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’A Chinese diesel crunch
If you were wondering why distillate spreads improved over the last month in Europe, apparently there has been a unique demand situation heading over from Asia — prominently China — as well as Latin America.
US petroleum stocks fit for bursting
Weekly US energy inventory data release on Wednesday confirmed the unbelievable. US petroleum stocks rose in the week despite especially cold weather in the region during the period.
Meanwhile, Dennis Gartman of the Gartman Letter draws attention to the fact that aggregate inventory rose by 8.9m barrels,
When cold is good
Recent cold weather in the northern hemisphere may be putting pressure on natural gas and rock-salt supply, but there’s one imbalanced market where the big chill is probably very welcome indeed.
We’re talking here about the refining business and related oil products market.
Why refinery shutdowns matter
Last Friday, what many in the energy market had long suspected might happen, happened.
Valero, the largest independent refiner in the US, was forced to close another 200,000-plus barrel-per-day refinery — this time,
Goldman warns of near-term downside risk in WTI
Oh my. We hope you’re sitting down because the following might come as a bit of a shock.
On Tuesday Goldman Sachs’ commodity team admitted they may have got something wrong:
The market remains caught in the tug-of-war between weaker-than-expected DM demand,
Houston, we have a problem
Michael Shedlock of Mish’s Global Trend Analysis flags up a rather worrisome review by some concerned retired auditor folk on the situation facing the City of Houston in Texas, USA.
Indeed, according to Bob Lemer,
That Opec effect on fuel cracks
When Opec first started cutting crude production back in October, one of the immediate effects on the market was a pullback in the supply of heavy sour crudes.
As we noted before, this is because Saudi Arabia, Opec’s largest and most proficient swing producer,
Goldman still bullish on crude (even in the face of weakness)
WTI crude fell through significant support on Thursday, having traded firmly range-bound since the beginning of August.
The weak technicals and bearish fundamentals, however, are not going to dampen Goldman Sachs’s bullish outlook.
Boiling oil into backwardation
As can be seen in the chart below from Stephen Schork of the Schork Report on Tuesday, the contango in the WTI Nymex crude market has weakened over the last few months quite substantially:
A weakening contango,
Over tanked in oil
Hat tip to Morgan Downey, author of Oil 101, for the following chart reflecting the still ongoing over-supply issues facing energy and tanker markets.
Related link:
Tanked – FT Alphaville
Petroplus, still praying for a distillate recovery
Europe’s largest independent refiner, Swiss-based Petroplus, announced a capital raising on Wednesday consisting of a $400m from a senior-note issue, a $150m convertible bond issue and a CHF290m new share issue to boost the firm’s capital and support its acquisition campaign.
Refining, the weakest link in the recovery
Crude oil refining margins have been trying to warn the world about weak US demand for months now. This week’s oil major results may finally spread the realisation that not all is well in industrial demand for energy into the wider public consciousness.
Oil, still fundamentally weak
WTI oil fell more than 5 per cent to $63 per barrel on Wednesday after US inventory data showed a much higher than expected build in crude stocks. Analysts had been expecting inventories to draw of 1.5m barrels,
BP results, ‘demand is in the toilet’ edition
From BP’s Q2 results on Tuesday:
Indicator refining margins in the third quarter to date have been lower than in the second quarter and substantially below 2008 levels. Refining availability is expected to remain higher than in 2008,
Distillate weakness driving gasoline strength
Francisco Blanch, commodities strategist at Merrill Lynch, observes in a recent note to what extent the distillate overhang has now ironically become the primary driver of gasoline strength, and to what degree refineries are switching over to gasoline-max mode to try and make-up for the shortfall:
The big floating storage debate
The issue of floating storage is causing a spirited debate within the energy trading community.
You see, time-spreads are improving — in energy speak that means the curve is flattening, and the contango is abating.
‘Demand is in the toilet’
Stephen Schork of the Schork Report sums up the energy demand picture in the US succinctly on Thursday:
So there you go, refiners did not make a lot of product last week because demand is in the toilet.
Gasoline in severe backwardation
Here’s the front end of the forward curve for both Nymex gasoline and heating oil futures.
As can be seen gasoline is now severely backwardated at the front-end of the curve, while heating oil futures (aka distillate) are still firmly holding on to contango.
Independent refiner downgrades imminent?
First there was Flying J which filed for Chapter 11 bankruptcy in December, 2008, then there was Lyondell Basell, which filed for Chapter 11 bankruptcy in January, 2009.
And now, the pressure of challenging distillate margins and low demand appears ready to take a toll on some other very prominent independent refiners.