Morning Petrospective – October 1, 2010       

il prices were up again substantially on Thursday, despite overbought pressures and resistance. US GDP grew at 1.7% in the second quarter, which was better than the consensus of analysts surveyed, who had expected growth of 1.6%. These figures compare to a growth rate of 3.7% in the first quarter and 5% at the end of 2009. On an absolute level, the numbers are dire. But they are getting better on a relative basis.

This week’s unemployment report showed a drop of 16,000 initial claims for unemployment. That was more than the average of the Bloomberg survey, which expected a decline of 9,000 claims. Next Friday will show us September unemployment as a month.

Opec reported late on Wednesday that crude oil production from the 12 OPEC members in September declined 145,000 barrels a day from August’s levels. Iraq and Saudi Arabia accounted for the decline, and market observers were reluctant to read too much into the figures. Saudi Arabia is almost surely involved in seasonal maintenance, while Iraqi output has been volatile for a number of years, even pre-dating the invasion in March, 2003. We would expect output to rebound in September and October given recent price gains.

The DJIA was down 47.23 to 10,788.05, but September ended as the strongest September since 1939. It was the strongest month in a year, and equities are very near the highs seen after the “Flash Crash” in May. Economic news has been spotty, and Thursday’s unemployment and GDP numbers tell us an interesting story of an economy that is still churning out bearish economic data figures in absolute terms – but they are better than they were, in a relative sense, and that is enough to push quotes higher.

We have the same perspective in oil statistics. Seen in any absolute sense, inventories are at extraordinarily high levels. And they have been there for months. But this week’s DOE report was better than last week’s report, so the picture is getting better, again in a relative sense. Still, it is difficult for us to watch oil prices and equities making themselves at home at existing levels with the supply-demand picture what it is in oil and with economic data routinely anemic. Most of the good news in both sets of figures has come from numbers that turned out not as bad as they were expected to be.

All eyes will be on Friday morning’s Institute for Supply Management (ISM) report on US manufacturing. Recent numbers have lost a step, but manufacturing was the strongest sector of the economy over the first half of 2010. Any return to stronger numbers – or a better-than-expected set of figures – would bring in more buying, we would expect.Oil prices, especially for heating oil, are overbought and are up into resistance on the Bollinger Bands. But, heating oil prices also broke decisively over the August 4^th high of 220.88, making the next level the May 3^rd high at 235.74. That might take something really dramatic, but the trend is clearly higher, here, and Thursday’s breakout was a rout of the bears. If we get more positive economic news or any strong fundamental news in heating oil, prices have a shot at reaching that level. We would be surprised to see prices break that level – in fact, we are surprised to see this advance here and now. Seasonally, heating oil has a long history of making important tops in the middle of October. Equities also have struggled in October, as well. It is setting up as a critical tenth month this year.

     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 has said Inpex has not been named in the US' new list of foreign companies with investments in Iran that might face of sanctions.
• Russia's reduced export duty on its main oil export blend, Urals, and other blends, except ESPO, of $266.50/mt, for Oct takes effect Fri.
• ExxonMobil is considering retreating from its Japanese oil retail business.

Bentek Energy

• Industrial End Users Analytic Report – September and 3Q210 Finish Flat With 2009
• Gulf Coast Production Analytic Report - Onshore Production Drops Across all Regions
• Power Burn Analytic Report - U.S. Power Burn Expected to Decline 29% Over the Weekend

Bloomberg 

• Crude Oil Trades Near Highest in Seven Weeks on Signs of Improving Demand
• Total, Shell, Eni to End Iran Investments, U.S. Says
• Sinopec to Invest $7.1 Billion in Repsol's Brazil Unit
• Oil Majors Will Dominate U.S. Shale Gas Acquisitions, Wood Mackenzie Says

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