September 30, 2011

It was bound to happen. China's manufacturing sector is slowing down. If your largest customer is in recession, which the U.S. is, despite the rosy talk from the White House, sooner or later your production will go down if you are looking out over the horizon for economic trends. Manufacturing does not occur in a vacuum, there have to be customers for the goods. As U.S. incomes have been set back 30+ years since the current regime took over, demand for Chinese manufactured goods have to be affected. That is why there is a demand curve and a supply curve. China is starting to get hit by the demand curve as American consumer damand falls.

There was further bad news as German retail sales are down. The Germans carry a double burden, their own economic issues and the Greek sovereign debt.

It has been an incredible quarter with prices steadily falling for the last half month. For the quarter: WTI -$16.22 (17%), $79.20; Brent -$10.10 (9%), #102.38; RBOB -40.56¢ (13.4%), $2.626; HO -13.79¢ (4.7%).

September 28, 2011

German Chancellor Angela Merkel's doubts about Greek compliance with loan covenants sent the markets tumbling. Added to the crude and product inventory build and reduced refinery output, it's surprising that crude did not go below $80. More bearish news came from equities where there was a sharp drop. To round up the bad news were reports that ConocoPhillips plans to sell or close one refinery on the East Coast while Sunoco plans to sell or close two refineries also on the East Coast. These moves by refiners to get out of the business points to even more demand deterioration than we are being led to believe.

Today, WTI -$3.24, $81.21; Brent -$3.32, $103.81; RBOB -4.48¢, $2.6507; HO-5.82¢, $2.8184.

September 26, 2011

The analysts and traders are trying to find a reason to get prices to go up and the anonymous European Central Bank official who says every thing is going to be OK was enough not to go down for the fourth straight day but WTI barely moved up, ending at less than a cent a gallon (39¢/bbl) today. The other news was bearish as US home prices are still falling and the Saudis are threatening to cut production if Brent and affiliated crude prices go below $90/bbl.

Today, WTI+39¢, $80.24; Brent-3¢, $103.94; RBOB+1.47¢, $2.5694; HO-.43¢, $2.7915.

September 23, 2011

I'm reading (Son of Entropy)2, my friend Pete Mayer's reminiscences of his parents (Mom Maria won the Physics Nobel in 1963 but Pete thinks his father, a chemist, was the better scientist) and I'm struggling with the concept of entropy but if we're entropically supposed to be heading up in crude and product prices, the opposite is happening. Since Obama's jobs speech, prices have been inexorably going downward as traders and analysts more and more believe that Greece will default and Europe will crash and the U.S. seems to be headed into recession alongside Europe. Normally, a lot of heat is generated while the object is moving entropically and maybe we are crashing and burning.

All commodities dropped today as equities seemed to go sideways (marginally positive). This was happening as the G20 pledged to keep their economies moving forward but today's trading results seem to indicate that very few are confident of this pledge. Distillate demand is up and this ordinarily indicates an improving economy as diesel moves the products of the economy but this was ignored by the markets.

For the week, WTI-$8.11, $79.85, Brent-7.73, $103.97; RBOB -22.94¢, $2.5547, HO-21.31¢, $2.7958.

September 21, 2011

The Federal Reserve is trying to bring interest rates down by buying $400 billion of long term debt but their description of their prescription used words associated with a declining economy especially noting "significant downside risk" and "slow growth." The markets acted quickly and brought futures prices down for crude and product despite a crude drawdown in inventory. That drop in crude inventory was attributed to a fall in imports. Distillate inventories fell while gasoline stocks were up. Just as significantly, the dollar went up with news of the the Fed's proposed action.

Analysts are also following the stock market and Dow Jones average dropped 2.5% after Moody's downgraded Bank of America and Wells Fargo. All this news overshadowed the Palestinian bid for U.N. recognition and the continuing fighting in Libya.

Today, WTI-97¢, $85.92; Brent-18¢, $110.36; RBOB-3¢,$2.67; distillate-3¢, $2.93.

September 19, 2011

The European debt crisis is worsening and U.S. unemployment seems to be stuck at 9% and this points to falling demand and the markets reacted today and crude fell 2.6% while gasoline dropped 3.1%. Crude fell even though the market dropped as overall global economic conditions seem to be deteriorating. Crude also tumbled despite OPEC's pronouncement that they were cutting back on production as Libya's capabilities increased.

Today, WTI -$2.26, $85.70; Brent -$2.57, $109.13; RBOB -8.76¢, $2.6965; HO -6.42¢, $2.9447.

September 12, 2011 - Anniversary of the Battle of Vienna, 1683

The euro rebounded vs. the dollar despite the expected Greek sovereign debt default. French banks are especially vulnerable for the amount of loans they hold. Crude went up slightly and there seems to be no boost from President Obama's jobs speech last week. Traders believe that crude will not increase appreciably the rest of the year and are shorting the oil market. Traders do seem bullish on gasoline but that is where demand deterioration shows the most.

Today, WTI+95¢, $88.19; Brent-54¢, $112.23: RBOB-3.28¢, $2.7382; HO-3.83¢, $2.9475.

September 9, 2011

European economic woes arising out of the Greek sovereign debt problem and possible default overshadowed President Obama's prescription for high unemployment levels given last night at a joint session of congress. The focus on the debt problem and the predicament it places on the euro zone and its banks caused the euro and the stock market to fall and this raised the dollar. With the dollar a better buy today, money moved to the dollar and away from commodities like crude. Crude fell 2% from yesterday's settlement.

A side note was the big drop in gasoline, 11.42¢, and to a lesser extent distillate, 5.85¢. Gasoline's fall was due to the growing realization that the summer driving season just past was very weak and as there seems to be no movement in the economy, the fall season would not be any better.

For the week, WTI+79¢, $87.24; Brent-42¢, $112.77; RBOB-6.86¢, $2.771; HO-1.16¢, $2.9858.

September 8, 2011

There's a new storm brewing in the Gulf and pushing crude prices up 4% as production is halted for safety reasons once again after the shut downs of last week due to Tropical Storm Lee. These expected productions shortfalls caused traders to buy oil futures and this paralleled the rise in equities as the dollar fell. These prices increased despite the continuing worries about the debt crisis. Furthermore, emphasizing demand deterioration in the U.S., EIA trimmed their forecast for economic growth to 1.5% from 2.4% this year and to 1.9% from 2.6% next year. This effectively says that the Energy Department sees a stagnant economy for the next year and a half.

Today, WTI+$3.32, $89.34; Brent +$2.91, $$115.80; RBOB+8.54¢, $2.908; HO+6.54¢, $3.0756.

September 2, 2011

The market has hit an interesting point because the bad news today was such that despite the bullish outlook from the lingering effects of Hurricane Irene and the expected effects of Tropical Storm Lee, the bearish stark reality of a recessionary economy really came to the forefront. On Fridays it is normally good to look at price movements from the vantage point of a week to temper the daily volatility of the markets. Today, however, it will be instructive to consider the reality of a failed summer for gasoline demand and the impending fall of more demand deterioration as the double dip recession is more and more accepted as fact and unemployment stays high amid greater economic uncertainty. When the new unemployment numbers were announced today with all media sources talking about the "unexpected" nature of the stagnant job market, it became obvious that the U.S. economy is not getting better. Immediately equities fell and crude followed. One can only speculate what the real number of new jobs and unemployment claims are since they are always revised a week or so later and the time spread cushions the effect on the market.

On a week to week basis, gasoline is down only 1.8% but just from yesterday's settlement to today's gasoline had fallen 3.2%. To be trending positive and then have the bottom fall out is significant. Crude analyzed from week to week shows +1.3%but just looking at the movement from the first day of the month to the second, the fall is -2.8%. Today's jobless numbers, especially no new jobs created during the month of August, reveals a very faltering economy.

For the week, WTI +$1.08, $86.45; Brent +$1.83, $$113.19; RBOB -9.5¢, $2.8396; HO +1.27¢, $2.9974.