Morning Petrospective – July 22, 2011
fter a volatile overnight session oil prices were mixed in continuing odd trade on Thursday. By the final bell, crude oil prices were higher and refined products prices were lower, which fits in better with what we had seen in Wednesday’s DOE figures, which had shown a larger-than-expected drawdown in crude oil stocks and a larger-than-expected build in distillate stocks. Gasoline stocks were also higher in this week’s DOE report. And refineries had increased utilization, suggesting more products supply to come.
Crude oil prices also received help from the euro, which was higher on Thursday, and from equities, which also were higher. The dollar had rallied against the euro around 6 AM, but it peaked at around 7 AM and fell steeply until after 10 AM. There were reports that Europe had resolved the latest Greek debt issues on Thursday and that seems to have helped the euro post gains throughout the session. The question, now, though, is whether the problem can stay solved. Greece keeps coming back every week or two as a problem, it seems.
The DJIA was up 152.50 to 12,724.41 on Thursday, and the gains in equities helped convince traders that the economy is still on track towards recovery. The thinking is that demand for energy should increase if the economic recovery proceeds or picks up.
Restraining prices, though, was news that jobless claims had increased by 10,000 to 418,000 in the latest week. And the index of leading indicators rose at a slower pace in June than had been expected. Analysts said that the latest indicators suggest that second-half growth will be “restrained” and will not be terribly robust. The Conference Board’s outlook for the next three to six months was up 0.3% after a 0.8% gain in May. That was better than the 0.2% gain widely predicted.
China’s flash PMI for July fell to its lowest point since March, 2009, which gave fresh credence to the possibility of there being a “hard landing” for China’s previously bulletproof economy. Observers noted that this was likely to focus Chinese leaders on keeping the yuan at artificially low levels to maintain export activity. Capital Economics believes that this PMI has overstated the picture and it feels that the Chinese economy may already have reached its low point. It points to still-expanding freight traffic and to improvements in electricity supplies as reasons to be optimistic here.
The Federal Reserve of Philadelphia’s index went from -7.7 in June to 3.2 in July, which represents modest improvement. The biggest concern of business leaders polled was uncertainty. Many had expected it would be rising commodities prices, but it was not. And that brings us back to the US debt limit. Discussions are ongoing between the two parties with insults and recriminations alternating with decisive compromise. The question remains whether the two parties can bridge the gaps before August 2nd.
Thursday’s mixed movement in the oil complex highlights just how confused a market this is right now. Day-trading has become such a big factor, as well, that many traders are not looking at longer-term factors, but are absorbed each day by short-term trends. This certainly is not the market most of us grew up with.
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 – Power Burn Reached Over 35 Bcf/d Yesterday to Cool Heat Wave.
- Nuclear Plant Status Analytic Report – Sequoyah 01 Expected to Return to Service Over the Weekend.
- Texas Observer – Texas Leads US in Oil Rig Counts.
- Gulf Coast Production Analytic Report – Louisiana Offshore Production Shows Uptick.
Platts
- Political instability in Libya and Yemen dents Austrian oil and gas company OMV's Q2 upstream production, prompting a 14% year-on-year fall.
- Japan's Inpex plans to sell about 10% of its Ichthys LNG project in Australia to customers lined up to lift output from the development.
- The Indonesian unit of ConocoPhillips will temporarily cut its gas supply to Singapore, due to routine maintenance at its Suban field.
- Japan's LPG inventories stood at 1.88 million mt as of June 30, down 5.7% from 1.99 million mt a year ago.
Bloomberg
- Oil Heads for Fourth Week of Gains on Optimism Over European, U.S. Debt.
- Total Plans to Drill Three Gas Exploration Wells Off Australia in 2012.
- Chubu Electric to Build $1.3 Billion Tsunami Defenses for Hamaoka Plant.
- SunCoke Rises 6.3% in Debut After Initial Share Sale Raises $185.6 Million.
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