3SOF

Friday, April 8, 2011...

•   May crude oil prices this morning are trading +$1.54 a barrel and May gasoline is +3.90 cents per gallon, both at fresh 2-1/2 year highs. Crude oil and gasoline prices yesterday settled mixed as a strong dollar and an ECB rate hike undercut gasoline but strong economic data along with an oil field fire in Libya lifted crude: CLK11 +$1.47, RBK11 -0.64. May crude posted a 2-1/2 year high.

                Bullish factors included (1) a fire at the al-Sarir oil field in Libya caused by Qadaffi's forces, and (2) stronger than expected economic data on weekly US jobless claims and Feb German industrial production, which signals economic strength that may boost energy demand.

                Bearish factors include (1) the stronger dollar, which reduces investment demand in commodities, and (2) the action by the ECB to raise interest rates, which bolsters concern that economic growth and energy demand will slow.

Oil price tumbles on supplies and Goldman pullback
Oil price lowest in weeks, OPEC and IEA say high prices dented demand

NEW YORK (AP) -- Oil dropped to the lowest level this month on Tuesday as energy forecasters said the world's supply of oil will remain ample, and a prominent investment bank said prices are too high.

Forecasters also said they're seeing signs that high oil prices are hurting demand for fuel in the U.S. and elsewhere.

Goldman Sachs warned investors that the price of oil has already topped its second-quarter forecast and is due for a "substantial pullback" in the near term. Goldman is considered a big player in oil markets, and is best known for bullish price forecasts.

Benchmark West Texas Intermediate crude for May delivery gave up $3.67, or 3 percent, to settle at $106.25 per barrel on the New York Mercantile Exchange. Oil dropped as low as $105.47 earlier in the day.

Oil's 33 percent rally since the middle of February has been built largely on concerns about disruptions to supplies from North Africa and the Middle East. On Tuesday, Goldman analyst David Greely backed off an earlier warning that the loss of Libya's daily oil production of 1.6 million barrels would create a squeeze on supplies similar to that seen in 2008, when oil spiked to $147 per barrel.

Geely now calls global supplies "adequate." That, and his forecast that the price of Brent crude, the benchmark for oil trading in Asia and Europe, would retreat from around $125 to his forecast of $105, helped spark a selloff.

In London, Brent crude lost $2.99, or 2.4 percent, to settle at $120.43 per barrel on the ICE Futures exchange.

WTI, the U.S. benchmark, followed. Its price has dropped about 6 percent in two days after settling above $112 on Friday.

Analyst and trader Stephen Schork pointed out that anyone who bought WTI futures last week paid between $107.58 and $112.94 per barrel. If oil stays below that level, it could trigger a wider sell-off.

"If they panic, we could be at $100 (per barrel) in no time," Schork said.

On Tuesday, some of the industry's primary data-collecting agencies suggested that refineries should remain well supplied with oil despite growing demand from China and other emerging economies.

The International Energy Agency said a supply crisis has been averted, in the short term at least, as Saudi Arabia, Kuwait and the United Arab Emirates boost production to offset Libya's lost output.

Both OPEC and IEA warned that high energy prices are starting to force people to conserve on fuel. "High prices are already starting to dent demand growth," IEA said in its monthly report.

Economists have been looking for signs that consumers are starting to balk at higher energy prices. Industry surveys of gasoline purchases suggest that motorists have started to drive less, though some analysts, including those at Barclays Capital, say they haven't seen a "considerable impact" yet.

Analysts say it's unclear whether oil is headed for a correction and lower prices. They note that the price of oil fell about 5 percent in the days after Japan was rocked by a devastating earthquake and tsunami. That decline was reversed in days, as were smaller ones since.

"The trend is still up" for oil prices, said Tom Bentz, director of BNP Paribas Commodity Futures. But he added, "I don't know how long we can keep seeing increases in inflation across the board -- food inflation, energy inflation -- and how long we can see that go on without having some kind of pullback in demand."

U.S., gasoline demand has dropped for six straight weeks, according to MasterCard SpendingPulse. SpendingPulse said Americans bought 3 percent less gas last week than at the same time last year. The consumer research group tracks gasoline purchases at 140,000 service stations around the country.

The Energy Department said Tuesday that gasoline prices should be higher when vacationers hit the highways this summer. The agency now expects Americans will pay an average $3.86 per gallon during the summer driving season, which traditionally begins with Memorial Day weekend.

The national average for a gallon of regular is already at $3.79 after rising 2 cents overnight, according to AAA, Wright Express and Oil Price Information Service. Illinois has joined California, Hawaii and Alaska with average prices above $4 per gallon.

In other Nymex trading for May contracts, heating oil lost 7.99 cents to settle at $3.1726 per gallon and gasoline futures gave up 3.64 cents to settle at $3.1641 per gallon. Natural gas fell a penny to settle at $4.098 per 1,000 cubic feet.

Monday, April 11, 2011...

•   May crude oil prices this morning are trading down -97 cents a barrel and May gasoline is -3.30 cents per gallon. Crude oil and gasoline prices last Friday rallied sharply as the dollar plunged and fighting intensified in Libya: CLK11 +$2.49, RBK11 +7.42. May crude posted a 2-1/2 year high and May gasoline soared to a 2-3/4 year high.

                Bullish factors included (1) the plunge in the dollar index to a 16-month low, which bolsters investment demand for commodities, (2) the ongoing strife in Libya with the prediction from Barclays Capital that damage to oilfields in Libya by forces loyal to Mummar Qaddafi are the "ultimate blow" to hopes for a prompt resumption of exports, and will help send oil prices towards $130 a barrel, and (3) the larger-than-expected increase in Feb German exports which boosts confidence in the global economic outlook and energy demand.

                Bearish factors was the report from JBC Energy GmbH that a jump in oil prices to an average of $125 a barrel this year may erode the economic recovery and reduce crude demand by 700,000 barrels a day.

Tuesday, April 12, 2011...

•   May crude oil prices this morning are trading down -24 cents a barrel and May gasoline is +2.45 cents per gallon. Crude oil and gasoline prices yesterday pulled back after the IMF cut its GDP growth estimates for the US and after Libyan leader Qaddafi agreed to a cease fire: CLK11 -$2.87, RBK11 -6.02. May crude posted a 2-1/2 year high but erased its gains and closed lower.

                Bearish factors included (1) a stronger dollar, which discourages investment demand in commodities, (2) the action by the IMF to cut its GDP estimate for the US this year to 2.8% from a Jan estimate of 3.0% and to cut its GDP forecast for Japan this year to 1.4% from 1.6%, which signals reduced fuel consumption, and (3) the report from the African Union that said Libyan leader Qaddafi agreed to a cease-fire plan, which bolstered speculation that Libyan oil exports may recover.

                Bullish factors included (1) the statement from Libyan rebels that they will not agree to a cease-fire deal if Libyan lead er Qaddafi or his sons are allowed to stay in power, and (2) the larger-than-expected increase in Mar China exports, which indicates economic strength that may lead to increased energy demand.

Wednesday, April 13, 2011...

•   May crude oil prices this morning are trading up +18 cents a barrel and May gasoline is +2.07 cents per gallon. Crude oil and gasoline prices yesterday sold-off for a second day after the IEA said that prices above $100 a barrel are starting to hurt the global economy: CLK11 -$3.67, RBK11 -3.64. May crude posted a 1-1/2 week low and May gasoline slid to a 1-week low.

                Bearish factors included (1) the monthly report from the IEA that stated there are signs of an oil-demand "slowdown" due to current oil prices above $100 a barrel, (2) the statement from investment bank Rajhi Capital that Saudi Arabia plans to expand its oil rig count by about 28% in order to ensure adequate spare production capacity, and (3) expectations for weekly crude supplies to increase for the sixth straight week when the DOE releases its weekly inventory figures on Wed.

                Bullish factors included (1) the slump in the dollar index to a 16-1/4 month low, which encourages investment demand i n commodities, (2) the action by the US Energy Department to raise its crude oil price forecast for 2011 to $106.38 a barrel from an earlier forecast of $101.77 a barrel, and (3) the outlook for US gasoline supplies to fall for the eighth consecutive week when the DOE releases its weekly inventory figures on Wed. Expectations for Wednesday's weekly DOE inventories are for crude oil to climb +1.0 million bbl, gasoline stockpiles to fall -850,000 bbl, distillate supplies to climb +500,000 bbl and the refinery utilization rate to rise +0.5 to 84.9%.

Thursday, April 14, 2011...

•   May crude oil prices this morning are trading down -99 cents a barrel and May gasoline is -3.09 cents per gallon. Crude oil and gasoline prices yesterday moved higher on a weak dollar and a plunge in US gasoline inventories to a 5-month low: CLK11 +$0.86, RBK11 +7.83. May crude posted a 1-1/2 week low but recovered its losses and finished higher.

                Bullish factors included (1) the weaker dollar, which encourages investment demand in commodities, (2) the larger-than-expected drop in weekly gasoline inventories which fell to a 5-month low (-7.0 million bbl to 209.7 million bbl versus expectations of -850,000 bbl), (3) increased demand after US gasoline demand rose +3.7% w/w in the week ended Apr 8 to 9.18 million barrels a day, and (4) the unexpected plunge in the refinery utilization rate to a 2-month low, which indicates reduced output of gasoline and distillate products in the weeks ahead (-3.0 to 81.4% versus an expected increase of +0.5 to 84.9%).

                Bearish factors in cluded (1) the larger-than-expected increase in weekly crude oil inventories which rose for the sixth consecutive week to a 3-1/2 month high of 359.3 million bbl (+1.63 million bbl versus expectations of +1.0 million bbl), and (2) the +26,000 bbl increase in weekly crude inventories in Cushing, OK, delivery point for WTI crude, to 41.9 million bbl, the highest since the DOE began tracking stockpiles at the hub in 2004.

Friday, April 15, 2011...

•   May crude oil prices this morning are trading down -2 cents a barrel and May gasoline is +1.20 cents per gallon. Crude oil and gasoline prices yesterday settled mixed as a report that Saudi Arabia cut crude production boosted crude while an unexpected increase in jobless claims undercut gasoline: CLK11 +$1.00, RBK11 -0.77.

                Bullish factors included (1) the report from Banque Saudi Fransi that said Saudi Arabia cut its crude output by 300,000 barrels a day because it couldn't find buyers for the lighter blend of crude it was producing after Libya's crude output was halted, (2) the fall in the dollar index to a 1-1/3 year low, which boots investment demand in commodities, and (3) early strength in gasoline after Sunoco FCC was forced to close a processing unit at its Philadelphia refinery, which may tighten gasoline supplies on the east coast.

               Bearish factors included (1) the unexpected jump in weekly US initial unemployment claims, which signals labor market weakness th at may reduce fuel demand, and (2) the report from the China Securities Journal that said China is likely to raise the reserve requirements for banks in the "near future," which may slow its economy and demand for fuel.

Monday, April 18, 2011...

•   May crude oil prices this morning are trading down -$1.30 a barrel and May gasoline is -2.07 cents per gallon. Crude oil and gasoline prices last Friday moved higher after US consumer sentiment and industrial output increased more than expected: CLK11 +$1.55, RBK11 +5.45. May gasoline rose to a 2-3/4 year high.

                Bullish factors included (1) the stronger-than-expected Apr US University of Michigan consumer confidence and Mar industrial production, which signals increased energy consumption, and (2) stronger-than-expected Q1 China GDP, which signals higher fuel demand.

                Bearish factors included (1) the stronger dollar, and (2) the larger-than-expected increases in Mar Euro-Zone and Mar China consumer prices, which may lead to additional interest rate hikes from the ECB and PBOC that may slow global economic growth and energy demand.

Tuesday, April 19, 2011...

•   May crude oil prices this morning are trading dowm -87 cents a barrel and May gasoline is -3.35 cents per gallon. Crude oil and gasoline prices yesterday weakened and finished sharply lower after Saudi Arabia said the global oil market has enough crude and after China raised banks' reserve requirements: CLK11 -$2.54, RBK11 -3.64.

                Bearish factors included (1) the rally in the dollar index to a 1-week high, which undercuts investment demand for commodities, (2) comment from Saudi Arabian Oil Minister Ali al-Naimi who said the global "market is oversupplied" with crude, and (3) the action by China to raise banks' reserve requirements for the fourth time this year, which may slow economic growth and energy demand.

                Bullish factors included (1) ongoing fighting in Libya between rebel forces and troops loyal to Mummar Qadaffi, which may prolong the lack of Libyan crude exports, and (2) the prediction from JPMorgan Chase that oil prices may surge past $130 a barrel if OPEC doesn't increase its crude output by Q3.

Wednesday, April 20, 2011...

•   June crude oil prices this morning are trading up +$1.34 a barrel and June gasoline is +3.19 cents per gallon. Crude oil and gasoline prices yesterday settled mixed as crude oil gained on comments from OPEC's Secretary General while gasoline fell on concern high prices will slow the economy and fuel demand: CLM11 +$0.59, RBM11 -1.91.

                Bullish factors included (1) the weak dollar, which encourages investment demand in commodities, (2) comments from OPEC Secretary General El-Badri who said he expects crude prices to stay above $100 a barrel until at least next year, and (3) the outlook for weekly US gasoline inventories to decline for the ninth consecutive week when the DOE releases its weekly inventory numbers on Wed.

                Bearish factors included (1) heightened concern that fuel prices at 2-3/4 year highs will slow the US economic recovery and fuel demand, and (2) the outlook for US crude inventories to increase for the seventh straight week when the DOE releases its weekly inventory figures on Wed. Expectations for Wednesday's DOE inventories are for crude oil supplies to rise +1.35 million bbl, gasoline stockpiles to fall -1.75 million bbl, distillate inventories to increase +400,000 bbl and the refinery utilization rate to rise +0.9 to 82.3%.

Thursday, April 21, 2011...

•   June crude oil prices this morning are trading up +78 cents a barrel and June gasoline is +2.02 cents per gallon. Crude oil and gasoline prices yesterday rallied sharply on a slump in the dollar and the unexpected decline in weekly crude inventories: CLM11 +$3.17, RBM11 +4.91. June crude posted a 1-week high.

                Bullish factors included (1) the slide in the dollar index to a 16-1/2 month low, which encourages investment demand in commodities, (2) the unexpected decline in weekly crude oil inventories (-2.32 million bbl versus expectations of +1.35 million bbl), (3) the -1.58 million bbl decline in weekly gasoline inventories which fell for the ninth consecutive week to a 5-month low of 308.1 million bbl, and (4) the rally in the S&P 500 to a 1-week high, which bolsters confidence in the economic outlook and energy demand.

                Bearish factors included (1) weakened demand for gasoline after US gasoline demand in the week ended Apr 15 fell -1.2% w/w to 9.06 million barrels a day, and (2) the larger-than expected increase in the weekly refinery utilization rate, which bodes well for increased output of gasoline and distillate products in the weeks ahead (+1.1 to 82.5% versus expectations of +0.9 to 82.3%).

Monday, April 25, 2011...

•   June crude oil prices this morning are trading up +45 cents a barrel and June gasoline is +1.53 cents per gallon. Crude oil and gasoline prices last Thursday fluctuated on either side of unchanged and finished higher as the weak dollar offset the larger-than-expected decline in the Apr Philadelphia Fed manufacturing index: CLM11 +$0.84, RBM11 +2.39. June crude rallied to a 1-1/2 week high and Jun gasoline posted a contract high and nearest-futures May gasoline climbed to a 2-3/4 year high.

                Bullish factors included (1) the plunge in the dollar index to a 2-2/3 year low, which encourages investment demand in commodities, and (2) the rally in the S&P 500 to a 1-1/2 week high, which bolsters confidence in the economic outlook and energy demand.

                Bearish factors included (1) the larger-than-expected decline in the Apr Philadelphia Fed manufacturing index which fell to a 5-month low and suggests weakened energy demand, and (2) the smaller-than-expected drop in weekly US jobless claims, which indicates labor market weakness that may limit fuel demand.

Oil settles a penny lower, gas pump prices up
Oil slips as dollar gains, gasoline up for 34th straight day to $3.86 per gallon
Monday April 25, 2011, 3:35 pm EDT

NEW YORK (AP) -- Oil was flat Monday, as the dollar pulled back from lows set earlier in the day and investors awaited this week's Fed meeting.

Oil is priced in dollars, so it tends to fall as the dollar strengthens and makes crude more expensive for investors holding foreign money. While the dollar was down slightly versus other major currencies, it bounced back from earlier lows.

The dollar has been weak because investors think the Federal Reserve will continue to keep interest rates near zero when it meets Tuesday and Wednesday. Other central banks have been raising interest rates out of concerns about inflation. Rock-bottom U.S. interest rates make the dollar less attractive to investors.

Benchmark crude for June delivery lost a penny to settle at $112.28 per barrel on the New York Mercantile Exchange. In London, Brent crude lost 33 cents to settle at $123.66 per barrel on the ICE Futures exchange.

Gas pump prices continued to climb for the 34th straight day, to a national average of more than $3.86 per gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular has increased 32 cents since March 22. The average price is now a dollar more per gallon than a year ago.

In other Nymex trading, heating oil lost 1.73 cents to settle at $3.1989 per gallon and gasoline futures added less than a penny to settle at $3.2785 per gallon. Natural gas dropped 2.3 cents to $4.389 per 1,000 cubic feet.

Gas Prices and the Blame Game: Opinion

NEW YORK (TheStreet) -- When gas prices spike, owing to Middle East turmoil or hurricanes, conspiracy theories abound about profiteering speculators. The truth is Americans are suffering from bad energy policies with politicians eager to sell pet projects and hoist blame onto others.

In such a fit, President Obama offers fanciful alternative energy technologies as a solution to rising pump prices and a task force to ferret out fraud in energy markets.

Even before disturbances in Egypt, Libya and elsewhere, economists expected oil prices to increase from their September lows of $75 a barrel to more than $100 a barrel by this summer.

Economic recovery is pushing up gasoline demand and jet travel; President Obama's restrictions on offshore drilling are curtailing U.S. oil supplies; electric vehicles and hybrids won't appreciably dent U.S. gasoline consumption before the end of this decade; and Chinese oil imports are growing 10% a year. All Middle East strife did was accelerate the price surge.

When political unrest or natural events make future oil prices uncertain, big consumers, like refineries and airlines, limit their risks by purchasing contracts for future deliveries, and the cost of reasonably insuring those contracts adds to prices.

For example, Egypt and Libya alone had the potential to disrupt delivery of 5% of the global crude oil supply. However, the short-term flexibility of global consumers to curtail consumption is very low -- the immediate price effect of such a loss in supply could be more than 25%. Measured against the September or October prices, that would be about a $20 dollar jump.

When refiners, airlines and others purchase contracts for future delivery, if the expected jump in prices is in the range of $20, traders on the other side of those contracts bear the risks of even higher prices and need a buffer to offset potential losses. Hence a $30 jump on a 90- or 180-day contract is hardly unreasonable.

Between the effects of increased demand and tightening global supplies, expected before the Egyptian rebellion, and continued concern that the democracy movement could spread to autocratic and mildly repressive regimes like Saudi Arabia, a price increase from $75 in September to $105 in April is quite reasonable.
Also, profiteering in the gasoline market appears equally remote. Prices have increased about $1.10 gallon since September to $3.86 in April, while the cost of crude oil has increased a bit more than $33 a barrel or 80 cents a gallon. When market conditions improve, such as during the summer driving season, refiners' margins generally improve. Another 30 cents seems well within what could be expected, and there appears to be little room for speculators in the gasoline market to be taking an outsized slice.

Before readers pounce on refiners remember that refining, historically, isn't a high-profit business. If margins don't increase when prices are strong, those folks can't stay in business. It's like hotel rates, seasonal fluctuations and unusual events are built into the business model.

All this has a profound effect on U.S. growth. Economists expected that the economic recovery could withstand a gradual increase in gas prices to more than $3.50 by summer, but the sudden jump this winter and spring caused most forecasters, this one included, to scale back first-quarter growth estimates from 3.3% to something in the range of 2.8%.

Add other festering problems such as the debt crisis in Europe, state governments accelerating layoffs, uncertainty imposed by the budget and debt ceiling melodramas in Congress, and business fears about the Obama administration's penchant to scapegoat and regulate, most forecasters are expecting the Commerce Department to report Friday first-quarter growth was closer to 2%. Already, new unemployment claims are on the rise again, and the recent improvement in the monthly jobs creation numbers may be short-lived.

Americans could have it another way. U.S. oil consumption is about 15.3 million barrels a day, with imports supplying 9.5 million barrels a day and domestic production at 5.8 million barrels a day. Prudent emphasis on more fuel-efficient vehicles -- not just wiz bang electrics -- could cut domestic fuel consumption by 2.5 million barrels a day, renewed development of economically viable oil reserves could increase domestic production by about 4 million barrels a day, and imports could be cut by one-half to two-thirds.
While gas prices might still be high, the money Americans spend at the pump and on better vehicles would stay at home to create high paying jobs, and boost growth and living standards for all Americans.

More domestically produced oil would not add to environmental problems --those have to be managed whether oil is produced in the United States or imported. Indeed, greater reliance on domestic oil would be kinder to the environment because U.S. policymakers are better able to require safe production methods at home than abroad.

Instead, seizing on public anger about rising gas prices, President Obama fails to take responsibility for his policies and relies on his best asset -- his fine speaking voice -- to troll for votes by villainizing oil companies and faceless speculators.

Such demagoguery imperils an already fragile American prosperity and debases the presidency. All politicians need to run for re-election but presidents are elected to be statesmen and put the national interest above their own.

Mr. President, we are waiting.   

Tuesday, April 26, 2011...

•   June crude oil prices this morning are trading down -41 cents a barrel and June gasoline is +0.28 of a cent per gallon. Crude oil and gasoline prices yesterday retreated after an early rally faded and prices finished mixed on profit taking: CLM11 -$0.01, RBM11 +0.62. June crude rallied to a 2-1/2 year high but closed lower and Jun gasoline posted a contract high and nearest-futures May gasoline climbed to a 2-3/4 year high.

                Bearish factors included (1) the decline in the equity market which erodes optimism in the economic outlook and energy demand, and (2) technical selling after the energy markets failed to hold its gains to 2+ year highs.

                Bullish factors included (1) the weak dollar which encourages investment demand in commodities, and (2) comments from a Saudi Arabian oil official who said his country's oil output will stay at 12.5 million barrels a day, squashing rumors that the country was considering hiking output to 15 million barrels a day.