Morning Petrospective – October 15, 2010       


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il prices started out moving higher on Thursday morning, based on a stronger euro and a surging stock market. Those factors helped to give oil prices a higher opening on Wednesday, and the complex was poised for technical breakouts as we headed into the morning reports. The EIA underground storage report for natural gas was the ‘first’ one up, and it showed a build of 91 bcf, which was towards the upper end of the range of median expectations (which fell between the range of 89-92 bcf). As it turned out, though, the build was bearish, cutting the year-on-year deficit from 1489 bcf (4.08%) to 118 bcf (3.18%). Against the five-year average, inventories increased from 220 bcf (6.71%) to 247 (7.38%) more.

The inventory figures were ostensibly bullish. We had draws across the board against week-ago levels and in several respects, this week’s figures should have been just about as bullish a group of statistics as has been seen this year. The draws followed similar declines in the API report, and for shallow-drilling investors, unaccustomed to the slightest digging for oil data, this week’s figures should have been enough to generate buying, given any rally in the euro or rise in stocks. Since we started with both of those moving higher yesterday morning, there was every reason to expect higher oil prices.

As the day wore on, though, both the euro and the stock market gave back their earlier gains. The dollar still finished the day in negative territory, but it started to rally in afternoon trading and into Thursday evening fairly quickly. The DJIA finished the day off 1.51 to 11,094.57.

As we noted above, the headlines for this week’s major inventory reports (API & DOE) were ostensibly supportive. All three widely-watched inventory categories posted declines. And refineries continued to cut utilization, even though most traders expected this set of figures would give us a minor corrective rebound. Refineries cut utilization by 1.2% to 81.9%, which is historically on the low side for this time of year.

But, the numbers that pushed oil quotes back into negative territory were the numbers reflecting demand. Gasoline consumption for the week dropped 177,000 bpd to 8.812 million bpd, which is well below the psychologically important 9 million bpd level that we typically see in mid-October. Total products supplied fell to its lowest level in nearly a year and four-week aggregate average demand for all oil products is now just 0.82% higher than the same average four-week period in 2009. Four-week gasoline consumption is now 1.12% lower than a year ago, which is startling. The four-week average was 52,000 bpd lower than it was a week ago. And, even four-week distillate demand lost ground against a week ago, falling 35,000 bpd. It is 8.84% higher than the same aggregate average a year ago, but it was 13.40% higher just two weeks ago.

 
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     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

  • Badri says not concerned about Iran's 2011 OPEC presidency–for first time since before 1979 revolution–and impact on relations with the West.
  • Shell launches major update of crude, products GTCs for first time since 1999 to 'reflect increasing complexity of oil trading environment'.
  • Thai refiner Star Petroleum Refining to skip gasoline exports in November following a brief unplanned outage at a gasoline unit last week.
  • Shanghai-listed Shenergy subsidiary says discovers major oil and gas reserves in Pinghu field in the East China Sea.

Bentek Energy

  • Southeast/Gulf Observer - SE/Gulf Demand Dips 0.7 Bcf/d.
  • Industrial End Users Analytic Report - EPA Increases Ethanol Blend from 10% to 15%.
  • Nuclear Plant Status Analytic Report - Outage Season Continues to be Low as Maintenance remains flat.
  • Power Burn Analytic Report - U.S. Power Burn Continues Decline.

Bloomberg 

  • Enel's Green IPO Values Unit at as Much as $14.8 Billion.
  • Natural Gas Price Swings Drop to Tightest in Eight Years: Energy Markets.
  • OPEC Members Seek $100 Oil to Counter Dollar Weakness.
  • PG&E, Atmos Energy Benefit From $50 Billion Pipeline Upgrades.

 

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