Morning Petrospective – April 8, 2011
he ECB (European Central Bank) raised interest rates on Thursday, in a move that had been widely expected by investors after having been advertised by central bankers in Europe. There was also a powerful aftershock in Japan, although it did not affect any nuclear units. Equities and the euro were lower, taking two normally bullish factors away from oil, but crude oil prices hit more than $110, while refined products lagged. Refined products changed back and forth through the afternoon, crossing into positive and negative.
By the final bell, Nymex crude was up $1.40, heating oil crossed back into the green, finishing 1.26 cents a gallon higher, while gasoline prices ended the day down 1.20 cents a gallon. Earlier, gasoline had been positive and heating oil had been negative. It was a volatile day for the refined products, and the Japanese aftershock brought buying interest back for diesel (heating oil), while this week’s disappointing demand figures from SpendingPulse and from the DOE caught up with gasoline. Demand is pretty poor for both refined products, with four-week distillate demand dropping from up $.44% a week ago to up less a percentage point now. Four-week gasoline demand is down 1.24% on the year.
Higher prices are having an impact on demand for refined products. We have an interesting spiral in motion. It breaks down and then gets caught up again. It goes like this: A stronger economy helps boost oil prices as investors anticipate stronger future demand. Higher prices (for refined products) hurt consumers and lead to demand destruction. Higher oil prices hurt consumers and their ability to spend money elsewhere. As a result, in order to keep the economy going, the fed needs to keep rates low or money inexpensive and that hurts the dollar … which boosts oil prices. A weaker dollar helps exports and that helps the economy, boosting oil prices, hurting the dollar as well as consumer discretionary spending … . It gets absolutely dizzying. It has elements that want to halt the cycle and other elements that keep it in motion. The latter factors are dominant here.
On Thursday, traders reacted to reports that an oil field in Libya had been damaged. And Nato reported that Khadafi’s forces had started "at least one fire at an oil facility in the region of Sarir," according to AFP (Agence France-Presse). At the same time, a leading American general told the Senate that it is unlikely that Libyan rebels will be able to get rid of Khadafi, again, according to AFP. Traders have been worried that a dragged-out civil war might ultimately damage or destroy Libyan oil installations … and events on Thursday seem to have highlighted those fears.
Traders also were reacting to positive economic data in the US. In early trading, crude oil prices were supported by the Labor Department’s weekly unemployment figures, which showed fewer-than-expected U.S. workers applying for jobless benefits last week. The number of initial claims fell 10,000 to 382,000, against forecasts suggesting a decline of only 3,000 (DJN). The number of people still collecting unemployment also dropped last week, by 9,000.
Opec will cut crude oil loadings for a ninth week, because of lower Libyan production and exports, Oil Movements said on Thursday. Opec is expected to ship 22.98 million bpd in the four weeks ending April 23rd, compared to 23.36 million bpd in the four weeks ended March 26th. Libya reportedly produced 390,000 bpd in March, according to Bloomberg estimates.
territory. Upward momentum returned in crude.
FMX Newswire
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Bentek Energy
- Supply/Demand Balance Analytic Report – Production Recovers With Maintenance Concluding and Strong Northeast Output.
- Nuclear Plant Status Analytic Report – Outages Slightly Above April 2010 Levels.
- Rockies Observer – Rockies Basis to STay Strong Through Next Week.
- Power Burn Analytic Report – Gulf Power Burn Up 0.7 Bcf/d As Temperatures Continue to Rise.
Platts Oil
- A source at Oseberg operator Statoil said the field is due to shut for maintenance on May 19, without giving details of the duration.
- Offshore drilling in the North Sea and UK Continental Shelf fell by 25% in Q1 from Q4, according to a report by Deloitte published Friday.
- Managed money ramps up crude futures length.
Bloomberg
- Oil Rises to 30-Month High Above $111 in New York, $124 in London on Libya.
- Japan Hit by 7.1 Quake; Workers Evacuated From Fukushima.
- Fu Chengyu to Join Sinopec as Chairman, Stepping Down as Cnooc President.
- PetroChina Denies Report of Possible Plan to Purchase China Gas Holdings.
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