Morning Petrospective – July 28, 2011
he debt crisis in the United States continued and markets started to take it much more seriously. Equities took it especially hard with heavy liquidation, and the DJIA dropped 198.75 to 12,302.55. People decided they no longer wanted to hold shares in American companies if Congress still could not do such a simple thing as raise the debt limit. Few believe that the crisis will continue without some resolution before August 2nd, but it is now starting to look increasingly likely that the US credit rating will be lowered.
That could cost the country billions in higher credit costs. Needless to say, this was not really necessary. Now, legislators need to find a way in the few remaining days to come up with something to solve the problem. Equities have already taken it hard, and they could drop even more urgently if this crisis is not resolved soon. It would be especially bad to let it fester over the weekend, with August 2nd next Tuesday.
Strangely enough, the US dollar was steeply higher on Wednesday. Greece had its credit rating lowered yet again, and that seems to have hurt the euro. The combination of much lower euro values and equities down almost 200 points pushed oil prices down significantly.
This week’s DOE report was also seen as being mostly bearish. There were builds in all three major inventory categories. Crude oil imports were higher, but refinery utilization was lower, and that suggests the movement of more crude oil into inventories. And four-week demand, which most traders do not look at on Wednesday, was down dramatically. A week ago, total four-week demand was down 1.57% against a year ago; now it is 2.88% lower. Four-week gasoline demand was down 2.17% a week ago; now it is down 3.31%. And four-week distillate demand was down 2.53% a week ago. Now, it is down 3.49%. All of those are substantial moves towards the bearish side in an average that should not change that quickly.
Tropical Storm Don was named yesterday in the Gulf of Mexico and four of the largest oil and gas producers in the region started to evacuate workers from production platforms and drilling rigs on Wednesday. Shell, Anadarko, Apache and BHP Billiton all evacuated workers, although none of them has given orders to cut back on production yet. At this stage, this is just a personnel decision being taken as a precaution. The companies do not want to be stuck with too many people to evacuate easily if the storm becomes intense.
Also contributing to Wednesday’s decline in oil prices was a 2.1% drop in durable goods orders for June. The decline, though, was centered in aircraft and vehicles, the latter being still influenced by the earthquake in Japan. Nevertheless, it was not constructive news.
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 – Tropical Storm Don to Bring Relief to the Texas Power Grid.
- Nuclear Plant Status Analytic Report – Outages Up as Browns Ferry Cuts Generation Output.
- Industrial End Users Analytic Report – Industrial Demand Remains Under 2010 Levels.
- Supply/Demand Balance Analytic Report – US Supply Jumps 0.6 Bcf/d Overnight; Ruby Pipeline Enters Service.
Platts
- Italy's Eni makes 'significant' gas, condensate find off Ghana that may allow it to pursue LNG export project from the area.
- Regulator clears ExxonMobil & Total exploration for Polish shale gas.
- UK crudeoil output fell almost 11% in May on month to 1 million b/d, according to the DECC. .
- Singapore-based BW Maritime withdraws two new VLCCs from market.
Bloomberg
- Crude Oil Trades Near Lowest in Week on U.S. Economy, Rising Stockpiles.
- Shell Second-Quarter Earnings Double on Higher Oil Prices, Projects.
- Toshiba Bond Risk at Four-Month Low as Nuclear Concerns Ease: Japan Credit.
- House Debt-Limit Vote Sets Stage for Showdown.
Technical Recap
Crude Options Report / Straddle Runs
NG Options Report
Market Prices
Premium Subscriber (click here to register):
Volumes & Open Interest
End Of Day Straddles
Settlements
To view our energy news and articles on your PDA or mobile device, click here.