Morning Petrospective – May 5, 2011
il prices were lower on Wednesday as traders reacted to this week’s DOE report, which showed drawdowns in both distillate and gasoline inventories. Neither draw was large, but we did not see the builds that so many had expected. Nonetheless, this week’s report had a large enough build in crude oil stocks and a decline in gasoline demand and those numbers suggested to many that oil demand has been hurt by high pump prices and an economy that is still having trouble walking upright on two feet. A dollar that rallied from 8 AM this morning into the afternoon also hurt oil and commodities prices.
Silver, last week’s speculative asset darling, continued to struggle and was down $3.14 an ounce to $39.44 and gold was down $21.60 to $1347.32. The DJIA was down 83.93 to 12,723.58, and traders did not really seem to be in love with any particular asset class. In that respect, oil prices were the victim of a continuing bout of asset liquidation, as traders leave volatility and identification with assets behind and focus on an economy that still has trouble posting unequivocally strong numbers. This latest ADP unemployment survey, which is a ‘sort of’ first look at the monthly figures that will be released by the Labor Department on Friday, showed a strong increase in jobs – but not by as many as it forecast a month ago. As a result, few saw it as the fiery standard-bearer everyone has been awaiting to lift the economy definitively out of recession. There just is nothing here to make traders feel confident again in the face of broad asset liquidation.
The ADP survey showed a net increase of 179,000 in private sector jobs in April, down from 207,000 in March. Capital Economics expresses it well by saying, “A small dip in employment is not a disaster, but ideally we would have liked to see the growth rate continuing to accelerate. At this rate it would still take another three and a half years to recover all the jobs lost during the recession.” Also released on Wednesday, the ISM non-manufacturing index dropped to 52.8 in April – its lowest level since August – down from 57.3 in March. A Bloomberg survey had predicted a figure of 57.5, so this week’s number was a disappointment all around. Capital Economics said on Wednesday that this figure “will dampen hopes of a rapid re-acceleration in GDP growth in the second quarter.” That seemed to be Wednesday’s theme.
For the week, gasoline demand was down 205,000 bpd to 8.943 million bpd, which is really not impressive for late April. The four-week average is now 9.084 million bpd, which is 1.92% lower than a year ago. With the national average pump price for unleaded regular at nearly $4.00 a gallon, consumers are just not capable of keeping their tanks full and the economy growing.
Wednesday was a day of disappointment. Employment seems unlikely to increase by as much as it needs to for sustainable economic growth and the services side of the economy (non-manufacturing), - which accounts for most of the economy – is just not very robust here. With these factors in mind, the major assets that have been the focus of investor buying for so long have lost some luster.
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.
Bentek Energy
- Rockies Observer – Rockies Basis Falls With Demand.
- Supply Demand Balance Analytic Report – EIA Storage Figure Expected to Confirm April Demand Strength.
- Industrial End Users Analytic Report – Louisiana Industrial Demand Up.
- Power Burn Analytic Report – Power Burn Is Down 1.6 Bcf/d Over the Past 2 Days.
Platts
- Clinton says Washington will tap frozen assets of Qaddafi regime to aid Libyan rebels, after international meeting in Rome.
- Kinder Morgan signs over $1bil deal to buy US shale gas interest, build crude,condensate line from Eagle Ford shale to Houston Ship Channel.
- North American shalegas 'revolution' impacts to vary across globe, according to OTC panelists.
- Oil bulls take little comfort in weekly EIA data as US oil demand fell sharply last week.
Bloomberg
- Crude Oil Falls for a Fourth Day Amid Signs of Slowing Fuel Consumption.
- Qu Seeks to Squeeze Out Canadian Solar’s Competitors in Global Panel Glut.
- Glencore IPO Shows Unregulated Traders Beating Goldman Sachs.
- U.S. to Let Libyan Rebels Access Qaddafi’s Frozen $33 Billion.
Technical Recap
Crude Options Report / Straddle Runs
NG Options Report
Market Prices
Premium Subscriber (click here to register):
Volumes & Open Interest
End Of Day Straddles
Settlements
To view our energy news and articles on your PDA or mobile device, click here.