Morning Petrospective – August 12, 2010
il prices were crushed yesterday – along with equities. Adding insult to injury (from a bullish perspective), the dollar roared higher against the euro, giving oil bears the two strongest reasons they could ask for to sell oil prices … in the current asset-dominated market. Investors were reportedly liquidating longs even as locals and commission houses were selling short.
The euro lost a whopping 331 points to leave the European currency at $1.2841. The DJIA dropped 265.42 to finish at 10,378.63. As a result of those two broadsides, crude oil prices stumbled to a loss of $2.23 on Wednesday. It was the largest one-day decline since July 1st. The trigger for all the red seems to have come from Asia, specifically China and Japan.
The selling started late last night and early this morning as investors started to sell the euro, buy the US dollar and liquidate equities. This selling was triggered by reports overnight that the Chinese and Japanese economies were not growing as quickly as had been believed or assumed. Chinese retail sales and industrial output and Japanese wholesale prices and machinery orders all came in weaker than expected, Dow Jones noted in Wednesday’s market roundup.
Investors were also reflecting upon the Fed’s comments on Tuesday that the US economy was not growing along the lines it had been hoping, and as they tried to make sense of the central bank’s balance sheet maneuvers, which are new and untested. One question circulated yesterday again and again, reflecting the uncertainty in economic markets: “What does the Fed know that the rest of us cannot yet see?”
After two months of falling, the US dollar staged a spectacular recovery yesterday (chart to right) – or perhaps the euro had an equally spectacular collapse. Against the yen, the dollar was lower for most of the day, recovering slightly at the end of trading.
This week’s DOE report did nothing to change the perception that oil is a commodity in abundant supply that has only rallied recently on the back of gains in the euro, the stock market or both. Crude oil stocks fell, but they have been at their highest levels for the end of July in years. Distillate stocks were higher, yet again, and gasoline stocks grew for the seventh straight week, which is not what they should be doing during the heart of “driving season.” Gasoline demand fell to a two-month low for the week at 9.236 million bpd, although four-week demand, at 9.445 million bpd, is now 3.29% higher than the same aggregate average a year ago. Four weeks ago, the four-week average was just 1.79% higher at 9.308 million bpd. Distillate demand for the week came in at 3.400 million bpd, its lowest level since October, 2009. The four-week average was 3.455 million bpd, up 3.57% against a year ago. At the end of May, four-week distillate demand averaged 4.007 million bpd and was a blistering 17.06% higher than a year ago.
Refinery utilization did follow up the promise of Tuesday’s API report with a decline of 3.1% to 88.1%, but supplies are still too high and demand is just strong enough for oil prices to hold up without help.
FMX Newswire
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Platts oil
- Texas sued the US over the federal deepwater drilling ban, saying the Obama administration should have consulted the state first.
- US EIA ups OPEC oil earnings forecast $8 bil to $821 bil in 2011.
- OPEC output rises in July as Nigeria stages a bit of a recovery.
- Q1 set to lose its crown as peak oil demand season.
- New Singapore commodity derivatives exchange gets regulatory nod.
Bentek Energy
- Northeast Observer – Inbound Flows and Prices Drop as Cooler Weather Briefly Returns
- Texas Observer – Proposed Ethane Project Targets Open Capacity in Tennessee
- Gulf Coast Production Analytic Report – Tropical Depression 5 Passes Through
- Supply/Demand Balance Analytic Report – Demand Declines 5 Bcf as U.S. Begins to Cool Down
Bloomberg
- Oil Falls for a Third Day on Stockpile Gain, Signs Economic Growth to Slow
- Fuel Oil Shipments to Singapore May Tumble as Profits Drop
- Asia Fuel Oil, Gasoil Drop as Crude Oil Declines on U.S. Supply Gain
- CNPC to Raise $2.9 Billion From Bonds for Russian Oil Pipeline, Projects
- Aker Solutions Chief Sees Delays in Deepwater Projects Due to BP Oil Spill
- Transitgas Says Start of Pipeline Flows to Italy Is Delayed to End August
- U.S. Lawyers Seek Dismissal of Lawsuit Challenging Deepwater Drilling Ban
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