Morning Petrospective – August 26, 2010
il prices rallied on Wednesday despite another appalling DOE report. Crude oil stocks increased their year-on-year surplus from 10.6 million barrels (3.08%) to 14.5 million barrels (4.22%). Distillate stocks went from a surplus a week ago of 12.6 million barrels (7.80%) to 13.6 million barrels (8.37%); and gasoline stocks grew from last week’s year-on-year surplus of 13.5 million barrels (6.43%) to 17.5 million barrels (8.41%). At the same time, the four-week aggregate averages for demand dropped; gasoline four-week demand fell 64,000 bpd and went from 3.59% higher to 2.98% higher than a year ago. The four-week distillate average went from being 5.84% higher than a year ago to 4.92% higher.
At the same time, all three major inventory categories showed builds this week, and refinery utilization dropped 2.3% to 87.7% at the same time that crude oil imports increased by 320,000 bpd to 9.881 million bpd. That combination of higher imports and lower runs explains the large (and much larger than expected) build in crude oil stocks, but it does not help us understand the builds in refined products stocks. With utilization down, we could have had reductions in the amount of products produced; instead, distillate output was up 15,000 bpd while gasoline production was up 173,000 bpd. With the weekly figures for demand off 46,000 bpd and 84,000 bpd, respectively, this report showed a net movement of 61,000 bpd to the supply side for distillate and 257,000 bpd for gasoline. But, wait, we did not yet add in imports in the latest report. They helped moderate distillate’s over towards the supply side by 9,000 bpd, for a net move of 52,000 bpd to the supply side. Gasoline, on the other hand, had a huge increase in imports – 331,000 bpd – which pushed its net move to the supply side this week to a spectacular 588,000 bpd. It is almost ruinous in this economy.
Despite this week’s DOE report, oil prices rallied. In crude oil’s case, it may have been a matter of the October contract settling on Tuesday very near the low settle in late May (see the chart at the end of this). That seems to be stretching an odd technical case, though. There was support reached at $67.15, $69.00 and $69.53 at the end of May, according to our records. The lowest of those lows was $64.24, reached on May 20th, and that price is the one that is most significant.
Prices also rose on Wednesday despite another simply dreadful housing report and a disheartening report on durable goods orders. Sales of previously-owned homes fell 27.2% to an annualized rate of 3.83 million units, which was well below the pace of 4.65 million, which was the median of a survey conducted by Bloomberg. It was the slowest rate of sales since they started keeping these figures in 1999. At the current rate, it would take 12.5 months to move all the previously-owned houses for sale on the market. At June’s rate, it would have required 8.9 months to move them, so it is getting worse.
Durable goods orders were up 0.3%, but only because of “a massive 75.9% m/m surge in orders for commercial aircraft,” Capital Economics wrote. But, if one pulled orders for transportation out of the mix, “core orders fell by a worrying 3.8% m/m,” CE said, adding, “July’s collapse … suggests the growth rate of business investment is slowing fast.”
The DJIA rallied 19.61 points to end at 10,060.06. With economic statistics seemingly now going from bad to worse, investors are hoping that the key index can find support and stay above 10,000. Oil prices were higher yesterday on long-term support, oversold pressures and a mild rally in the euro. The fundamental and economic underpinnings only eroded further, though.
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
- BP and US gov't now seek to remove drilling pipe from the Macondo BOP by the end of the week; goal is to replace BOP & complete relief well.
- Cosan and Shell are entering a $12 billion JV in Brazil to produce ethanol, sugar and power, plus distribute fuels.
- Santos is looking to sell a stake of up to 15% in its Gladstone coal seam gas-to-LNG project in eastern Australia.
- Another rare glimpse into Glencore's finances today - H1 net profit was up 42% to $1.56 billion.
- The only way is down for UK oil output - June production was down 21% on the year at 1.13 million b/d, according to government data.
Bentek Energy
- Power Burn Analytic Report - Power Burn at Lowest Level of August as Temperatures Continue to Decline
- Gulf Coast Production Analytic Report - Evening Cycle Production Down 237 MMcf/d with Declines on HIOS and Transco
- Supply/Demand Balance Analytic Report - Injections Continue to Rise as Demand Falls
- Texas Observer – Texas Demand Begins Recovery
Bloomberg
- Oil Rises a Second Day as Stocks Rally on Speculation Prices Fell Too Far
- PetroChina Profit Misses Estimates as Fuel Price Controls Crub Oil Gains
- Refining Margins' 51% Decline May Worsen as China Slows
- Shell Moves Sakhalin LNG Manager to Australia to Build Project
- Oil India Seeks to Acquire Shale Gas Assets Overseas, Chairman Borah Says
- Santos Aims to Sell 15% of $15 Billion Australia LNG Gas Project This Year
Technical Recap
Crude Options Report / Straddle Runs
NG Options Report
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