Crude Oil

[setravis]

Monday, 15 November 2010...

•December crude oil prices this morning are trading +74 cents a barrel and December gasoline is +2.39 cents per gallon. Crude oil and gasoline prices last Friday moved lower and finished with large losses as the dollar strengthened along with speculation that China may raise interest rates which might crimp fuel demand: CLZ10 -$2.93, RBZ10 -2.580. Dec crude slipped to a 1-week low while Dec gasoline posted a 6-month high but erased its gains and closed lower.
               Bearish factors included (1) the early rally in the dollar index to a 5-week high, which curbs investment demand for commodities, (2) the jump in Oct China consumer prices to a 25-month high, which bolstered speculation that Chinese economic growth and demand for commodities may slow if it increases interest rates further to combat inflation, and (3) the prediction from the IEA that oil production outside of OPEC will be 53.4 million barrels a day in 2011, +250,000 barrels a day more than last month's estimate due to increased production in North America and China.
               A bullish factor for energy prices last Friday was the spike in gasoline to a 6-month high after the Nov US University of Michigan consumer confidence rose more than forecast to a 5-month high.

[setravis]

Tuesday, November 16, 2010...

•   December crude oil prices this morning are trading -$1.05 a barrel and slipped to a 1-1/2 week low and December gasoline is -1.71 cents per gallon. Crude oil and gasoline prices yesterday moved higher early as an improvement in global economic indicators pointed to higher fuel demand but sustained dollar strength knocked prices back and they settled slightly lower: CLZ10 -$0.02, RBZ10 -2.580.

                Bearish factors included (1) the rally in the dollar index to a 1-1/4 month high, which reduces investment demand in commodities, and (2) the larger-than-expected decline in the Nov Empire manufacturing index, which contracted at its worst level in 19 months and signals weakened energy demand.

                Bullish factors included (1) the larger-than-expected increase in Oct US retail sales, which posted its biggest increase since March and boosted speculation that fuel demand will increase, (2) the larger-than-expected expansion of Q3 Japan GDP, which signals a higher rate of energy consump tion than expected, and (3) the rally in equity prices, which boosts confidence in the economic outlook and energy demand.

[setravis]

Wednesday, November 17, 2010...


•   December crude oil prices this morning are trading -71 cents a barrel and December gasoline is -1.21 cents per gallon. Crude oil slipped to a fresh 2-week low in overnight trade on concern China's action to curb inflation will reduce its demand for commodities. Crude oil and gasoline prices yesterday moved sharply lower due to strength in the dollar and on speculation the European debt crisis and steps by China to cool inflation will reduce demand for energy: CLZ10 -$2.52, RBZ10 -3.030. Dec crude fell to a 2-week low and Dec gasoline dropped to a 1-1/2 week low.

                Bearish factors included (1) the rally in the dollar index to a 1-1/2 month high, which reduces investment demand in commodities, (2) the action by South Korea to raise interest rates along with speculation that China will hike its interest rates further to cool inflation, and (3) weaker than expected US economic data on producer prices, industrial production and the NAHB housing market index, which signals fuel demand may be constrained as the economy struggles to expand.

                Bullish factors included (1) the prediction from the AAA that US travel during this year's Thanksgiving holiday weekend may increase +11% from last year, which may lead to increased gasoline demand, (2) the action by the Nigerian rebel group MEND to attack an Exxon Mobile oil installation in Nigeria along with its threats for "further attacks across the Niger delta in coming weeks," which may reduce crude production in Nigeria, Africa's biggest producer, and (3) the outlook for a cut in US energy supplies when the DOE reports weekly crude inventories on Wed. Expectations for Wednesday's weekly inventories from the DOE are for crude oil supplies to drop -700,000 bbl, gasoline stockpiles to decline -1.0 million bbl, distillate inventories to fall -2.0 million bbl and the refinery capacity rate to rise +0.5 to 82.9%.

[setravis]

Thursday, November 18, 2010...


•   December crude oil prices this morning are trading +$1.24 a barrel and December gasoline is +2.96 cents per gallon. Crude oil and gasoline prices yesterday moved lower on speculation that actions by China to slow its economy will reduce oil demand in the world's biggest energy-consuming country although gasoline rallied late to settle little changed: CLZ10 -$1.90, RBZ10 +0.220. Dec crude and Dec gasoline both fell to 2-week lows.

                Bearish factors included (1) concerns that Chinese energy demand will weaken after the statement from China's cabinet that the government may impose price controls on "important daily necessities" and production materials, along with the report from the China Securities Journal that the PBOC may raise interest rates for a second time this year as soon as Nov 19, (2) concerns that US fuel demand will remain constrained after the drop in Oct US housing starts to a 1-1/2 year low signals renewed weakness in the US economy, and (3) the increase in US ethanol production to a record 895,00 barrels a day in the week ended Nov 12, which may curb gasoline demand from refiners.

                Bullish factors included (1) the weaker dollar, (2) the much larger-than-expected declines in weekly crude and gasoline inventories (crude -7.29 million bbl versus expectations of a -700,00 bbl draw and gasoline -2.66 million bbl to a 1-year low of 207.7 million, versus expectations of -1.0 million bbl), and (3) increased energy demand after total US consumption of petroleum products averaged 19.3 million barrels a day in the past 4 weeks, up +3.7% from 18.6 million during the same period a year earlier.

[setravis]

Friday, November 19, 2010...


•   December crude oil prices this morning are trading +2 cents a barrel and December gasoline is -0.08 of a cent per gallon. Crude oil and gasoline prices yesterday moved higher on optimism that a resolution to Ireland's debt crisis is near along with stronger-than-expected US economic data: CLZ10 +$1.41, RBZ10 +7.040.

                Bullish factors included (1) the weaker dollar, (2) a rally in global equity markets after Irish central bank Governor Holohan said he expects his country to ask the EU and the IMF for "tens of billion" of euros to rescue its banks, and (3) the stronger-than-expected increase in the Nov Philadelphia Fed manufacturing index which matched its best level in 5-1/2 years.

                Bearish factors was the action by the OECD to lower its growth forecast for the global economy next year to 4.2% from a May forecast of 4.5%, as it predicts a "soft spot" in 2011 as government stimulus is withdrawn and an investment recovery slows.

[setravis]

Monday, November 22, 2010...


•   January crude oil prices this morning are trading +33 cents barrel and January gasoline is +0.93 of a cent per gallon. Crude oil and gasoline prices last Friday settled lower on concern the action by China to curb bank lending will lead to slower economic growth and reduced demand for energy: CLF11 -$0.44, RBF11 -3.140.
               
                Bearish factors included (1) the action by China to raise its banks' reserve ratio requirements, which may slow its economy and fuel demand, and (2) the drop in global equity markets, which reduces optimism in the economic outlook and energy demand.
               
                Bullish factors include (1) optimism that a bailout of Ireland's banks will prevent the European sovereign-debt crisis from getting worse, which would slow economic growth and fuel demand, and (2) data from the API that said Oct US diesel consumption rose +8.4% y/y to 3.19 million barrels a day and that total diesel consumption during the first 10 months of this year is up +2.9% to 2.97 million barrels a da y, a sign that the US economy is rebounding.

[setravis]

Tuesday, 23 November 2010...


•January crude oil prices this morning are trading -76 cents a barrel and January gasoline is -2.02 cents per gallon. Crude oil and gasoline prices yesterday erased an early rally and moved lower on concern the European sovereign-debt crisis may spread and limit economic growth and energy demand: CLF11 -$0.24, RBF11 -2.94. Jan gasoline slipped to a 3-week low.

                Bearish factors included (1) concerns the European sovereign-debt crisis may worsen and limit economic growth and energy demand after Moody's Investors Service said that loans to Ireland from the EU and the IMF may increase the country's debt burden and pose a "credit negative" for Ireland, and (2) the rebound in the dollar which erased early losses and finished higher.

                Bullish factors include (1) early optimism that a bailout of Ireland's banks will prevent the European sovereign-debt crisis from spreading, and (2) the prediction from Goldman Sachs that recent actions by Chinese policy makers to contain inflation will have a "limited" impact on oil-demand growth and that exceptional strength in Chinese diesel demand could push China's oil demand to new highs in November and December this year. 

[setravis]

Wednesday, November 24, 2010...


•   January crude oil prices this morning are trading +24 cents a barrel and January gasoline is +1.30 cents per gallon. Crude oil and gasoline prices yesterday traded mostly lower as dollar strength offset the positive impact of the upwardly revised Q3 US GDP: CLF11 -$0.49, RBF11 -1.09. Jan gasoline slipped to a 3-week low.

                Bearish factors included (1) concern that the European sovereign-debt crisis may spread beyond Greece and Ireland to Portugal and Spain and constrict European economic growth and energy demand, (2) reduced investment demand for crude after the dollar index surged to a 1-3/4 month high after North and South Korea exchanged artillery fire, and (3) the updated 6-10 day weather forecast from the National Weather Service that calls for above-normal temperatures in the Northeast, which may curb demand for heating fuels.

                Bullish factors include (1) the larger-than-expected upward revision to Q3 US GDP, (2) attacks on Nigerian oil installations by Nigeria's main rebel group that have caused Nigeria's four state-run refineries to produce at only 30% of capacity, according to the Nigerian Department of Petroleum Resources, and (3) the outlook for US crude supplies to decline for a third week when the DOE on Wednesday reports weekly crude inventories. Expectations for Wednesday's weekly inventory report from the DOE are for crude oil supplies to fall -2.0 million bbl, gasoline stockpiles to drop -1.25 million bbl, distillate inventories to slip -1.0 million bbl and the refinery capacity rate to increase +0.4 to 84.4%.

[setravis]

Friday, November 26, 2010...


•   January crude oil prices this morning are trading down -65 cents a barrel and January gasoline is -0.74 of a cent per gallon. Crude oil and gasoline prices Wednesday moved higher throughout the day as an improvement in jobless claims and consumer confidence pumped up the stock market and fueled expectations for increased energy demand: CLF11 +$2.61, RBF11 +7.50.

                Bullish factors included (1) the weaker dollar, (2) the drop in weekly US initial unemployment claims to a 2-1/4 year low and the increase in the Nov University of Michigan consumer confidence to a 5-month high, which bolsters optimism the economic rebound will accelerate, and (3) comments from OPEC's Secretary-General who said oil prices above $100 a barrel would not necessarily derail the global recovery and that OPEC would only boost supplies if there was a physical shortage.

                Bearish factors include (1) the unexpected increases in weekly crude oil and gasoline inventories (crude +1.03 million bbl versus e xpectations of -2.0 million bbl and gasoline +1.91 million bbl versus expectations of -1.25 million bbl), and (2) the unexpected declines in Oct durable goods orders and Oct new home sales, which signals an uneven recovery that may limit energy demand.

[setravis]

Monday, November 29, 2010...


•   January crude oil prices this morning are up 77 cents a barrel and January gasoline is up 1.96 cents per gallon on cold weather in Europe, today's 3-year high in Eurozone economic confidence, and continued optimism about stronger economic data in the US. Crude oil and gasoline prices last Friday moved lower in quiet trade due to a stronger dollar and concern that global economic growth will slow as the European credit crisis spreads: CLF11 -$0.10, RBF11 -0.34. Jan crude posted a 1-1/2 week high in overnight trade but erased its gains and finished lower.

                Bearish factors included (1) the rally in the dollar index to a 2-month high, which reduces the investment demand for commodities, (2) concern the European sovereign-debt crisis will spread and slow global economic growth and energy demand, and (3) concerns that China will continue to limit loan growth which may slow its economy and energy demand after the Shanghai Securities News reported that the Chinese government m ay cut the target for new lending next year.

[setravis]

Tuesday, November 30, 2010...

•   January crude oil prices this morning are trading -29 cents a barrel and January gasoline is -1.24 cents per gallon. Crude oil and gasoline prices yesterday moved higher on optimism that an increase in holiday sales signals the economy and energy demand may strengthen: CLF11 +$1.97, RBF11 +6.34. Jan crude and Jan gasoline climbed to 2-week highs.

                Bullish factors included (1) data from the National Retail Federation that showed US shoppers over the Thanksgiving weekend increased purchases by +6.4% over the 2009 period, a sign of a stronger economy, and (2) the prediction from the US Climate Prediction Center that temperatures in the eastern half of the US will be below normal from Dec 6 to Dec 12, which may prompt stronger demand for heating fuels.

                Bearish factors included (1) the rally in the dollar index to a 2-1/4 month high, which reduces the investment demand for commodities, and (2) weakness in f=global equity markets which reduces confidence in the global econo mic outlook.

[setravis]

Wednesday, December 1, 2010...

•   January crude oil prices this morning are trading +$1.30 a barrel and January gasoline is +5.22 cents per gallon. Crude oil and gasoline prices yesterday fell as the dollar gained on concern the European sovereign-debt crisis is spreading: CLF11 -$1.62, RBF11 -3.76. Jan gasoline rose to a 2-week high but erased its gains and finished lower.

                Bearish factors included (1) the rally in the dollar index to a 2-1/4 month high, which reduces the investment demand for commodities, (2) concern that the European debt crisis will spread and undercut the global economy and energy demand, and (3) concern that the US housing crisis may linger and limit fuel demand after the Sep S&P/CaseShiller composite-20 home price index fell for a third month.

                Bullish factors included (1) the larger-than-expected increase in Nov US consumer confidence to a 5-month high along with the unexpected increase in the Nov Chicago purchasing managers index to a 7-month high, which indicates the econ omy may strengthen and improve fuel demand, and (2) the outlook for a fall in weekly crude supplies when the DOE releases weekly crude oil inventory figures on Wed. Expectations for Wednesday's weekly crude inventories from the DOE are for crude oil supplies to fall -1.1 million bbl, gasoline stockpiles to gain +625,000 bbl, distillate inventories to drop -1.1 million bbl and the refinery capacity rate to rise +0.4 to 85.9%.

[setravis]

Thursday, December 2, 2010...

•   January crude oil prices this morning are trading down -11 cents a barrel and January gasoline is up +1.08 cents per gallon. Crude oil and gasoline prices yesterday rallied sharply on a weaker dollar, strong Chinese manufacturing activity and reduced European debt concerns: CLF11 +$2.64, RBF11 +9.71. Jan crude climbed to a 2-week high and Jan gasoline surged to a 6-3/4 month high.

                Bullish factors included (1) a weaker dollar, (2) speculation the ECB will act to prevent further contagion of the European sovereign-debt crisis when it meets Thursday, (3) the Nov China PMI manufacturing index which rose more than expected to its fastest pace in 7 months, and (4) the Nov ADP employment change which showed the biggest monthly increase in jobs in 3 years and boosts confidence in the economy and energy demand.

                Bearish factors included (1) the unexpected increase in weekly crude oil inventories (+1.07 million bbl versus expectations of -1.1 million bbl), and (2) snowstorms an d adverse weather throughout Europe that has disrupted air travel and limited auto travel, which may reduce fuel demand, and (3) the official end of the third-most active Atlantic hurricane season in history, according to the National Hurricane Center, which left the US unscathed and failed to disrupt crude or refinery production in the US Gulf coast.

[setravis]

Friday, December 3, 2010...


•   January crude oil prices this morning are trading up +9 cents a barrel and January gasoline is -0.49 of a cent per gallon. Crude oil and gasoline prices fluctuated on either side of unchanged yesterday until the dollar sold-off after mid-morning which prompted a rally in energy prices into the close: CLF11 +$1.25, RBF11 +4.89. Jan crude posted a 2-1/2 week high and Jan gasoline climbed to a 6-3/4 month high.

                Bullish factors included (1) a weaker dollar, (2) the action by the ECB to delay the withdrawal of its stimulus measures, and (3) strength in US retail sales after Retail Metrics reported that Nov US comparable store sales rose more than expected, which indicates strength in the economy that may lead to increased fuel demand.

                Bearish factors included (1) the prediction from tanker-tracker Oil Movements that OPEC will increase crude shipments by +0.4% to 23.56 million barrels a day in the four weeks to Dec 18, and (2) the larger-than-expected increase in weekly US initial unemployment claims, which questions the sustainability of the economic recovery and energy demand.

[setravis]

Monday, December 6, 2010...

•   January crude oil prices this morning are trading -18 cents a barrel and January gasoline is +0.14 of a cent per gallon. Crude oil posted a 26-month high in overnight trade before falling back. Crude oil and gasoline prices last Friday gyrated on both sides of unchanged early but a weaker dollar trumped a weak payrolls report and prices finished mixed: CLF11 +$1.19, RBF11 -0.32. Jan crude climbed to a 25-month high.

               Bullish factors included (1) the slide in the dollar index to a 1-1/2 week low, which boost investment demand for commodities, (2) the stronger-than-expected Nov ISM non-manufacturing index which expanded at its fastest pace in 6 months and indicates increased energy consumption, and (3) the prediction from JPMorgan Chase that OPEC is unlikely to increase crude oil production next year unless prices surge through $100 a barrel and that crude prices will advance to $120 a barrel by 2012 as consumption grows in emerging economies.

               The main bearish factor last Friday was the smaller-than-expected increase in Nov nonfarm payrolls along with the unexpected increase in the US Nov unemployment rate to a 7-month high of 9.8%, which questions the sustainability of the economic recovery and energy demand.