Morning Petrospective – September 14, 2010       

il prices were higher in trading overnight and on Monday morning, and the bulls seemed to have everything working in their favor. The DJIA finished up 81.36 to 10,544.13. The euro was up strongly against the US dollar. The season’s biggest hurricane was still roaming across the Atlantic, with a second storm taking shape behind it, and Chinese growth had a striking ‘rebound’ to lead investors back to the long side in the oil markets. And, to top all of that off, the Enbridge pipeline leak, which had been Friday’s leading feature, could be draining 300,000 to 400,000 bpd from Midwest supplies and from stocks in Cushing, Oklahoma.

Chinese industrial production in August grew at a 13.9% rate against year-earlier growth levels and, while it was not the 20% that had been typical at the start of the year, was certainly more than analysts had been expecting. Chinese growth has been a major underpinning of demand for raw commodities, and this news was seen as being bullish for oil markets. Of course, this could also lead to government tightening again in China to prevent growth from getting too brisk, but markets were not thinking about that yesterday.

The US dollar dropped steeply against the euro (chart to the left) and that was seen as being bullish for oil (because it makes dollar-denominated oil less expensive in terms of euros). It was the euro’s biggest one-day gain against the US dollar in two months (since mid-July). Investors were buying euros on the Chinese news, which made risk more popular, and on an upward revision to estimates on euro-zone growth. A new agreement on global banking regulations also made investors more risk-tolerant and recovery-oriented. The euro gained about 1.5% against the dollar as new buying and heavy short-covering lifted euro quotes yesterday. And the Enbridge pipeline on Monday had only reached the point where it had recovered spilled oil and could get a look at what will be required to fix the rupture. Reuters noted that there were stories out there suggesting that the pipeline leak could ‘cost’ Cushing up to 300,000 bpd or the Midwest, as a region, more than 400,000 bpd. The news service emphasized that it is still too early to know exactly how much oil will be lost, as opposed to rerouted or diverted to storage or collection points. And no one seems to know how long it will take, yet, to repair.

And traders could not help but worry at least a little about Hurricane Igor. It looks like it will curl into the Atlantic Ocean and avoid oil and gas producing areas, but it is still too early to be sure.

It was a clean sweep for the bulls on Monday. Thankfully, there is more oil than there has been in three decades to prevent prices from rising much more dramatically than they have.

     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

• Thailand LPG imports will drop by 50%, from about 120,000 mt/month currently, as PTT's sixth gas separation plant reaches peak capacity.
• Indonesia's Pertamina expects to lose $555 million this year on sales of subsidized LPG and other fuels.
• OPEC is 50 years old today--secretary-general Abdalla el-Badri has told a press conference that the group is comfortable with $70-$80/b oil.
• Julia becomes a Hurricane in the mid-Atlantic but its forecast track is well away from the Caribbean and Gulf of Mexico.

Bentek Energy

• Gulf Coast Production Analytic Report - Production Creeps Up As HOOPS Outage Ends
• Power Burn Analytic Report - U.S. Power Burn Shifts Upwards as Peaker Use Increases 18%
• Industrial End Users Analytic Report - Murphy Oil Expands Ethanol Assets with New Acquisition
• Supply/Demand Balance Analytic Report - Associated Gas Production in the Gulf Impacted By Oil Pipeline Shut-Down

Bloomberg 

• Crude Oil Falls in New York as Enridge Makes Preparations to Fix Pipeline
• Oil Supply Falls for Second Week as Imports Drop in Survey
• Enbridge Fixing Damaged Pipeline in Illinois as Smaller Link Is Shut Down
• Energy Boom Is Coming Regardless of Slowing Global Economy, Officials Say
• Deep-Water Drilling Ban Defended by U.S., Foes Seek to Uphold Court Order
• Total Hoards Oil's Largest Cash Pile to Buy Fields for Growth
• OPEC's First Lady Alison-Madueke Grapples With Nigerian Reform

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