Morning Petrospective – April 1, 2011
il prices were higher on Thursday, with gasoline leading the charge and making new recent highs, eclipsing the previous high at 309.36. Crude oil prices got within hailing distance of $107.00, but did not break it and heating oil got nearer to 313.72. Gasoline prices now have another technical breakout with a new, recent high. Market observers were talking about the US dollar weakening against the euro, and they were talking about the Libyan rebels suffering severe setbacks that pushed them all the way back to Brega, on the outskirts of Benghazi, their unofficial capital. The rebels are just not well-organized or trained.
That fact has brought to the market a number of unsavory realizations. The Allies can hammer Khadafi loyalists from the skies, but the rebels are apparently not yet capable of converting those gains into lasting territorial accomplishments. Today’s strange story from Libya had Khadafi loyalists taking normal cars to the battlefront to confuse Allied warplanes. They left the tanks and armored vehicles somewhere safe. But, when the fighting has been joined on the ground, his forces have consistently been able to concentrate more force at the point of contact. That has proven to be the rebels’ undoing.
All of which brings us to the realizations we mentioned. It may require Allied boots on the ground to end this civil war in a way that will be acceptable to the coalition. If they do not put their own men and women on the ground, it could take months or years to train a suitable fighting force to oust Khadafi. As a result, the Allies may find themselves forced to make friends with people who can provide ground troops – but who are not going to cooperate with the coalition once the civil war has ended. The coalition might have to ask itself what it is going to do if the only force capable of preventing Khadafi from retaking Benghazi is loaded with fighters that look surprisingly like Hezbollah or al-Qaida. If that happens, the coalition could implode or pull key Western governments down … because one of the first reactions some will take if they do find Hezbollah or al-Qaida defending Benghazi will be to deny it.
In any event, oil prices raced higher on Thursday as traders started to ask questions about the ongoing civil war in Libya, and now about how the rebels, in whom the coalition is fairly heavily invested, will succeed in toppling Khadafi. The counteroffensive by Khadafi loyalists has made it clear that we are miles from the end-zone and even further from the end-game. And Libyan oil is unlikely to return to the market any time soon. While fighting worsens in Libya, the possibility that chaos could spread is still alive and well.
Traders were also buying commodities in general on Thursday. The euro was lifted by forecasts that the European Central Bank (ECB) may increase interest rates as soon as next week. The ECB has taken a tough posture against inflation, which is starting to rear its head in a number of undesired places. Higher interest rates there (Europe) would make the euro more attractive than the US dollar.
Crude oil prices are up 16.7% so far in 2011 (as the first quarter ends). At this stage, with gasoline prices making new recent highs, we have to believe that the seasonal tendency is back in play. Unfortunately, it looks like we need to be looking again at the long side.
FMX Newswire
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Bentek Energy
- Northeast Observer – Marcellus IP Rates Higher Than Previously Estimated.
- Rockies Observer – Rockies Demand Falling with April Weather.
- Texas Observer – Implied Injections Climb on Lower Regional and Market Area Demand.
- Power Burn Analytic Report – Power Burn Drops 1.7 Bcf/d.
Platts Oil
- Statoil says it has discovered oil at its Barents Sea Skrugard prospect.
- Piracy is escalating and its aggressive nature is on the rise, as are the huge costs to shippers.
- The ongoing nuclear crisis in Japan has made some oil tanker owners avoid ports along Japan's east coast.
- Asian spot LNG firmed to $12.15/MMBtu, as buyers continued to seek cargoes for delivery in May.
Bloomberg
- Oil Reaches 30-Month High on Strong China Data, Libyan Conflict.
- EU Emissions in 2010 Rose for the First Time in Three Years.
- Japan Reviews Water Tests Showing Radioactive Iodine at 10,000 Times Limit.
- Oil Leads Quarterly Gains on Middle East Unrest as Earthquake Saps Stocks.
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