Morning Petrospective – September 9, 2011
il prices ended the session slightly lower as traders vacillated between buying and selling all day long. In trading overnight, crude oil prices were higher and refined products prices were lower, with gasoline losing less than heating oil. These reactions seem to have been reflections of Wednesday night’s API report, which had shown a draw in crude oil and gasoline stocks and a build in distillate stocks. Since the API report had been a perfect indicator of the DOE report for two weeks, traders followed it Thursday.
Oil prices dropped in sympathy with lower equities quotes and on a stronger US dollar to euro trade. The dollar gained against the euro steadily throughout the day, and the DJIA finished 119.05 lower at 11,295.81. Those two stole the two biggest supporting factors from the oil complex.
Investors moved to the sidelines on Thursday in anticipation of President Obama’s speech. The main elements had been leaked ahead of time and they brought in buying on Wednesday. But, investors realized that it will require Republican support to pass any new bills and that might be difficult to achieve heading into a quadrennial election year.
The dollar rally was a symptom of the nagging uneasiness over Europe’s continuing sovereign debt worries. Every other day, some little piece of negative news seems to hurt the prospects for recovery there. On Wednesday, the ECB refused to lower interest rates, as some had expected. But, ECB chief, Jean-Claude Trichet noted the shift in the outlook there to one that is less promising and many took that as clearing a way for future rate cuts. The dollar rallied after Mr Trichet spoke on Wednesday.
On Thursday, it was Fed Chairman Ben Bernanke’s turn. For weeks, now, investors have been convinced that Mr Bernanke would outline – in detail – the possible tools at his disposal. They have expected him to cite the “twist” and to mention a possible QE3, among other potentialities. They had expected to be able to handicap his preferences by the way he cited each possibility. But, that has not happened and it did not happen on Thursday. He basically told reporters that they knew what his possible tools are and that he stands ready to do whatever he needs to do to improve the economy and increase employment. Given the fact that President Obama had a much-anticipated speech last night, Mr Bernanke should not really have been expected to eclipse it. If the reception in markets is especially cool on Friday, the Fed may become more specific.
This week’s DOE report showed a build in distillate stocks of 0.709 million barrels. Gasoline stocks were up 0.199 million barrels. Crude stocks dropped 3.963 million barrels, and crude oil imports dropped 1.042 million bpd to 8.565 mln bpd. Utilization fell 0.2% to 89.0%.
This week’s EIA underground natural gas storage report showed a build of 64 bcf. (see page 9).
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