Morning Petrospective – June 29, 2011
he oil complex had a strong rally on Tuesday as traders reacted to a weaker US dollar and optimism that Greece’s parliament will succeed in passing an austerity program later this week. There have been demonstrations in the street in Greece, as ordinary citizens have taken to the streets to protest cuts in social services. Despite these demonstrations, the party loyal to Prime Minister Papandreou seems to be holding together to pass the austerity measures needed to secure the next loan. That helped the euro, which rose against the dollar.
The US dollar started dropping steeply around 8 AM Tuesday morning and it was under selling pressure up till around noon. From that point on, it traded sideways. Nevertheless, the damage was done, and that was one of the bigger factors in Tuesday’s weakness, according to market traders and observers.
From our perspective, prices were oversold and were on the lower red Bollinger Band, which tells us that there was technical pressure for prices to rally. Independence Day is the start of its own seasonal higher in crude oil and is the second best time of year to buy heating oil for the coming winter. After last week’s striking decline, this market was stunned by the timing of the strategic release, and they were asking a number of questions. Without fresh selling pressure, Tuesday’s session was dominated by traders covering shorts and taking a look at the long side. There were also traders buying ahead of the holiday weekend, either to offset short positions or to position themselves in case of a late-in-the-week rally by those wanting to get flat for Independence Day. Volume was on the lighter side.
As we said above, it looks like the ruling party in Greece has the votes it needs to pass the austerity package (a budget of €28 billion), but there are reports that two or more members of the ruling party could vote against the bill. That would force Europe’s leaders to embrace an immediate “Plan B.” And it would hurt the euro and leave traders wondering what will happen next. Markets hate uncertainty and a “no vote” would give us that in spades.
This week’s API report showed draws across the board, with gasoline stocks down 91,000 barrels, distillate stocks down 945,000 barrels and crude oil stocks down 2.699 million barrels. Refinery utilization was unchanged at 86.5% and crude oil imports were up 595,000 bpd. Implied demand came in at 4.767 million bpd for distillate and at 9.573 million bpd.
The Conference Board’s measure of consumer confidence fell to a seven-month low of 58.5 in June, down from 61.7 in May. Lower gasoline prices could not offset weakness in equities, jobs and housing.
FMX Newswire
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Bentek Energy
- Supply/Demand Balance Analytic Report – MIT Study Finds No Impact to Groundwater From Hydraulic Fracturing.
- Industrial End Users Analytic Report – Dallas Federal Shows Slowed Manufacturing Growth.
- Power Burn Analytic Report – Power Burn Expected to Rise for the Remainder of the Week.
- Storage Analytic Report – Preliminary Storage Injection Drops on Increasing Cooling Demand.
Platts
- Pakistan receives 17 bids to supply 500,000 Mcf/day LNG for 10 years.
- US regulators say hydraulic fracking not as dangerous to water quality as thought. .
- Germany notifies oil companies of entitlements under IEA stock release.
- US crude oil stocks drop a larger-than-expected 2.699 mil barrels, despite jump in imports: API data.
Bloomberg
- Crude Oil Advances a Second Day on Speculation OPEC May Reduce Production.
- Tepco, Chubu Rally Around Japan Nuclear Future, Defying Growing Opposition.
- Greece’s ‘Indignants’ Confront Politicians They Blame for Financial Plight.
- Papandreou Races to Avert Default Amid Protests.
Technical Recap
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NG Options Report
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