Morning Petrospective – September 19, 2011

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rude oil prices sold off on Friday, after being unable to advance above $91.00 a barrel. The actual resistance seems to have set up at $90.55, but prices got nowhere near either of these on Friday. Crude oil prices dropped $1.44 a barrel, but they still managed to finish the week in positive territory. By Friday afternoon, prices were up $0.72 for the week. Traders had prices down even more at one point, but these rallied going into the close. Bearish factors included a stronger dollar and continuing fears that European debt might not improve.

There were plenty of bearish economic statistics out last week, with last week’ unemployment figure showing 11,000 more first-time claims, pushing the figure up to 428,000. Just a few weeks ago, economists had been looking hopefully at a number below 400,000 as a potential springboard to higher employment. Now, the four-week average has increased from 415,500 to 419,500, leaving economists to fear that we may have the trend getting worse.

Housing figures were bearish, the Empire State Index was bearish, and the CPI showed more inflation than had been expected and many observers now feel that incipient inflation could force the Fed to turn away from another round of quantitative easing or anything else that could turn the temperature up on inflation at all. If we are back in a period of slow growth but higher prices, or stagflation, it will be very difficult to get out of it.

The latest CPI figures showed headline inflation up 0.4% to an annualized rate of 3.8%, up from 3.6%. Food prices were up half a percentage point and gasoline prices were up 1.9% m/m. Late last week, when these figures were released, traders focused on a 0.2% gain in industrial production in August. Capital Economics saw it as encouraging, even though most observers felt it was anemic.

As we start another week, traders will be looking for any signs that the economy is trying to grow here. Technically, energy prices still have resistance overhead. In the refined products, there are still double top patterns on the charts. Prices have a way to go before we will be able to say that they look like they may want to break above resistance levels. They will need to do that first, before being able to move higher near-term. Prices were overdone to the upside on Friday, and it may require some movement either sideways or lower before being able to get up enough of a head of steam to return to the upside.

All eyes are likely going to start out this morning on European debt. If Finance ministers were able to reach any kind of working agreement over the weekend, that could be seen as a good starting place for the bulls on Monday. If they were unable to reach any kind of agreements to make the situation better, it will be difficult to move forward. There was some hope going into the weekend that the sovereign debt issue could be put to rest once and for all, rather than being something that returns time after time to sap confidence in the global recovery.

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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

  • California SW Observer – Tepid Demand Weighs on Prices.
  • Midcon Observer – Lower Midcon Routes to Chicago Become Most Attractive in the Cash Market.
  • Supply/Demand Balance Analytic Report – Dry Production Pushes Up To New High On Strong South Output.
  • Gulf Coast Production Analytic Report – Tropical Low –Pressure Systems Building in the Atlantic.

Platts

  • Brazilian ethanol prices fall on lower demand, according to CEPEA/ESALQ data.
  • UK-based Gulfsands Petroleum warns over impact of sanctions on Syria's output.
  • Ukraine to use gas pipelines to send shale gas to Europe: Energy & Coal Industry Minister Boyko.
  • Board of TNK-BP oil venture likely to discuss candidates for vacant CEO position at meeting Thu-Fri:sources close to the company management.

Bloomberg

  • Crude Drops to One-Week Low as OPEC Signals Oil-Demand Growth Is Slowing.
  • LNG Price Boom Seen as Japan Vies With China While Exxon’s Shipments Grow
  • Billionaire Reddy to Sell $1 Billion Unit Stake to Buy Mines.
  • Hedge Fund Heavyweight Says Gold Bet Not Over.

Technical Recap

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