Morning Petrospective – June 16, 2011

he oil complex was down dramatically on Wednesday as the euro was hammered on continuing Greek debt worries. The euro was down 270 points against the US dollar, and the stock market was hit hard as well. The DJIA was down 178.84 to 12,076.11. Traders were in full flee mode from risk and were buying the dollar as a safe haven. The weakness started with the euro and spread to a number of other markets through Wednesday’s trading. Demonstrators were posted outside the Greek Parliament and Greece’s prime minister offered/threatened to resign as ministers struggled with the debt issue.

The big fear here is that Greece could walk away from a potential restructuring as the Greek people refuse to embrace austerity. And from there, it is not all that far to it becoming a contagion that spreads to Spain, Portugal and Ireland. Spain is currently entertaining a piece of legislation that would allow homeowners to walk away from bad mortgages, which would obviously have a horrific effect on banks there. If voters in a number of countries can no longer stomach austerity, they might try to pass bills to make their problems go away – which will not work.

By the final bell, crude oil prices settled down $4.56 a barrel while refined products lost more than 14 cents a gallon. In the process some important technical levels were broken. Prices finished near their lows for the day. Prices broke $95.00, and broke below $94.60, although they did finish beneath that. Still, prices finished at their lowest levels in a long time, and crude has unconfirmed objectives to $85.00 now. Refined products should move lower as well.

This week’s DOE report showed a small drawdown in distillate stocks, a small build in gasoline stocks and a decent drawdown in crude oil stocks. Refinery utilization dropped by 1.1%, which was unexpected, given existing margins in the US. Crude oil imports were up by 38,000 bpd.

Total four-week demand was down 3.16% on the year, which was an improvement on last week’s decline of 3.71%. Four-week gasoline demand was up 0.5%, up from 0.29% (higher) a week ago, and four-week distillate demand was down 3.57%, compared to down 4.91% a week ago. These represent improvements.

Consumer prices increased by 0.3% in May, which was the largest month-on-month increase in five years. When one takes out lodging away from home, motor vehicles and clothing increases, the headline increase was just 0.2%. Still, the increase is probably enough to dissuade the Fed from looking more deeply into a possible third round of quantitative easing until it is absolutely necessary, according to comments made by Capital Economics.

There was an encouraging note on Wednesday, with industrial production up 0.1% month-over-month. There were a number of one-time or temporary negatives, but there was also a 0.4% increase in manufacturing, which kept the overall figure positive. The manufacturing increase was especially encouraging because of the decline in automobile output, because of the earthquake and tsunami.

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

• Industrial End Users Analytic Report – Refinery Demand Remains Over 2010 Levels.
• Gulf Coast Production Analytic Report – Total Offshore Production Trails 2010 Volumes by 1.0 Bcf/d.
• Nuclear Plant Status Analytic Report – Preliminary Estimate Decreased by 1.0 Bcf From Yesterday.
• Midcon Observer – Midcon Storage Injections Surge as Demand Stabilizes.

Platts

• Lagging East & West natgas storage may inject volatility if major hurricane hits US Gulf.
• Reports of 0.1% European gasoil death greatly exaggerated.
• Angola's provisional crude loading program for August sees volumes down 92,565 b/d at 1.583 million b/d. 
• The IEA is waiting to see how fast Saudi Arabia delivers extra oil to world markets and is ready to release stocks if necessary.  

Bloomberg

• Crude Oil Climbs From Four-Month Low After IEA Increases Demand Forecast.
• IEA Boosts 2016 Oil Demand Forecast.
• Khodorkovsky Rates Corruption Impact on Russia.
• Russia, China May Sign Gas Deal Later in Year.

Technical Recap

Crude Options Report / Straddle Runs

NG Options Report

Market Prices

Premium Subscriber (click here to register):

Volumes & Open Interest

End Of Day Straddles

Settlements

To view our energy news and articles on your PDA or mobile device, click here.