Morning Petrospective – July 28, 2010
il prices sold off yesterday and it may well be that this complex has run out of time (to break to new highs). We mentioned yesterday that prices only had this week to break decisively over $79.60, its technical resistance, and that it was almost certainly going to need to break over $80.00 as well, which is more purely psychological resistance.
Monday’s activity had been inconclusive and, by finishing unchanged, prices had left open the debate as to whether they were gathering strength for a final push to new recent highs or if they were simply unable to advance any further. We thought they might have the rest of the week to figure out the answer to that question. It now looks like they may have used their time.
Equities were near unchanged on Tuesday, and they finally ended the session up 12.26 to 10,537.69. They did not ofer enough strength during the trading day to pull oil prices higher. In the event, it now looks like oil prices may have faltered at the hurdle. They broke $79.38, but as is so often the case in this market, it was a bull trap that took quotes only as far as $79.60- before prices ostensibly failed and turned lower. At this stage, it will require a strong advance almost immediately (Wednesday or Thursday) to prove that Tuesday’s selloff was not a technical failure to break to new highs – and a signal that prices are now intent upon moving to test the lower bounds of their range between $69.50 and $79.60.
The Conference Board reported that its index of consumer confidence dropped from 54.3 in June to 50.4 in July. And the Richmond Federal Reserve reported a decline in its regional manufacturing index, from 23 to 16. These were seen as disappointing and they halted an incipient rally in equities on Tuesday.
Tuesday evening’s API report showed a build of 3.084 million barrels in crude oil inventories, a build of 407,000 barrels in distillate stocks and a 877,000 barrel build in gasoline stocks. Refinery utilization, long expected to drop after Independence Day, finally did decline, losing 1.3% to 87.4%. It is still 4.0% higher than it was a year ago, using the API’s figures. The unexpected build in crude oil stocks came on an equally unexpected surge of 1.670 million bpd in crude oil imports, which the API pl;aced at 10.719 million bpd. Implied demand was 9.449 million bpd for gasoline and it was 4.422 million bpd in distillate.
This sets up Wednesday’s DOE report as being substantially more important. Traders will be looking to see if we have anywhere near as large increases in crude oil imports and inventories, and they are already looking for a large decline in refinery utilization.
SpendingPulse reported gasoline demand up 161,000 bpd to 9.507 million bpd, or up 1.7% on the week. It was the heaviest demand since July 2nd. It was 420,000 bpd (4.6%) higher than a year ago, although it was 120,000 bpd (1.3%) below the five-year average. Four week demand averaged 9.432 million bpd, up 197,000 bpd (2.1%) from a year ago. That figure was 78,000 bpd below the average seen in 2008. Year-to-date demand is now up 0.9% against a year ago, an improvement from last week’s figure of up 0.7%.
FMX Newswire
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Platts oil
- After months of intense buying, India's IOC halts gasoil buying, probably because of the rains when its demand for transport and power drops.
- A fully laden VLCC belonging to Japan's Mitsui OSK Lines Wednesday experienced an onboard explosion caused by a suspected attack on the ship.
- Nigeria's crude oil reserves stood at 31.81 billion barrels at the end of the second quarter, down 4.8% due to the lull in exploration.
- US Senate Democrats unveil energy bill and aim for quick vote.
Bentek Energy
- Gulf Coast Production Analytic Report - Production Recovery Continues from Bonnie
- Storage Analytic Report - Preliminary Midpoint for Week Ending July 29 Is Up 1 Bcf from Yesterday
- Supply/Demand Balance Analytic Report - Demand Lessens Throughout the U.S.
- Texas Observer - Texas Demand Poised to Climb
Bloomberg
- Oil Slips on Signs Slowing U.S. Recovery Will Curtail Demand
- India Wants Reliance, GAIL to Invest $21 Billion in Gas Network in 5 Years
- Refining Hits 10-Week High as Japan Starts Idled Factories: Energy Markets
- Shell's Impact in Australian Oil, Gas `Only the Beginning,' Goldman Says
- China's Environment Accidents Double as Growth Takes Toll
- Eni Plans to Reschedule Gulf of Mexico Projects Following BP Crude Spill
Technical Recap
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