Morning Petrospective – November 3, 2010
s American voters went to the polls in an election that most observers felt would swing the House of Representatives over to the Republicans, traders and investors continued to buy a number of commodities and equities. Oil prices were higher in trading overnight, and they continued moving higher through the session. In contrast to Monday’s session, oil traders had a stronger euro (weaker dollar) and higher equities to help them. But, the oil markets still had carryover buying from Monday, when oil prices moved higher, without any help from either equities or currencies; in fact, both had been working against oil prices moving higher … but they did anyway.
Most traders and investors had their eyes and ears trained on the Federal Reserve’s Open Market Committee (FOMC) meeting that started Tuesday morning. The assumption is that the long-awaited and long-discounted “QE2” will ‘set sail’ with the conclusion of this meeting. Quantitative easing (QE) is an obscure and rather arcane tool used by the Fed to bolster the economy. We do not get the impression that many people, especially in the oil business, really understand it, and it seems to be one of those secret formulas, like the original formula for Coca Cola, that few have had complete access to. There is an additional element, though. It seems to be like the ingredients of nitroglycerine; an improper mixture could blow up in the face of those trying to blend it. Despite that observation, quantitative easing was the unifying thread that ran through the market activity for a number of markets on Tuesday. It helped push quotes higher.
This afternoon’s API report showed draws across the board, with a drawdown of 4.137 million barrels in crude oil stocks, a drawdown of 4.727 million barrels in distillate stocks and a drawdown of 3.202 million barrels in gasoline stocks. Utilization rates declined by 0.4% to 81.2%, and only crude oil imports increased – by 614,000 bpd – to 9.350 million bpd. Implied demand came in at a very robust 9.543 million bpd in gasoline and at a stunning 5.025 million bpd in distillate. Taken together, those are the strongest API implied demand figures seen yet this year. They add to the already bullish factors that pushed quotes higher on Tuesday.
The activity started with an unexpected rate hike by Australia’s central bank. That placed pressure on the US dollar and helped boost the euro in early trading on Tuesday. As we noted, though, the dollar was higher on Monday and had no negative influence on oil prices. Still, the weaker dollar on Tuesday morning did help oil prices start the day on a positive note.
Equities were also higher on Tuesday. The market opened higher and stayed in higher territory throughout the day. By the final bell, the DJIA was up 64.10 to 11,188.72. It is not yet into fresh high territory for 2010, but it is still within striking distance and it may still burst to new highs before the week end.
In after hours trading, crude oil prices touched $84.47, a new high for the last six months.
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Platts oil
- India will seek to buy more crude from Nigeria as the African country looks at hiking its output from 2.7 mil b/d to 4 mil b/d by 2012.
Bentek Energy
- Supply/Demand Balance Analytic Report - Production Recovers to Near Record High, Demand.
- Industrial End Users Analytic Report - ISM Report Shows Manufacturing Strength.
- Rockies Observer - TransCanada Delays In-Service of Bison Pipeline Until Mid-December.
- Texas Observer - Trunkline Applies With FERC to Modify Its South Texas System.
Bloomberg
- Oil Rises to a Six-Month High on U.S. Stimulus Bets, Fuel Supply Forecast.
- LNG's Asia Premium to U.S. Gas Advances to 20-Month High: Energy Markets.
- BP's Dudley Embraces Deepwater Risk in U.S., Brazil After Spill.
- BG's $15 Billion Australia LNG Project Sparks `Dash for Labor' With Rivals.
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