March 10, 2011

WTI and Brent were both headed for significant falls when news about Saudi police shooting rubber bullets at protesters was broadcast. Prices were headed below $100 not today but in the near future but now no one is sure what level of violence will occur in Saudi Arabia, the world's largest exporter of crude. The other news affecting the economy and crude prices were bearish. Unemployment claims went up last week and Greece's credit rating was downgraded. Analysts are worried that such a high price increase will cause the foreseen economic uptick to falter.

Today, WTI $1.73, $102.65; Brent -69¢, $115.25; gasoline -0.23¢, $3.0185; distillate -2.13¢, $3.0444.

March 9, 2011

Geopolitical events and the fundamentals of demand and supply find the two crude products in the market going in different directions. NYMEX WTI futures fell while Brent futures in Europe rose. WTI and Brent both moved upwards in the morning because of Ghaddafi's renewed attacks on Ras Lanuf, Libya's largest petroleum complex. When the EIA released the inventory figures late in the morning showing an increase of 2.5 million barrels and stocks totalling over 40 million barrels, the highest ever reported, WTI fell. The story became more complicated because both products, gasoline and distillate, showed large jumps upward when normally they would move parallel to WTI.

Today: WTI -73¢, $104.38; Brent +$2.80, $115.94; gasoline +7.19¢, $3.0208; distillate +5.42¢, $3.0657.

March 8, 2011

A week ago WTI settled under $100 but the fighting in Libya has gotten hotter and Ghaddafi seems to be making a comeback with overwhelming artillery and air power. Europeans seem unsure if they should implement a no-fly zone and the Obama administration seems uninterested and wishing only to do nothing. Only the fast rising price of gasoline seems to be pushing the White House into making any statement at all. The latest statement was to suggest to open up the strategic reserve but you don't use a short supply strategic reserve to flood an already oversupplied market with crude bought when WTI was under $30. However, the Obama administration wants to get prices to fall without approving more drilling and without interfering in the Libyan civil war.

Today's slight price decrease seems to have been caused by OPEC's continuing assurance that the Libyan short fall can be made up. I mentioned OPEC because Kuwait, the UAE and Nigeria have now joined Saudi Arabia in trying to calm the markets down. However, Saudi Arabia faces demonstrations in a couple of days and Nigeria is about to have an election and that always causes unrest throughout the country.

Today: WTI -34¢, $105.11; Brent -87¢, $113.14; gasoline -5.54¢, $2.9489; distillate -5.4¢, $3.0115.

March 7, 2011

The conflict in Libya now seems to be headed towards a prolonged struggle and the fight is now at production and marine terminal sites as well as near a refinery. Should fighting continue and affect those facilities, the damage may be unrepaired for an extended period of time and use up spare capacity currently available. Ghaddafi has proven he is not willing to go into exile and continues to bring in foreign mercenaries to fight the rebels. He has also shown a willingness to bomb these facilities from the air while NATO dithers about setting up a no-fly zone. The biggest fear is that the unrest will erupt next in Saudi Arabia and Nigeria. Nigeria is scheduled to have elections in April and violence could erupt there to stymie the flow of crude.

Today: WTI +$1.15, $105.45; Brent -92¢, $115.04; gasoline -3.92¢, $3.0043; distillate -2.06¢, $3.0655.

March 4, 2011

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.

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.

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.