Morning Petrospective – September 28, 2011

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ast week, it suddenly seemed clear. The economy was headed for a double-dip recession; investors were getting out of gold, equities and commodities, including oil. The Fed had not done enough with Operation Twist and Germany stood in the way of European solutions to sovereign debt. Then, we had the weekend and came back on Monday. It seemed like a rally in a bearish market. But, on Tuesday, it now seems that everything has changed – again. Once again, no one’s life is complete without gold or oil futures.

So, what changed? We know that prices in oil and for the DJIA hit important support levels – at the same time that they were extremely oversold. As a result, both of those rallied big-time on Monday and Tuesday. At the same time, the US dollar, which still looks like it has put in a major bottom, has been working lower – on and off. The entire asset “platter” seems to be back on the menu.

clip_image003 In terms of macro-economic reasons for the change, we must admit that we are at a loss. The IMF, ECB and EU have some hope. They are working on an arrangement that will make things better. So far, though, all they really seem to have is this vague hope. The Germans remain virulently against anything that could lead to inflation, and the entire Western world is caught in an economic vice that can only be mitigated by inflation. That is the bottom line. Europe need to inflate some of its problems away, but the Germans won’t hear anything that promotes inflation, something about the Weimar Republic … .

In any event, European leaders are working on a plan to contain the sovereign debt problem, and the markets seem to believe they are onto something. Risk is back on the menu … and everyone is hungry.

This week’s API report showed a drawdown in distillate stocks of 223,000 barrels, in the one category that still needs to see builds. Crude oil stocks were up 0.568 million barrels and were up 4.621 million barrels. Refinery utilization was p 1.5% to 85.9%. Crude oil imports were up 498,000 bpd to 9.373 million bpd. Implied demand came in at 4.918 million bpd for distillate and 9.405 million bpd for gasoline.

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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

  • Power Burn Analytic Report – Switching Expected to Increase in October as Spread Widens.
  • Industrial End Users Analytic Report – Demand Higher Across Most Regions.
  • Supply/Demand Balance Analytic Report – Power Burn Poised for Steep Declines.
  • Texas Observer – Demand Peaks Near – Term; Outflows Face Upward Pressure.

Platts

  • Russia energy ministry calls on EC to honor Gazprom rights during #antitrust raids.  
  • Six companies named in European Commission natural gas antitrust raids.  
  • Dutch chemicals group Lyondell Basell announced plans Tuesday to permanently close its loss-making Berre refinery in the south of France. 
  • Italy's Eni has agreed to buy GDF Suez's 10.4% stake in the UK's Elgin and Franklin North Sea gas fields for $802 million.

Bloomberg

  • Oil Falls, Heading for Quarterly Decline in New York on Europe Debt Crisis.
  • BP May Quadruple Indonesian Gas Plant as Part of Asian Drive.
  • Reliance Holders Press Ambani, BP’s Dudley to Seek Higher India Gas Price.
  • Hurricane Hilary to Weaken in Pacific; Depression Ophelia May Strengthen.

Technical Recap

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