January 28, 2010

Weak demand forced the market to a split decision as crude and distillate were basically sideways but up a little while gasoline was definitely down by over a penny and a quarter. Yesterday's very bearish report on higher than expected gasoline stocks revealed demand had not yet returned to even 2008 levels. The bearish news on crack spreads of less than $7.50 for both gasoline and distillate points to a major demand problem for products. Refinery shut downs and maintenance turn arounds cannot mask weak overall demand.

Low demand for gasoline is increasing gasoline inventories. This causes the futures slate of product and crude to move sideway or fall.

Today, crude +0.19 to $73.61, gasoline -1.29 cents to $1.9184, distillate +0.37 cents to $1.9191. Street prices stayed at $2.329.

January 27, 2010

Crude inventory was down but gasoline and distillate stocks rose. Most traders realized this set of events had to do with continuing stagnant demand that saw refinery utilization at 78.5%, barely moving up 0.1% as well as the Sabine Channel closure most of last week that cut back on crude deliveries. This is turnaround time for refineries and very few refineries will be stocking up on crude with decreased demand for product. Crack spreads are so low that crude runs are at the level of the fall hurricane season.

Just as bearish was the increase in distillate inventory. The fact that mid-section of the country is facing another series of winter storms and distillate demand is down indicates how few trucks are running and how few jets are flying.

Today, crude -$1.29 to $73.42, gasoline -3.92 cents to $1.9313, gasoline -3.92 cents to $1.9154. Best street price was $2.329, down 4 cents.

January 26, 2010

Yesterday's rise could not gain traction today and there were slight decreases in crude and distillate and a moderate drop in gasoline. Traders are still worried that China's new tight credit policies will slow manufacturing growth and dampen demand. The dollar's gain on the Euro also moderated any appetite for buying futures.

In the background of these day to day events is news that OPEC members are cheating at the rate of 1.75 million barrels per day. Crude in the $70 - $80 range is profitable for the cheaters but they are building supply for which there is not such great demand. Expect prices to fall again if the EIA's reports an inventory build.

Today, crude -$0.34 to $74.71, gasoline -2.58 cents to $1.9705, distillate -0.49 cents to $1.9546, street price +2 cents to $2.369.

January 25, 2010

Equities rebounded and the tanker collision in the Sabine Waterway inclined traders to buy higher today but only barely. Demand is still perceived as not to the level of even last year and supplies are plentiful. Traders are loathe to be holding expensive paper when demand is unlikely to increase.

Today, crude +$0.51 to $75.05, gasoline +2.74 cents to $1.9963, distillate +1.95 cents to $1.9595. Best street price today was $2.349, the lowest price in over a month.

January 22, 2010

There were many reasons for crude to fall today: The Obama administration's restrictions on financial institutions' risk taking, speculation that China was going to raise interest rates to slow growth, continuing weak total demand that mirrors a slumping economy and punctuated by this week's declining equities market, the likelihood that seasonal demand for distillate will now drop as we approach warmer spring weather, and larger than average stocks of crude and product around the world. There was a reason for everybody to sell rather than buy.

Today's prices were the lowest since crude hit $74.11 on December 22, exactly a month ago. The 10 cent drop in distillate is indicative of the overall economic problem. Economic conditions are such that not enough trucks and trains are running and fewer jets are flying. Refiners have been reducing inventory and cutting back on production and that has kept prices higher but still crack spreads are not generating profits.

For the week, crude -$3.42 to $74.54, gasoline -$0.0753 to $1.9689, distillate -$0.1049.

January 21, 2010

Prices fell today for crude and products as demand data, inventory levels, and refinery utilization rates were made public. Since Tuesday's close at $79, crude has fallen 4.1%. Prices fell even though national inventories dropped below the anticipated supply increase as it was realized all of the inventory decline was on the West Coast which is isolated from the supply stream of the rest of the country. Distillate stocks also fell but gasoline increased substantially over expectations insuring that there would be a lot of caution about investing in increased prices for abundant product. Prices continued to trade low when the bad economic news was revealed later in the day.

The fall of distillate is interesting because we still have at least another month of cold weather and distillate stocks have been falling. Traders have fixated, however, on average inventory levels and those remain higher than a twenty year average indicating abundant stock for weak demand. The fall in gasoline demand means people are driving their cars less. The relative weak demand for distillate means that fewer trucks are moving goods around the country and fewer jets are flying passengers since we have so far had a colder than average winter and heating oil demand must be up.

Today, crude -$1.35 to $75.80, gasoline -6.96 cents to $1.9769, distillate -4.01 cents to $1.981.

January 20, 2010

Crude rose for the first time in six sessions. The futures price still did not go above $80 and actually it is lower than even last Thursday's close. This price move is once again not about the fundamentals of the economy or supply and demand but about the movements of the stock market and the dollar. Monday's holiday will delay the release of inventory data until Thursday. Interesting to note that both products' increases were not close to crude's level.

Today's numbers: crude +$1.04 to $79, gasoline +1.57 cents to $2.0599, distillate +0.21 cents to $2.047.