Morning Petrospective – May 17, 2011
he opening of the Morganza Floodway along the Mississippi River helped to relieve pressures on the river that might have affected refineries. As a result, most refineries (in harm’s way) were in the clear on Monday. As a result, oil prices tumbled, despite a stronger euro. This is yet another example of weakness in this market. Last week, we were talking about the stronger dollar as the major source of weakness. But on Monday, a resurgent euro was unable to get the bulls’ attention. They kept liquidating positions.
One could argue for the dollar’s strength within a bigger picture. Despite Monday’s weakness (in the US dollar), the overall picture on the charts is of a market trying to rally. In any event, this complex did not have eyes or ears for the bullish parts on Monday. It was more interested that it was seemingly about to dodge a bullet in terms of flooding. These same fears of flooding gave gasoline traders reason to bid quotes up 21 cents a week ago on Monday. As we went through last week’s trading, it looked more and more like we would miss any serious downtime at refineries, but the fears were all but completely dismissed this Monday.
When the trend changes, everything seems to play into the new trend. There were plenty of reasons for one to get excited on the upside as we started another week, but none of them was able to get its roots planted. Instead of placing the focus on the production which was temporarily lost, the markets rode the zoom lens on so many more units escaping. And, instead of rallying on weaker dollar, prices weakened on the generally stronger chart picture the dollar is making longer term.
Gasoline was the largest mover in Monday’s trading, largely because it accounts for more than 50% of the refinery yield, nationwide. Especially at this time of year, just before the official beginning of “Driving Season,” the loss of a number of refineries would have been most acutely felt in the reduced supply of gasoline. The news that spillways had been opened to accommodate refineries farther downstream (thus preventing the river from cresting there) alleviated a great deal of concern and brought back from the brink hundreds of thousands, even millions of barrels of gasoline that will not be lost or delayed now. As a result, gasoline prices dropped 15 cents a gallon on Monday, pulling heating oil and crude oil prices lower with them.
The Empire State manufacturing index fell to a five-month low of 11.9, down from 21.7. Capital Economics sees the figures as being stronger than the headline index suggests. Sales and shipments are both coming down from multi-month highs, and the employment part of the index actually improved.
In Europe, euro-zone CPI increased from 2.7% to 2.8% in April, and this is seen as potentially leading to another rate hike by the ECB in July.
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
- Canadian Observer – AECO Rally and Strong Hydro Supplies Reduce Exports to US.
- Supply Demand Balance Analytic Report – Canadian Imports Fall While US Demands Remain Moderate.
- Industrial End Users Analytic Report – Major Consumers See A Jump in Gas Demand.
- Power Burn Analytic Report – Power Burn Up 0.3Bcf/d Below 2010 Levels.
Platts
- French weekly LNG inputs climb 5.9% on the year to 3,918.5 GWh, according to GRTgaz data.
- BP loses Rosneft deal after failing to appease TNK-BP co-owners.
- Petro Vietnam's upstream arm PVEP to buy stakes in Peru oil block from Conoco Phillips
- Petro Dollars column: examining the ongoing push towards the next generation of jet biofuels.
Bloomberg
- Oil Trades Near Lowest in a Week as Supply Gains Vie With Growth Outlook.
- BP-Rosneft Share Swap Collapses on TNK Block.
- Mississippi River Diversion Reduces Threat to Cities, Crude-Oil Refineries.
- Nigerian Army Raids Militant Camps in Southern Oil-Producing Delta Region.
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