December 30, 2010

Fundamentals came into play today during a light day of trading due to the New Year's holiday. On this last trading day of the year, the market noted a build in distillate and a smaller than expected draw for crude. Gasoline inventory drew down as expected. Together with manufacturing data from China that showed a slowing of growth, this lead to a fall in crude and product prices from yesterday. Crude fell below $90 but this seems high based on available supply and the current level of economic growth. This is why the announcement of the lowest jobless claims in two years did not keep the price moving up. The harder number to explain is the distillate inventory build that is happening amid snowstorms and cold weather.

Having an annual perspective gives a better understanding of what happened this year. Crude +$9.99, 12.5% increase, $89.82; gasoline 32.82¢, 15.9% growth, $2.3912; distillate +36.1¢, 17% higher, $2.4845.

See you in 2011.

December 29, 2010

Analysts may be starting to wake up as to why inventories are falling this month and may not want to be holding expensive inventories next month when products start to build with lower priced product. Crude and product prices all went up. The news that consumer confidence and home values are down did nothing to help make prices increase. Prices are magnified this week as trading volume is low. Tomorrow's EIA report will affect the final settlement prices of the year.

Today, crude -33¢, $91.12; gasoline -1.77¢, $2.3904; distillate -0.45¢, $2.5215.

December 28, 2010

The fourth day of crude above $90 while gasoline and diesel have settled sideways. December retail sales were reminiscent of better economic times and gasoline demand has been improving lately. Some analysts are talking about inventory draws but by now everyone has been reminded of LIFO and year-end tax planning. Economic news is a mixed bag: prices for homes for sale are down, equities are up, fuel demand is picking up, but no one is sure about Chinese fuel demand and its attempt to dampen inflation.

Today, crude +41¢, $91.45; gasoline -1.38¢, $2.4081; distillate +0.0094, $2.526.

December 27, 2010

Is China's increasing of interest rates and deposit requirements a move that will curb inflation or will it do little to help their economy as it is only one quarter of one per cent?

Will the airlines ever make up for the planes that did not fly over the weekend? What happens to total diesel demand now that both shopping and trucking were greatly curtailed because of snow storms On Christmas Day and the following Sunday. The markets seem to think that that demand will not make up the lost product, relatively speaking.

The draw on inventories will also soon end as the new year will mean that the LIFO layers will start anew and inventories can reflect true demand. This may stop the increase of crude and and product prices or limit the effects of dollar devaluation.

Today, crude -44¢, $91.04; gasoline -1.71¢, $2.4219; distillate -2.42¢, $2.5166.

December 23, 2010

As we approach 12/31/10 and the final inventory of the year, refiners are paying close attention to inventory levels because of the LIFO rules and inventory layers and all the other tax valuation issues. Consequently, inventory has been drawn two weeks consecutively. Some analysts see this as positive signs that the economy is improving and demand is increasing. However, the housing sales numbers are half what they were forecast to do. At best And with the holiday season, many analysts have already taken off for the year and the number of trades are lower so that any movement seems bigger than it is. Nevertheless, crude has risen 3.9% in a week. Gasoline is already $3/gallon in some markets.

For the week (short week due to the Christmas holiday), crude +$3.46, $91.48; gasoline +12.12¢, $2.439; distillate +1.12¢, $2.5408.

December 21, 2010

Crude and products settled higher today as reports of high same store retail sales were published. Coupled with initial reports of tightening supply, this news made for very bullish activity today.

Today, crude +99¢, $89.80; gasoline +2.31¢, $2.399; distillate +2.9¢, $2.5178.

December 20, 2010

Initial U.S. Commerce Department GDP reports indicate an improving economy. It is important to remember that it is the initial report and every report in the past year has been adjusted downward but analysts overlooked that today and pushed prices up. Global cooling in North America and Western Europe is also impelling prices up. The period around the holidays see lower levels of trading and many moves now seem greater than they would normally be considered because trading is so light.

Today, crude +69¢, $88.81; gasoline +5.81¢, $2.3759; distillate +1.51¢, $2.4888.