October 31, 2011

October's 18% crude futures price increase is breathtaking when you consider that Ghaddafi was finally overthrown and killed this month and the Europeans are still mired in the sovereign debt crisis. Ghaddafi's demise means more product in the market fairly soon causing prices to fall. The inability to definitively decide how to solve the European debt problem is also bearish. However, crude moved into the $80s in the second week and into the nineties in the last week and seems ensconced there for now. It is curious that gasoline only rose 0.6% in the same time period while distillate jumped to a more reflective level at 8.9%

Japan devalued the yen and that led to a very modest decline for both Brent and WTI. The actions on the yen and the continuing reactions to last week's debt agreement pulled prices lower in today's trading.

For the month, WTI+$13.99; $93.19; Brent+$7.18, $109.56; RBOB+1.69¢, $2.6429; HO+24.81¢,, $3.0429.

October 28, 2011 - 1699th anniversary of the Victory at the Milvian Bridge

A lot of bearish news brought only a 0.7% decline for crude from yesterday's settlement. This was because the initial report on U.S. GDP was a 2.5% increase as compared to the 1.3% growth for the previous quarter. The Feds have always adjusted the initial reports on economic activity and those adjustments have always been negative.

The most bearish news was that Japanese industrial output fell 4% in September which was twice the estimate. The other bearish news was that the growth in consumer spending is outpacing the growth in personal income indicating that Americans are eating into their savings or borrowing more.

Traders are still feeling bullish because of the Euro debt repayment plan approved unanimously yesterday.

Important trend to note is that the spread between NYMEX and Brent has plunged to $16.59. There is a little bit more stability in European markets due to Ghaddafi's death and approval of the Euro debt repayment plan.

This week, WTI+$5.92, $93.92; Brent+35¢, $109.91; RBOB-0.24¢, $2.6822; HO+4.17¢, $3.0592.

October 24, 2011

There is now a real indication that prices may be going up. The market has begun to experience backwardation, i.e., prices are higher today than they are expected to be in the future. The market has been operating in contango with prices higher in the future rather than today. This news as well as the digital imaging if the Cushing Storage Terminal that showed significant inventory drawdowns led to a 4.4% increase and pushed WTI above $90 for the first time since mid-September.

Lending even more credence to greater demand and a more limited supply was news that China's manufacturing is expected to increase and Japanes exports are up.

Today, WTI+$3.87, $91.27; Brent+$1.89, $111.45; RBOB+0.4¢, $2.6888; HO+3.71¢, $3.0546.

October 20, 2011 - MacArthur returns to the Philippines

All analysts' eyes remain focused on Europe as the Europeans struggle with an acceptable agreement on a rescue fund for the sovereign debt problems. The Germans, in particular, seem unsure about taxing their citizens to insure that Greeks can enjoy early retirement. Thus the two crude benchmarks moved in opposite directions with WTI falling 1% and Brent rising 1%. Ghaddafi's death did not figure into the Brent settlement price but probably did help to bring NYMEX prices down with the knowledge that production would now be stepped up and unimpeded by fighting.

Economic news from the U.S. was similar dualistic with news on oil demand being quite bearish while the Philadelphia Fed published a report that the manufaturing index unexpected rose by a rather significant 26.2 which is the highest increase in over 30 years. This number must be followed for the next several months to prove that it is not an outlier.

Today, WTI-81¢, $85.30; Brent+$1.06, $109.63; RBOB+0.4¢, $2.6755; HO+4.89¢, $3.0301.

October 19, 2011 - Scipio Africanus victorious at Zama

Financials trumped fundamentals as crude fell 2.5% following the faltering movement of equities and going counter to the crude and product inventory builds. Further helping the fall of futures prices were the division between Germany and France on a solution for the Greek sovereign debt problem and the Fed's report of a lackluster economy.

Today, WTi-$2.23, $86.11; Brent-$2.58, $108.57; RBOB-7.54¢, $2.6715; HO-4.65¢, $2.9812.

October 19, 2011 -

October 17, 2011

German officials expressed uncertainty on whether a solution could be found for the sovereign debt problem and the Fed revised August GDP numbers to reflect zero growth. Concurrently this stopped a string of increases for crude. More attention will be paid on China's announcement of its economic activity tomorrow.

Today, WTI -42¢, $86.38; Brent -$2.45, 110.17; RBOB -8.18¢, $2.7429; HO -4.22¢, $3.0136.

October 13, 2011

For the second straight day, crude futures fell, if slightly. WTI followed equities but also reacted to the greater than forecasted inventory build. Product inventories saw a draw but that was because refinery utilization was trimmed 3.5% due to falling demand.

Today, WTI -$1.34, $84.23; Brent -25¢, $111.11; RBOB +.088¢, $2.7575; HO +3.67¢, $2.9714.

October 12, 2011 - Anniversary of Columbus landing in the New World

Prices were being pulled up by the decline in the dollar and the rise of equities but were also being dragged down by the news coming out of the Federal Reserve Open Market Meeting where a lot of concern about the economy was raised. However, today's settlement was the first decline in six sessions, if such a small dip can be considered more than a sidelong move, but also was the third consecutive session of sideways movement. It may be that $85 is about as high as the market will allow WTI to go.

Today, WTI -24¢, $85.57; Brent +63¢, $113.36; RBOB +0.11¢, $2.7487; HO +3.06¢, $2.9347.

October 10, 2011 - Anniversary of the Battle of Tours

Analysts are trying to find any positive news that will get prices moving up and today that piece of positive news was the pledge by Merkel and Sarkozy that the sovereign debt problem would be solved. This solution has been in the works for over a year with no end to the problem but the pledge was enough to raise crude 2.9%. Since today was the Columbus Day holiday, trading was light. The increases for crude and products was also probably due to the fall of the dollar as the euro strengthened.

Today, WTI +$2.43, $85.41; Brent +$3.25, $108.95; RBOB 4.77¢, $2.6953; HO +4.51¢, $2.9039.

October 7, 2011 - Anniversary of the Victory at Lepanto

Crude moved up slightly from Thursday but showed a large increase from the middle of the week and a more moderate increase from last week's settlement. The gyrations and volatility of the market are the result of prices following events in Europe, primarily the seemingly inevitable Greek sovereign debt default that Chancellor Merkel and President Sarkozy are trying to avert. However, the problem is Greece. The Greeks are unwilling to pay taxes but they do wish to enjoy their lifestyle especially highly paid retirement. Merkel and Sarkozy now have more problems as Italy and Spain were given credit downgrades yesterday.

Early in the trading day, the Labor Department announced the creation of 103,000 new private sector jobs but the unemployment rate was unmoved at 9.1%. Then came the news that 45,000 of those new jobs were actually old jobs at Verizon being filled by returning stikers and the jobs picture did not look as promising.

For the week, WTI +$3.78, $82.98; Brent +$3.32, $105.70; RBOB +2.16¢, $2.6476; HO +6.4¢, $2.8588.

October 5, 2011

Inventories normally build in the fall as refiners have extra stock from the summer but refiners kept inventories low this summer anticipating low demand. Today's EIA inventory report shows draws for crude, gasoline and diistiilate and that led to big increases in price. Automatic Data Processing published a report that private sector payrolls were up 91,000 jobs in September. ADP is more reliable than the government statistics that are always being revised upward after the initial release.

Today, WTI +$4.01, $79.68; Brent +$2.50, $102.37; RBOB +8.08¢, $2.5692; +5.32¢, $2.7766.

October 1, 2011

The specter of a major economic downturn caused by Greek sovereign debt default overcame slightly good news about U.S. manufacturing and construction starts. Greece seems inexorably headed towards default and an economic crash can only be averted by action from the German government to support the banks that are owed money by the Greek government. However, the overall fundamentals of the oil markets haven't changed as the American economy continues to head toward a double dip recession and joblessness maintains a position above 9%.

Today, WTI-$1.59, $77.61; Brent-67¢, $101.71; RBOB-11.5¢, $2.511; HO-4.195¢, $2.7529.