Morning Petrospective – August 6, 2010
he entire energy complex lost ground yesterday as traders decided to take profits on the long side. The technical breakouts earlier in the week had already made their points, and they had been confirmed by action on Tuesday and Wednesday. The charts were bullish enough not to need a positive set of settlements on Thursday afternoon.
Traders could not rally fresh buying interest, as concerns over high unemployment sapped power from any argument to buy in this complex. And yet, with a more definitive employment figure due to be released on Friday, traders were content to lighten their long positions and wait for the monthly number to arrive.
The waiting prevented prices from falling more than they did. There was also short-covering and some fresh buying into the decline on Thursday. Nonetheless, the day’s biggest news came from the weekly employment figure, which showed an increase in jobless claims (for insurance benefits) of 19,000. Economists had been predicting an average drop of 2,000 in initial claims this week.
The euro was higher in early trading, offering support to oil prices. As the day wore on, though, the dollar rallied and the euro fell, and that pulled one source of support away. The DJIA traded near unchanged for large parts of yesterday’s session, and the DJIA closed down 5.45 to 10,674.98. Its relationship with crude oil prices has not been all that tight over the last 10 days or two weeks or so, but oil prices are still likely to have a difficult time ignoring big moves in equities. We have had a number of smaller moves in equities recently.
Oil prices are still in position to advance if we get strong moves higher in the euro or in equities as a result of a bullish employment report on Friday. There could be short-covering ahead of the weekend, based on fears of a tropical storm or hurricane, as well. Colorado State recently confirmed its estimate for 18 named storms, 10 of which it expects to become hurricanes. The National Oceanic and Atmospheric Administration (NOAA), on the other hand, reduced its forecast to 14 to 20 named storms, down from 14 to 23, because of less activity so far.
Oil Movements predicts that Opec will cut its shipments of crude oil 1.8%, from 23.750 million bpd to 23.330 million bpd, in response to planned refinery maintenance. It sees a total of 466.310 million barrel of oil on tankers in the four-week period that ends on August 21st, down 4.5% from the 488.320 million barrels that were on board ships in the four-weeks up through July 24th.
Friday’s employment report is expected to show the loss of 60,000 jobs, with the unemployment rate forecast to rise from 9.5% to 9.6%, according to the average of economists surveyed by Dow Jones. Any unexpected deviation from that estimate will have the potential to move prices.
This week’s EIA natural gas underground storage report showed a build of 29 bcf. The five-year average build was 43.4 bcf and last year there was a build of 66 bcf.
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 Korean GS Caltex posted a 70% plunge in Q2 net profit from a year ago despite a 36% rise in sales due to foreign exchange losses.
- Shell Singapore naphtha-fed steam cracker in Pulau Bukom was still facing compressor problems after the unit was restarted late Thursday.
- Iranian oil tanker returning from Egypt's Red Sea port of Ain Sukhna attacked by pirates in the Bab el-Mandab strait, Mehr reports.
- Ugandan MPs ask government to deny final approval of Heritage's sale of stakes in two blocks to Tullow until it pays $405 mil capital gains.
Bentek Energy
- Power Burn Analytic Report - U.S. Power Burn Plummets as Northeast, Midwest and Southeast
- Supply/Demand Balance Analytic Report - U.S. Demand Plummets, Expected to Fall Further Throughout Weekend
- Gulf Coast Production Analytic Report - Colin Reforms to Tropical Storm
- Storage Analytic Report - The Producing Region Is Back to Injection Mode on the Week Ended Aug. 5
Bloomberg
- Oil Falls Third Day as U.S. Job Loss Forecast Spurs Demand Growth Concern
- Indian Oil May Sell Shares If State Cuts Stake in Refiner to Pare Deficit
- BP Cementing Well Caps Confidence Crisis for Energy Bonds
- Bermuda Braces for Flooding as Tropical Storm Colin Draws Closer to Island
- Crude Oil May Fall as Fuel Stockpiles Increase, Demand Drops, Survey Shows
- Eni Said to Delay India Oil Block Exploration on Rig Shortage, BP Spill
- U.S., Vietnam Hold Talks on Sharing Nuclear Fuel, Drawing China Criticism
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