Morning Petrospective – June 28, 2011

rude prices dropped a little more than half a dollar while refined products rallied a penny and a half in heating oil and three cents in gasoline. The rally in gasoline means that, after the latest decline in average retail pump prices to $3.57/gallon, there are another 23 cents a gallon “owed” to consumers and businesses. Gasoline futures have fallen 64 cents a gallon while the decline at the pump has been 41 cents a gallon. Still, those 41 cents are the equivalent of a tax rebate (annualized) of $60 billion, or $164 million a day. Consumers will gratefully accept it.

As of Monday afternoon, consumers were owed another 23 cents a gallon, based on where futures closed and on how much has already been returned in the form of lower pump prices. The question is whether this will be enough to lift the country out of recession.

US crude prices were lower, based on concern over Greece’s debt problems and over continuing economic weakness in economic data. Crude prices were lower despite a dollar that sold off once overnight trading resumed on Sunday night. The dollar declined on expectations that Greece will vote through an austerity program in a parliamentary vote later this week, currently scheduled for Thursday. The vote is being billed as likely to be close, but most observers expect the Greeks to understand just how much is at stake. Contrarians argue that Greece’s people may decide there is less pain in a default than in austerity. They probably would suffer more over the longer term from a default, but they may not have extrapolated it that far out.

Trading was lighter on Monday as a large number of traders have taken this full week off. This is the beginning of the summer vacation period and from here to Labor Day is the real heart of vacation period. It is one of the reasons we so often see prices turn back up. While numbers of people from the trade are on vacation, other traders have the opportunity to move prices more easily. It is this vacation season, though, that is at the heart of “Driving Season,” which has more or less started this week. Officially, the heart of Driving Season is Independence Day to Labor Day and the full season “officially” starts with Memorial Day. But, high schools got out last week, so family vacations could not really begin in earnest until this past Friday.

The US economy reportedly grew at a rate of 1.9% in the first quarter in what the Fed is describing as the start of a slowdown in growth. This is down from a 3.1% gain in the fourth quarter, but it matches the results of a survey conducted by Bloomberg. In that respect, the number was not an unwelcome surprise; it was just unwelcome. Inflation reportedly increased more than expected in the first quarter. The 4.2% decline in spending by state and local governments was larger than expected and was the biggest such decline since 1981. The Fed lowered its expectations for growth this year to 2.7% to 2.9%, down from 3.1% to 3.3%. It was the second revision lower this year by the Fed.

FMX Newswire

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Bentek Energy

• Supply/Demand Balance Analytic Report – Prices at Sumas Experience Upward Pressure Due To Flooding and Maintenance.
• Industrial End Users Analytic Report – Industrial Demand Down 1% Today.
• Power Burn Analytic Report – Power Burn Continues to Rise with Cooling Demand.
• Storage Analytic Report – Strong Injections In the Producing Region Pushes US Build Up.

Platts

• Are sluggish official output figures for European petrochemicals accurate?
• Iran's OPEC governor says world oil markets are balanced but that the oil producer club is ready to pump more if demand goes up.
• India's first SPR capacity, coming up on the eastern coast, will achieve mechanical completion by end of fiscal year April 2011-March 2012.
• Japan's JBIC signed a MOU with Indonesia's oil and gas upstream regulator BPMigas to increase gas production in the Southeast Asian country.  

Bloomberg

• Oil Trades Near Four-Month Low in New York Before U.S. Fuel-Supply Report.
• Japan Considers $2.8 Billion for Tepco, Radiation Tracking in Draft Budget.
• Kuwait Approves Spending $14.5 Billion to Build Nation’s Largest Refinery.
• EDF Will Sell 15% of Nuclear Output to Rivals After Market Opening in July.

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