Morning Petrospective – September 15, 2011

he oil complex was mixed yesterday, as traders tried to consider European sovereign debt woes, a recovering US stock market and mixed US weekly inventory, supply and demand statistics. Traders had been looking forward to this week’s report because of the widespread closure of US Gulf production as a precautionary measure. But, what seemed a bullish factor on Monday and Tuesday – the impact of Lee – was downplayed as a one-off factor on Wednesday. Because those platforms will be back, traders got past the drawdown.

The “drawdown” we are talking about was in crude oil inventories, which dropped by a larger-than-expected 6.7 million barrels. But, because everyone knows that it was the result of a storm that won’t be a recurring factor, the market moved beyond the large drawdown relatively quickly. Curiously enough, crude oil prices had the weakest day in the complex.

Refined products stocks were unexpectedly higher than anticipated. Distillate stocks were up by more than a million barrels more than the average expectation. But gasoline stocks had been universally seen as likely to come in 500,000 barrels lower – and they were up 1.94 million barrels instead. So, using a purely relative scale, distillate stocks were up ‘the least’ compared to expectations, which had been for a build. Gasoline stocks showed a large build on expectations for a small draw.

The builds in refined products were unusual because refinery utilization fell by 2.0% to 87%. Distillate output fell by 54,000 bpd as a result, but gasoline output was curiously higher – up by 195,000 bpd. That is almost certain to be reversed in next week’s figures, but it was a bearish factor this week, further contributing to a bearish picture for gasoline.

It does not stop there, either. Four-week gasoline demand was down 2.70% - compared to being down 2.08% two weeks ago. That was another bearish development for gasoline. But, distillate demand has fallen even more dramatically in two weeks. Four-week average demand is now 0.78% higher than a year ago. But, just two weeks that average was 5.52% higher. The demand has fallen fairly significantly in relation to a year ago.

The dollar was lower yesterday, which should have helped oil prices, but really was not a major factor. The DJIA was up 140.88 to 11,246.73, and that should have helped oil prices as well, but did not seem to be much of a factor. Longer-term, the dollar seems to have had an important upside breakout, which could keep oil prices under pressure for a while. And equities seem to have any advances halted by the seemingly inexhaustible ability of Greece to return to euro-zone headlines.

FMX Newswire

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Bentek Energy

• Power Burn Analytic Report – Rapid Temperature Decline Prompts Power Burn to Fall 4.0 Bcf/d.
• Nuclear Plant Status Analytic Report – Columbia Nuclear 02 Expected to Return to Service This Week.
• Supply/Demand Balance Analytic Report – East Production Rebounds While West Remains Down, Power Burn Plummets.
• Industrial End Users Analytic Report – Daily Demand Up 2%; Manufacturing Reports Set for Release Today.

Platts

• Libyan oil output loss stands at over 265 million barrels - the equivalent of 440 Afromax tankers.
• New Europe gas row erupts as Turkey chases Greece for higher price.
• India shale gas framework due early next fiscal year, according to #oil secretary. 
• Environmental opposition could force TransCanada to miss 2013 start for Keystone XL pipeline.

Bloomberg

• Crude Oil Advances a Second Day in London on European Support for Greece.
• Gas Trading in Netherlands Outpaces Peers as LNG Arrives: Energy Markets.
• Goldman Sachs Maintains Crude Oil, Copper Forecasts Even as Risks Increase.
• Libya Plans to Resume Partial Oil Exports Within Four Days, Official Says.

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