December 9, 2009

Crude supplies along the Gulf Coast declined 3.8 million barrels which would normally trumpet price increases but the other fundamentals dictated that NYMEX futures fall and fall they did. Unexpectedly, gasoline stock piles grew 2.25 million barrels and distillate increased 1.62 million barrels. In a move to get rid of expensive inventory being held at refinery storage, refinery utilization rose to 81.1% but this is still historically low. This is because demand numbers again dropped by 3%. Utilization also went up despite crack spreads falling by 12%. Analysts are now saying that traders are betting on lower prices and are selling. One of the technical traders was quoted as saying that crude was on the way to $65. Crude certainly did not take long to get out of the $75 - $80 trading range. From the 438th anniversary of the Battle of Lepanto to 2 days after the 68th anniversary of Pearl Harbor are the lows for this period. We may reach another low tomorrow as this is now 6 straight days of decreases.

For the day, crude -$2.57 to $70.40, gasoline -6.8 cents to $1.8625, distillate -7.7 cents to $1.914 (think of all that snow and blizzards in the mid-West).

December 8, 2009

The dollar rose forcing traders to think fundamentals and crude and products futures prices fell. The most overbearing fundamental component is supply and the world is awash in crude and the US crude inventory is estimated to be higher by 500,000 barrels while gasoline supplies are also estimated to be 1,750,000 barrels higher, the gasoline number is the highest since mid-April. Since we are already in the winter cold temperature season distillate supplies were down 750,000 barrels. The other overbearing fundamental factor is demand and that remains weak.

The contango spread between January and February increased another 11 cents to $2.03 and this is indicative of the huge stockpiles of crude around the world.

For the day, crude -$0.90 to $72.97, gasoline -1.6 cents to $1.9305, distillate -1.9 cents to $1.9305.

Tomorrow is inventory report day.

December 7, 2009

For a 4th straight day day crude and products futures prices declined. The trend to watch is the expanding contango spread between front month and the next month. The difference between January and February is now almost $2 and growing. The reason for the swelling is the large amount of worldwide inventory. Refiners and other large users are cutting back on contracts and purchases in an attempt to prevent huge losses in owned inventory of crude and product. It did not help that Fed Chairman Ben Bernanke was talking down the economy today by saying that it faced "headwinds."

For today crude -$1.87 to $73.87, gasoline -3.55 cents to $1.9465, distillate -3.17 to $2.0095.

December 4, 2009

The market affirmed today that crude will move inverse to the dollar. The dollar moved up today and crude and products all fell to their lowest level since 10/14. Early on the infinitesimal downward movement of the unemployment rate led traders and analysts to buy crude and products up but the dollar improved and the supply and demand elephant in the room reversed the upward movement.

OPEC is making noise that production quotas will not be changed but Nigeria is said to be cheating significantly. No matter, the planet is awash in crude as ULCCs and VLCCs are said to be full and tethered to their moorings, Mediterranean and otherwise.

For the day, crude -$0.53, gasoline -1 cent, distillate .3 cents.

December 3, 2009

There was a lot of talk about the economy, the jobless rate and the dollar today but in the end crude and products barely moved. Traders and analysts forgot that there were only three reporting days during the Thanksgiving holiday week and made a big deal about the perceived fall in unemployment claims. The really important data were the increase in crude inventory and the continuing decrease in demand. Commodity traders keep talking the economy up but the fundamentals of supply and demand are the inconvenient truths at this point.

Crude closed -11 cents at $76.27, gasoline +.49 cents at $1.9911, distillate +1.35 cents at $1.9911.

December 2, 2009

Inventory levels surprised everyone by building 4.7% highlighted even as imports fell 6.1% and demand also dropping 3.2%. This only emphasizes the overabundant amount of worldwide inventory that continues to grow because producers are producing more to take advantage of the high prices for crude. Added to this is the decrease reported in the Index of Manufacturing Activity to 53.6 from 55.7 that contrasted greatly versus the positive China manufacturing report yesterday. Additional negative news included 169,000 jobs lost in November and refinery utilization down again 0.6%.

Crude fell $2.12 to $76.38, gasoline down 6.5 cents to $1.9862, and distillate dropping 5.2 cents to $2.0305.

December 1, 2009

Crude rose 1.2% or $0.90 as China's manufacturing purchasing index and US manufacturing output climbed and, more importantly, the dollar fell. The gorilla in the market is still very evident as there was talk of the high crude inventories world wide even though it is expected that tomorrow's inventory report will show a draw. With prices going up this year over last fall, it was not unexpected that OPEC showed an escalation in production.

In an announcement that affects price at the street level and commodity prices in general the EPA delayed the imposition of E15 regulations. Refiners and automakers are cautioning about the problems caused by any ethanol blend greater than 10%. There is also considerable customer worry about ethanol and there has been market resistance in certain markets.

Street prices continue in the $2.40 range. One can only be thankful in Jonesboro as I saw $3.10 prices in Chicago over the weekend and $2.70 in Chicago's southwestern suburbs.

For the day, crude closed at $78.50, amazingly Brent continued its climb to $79.67, gasoline ascended to $2.051 and distillate mounted to $2.0824.