Morning Petrospective – July 26, 2011
raders returned to a new week … but to the same old story from Washington, DC. The two parties are still struggling to find a way to agree to raise a debt limit they both agree needs to be raised. They cannot – apparently – agree on much else. They are looking at cost-cutting, revenue “enhancing” and various permutations of spending cuts and tax increases. They can’t agree on proportions of the two, and they can’t agree when to take up the fight again. This is a taste of what is coming, because this issue will not go away.
As a result of this stalemate in Washington, we saw the unusual combination of lower US dollar, equities and oil prices on Monday. The dollar traded back and forth for most of the day, and it finished slightly better after dropping steeply at around 6 AM and then rallying back – just as steeply – until around 11 AM. And, then, it started the whole process all over again, dropping sharply. As bad as the dollar may be, the euro has problems of its own.
Equities also were lower because Congress could not agree on a debt plan. The DJIA dropped 88.36 to 12,592.80 as a result, but once again, the movement higher - seen last week when there were rumors that an agreement had been reached - were better than the decline on the failure to agree. That is a pattern we have seen repeated over and over, and it has been true of oil. The declines do not seem as urgent or as steep as the advances.
The bullish information we get, including rumors that the debt-limit has been raised, seem to get much more movement on the upside than the failures to get a real increase in the limit fosters a decline. That tells us a lot. It tells us that oil prices (as well as equities) really want to move higher. Neither one has made a new high since the end of April, but they both continue to exhibit signs of being able to advance more readily than decline.
We saw it most clearly after last week’s DOE report. It was bullish for crude oil, because we had a much larger draw in crude oil stocks than anticipated. And refinery utilization was higher, signaling higher demand for crude oil … but it also signals an increase in refinery production of refined products, both of which had disappointing reports last week. It would have been just as easy for traders to focus on higher utilization as a bearish factor for refined products. And, it would have been just as easy to focus on refined products stocks as it was to focus on the crude oil end. That is especially true since we only actually use refined products. But, traders looked at crude and not products last week.
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
- Power Burn Analytic Report – Coal To Gas Switching Limited by High Electricity Demand.
- Nuclear Plant Status Analytic Report – HB Robinson At 100% Utilization.
- Industrial End Users Analytic Report – Ethanol Production Associated Gas Demand Remain Well Over 2010.
- Gulf Coast Production Analytic Report – Louisiana Offshore Production Drops, SONAT Receipts Down.
Platts
- BP's Q2 profit fails to lift shares as oil spill still weighs.
- Asia could draw LNG away from Europe in 2012 on better prices, according to BarCap report.
- Norse Energy seeks permits to drilling New York's Marcellus Shale.
- Australian carbon tax to have little impact on Ichthys LNG, according to Inpex.
Bloomberg
- Reliance Profit May Have Peaked as Ambani Struggles to Increase Gas Output.
- Oil Rises as U.S. Debt Concern Weakens Dollar, Countering Demand Concern.
- BP Chief ‘Open’ to Refining Spinoff.
- Sinohydro Plans $2.7 Billion IPO, China’s Biggest in 11 Months.
Technical Recap
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NG Options Report
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