Morning Petrospective – September 9, 2010       

il prices were higher on Wednesday despite the release of the Federal Reserve’s “Beige Book,” which showed “widespread signs of a deceleration” in economic growth and recovery. Most significantly, the Dow Jones Industrial Average (DJIA) was higher on the day, finishing with gains of 46.32 to end at 10,387.01. The euro ended the day effectively unchanged. Technically, refined products have now put in place minor head & shoulders bottom formations, which suggest that both heating oil and gasoline prices could make sustained runs at their most recent highs, at 220.88 in heating oil, and at 219.93 in gasoline. Wednesday’s activity was tentatively bullish.

The Beige Book did manage to pull quotes down from the session’s highs, reached early Wednesday morning. And, we must confess to being surprised that the stock market (DJIA) was able to press into positive territory after yet another sign that the economy is weak and the recovery anemic. While there have certainly been some positive factors in recent data releases, most of the time they have achieved a kind of default bullish bias just because they have not been as bearish as expected.

  This might not be as significant if it were not for the fact that there is more oil in inventories right now than at any time in the last three decades. That includes 1986, when prices reached $9.75. It includes June of 1990, when crude touched $15.06 in June before advancing on Saddam Hussein’s Kuwaiti adventure. And it includes December of 1998, when heavy supplies pushed crude oil quotes back to $10.35. When the oil market has more oil available than it did when prices were repeatedly in the $10-$15 price range, one can see why we might be worried about a potentially calamitous selloff. If we throw in low natural gas prices, for purposes of Btu comparison, the potential for a steep decline, using that most dangerous tool of all - logic – seems to be very high right now. And, truth be told, nothing would be better for American economic recovery than genuinely cheap oil. We have never had a strong economic recovery without cheap oil – nor have we ever had cheap oil without dramatic US growth. There has to be something worthwhile in that history.

This week’s American Petroleum Institute (API) report showed a draw of 7.308 million barrels in crude oil stocks, a build of 654,000 barrels in gasoline stocks and a build of 1.288 million barrels in distillate stocks. Crude oil imports dropped 346,000 bpd to 8.863 million bpd, and refinery utilization was up 1.4% to 86.2%. Implied demand in gasoline came in this week at a rather weak 9.093 million bpd, while implied distillate demand registered 4.338 million bpd.

This week’s DOE report will be released on Thursday at 10:30 AM because of Labor Day this week. We have a difficult time seeing it coming out as a bullish report. Estimates suggest that stocks will remain at or near multi-decade highs. It will be hard putting a bullish spin on it.

     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

• Australia's Basker-Manta-Gummy oil and gas field joint venture has agreed to pay Norway's BW Offshore $32.5 mil as part of a settlement.
• Mexico aims to put the brakes on more than six years of decline in crude production, according to the 2011 budget proposal.
• A US EPA official acknowledged a criminal probe is being conducted of the Enbridge Line 6B crude pipeline rupture in Michigan in late July.
• US Interior will ask Congress for $100 million to hire and train more inspectors as part of an initiative for improving offshore E&P safety.

Bentek Energy

• Power Burn Analytic Report - Power Burn Recovers by 0.5 Bcf as Hermine Moves Past Gulf
• Industrial End Users Analytic Report - September Industrial Demand Flattening with 2009
• Texas Observer - California/SW Demand Drop Pushes Gas Back Into Texas
• Supply/Demand Balance Analytic Report – Production Averaging 4.1 Bcf/d Higher for First Ten Days of September

Bloomberg 

• Crude Oil Pares Gains on Concern Report to Show Increase in U.S. Supplies
• OPEC Report Trims 2011 Demand for OPEC Crude Because of External Supply
• Korea National Won't Raise $2.6 Billion Takeover Bid for Dana Petroleum
• Refiners Cut Oil Output in U.S. to April Low, Survey Shows
• Energy Bonds Outperform as BP Shrugs Off Junk-Debt Stigma
• China Renewable-Energy Aid to Draw Complaint by U.S. Steelworkers' Union
• Saudi Aramco to Supply Full Volumes to Asian Buyers for October Delivery

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