Morning Petrospective – May 6, 2011
hat started on Monday with higher margin rates continued on Thursday with margin calls as longs watched losses mount - or saw profits evaporate - in positions in precious metals and oil. On Thursday, the dollar got squarely into the act, with a decision by the European Central Bank (ECB) not to raise interest rates as the catalyst for heavy selling of the euro – and buying in the dollar. With the dollar spiking higher, catapulted by shorts buying back months of accumulated holdings, the oil complex came under heavy selling pressure in very early trading on the Nymex and before that in overnight trading on Globex.
Taking a pre-lunchtime snapshot, at a few minutes after 11 AM, the DJIA was down 95 points, silver was down $3.00, gold was down $20 an ounce, crude was down $6.00 a barrel, heating oil was down 17 cents and gasoline was down more than 14 cents a gallon. The euro was down more than two full euro cents against the US dollar. This was almost an old-fashioned panic. Since prices have been advancing well beyond any reasonable measure of value, Thursday’s declines felt more like orderly corrections than chaotic panics. There was no sense that anyone was ready to jump from the window, and there was no consensus even on whether bullish trends had in fact turned. It felt like the suds had been blown off the top of the draught, but no one had yet spilled any of the drink.
This week’s unemployment report was disappointing, and it showed an increase of 43,000 (to 474,000) in the number of people looking to collect unemployment insurance. Market observers feel that this report underlines concerns that improvement on the labor front may be losing momentum. Analysts surveyed by Bloomberg expect tomorrow’s Labor Department report to show 185,000 workers added to payrolls in April. That would be fewer than the number added in March and would fail to keep an improving pace as a standard.
Oil Movements projects that Opec will ship 22.71 million bpd in the four weeks ended May 21st, up 0.4% from 22.61 million bpd moved in the period that ended April 23rd. The increase is in response to higher refiner demand as we head into the peak driving period in the US and Europe.
When the dust cleared this afternoon, crude oil prices had dropped $9.44 a barrel, heating oil had fallen 25.61 cents a gallon and gasoline had given up 22.71 cents a gallon. The DJIA was down 139.41 to 12,584.17. Gold was down to a three-week low, silver ended down 8%, meaning it has lost more than 25% since last Friday. Copper prices ended below $4 a pound for the first time in 2011.
At this stage, we would expect it to take time for prices to get back where they were. Normally, it requires a period of consolidation and then time before they can return to the levels seen before any collapse. We are not sure, though, any more. We are not buyers here or now, but we have a funny feeling that oil prices will recover more quickly than in the past – once this is over.
FMX Newswire
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Bentek Energy
- Texas Observer - HSC Cash Basis Expected to See Upward Pressure in the Near Term.
- Supply Demand Balance Analytic Report – Storage Figure Confirms Growing Injection Strength, NYMEX Drops to $4.26.
- Nuclear Plant Status Analytic Report – Outage Levels Continue to Remain High.
- Power Burn Analytic Report – Power Burn to Climb Over 3 Bcf/d by Monday.
Platts
- Prompt prices on Continental Euro gas markets fell Friday am due to lower crude oil prices and bearish fundamentals.
- BP claims $2.067 billion from Mitsui affiliate MOEX Offshore in Macondo oil spill costs.
- Glencore not renewing Singapore licence for delivered bunker fuel sales, says Maritime and Port Authority .
- More refrigerated #propane imports flow into NWE on thriving petchem demand, according to industry sources.
Bloomberg
- Oil Falls in New York; Set for Biggest Weekly Decline Since December 2008.
- BASF Quarterly Profit Beats Estimates, Expects Sales Growth.
- Commodities Slide for Fifth Day as Oil, Silver Drop; U.S. Futures Advance.
- Helicopter Carrying Seals Downed by Vortex, Not Mechanical Flaw or Gunfire.
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