Morning Petrospective – September 23, 2010       

il prices were lower again on Wednesday, with gasoline prices leading the way down. All three contract categories (crude, heating oil & gasoline) were lower on the day. The guiding factors came from this week’s DOE report, which followed the lead established Tuesday night with the API report; both showed builds in all three major inventory groups, although the API builds did turn out to be larger. It was still interesting that all three major inventories showed builds and, as we suggested they might be, traders were more disappointed to see a build in crude oil stocks after the Enbridge Pipeline situation last week. Analysts had based their predictions for this week’s crude oil drawdown on the loss of Canadian oil supplies from the Enbridge system.

This week’s DOE report showed the four-week average for total products supplied at 19.507 million bpd, down 77,000 bpd from a week ago, but up 303,000 bpd and 1.58% from a year ago. A week ago, the four-week average was up 0.67%, even though it was at a higher figure. This week’s single-week demand figures for gasoline and distillate were down 172,000 bpd and 153,000 bpd, respectively, to 8.847 million bpd and 3.689 million bpd. The four-week average for gasoline demand came in at 9.129 million bpd, down 132,000 bpd on the week and down 0.10% on the year. Last week, it was 9.261 million bpd and up 0.47% on the year. The four-week average for distillate demand was up 16,000 bpd on the week to 3.848 million bpd and was up 12.88% on the year. A week ago, it was 3.832 million bpd and up 11.49% against the same four-week average from 2009.

This week’s report also saw the surpluses against two years ago increase – across the board. Taking crude oil, distillate and gasoline stocks and comparing them to levels seen two years ago, this week’s report showed an increase in the surpluses of 14.5 million barrels against a week ago. If one adds in the surpluses in jet fuel and residual fuel, this week’s figures added an additional 2.4 million barrels. And this is the third week we have seen this occur. Three weeks ago, the surplus in the three main categories against two years ago was 132.3 million barrels. Now, it is 165.0 million barrels. The combined surplus in jet fuel and residual fuel has gone from 8.5 million barrels, three weeks ago, to 14.6 million barrels now, giving us a total increase in the five-product, two-year surplus of 38.8 million barrels in three weeks. That is 27.56%.

To make a long, complicated story short, we continue to increase the amount of oil we have in storage against the amount held two years ago. This has been camouflaged by a decrease in the year-on-year surplus. The three main categories (crude, distillate & gasoline) have seen a decline in the combined year-on-year surplus of 8.3 million barrels over the last week. The distillate surplus fell from 6.7 million barrels to 4.1 million barrels. The gasoline surplus dropped from 16.8 million barrels to 13.0 million barrels, and the crude oil surplus fell from 24.6 million barrels to 22.7 million barrels. At first glance, that could be mistaken for improvement. We still have way too much oil, and demand is not trending higher in any meaningful way.

The DJIA finished down 21.72 points to 10,739.31 on Wednesday afternoon. The US dollar dropped almost all day long against the euro, and some observers feel that it helped moderate the decline in oil quotes. It has been a few weeks, though, since the dollar-euro has been the main factor in the oil markets. It wasn’t yesterday. As has been the case more recently, supply and demand set the tone for oil prices.

     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

• Santos is awaiting a decision from the South Korean government on the approval of the sale of LNG from its Gladstone project to Korea Gas.
• Algerian Sonatrach has awarded a contract worth $900 million to France's Technip to rehabilitate and expand the 60,000 b/d Algiers refinery.
• French refineries and ports join latest national strike to protest government's pensions overhaul.
• Norway's Statoil buys a 20.67% stake in Nautical Petroleum licence which holds UK's Mariner heavy oil field for $136.8 million.

Bentek Energy

• Industrial End Users Analytic Report - Texas Industrial Demand Falls
• Gulf Coast Production Analytic Report - Alabama Offshore Production Flows Continue to Return After Outage
• Power Burn Analytic Report - Power Burn Declines Across the U.S.

Bloomberg 

• Crude Oil Falls as Increase in U.S. Supplies Spurs Concerns About Recovery
• Petrobras `Reverse Privatization' Looms as Brazil Backs $78 Billion Offer
• South Africa Mulls Shale Gas to Reduce Nation's Dependence on Oil Imports
• Tropical Storm Malakas Churns Toward Japanese Islands, May Become Typhoon
• Coal From South Africa Seen Rebounding on Sales to India
• JPMorgan's Texas Energy Bond Sales Climb to Highest in at Least a Decade

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