Morning Petrospective – July 21, 2010    

t was a very strange day in the markets on Tuesday. In the morning, the DJIA was down more than 50 points, reaching larger double digits although without breaking 100, the euro was under selling pressure and June housing starts dropped 5.0%. It was the second consecutive steep drop in the aftermath of a first-time home buyers’ credit expiration. Housing starts are now down 19% from April, two months ago. These were all bearish factors … so, of course oil prices were … higher … ? Yes, oil prices advanced through a declining stock market, a dropping euro and a very bearish figure for housing starts, which fell from 578,000 in May to 549,000 in June. Once again, oil prices were resilient.

In a curious twist, one might be able to say that oil prices pulled the DJIA up. From down as many as 80 points, equities rallied to finish the day up 75.53 to 10,229.96. We don’t really think that oil prices pulled stocks higher, but oil prices were higher while the Dow was lower and then finally equities rallied. Whichever way one looks at it, equities and oil prices were remarkably strong in the face of more bad economic news.

In the process of rallying on Tuesday, crude oil prices finished at their highest level in three weeks. On the bullish side of the ledger, buyers were looking at a strengthening storm system in the Caribbean, which has the potential to become a tropical storm. This was supposed to one of the most active tropical storm seasons in decades, but it has gotten off to a slow start – after Hurricane Alex set the bar by being the earliest hurricane in 15 years. This new system has a 60% chance of becoming a tropical cyclone, according to the National Hurricane Center (NHC).

All three major wire services changed their estimates for Wednesday’s DOE report, in some cases dramatically. None of the changes brought estimates closer into line with what was seen Tuesday evening in the API figures. Suffice it to say that there is room for surprises.

  This week’s API report showed a drawdown of 0.241 million barrels in crude oil stocks, a drawdown of 0.412 million barrels in gasoline and a build of 0.979 million barrels in distillate. Implied distillate demand came in at 4.399 million bpd and implied gasoline demand was 9.332 million bpd, both respectable figures. Crude oil imports were up 124,000 bpd to 9.049 million bpd.

     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 Dalian port resumes operations at Xingang and Dayaowan terminals, crude unloading still suspended after Friday's blasts, oil spill.
• Philippines oil firms ask government to amend law and allow ethanol imports beyond 2011 or delay 10% blending mandate deadline from Feb.
• Iran has stopped gas exports to Turkey following a request from Ankara because of an explosion on the pipeline.
• BP shares opened higher Wednesday after the company agreed its first major asset sale to help meet the costs of its Gulf of Mexico oil spill.
• Russia's energy ministry wants $2 billion for the licenses for two large oil fields--Trebs and Titov--with reserves of 1 billion barrels.
• BP says has no plans to sell Indonesian assets.

Bentek Energy

• Gulf Coast Production Analytic Report - Tropical Wave Now at 70% Probability of Cyclone
• Storage Analytic Report - Midpoint up 2 Bcf from Yesterday's Estimate
• Power Burn Analytic Report - NOAA Forecasts 60% Change of Tropical Cycle Off of Cuban Coast
• Supply/Demand Balance Analytic Report - Southeast Production Drives Down U.S. Supply Again

Bloomberg

• Oil Trades Near a Three-Week High After Decline in U.S. Crude Stockpiles
• Oil Spill Shuts Dalian Beaches, 300 Tons of Fuel Recovered in Cleanup
• Kazakhstan Oil Reserves Too Rich for Tax to Deter Chevron: Energy Markets
• BP to Keep Damaged Gulf Oil Well Sealed Today
• Japan Power Prices Rise to 2-Year High as Tokyo Swelters in 35-Degree Heat
• Transocean Is BP Spill Focus as Five Workers Named `Parties of Interest'
• Robert Dudley May Replace Hayward as BP Chief Within Weeks, Times Reports

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