10 year chart of Gasoline Futures

While sitting in the bleachers at my son’s soccer match on Saturday afternoon (They won 5 to 2 and N. scored a goal) parents were talking about two things: college search efforts and the high price of gasoline. After listening to all the confusion and misconceptions regarding the pricing of gasoline I decided I should update my previous posting  entitled “Oil Supplies, Demand and the Keystone Pipeline.” 

This entry includes updated data from my January posting, some new data points and  comments regarding shifting market dynamics and relevant industry news that may have gone unnoticed by the public.

Relevant data from the EIA.org web site :

Domestic Production: In 01.01, domestic oil production was 5.9m bpd (barrels per day). In 01.09 production had fallen to 5.2m bpd.  The latest EIA data shows that US production has risen 11% from 01.09 to 5.8m bpd.

Oil rig data from Baker Hughes, an oilfield servicer who tracks industry trends, shows a 29% increase in the number of rigs in the last 3 years.

Petroleum Imports:  In 01.01, the U.S. imported 11.6m bpd. By 01.09 that amount posted a 13% increase to 13.2m bpd. The latest report EIA shows petroleum imports were running at a rate of 11.2m bpd, a 15 % reduction since President Obama took office.

Product Supplied: (Demand)

The combination of the economic slowdown and improved energy efficiency has energy demand at levels not seen since 1999. The latest product supplied figures show current usage is off about 17% from the 2008 high.

Petroleum Inventory Levels:      

Gasoline inventories are tracking on the high end of their 5 year average.





Petroleum Exports: In 01.01, the U.S. exported approximately 1m bpd of petroleum products. By 01.09 exports had increased 48% to 1.5n bpd. By 2012 exports had more than doubled and the latest 4 week average was 3.2m bpd. In 07.11 the US became a net exporter of gasoline fuels. HuffingtonPost reports that at the end of 2011 energy products were the leading export of the United States http://www.huffingtonpost.com/2011/12/31/united-states-gas-export_n_1177559.html

Taking a myopic United States centric view, one would think that US prices should be well contained. And it seems that many in the US ignore the rest of the world when it comes to energy pricing. Referring back to the US export chart, you can see that there is demand for “our” energy. 

With US production increasing and demand falling,  WTI prices are about 25% below the record highs set in the summer of 2008. Gasoline, on the other hand, is running about 15% below the summer of 08 prices.  What is the disconnect between the pricing of “oil” and gasoline?

 In the past West Texas WTI crude has been used as the world’s benchmark for oil prices and the prices of WTI and brent have closely tracked one another. but over the last few years logistical problems at the Cushing, Ok delivery point have crimped the accessibility to the oil to the marketplace and has limited the use of WTI as an accurate price indicator. This can be seen when viewing futures trading activity of the different contracts. In January ’11 10,681,994 Brent contracts trade on the ICE exchange and 17, 948,417 WTI contracts traded on the NYMEX platform. This January brent trading on the ICE increased by 7% to 11,208,911 while WTI trading fell by 30%, to 12,557,020. 

As you can see the price moves in gasoline are closely following brent oil.

A couple of other facts to bear in mind: Most exports of US petroleum products flow from oil facilities in the Gulf of Mexico where they end up in Mexico and Latin American countries like Ecuadoor (an OPEC member!)  

Because various East Coast refineries have been idled, much of the gasoline  needed on the Eastern Seaboard is imported from Europe.

More than 50% of US energy demand is met by domestic production.

Almost one half of what we do import comes from within the Western Hemisphere. Less than 20% comes from the Persian Gulf

Some other notable news items that you probably haven't heard in the media:

1. The US government sold leases for more than one million acres offshore Texas
2. The US and Mexico signed a treaty that makes 1.5 million acres of the US Continental shelf more accessible.
3. The US will offer 38 million acres for lease in an area that shows great  promise.

(source http://www.platts.com/BlogDetails/oilblog of February 24, 2012

As you can see, President Obama does have an "oil" agenda. The only thing we could do differently would be to nationalize the petroleum industry and prohibit oil companies from selling their product on the "free market'.    Hey that sounds like Socialism or something 

IEA Oil Release News Reports

Brent Weekly

RBOV Weekly

WTI Weekly

Press releases IEA makes 60 million barrels of oil available to market to offset Libyan disruption

IEA collective action – June 23, 2011 Frequently asked questions How many times has the IEA undertaken such a “collective action”? When was the last time? How exactly will stocks be made available to the market in each of your member countries? What mechanism is used? How much time will it take for these stocks to become available? How much oil will each country release? Will each country release the same proportional amount, or will some countries do more? How is that decision made? THas the IEA consulted with OPEC or Saudi Arabia on this decision? Would this IEA action not discourage Saudi Arabia and other willing OPEC members from increasing oil production? I thought the IEA only does this for supply disruptions in excess of 7%. The 1.5 million-barrels-a-day disruption from Libya doesn’t seem all that much, given that global demand is around 88 mb/d, so why go to all the trouble? If the disruption from Libya is 1.5 million barrels per day, why are the IEA member countries releasing 2 million barrels per day? Libyan supplies have been off the market since February. Why are you only doing this now? Are IEA countries not putting at risk their capacity to react to more serious oil disruptions that may happen in the coming months considering geopolitical uncertainties in MENA countries?No; Several analysts say this is only likely to have a short-term effect on the market, and that prices will be higher in a month’s time. What’s your response?  Will you extend this by 30 days? How will you decide? Isn’t the IEA effectively doing this to counter high prices – and in that sense isn’t this fundamentally different from a traditional release in response to a supply disruption? Doesn’t this therefore set a bad precedent, by making the IEA a market manipulator? API Head: SPR Release Avoids Question Of Domestic Supply -CNBC U.S., allies to release 60 million barrels from oil reserves UPDATE 2-Bids for 30 mln barrels of SPR oil due by June 29

MBA Purchase Applications

Purchase Index - W/W Change	Prior 4.5 %	Actual  -2.8 %
Refinance Index - W/W Change	16.5 %	-7.2 %
Composite Index - W/W Change	13.0 %	-5.9 %

MBA: U.S. Mortgage Demand Slips As Rates Creep Higher

FHFA House Price Index

FHFA House Price Index Rises 0.8 Percent in April; First Monthly Increase Since May 2010

 EIA Petroleum Status Report Report Summary

Crude oil inventories (weekly change)	-3.4 M barrels	-1.7 M barrels
Gasoline (weekly change)	0.6 M barrels	-0.5 M barrels
Distillates (weekly change)	-0.1 M barrels	1.2 M barrels

Crude Inventories by PADD

Gasoline Inventories by PADD

FOMC Statement

Federal Reserve Lowers U.S. Growth Outlook

Softs+0.80%

Cotton +4.19%    Lumber +1.16%   Cocoa +0.43% Coffee +0.10% OJ -0.33% Sugar -0.76%

Energies+0.18%

Gasoline +2.63%    Heating Oil +1.53%  WTI +0.42% Natural Gas -1.60%        Ethanol -2.49%

 

Analysis of US EIA data: US oil product demand rebounds, but inventories rise on increased refinery runs    

Platts report: China’s May oil demand robust at 9.31 million b/d, but inventories rising

Financials+0.01%

10-Year +0.08%     5-Year +0.06% T-Bond +0.02% 2-Year +0.01%   Eurodollar +0.01% 

Metals-0.08%

Gold +0.29% Silver +0.09%  Plat+0.03% Pall-0.29% Copper -0.68%

Currencies-0.21%

.USD +0.47% Swiss +0.14% Peso -0.09% C$ -0.20% Yen -0.25% A$-0.37%   Euro FX -0.46% Pound  -1.10%

Sterling turns ugly, Fed stance gives dollar lift

 

Indices-0.28%

Midcap -0.23%       DJIA -0.44% S&P 500 -0.52% Russell -0.55%  Nasdaq 100 -0.60%  

Grains-2.01%

Oats -0.42% Bean Oil -0.80%                Canola -1.12% Meal -1.31% Beans -1.37% Rice -1.52%  Corn -4.24%  Wheat -5.34%

 Grain Prices Plunge as Favorable Weather May Revive Crops in U.S., Europe

Economic Data

MBA Purchase Applications

Purchase Index - W/W Change	Prior          -3.2 %	Actual 1.5 %
Refinance Index - W/W Change	13.2 %	0.9 %
Composite Index - W/W Change	7.8 %	1.1 %

Durable Goods Orders

New Orders - M/M change Prior 2.5 % Rev 4.4 % Est        -3.0 % Range                      -5.7 % to 0.5 % Act              - 3.6 % New Orders - Yr/Yr Change 10.5 % 14.1 % 5.3 % Ex-transportation - M/M 1.3 % 2.5 % -1.5 % Ex-transportation - Yr/Yr 6.1 % 8.2 % 6.7 %

From Briefing.com:

Highlights: Durable orders fell 3.6% in April after increasing an upwardly revised 4.4% (from 4.1%) in March. This was the biggest decline since October 2010.

• The Briefing.com consensus expected durable goods orders to decline 2.0%.

Read more: http://www.briefing.com/Investor/Public/Calendars/EconomicReleases/durord.htm#ixzz1NOsaS7Gx

Orders for durable goods fall 3.6% in April Airline, auto declines account for bulk of reversal, U.S. data indicate

FHFA House Price Index

M/M change	Prev         -1.6 %	Revised       -1.5 %	Act    -0.3 %
Y/Y change	-5.7 %	-5.5 %	-5.8 %

EIA Petroleum Status Report

Crude oil inventories (weekly change)	Prior          0.0 M barrels	Current             0.6 M barrels
Gasoline (weekly change)	0.1 M barrels	3.8 M barrels
Distillates (weekly change)	-1.2 M barrels	-2.0 M barrels

 

Weekly Petroleum Status Report

Analysis of US EIA data: US middle distillate inventories drop as ULSD demand surges

U.S. Oil Import Dependence: declining no matter how you measure it

 

Market Activity

Softs+2.53%

LB+3.61% CC+3.40% SB+3.33% OJ+2.22% KC+1.40%      CT+1.40%

Commodities: Slow Boat to China Big Boost for Canada Lumber-2

Metals+2.04%

SI+4.74% HG+2.33% PA+1.75% PL+1.10% GC+0.12%

PRECIOUS METALS: Gold, Silver Rise On Safe Haven Buying

Energies+1.34

HO+2.44% CL+1.62% RB+1.12% ZK +1.03% NG+0.62%

Oil hits 2-week high on U.S. distillate draw, dollar

Grains+0.96%

O+2.50% W2.15% C1.23%  BO+0.84% RS+0.57% S+0.35% RR +0.30% SM-0.25%

Evening markets: wheat rises, dismissing Russia export risk

Indices+0.72% CRB +1.57% VIX -1.91%

RJ+1.16% EW+0.62% NQ+0.35%         ES+0.32% YM+0.28%

U.S. stocks end higher after 3-session drop

Currencies+0.11%

SF+0.73% BP+0.59% USD unch MP unch CD -0.07% JY-0.12% EC-0.18% AD-0.25%

Financials-0.01%

ZF+0.12% ZN+0.06% ZT+0.02% ED unch ZB-0.10%           

Market Recap 05.04.00

Economic Data

US:MBA Purchase Applications

Purchase Index - W/W Change	Prev         -13.6 %	Act 0.3 %
Refinance Index - W/W Change	-0.6 %	6.0 %
Composite Index - W/W Change	-5.6 %	4.0 %

US:Challenger Job-Cut Report

Announced Layoffs - Level

Prev 41,528

Act  36,490

US:ADP Employment Report

ADP employment

Prev 201,000

Rev 207,000

Act  179,000

 US:ISM Non-Mfg Index

http://hosted.ap.org/dynamic/stories/U/US_ECONOMY?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2011-05-04-18-36-39

 US:EIA Petroleum Status Report   EIA Petroleum Data Viewable Here

Highlights of EIA Report http://tonto.eia.doe.gov/pub/oil_gas/petroleum/data_publications/weekly_petroleum_status_report/current/pdf/highlights.pdf

PLATTS analysis of US EIA data: US oil demand drops sharply for week ended April 29

http://www.platts.com/PressReleases/2011/050411b

CFTC “This Month In Futures Markets for April 2011”

http://www.cftc.gov/oce/web/index.htm

Market Data

Worries that China may raise interest rates again was an important factor in today’s market activity.

 http://www.automatedtrader.net/real-time-news/76076/china-pboc-hints-at-more-tightening-as-global-inflation-rises

Financials+0.18%     

US+0.38% TY+0.15% FV+0.03%    ED+0.01% TU+0.01%

http://www.reuters.com/article/2011/05/04/usa-fed-lockhart-idUSEBE7DA0020110504

Currencies-0.09%

JY+0.44% BP+0.20% EC+0.11% SF+0.02% USD-0.06% MP-0.44% CD-0.46% AD-0.85%

http://www.bloomberg.com/news/2011-05-04/switzerland-s-franc-rises-to-record-versus-dollar-on-rate-stock-outlook.html

Indices-0.52%

NQ-0.06% YM -0.56% ES-0.57% EW-0.74% RJ -1.03%

http://www.reuters.com/article/2011/05/04/us-markets-stocks-idUSTRE74120Z20110504

Energies-0.85%

ZK+1.11% RB-0.47% HO-1.70% CL-1.96% NG-2.08%           

http://www.bloomberg.com/news/2011-05-04/crude-oil-declines-a-third-day-in-new-york-after-u-s-inventories-increase.html

Grains-1.06%

C+0.79% O+0.58% SM-0.68% S-0.86% BO-0.94% RS-1.44% W-2.68% RR-3.25%

http://www.cmegroup.com/education/market-commentary/ag/2011/05/recap-wheat_138.html

Softs-2.84%

OJ-0.23% CC-1.83% SB-3.17% KC-3.81% CT-3.81% LB-4.18%

http://www.bloomberg.com/news/2011-05-04/sugar-falls-for-a-fifth-day-on-thai-output-china-inflation-coffee-drops.html

Metals-3.36%

GC-1.66% PL-1.74% HG-3.01%  PA-4.44% SI-7.67%

http://www.reuters.com/article/2011/05/04/businesspro-us-markets-silver-slide-idUSTRE7437XU20110504

Market Wrap for 4.20.11

Economic Reports

MBA Purchase Applications

Purchase Index - W/W Change	Prev      -4.7 %	Curr 10.0 %
Refinance Index - W/W Change	-7.7 %	2.7 %
Composite Index - W/W Change	-6.7 %	5.3 %

Existing Home Sales

Existing Home Sales - Level - SAAR	Prev 4.88 M	Rev 4.920 M	Est 5.000 M	Range 4.750 M to 5.100 M	Act 5.10 M
Existing Home Sales - M/M Change	-9.6 %	-8.9 %			3.7 %
Existing Home Sales - Yr/Yr Change	-2.8 %				-6.3 %

Existing home sales rose 3.7% last month to an annual rate of 5.1mil. The median Price was up 2.2% to $159,600. Y-O-Y prices fell 5.9%. Distressed sales made up 40% of all transactions. 35% of sales were for cash.

EIA Petroleum Inventories

http://ir.eia.gov/wpsr/wpsrsummary.pdf

Stocks		Change From Last
04/15/11		Week	Year
Crude Oil	357.0	-2.3	1.1
Gasoline	208.1	-1.6	-16.8
Distillate	148.3	-2.5	-0.5
Propane	26.386	-0.360	-4.412

Gasoline Demand (Million Barrels per Day)

Week Ending			Year Ago
04/01/11	04/08/11	04/15/11	04/16/10
8.853	9.181	9.062	9.152

http://platts.com/PressReleases/2011/042011b

Market Activity

Metals+2.26%

PA +4.06% SI+2.81% HG+2.65% PL+1.85% GC+0.41%

http://hosted.ap.org/dynamic/stories/U/US_COMMODITIES_REVIEW_SUMMARY_BOX?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT

Indices+1.82% CRB +0.30% VIX -4.97%

RJ+2.08% NQ+1.93% EW+1.89% ES+1.53% YM+1.39%

http://www.bloomberg.com/news/2011-04-20/vix-retreats-to-lowest-since-2007-as-corporate-earnings-exceed-estimates.html

Energies+0.92%

CL+2.91% HO+1.91% RB+1.10% NG+0.94% ZK-2.14%

Currencies+0.60%

AD+1.66% EC+1.26% SF+1.24% MP+0.59% BP+0.55%     CD+0.38% JY+0.03%

Grains+0.17%

RR+1.61% S+1.17% BO+1.06% SM+0.81% RS+0.63% W-0.10% O-1.65% C-2.17%

Softs-0.11%

SB+3.83% OJ+1.41% KC+1.10% CC+0.61% CT-3.50% LB-4.10%

Because of the holiday shortened week, front-month (May) cotton was sharply lower as traders liquidated long positions ahead of 1^st notice day, which is Monday

Financials-0.28%

ED+0.01%  ZT-0.02%  ZF-0.23% ZN-0.31%  ZB-0.46%