Morning Petrospective – October 13, 2010       

weaker euro combined with lower equities prices early on Tuesday morning to press oil quotes lower in overnight trading. And, this pattern persisted through the morning to push oil prices to the day’s lows. Even though quantitative easing remains the continuing act in the center ring, the side acts just were not playing to the bulls. The euro slowly clawed its way back to positive territory, and the DJIA followed the euro’s lead, ultimately ending the day up 10.06 to 11,020.40. Regardless, though, oil prices just could not scrape their way back up. It just turned out to be a listless day for the buyers in the oil complex. As the day ended, though, investors were talking about the increasing likelihood of quantitative easing sooner than later.

The Us dollar opened higher on Tuesday, as the chart below illustrates, but there was steady selling throughout the session, and that eventually pulled oil prices up from the day’s lows. By the end of Tuesday’s trading, the dollar had finished in negative territory against the euro. And that could set us up for further dollar weakness on Wednesday.

The DJIA ended the day up 10.06 to 11,020.40. It had been down significantly earlier in the day. As the day wore on, individual corporate stories and the FOMC minutes helped buoy issues enough to lift the index into positive ground. Equities have closed higher these last two days, but not with any momentum behind them.

Gasoline prices dropped more than heating oil prices on Tuesday, after finishing in the green on Monday while heating lost 29 points. A strike in France that has idled refining units helped gasoline prices Monday, but spread traders pushed gasoline quotes down against heating oil on Tuesday. We are coming into heating season and driving demand is on a steady decline through the end of the year – after which it typically drops off a cliff.

Traders were talking about the Opec meeting in Vienna this week, on a day during which the cartel increased its estimate for oil consumption in 2010, based on economic growth in the first half of the year. The ministers meet on Thursday, and it is expected to be a non-event, with existing quotas kept in place – and kept as a “target” rather than a stricture on production. We will hear a good deal about the weak dollar this week, especially from Iran and Venezjuela, but it should be an uneventful meeting otherwise.

The minutes from September’s FOMC meeting were released on Tueasday afternoon, with a majority of governors suggesting that additional measures need to be taken to jump-start the economy. That means QE II for most observers.

The Interior Department lifted the moratorium on deep-water offshore drilling on Tuesday, after adding a series of protocols that need to be followed on all future drilling endeavors. One third of the planet’s oil supply comes from offshore sources now. In five years, half the available output will come from offshore sources. The resumption of drilling should return 33 rigs to service, ultimately, and should lead to additional efforts in the future. The lifting of the moratorium should add 300,000 bpd to US production by 2015. An estimated 10,000 to 20,000 jobs will be recaimed with the end of the drilling ban, and it may be more … depending upon how far one goes down the chain. It is not just oil and gas professionals, engineers and drill operators. Catering companies, helicopter and small craft operators involved in the delivery of people and supplies, fabricators, and clothing retailers are just the first line of ancillary support jobs involved in the business.

Traders will be looking more closely at this week’s supply and demand figures as we get closer to the week’s reports.

     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

• The Kuwaiti government has appointed Farouk al-Zanki as the new CEO of state-owned Kuwait Petroleum Corp.
• Don Voelte, the high profile CEO of Australia's Woodside Petroleum, has announced plans to retire in the second half of 2011.
• Malaysian state energy firm Petronas is to list its chemicals arm in a sale that could raise $4.0 billion.
• The US' deepwater drilling moratorium, originally set to expire November 30, will be lifted immediately, US Interior Secretary Salazar said.

Bentek Energy

• Texas Observer - Implied Injections Push Back Above 2 Bcf/d as Outflows Decline.
• Industrial End Users Analytic Report (Daily) for 10/13/2010 –Gulf Industrial Demand Declines for the Chemical Sector.
• Power Burn Analytic Report (Daily) for 10/13/2010 –U.S. Power Burn Expected to Decline 35% by the End of the Month.
• Gulf Coast Production Analytic Report - Interior Lifts Deepwater Drilling Moratorium.

Bloomberg 

• Crude Oil Rises as IEA Increases Demand Forecasts, China's Imports Climb.
• Gasoline Supply Drops to Lowest Level Since June in Survey: Energy Markets.
• Lifting of Deep-Water Drilling Ban Fails to Win Praise for Obama.
• Total Starts Halting All Its French Refineries as Workers Extend Strikes.

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