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<< Gas Petrospective – July 19, 2010 | Energy Spot Prices – July 19, 2010 >>

Morning Petrospective – July 19, 2010

July 19 2010, 08:37

Morning Petrospective – July 19, 2010

il prices were lower on Friday, as the complex posted its third consecutive day lower. Tellingly, though, the losses over Wednesday, Thursday and Friday were not as large – combined – as the gains posted on Tuesday. Crude oil prices lost $1.14 a barrel over the final three days of the week, but had gained $2.20/bbl on Tuesday. Curiously, in an odd symmetry, crude oil also had lost $1.14 on Monday, leaving it a net loser of $0.08 on the week, dropping four out of five trading days. The biggest factor at the end of the week was the economy and its leading barometer, the stock market. The DJIA dropped 261.41 to 10,097.90 on Friday afternoon.

While the week following Independence Day had been surprisingly upbeat, with crude up $3.95, this week just ended had everything but the kitchen sink thrown at it. Heating oil ended the week down 1.44 cents and gasoline finished off 2.14 cents, but all three commodities could have sold off substantially more. As we ended the week, market participants were trying to find the positives in a sea of negative economic indicators, with disappointing numbers from retail sales, housing, manufacturing and the Fed overwhelming a 29,000 decline in unemployment claims, which was the week’s bright spot.

The PPI raised specters of deflation, and Capital Economics wrote, “The world economy is predictably starting to slow as the fading of the policy stimulus again exposes the underlying fragilities left by the recession.” The CPI showed a somewhat unexpected increase in the cost of living, which doused some of the fears of deflation, but simultaneously illustrated just how difficult it is now for consumers to find anything extra with which to help dig the economy out of its doldrums.

The so-called “core rate” of the CPI climbed 0.2% in June, which was the largest increase since October. Expectations had been for an increase of 0.1%. Overall, consumer prices dropped 0.1%, for a third consecutive decrease. The core rate has now gained 0.9% since a year ago, “matching the smallest year-over-year gain since 1966,” Bloomberg wrote on Friday. Energy costs were down 2.9% on the month, while food costs were unchanged. While these changes would have been welcomed at almost any other point in most of our lives, they have a somewhat more sinister aspect to them now.

The Reuters/University of Michigan index of consumer sentiment fell to 66.5 in July, from 76 in June. It had been expected to fall to just 74, and was yet another figure released this week showing growing cause for concern. In Bloomberg’s survey of 62 economists, the lowest prediction had been for a figure of 71, which suggests an even gloomier feeling on Main Street than on Wall Street or on Ivy Row (academia). Capital Economics (CE) pointed out that this decline effectively ate away most of the gains seen over the last year. And the drop in the expectations index, to 60.6 from 69.8, “took it to its lowest level since March, 2009,” CE wrote, adding that “the slowdown in the economic recovery that we always expected has begun.”

Given all these factors, oil prices have been downright resilient, with crude giving up just eight cents this week. Despite these factors, and abundant supplies, buyers are still ready to step up in oil markets.

“The financial reform legislation approved by the Congress today represents a welcome and far-reaching step toward preventing a replay of the recent financial crisis,” Fed Chairman Ben Bernanke said in a statement quoted by Dow Jones. Cameron Hanover and FMXConnect have more on the financial reform bill on http://www.fmxconnect.com/fmxenergyconnect/post/2010/07/16/Financial-Reform-Bill-Impact-on-the-Energy-Industry.aspx courtesy of Jim Collura from NEFI.

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

South Korea's state-run KNOC to build a $297.5 million oil sand plant in Canada with a capacity of 10,000 b/d of heavy oil by 2012.
Domestic fuel oil prices in northeast China not affected by Friday's explosions of oil pipelines in Dalian, a survey by Platts Monday showed.
BP Monday announced that the cost of response to the Macondo well blow-out in the Gulf of Mexico to date amounts to around $3.95 billion.
Export volumes of Sokol crude loading in September from Russia's Sakhalin 1 has returned to pre-maintenance volumes of over 163,00 b/d.
Unloading of crude at China's Dalian port suspended as authorities battle to contain the oil spill caused by Friday's pipeline explosion.
Eni starts gas production from Tuna field offshore Egypt, owned 50:50 with BP—which, with RWE, signed a new deal for $9 bil Nile Delta E&P.
US government authorizes further 24 hours of tests on latest cap on Macondo well as BP detects seepage from surrounding seabed.

Bentek Energy

Power Burn Analytic Report (Daily) - Power Burn in Northeast Down 1.0 Bcf/d Over Weekend
Gulf Coast Production Analytic Report (Daily) - Gulf Coast Production Up on Independence Hub Fluctuations
Storage Analytic Report (Daily) - Midpoint for the Daily Range Settles at a 48-Bcf Injection
Texas Observer (Daily) - Implied Storage Flips To Injections
Supply/Demand Balance Analytic Report (Daily) - Power Demand Falls from Friday's High, but Temperatures Will Remain Warm

Bloomberg