Morning Petrospective – July 19, 2011
il prices were lower on Monday as traders kept one eye on shifting Euro-zone debt worries and the other eye on the ongoing stalemate between parties in Washington. It is an active stalemate. Every day we get new wrinkles and possible solutions, but it never seems to get any nearer to resolution. Most people we listen to say that a default would be an unmitigated disaster because it would raise everyone’s borrowing costs. So far, neither party is actively promoting a default, so we assume it would be a bad thing. It is torture watching them trying to reach an agreement.
That combined with shifting euro-zone debt worries. Last week ended with Italy and Greece supposedly settled. Stress tests had been given and largely passed. On Monday, these tests had not been rigorous enough – and Italy and Greece were back on the hot seats. Monday’s big word was contagion. And the fear of debt crisis spread from Europe to the US where it hurt the euro more than the dollar, after everything was said and done, and where stocks were lower in a general liquidation. The DJIA was down 94.57 to 12,385.16.
The combination of lower euro and lower equities would have been enough to push oil prices lower. The fear of a general debt crisis contagion made it worse. Every time the situation seems to have been fixed or solved, it seems to reappear much sooner than expected. This is starting to look like an especially poor time for US political parties to be playing “chicken” with default. It is not that funny with major national debt crises just across the Atlantic Ocean.
As we noted in yesterday’s report, oil prices are near major Bollinger Band resistance at the upper blue bands on the daily charts. They are also dropping from those levels on the monthly charts. It was the weekly charts that seemed to have any upside potential left in them. The conflicted differences between charts tells us something about this complex. It is having a hard time figuring out which way it should move next.
This week’s DOE report should be instructive. We tend to see refinery utilization start to decline after Independence Day, although this year we have the Brent-WTI spread playing games with margins. That could affect some plants, but most of our country typically has a refining schedule worked out months in advance. Maintenance turnarounds are planned well ahead of time and probably no more than a few percentage points are influenced by today’s margin. Still, it is a significant amount and it is the incremental gallon of gasoline or diesel that comes from it. It also determines whether crude stocks build or draw down.
We continue to be interested in demand levels, and we will get this week’s first look on Tuesday.
FMX Newswire
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Bentek Energy
- Power Burn Analytic Report – Power Burn Expected to Reach Over 30 Bcf/d Tomorrow.
- Industrial End Users Analytic Report – Chemicals and Refineries Balance Each Other.
- Supply/Demand Balance Analytic Report – US Demand Reaches 65.0 Bcf/d on Increasing Temperatures.
- Nuclear Plant Status Analytic Report – Relief Comes to Texas Power System.
Platts
- It is '90%' certain the IEA will not release more oil, Germany's National Petroleum Stockpiling Agency said, after June's 60 mil bbl release.
- Refineries across Japan have suspended oil product loadings due to Typhoon Ma-On, company officials said Tuesday.
- China's natural gas imports reached an all-time high of 2.7 Bcm in June.
- Indonesia’s Pertamina will invest $80 mil to convert the Arun LNG plant in Nanggroe Aceh Darussalam into an LNG receiving terminal and regasification unit.
Bloomberg
- Oil Gains in New York as U.S. Supplies, China Demand Counter Europe Debt.
- Typhoon Ma-on Approaches Japanese Coast, May Miss Fukushima Nuclear Plant.
- View: Transforming India Opens Door for U.S. Alliance.
- Oil Gains in New York as U.S. Supplies, China Demand Counter Europe Debt.
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