Morning Petrospective – September 21, 2010       

il prices rallied on Monday as traders reacted to a US dollar that was under selling pressure for most of the day, even though it rallied later on, news of tension between China and Japan and on the strength of US equities, which were higher and implied to investors that risk trades were back as a successful mode of placing money. After four days of declining, the oil markets seem to have been ready for a rally, and prices were oversold on the most sensitive measurements. Having said all this, we have our doubts about several of Monday’s factors being able to take root in as fertile soil as we move through this week. Some of the reasons for the rally seem to have been specific to Monday, and might not be easily repeated later in the week.

Probably the biggest factor in Monday’s price rise was the strength in equities, and the DJIA finished up 145.77 to 10,753.62. It was the stock market’s strongest (or highest) close since early May, and it was back to levels seen just after the “Flash Crash,” although prices have not yet returned to the levels seen before that critical day, which is seen as a kind of dividing point in the market. What was significant, though, was the DJIA’s ability to eclipse all of the highs seen in this market since the second half of May until now. The DJIA is effectively poised now to make a run at the levels that were seen before the big decline and are less than 200 points away from the pre-crash levels.

The US dollar spent most of the day in negative territory, after as sharp rally around 9 AM was followed by a quick selloff and then a gradual rally to end slightly lower on the day. Currencies have been extremely volatile recently.

In a number of respects, Monday’s trading was a return to ‘bad habits’ in oil trading. Last week was probably the one week where fundamentals seemed to matter the most and outside influences (like equities and currencies) - that had run roughshod over supply and demand factors - seemed to matter the least, for a very long time. Right away, though, this week has started with supply and demand taking a back seat to equities and currencies.

Traders are expected to focus on Tuesday on the Federal Reserve Open Market Committee meeting, which financial analysts will be watching for signs of further “quantitative easing.” On Monday, investors reacted to the National Association of Home Builders’ monthly housing market index, which remained at 13 for a second consecutive month. It was a continuation of the worst reading for the index in a year and a half. This was just the first, though, in a series of statistics on housing that will be released this week.  By Tuesday afternoon, traders will turn their attention to oil market fundamentals, starting with the MasterCard SpendingPulse gasoline demand figures, and then followed by the weekly API report. That, in turn, will only serve as the appetizer for Wednesday's main course – the weekly DOE supply & demand and inventory statistics. Although the forecasts (above and to the right) are specifically for the DOE statistics, they also apply to the API figures.

     FMX Newswire       

Site Update: Due to technical difficulties at our data provider, the VOI Tool and other data bases will not be properly loaded until later this morning. We apologize for the inconvenience. We are told the data will be properly available tomorrow.

Please contact us at 203 504 2786 ext 304 or send an email to support@fmxconnect.com for help.

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

• Austria's OMV, already the biggest foreign gas operator in Pakistan, has agreed to buy Petronas' upstream assets in the country.
• Bow Energy has ended talks with LNGL over the possible supply of CSG to LNGL's stalled Fisherman's Landing liquefaction project.
• Russia and China have agreed to raise the capacity of the planned JV refinery at Tianjin to 260,000 b/d from 200,000 b/d initially.
• Russia expects to agree on key terms on gas supplies to China during President Dmitry Medvedev's visit to Beijing: DPM Igor Sechin.

Bentek Energy

• Power Burn Analytic Report - Power Burn Changes Little From Yesterday
• Gulf Coast Production Analytic Report - Offshore Production Down Slightly With Decline on ANR Pipeline

Bloomberg 

• Crude Oil Declines as Traders Sell October Futures Before Today's Expiry
• Record Warmth Spawns Stronger Hurricanes Across Atlantic Ocean
• Oil Supplies Hit Five-week Low in Survey on Enbridge Halt
• Shell-PetroChina Takeover of Arrow Means $308 Million Profit for New Hope
• Wellstream Paces Gains Among Oil Services Companies on Takeover Approach

Technical Recap

Crude Options Report / Straddle Runs

NG Options Report

Premium Subscriber  (click here to register):

Volumes & Open Interest

End Of Day Straddles

Settlements