Morning Petrospective – November 28, 2011

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il prices often do strange and different things around holidays, and traders return and generally find that they have to accept the new status quo. We sometimes even see major highs and lows around holidays, although we would feel premature in proclaiming recent highs to have been major ones. Still, for those of you who missed Wednesday and Friday, heating oil prices dropped 10.73 cents a gallon while gasoline lost 11.29 cents a gallon over those two trading days. Natural gas prices rallied 12.7 cents late last week. Crude oil prices dropped $1.84 on Wednesday and rallied 60 cents on Friday. Traders and investors had a number of international factors on their minds as we ended the week.

US equities prices were generally lower, with the DJIA falling 236.17 on Wednesday 25.77 to 11,231.78 on Friday. Global investors were thinking about Italian bonds at their highest yields since the euro-zone started, and they were worried about Germany’s “broken” bond auction on Wednesday, when it failed to sell 35% of the 10-year bunds it offered, pushing the euro to a seven-week low against the US dollar. Some observers considered this a “disaster for Germany,” suggesting that it will be difficult for other European nations to raise capital if the strongest among them could not. The yield on French 10-year bonds increased 10 basis points while Belgian ten-year bonds climbed 14 basis points in yield. That was last week’s direst leftover.

As we start this new week, we should expect European bonds and bunds to be among the major market movers. They are likely to influence the US dollar and global equities and, those, in turn, are likely to push oil prices higher or lower. This week, though, there will be competition for oil’s attention.

We have an Egyptian election today, and Egyptians have been demonstrating in increasingly violent displays of disaffection for the military forces that have taken over in Cairo. Beyond the apparent unity against the military, little is clear. The number of different groups - with different objectives - seeking to grab power in Egypt is staggering.

Global stockpiles of diesel have fallen – which is the major reason US distillate stocks are now 25.3 million barrels (15.98%) lower than a year ago and 33.7 million barrels (21.42%) lower than they were two years ago, according to last week’s DOE report. Even though four-week average total product demand is down 0.30% against a year ago, with four-week gasoline demand down 4.03% to 8.6 million bpd, four-week distillate demand is up 5.67% to 4.249 million bpd. The global pull on US supplies has been behind these figures, and Bloomberg now reports stocks in Singapore at their lowest levels since July, 2008 – when oil prices were peaking worldwide. Chinese diesel inventories fell 6.8% in October, making it the fifth consecutive month of declines, with generators likely to use diesel to meet electrical demand this winter. It is now a net importer of diesel, after turning into one last November, ahead of heating season a year ago. Heating oil prices are oversold and in support, here, and they represent the strongest part of the oil complex as we approach winter, some four weeks into the heating season. The bearish factors surrounding the euro-zone and equities may give us buying opportunities.

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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.

Bloomberg

  • Oil Climbs to Highest in More Than a Week on U.S. Sales, Syrian Sanctions.
  • EU Demand for Climate Pledge From Japan, Russia Raises Hurdle at UN Talks.
  • Raw Materials Topping Equities With Economic Expansion Intact: Commodities.

  • Spain’s Fersa May Miss Capacity, Sales Goals on European Crisis.

Bentek Energy

  • Supply/Demand Balance Analytic Report – US Production Holds Steady; Demand Forecast to Increase This Week.
  • Industrial End Users Analytic Report – Demand in BENTEK Sample Down Over Past Week.
  • Power Burn Analytic Report – Texas Power Burn Demand to Climb as Colder Weather Approaches.
  • Midcon Observer – Seasonal Temperatures for Upper Midwest; Increasing Michigan Demand.

Platts Oil

  • Japan and South Korea eye buyers' consortium to secure cheaper gas, Japanese government source tells Platts.
  • Singapore bunker premium for Dec $13-16/mt, little changed from Nov.
  • Cougar seeks Indonesian underground coal gasification projects with MedcoEnergi.
  • Philippines' Galoc oil field shut for 3-mth Floating Production, Storage & Offloading upgrade.

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