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<< Gas Petrospective – July 12, 2010 | Energy Spot Prices – July 12, 2010 >>

Morning Petrospective – July 12, 2010

July 12 2010, 08:24

Morning Petrospective – July 12, 2010

il prices finished an up-again, down-again session, during which it seemed that oil prices were following the DJIA, with a minor double-digit gain, capping a remarkable comeback week after heading into last week’s close with consecutive losses all week long.

It seemed that all day Friday, crude oil prices were mirroring the moves in the DJIA. Single-digit gains in the Dow were accompanied by single-digit gains in oil. At the end of the day, crude oil prices finished up 65 cents while the DJIA ended up 59.04 to 10198.03. All week long, this same rough parity kept crude oil and the Dow posting similar number gains. When the DJIA had triple-digit gains, so did oil.

It was the largest one-week rally in oil prices since May. Of course, last week’s decline was still larger. For the week, crude oil prices gained $3.95 a barrel. Heating oil prices gained 11.02 cents a gallon, and gasoline prices gained 9.23 cents a gallon. Natural gas were down 28.5 cents per million Btu.

The coincident trading in the DJIA and oil seems to have come as the result of the Dow being seen as a harbinger of economic activity. The assumption is, and has been, that higher equities signify better economic activity to come – which, in turn, is seen as a sign that the demand for energy will increase. The week before Independence Day had some of the worst economic data since the recovery was believed to have started, back in the spring of 2009.

The week just ended, after Independence Day, started in much the same vein. Early economic indicators seemed to pick up where the week before had left off. But, as the week progressed, a bullish API report, a positive Australian jobs report and a larger-than-expected drawdown in crude oil stocks in the week’s DOE report bought the markets time. By Thursday, the mood had changed with the release of a more promising weekly employment number and after some positive aspects in retail sales.

The DJIA rallied briskly on Wednesday and somewhat less on Thursday and Friday. But, it was powered by a general reconsideration of the economy, and it helped generate similar-digit rallies each day in crude oil futures. And refined products came along for the ride.

Second quarter corporate earnings will start to be released next week. And those numbers are likely to keep equities jumping. Markets will also react to any economic data that seems to have a bearing on the question tearing at investors – whether the economic recovery just hit a bump or has been put on hold for a double-dip recession.

Seasonally, the period right around Independence Day is typically a good time to buy in the oil markets. We felt that the markets were too weak and too unsettled to recommend it, but we may have missed an opportunity. This next week will tell, we expect.

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

China's Jun crude imports vault 34% on year to 22.27 mil mt.
Malaysia's crude oil exports jump 14% year-on-year in May to more than 1.68 mil mt.
BP's cost of response to the Macondo well blow-out in the Gulf of Mexico has risen to $3.5 billion, the company said Monday.
PetroChina on Monday confirmed reports that it would be open to closer ties with BP as the latter struggles to contain the Macondo oil spill.
UK explorer Falkland Oil and Gas saw shares plummet by over 60% after announcing it failed to find oil with first well off Falkland Islands.
BP shares jump 7% to hit 4-week high on fresh takeover speculation and news of progress on new system to capture oil from Macondo

Bentek Energy

Power Burn Report - Switching Returns as Coal-Gas Spread Collapsing
Industrial End Users Report - Industrial Demand Steadily Increasing Over Weekend
Daily Supply/Demand Balance - Demand Eases over the Weekend, but Could Rise Late Week
Texas Observer (Daily) - Texas Demand Pushes Higher
Daily Storage Range - Final Storage Estimate for Week Ending July 8 is Down 2 Bcf from Friday

Bloomberg