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Morning Petrospective – April 28, 2011

April 28 2011, 08:22

Morning Petrospective – April 28, 2011

en Bernanke spoke to reporters on Wednesday, and he did not do anything unexpected. That lack of surprises had also been expected from a Fed Chairman thoroughly committed to sharing his thoughts on future policy with traders and others. Quantitative easing is done with and will wind down through June, as advertized. And interest rates will remain where they are, at effectively nothing. The US dollar, which had been hoping for some sign of backbone, dropped after Bernanke’s press conference, which was seen as soft on inflation.

Officially, inflation is low, at least according to the so-called “core rate,” which is essentially anything that changes slowly and affects the upper middle class. Items like food and fuel, which are so critical to middle and working class families, and which have been gyrating like belly dancers, are not included in the “core rate,” which one might imagine would be all about food and fuel, which have been basic to human existence since the species developed thumbs (a long, long time ago). Based on the official measures, everything is fine. Those who see the makings of something more ominous in higher food and fuel prices are not going to find succor from the Fed.

The US dollar dropped to new two-year-plus lows on Wednesday, and it continued dropping Wednesday night. Oil prices advanced on Wednesday, largely on the back of the weaker US dollar, and the earliest expectations for Thursday are for more of the same. Mr Bernanke pledged to keep interest rates low for “an extended period,” and traders saw his comments as being bullish for stocks (equities), commodities and foreign currencies.

Crude oil prices settled at a new 31-month high while gasoline reached new highs since late July, 2008 after rising for a fifth consecutive day. Helping gasoline prices, which were far and away the strongest member of the oil complex, was Wednesday’s DOE report, which showed a drawdown in gasoline inventories of 2.5 million barrels. Reported demand was up 86,000 bpd to 9.148 million bpd. Four-week demand for gasoline was down 1.63% to 9.061 million bpd, but there are promising signs on the supply-demand front because output dropped 327,000 bpd to 8.841 million bpd. If that continues, gasoline stocks will find it easy to keep on falling. We are not certain that this will continue; it should not. But, it should not have been seen this week either. Total products demand is up 3.30% over the last four weeks, and it would be up dramatically if gasoline were to increase in comparison with 2010.

That could be a steep hill to climb, though, with retail pump prices approaching a national average of $4.00 a gallon for regular, unleaded 87 octane. Here, in Connecticut, 87-octane is going for $4.25 and more, with premium licking up against $5.00 a gallon in some parts of the state. These are levels that anger consumers and produce resistance to driving. Some driving just cannot be avoided.

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.

Bentek Energy

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Reuters