Morning Petrospective – September 10, 2010       

he buyers were out this morning, and they reacted to a DOE report showing draws across the board as being bullish. That was buttressed by higher equities prices and by a weekly unemployment figure that was better than had been forecast. But, as traders dug more deeply into the weekly supply and demand statistics, they were left with the unalterable conclusion that there is a huge amount of oil being held in stocks right now. Prices initially reached an intraday high of $75.96 a barrel, but they faltered below $76.00 and could not break above that level. Compared to two years ago, this week’s DOE report showed a large increase in inventory levels.

The number of workers filing initial claims for unemployment dropped by 27,000 to 451,000 in the week ended last Friday. That helped equities move higher in trading Thursday morning. But, the DJIA went from gains of nearly 90 points to gains of roughly 20 points as oil markets closed on the Nymex. As equities started to slip, oil traders (looking at fundamentals) started to overwhelm investors (who follow equities or currencies to value oil as an asset class). A weaker euro also helped traders to the detriment of (long-only) investors.

Oil inventories might have seemed to have declined in this latest report. By some measures, though, they actually increased. This week’s DOE report showed draws across the board, which was supportive. And refined products stocks improved in relation to year-ago levels. Last week, distillate stocks were 11.6 million barrels (7.09%) higher than a year ago; now they are 9.2 million barrels (5.55%). Gasoline stocks were 20.3 million barrels (9.90%) higher; they are now 18.0 million barrels (8.69%) higher. But, that is the extent of the good news. A week ago, crude oil stocks were 18.3 million barrels (5.33%) higher than a year ago and 57.8 million barrels (19.02%) higher than they had been two years ago. Now, they are 22.4 million barrels (6.63%) and 61.89 million barrels (20.77%) higher respectively. And refined products stocks also increased against levels seen two years ago. A week ago, distillate stocks were 43.5 million barrels (33.63%) higher than they were two years ago; now, they are 44.3 million barrels (33.94%) higher. Gasoline stocks were 31.0 million barrels higher (15.95%) – and they are now 37.3 million barrels (19.85%) higher than in 2008. Taken together, this week’s DOE report showed the three major oil inventories 11.2 million barrels higher, against two years ago, than they were last week. That is an extra 8.46% more oil (versus two years ago) than we had a week ago. Even a report that initially looked supportive left us further adrift fundamentally, drowning in more oil than we had two years ago.

Gasoline stocks typically decline by 6% from the end of the second quarter to Labor Day, Dow Jones noted on Thursday. This year, they increased by 5%. At the end of June, gasoline stocks were 6.3 million barrels (2.95%) higher than a year ago and 7.6 million barrels (3.59%) higher than they had been two years ago (now, 18.0 and 37.3 million barrels more). And this week’s DOE demand figures declined from the percentage increases seen just a week ago. All products supplied were up 1.45% (using a four-week average) against a year ago last week. Now, they are up 0.70%. Four-week gasoline demand was up 1.95% (against a year ago) last week. Now, it’s up 1.11%. Only distillate’s four-week average improved, increasing from up 7.78% to up 9.41%. Four-week jet use was up 1.60%; now, it’s down 0.82%. Four-week residual consumption was down 18.31% a week ago, and is now down 20.49%.

Technically, crude is in a trading range between $69.50 and $82.97. Fundamentally, we have more oil in storage than at any time in the last three decades. And, we are starting to see investors losing muscle in relation to traders. It is no longer enough just to have higher equities, a stronger euro or a better unemployment report alone. Four weeks ago, it was.

     FMX Newswire       

FMX Newswire is an overnight news summary designed to meet the needs of professional energy traders. The content is to-the point, professional grade and not widely reported in the mainstream media. All sources are professional respected firms and newspapers.

Platts oil

• Mediterranean sour crude market relaxes from record highs but leaves its mark.
• Gazprom raises 2010 investment program to $29 bil, up13% from figure set last Nov; discovers new gas field in Kirinsky block of Sakhalin 3.
• Still no update from PG&E on San Francisco gas pipeline explosion, which killed at least one person, destroyed 50 homes—pictures look grim.
• BP delays scheduled publication of Q3 results by a week to Nov 2 to deal with accounting complexities of Macondo oilspill in Gulf of Mexico

Bentek Energy

• Industrial End Users Analytic Report - Ethanol Production Continues to Flatten
• Power Burn Analytic Report - West Power Burn Down 1.1 Bcf/d As Region Cools
• Supply/Demand Balance Analytic Report - Demand Falls Across the US, Down 8 Bcf/d This Week
• Texas Observer - Texas Outflows Sink to New Low

Bloomberg 

• Oil Rises After U.S. Jobless Claims Decline, China Crude Imports Increase
• IEA Maintains Estimates for Worldwide Oil Demand Amid Economic Concerns
• GDF Suez Sells Entire 5% Holding in Gas Natural for About $687 Million
• CNOOC, Sinopec Weigh $7 Billion Offer for Assets of Brazil's OGX
• BlackRock, George Soros Fund Buy Stakes in Gas Producer Far East Energy
• Gas Explosion Engulfs Homes in San Francisco Suburb; One Killed
• UN Risks `Huge Mistake' in Carbon-Trading Investigation
• Saudi Aramco to Supply Full Volumes to Asian Buyers for October Delivery

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