Morning Petrospective – September 15, 2010       

uesday was a wild trading day which saw oil prices lower, higher and then lower again. The selling started on news that Japan’s ruling party had re-elected its leader, who has been against trying to buy US dollars to prevent the yen from appreciating against the greenback. The recent movement of the yen against the dollar has made exporting difficult for Japanese companies, and the shares of those companies dropped after the election. The ruling party leader is usually the country’s prime minister. The yen reached a 15-year high against the dollar yesterday, but at first the dollar gained on the euro, and that helped push oil prices lower.

Oil traders were also rethinking the significance of the Enbridge pipeline problems. The company announced on Tuesday that it expected to finish welding work on a replacement section for the 6a line part of the pipeline. And refiners were looking for alternative supply routes and sources of crude. Regulators need to give permission to restart the pipeline, which can carry 670,000 bpd, or nearly a third of the Midwest’s refining needs. About 6,100 barrels were leaked and ultimately recovered.

  Citgo was looking for alternative supply sources for its 170,500 bpd Lemont refinery. And Marathon, which Bloomberg reported had imported 6.11 million barrels of Canadian crude in June, had already adjusted supply routes for its Midwest refineries. This was the second problem in as many months for the Lakehead System. On July 26^th, there was a rupture in a 30-inch pipeline, designated “6B,” carrying 190,000 bpd in Michigan. That line is expected to be restarted soon. And Enbridge briefly shut and restarted a third pipeline, carrying 70,000 bpd from Ontario to Kiantone, NY, after suspeecting there could be a leak in that line. In any event, the system seemed to be getting back to normal during yesterday’s trading hours.

Oil prices had jumped in the late morning on stronger equities and on a much stronger euro, but the buying ran into technical resistance (on the charts) and equities could not hold their gains. That allowed oil prices to slip back on profit-taking and on the belief that the Enbridge System will soon be out of the headlines.

This week’s American Petroleum Institute (API) report showed a build of 3.333 million barrels in crude oil stocks, with a revision of up 4.29 million barrels for last week’s figure, a draw of 963,000 barrels in gasoline stocks and a draw of 1.524 million barrels in distillate stocks. Crude oil imports were up 188,000 bpd to 8.907 million bpd, and refinery utilization was down 0.6% to 85.6%. Implied demand in gasoline came in this week at 9.216 million bpd, while implied distillate demand registered 4.674 million bpd, which was good.

Oil traders were forced to sip from a peculiar brew on Tuesday, which included the gyrations in the DJIA, the euro, and reports about the Enbridge pipeline system, but which also had an early morning survey from Germany which suggested less robust growth in the economy expected to act as the regional locomotive of growth for the euro-zone. In the US, part of the pre-lunch strength in equities had come on a better-than-expected retail sales figure for August.

 Capital Economics noted, “The 0.4% m/m gain in US retail sales in August suggests that the household sector is far from firing on all cylinders, but nor is consumption collapsing.” It went on to say, “The 0.5% m/m rise in non-auto, non-gasoline sales was the largest since March and is therefore encouraging.” The report was considered to be encouraging at first blush, but was not seenm as being strong enough to set any major theme of economic strength or recovery that could carry equities and oil markets higher to the end. The DJIA finished the day down 17.64 to 10,526.49.

Oil traders will turn the page now to this week’s DOE report, in which the surveys are expecting a decent drawdown in crude oil stocks, a build in distillate stocks and a decline in gasoline inventories.

     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

• Japan's crude stocks fell 4.3% to 91.66 million barrels September 11, from 95.77 million barrels a week ago.
• Malaysia's LNG exports were down 12.1% year on year in July at 1.85 million mt, though up 0.8% month on month.
• S Korea's LNG imports continued to show strong annual growth in August, up 80% year on year at 2.04 mil mt, though down 1.6% month on month.

Bentek Energy

• Texas Observer - El Paso Sends More Gas to SoCal As Spread Widens
• Supply/Demand Balance Analytic Report - Southeast/Gulf Drop in Production Drives Down Supply
• Southeast/Gulf Observer - Implied Injections in SE/Gulf Drop Along With Inflows From Texas

Bloomberg 

• Oil Falls For Second Day as Inventories Rise, Enbridge Begins Pipe Repairs
• Enbridge Allowed to Start Midwest Oil Pipeline by End of Week, U.S. Says
• Gasoline Shipments to U.S. Slide as Profit Margin Vanishes
• Pemex Plans to Raise $10 Billion to $12 Billion This Year on Bonds, Loans
• Daewoo Ship Venture May Beat Shell as First Floating LNG Vessel Operator
• Karl Set to Become Hurricane, May Force Closure of Mexican Gulf Oil Rigs
• U.K. Lawmakers to Quiz BP's Hayward on `Witch Hunt' After Spill

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