Crude Oil

[setravis]

Tuesday, December 7, 2010...

.   January crude oil prices this morning are trading +$1.02 a barrel and January gasoline is +1.98 cents per gallon. Jan crude posted a 26-month high and Jan gasoline climbed to a fresh 7-month high in overnight trade as most commodity prices soared after President Obama agreed to extend tax cuts. Crude oil and gasoline prices yesterday erased an early rally and settled mixed as the dollar strengthened: CLF11 +$0.19, RBF11 -1.04. Jan crude rallied to a 26-month high and Jan gasoline posted a 7-month high but shed its gains and settled lower.

                Bullish factors included (1) comments from Fed Chairman Bernanke who said a return to recession "doesn't seem likely" because sectors of the economy such as housing can't become more depressed, (2) a possible increase in heating fuel demand after the National Weather Service Climate Prediction Center said temperatures in the US Midwest and Northeast will be lower than normal from Dec 8-16, and (3) the action by Nigerian rebel forces to damage a crude pipeline in Nigeria which may reduce crude oil output from Africa's biggest producer.

                Bearish factors included (1) strength in the dollar which curtails investment demand for commodities, and (2) the action by Moody's Investors Service to cut Hungary's debt to the lowest investment grade and indicate it may cut the rating to junk, which indicates a possible worsening of the European debt crisis that may limit economic growth and energy demand.

[setravis]

Wednesday, December 8, 2010...

•   January crude oil prices this morning are trading down -75 cents a barrel and January gasoline is -2.34 cents per gallon. Crude oil and gasoline prices yesterday rallied early after President Obama agreed to extend tax cuts but gave up their gains and closed lower as the dollar strengthened: CLF11 -$0.69, RBF11 -1.87. Jan crude rallied to a 26-month high but erased its gains and closed lower and Jan gasoline climbed to a 7-month high but shed its gains and finished lower.

                Bearish factors included (1) the rebound in the dollar which shook off early weakness and finished higher, (2) weakness in gasoline after Irving Oil and Valero Energy returned refinery units to service after scheduled maintenance, which will increase gasoline output, and (3) long liquidation in crude oil after prices jumped over $10 a barrel in the past 2-weeks (+13%) to a 26-month high.

                Bullish factors included (1) the action by President Obama to agree to extend the Bush-era tax cuts for 2 years, which may lift the economy and energy demand, (2) the prediction from the National Weather Service's Climate Prediction Center that temperatures from the US Midwest to the Northeast will be lower than normal from Dec 12 through Dec 20, and (3) the outlook for a decrease in US crude supplies when the DOE releases its weekly crude inventory data Wednesday. Expectations for Wednesday's weekly inventory report from the DOE are for crude oil supplies to fall -1.5 million bbl, gasoline stockpiles to increase +750,000 bbl, distillate inventories to drop -900,000 bbl and the refinery capacity rate to rise +1.0 to 83.6%.

[setravis]

Thursday, December 9, 2010...

•   January crude oil prices this morning are trading up +18 cents a barrel and January gasoline is +0.87 of a cent per gallon. Crude oil and gasoline prices yesterday fell after the dollar strengthened and gasoline supplies unexpectedly increased: CLF11 -$0.41, RBF11 -1.84.

                Bearish factors included (1) strength in the dollar, (2) the unexpected increase in weekly gasoline and distillate supplies (gasoline +3.81 million bbl versus expectations of a -300,000 bbl draw and distillates +2.15 million bbl versus expectations of -900,000 bbl), (3) the +6.1% increase in US ethanol production to a record 939,000 barrels a day in the week ended Dec 3, which may cut refinery demand for gasoline, and (4) a possible interest rate hike by China which could slow its energy demand after it said it will release its inflation data 2 days earlier than planned, which fuels speculation of an imminent interest rate hike.

                Bullish factors included (1) the larger-than-expected draw down of weekl y crude inventories (-3.82 million bbl versus expectations of -1.5 million bbl), (2) the action by the US Energy Department to bolster its crude oil price estimate for this year to $78.98 from a Nov estimate of $78.80 and to raise its 2011 crude price estimate to $86.08 a barrel from last month's forecast of $85.17 as it hiked its US oil consumption forecast for 2011 to 19.24 million bpd, up +80,000 bpd from last month's forecast, and (3) the prediction from Colorado State University of an above-average hurricane season for the Atlantic in 2011 with 17 named storms, above the average of 11 named storms which increase the chances of service disruptions and damage to Gulf Coast oil installations and refiners.

[setravis]

Friday, December 10, 2010...

•   January crude oil prices this morning are trading +55 cents a barrel and January gasoline is +0.47 of a cent per gallon. Crude oil and gasoline prices fluctuated on either side of unchanged and settled slightly higher as optimism the economy was improving offset the negative effects of a stronger dollar: CLF11 +$0.09, RBF11 +3.58.

                Bullish factors included (1) the larger-than-expected decline in weekly initial unemployment claims, which indicates improvement in the labor market, (2) the upward revision to Q3 Japan GDP along with the biggest increase in Australian payrolls in 10 months, which signals strength in the global economy that may boost energy demand, and (3) strength in gasoline after Hovensa LLC shut its 150,000 barrel-a-day fluid catalytic cracker at its St. Croix refinery for repairs, which may reduce gasoline supplies available to the US East Coast.

                Bearish factors included (1) a stronger dollar, and (2) concern that the European credit crisis may worsen after Fitch Ratings cut Ireland's credit rating 3 levels, citing "the recent intensification of the financial crisis."

[setravis]

Monday, December 13, 2010...

•   January crude oil prices this morning are trading up +$1.26 a barrel and January gasoline is +3.82 cents per gallon. Crude oil and gasoline prices slipped last Friday as the dollar strengthened: CLF11 -$0.58, RBF11 -3.12.

                Bearish factors included (1) a rally in the dollar, which reduces investment demand in commodities, (2) the action by the PBOC to raise banks' reserve requirements for the third time in the last five weeks, which may slow China's economy and energy demand, and (3) the prediction from tanker-tracker Oil Movements that OPEC will boost its crude shipments by 2.6% to 23.76 million barrels a day in the four weeks to Dec 25.

                Bullish factors included (1) the +26% m/m increase in Nov China crude imports to 20.3 MMT as refiners ramped up crude processing rates to ease a diesel shortage, and (2) the action by the IEA to raise its 2011 global crude oil demand forecast for the third straight month to 88.8 million barrels a day, up +260,000 barrels from their pre vious forecast and that global oil demand in Q3 of this year grew 3.3 million barrels a day y/y.

[setravis]

Tuesday, December 14, 2010...

•   January crude oil prices this morning are trading +4 cents a barrel and January gasoline is -0.67 of a cent per gallon. Crude oil and gasoline prices moved higher yesterday as the dollar weakened and after China's refiners boosted crude processing to a record in November: CLF11 +$0.82, RBF11 +0.91.

                Bullish factors included (1) the weaker dollar, which boosts investment demand in commodities, (2) the action by China's refineries to process a record 36.65 MMT of crude oil in Nov, or 8.96 million barrels a day, a sign of strong demand, and (3) the statement from Goldman Sachs that global oil demand has exceeded supply by more than 900,000 barrels a day on a seasonally adjusted basis since May, along with their prediction that the world oil market will remain in deficit in the first half of next year with prices averaging $100 a barrel in 2011 an $110 a barrel in 2012.

                Bearish factors included (1) the prediction from Merrill Lynch that Saudi Arabia will lead OPEC to incre ase crude production "early next year" to avoid a surge in prices that could put the global economic recovery at risk, and (2) the quarterly report from Germany's Bundesbank that said 2011 German GDP growth may weaken to 2.0% from 3.6% this year as the German economy shows a "considerable slowdown" in Q1 of 2011, which may lead to reduced energy demand.

[setravis]

Wednesday, December 15, 2010...

•   January crude oil prices this morning are trading down -76 cents a barrel and January gasoline is -1.14 cents per gallon. Crude oil and gasoline prices yesterday settled lower as the dollar rebounded from a 3-week low and on expectations for an increase in weekly gasoline inventories: CLF11 -$0.33, RBF11 -2.20.

                Bearish factors included (1) the rebound in the dollar index which recovered from a 3-week low to settle little changed, which reduces investment demand in commodities, and (2) weakness in gasoline prices on the outlook for an increase in weekly gasoline supplies when the DOE reports weekly gasoline inventories on Wed.

                Bullish factors included (1) a possible increase in heating fuel demand after the National Weather Service's Climate Prediction Center predicted that temperatures in the eastern half of the US will be below normal from Dec 19 to Dec 27, (2) the prediction from Goldman Sachs that a drop in OPEC spare production capacity will signal a "second stage" in the oil market's recovery that will lift crude prices above $100 a barrel by the second half of 2011, and (3) the prediction from Banque Saudi Fransi that "in order for Saudi Arabia to push other OPEC members to increase oil production, prices have to remain at or above $100 a barrel for a long period and not only for some weeks or a month." Expectations for Wednesday's DOE weekly inventory report are for crude oil stockpiles to drop -2.5 million bbl, gasoline inventories to increase +2.0 million bbl, distillate supplies to remain unchanged, and the refinery capacity rate to remain unchanged at 87.5%.

[setravis]

Thursday, December 16, 2010...

•   January crude oil prices this morning are trading down -41 cents a barrel and January gasoline is -0.23 of a cent per gallon. Crude oil and gasoline prices yesterday recovered from early weakness and settled higher after weekly crude inventories dropped by the most in 8 years: CLF11 +$0.34, RBF11 +1.28. Jan crude closed higher after posting a 1-week low and Jan gasoline finished higher after rebounding from a 2-week low.

                Bullish factors included (1) stronger-than-expected US economic data after the Dec Empire manufacturing index expanded more than expected while Nov industrial production rose more than forecast and Nov capacity utilization climbed to a 25-month high, (2) the plunge in weekly crude oil inventories by the most in 8 years (-9.85 million bbl versus expectations of -2.5 million bbl), (3) the smaller-than-expected increase in weekly gasoline inventories (+809,000 bbl versus expectations of +2.0 million bbl), and (4) an increase in US gasoline demand after t he Energy Department reported that US gasoline demand as measured by what refiners and blenders provide to wholesalers in the week ended Dec 10 rose 1.9% to a 7-week high of 9.35 million barrels a day.

                Bearish factors included (1) the stronger dollar, and (2) the unexpected increase in weekly distillate inventories, which are now +16% above their 5-year average for the period (+1.09 million bbl versus expectations of no change).

[setravis]

Friday, December 17, 2010...

•   January crude oil prices this morning are trading -18 cents a barrel and January gasoline is +0.37 of a cent per gallon. Crude oil and gasoline prices yesterday traded on the defensive most of the day due to strength in the dollar: CLF11 -$0.92, RBF11 -0.49.

                Bearish factors included (1) stronger-than-expected US economic data that boosted the dollar, and (2) the weaker than expected Dec Euro-Zone PMI composite which signals a decrease in energy consumption.

                Bullish factors included (1) the unexpected decline in US weekly unemployment claims along with the unexpected increase in the Dec Philadelphia Fed manufacturing index to its best level in 5-1/2 years, which signals an economic recovery that has legs and may boost fuel demand, and (2) the action by Barclays Plc to hike its crude oil forecast for next year to $91 a barrel from $85, saying that OPEC won't consider increasing oil production until crude prices reach $100 a barrel, rather than raising crude output befor e prices rise that far.

[setravis]

Monday, December 20, 2010...

•   January crude oil prices this morning are trading up +67 cents a barrel and January gasoline is +2.50 cents per gallon. Crude oil and gasoline prices last Friday closed slightly higher as an increase in US leading economic indicators offset a rally in the dollar: CLF11 +$0.32, RBF11 +1.35.

                Bullish factors included (1) the +1.1% m/m increase in Nov US leading indicators, the biggest increase in 8 months and a sign that fuel demand may improve as the economic recovery continues into next year, (2) the unexpected increase in the Dec German IFO business confidence to a record high, which improves the outlook for the European economy and energy demand, and (3) the report from the API that said Nov US fuel consumption jumped +6.5% y/y to 20 million barrels a day and that total US fuel consumption from Jan-Nov is up +2.4% y/y to 19.2 million barrels a day.

                Bearish factors included (1) the surge in the dollar index to a 2-week high, which reduces investment demand for commodi ties, and (2) the prediction from tanker-tracker Oil Movements that OPEC crude oil shipments will increase +0.3% to 23.46 million barrels a day in the four weeks to Jan 1.

[setravis]

Tuesday, December 21, 2010...

•   February crude oil prices this morning are trading up +3 cents a barrel and February gasoline is +0.54 of a cent per gallon. Crude oil and gasoline prices yesterday finished stronger as optimism over US growth prospects offset a stronger dollar: CLG11 +$0.77, RBG11 +4.95.

                Bullish factors included (1) speculation that fuel demand will improve heading into the Christmas holidays, (2) data from the US Department of Transportation that showed US drivers increased their mileage driven by +0.6% in the first 10 months of this year compared with last year, which signals increased gasoline demand, (3) speculation that the abnormally cold weather in Europe and the US will increase demand for heating fuels, and (4) comments from St. Louis Fed President Bullard who said that recent US economic data "bodes well" for 2011, which could also improve US energy demand.

                Bearish factors included (1) the rally in the dollar index to a 2-week high, which reduces investment demand for commodities, and (2) speculation that the ongoing European debt crisis will reduce economic growth and energy demand.

[setravis]

Wednesday, December 22, 2010...

•   February crude oil prices this morning are trading up +36 cents a barrel and February gasoline is +1.59 cents per gallon. Crude oil and gasoline prices yesterday moved higher on optimism that the global economic recovery can be sustained: CLG11 +$0.45, RBG11 +1.96. Feb crude posted a 1-week high and nearest-futures (Jan) gasoline jumped to a 7-1/2 month high.

                Bullish factors included (1) the weaker dollar, which encourages demand for commodities, (2) the +15% y/y increase in Nov China oil-product consumption with an overall +11% increase in overall Chinese oil product demand in the first 11 months of this year, and (3) the outlook for weekly US crude inventories to decline for a third week when the DOE releases its inventory figures on Wed.

                Bearish factors included (1) adverse weather in Europe which has forced airport closures and flight cancellations for a fourth day, which signals reduced fuel demand, and (2) the statement from Moody's Investors Service that it ma y cut Portugal's bond rating "by a notch or two" because of concerns over "sluggish" economic growth, which signals the European debt crisis may worsen and reduce economic growth and energy demand. Expectations for Wednesday's weekly inventory report from the DOE are for crude oil supplies to fall -3.5 million bbl, gasoline inventories to increase +1.5 million bbl, distillate stockpiles to decline -500,000 bbl and the refinery capacity rate to remain unchanged at 88.0%.

[setravis]

Thursday, December 23, 2010...

•   February crude oil prices this morning are trading up +2 cents a barrel and February gasoline is -0.33 of a cent per gallon. Crude oil and gasoline prices yesterday moved higher after weekly US crude inventories slipped to a 10-month low: CLG11 +$0.66, RBG11 +2.53. Feb crude soared to a 2-year high and nearest-futures (Jan) gasoline climbed to a 7-1/2 month high.

                Bullish factors included (1) the larger-than-expected drawdown of weekly crude inventories to their lowest level since Feb (-5.33 million bbl to 340.7 million bbl versus expectations of -3.5 million bbl), and (2) the upward revision to Q3 US GDP, which indicates stronger fuel consumption.

                Bearish factors included (1) the larger-than-expected increase in weekly gasoline inventories (+2.40 million bbl versus expectations of +1.5 million bbl), (2) reduced demand after US gasoline demand fell -1.5% w/w to 9.21 million bpd, and (3) the action by China to increase its domestic gasoline and diesel prices for the th ird time this year, which may reduce its fuel demand.

[setravis]

Gas prices top $3 a gallon...

On Thursday December 23, 2010, 11:29 am EST
Gas prices crossed the milestone $3 mark Thursday for the first time since Oct. 17, 2008, as the national average compiled by motorist group AAA reached $3.013 a gallon.

Prices have risen more than 4% from $2.872 a month ago and are nearly 16% higher than the $2.585 average a year ago, according to the AAA figures.

The cost of gasoline has been climbing steadily since bottoming out at $1.616 in December 2008. However, the average price is down $1.101 -- or 26.7% -- from the record high of $4.114 reported on July 17, 2008.

"On a national average, we've never had Christmas Day with gasoline at three dollars or higher," said Tom Kloza, chief oil analyst with Oil Price Information Service, an energy trade publication based in Wall, N.J.

The rise in gas prices mirrors a rise in crude oil, which passed the $90 a barrel mark on Wednesday. Oil prices haven't settled above $90 a barrel since October of 2008.

The spike in crude has been helped along by a weak dollar, and according to some critics, the Fed's quantitative easing program.

But higher gas prices aren't going to keep motorists off the road this holiday season, according to Troy Green, a national spokesman for AAA.

He said AAA is sticking with its projection that 85.7 million people will travel by car to their holiday destinations, a 3.2% increase over last year.

Prices in Hawaii are the highest in the nation, with a gallon of gas costing $3.636. But this state is an outlier.

Californians pay the most in the lower 48, shelling out $3.275. New York follows, with an average gallon costing $3.262.

Twenty-six states and the District of Columbia are already paying more than $3 a gallon.

But some states pay far less. Residents of Colorado enjoy the lowest price at $2.755 per gallon.

On its Web site, AAA says the information is gathered by Oil Price Information Service and based on up to 100,000 stations nationwide.

According to a separate report issued by the Oil Price Information Service, drivers are estimated to spend $305 on gasoline in December.

[setravis]

Monday, December 27, 2010...

•   February crude oil prices this morning are trading down -40 cents a barrel and February gasoline is -1.14 cents per gallon. Crude oil and gasoline prices last Thursday moved higher for the fourth consecutive session on a weaker dollar and an increase in US consumer confidence: CLG11 +$1.03, RBG11 +1.93. Feb crude posted a 26-month high and nearest-futures (Jan) gasoline climbed to a 7-1/2 month high.

                Bullish factors included (1) the weaker dollar, which boosts investment demand for commodities, and (2) strong US economic data that showed Nov US consumer spending climbing for the fifth straight month and Dec US University of Michigan consumer confidence rising to a 6-month high.

                Bearish factors included (1) concern the ongoing European sovereign-debt crisis will worsen and limit economic growth and energy demand after Fitch Ratings cut Hungary's long-term credit rating, and (2) the weaker than expected Nov US new home sales, which signals the US housing crisis may lin ger and curb economic growth and fuel demand.