Morning Petrospective – May 10, 2011
il traders must have more lives than cats right now. This market has had everything from Japanese quakes and tsunamis to the death of bin Laden to a dollar jumping up and down like a cardiac jumping bean to now worrying about a slug of water, being carried down the Mississippi the way a snake swallows a pig, putting out the power of as many as a dozen refineries. Of course, if the high water mark is touched without harming these oil processing plants, then prices could drop right back down. Prices have taken back 21 of 38 cents that were shaved from the wholesale price last week.
Complicating the picture even further was today’s trade in the US dollar. European finance ministers are agonizing over Greece and its debts, and the dollar rallied from 4 AM Monday morning until just before noon. After that, it dropped, and that weakness this afternoon helped oil prices rally. The US dollar was the one factor traders felt comfortable returning to last week, as one factor replaced another in the popular consciousness.
Traders will also be looking ahead to this week’s DOE report. Traditionally, this week has shown builds in distillate and increases in the amount processed by refineries. But, it has not has as clear a history with crude oil stocks or gasoline inventories. That leaves room for surprises, whichever way the actual statistics come in. All three wire service surveys are suggesting a pretty large increase in utilization rates, and those would be dropped dramatically if flooding ends up shuttering units.
Traders were reacting to a fire at Chevron’s Pascagoula, Mississippi refinery (330,000 bpd) and their buying pushed gasoline prices up dramatically yesterday, bidding quotes up almost 19 cents a gallon. The fire was extinguished, but traders were scared by the vulnerability of so many refineries to the flooding. Severe flooding has already reduced barge traffic and it has turned the Missouri and Mississippi River basins into flood-plains.
On the economic front, market participants revisited Friday’s monthly take on unemployment statistics, and a number of bullish traders saw in the figures room for prices to return almost immediately to the levels just seen on the upside.
We are more circumspect in our approach to the markets here. We still feel that QE2 played a major role in the weakness of the US dollar and in the strength seen in commodities since September 1st, when its probability was raised. It actually was started in November, but knowing it was coming launched the current bull markets in just about everything.
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
- Texas Observer – Southeast/Gulf Demand Bolsters Henry Hub.
- Supply Demand Balance Analytic Report – Cool Spring Weather Causes Slight Demand Restoration.
- Industrial End Users Analytic Report – Monthly Industrial Demand Pushes Past May 2010 Levels.
- Power Burn Analytic Report – Power Burn Up 1.1 Bcf/d, Expected To Reach Spring High on Thursday.
Platts
- Japan's Tokyo Electric Power estimates Yen 1 trillion extra costs for fossil fuels in the 2011-12 financial year.
- Spot prices for delivered cargoes of coaster butane in Northwest Europe stay strong on good petchems demand, say industry sources
- Iran plans to launch new petchems contracts on its oil bourse on Kish island, according to Platts markets sources.
- Global spot and short-term LNG trades spiked 40% year on year to 727 cargoes in 2010, according to GIIGNL report.
Bloomberg
- Oil Drops From Three-Day High on Forecast of Rising U.S. Crude Stockpiles.
- Gas-Price Limits Deter Reliance, PetroChina Exploration: Chart of the Day.
- China’s April Net Crude Oil Imports Rise as Factories Increase Fuel Demand.
- Mississippi Crests in Memphis as Flooding Threat Moves South to Refineries.
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