Morning Petrospective – October 7, 2010       

he oil complex was higher yesterday, with gasoline prices leading the advance. Gasoline prices gained more than three cents a gallon while heating oil prices added slightly more than half a cent a gallon. Crude gained 41 cents a barrel. The gains in the two “oils” were mild, while the gasoline gain was worth noting. Nonetheless, crude oil finished at a new high for the last five months.

Traders were buying oil futures based on this week’s DOE report, which showed drawdowns in refined products inventories. Gasoline stocks dropped by more than 2.6 million barrels, which was substantially more than estimates, which had been looking for a drop of a few hundred thousand barrels.

Crude oil stocks were up more than three million barrels, and analysts had been expecting a build of 140,000 to 300,000 barrels, according to the results of surveys conducted by the three major wire houses (Dow Jones, Bloomberg, Reuters). Refinery utilization declined substantially – as well as substantially more than expected (expectations were for a decline of 0.4% to 0.5%) – and that was both bullish for refined products and somewhat negative for crude oil. It means that refineries are likely to refine less crude and produce fewer refined products.

This week’s DOE report was slightly disappointing on the demand side, with the four-week average total of all products supplied down 318,000 bpd on the week. The four-week average is now up 2.17%, compared to 2.78% higher after last week’s figures. Weekly demand figures were down 175,000 bpd for distillate and down 394,000 bpd for gasoline, although these figures were strangely compensated for by declines of 139,000 bpd in distillate output and 16,000 bpd in distillate imports and a decline of 390,000 bpd in gasoline output and 168,000 bpd in gasoline imports.

Nevertheless, four-week gasoline demand is now 9.060 million bpd, up 0.14% against the same aggregate average a year ago. Last week, it was up 0.86% on the year to 9.128 million bpd. Four-week distillate demand is now up 11.47% to 3.789 million bpd. But, last week, it was up 13.40% to 3.841 million bpd.

For the second week in a row, the surplus against two years ago dropped. Crude oil inventories are now 58.3 million barrels (19.27%) higher than they were two years ago. Last week, they were 63.4 million barrels (21.53%) higher, and two weeks ago they had been 68.1 million barrels (23.47%) higher than they had been two years earlier. Gasoline stocks are now 33.1 million barrels (17.72%) higher. Over the previous two weeks, they were 43.0 mln bbls (23.94%) and 47.4 mln bbls (26.52%) higher than they had been two years earlier. And, distillate stocks are now 49.9 mln bbls (40.70%) higher, compared to 50.5 mln bbls (41.02%) and 49.5 mln bbls (39.47%) higher than they had been two years ago, one week and two weeks ago. We still have plenty of oil, but the huge surpluses against two years ago are starting to melt away.

The dollar continued its steep decline yesterday, and the DJIA gained 22.93 to finish at 10,967.65. Both of those argued for stronger oil prices yesterday. It is difficult to tell if oil prices would have gained just as much without the DOE figures.

     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

• Turkey has begun talks with Russian and Italian firms over the construction of a ship canal to relieve congestion in the Bosporus Straits
• BP and Azerbaijan's state Socar have signed an agreement for the exploration of the Shafag and Asiman structures in the Caspian Sea
• Saudi Aramco's gasoline imports have declined at least 40% in October from September as holiday-driven demand has eased

Bentek Energy

• Northeast Observer - Low Demand in the Southeast Continues to Impact  Northeast Cash Prices
• Supply/Demand Balance Analytic Report - Maintenance and Line Packing Shifts Production
• Texas Observer - Injections Drop on Warmer Temperatures and Small Decrease in Production
• Power Burn Analytic Report - U.S. Power Burn to Increase 24% by Monday

Bloomberg 

• Oil Trades Near Five-Month High as Dollar Drops, U.S. Fuel Supplies Fall
• Conoco's Management Shakeup Provides Road Map to CEO Succession
• Heating Oil Profit Doubles Gasoline on U.S. Export Surge: Energy Markets
• Poland Offers $1.5 Billion Stake in PGE Utility to Help Cover Budget Gap

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