Morning Petrospective – July 25, 2011

rude oil futures were higher again on Friday, making it a fourth consecutive day of advance. The biggest factor in traders’ thinking was the US debt ceiling. It was widely assumed that a compromise measure will be agreed upon next week to raise the debt limit. And that was seen as being bullish for oil prices. For a second day in a row, crude oil prices broke over $100 a barrel, and they once again failed to settle at a price above that figure.

Dow Jones reported on Friday night that President Obama had said earlier on Friday, ‘"I am confident [the debt ceiling will be raised] simply because I cannot believe that Congress would end up being that irresponsible that they would not send a package that avoids a self-inflicted wound to the economy at a time when things are so difficult," Obama said. He also signaled he'd take the responsibility himself. "I'm happy to do it," Obama said. [Republican Speaker of the House] Boehner also said Friday that, despite talks breaking down, he's "convinced" the debt ceiling will be raised.’

The talks continued over the weekend, and the opera continued. The problem is that they are trying to dance together without touching. And the music choreographing their dance comes through headphones with one group listening to hip-hop and the other side listening to country western. It is making for an especially unappealing dance to watch. But, both sides insist that a deal will be done in time.

The attacks in Norway seem to have been the acts of a single deranged Norwegian. He is desperately antagonistic to Muslim terrorists, so he took one of the worst pages from their worst playbook and imitated them. Sometimes reality is stranger than anything one could make up.

In trading on Sunday night, equities, the dollar and oil were all lower in disappointment that the two parties could not hammer out a deal on the debt cap. It looks like this is going to be our big feature this week, with prices rallying on every rumor that something seems to be getting done. It looks like a classic case of buying rumors only to need to sell the fact. Raising the debt cap will get us through this immediate crisis, but it won’t lead to a single new job or a dollar in GDP (although its failure would lead to the loss of both). Once traders get over the euphoria of Congress reaching agreement, there will not be much to build on afterwards. And that makes a selloff seem likely after approval.

Traders will be watching China very closely for signs that its economy is slowing after repeated interest rate hikes and higher reserve requirements designed to slow things down. They seem to be working … maybe even too well. We are interested in this week’s DOE report to see if refinery utilization continues to increase. The crazy WTI-Brent differential seemed like an interesting sideshow for a number of weeks, but it looks like real-world refiners locked in some of the margins and are now refining at higher rates to take that extra money to the bank. Good for them. The blowout of that spread was ridiculous and it’s nice to see reality get rich from it.

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 Dips Below 30 Bcf/d, 2.6 Bcf/d Increase Expected Tomorrow.
• Nuclear Plant Status Analytic Report – Sequoyah 01 Returned to Service Over the Weekend.
• Industrial End Users Analytic Report – US Industrial Demand Continues to Rise.
• Gulf Coast Production Analytic Report – Caribbean Tropical Wave Tracks Westward, May Strengthen in Gulf of Mexico.

Platts

• Iraqi Oil Minister Abdul Karim Luaibi says satisfied with current oil price levels.
• China imports 648,561 b/d crude oil from Iran in June, the highest in more than 2 years.
• Italy's Eni has signed a cooperation deal with China's Sinopec to explore possible joint projects in China and internationally, Eni says.
• Oil tanker Captain X Kyriakou is due to leave the Libyan rebel-held port of Zuetina Monday after loading 800,000 barrels of crude.

Bloomberg

• Oil Falls in New York After U.S. Lawmakers Fail to Reach Debt Agreement.
• Oil at $120 Becomes Biggest Energy Bet.
• Dow Chemical Will Build $20 Billion Petrochemical Plant With Saudi Aramco.
• BP Breakup Could Unlock $100B, JPMorgan Says.

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