Morning Petrospective – June 15, 2010       

n Monday, oil prices opened higher and traded at those higher levels throughout the morning part of the session. Prices had been higher on Sunday night, and they worked higher from those figures Monday morning in Asia and then Europe. Stronger equities and a weaker US dollar in relation to the euro were cited as two major factors behind the stronger prices Sunday night into Monday morning.

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As we have noted recently, oil prices have been moving on a combination of the old “outside” factors, like equities and currencies, and the very old, or traditional, factors like supply and demand or economic data. The state of the economy has always been a factor in oil trading, even if it has been implied or inferred.

Equities pared their gains as the morning became afternoon, and the euro gave back some of its gains. Moody’s downgraded Greece’s sovereign debt and that pulled some support from the euro. Even with that, though, oil prices eased more dramatically than either equities or the euro, at least before the oil market close. Monday’s pullback looks like a second failure to break above resistance overhead.

On Monday, crude oil prices failed again to break decisively higher. They could not break over $76.00 with any kind of momentum, and the day’s high at $75.99 tells us that someone decided to sell aggressively just below $76.00. We expect that the selling at $76.00 was heavy, and that someone saw that and decided to get in front of it by selling a penny below that. The market’s inability to print $76.00 has to be seen as a bearish factor. The fact that crude oil had the euro and equities helping it all morning long, and yet it was still unable to break decisively higher has to be seen as being bearish. Monday’s failure to make hay while the sun shone is likely to come back to haunt this market.

Traders will start thinking about this week’s inventory, supply & demand statistics by this afternoon.

     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.

Platts oil

· The average US regular retail gasoline price dropped 2.4 cents to $2.701/gal, EIA reported Monday in its latest weekly survey.

· China this week imported an LPG shipment from Kazakhstan by rail, the first time it has brought in the product from central Asia like this.

· The Tindalo oil field offshore Philippines is producing at a restricted 6,000 b/d after the failure of its water processing equipment.

Bentek Energy

· Daily Storage Range - Current Week Storage Injection Estimate 1 Bcf Higher Than Last Week

· Gulf Coast Production Report - Offshore Production Drops by 305 MMcf/d

· Daily Supply/Demand Balance - Offshore Production Declines Lead U.S. Supply Lower; Demand Also Falls

· Power Burn Report - West Power Burn Down Due to Hydro Gen

Bloomberg

· Crude Oil Futures Rise on U.S. Stockpiles Outlook, Euro Rebound

· BP’s Rating Cut by Fitch to Two Levels Above ‘Junk’

· Gas Rally Boosts Coal’s Allure for Power Plants: Energy Markets

· BP Bankruptcy Would Offer No Protection From Costs

· Gazprom Profits Yielding 3 Times Bonds Signal Rally

· Atlantic Low-Pressure System Unlikely to Be 2010’s First Storm

Other News

· Crude Lower After Moody's Cuts Greece Debt Rating (MarketWatch)

Technical Recap

Volatility Term Structure

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***From NYMEX Settlements

1. Z10 1000 C.

2. Q10 8000 C.

3. N10 7000 P.

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