220,000 jobs were created in the private sector in February but this seemingly good news was not the big push as forces loyal to Ghaddafi have been counterattacking and some of the targets are oil production facilities. The longer the unrest in Libya the more inflamed the Middle East becomes. In Saudi Arabia and Bahrain it is mostly Shia against Sunni whereas the problem in Libya is Ghaddafi against his own people. The problem remains, however, the general ferment of common people against long time regimes.
Big prices increases for the week: WTI +$6.13, $104.30; Brent +$3.94, $115.96; gasoline +31.34¢, $3.0435; distillate +15.81¢, $3.0861.
Friday, March 4, 2011
Thursday, March 3, 2011
March 3, 2011
It is hard to gauge the market when geopolitical currents rather than fundamentals or technicals are driving price movements. Since the self-immolation of the vegetable vendor in Tunisia back in December led to the end of the Mubarak regime in Egypt in January, analysts have been watching tv monitors for news of North Africa and the Middle East rather than the movements of the currency markets or the price channels or even supply and demand. Nobody is talking contango or backwardation because it is hard to gauge the future. Nobody is talking technical because we are in uncharted territory, the Middle East is in ferment and it is not even an Arab-Israeli confrontation but the old order is being overthrown.
There is also considerable worry that prices are moving too high too fast. The worry is that the world economy, just trying to get out of the current recession and facing the sovereign debt problem in Europe, will have a hard time picking up momentum for real growth if prices go too high. There is a secondary worry that with the world awash with oil someone is going to get caught holding the bag with these high prices. There is also the problem of which product, WTI or Brent, really reflects the world price. The Middle East unrest has widened the gap between Brent and WTI which has approached $20. The oversupply is never more evident than in the full storage tanks in Cushing, OK, that are more loaded with inventory than at any time in the past.
Today, the market took a breather as Hugo Chavez made an attempt to help out fellow dictator Ghaddafi by offering the Venezuela plan: WTI -30¢, $101.93; Brent -$1.88, $114.78; gasoline -0.5¢, $3.0245; distillate -0.84¢, $3.0493.
There is also considerable worry that prices are moving too high too fast. The worry is that the world economy, just trying to get out of the current recession and facing the sovereign debt problem in Europe, will have a hard time picking up momentum for real growth if prices go too high. There is a secondary worry that with the world awash with oil someone is going to get caught holding the bag with these high prices. There is also the problem of which product, WTI or Brent, really reflects the world price. The Middle East unrest has widened the gap between Brent and WTI which has approached $20. The oversupply is never more evident than in the full storage tanks in Cushing, OK, that are more loaded with inventory than at any time in the past.
Today, the market took a breather as Hugo Chavez made an attempt to help out fellow dictator Ghaddafi by offering the Venezuela plan: WTI -30¢, $101.93; Brent -$1.88, $114.78; gasoline -0.5¢, $3.0245; distillate -0.84¢, $3.0493.
Wednesday, March 2, 2011
March 2, 2011
The unexpected draws on crude and product supplies supported the upward price movement caused by the continuing Libyan civil war and have pushed WTI over the $100 level. Gasoline has now joined distillate above $3. Ghaddafi's remaining loyalists and foreign mercenaries are counterattcking and contesting the rebel hold of cities outside of Tripoli. The longer the conflict festers, the more regional problems will surface and that includes Saudi Arabia and Bahrain. At this point, analysts are buying or selling futures for geopolitical reasons and not for technical or fundamental reasons nor are they looking at what is happening in the currency market.
Today, WTI +$2.60, $102.23; Brent +$1.24, $116.66; gasoline +3.12¢, $3.0295; distillate +3.37¢, $3.0577.
Today, WTI +$2.60, $102.23; Brent +$1.24, $116.66; gasoline +3.12¢, $3.0295; distillate +3.37¢, $3.0577.
Monday, February 28, 2011
February 28, 2011
February is the shortest month and because of the alignment of the days it also had the fewest trading days. However, there was great volatility in the month because of the unsettled situation in North Africa and the Middle East. Last month the overthrow of Mubarak brought WTI prices into the $90 range. This past month the Libyan crisis plus anti-government demonstrations in Yemen and Bahrain have sent prices above $100. Now comes reports of demonstrations in Oman. The risk premium has sent the prices soaring, especially Brent which has reached $120.
Saudi Arabia has made good on its promise to increase production to cover for any losses of Libyan production. Kuwait is now considering increasing its production. As long as there are no street demonstrations in either kingdom, markets will be somewhat calm. For US consumers, the large and continually building inventory in Cushing has served as a buffer against even greater price hikes and volatility.
For the month WTI, +$4.90, $97.06; Brent +$11.16, $112.02; gasoline +23.95¢, $2.7301; distillate +18.12¢, $2.9208.
Saudi Arabia has made good on its promise to increase production to cover for any losses of Libyan production. Kuwait is now considering increasing its production. As long as there are no street demonstrations in either kingdom, markets will be somewhat calm. For US consumers, the large and continually building inventory in Cushing has served as a buffer against even greater price hikes and volatility.
For the month WTI, +$4.90, $97.06; Brent +$11.16, $112.02; gasoline +23.95¢, $2.7301; distillate +18.12¢, $2.9208.
Friday, February 25, 2011
February 25, 2011
The breather taken yesterday for the tide of rising prices ended quickly today when WTI settled 92¢ higher at $98.17 while Brent closed $1.01 higher at $112.12. Analysts understand that IEA and the rest of OPEC, especially the Saudis, can turn on the tap and replace the lost volumes of Libya. However, they are concerned that the unrest is not over and that something more will happen in Algeria and in Saudi Arabia despite the peace overtures being made by the respective governments to the restive populations.
Why are retail prices moving so quickly? News anchors and reporters have a problem understanding how the market works at the retail level and why crude futures going up today for a contract 30 or 45 or 60 days into the future will cause the price on the street to go up the very next day. Most refiners have to include a futures component in their pricing and that component has an immediate effect. In essence the future is today when we're talking how the price of crude affects the market. It is the only way that crude suppliers and refiners can keep up with market volatility.
Big upswing for the week: WTI +$12.07, $98.17; Brent +$9.54, $112.12; gasoline +18.32¢, $2.735; distillate +21.49¢, $2.928.
Why are retail prices moving so quickly? News anchors and reporters have a problem understanding how the market works at the retail level and why crude futures going up today for a contract 30 or 45 or 60 days into the future will cause the price on the street to go up the very next day. Most refiners have to include a futures component in their pricing and that component has an immediate effect. In essence the future is today when we're talking how the price of crude affects the market. It is the only way that crude suppliers and refiners can keep up with market volatility.
Big upswing for the week: WTI +$12.07, $98.17; Brent +$9.54, $112.12; gasoline +18.32¢, $2.735; distillate +21.49¢, $2.928.
Wednesday, February 23, 2011
February 23, 2011
Sometime during the trading session today, WTI passed $100 before closing at $98.05. Brent has spent most of the month over $100, passed $111 and closed at $111.20. What's heating the market up is not just the unsettled situation in Libya with a madman using his troops to fire on demonstrators. It is that the whole situation in North Africa and the Middle East is unstable. The Saudi petroleum minister may promise to produce enough to cover the shortage caused by the Libyan industry under siege but what if demonstrators appear on Saudi streets. Will Saudi Arabia be able to supply or will the regime need to focus on survival. WTI was last at $100 in October of 2008 when it was headed down. This price channel is headed the wrong way if the economy is to improve. Every $10 increase for crude means a 0.25% to 0.50% decrease in GDP.
Today, WTI +$4.23, $98.05; Brent +$5.41, $111.20; gasoline +6.28¢, $2.712; distillate +11.22, $2.9035.
Today, WTI +$4.23, $98.05; Brent +$5.41, $111.20; gasoline +6.28¢, $2.712; distillate +11.22, $2.9035.
Friday, February 18, 2011
February 18, 2011
The geopolitical situation continues to control crude price movements as both WTI and Brent fell slightly once the U.S. announced that it was monitoring the movement of two Iranian warships through the Suez Canal on their way to Syria. Both crudes had been trending upward prior to the White House announcement.
Bahrain and Libya are experiencing violent demonstrations with deaths caused by police and military reactions to those demeonstrations. Brent traders are normally buying futures for non-U.S. interests and Brent has been significantly more affected by the events in the Middle East than WTI. WTI has been shielded from greater price volatility because of the continuing inventory build in the Cushing, OK, terminals.
The past week has seen very little volatility in either product as the Egyptian problem is not as pressing. The fundamentals of Cushing and the geopolitical issues of the Middle East weigh greater on the minds of analysts than the action in the currency markets or how China is dealing with its economy.
For the week, WTI -24¢, $86.10; Brent -10¢, $102.58; gasoline +2.17¢, $2.5518; distillate -1.88¢, $2.7131.
Bahrain and Libya are experiencing violent demonstrations with deaths caused by police and military reactions to those demeonstrations. Brent traders are normally buying futures for non-U.S. interests and Brent has been significantly more affected by the events in the Middle East than WTI. WTI has been shielded from greater price volatility because of the continuing inventory build in the Cushing, OK, terminals.
The past week has seen very little volatility in either product as the Egyptian problem is not as pressing. The fundamentals of Cushing and the geopolitical issues of the Middle East weigh greater on the minds of analysts than the action in the currency markets or how China is dealing with its economy.
For the week, WTI -24¢, $86.10; Brent -10¢, $102.58; gasoline +2.17¢, $2.5518; distillate -1.88¢, $2.7131.
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