors spelled a fall for the oil sector.

Today, WTI-$1.05,$95.15; Brent-$2.23,$116.10; RBOB-2.21¢,$3.0705; HO-0.89¢,$3.0875.

July 8, 2011

The Obama regime does not need to release SPR crude to drop prices. It just needs to release the jobless numbers alongside the jobs created numbers, the real numbers that were published today and not the illusory numbers that were released yesterday. This is the gift that will keep on giving as far as futures pricing is concerned because now the revised numbers for April and May are being issued and the figures are even worse as far as job growth is concerned. As a consequence, NYMEX dropped almost $2.50 but Brent barely showed a blip dropping less than 35¢/barrel. Unless and until the employment numbers become truly positive, they will continue to be a drag on prices.

The jobless numbers are important because they are the predictors of fuel demand. No new jobs presages no fuel demand growth. The unemployed do not have money to buy gasoline and drive their cars.

For the week, WTI+$1.26,$96.20; Brent +$6.94,$118.33; RBOB+12¢,$3.0926; HO+17.19¢,$3.0964.

July 6, 2011

The day before the publication of the industry inventory reports is often the day of treading water. Since Monday was a holiday, the release of inventory was pushed back a day until Thursday. China raised interest rates to counter inflation in their economy. Portugal is one of the PIIGS, European countries struggling with debt, and Moody's has now downgraded their bond rating to Ba2, down four levels. Greece remains in the news because it has been given the lowest bond rating and Portugal seems on the way to the same level. All of this news led to weak movements in the futures markets.

Today, WTI-24¢,$69.65; Brent-4¢,$113.68; RBOB+1.96¢,$2.997; HO+.84¢,$2.965

July 5, 2011

When the Obama regime and the IEA announced two weeks ago that 60 million barrels of the strategic petroleum reserve would be released and prices dropped, everyone thought that it was the wrong timing because prices were falling anyway. Today prices leaped to almost $97 and there is a feeling that the economy is really rebounding as is the demand for fuel. Those two sentiments intersected today in the markets and even the strengthening dollar could not bring the price of crude down.

The bidding for the SPR barrels to be released has been brisk but there are fears that outside of the U.S. these barrels may not enter the market and thus cause genuine shortages for the very areas of the world that need the SPR release most. There also seem to be big problems with the Exxon Mobil handling of the leak into the Yellowstone River. Industry officials believe that the anti-oil bias of the Obama regime may be given even freer rein to tighten production and supply in the U.S.

Today, WTI+$1.94, $96.98; Brent+$2.25,$113.64; RBOB+0.48¢,$2.9774; HO+3.21¢,$2.9566.