Morning Petrospective – October 12, 2010       

fter trading higher in trading overnight, it looked like we might have another day higher in the energy complex on Monday. In the early trading in Asia and then in Europe, equities had followed the DJIA’s inspirational close over 11,000 on Friday and built on it. Resources companies led the advance in China long before the sun rose over European markets. The euro was holding its own in early morning trading, and it looked like equities, currencies and commodities were set to start yet another week using the same carefully rehearsed script.

Oil prices did open higher on Monday, but a suddenly stronger us dollar brought selling into commodities and managed to press crude oil prices into negative territory by the day’s settlement.

The Us dollar opened lower on Monday, and it looked poised to break Thursday’s multi-month low. In early trading in Asia, it looked like the dollar was going to have yet another awful day, and that had helped oil prices to post gains in trading late on Sunday night and early Monday morning. By about 7 AM EDT, though, the dollar had fought its way back to unchanged and oil traders were turning their attention more towards equities, which were still building on last week’s gains.

As it turned out, though, the DJIA added only 3.86 to finish at 11,010.34, and the longs (in oil futures) started to feel pressure on their flanks. Neither the euro nor equities was giving oil investors the kind of coverage that they had hoped for, as we started a new week.

The selling spread from crude oil futures to heating oil futures, which ended the day in minor, negative territory. Gasoline prices, on the other hand, were bolstered by Friday’s US Department of Agriculture (USDA) report on corn crop yields. That report had unexpectedly lowered yield figures, and it was cited as the major factor behind very sharp gains in corn and ethanol prices. Both have made new highs recently, which argue for even loftier quotes to come.

We seem to be moving farther and further afield with the factors that influence oil complex constituents each day. We always knew that corn market factors would influence gasoline prices by way of ethanol, but to spend three-quarters of a report without getting to oil market fundamentals is aggravating.

A number of businesses were closed for the Columbus Day Holiday on Monday, and that also means that this week’s DOE report will be released a day later than normal, on Thursday. That may have allowed traders and investors more leeway in ignoring oil market fundamentals, which will not be available in any meaningful, new way until later in the week. There were also holidays reportedly in Canada and Japan on Monday.

Quantitative Easing (QE) remains the big economic focus of discussion and we have to expect it to dominate the thinking of many investors as we move through the week. We feel that there will be a sense of disappointment, though, once it may actually be implemented. As we move nearer to Thursday, the DOE report will become a bigger factor in everyone’s thinking, and the earliest survey estimates from the major wire houses are included above.

     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

• A product tanker carrying jet fuel collided with a container ship early Tuesday near the Dutch coast of Scheveningen
• South Korea's Posco said Tuesday its Q3 net profit fell 8.6% from a year earlier, despite a 24.4% gain in sales, on higher borrowing costs.
• Chevron has sold its 23.44% stake in the US' Colonial Pipeline to an affiliate of investment fund Kohlberg Kravis Roberts & Co.
• The JV formed by Indonesia's Pertamina and PGN signed Tuesday a heads of agreement on Mahakam LNG sales with Total and Inpex

Bentek Energy

• Nuclear Plant Status Analytic Report - Nuclear Outages Increase 1,496 MW over the Weekend
• Industrial End Users Analytic Report - October Demand Weak
• Gulf Coast Production Analytic Report - Louisiana Balances Production Changes
• Power Burn Analytic Report (Daily) for 10/12/2010 – U.S. Power Burn Reaches Over 20 Bcf/d Yesterday due to I2 Nominations

Bloomberg 

• Crude Oil Futures Decline in N.Y. Before OPEC Meeing as Dollar Strengthens
• OPEC May Maintain Quotas After Saudi Minister Says Market `Well-Balanced'
• Exxon, Chevron's Africa Ambitions Face Risk From State Curbs
• French Refineries, Nuclear Reactors, Ports Disrupted by Nationwide Strike

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