Morning Petrospective – September 12, 2011

arkets responded tentatively – at first. It seems like there might have been a period during which someone bold could have announced the president’s speech a success and started buying equities or commodities and it might have started a chain reaction … maybe in the period overnight after his speech. There was no immediate rush for the exits and many investors waited to see what others did first, which is why we say there “might” have been a chance. Any moment that might have been passed and, by Friday morning, the selling had begun.

It built momentum slowly. But, as the day wore on, the feeling that a major opportunity had passed became more palpable. There was a feeling that a window somewhere had closed, as slowly but firmly as a mother closing a child’s window for bedtime on a school-night in the first full week of classes last week.

There had been some positive anticipation going into last week’s speech, but the comments we heard on Friday were that there had not been enough that was new and that the president’s insistence on getting the rich to pay their fair share had alienated Republicans. What had looked like an open-minded electorate going into the speech seemed more entrenched by Friday afternoon. The Democrats feel that we absolutely must have some stimulus to get out of our current economic depths, and they see taxes on the upper earners as the only way to pay for it. The Republicans are not as convinced that we need government stimulus and they are unwilling to concede an inch on taxes – either by raising new ones or by allowing tax holidays on others to expire. There does not seem to be any common ground between the two parties.

The Democrats are in an unenviable place. Just by occupying the White House and by holding a majority in the Senate, they will be blamed even if no new bills can be enacted. If everything stays the way it is and gets worse, they will be blamed. If nothing changes and things get better, the Republicans can claim that they prevented the Democrats from making things worse. The Democrats can only succeed by taking bold action – which then works or at the least occurs at the same time that the economy improves. There may not be any causality, but they have to be able to claim that there was. The only risk for the Republicans by doing nothing is that the Democrats stall the super-committee and force in huge, automatic cuts in defense spending, in retaliation for giving them no chance to help the economy now.

If last week’s speech does not seem capable of generating any kind of bipartisan compromise, then it will be Fed Chairman Ben Bernanke’s turn, again. He has been very careful not to upstage the president or Congress, but he has said time and again that the Fed will be there if it is needed. It seems, more and more, than it may be needed.

In other news, Libya announced yesterday afternoon that it had resumed pumping oil. Most observers believe it will take months to get production back to normal, but we expect Western countries to make their oil experts available to help get Libyan oil back as quickly as possible. We think it will be faster than expected.

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 – Fires in Texas Continue to Suppress Power Burn.
• Texas Observer – Higher Demand Should Boost Basis.
• Supply/Demand Balance Analytic Report – Production Increasing as Tropical Impact Diminishes and Maintenance Ends.
• Industrial End Users Analytic Report – Demand Sample Down 1% Today; Rockies Shows Year-over-year Gains.

Platts

• Prompt bunker deliveries in Greece affected by customs strike, say shipping sources.
• European Union starts talks on trans-Caspian gas pipeline.
• OPEC says recovery of Libyan crude production to full capacity within 18 months appears to be realistic.
• OPEC cuts its estimates of global oil consumption in 2011 and 2012 on the back of the slowing economic recovery.

Bloomberg

• Oil Drops a Third Day on Europe Concern; Gulf Storm Threat to Output Eases.
• Oil Tanker Sailing for Libya’s Mellitah as First Cargo From West Offered.
• Tropical Storm Nate Downgraded Over Mexico as Maria Moves From Caribbean.
• Libya’s Opposition Advances on Sirte After Halting Assault on Bani Walid.

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