At quarter's end, we need to take a look at how prices have been moving in the 2Q since all the factors that were evident at the end of March were still in play today.
The Greek sovereign debt crisis is still with us even if the Greek parliament has passed austerity measures. The dollar is still in a dance with the euro and right now the dollar is falling while the euro is rising because analysts believe that the Eurozone will find a way to solve the debt problems even while demonstrators are in the streets clashing with police.
It is worth noting that NYMEX crude has fallen much more in the 2Q than Brent or gasoline or distillate. U.S. refiners may be able to make greater margins since this is the driving season and they may be taking advantage of the seasonal driving patterns and supply and demand. IEA and the U.S. government may have jumped the gun on the SPR release as today NYMEX passed its settlement position on June 22 the day before the SPR release was announced.
For the quarter, WTI-$11.30,$95.42; Brent-$4.88,$112.48; RBOB-7.6¢,$3.0316; HO-15.71¢,$2.9327.
Thursday, June 30, 2011
Wednesday, June 29, 2011
June 29, 2011
EIA publication of the previous week's numbers led to crude and product increases as the inventory draws for crude and gasoline were greater than expected. Though distillate saw a build in inventory it was significantly less than expected and New York harbor heating oil also jumped up. Early in the day news of the austerity measure passage by the Greek parliament caused the dollar to fall and consequently crude prices started to rise. The effect of the IEA release is now alsmost negligible.
Today, WTI+$1.88,$94.77; Brent+$3.62,$112.40; RBOB+12.01¢,$3.0097; HO+9.45¢,$2.9202.
Today, WTI+$1.88,$94.77; Brent+$3.62,$112.40; RBOB+12.01¢,$3.0097; HO+9.45¢,$2.9202.
Tuesday, June 28, 2011
June 28, 2011
The effects of last week's announcement that IEA would release 60 million barrels over a thirty day period seem to be dissipating very quickly. Today's settlements for WTI and Brent showed a 52% and 41% increases from last week's lows. The fall of the dollar caused by the impending resolution of the Greek sovereign debt problem proved to be a stronger push than the pull of more supply.
Last week's gasoline consumption was up 1.9% to 19MBD and the next two weeks will show even more consumption because of the July 4th holiday. QE2 ends Thursday and that may ease the inflationary push of higher commodity prices. Tomorrow's release of the Cushing inventory figures will be contrasted with the moves in the financial markets in a market that still does not know its direction.
Today, WTI+$2.28,$92.89; Brent+$2.79,$108.78; RBOB+8.21¢,$2.8896; HO+6.08¢,$2.8257.
Last week's gasoline consumption was up 1.9% to 19MBD and the next two weeks will show even more consumption because of the July 4th holiday. QE2 ends Thursday and that may ease the inflationary push of higher commodity prices. Tomorrow's release of the Cushing inventory figures will be contrasted with the moves in the financial markets in a market that still does not know its direction.
Today, WTI+$2.28,$92.89; Brent+$2.79,$108.78; RBOB+8.21¢,$2.8896; HO+6.08¢,$2.8257.
Monday, June 27, 2011
June 27, 2011
The U.S. Commerce Department published data on stagnant consumer spending but the dollar fell against the euro and so WTI fell marginally and Brent rose marginally. There is probably still some carry over from the IEA release of strategic petroleum reserve but the greater effect would have been on Brent as there is abundant inventory in the U.S.
Today, WTI-55¢,$90.61; Brent+47¢,$105.99; RBOB+3.039¢,$2.89075; HO+1.46¢,$2.7649.
Today, WTI-55¢,$90.61; Brent+47¢,$105.99; RBOB+3.039¢,$2.89075; HO+1.46¢,$2.7649.
Friday, June 24, 2011
June 24, 2011 - 697th Anniversary of the Battle of Bannockburn
The announcement of the SPR release had only a one day effect on NYMEX crude because of the large inventory in Cushing. Brent continued to fall because there will be a greater effect of the IEA release in Europe where there is no large inventory being held. Since the release is sometime in the near future, Brent has started to trade in contango. Contango trading patterns occur when traders believe that supplies will be adequate in the future. The opposite is backwardation where traders act on the belief that supply will be tight in the future.
The dollar's continued strength versus the euro help to keep WTI prices above yesterday's settlement. It is hard to forecast the direction of crude prices as releases of SPR is so infrequent and the market conditions are very different. Prices were already heading lower and this action by the IEA countries only seems to make analysis more difficult. There is an added effect on the Brent premium because Brent is falling at a greater rate and reducing its premium over WTI.
For the week, WTI-$1.85,$91.16; Brent-$7.69,$105.52; RBOB-16.94¢,$2.7766; HO-23.33¢,$2.7503.
The dollar's continued strength versus the euro help to keep WTI prices above yesterday's settlement. It is hard to forecast the direction of crude prices as releases of SPR is so infrequent and the market conditions are very different. Prices were already heading lower and this action by the IEA countries only seems to make analysis more difficult. There is an added effect on the Brent premium because Brent is falling at a greater rate and reducing its premium over WTI.
For the week, WTI-$1.85,$91.16; Brent-$7.69,$105.52; RBOB-16.94¢,$2.7766; HO-23.33¢,$2.7503.
Thursday, June 23, 2011
June 23, 2011 - 2
The IEA announcement caused a major change in the movement of the two crude bench marks today. Because the shortfall for Europe is caused by the Libyan Civil War, the IEA's move also caused the premium for Brent over WTI to shrink from $18.80 to $16.32in one trading session. The problems in North Africa and the Middle East have raised the premium from an average of $0.76 last year to $15 to $20 most of this year. Today, WTI-$4.39,$91.02; Brent-$6.87,$107.34; RBOB-13.57¢,$2.8376; HO-17.32¢,$2.7817.
June 23, 2011
The International Energy Agency (IEA), the "autonomous" intergovernmental organization dedicated to responding to physical disruptions in the oil markets, unexpectedly announced today that it would be releasing 60 million barrels of crude over 30 days to make up for the loss of supply of Libyan light sweet crude. This led to a 4.6% decrease in NYMEX crude futures and 6% drop in Brent. Gasoline also fell 4/6% while distillate declined 6%. The market is generally wary of non-commercial interference and the lack of prior notification is causing unease among traders.
The market unease is that such interference normally leads to greater volatility and this move is less about bolstering supply which is at all time highs in the U.S. but more about the politics of gasoline prices. Gasoline prices were approaching $4 as a national average and this would leave an indelible mark on the minds of U.S. voters already struggling with food inflation caused by quantitative easing. People believe gasoline price increases at the pump and food price escalation at the check stand no matter what economists say about the low growth of the consumer price index.
The U.S. share of this release is 30 million barrels. The fact that the dollar rose while the euro fell today also helped to push prices down. The bad economic news has kept crude prices low this month as unemployment seems inflexibly high and housing starts are intractably low. When Fed Chairman Bernanke announced that he was clueless about the economy, there was no longer much optimism about the economy.
The market unease is that such interference normally leads to greater volatility and this move is less about bolstering supply which is at all time highs in the U.S. but more about the politics of gasoline prices. Gasoline prices were approaching $4 as a national average and this would leave an indelible mark on the minds of U.S. voters already struggling with food inflation caused by quantitative easing. People believe gasoline price increases at the pump and food price escalation at the check stand no matter what economists say about the low growth of the consumer price index.
The U.S. share of this release is 30 million barrels. The fact that the dollar rose while the euro fell today also helped to push prices down. The bad economic news has kept crude prices low this month as unemployment seems inflexibly high and housing starts are intractably low. When Fed Chairman Bernanke announced that he was clueless about the economy, there was no longer much optimism about the economy.
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