Another Petroleum Update

[BoeingBoy]

Before hitting the Energy Information Admin's "Weekly Petroleum Status Report", which covers the week of 3/14-3/18, some newer news....

The good - crude oil prices are down this week. I was working, but I believe CNBC had crude closing at a little under $57/bbl on Monday after trading above $57/bbl during the day. Today's Bloomberg prices are:

NYMEX $54.l10
Brent $52.51
WTI Cushing $48.96 (hopefully not a mistake since that's a much bigger drop than any other)

The bad - at least for refined product prices. A fire at a BP refinery in Texas has done a so far undetermined amount of damage. Here's the story.

Now for the Weekly Status Report. Some excerpts:

U.S. crude oil imports averaged nearly 10.3 million barrels per day last week,
up 229,000 barrels per day from the previous week. Over the last four weeks,
crude oil imports have averaged about 10.1 million barrels per day, which is
366,000 barrels per day more than averaged over the comparable four weeks last
year.

U.S. commercial crude oil inventories (excluding those in the Strategic
Petroleum Reserve) rose by 4.1 million barrels from the previous week. At 309.3
million barrels, U.S. crude oil inventories are in the upper half of the average
range for this time of year.

Distillate fuel inventories [one of which is jet fuel] fell by 2.8 million barrels last week, and are in the lower half of the average range for this time of year. While most of the decline was in high-sulfur distillate fuel (heating oil), low-sulfur distillate fuel (diesel fuel) also declined.

Total product supplied over the last four-week period has averaged nearly 20.8
million barrels per day, or 2.3 percent more than averaged over the same period
last year.

Distillate fuel demand has averaged 4.3 million barrels per day, or 3.2
percent above the same period last year. Kerosene-type jet fuel demand is up
10.8 percent over the last four weeks compared to the same four-week period last
year.

Now for jet fuel spot prices on 3/18:

New York Harbor $1.6410/gal
Gulf Coast $1.6148
Los Angeles $1.7418

Crude on the 18th:

WTI Cushing $56.80/bbl
Brent $55.97

Jim

 

[sfb]

From the local paper in the area (regarding the explosion at BP's Texas City refinery):

Sources estimate 14 to 20 BP deaths

God rest their souls and help their families.

 

[whlinder]

In USA320's thread he discussed his belief that oil prices are too high for the underlying fundamentals.

Right now I believe there is “irrational exuberanceâ€￾ (to coin a phrase from Alan Greenspan) regarding NYMEX Crude Oil Futures prices. There is an interesting “Bullâ€￾ vs. “Bearâ€￾ battle that could begin. The market has come a long way, very fast and the question is the market in a “demand or speculativeâ€￾ rally?

I’m of the opinion that there will be significant volatility and when the correction comes, and it always does in every market, it will be swift and painful as fear of losing profits becomes reality.

Time will tell and it will be interesting to watch because I believe 80% of trading is psychology and 20% is mechanics, which makes it so difficult, even for the professionals.

Regards,

USA320Pilot

[post="256550"][/post]​

A columnist from the Washington Post wrote about market bubbles yesterday and thinks we might be in an oil bubble.

Phil Verleger, the energy expert, brings a similar analysis to the recent run-up in oil prices, which he said is being driven less by fundamentals (supply, demand and the cost of replacing reserves) than it is by the upward pull of futures markets. He said OPEC and its silent partners, the major oil companies, know that they earn the highest profit when oil inventories are lean, and the best way to keep them lean is to keep spot prices higher than futures prices. Now that every hedge fund and college endowment is in the futures market placing bets on higher prices over the next year, spot prices are following suit.

Link

 

[USA320Pilot]

Oil prices inching downward

Oil prices sank more than $2 a barrel yesterday on rising crude supplies in the United States, a strengthening dollar and signs that China's energy appetite, while still growing, has its limits.

Rising interest rates, which could slow economic growth and energy demand, also were a factor. Brokers noted that technical and speculative trading magnified the sell-off.

"When you run up quickly, you can also come off very quickly," said Tom Bentz, a broker with BNP Paribas Commodity Futures in New York.

See Story

Regards,

USA320Pilot

 

[SpinDoc]

Oil prices inching downward

Oil prices sank more than $2 a barrel yesterday on rising crude supplies in the United States, a strengthening dollar and signs that China's energy appetite, while still growing, has its limits.

Rising interest rates, which could slow economic growth and energy demand, also were a factor. Brokers noted that technical and speculative trading magnified the sell-off.

"When you run up quickly, you can also come off very quickly," said Tom Bentz, a broker with BNP Paribas Commodity Futures in New York.

See Story

Regards,

USA320Pilot

[post="258293"][/post]​

Dare we say the bubble is about to burst?
The crude oil speculators have made their money
and the profit taking is starting. I hope most
of the greedy SOB's lose their shirts.

 

[autofixer]

Let's hope oil continues to drop, however, with the new world fundementals in place, don't look for oil to drop below $40.
http://www.worldtribune.com/worldtribune/0...3454.94375.html

The "nightmare" is for OPEC to swith to the EURO as their reserve currency. It may happen. If this would happen, all oil would have to be purchased in Euros...bad, bad, bad for the US economy.

 

[Busdrvr]

Let's hope oil continues to drop, however, with the new world fundementals in place, don't look for oil to drop below $40.
http://www.worldtribune.com/worldtribune/0...3454.94375.html

The "nightmare" is for OPEC to swith to the EURO as their reserve currency. It may happen. If this would happen, all oil would have to be purchased in Euros...bad, bad, bad for the US economy.

[post="258463"][/post]​

Why is it "bad"? in any case, all oil is NOT purchased withe the dollar, and if they changed the currency for the target prices to the Euro, all oil would NOT have to (nor would be) bought with the Euro.

 

[BoeingBoy]

Why is it "bad"?

[post="258510"][/post]​

In two words, exchange rates.

All oil is not purchased with dollars, but it's priced in dollars. If oil were to start being priced in Euro's, then our purchase cost in dollars would fluctuate with the exchange rate even if the price of oil (in Euro's) stayed the same.

This does not make it necessarily good or bad, it just adds another factor to the equation.

Jim

 

[USA320Pilot]

SpinDoc:

SpinDoc said: “Dare we say the bubble is about to burst? The crude oil speculators have made their money and the profit taking is starting.â€￾

USA320Pilot comments: NYMEX traders seem to be disregarding fundamentals and from a technical analysis point of view, the security is over bought. At some point “longâ€￾ speculatorsâ€￾ will have to sell their contacts or they will never profit. That’s why I believe the price of crude oil futures will come down, but I agree the long-term trend is up and will likely stay over $40 per barrel due to world demand.

Regards,

USA320Pilot

 

[autofixer]

Actually all oil IS purchased in dollars. For example, the Japanese must sell us Hondas and in return be payed in dollars so that thay may purchase oil (Here is an example http://www.isdb.org/english_docs/idb_home/...e/bedpr222.inc). All we must do is print more fiat dollars to pay for oil. If the EURO is the reserve currency, we will have to sell products to Europe or other nations that use the euro as the exchange currency to receive euros to purchase oil. The long and short of this situation is Inflation and the devastation to the US economy that would cause.

Just some food for thought, this is a way for Europe and the OPEC nations to do economic battle with the US. They cannot defeat us militarily, but they may try this economically. It is being talked about at OPEC as the dollar is being devalued due to the printing of more fiat dollars (To pay for our massive welfare state and massive deficits).

If the dollar is devalued OPEC gets less for their oil (In terms of "real" dollars). By the same token, Germany has to sell us more VWs to get dollars, to buy their oil, as the dollar is devalued. If the EURO is holding its own against the dollar (as it is), there will be pressure from all over the globe to make the Euro the reserve currency.

The key to all of this is the dollar and its continued fall in value. If the dollar continues its freefall against the EURO, look for the nigtmare situation to happen and soon. The OPEC nations will not let the value of their oil to fall just because we cannot get our economic house in order.

http://www.economist.com/finance/displaySt...tory_id=3750656
http://www.csnews.com/csn/search/article_d...t_id=1000816349

 

[Busdrvr]

Fixer, do you honestly have any idea how the fed controls money supply? does the government just "print more"? YGTBSM. Yes, on the international market, oil is priced in Dollars, however, there is a sizable amount of oil trade that never hits the 'market' (like Chavez supporting Castro).

In any case.
The value of the Dollar is still above it's pre-96 levels (when the treasury started buying up dollars to artificially jack up it's value, and make U.S. workers less competative) see www.sounddollar.org
If our budget deficits were causing dollar weakness, then why does Japan have to actively intervene to keep the yen weak despite a MUCH larger deficit? Why would Japan WANT a weak currency vs the dollar?
Supply and Demand. A weak dollar may make foreign oil more expensive, but it also make U.S. oil exploration more attractive.

Besides, who needs middle east oil?

http://www.americanenergyindependence.com/biodiesel.html

 

[autofixer]

Yeap. they just print away. What is to prevent it? Is the dollar based on anything? Right now they are tightening, since they printed too much in the past. Printing is a metaphor for easing the money supply.
That in effect causes more money to be in the private market vs. the government's (TBills, Bonds, etc). Now, the dollar is plumeting in value and as a result intrest rates are moving upward (You must give a better intrest rate to attract foriegn investors if the dollar's value is worth-less), so you tighten up the supply and guess what? The basic rules of supply and demand come into play and the dollar goes up in value and intrest rates can come down.

I understand that most of our oil comes from Canada, Mexico and Venezula, however, all oil is competed for from the same pot (It is known as the world market). For example, most Alaska oil goes to Japan...it is just a matter of logistics as to the actual physical location the oil is mined from. So we NEED oil from southwest Asia, as it is all competed for at the NY Merc. Exchange. If the House of Said falls and the supply of Saudi oil becomes questionable, the price of Venezuelan crude will sky rocket. Why? Because the pot of availble crude is smaller and Adam Smith tells us what must happen.

Japan wants the Yen to be at parity with the dollar ($1=1Y). The US wants the EURO to be at parity with the dollar. In a utopian world this would be the case, but with politicians concerned with the next election cycle, it is not the case. However, a weak Yen causes XBoxes to be cheaper in the US. This in effect causes more dollars to flow to Japan and they can continue buy oil at $55 per barrel. Japan wants oil to be cheaper so that they can stop printing the Yen. The value of the Yen will snap back toward parity with the dollar and euro and all would be wonderful.

 

[mweiss]

Yeap. they just print away.

Nope, they don't.

What is to prevent it?

A recollection of 1930s Germany.

Is the dollar based on anything?

Yes. Full faith and credit. This means that it's especially important not to screw with either.

Printing is a metaphor for easing the money supply.

No, it is not. You're really, really confused about economic policy here. The two are vastly different concepts.

 

[SpinDoc]

Nope, they don't.

A recollection of 1930s Germany.

Yes. Full faith and credit. This means that it's especially important not to screw with either.

No, it is not. You're really, really confused about economic policy here. The two are vastly different concepts.

[post="258747"][/post]​

Actually, money is NOT printed by the U.S. Government.
It is printed by a group of private bankers (including
John D. Rockefeller and others) and loaned to the
Federal Government, with interest. Many people would
be quite surprised to know that the Federal Reserve is
NOT part of the federal government.

Anyhow, getting back to the topic, oil futures cannot
theoretically continue to go up. Sooner or later,
profit taking will ensue and the cost will go back
down. World oil supplies right now are adequate
for the next quarter, and the speculators will have
to sell before they lose money.

 

[700UW]

If the Federal Reserve is not part of the Government, why is the Federal Reserve Chairman and all its members appointed by the President and approved by the Senate?

On December 23, 1913, the Federal Reserve System, which serves as the nation's central bank, was created by an act of Congress. The System consists of a seven member Board of Governors with headquarters in Washington, D.C., and twelve Reserve Banks located in major cities throughout the United States.

Federal Reserve