Morning Petrospective – June 8, 2011
il prices were mixed on Tuesday morning, with crude oil quotes slightly lower and refined products quotes up by a couple of cents. The DJIA was higher and the dollar was lower, all in the early trading. It looked like profit-taking by the shorts, bargain-hunting in equities and book-squaring in refined products ahead of this week’s DOE figures. Volume was light in the early trading, and that helped crude prices turn positive after 10:30 AM, just as a report came out that Opec will decide to increase its production quotas when the ministers meet tomorrow.
That report seemed to put some pressure on prices. Crude oil turned from positive figures to being down 77 cents, even as the DJIA advanced up to 78 points higher on the day and the euro continued to advance against the US dollar, all just a little after 11 AM.
It did not end that way, though. The dollar was weaker overnight, but it did not exert that big an influence until late morning on Tuesday. By afternoon, crude oil prices had turned positive, while refined products had turned minor gains into more substantial ones. This was seemingly bullish, although one has to try to fit a disappointing finish in the DJIA into any larger picture.
The weakening dollar was clearly a big part of the rally. Ben Bernanke spoke later in the day, and he spoke of the need to maintain low interest rates for the “extended period” that has been a staple of Fed speeches now for two years and more. He also trotted out another, newer phrase that he has become fond of – the use of the word “transitory” in describing inflation and higher commodities prices. In his mind, low interest rates will be with us for a while; inflationary pressures from higher commodities prices will not.
Most significantly, Mr Bernanke downplayed the likelihood of there being a QE3. If there was any consideration of quantitative easing returning, Bernanke would have let us know. In post-speech analysis, observers said that QE has not been locked out, but it certainly has been quarantined for now.
This week’s API report showed a build of 1.774 million barrels in distillate stocks, which is needed. Crude oil and gasoline inventories both increased, by 5.512 million barrels in crude and by 0.390 million barrels in gasoline. Utilization rates were up by 0.7% to 84.7%. Crude oil imports, which have been rather erratic in the weekly API figures, were down 1.183 million barrels a day. That implies lower utilization to follow.
Tomorrow will be an interesting session, with the DOE report competing with Opec, the dollar, equities, technicals, the Fed and the economy for headline time. For our money, the genesis of a number of those factors is the Fed and its policy – or lack thereof
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Bentek Energy
- Industrial End Users Analytic Report – June Demand Starts Strong.
- Texas Observer – Texas Demand Begins to Ease Off, Flows Move East.
- Supply/Demand Balance Analytic Report – Regional Demand Across the Country Tumbles, Except the Northeast.
- Power Burn Analytic Report – Power Burn Down 0.8 Bcf/d Over Yesterday.
Platts
- More refrigerated #propane imports flow into Northwest Europe in first half of June, according to industry sources.
- Angola, Nigeria could bring on spare production capacity if OPEC agrees to put more oil on the market to help dampen high prices.
- World energy consumption up 5.6% in 2010, the highest rate since 1973: BP review.
- Riddle, mystery & enigma dept:BP CEO Dudley says despite reports it has NO plans to sell TNK-BP stake to salvage deal with Russia’s Rosneft.
Bloomberg
- Oil Declines as OPEC Considers Raising Quotas on Slowing Economic Growth.
- Poland Targeting Shale Gas With Exxon to End Russian Dominance.
- EPA Air-Pollution Rules to Cost Almost $18 Billion Yearly, Coal Group Says.
- Japan Plans Fundamental Change in Nuclear Safety Rules, Create Regulator.
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