March 28, 2011

NATO's air forces have effectively changed the momentum of the Libyan Civil War against Ghaddafi in favor of the rebels. There was news today that the rebels could begin exporting production in a week. This positive, for greater supply, news led to a fall in both crudes and both products. There has been a feeling among analysts that prices are a bit high for the weaker than expected global demand and because of the considerable supply around the globe, especially in the bench mark storage point in Cushing. The risk premium will not yet disappear but there is strong indication that prices are too high for the fundamentals.

Today: WTI -$1.42, $103.40; Brent -79¢, $114.80; gasoline -2.12¢, $3.0233; distillate -2.3¢, $3.217.

March 24, 2011

PIGS and their debt issues have not factored into the price of oil for so long but today news that Portugal needed to be bailed out of its sovereign debt problem restrained prices. Also restraining prices was the news that the orders for durable goods had decreased meaning that the economy might be slowing down and demand for oil may not increase. The fallback in prices was tempered by the continuing violence in Libya. Deaths in Syria were also reported and there is word that Yemen's president and the top army general were negotiating their resignation.

Today, WTI -17¢, $105.58; Brent +22¢, $115.76; gasoline +2.47¢, $3.0459; distillate +0.68¢, $3.0629.

March 23, 2011

Rather than calm the waters, the no-fly zone set up by the U.S. and its allies and the bombing of pro-government forces have caused crude prices to rise even higher amid expectations of greater civil unrest elsewhere in the Middle East. Supply is not the problem and is not the problem in the foreseeable future. Crude inventories continue to build while gasoline had a larger than expected draw and distillate was flat in today's EIA report. Ever since political unrest drove out the regimes in Tunisia and Egypt, the market has been skittish about the political problem spilling out onto Saudi Arabia. The market knows that these high prices may not be sustainable but clearly is worried about being surprised by the fall of a pro-Western supplier such as Saudi Arabia.

Today: WTI +$1.29, $105.75; Brent -15¢, $115.54; gasoline +1.61¢, $3.0212; distillate -1.9¢, $3.0561.

March 22, 2011

Certain Japanese recovery with additional demand for oil and the continuing battle in Libya led NYMEX prices up in light trading. Brent and both products followed suit. The renewed fighting despite the no-fly zone indicates that there will be little if any flow of crude out of Libya any time soon. Meanwhile, the problems for the Yemeni regime continue to grow as generals have now defected to the opposition. This fighting raise the risk premium because of Saudi Arabia's proximity to Yemen.

Today, WTI +$2.06, $104.46; Brent +75¢, $115.69; gasoline +0.77¢, $3.0051; distillate +2.33¢, $3.0751.

March 18, 2011

Some analysts are beginning to believe the Tokyo Electric Power Co. (Tepco) that they are making progress and starting to cool down the Fukushima nuclear reactors because yesterday most of the market's attention was turned towards Libya and Bahrain. Ghaddafi continues to bomb his own people, however, today he unilaterally declared a cease-fire after Britain announced that it would deploy planes to stop Ghaddafi from bombing rebel positions and civilians. Bahrain also continues to be problematic as the Shia continue to demonstrate against the Sunni regime despite the deployment of Saudi and other Gulf State forces in support of the Bahraini government.

All these events have led to a resurgence of the risk premium. The potential for a quick Japanese economic recovery will lead to greater mid- and long term demand for oil as it is likely that Japan will turn to oil-fired power plants to generate electic power. The Libyan crisis, even if Ghaddafi returns to power, will likely take its toll on future production. The continued Shia turbulence in Bahrain and Saudi Arabia will raise the likelihood of greater violence and instability in the region.

Yesterday: WTI +$3.35, $101.33; Brent +$4.03, $114.72; gasoline +10.18¢, $2.946; distillate +6.26¢, $3.0592.

March16, 2011

The market is being pushed and pulled in different directions and it is hard to determine how to prioritize the factors affecting the markets. Crude inventory continued its inexorable build while both products saw significant draws because we are in early spring there will be greater demand for gasoline and diesel. Bahraini security forces reinforced by Gulf States military have had violent clashes with demonstrators and because this is next door to Saudi Arabia the risk premium must be added to prices. Ghaddafi seems poised to retake all of the rebel-held areas in Libya and this may mean that oil will once again be flowing even at a great human cost. Japan is pulling prices down because no one understands the full extent of the nuclear meltdown and its effects on the Japanese economy and whether future Japanese demand for oil will increase. A lot of push for prices to go up and a major pull to bring prices down consequently products moved big while crudes move moderately.

Today, WTI +58¢, $97.98; Brent +$2.14, $110.69; gasoline +3.82¢, $2.8442; distillate +4.02¢, $2.9966.

March 14, 2011

I'm worried about the fallout from the Fukushima plant blowing radiation down to Guam even though it is unlikely that Air Mike will be sending planes to Sendai. The markets are worried that Japan's economy is going to take a hit from the devastation of the earthquake, the tsunami, and the nuclear plant meltdown. No one seems to know if Japan will need more oil to keep the economy going and build oil or coal-fired power plants to replace the nuclear plants that have been damaged by the earthquake and tsunami or whether economic activity in Japan will fall so much that extra energy will be unnecessary.

It was because of this thinking that WTI prices went down then went up during the trading day before ending virtually flat. Brent also barely moved from last Friday while gasoline went down while distillate went up. Today: WTI +25¢, $101.19; Brent -5¢, $113.64; gasoline -2.36¢, $2.9603; distillate +3.56¢, $3.0609.