Morning Petrospective – August 18, 2010       

il prices rallied on Tuesday, as a combination of oversold pressures, mathematical support and a rebound in its favored outside influences (the euro and equities) pushed quotes back up. In the process, prices ended a five-day span during which prices moved lower.

Yesterday’s ostensible trigger for a rally in equities was the news that certain retailers had better earnings than had been expected. Housing starts rose less than expected and building permits dropped to their lowest point in more than a year, suggesting little improvement in the housing sector any time soon. This was offset, though, by an increase in industrial production, and that combined with the better earnings to push equities higher.

Work was started on an annualized rate of 546,000 houses in July, which was lower than the 560,000 rate that was the median rate forecast by analysts surveyed by Bloomberg recently. It was still up 1.7% from June, but building permits dropped 3.1% to a rate of 565,000. July housing starts were down 7.0% from ayear ago. Permits were down 3.7% from July, 2009. The construction industry is having a hard time finding buyers for all but foreclosed homes, in the aftermath of an expired government tax incentive, which ended at the close of April. June housing starts were also revised lower, from an initial rate of 549,000 to a revised rate of 537,000.

US industrial output increased by 1.1% in July, in “a rare piece of good news,” according to Capital Economics (CE). Motor vehicle production was up almost 10% but, even without that, manufacturing in the US was up 0.6% on the month. CE noted, “The survey evidence still points to a slowdown in the pace of the manufacturing recovery, which is to be expected now that inventories are getting closer to normal levels. But today’s news should allay fears that the manufacturing sector is headed back into recession.”

Capital Economics also saw lower chances of deflation after the core producer prices were reported up 0.3% in July. That pushed the annualized rate of inflation to 1.5%, up from 1.1%, and the highest rate of inflation in the last 10 months. Food prices led the increase, gaining 0.7% in the last month. Of course, while these figures may reduce the threat of deflation, they do little to help the already pinched consumer. Jobs and incomes are under pressure on one flank, while costs are higher on the other flank. That’s what we call enfilading fire.

This week’s API report showed builds across the board, which was unexpected and surprising, not to mention bearish. Refinery utilization was also unexpectedly higher, and crude oil imports were down substantially, although they did not affect the large build in crude oil stocks. Implied distillate demand came in at 4.136 million bpd, while gasoline implied demand came in at a rather meek 9.177 million bpd.

The big question for Wednesday is whether the DOE report will in any way mirror the API numbers. In a nutshell, the API numbers were bearish, showing inventory builds in both refined products and in crude oil stocks, and showing weaker demand. The decline in crude oil imports suggests lower runs to come, but higher utilization and builds across the board are poor starts to this week’s statistics.

     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

• 70%-79% of the BP oilspill remains in the Gulf of Mexico & poses a threat to the ecosystem, according to a Georgia Sea Grant Program study.
• Woodside has let its timetable for a final investment decision on the expansion of its Pluto LNG project in Western Australia slip into 2011.
• State-run PetroVietnam received its first imported crude cargo -- a 400,000-barrel parcel -- from Azerbaijan late last week.
• US company Kosmos Energy has terminated an agreement to sell its stake in the Jubilee field offshore Ghana to ExxonMobil.
• Shell has declared force majeure on loadings from the Bonny Light oil terminal in Nigeria.
• UK explorer Rockhopper Exploration has failed to find oil with its second exploration well offshore the Falkland Islands.

Bentek Energy

• Power Burn Analytic Report - Midwest Power Burn Down 52% Since Last Thursday
• Gulf Coast Production Analytic Report – Destin Maintenance Reduces Mississippi Offshore Production
• Supply/Demand Balance Analytic Report - Demand Softens Across the U.S. as Temperatures Continue to Trend Downward
• Texas Observer - Texas Demand Strength Provides Cushion

Bloomberg 

• Crude Falls After Industry Report Shows Higher U.S. Oil, Gasoline Supplies
• Woodside Delays Pluto LNG Expansion on Drilling Results; Profit Rises 40%
• Oil Futures Show 2012 U.S. Discount Disappearing on Spill: Energy Markets
• Kosmos Drops $4 Billion Sale of Ghana Assets to Exxon Mobil on Opposition
• U.S. Sees No `Recent' China Pressure on Global Oil Companies in South Sea

Technical Recap

Crude Options Report / Straddle Runs

NG Options Report

Premium Subscriber  (click here to register):

Volumes & Open Interest

End Of Day Straddles

Settlements