Morning Petrospective – April 5, 2011
n Monday, the oil complex was higher in a comparatively mild session with lighter volume than has been the standard recently. All three major contracts on the Nymex (crude, heating oil and gasoline) touched new highs for the current advance, eclipsing figures last seen on the way down from the July, 2008 highs that saw crude oil over $147 a barrel. Brent blend, the European benchmark for crude oil, reached $120 a barrel on Monday. Nymex crude finished above $108 a barrel. Gasoline prices have powered to new recent highs and are now up $1.2797/gallon since September 1st, 2010.
These prices are the highest levels we have seen in 30 months. The headline event driving prices higher on Monday was the fighting in Libya, centered on the refinery at Brega, which has become an iconic symbol of what the fight in Libya is all about from a non-Libyan or regional perspective. The rebels have been reinforced by former army soldiers joining their cause and they have adopted less static hit-and-run tactics that allow them to fire from their flatbed trucks and then move somewhere else before counter-fire can be targeted.
From the oil market perspective, though, this is becoming a long-drawn out fight that promises to dominate headlines for weeks and potentially months. After ceding parts of it late last week, the rebels were reportedly trying – with some success - to take back Brega on Monday. They had lost it over the weekend and fighting has been fierce as control has shifted back and forth. One has to wonder what kind of long-term damage may be inflicted on oil facilities in this key coastal city.
The US dollar rallied on Monday, after selling off Sunday night. It was still weaker over the last quarter, and there are many who feel that its ongoing weakness has been a major factor in the ease with which oil prices have breezed into triple digits. Other commodities were also higher on Monday, and none of them is looking at supply disruptions from Libya or the North Africa-Middle East region. Silver prices touched their highest levels since the great bull market “squeeze” of 1980. Corn prices, which are the basis of ethanol prices, hit their highest levels ever on Monday.
All of these commodities were higher because of the impact higher energy costs have, but they are also reflecting fears over inflation and are higher because of a weaker US dollar. Friday’s Labor Department report showing a decent increase in employment started this new week on a solid economic footing, in many traders’ minds.
Gasoline prices averaged $3.66 a gallon at the pump on Monday, according to AAA. Where we live, 87 octane is just pennies under $4.00 a gallon. Pump prices are now 30% higher than a year ago, and many observers believe that they will play an increasingly negative role on consumer thinking and spending, moving forward.
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Bentek Energy
- Supply/Demand Balance Analytic Report – Midcon The Linchpin Of US flows This Spring.
- Industrial End Users Analytic Report – Summer Industrial Demand Declines.
- Canadian Observer – AECO Basis Holds Ground With Strong Outlook.
- Power Burn Analytic Report – Hydro Continues To Offset West Power Burn.
Platts Oil
- UK, Saudi oil ministers to call on oil markets to "recognise that the high price of oil does not reflect the realities of supply and demand".
- France's Total restarts oil production in Gabon late Monday after trade unions halt their four-day strike action in the African country.
- China's strategic crude stockpiling program will account for 200,000 b/d of average incremental demand in the next five-six years.
- Malaysia's state-owned Petronas has confirmed that it will be changing its crude pricing formula to a Dated Brent basis.
Bloomberg
- Oil Drops First Day in Four on Signs U.S. Demand Easing as Supplies Gain.
- Tepco Dumps Radioactive Water at Sea as Japan Seeks Russia Help With Waste.
- EU Says Japan's Nuclear Crisis Won’t Affect Emissions-Reduction Target.
- ContourGlobal to Start Generating Electricity at Rwanda's ‘Exploding Lake’.
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