Morning Petrospective – October 14, 2010       

he oil complex jumped higher on Wednesday, on a day devoid of its normal weekly DOE supply & demand statistics. Instead of inventories and four-week aggregate demand averages, traders and investors latched on to figures from China showing that its oil imports established new record highs. Those figures suggested that Chinese industrial use can make up for lost Western, read: American demand, and higher equities and a stronger euro did the rest. The oil complex has seemed to want to move higher for almost the entire year. There have been exceptions, in most of May, late June and the middle of August, for example. But, given reasons to rally, oil prices have typically embraced them.

China imported 5.67 million barrels a day of crude oil in September, the largest amount it has ever brought in. That is a 35% increase against a year ago and, it it maintains this blistering rate, it will surpass the United States as the world’s largest oil importer before Independence Day in 2012. Of course, that is a heady rate to maintain, and our numbers may be nothing more than the most speculative extrapolation. Still, it is a growth figure worth paying attention to.

At the same time, the International Energy Agency (IEA) raised its estimate for world oil use in 2010 and again in 2011. Opec recently revised its estimates upwards and its ministers are expected to leave production targets unchanged when the cartel’s meeting ends later this week.

As can be seen in the chart at the left, the US dollar was hammered yesterday, and that contributed to the rise in oil quotes. And the Dow Jones Industrial average was up nearly 76 points on Wednesday and, what the euro did not do for the oil bulls, the DJIA apparently did.

Investors were the best buyers on Wednesday, while producers and end-users were on the sidelines waiting for this week’s DOE figures. As has been the case for weeks now, investors were waiting for the quantitative easing (QE) that seems to have become a foregone conclusion as the next step to be taken by the Fed. Last Friday, investors saw the monthly September employment numbers - which everyone saw as being disappointing – as sure-fire triggers that would set QE 2 in motion. And, then on Tuesday, investors pored over the most recent FOMC minutes – and saw in their gloomy words the impetus for QE 2. It has been the most heralded and discounted move the Fed has not (yet) taken.

As long as prices were advancing, the strike at the Fos-Lavera oil terminal continued to bar tankers from entering the world’s third busiest oil port (who knew?) according to Dow Jones. Eleven of France’s dozen refineries have been affected by the strike, and Total has complained that the strike has forced it into shuttering all of its refineries, at least temporarily.

This week’s API report showed draws across the board, with a very large decline in crude oil stocks – which declined by more than four million barrels. This was unexpected, given the larger-than-expected decline in refinery utilization, which dropped 1.6% to 80.1%. Utilization has fallen more quickly than has been the case in previous years, which is odd because they have had the opportunity to stay current with maintenance this year more than in any year since the early 1980’s. There was a bigger-than-expected draw in gasoline inventories, against a smaller-than-anticipated draw in distillate stocks. Crude oil imports were up 70,000 bpd to 8.610 mln bpd.

     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

• Singapore courts has yet to rule on a search order by BP on 6 ex-employees, and the legal tussle looks set to continue with a new hearing.
• Iraq started the tendering process for a 1.5 mil b/d oil pipeline EPC contract to upgrade facilities in the south.
• Australia's ESG signs agreement with Marubeni, which paves the way for Marubeni to take an equity stake in Newcastle LNG project.

Bentek Energy

• Northeast Observer - Cold Weather Sets in on the Northeast, Pushing Cash Basis up to $0.43.
• Southeast/Gulf Observer (Daily) for 10/14/2010 – Implied Injections to See Upward Pressure as Demand Dips This Week.
• Nuclear Plant Status Analytic Report - Nearly 4 GW of Capacity Expected to Return to Service by Monday.
• Power Burn Analytic Report - U.S. Power Burn Down 10% As Temperatures Decline.

Bloomberg 

• OPEC Will Leave Oil Output Unchanged as Some Members Seek Higher Oil Price.
• Oil Rises a Second Day on Forecasts of Increased Demand, Dollar's Decline.
• Gasoline Rebound in U.S. Fans Europe's September Exports: Energy Markets.
• Occidental's Irani, Highest-Paid Oil Chief Executive, to Step Down in May.

Technical Recap

Crude Options Report / Straddle Runs

NG Options Report

Premium Subscriber  (click here to register):

Volumes & Open Interest

End Of Day Straddles

Settlements