Morning Petrospective – November 29, 2011

il prices rallied on Monday in reaction to events as disparate as crowds knocking down doors in the US for deals and knocking down doors in Syria as government troops sought those opposed to them. We had large crowds in Tahrir Square ahead of elections and we had large crowds in the Mall of America in anticipation of Christmas, a month away. What do these strikingly similar and different images have to do with each other? They look strangely similar … at first … but are not. But, the crowds looking for discounts on gifts for Christmas, Hanukah, Kwanzaa, Solstice and other holidays were seen boosting demand for oil at the same time that large crowds in the Middle East and North Africa were seen as potentially destabilizing for oil supplies.

Yesterday’s strength came on the mixture of optimism over Europe’s debt crisis and hopefulness for the US economy that has helped push oil prices higher on a number of sessions since spring. Every two weeks or so, we get some kind of promise from Europe, a summit meeting of some kind or the meeting of some critical committee, there is hope that the problem can be solved … and then it appears done except for some small detail. Then, two weeks later, that tiny little detail seems to have grown into the budding brute of a plant choking the life out of European growth, again. A meeting is hastily arranged, promising agreements are reached, and everything except some small, remote and unimportant detail, we are assured, is resolved. And, yet, some two weeks later … .

It felt to us as if we had to solve Greece’s debt crisis three or four times before it went away and has not come back, yet. But, now, we are watching a raft of European 10-year bonds, from Ireland, Italy, Greece, Spain, Portugal, even France and Germany. Last Wednesday, Germany was left holding a bag filled with ten-year maturities that no one seemingly wanted at existing or approximate yields. That was seen as a “disaster,” and yet here we are nearly a week later and it is not really dominating discussions. While Europe’s problems do not seem to go away, neither do they really linger over weekends or holidays.

An Italian bond auction commanded higher yields than expected, but at least all the bonds were purchased earlier this morning.

Traders seem willing to build on the hope seen in the economic statistics released recently in the US. There will be plenty of interest in this week’s Department of Labor’s monthly employment figures, which will be released on Friday morning.

We will also be eager to see this afternoon’s SpendingPulse figures on gasoline consumption. They have been disappointing in recent weeks.

The DJIA was up 291.23 to 11,523.01 yesterday, and that helped push oil prices higher.

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Bloomberg

• Crude Oil Advances as Euro Extends Gains After Italian Treasury-Bond Sale.
• Syria Says Sanctions Are ‘Economic War’.
• EU Demand for Climate Pledge From Japan, Russia Raises Hurdle at UN Talks.

• Speculators Reduce Bullish Holdings to Lowest Since July 2009: Commodities.

Bentek Energy

• Supply/Demand Balance Analytic Report – US Demand Moves Higher with Cooler Temperatures.
• Industrial End Users Analytic Report – Midwest Manufacturing Index at Highest Level in Three Years.
• Power Burn Analytic Report – Southeast Power Burn Demand Finds Support as Colder Weather Arrives.
• Nuclear Plant Status Analytic Report – South Texas Project Unit 1 Falls Offline as Cold Weather Nears.

Platts Oil

• This morning at 10 Eastern: a free S&P webinar , "Hot Topics in the Oil & Gas Industry." 
• Iran OPEC governor says producers' club not likely to increase output at Dec 14 meeting because of returning Libya crude: ILNA news agency
• Japan's Inpex agrees to acquire 40% stakes in 3 Canadian shale gas projects from Canada's Nexen for total of $700 million, Nexen says.
• Debating the plastic bag, the bete noir of the industry, and the misunderstanding of plastics uses.

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