January 31, 2011

NYMEX settled above $92 while Brent settled at nearly $101 in today's trading. The uncertainties caused by the popular unrest in Egypt and the potential for problems with moving crude and product through the Suez Canal are on the minds of many analysts. Despite assurances of more supply from OPEC should the Canal closure cause disruption, there are extra time and costs associated with moving crude and product around the Horn of Africa. There is also the political problem because Mubarak has been a staunch ally of the U.S. and has stayed the course on peaceful relations with Israel for over 30 years. A government takeover by the Muslim Brotherhood or a political group closely aligned with Islamists would change the balance required for peace in the region.

Prior to the recognition of the escalation of protests in Egypt, prices had fallen to $85.63. The daily settlement price for the near future will represent the market's analysis of the Egyptian problem. For the month, crude +$2.34, $92.16; gasoline +9.94¢, $2.4906; distillage +26.23¢, $2.7468.

January 28, 2011

The unrest in Egypt overshadows all the economic and industry news today. The fall of the Tunisian government and the violent protests and the government's violent response in Egypt has the markets worried. Egypt exports very little crude but has the most refining capacity in Africa. But the Suez Canal is what makes Egypt important to world oil markets as crude and refined products from the Arabian Gulf go through the Canal into Europe. Any disruptions of the Canal traffic will affect world prices.

There is also fear that the unrest in Egypt will spread across the Red Sea into Saudi Arabia. There are rumors that Iran may be funding some of the protests. The Mubarak regime has fought the Muslim Brotherhood for years and they are now joining the protests. The markets are definitely worried about a worst case scenario about the flow of oil out of the Gulf.

For the week, crude +20¢, $89.31; gasoline -2.45¢, $2.4579; distillate +3.2¢, $2.691.

January 27, 2011

Higher than expected new jobless claim, lower than expected orders for durable goods, the Kuwaiti oil minister talking about increasing supply, and the continuing build in U.S. crude inventories led to the 3rd day in four of falling prices.

Also growing is the premium paid for Brent over WTI due to the the inventory build in Cushing. The premium is now over $12 with Brent closing at $97.34. The premium doesn't just reflect the inventory build but also reflects demand that seems to be growing outside the U.S. but does not seem to be increasing to any degree in the U.S. To accentuate stale U.S. demand, refinery utilization is down to 81.8%.

Today, crude -$1.62, $85.63; gasoline -4.94¢, $2.3811; -1.42¢, $2.6548.

January 26, 2011

The reasons for today's prices are hard to determine as the there were inventory builds for crude and product but the dollar fell against the basket of six currencies. However, trading volume for WTI is getting a lot lower because the Cushing terminals are holding so much product that refiners using the NYMEX bench mark are unable to price according to real market supply and demand. While NYMEX has been showing contango for WTI, Brent has been trending backwardation. The contrast between the two crude bench marks may be more about perceived demand in the U.S. vs. perceived demand in the rest of the world and the bearish news in the U.S. is skewing the world market.

Today, crude +96¢, $87.25; gasoline +8.99¢, $2.4304; distillate +7.51¢, $2.669.

January 24, 2011

Ali Al-Naimi not Ahmed Zaki Yamani is the Saudi oil minister now and so the Saudis are not talking about raising prices but about raising production to meet demand. Al-Naimi brought the fundamentals of Saudi production power into the discussion and there was no need to talk about the euro vs. the dollar or any other issue that normally affects oil prices. It is estimated that the Saudis can produce another 4 million barrels daily and keep prices from going much higher. Every analyst understood from Al-Naimi's statement today that Saudi Arabia does not necessarily want the price to go beyond $100 and that led to a 4th straight day of falling prices. The high inventory levels at Cushing is pushing NYMEX prices to be priced at a greater discount than Brent.

Today, crude -$1.26, $87.85; gasoline -6.94¢, $2.413; distillate -3.95¢, $2.6195.

January 21, 2011

The high inventory levels at Cushing and the drop in refinery utilization led to a small increase in crude settlement but there was a big jump for gasoline and a medium rise in distillate. Analysts can risk more money in Brent and products and they are shying away from NYMEX because WTI seems impervious to market movements. the stronger downward movement of crude this week when compared to the much more modest drops in product bear this out.

For the week, crude -$2.43, $89.11; -1.22¢, $2.4824; distillate +1.5¢, $2.659.

January 20, 2011

Crude, gasoline and distillate saw inventory builds last week as reported by the Energy Information Administration (EIA)today. These inventory builds together with reports that China's economy grew above predictions at nearly 10% last month caused crude and product prices to fall today despite the good news about an unexpected fall in new jobless claims and a12%+ increase in existing home sales. Compounding the analyses of the market's movements is the very large premium for Brent (or discount for NYMEX) because of the large, and seemingly growing crude, inventory in Cushing.

Today, crude -$2.02, $88.86; gasoline +5.78¢, $2.4238; distillate -3.38¢, $2.6226.