Morning Petrospective – August 26, 2011

arren Buffett, individual investor and chairman of Berkshire-Hathaway, rode to the rescue of Bank of America and the broader stock market as a whole, 14 hours after Apple impresario Steve Jobs had stepped down from his position at Apple. He bought 50,000 preferred shares at $100,000 each – with a 6% dividend. It was a $5 billion vote of confidence and it may well have stopped the short selling in the US financial sector. The DJIA was up 55 points at 9:40 AM EDT, and that helped crude oil prices, which were up more than a dollar a barrel at that time.

“It was the one sector that had to turn around for the stock market to turn back up,” was how Mellissa Lee of CNBC saw the deal to bolster BoA and the financial sector in American equities. It was a critical shot in the arm at an important time. And, Mr Buffett took the focus away from Steve Jobs retiring to his huge purchase early Thursday morning. It changed the tone of investing at the time.

It has already been an extraordinary week. It started with the presumed ‘retirement’ of Colonel Khadafi in Libya, the possible return of Libya’s high-value crude, an earthquake near Washington DC, the retirement of Steve Jobs, Warren Buffett’s lifeline to BoA and it is likely to end with Ben Bernanke in Jackson Hole and Hurricane Irene in the Northeast. There is still time for surprises.

The Warren Buffett BoA deal helped the equities markets early on, but it could not prop them up through the afternoon. By 1 PM, the DJIA had turned lower and was down 151 points. Investors were worried about the economy and were talking about the latest jobs figure, which showed initial unemployment claims up 5,000 to 417,000. During the selloff, oil prices were dragged lower by the weakness in equities. But the two parted ways before 1 PM, actually closer to noontime, as oil traders focused less on the impact of a bearish economy than the more immediate effects of Hurricane Irene.

Refined products were up more than crude as traders looked to cover short commitments and some got long as they prepared for the arrival of Hurricane Irene along the East Coast this weekend. With a number of refineries along the coast (7%-9% of the nation’s total), from Virginia to New Jersey, and with cargoes of gasoline looking to land in harbors from New York to Boston to the Chesapeake Bay, there was plenty of oil to hedge. Hedging activity centered on gasoline, with some leftover buying finding its way to heating oil and crude oil.

By the final bell, gasoline was up almost nine cents, heating oil was up nearly 2½ cents and crude was up 14 cents a barrel. Hurricane Irene gained in stature and importance even after the market closed, and a number of states called states of emergency. Irene looks like it will be a factor again on Friday, with Ben Bernanke rounding out what has been an odd week.

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

• Supply/Demand Balance Analytic Report – Hurricane Irene Continues to Take Aim on Mid-Atlantic, Northeast.
• Texas Observer – As Irene Softens Eastern Demand, Texas Supply Will Turn West.
• Power Burn Analytic Report – Irene Downgraded to Category 2.
• Nuclear Plant Status Analytic Report – Outages Down 633 MW As Units Ramp Up Generation Output.

Platts

• Russia to implement tax regime Oct 1 cutting the rate for crude exports to 60% of the price of Urals, with a unified products rate of 66%.
• Higher West African crude oil premiums push up Asia Pacific crude.
• Nigerian minister of trade and investment says country should shift from being an importer to an exporter of oil products.
• Hurricane Irene has weakened slightly to category two but may reintensify Friday with landfall still set for Saturday: US NHC.

Bloomberg

• Crude Falls, Narrowing Weekly Gain, on Doubts About U.S. Stimulus Measures.
• U.S. Northeast Braces for Worst Hurricane Threat Since 1985 as Irene Nears.
• Libyan Rebels Seek Aid as Qaddafi Invokes Jihad.
• Japan Spurs Solar, Wind Energy by Approving Subsidies for Renewable Power.

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