Morning Petrospective – September 1, 2011

il prices were mixed yesterday with crude oil prices slightly lower and gasoline prices higher. The moves seen yesterday reflected this week’s DOE report, which showed a large build in crude oil stocks and a decent drawdown in gasoline inventories. Distillate stocks were mildly higher. Adding to the disparity, refinery utilization was down 1.1%, following seasonal influences over financial ones. Refinery margins are at generous rates recently, despite the red herring of Brent differentials against WTI.

Traders did not seem interested in outside influences like the euro or equities all that much yesterday. Curiously, the two worked against each other yesterday, with equities moving higher and the euro moving lower. Recently, the oil complex has been following equities more than it has been following currencies, but we would be reluctant to read too much into that. The dollar-euro has been working sideways within a large consolidation, but it has not made new lows since the end of April. Oil prices have not made new highs since then.

The connection with equities is actually more tenuous, in our minds, than the connection to currencies. The reason it is bullish now when the DJIA moves higher is because that typically suggests an improving economic environment for oil prices to operate within. On Wednesday, the DJIA was up 53.58 to 11,613.53.

This week’s big “event” will be Friday’s monthly unemployment numbers from the Labor Department. On Wednesday, ADP (Automatic Data Processing), which does the payroll for a number of companies, estimated that 91,000 new jobs were created in August. Economists have been looking at a figure closer to 100,000. There are a number of national PMI’s and ISM manufacturing and services indices due to be released over the next few days (through next Tuesday). Taken together, these are expected to paint a global picture of the current economic condition worldwide. A number of observers are divided whether we will start to readings in the ISM indices below 46-50, which would suggest the return of recession conditions in those countries registering numbers that low.

The recent figures have been pretty poor, and we are not sure why so many prominent economists refuse to see the numbers trending back towards recession. Just looking at the trend of the numbers, it does not look good. And, it seems to us that the belief that the Fed will “ride to the rescue” – even though not everyone wants it to – is overly optimistic. This Fed is not coy. It is not a Fed that requires careful listening to unravel subtle hints. Its history over the last four years has been one of loudly telegraphing its every move. In our humble opinions, if QE3 were coming, Ben Bernanke would have told us it is coming already. It is possible that he will tell the world when the Fed next meets, but we feel we have what he is giving.

FMX Newswire

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Platts

• Supply sees 0.1% Northwest European gasoil cargo price over Med for first time since June.
• EU energy regulatory agency ACER scopes first technical EU gas interoperability guidelines.
• Brazil's gasoline imports to surge 5-10 times on ethanol cut, say analysts.
• Platts analysis of latest EIA data: Imports grow due to SPR and diesel use also is climbing.

Bentek Energy

• Power Burn Analytic Report – Northeast Posts Gains of 0.5 Bcf/d in Power Burn.
• Industrial End Users Analytic Report – Sample Shows Demand Off in Nearly All Regions; Rockies are Lone Gainer.
• Supply/Demand Balance Analytic Report – Destin Force Majeure Shuts-In 300 MMcf/d of Offshore Production.
• Texas Observer – Tropical Activities Prompts First Evacuations.

Bloomberg

• Crude Oil Declines in London on Signs of Slowing Economic Recovery in U.S.
• Statoil’s Lund Sees Acquisition Opportunities After Stock Market Decline.
• ‘Friends of Libya’ Meet in Paris to Aid Transition.
• Rio Says Mozambique’s Benga Coal Project Construction Is ‘Well Under Way’.

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