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Morning Petrospective – July 20, 2011

July 20 2011, 09:12

Morning Petrospective – July 20, 2011

il prices advanced on Tuesday in response to sudden, renewed strength in equities and in the euro. And we had a surprising, positive housing report. That combination turned out to be a winning combination and prices gained in all three oil contracts, with crude gaining proportionately the most.

Traders took hope from signs that the euro-zone was nearer to solving its debt crises, with European Central Bank officials looking at another bailout for Greece. There were reports that the ECB had softened its position on the conditions for another loan, which helped.

The US dollar was under selling pressure as early as Monday night, and the selling continued early Tuesday morning. After 2 AM, the selling became more pronounced and the dollar quickly coughed up about 60 points in the following three hours of trading. By the time oil prices opened Tuesday morning, the damage had been done and oil prices were trading higher.

Stock prices (equities) also had a strong day on Tuesday and that helped oil prices as well. The DJIA was up 202.26 to 12,587.42.

Equities gained partially on signs that there may be a developing thaw between the two parties as they struggle to find common ground in raising the debt limit. Clearly, it would better if we did not need to borrow another dime. But, experts from both parties agree that a failure to have the money needed to pay the bills on August 2^nd would hurt the nation’s rating, which would automatically increase borrowing costs. And, while it is bad enough to owe $14 trillion, it would be worse to owe that much at a higher interest rate cost. That is the starting point that both parties recognize.

As we get nearer to August, the debt ceiling will become a bigger factor and markets will start to come increasingly under its gravitation. The sooner an agreement can be reached, the better it will be for everyone. On Tuesday, traders were more optimistic.

This week’s API report showed builds in refined products stocks with gasoline stocks up 1.957 million barrels and distillate stocks up 1.070 million barrels. Crude oil stocks were down 5.179 million barrels. Crude oil imports were up 74,000 bpd to 8.710 million bpd. Implied demand came in at 9.080 million bpd for gasoline and at 4.544 million bpd for distillate. The drawdown in crude oil stocks was much larger than expected in this week’s inventory reports.

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

Power Burn Analytic Report – US Power Burn Report Updated to New Format.
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Pacific NW Observer – Power Burn Softens Through Friday; Rockies Flows to PNW Still Face Pressure.

Platts