Morning Petrospective – August 23, 2011
onday’s big news was that Libyan rebels had over-run Tripoli and captured two of Moammar Khadafi’s sons. The impact was immediate as traders sold oil futures. Even though it could take time to get Libyan oil pumping again, it is our belief that it will be back sooner than anyone dares to imagine right now. Currently we are hearing estimates in the months. With the new regime entirely dependent on oil revenues, the momentum to get facilities operational will be overwhelming. With the US and Europe effectively broke, we would expect either or both to lend expertise to get oil flowing.
No matter how long it takes, it is does not look like it will take as long as it once looked like it would. The clock has started ticking, and we are convinced that Western nations, keen to buttress Libya’s fledgling democracy – and equally keen to do so with their hands firmly in their pockets – will pull all the strings they can to get Libyan oil (and cash) flowing again. There are a number of tribal chieftains to bring on board, and they are not going to jump in with the new regime for a hogshead of dates, a ton of raisins and a fruit platter. Chances are, they will want cash or gold. And, since Libya imports most agricultural goods – even though agriculture is listed as its second biggest sector – it will all come down to oil.
The US is not going to underwrite this. Europe can’t underwrite this. If Libya’s tribal leaders have left their tents long enough to get away from the Saharan sand storms, they will not be looking for Greek or Italian bonds. In order for this new democracy to attract enough support, it will need to get oil flowing right away. The West cannot help Libya it as much as its own oil program can. The US has spent nearly a billion dollars on Libya. That’s eight days of oil production at 1.5 million barrels a day at current prices. A little more output at slightly higher quotes could fill a billion dollar in a week.
From the get-go, the fall of Tripoli seemed to have more of a negative influence on the Brent/WTI spread than on crude oil prices alone. And the return of premium Libyan crude has so far been seen as more bearish for gasoline than for crude – because the premium crude produced by Libya is rich in light end yields – like gasoline. The selling started on Sunday night and continued through Monday, but prices were very oversold before Tripoli fell and the bears were not able to maintain selling pressure all day long. As a result, short-covering came in before the close and pushed oil quotes towards their highs for the day … in positive territory.
Traders are approaching this week with the knowledge that it was one year ago that the Fed decided to unleash a second round of quantitative easing on the economy. The question it has to answer is whether it is worth it to pay for higher equities quotes with food and fuel price inflation.
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 – Hurricane Irene’s Path Shifts Eastward, May Miss Dense Demand Zones.
- Supply Demand Balance Analytic Report – Hurricane Irene Intensifies, Forecasted to Hit Carolinas Sunday Morning.
- Nuclear Plant Status Analytic Report – St Lucie 01 Trips Offline Overnight.
- Industrial End Users Analytic Report – Fertilizer Industry, Manufacturing Drive Demand Higher.
Platts
- French exchange Powernext sees natural gas spot volume record.
- Angolan crude oil differentials rise on strong Asian demand, according to trading sources.
- Ukrain close to awarding first shale gas exploration license, says energy minister Boyko.
- China’s oil demand rebounds to 9.05 million b/d in July.
Bloomberg
- Oil Rises a Second Day on U.S. Fuel Demand, Libya Crude Production Outlook.
- Qaddafi Loyalists Counterattack in Tripoli as Libyan Rebels Claim Capital.
- Hurricane Irene Intensifies as Storm Nears U.S..
- Qaddafi Departure May Vindicate Obama Policy.
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