Morning Petrospective – July 27, 2011

rading volume remained on the thin side on Tuesday as traders were reluctant to adopt fresh positions until after the US government has agreed on a plan to increase the debt ceiling. No one knows exactly how to call it, because a partial default could lift interest rates, which could actually boost the dollar, but most tend to feel that the longer we go without any agreement, the worse it is for any assets like equities or commodities – while at the same time being bad for the dollar. That is a tough circle to square.

Because of the inability for yet another day to solve the debt crisis here in the US, the dollar broke down below an important trendline in trading last night. That brought in fresh selling by technical traders last night and early this morning. And, at first, traders decided to follow the link between a weaker US dollar (with a stronger euro) and higher oil prices. The weak dollar pushed oil prices higher on Tuesday. It was the opposite of what we had seen on Monday, when the inability to solve the crisis put pressure on the dollar and on oil prices.

Equities also were lower because Congress could not agree on a debt plan. The DJIA dropped 91.50 to 12,501.30. Last week’s advances were more convincing and the DJIA seemed to enjoy moving higher more than lower, but a number of investors are getting out of long positions just in case nothing gets done. Three-quarters of Americans in a recent poll said they did not expect Congress to pass a new debt ceiling in time, which is something of a poor reflection on the present public feeling for Congress and the White House.

The Conference Board’s index of consumer confidence was up to 59.5 in July from 57.6 in June, but analysts were at a loss to explain the mild improvement because most other measures of confidence have fallen recently. Capital Economics called it “bizarre, given that all the other measures of confidence have recently fallen.” And, it noted that the increase “did little to reverse the previous falls from 72.0 in February,” back when the economy still seemed to be growing and before the Mideast upheavals commonly called the “Arab Spring.” The increase in July leaves June’s index as an eight-month low, but July’s measure has hardly built in much of a cushion for August, especially if the debt limit is not successfully raised in time. Still, the surveys had predicted an average reading of 56.0, so markets were glad for the moderate good news.

Oil prices weakened after the regular trading session, in the wake of this week’s API report. This week’s API report showed a build of 2.907 million barrels in distillate stocks, which is actually needed for next winter. It showed a drawdown of 0.639 million barrels in gasoline stocks, and it showed an unexpected build of 3.960 million barrels in crude oil stocks. Most analysts have been predicting draws in crude oil stocks this week. Crude oil imports were up 452,000 bpd to 9.162 million bpd despite a decline in refinery utilization of 0.3% to 85.8%.

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 Remains Steady at 30 Bcf/d.
• Nuclear Plant Status Analytic Report – Columbia Gen Return to Service Delayed to August 31.
• Industrial End Users Analytic Report – Dow Chemical Reports Expanded Operations.
• Supply/Demand Balance Analytic Report – US Production and Demand Decline Slightly.

Platts

• German gas transmission system operator NetConnect Germany posts balancing profits.
• Iran's Ahmadinejad nominates Islamic Revolutionary Guards Corps' Ghasemi as oil minister.
• High bunker costs hitting tanker owners' earnings in oversupplied market.
• BG Group subsidiary QGC inks $142 mil shale gas joint venture with Australian Drillsearch.

Bloomberg

• Oil Falls in New York After Industry Report Shows U.S. Stockpile Increase.
• Oil Company Subpoenas Said to Be Readied by FTC in Gasoline Price Probe.
• White House Is Said to Propose Relaxed 54.5 MPG Fuel-Economy Goal for 2025.
• Murdoch’s Influence Wanes as Cameron Slams Door.

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