Weekly Petroleum Update for Week Ending 2/10/06

[BoeingBoy]

Highlights of the weekly EIA report:

U.S. crude oil imports averaged nearly 10.3 million barrels per day last week, up 404,000 barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged over 9.7 million barrels per day, a decrease of 137,000 barrels per day from the comparable four weeks last year.

U.S. commercial crude oil inventories (excluding those in the SPR) climbed by 4.9 million barrels from the previous week. At 325.6 million barrels, U.S. crude oil inventories remain well above the upper end of the average range for this time of year, and are at the highest level seen since the week ending June 24, 2005.

U.S. crude oil refinery inputs averaged 14.6 million barrels per day during the week ending February 10, up 84,000 barrels per day from the previous week's average. Refineries operated at 86.1 percent of their operable capacity last week.

Total products supplied over the last four-week period has averaged over 20.2 million barrels per day, or 1.7 percent less than averaged over the same period last year.

Jet fuel demand is up 0.8 percent over the last four weeks compared to the same four-week period last year.

As spot prices for crude oil have continued declining, jet fuel spot prices have followed. On 2/10/06, spot prices were:

NY Harbor - $1.7370/gal (down 8.55 cents WoW)
Gulf Coast - $1.7120/gal (down 7.80 cents WoW)
Los Angeles - $1.8050/gal (down 10.25 cents WoW)
WTI-Cushing - $62.01/bbl (down $3.40 WoW)

According to Bloomberg, WTI is trading @ $58.22/bbl on 2/16/06 at 10:12 EST. If that holds thru the market close tomorrow, that should translate to another 7-10 cent drop in spot prices for jet fuel on 2/17/06 relative to prices on 2/10/06.

As was the case in last week's update, the following chart hasn't changed and won't till Feb's average spot prices are available. I'm merely moving it from last week's post for convenience.

View attachment 4373

Jim

 

[FWAAA]

As spot prices for crude oil have continued declining, jet fuel spot prices have followed. On 2/10/06, spot prices were:

NY Harbor - $1.7370/gal (down 8.55 cents WoW)
Gulf Coast - $1.7120/gal (down 7.80 cents WoW)
Los Angeles - $1.8050/gal (down 10.25 cents WoW)
WTI-Cushing - $62.01/bbl (down $3.40 WoW)

Jim

I realize that the "WoW" means "week over week" but the alternate meaning is equally appropriate here - those are big weekly price declines.

Let's hope that fares can stay up despite the fuel price declines - most airlines (even those who have traversed Ch 11) still have billions of debt and new airplanes that must be paid for.

 

[markkus757]

Short term benefit during the leanest months is good for everybody. I wouldn't get too cosy because it's only going up the closer to summer we get.

 

[SpinDoc]

Short term benefit during the leanest months is good for everybody. I wouldn't get too cosy because it's only going up the closer to summer we get.

Yep. It'll go much higher after the U.S., U.K. and Israel bomb the dog crap out of Iran.
The futures traders will have convulsions because they'll be able to lie again and put the "fear" back in the market to drive the price of a barrel of oil sky high.

If only we could put all of the oil futures traders, ACLU lawyers, and environmentalist whackos on a small island in the South Pacific and nuke it, our world would be a much better place.

 

[JMM]

Yep. It'll go much higher after the U.S., U.K. and Israel bomb the dog crap out of Iran.
The futures traders will have convulsions because they'll be able to lie again and put the "fear" back in the market to drive the price of a barrel of oil sky high.

If only we could put all of the oil futures traders, ACLU lawyers, and environmentalist whackos on a small island in the South Pacific and nuke it, our world would be a much better place.

Too FUNNY, I agree. Of couse, once Bush and his croonies are out of office I see oil returning to a more normal price. There is simply no reason (even given supply and demand) for oil to be SO expensive. It is simply so certain folks can get rich.

JMM

 

[BoeingBoy]

There are several factors at play.....

One thing most people probably don't realize - I didn't till I started digging into all this for these reports - is that WTI (West Texas Intermediate) crude is one of the highest priced grades of crude oil in the world (last I looked I think it was 2nd highest). Using it to judge crude prices is like using the price of a Mercedes or Porshe to judge car prices. However, WTI prices have the advantage of being widely reported (like NYMEX prices, also for high grade and thus expensive crude).

Refineries purchase a mix of crude grades and their average price is quite a bit lower than that reported for WTI. They also buy most of their crude by contract, covering at least several months of delivery, not at the widely reported spot prices. The buildup of domestic stockpiles of crude since Katrina/Rita hasn't been because the refiners wanted to spend extra money storing that crude - it's been because they're contractually obligated to take that crude.

Finally, there is that old "supply and demand" concept. I would ask anyone this:

Pretend you produce widgets in factories all over the world and you're selling 98-99% of the widgets your factories are capable of producing. You know the following:

- 1 or more of those factories can be shut down or production signigicantly reduced at any time - equipment failures, power outages, worker unrest, natural disaster, etc - leaving you unable to produce enough widgets to meet demand.

- While you could build additional factories to provide a greater buffer in case of a shutdown, each of those additional factories could cost billions to build and the demand for widgets isn't there to absord the additional widgets they could produce. They are only needed as a backup to the existing factories.

- History has shown that you can raise your prices with little effect on demand - the customer has become addicted to those widgets.

Given these, how much would you voluntarily reduce your widget prices?

Jim

 

[Dog Wonder]

There are several factors at play.....

the customer has become addicted to those widgets.

Given these, how much would you voluntarily reduce your widget prices?

I am not selling my widget, no matter what is offered.

 

[SpinDoc]

I am not selling my widget, no matter what is offered.

Dog:

Every widget has it's price, and unfortunately, the oil widget is highly overvalued right now. The only people getting wealthy from the oil widget are the oil companies, the Saudis, and a select group of wealthy American investors, and it is due time for the market to collapse and shift the wealth back to the majority, rather than the minority.

Remember, US Airways and the rest of the airline industry are getting killed by the high cost of oil/jet fuel, and the rest of the economy can't continue to be sustained until oil prices fall to normal levels, which are around $20 - $25 per barrel. I'm all for capitalism, but there has to be limits on profit taking, or the golden goose will eventually be killed when no one can afford to buy the product.

 

[autofixer]

So the oil companies move off shore ... I am sure that will happen anyway. If "Big Oil" is based in Dubai, what are you going to do? Nobody is forcing them to be based in Houston. They are only in Houston because that is where the oil fields were. The weather is just as nice in UAE. China wants ALL the oil production in the world. If we place windfall profit taxes on oil company profits, they will simply shift their most profitable production to China. We (The West)will get the left overs at extreme prices. You think $3 per gallon was bad? What are you going to do? Bomb Dubai?

I predict that most world production will shift to Asia over the next decade, so get ready for it. The oil companies will not set by and let politicians determine their future. Politics, Environmentalism, and Economics never mix. Remember there is no Supreme Court in China that will force evironmentalism on the population.

China and Iran are in oil talks as we speak. I suspect a military mutual aid pack is in the works as well. What does that mean? It means the West loses all of Irans oil production and prices stay high. It means we cannot do anything about Iran producing thermonuclear weapons and exporting the technology to whomever they wish...terrorists, Syria, Venezuela.