by MrBill » Fri 25 May 2007, 08:37:15
Heading into a long weekend it should be relatively quiet again. As usual this time of year the focus is on gasoline stocks. Unrest in Nigeria and concerns over Iran are back in the headlines. A repeat of summer 2005 & 2006 in this respect.
$this->bbcode_second_pass_quote('', ' ')Crude oil may rise next week on
concern that there will be more cuts to Nigerian supplies and the
nuclear standoff between the United Nations and Iran will
intensify, threatening shipments from the country.
Nigeria is losing more than 800,000 barrels a day of
production because of violence, kidnappings and damage to oil
facilities. The Movement for the Emancipation of the Niger Delta
has increased attacks since the presidential election in April.
Nigerian President Olusegun Obasanjo will hand over power to
Umaru Yar'Adua on May 29.
President George W. Bush said yesterday that the U.S. and
its allies must increase pressure on Iran for defying UN orders
to halt its nuclear program. Iran has the second-biggest proved
oil reserves and is the second-largest producer in the
Organization of Petroleum Exporting Countries.
Source: Bloomberg, May 25
I thought this was interesting in a general kind of way. Not really new information, but these kind of questions come up on peak oil dot com about global imblances, so it is appropriate to post articles talking about them. Basically, we/collectively often blame the USA for global imbalances, often forgetting that one person's current deficit is another's surplus. One's trade deficit is another's surplus. You cannot have one without the other.
Anyone that has read my comments over the past two years knows that I rigorously fight a running battle over these issues to get them a) right, and b) look at underlying causes versus just the symptoms. I am not a coward and I do not need others to fight my battles. Never the less is nice to find articles that do support my own opinions. Then I do not feel so lonely! ; - )
$this->bbcode_second_pass_quote('', 'D')ani Rodrik poses an important question on his blog:
“If forced to choose between a world in which developing countries are growing rapidly but there are global macro imbalances associated with it, and one in which current account imbalances are smaller but there is less growth in poor nations--which one would you pick? I would go for the first.
Of course, the essential point is that we have to get the right mix between these two objectives. Arguably, we have sacrificed macro balances too much in the last few years. But as we go about redressing this, we better not forget the role that the level of the real exchange rate plays in developing nations, and not become too enamored of floating.”
I do believe, as I think Dr. Rodrik does, that we have sacrificed global macro balances too much over the past few years. And, like Dr. Roubini, I also worry that rapid reserve growth is creating a ever-larger internal imbalances in many countries. Two examples: China’s stock market and dangerously low (negative actually) real interest rates in most oil exporters.
I am not sure that countries like Russia and Brazil who attract very large capital inflows (in part because of interest rates than are higher than US rates) but just use the resulting inflow to add to their reserves are really doing much for their growth either. In effect, they are borrowing from abroad at a loss to build reserves they no longer need. Funds parked in central bank reserves are not invested in the local economy; they instead are lent back to the US and Europe.
Russia’s reserves increased an incredible $14b in the first week of May. Brazil’s reserves are rumored to have increased – counting off balance sheet intervention through the sale of reverse swaps – by something like $15b in the first two weeks of May and Brazil is still in the market. Those are big numbers. Reserve growth in the emerging world now seems to running at a $100b a month pace, if not slightly higher.
As Martin Wolf notes, it is hard to square that kind of reserve growth with the argument that the emerging world currently floats.
I am not sure there is much risk that emerging economies will become too enamored with floating any time soon.We have really just been in a range since mid to late Marchwith two to three tests to the top end of the range and two good tests to the downside in crude. Although crude has been in a range, especially WTI versus Brent, RBOB gasoline certainly has not been.
$this->bbcode_second_pass_quote('', ' ') Gasoline futures rose on concern U.S.
refineries may not be able to increase production enough to meet
rising demand from motorists, as this weekend's Memorial Day
holiday kicks off the summer driving season.
Demand for gasoline last week was up 1.2 percent from a
year earlier, a U.S. Energy Department report yesterday showed.
Refineries used 91.1 percent of nationwide capacity, up 1.6
percentage points from the week before. A ConocoPhillips
refinery in Louisiana is shut after a power failure, and Valero
Energy Corp. shut a gasoline unit at a Texas refinery.
--------------------------------------------------------------------------------------
Gasoline futures have increased 47 percent this year and
are up 9.3 percent from a year ago.
The margin, or crack spread, earned by refiners for turning
three barrels of crude oil into two barrels of gasoline and one
of heating oil rose $2.625, or 11 percent, to $26.313 a barrel
today, based on New York futures prices. On May 17, it reached
$30.479, the highest since at least 1989. The margin averaged
$10.942 during 2006.
The national average pump price for regular gasoline rose
0.6 cent to a record $3.227 a gallon yesterday, AAA said today
on its Web site. Gasoline has climbed 9.3 percent since last
year.
Source: Bloomberg, May 25
What is needed is more refining capacity and that is not likely to happen in 2007 or 2008. The other side of the equation, which is unease over supply due to places like Nigeria and Iran cannot also not be solved easily, but I think OPEC needs to show some goodwill and open its taps a little.
Like an overflowing bathtub with a plugged drain, adding more OPEC supply to world markets in the absense of refining capacity to turn it into transport fuel is probably not going to dampen prices. At least it did not help in the summer of 2005 in the run-up to Katerina/Rita/Wilma weather damage related spikes. Never the less, not opening up the taps may exacerbate the problem in a nervous market. Perhaps better to err on the side of caution.
On the US housing market (part of this posted elsewhere today). Sorry no link.
$this->bbcode_second_pass_quote('', 'T')he trigger for this latest round of sales was the US Census Bureau’s disclosure that 1) an annualised 981,000 new homes were sold in April (from 844,000 in March), well above the market’s expectations of 860,000, and 2) that the supply of unsold new homes had fallen from 8.1 months’ worth of sales in March – the peak level in the current housing slump – to 6.5 months. But not enough attention was paid to the fact that to unload that quantity of homes, sellers had to drop their asking price substantially. The median price of the homes sold fell from $257,600 in March to $229,100 and the average price from $324,700 in March to $299,100. Lower home prices have a potentially adverse impact on economic activity through wealth effects on consumption and through homeowners’ diminished ability to escape burdensome mortgage obligations by refinancing.
The organized state is a wonderful invention whereby everyone can live at someone else's expense.
by MrBill » Tue 29 May 2007, 05:01:18
A new partner for the new ME oil exchange (and still no IOB)....
$this->bbcode_second_pass_quote('', '[')b]Dubai Mercantile Exchange Ltd., a venture between the Dubai government and the New York Mercantile Exchange Inc., sold a 30 percent stake in the bourse to the state-managed Oman Investment Fund.
The Dubai, United Arab Emirates-based exchange will start
trading Omani crude oil futures contracts on June 1, it said in an e-mailed statement today.
The New York Mercantile Exchange, or Nymex, the world's
largest energy market, announced the formation of the Dubai
trading platform together with the Dubai government in June 2005.
The exchange aims to provide Asian sour-crude to consumers,
such as refiners and airlines, and offer alternatives to benchmark prices for West Texas Intermediate and Brent crude, both of which are higher quality ``sweet,'' or low-sulfur, crude.
Source: May 28 (Bloomberg) --
.... but lots of predicted growth. Of course the source is not identified....it wasn't me though.
$this->bbcode_second_pass_quote('', '[')b]Oil revenue across the Persian Gulf states will reach $3 trillion over the next 10 years, Asharq al- Awsat reported, citing an investment banker.
The projection is based on an average oil price of $40 a barrel and at current production levels, the newspaper cited Ziad Makawi, chief executive officer of Algebra Capital Investment, as saying.
Source: May 29 (Bloomberg) --
That's a whole lot of petro-dollars that are going to need recycling! Oh where, oh where will they flow? More manmade islands?
And in the meantime there is 'another' Great Game afoot.
$this->bbcode_second_pass_quote('', '[')b]Iran, whose government is holding talks with the U.S. on the future of Iraq, is ready to develop oil fields located in its neighbor to prevent western powers from benefiting from them, a group of lawmakers in Tehran said.
Iran has the capacity to develop ``at least 10 oil fields in Iraq,'' Kamal Daneshyar, the head of the energy committee in parliament, told Shana, Iran's oil ministry press agency.
Such cooperation will help restore stability and security in Iraq while preventing other countries, including the ``occupiers,'' from seizing that opportunity, Javad Sa'dounzadeh, a member of the same energy committee told Shana today.
The Islamic republic, which fought an eight-year war with Iraq that left more than 1 million people dead in the 1980s, has increased ties with its neighbor since the fall of Saddam Hussein four years ago. The countries signed a preliminary agreement in
July 2005 to build a pipeline to carry Iraqi crude oil in exchange for Iranian fuels. The accord has not moved forward since.
A U.S. envoy told his Iranian counterpart today that the Islamic Republic must stop arming militias in Iraq, during talks on Iraqi security in which officials from the U.S. and Iran had the highest-level contact between their two countries in 27 years.
Source: May 28 (Bloomberg) --
And if you cannot beat the NOCs then why not join them.... or at least find out how to work with them?
$this->bbcode_second_pass_quote('', ' ')
Asia-Pacific Economic Cooperation energy ministers plan to study the impact that state-owned oil and gas companies is having on trade and investment, according to a draft communique.
The 21-member body, including China, the U.S. and Russia, will set up a working group to assess how to cooperate with state-owned companies, according to the draft statement obtained by Bloomberg News in advance of the final communique later today.
Ministers from APEC, which accounts for 60 percent of global oil and gas demand, are meeting in Darwin, Australia, to discuss energy security and minimizing harmful emissions. The group's
dependency on oil imports is set to rise at a time when governments led by Russia and Venezuela are seizing oil assets
from private companies. ``It's a problem that private, international oil companies find it difficult to develop reserves,'' Claude Mandil, the International Energy Agency's executive director, said in an interview today. ``Partnerships of state-controlled and private oil companies are needed, but the way to cooperate hasn't been invented.''
BP Plc's Russian venture lost a court case yesterday over its license to a Siberian gas deposit with enough fuel to supply Asia for five years, allowing Russia's government to regain control of the field as early as this week.
Petroleos de Venezuela SA, Venezuela's state-run oil company,
said on May 14 that it plans to take control of 18 oil rigs currently operated by multinational corporations in order to reduce drilling costs.
`More Expensive'
``We're seeing increased competition for the world's oil reserves, and with the large number of national oil companies
around in Asia it really is becoming an issue,'' said Gavin Wendt,
senior resources analyst at Fat Prophets Funds Management in
Sydney. ``It's making it more expensive for commercial, private and Western companies to do deals.''
The APEC ministers will also encourage member nations to ensure sufficient investment in refinery capacity to meet demand,
to facilitate freer trade of oil products and to develop contingency plans in the event of disruptions to supplies, the draft says. Members should also promote energy-efficient transport and alternative fuels, improve energy efficiency and develop cleaner energy technologies, it says.
``We encourage APEC economies to adopt a broad range of
measures designed to enhance security of supply and promote fuel- efficient transport and the uptake of viable alternative fuels,''
the draft says.
Dependence on imported oil in APEC will rise to 52 percent
in 2030, from 36 percent in 2002, the draft statement says. Nuclear Safeguards
APEC nations will also be encouraged to consider setting up a regional body to coordinate the efforts of the member countries' nuclear safety authorities, the draft says.
The draft statement omits any reference to greenhouse gas
emissions trading, in line with comments yesterday by Australian
Industry Minister Ian Macfarlane, who said there were no formal
plans to discuss a regional trading plan.
APEC energy ministers expressed a ``very strong desire'' to
cooperate in general on reducing carbon emissions, Macfarlane
told reporters yesterday.
The APEC nations, which account for more than $19 trillion
of GDP, or more than 56 percent of the world's total, need
investments of about $6 trillion to meet energy requirements
through 2030, the group estimates. Energy Goals
To help mitigate greenhouse gas emissions, the energy ministers will encourage the 21 member nations to set goals and
plans for improving energy efficiency across industries. By joining forces with the International Energy Agency, an adviser to 26 oil-consuming nations, APEC will develop efficiency indicators that help all the member nations set out energy-saving plans and review progress, the draft says.
``We direct the working group to strengthen efforts to share
information on energy efficiency policies and measures, identify effective energy efficiency approaches and review progress toward efficiency goals,'' it says. ``We direct the working group to further advance collaboration with other international energy forums including the IEA.''
The 21 APEC members are Australia, Brunei, Canada, Chile,
China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Russia, Singapore, Taiwan, Thailand, the U.S. and Vietnam.
The organized state is a wonderful invention whereby everyone can live at someone else's expense.
by MrBill » Wed 30 May 2007, 03:52:56
Drew, I wish I knew who Tom Green was, but I don't? ; - )
$this->bbcode_second_pass_quote('', 'N')ymex Crude Drops $2 On Nigeria Crude oil futures dropped more than $2 to close just above $63.00 as the inauguration of a new president in Nigeria and historic talks between the U.S. and Iran eased worries over supplies from both major OPEC producers. The July crude contract on the NYMEX fell $2.05 to $63.15 a barrel. Oil traders (took) the risk premium out of the market, said Phil Flynn, an energy analyst at brokerage Alaron Trading Corp. in Chicago.The two biggest areas of perceived threats to oil supply (Nigeria and Iran) seem less risky today that they did on Friday.
Source: PruBache broker note
Crude prices are down significantly here already this week. RBOB also declined as more supply comes online. While oil company shares are also starting to feel the weight of lower prices.
$this->bbcode_second_pass_quote('', ' ') Crude oil was little changed in New York after plunging with gasoline yesterday on speculation U.S. refiners raised operating rates to an eight-month high and increased fuel stockpiles for a fourth week.
A U.S. government report tomorrow will probably show the nation's below-average gasoline stockpiles gained 1.4 million barrels, or 0.7 percent, last week, according to a Bloomberg News survey of 12 analysts. June gasoline, which expires tomorrow, fell more than 10 cents a gallon yesterday.
If ``gasoline inventories start to rise going into the summer here, that could be a potential short-term negative for the oil market,'' said Leo Mariani, an analyst at RBC Capital Markets in Austin, Texas.
Crude oil for July delivery was at $63.16 a barrel, up 1 cent, in after-hours electronic trading on the New York Mercantile Exchange at 1 p.m. in Singapore.
The contract settled at $63.15 a barrel yesterday, down $2.05, or 3 percent, from the end of last week. The exchange was closed for floor trading during the Memorial Day holiday on May 28. Trading the past two days was combined into a single session for settlement purposes.
Gasoline stockpiles in the U.S., the world's biggest oil consumer, held 196.7 million barrels on May 18, or 7 percent less than the five-year average for the period, the U.S. Energy Department said last week.
Demand peaks June through August as summer vacations put more cars on the road. Memorial Day marks the start of the summer driving season.
``Hype''
``There was a lot of hype going into the weekend,'' said Mark Waggoner, president of Excel Futures Inc. in Huntington Beach, California, who was buying gasoline yesterday. ``We will see a build but we will probably see demand up as well. In the weeks to come we're going to see a big pick up in demand.''
U.S. refiners probably used 91.6 percent of their plant capacity last week, based on the analyst survey, the highest late since Sept. 22. Daily gasoline production rose by 667,000 barrels the preceding four weeks.
Gasoline for June delivery was at $2.2980 a gallon today after tumbling to $2.2979 yesterday, a 4.4 percent decline from the end of last week. The more actively traded July contract was at $2.2050, after falling to $2.1934 yesterday, down 5.1 percent from May 25.
``I don't think this is going to last very long,'' Excel's Waggoner said. ``When the numbers come out, everyone is going to be looking at the demand and the imports. Right now there's no way the refiners can keep up with demand.''
Fuel Demand
Demand, based on deliveries from refineries, averaged 9.36 million barrels a day in the four weeks ended May 18, or 1.2 percent more than a year earlier, the Energy Department said last week. Production rose to 9.2 million barrels a day that week, the highest this year.
Valero Energy Corp., the largest U.S. refiner, began the process of restarting the fluid catalytic cracking unit at its McKee refinery near Sunray, Texas, according to a filing with the Texas Commission on Environmental Quality. The catalytic cracker was shut May 24 for maintenance.
While summer fuel concerns have driven recent oil price moves, geo-political risks to supplies from Nigeria and the Middle East will support prices longer term, RBC's Mariani said. That will likely keep West Texas Intermediate crude, the U.S. benchmark grade, between $60 and $65 this year, he said.
U.S. oil stockpiles held 344.2 million barrels on May 18, 7.6 percent more than the five-year average for the period. The 1 million barrel-increase analysts are forecasting will take inventories to their highest since June 23.
Rising U.S. stockpiles have tempered gains in New York oil futures the past three weeks when renewed violence in Nigeria pushed Brent prices to a nine-month high.
Brent, Nigeria
Brent crude oil for July settlement was unchanged at $68.13 a barrel today on the London-based ICE Futures exchange, after falling 2.3 percent yesterday. Yesterday's decline narrowed Brent's premium over the Nymex contract to $4.98 a barrel from a record $6.54 on May 24. The spread was at $4.97 today.
The Brent contract fell 3.4 percent this week after oil workers in Nigeria, Africa's biggest producer, ended a two-day strike and the nation's new president was sworn-in without new attacks on oil facilities.
``There was an easing of supply concerns from the termination of the Nigeria strike and news of the restart of U.S. refinery operations,'' said Chikako Inoue, an analyst at futures broker Taiheiyo Bussan in Tokyo.
President Umaru Yar'Adua promised to bring ``urgent attention'' to the nation's impoverished Niger Delta, and asked militants to end the violence in the region, the nation's biggest oil producer, the Associated Press reported.
Attacks on facilities in the area in the past year cut Nigeria's daily output by more than 600,000 barrels a day, or 25 percent.
Source: May 30 (Bloomberg)
The Russian RTS is in a free fall at the moment. Down 11% year to date after touching a new high at 2008 it looks like it will retrace to 1700 or lower. Mostly due to the legal uncertainty caused by Russian courts overturning commercial contracts and the problems that causes foreign investors. Of course, having no clear succession plan post-Putin in 2008 does not help at all!
UPDATE on Russian markets:
$this->bbcode_second_pass_quote('', '*')** THOUGHTS ON RUSSIA: UGLY & MURKY... ***
* Local cash leaving mkt moving into MENA region in good size.
* Local sentiment rolling over on already U/W energy names...
-Our trading desk has been noting this -ve feel for 3 mos now.
* Long locals have held this mkt +385% over 3 years...and that's
just the past 3 years (since Jan 2004) from RTS 525 to 2000.
* Locals starting to discount 2008 election uncertainties.
* Mkt off 11% YTD...have we seen redemptions yet? Will we?
* Western money still buying cheap assets but getting run over.
-When do they throw the towel in? Do they? Macro still best in
the world arguably, crude holding very well, what's catalyst?
I think fickle investors or a change in oil tax regime, until...
Source: ML trading desk
This move out of Russia seems country specific and so far has not spilled over into other emerging markets. Although the Chinese stock index is down 6% today on the back of tax hikes in China.
$this->bbcode_second_pass_quote('', ' ') Asia
NKY -0.96% Topix -0.35% Hang Seng -1.02% Shanghai -6.08% Taiex -0.84% Kopsi -0.83% ASX -1.35%
Stocks fell after Chinese government triples stamp. Listed brokerage firms were unsurprisingly hit hard Citic -10% Hong Yuan Securities -10%. Hong Kong was also dragged lower with China Mobile -0.6% and China Construction Bank -1.5%.
China's largest offshore oil explorer Cnooc -3.1% Woodside -1.3% Inpex Holdings -1.9% on decline in crude oil. Autos weaker Toyota -0.8% Honda -0.7% as investors worried about state of industrial production figures. Sumitomo Metal +2.3% Daiichi Sankyo +1.2% after both announced share buy backs.
Source: ML Early Call, May 30 The organized state is a wonderful invention whereby everyone can live at someone else's expense.
by MrBill » Thu 31 May 2007, 04:32:12
Hollywood culture? Sorry, leaves a bad taste in my mouth! ; - )
DOE inventory numbers released today due to the long weekend.
$this->bbcode_second_pass_quote('', 'G')UESSTIMATIONS: DJ crude + 0.3 dist + 0.5 gasoline + 1.0 runs + 0.5%. Wachovia crude + 1.0 dist + 0.7 gasoline + 0.75
Source: NYMEX floor broker
WTI is in a range now since March. My guess is that we will see another test to the downside around $60 per barrel before another try at the topside perhaps on weather related events during the hurricane season.
UPDATE:
$this->bbcode_second_pass_quote('', 'U')S Preparing For A Very Active Hurricane Season
U.S. federal agencies are preparing for a very, very active hurricane season, the deputy director of the Minerals Management Service said. The hurricane season for the Gulf of Mexico officially starts Friday, and the National Weather Service is predicting between 13 and 17 named storms, three to five of which may become major hurricanes.
Source: PruBache broker
But then I like symmetry in my charts, so that is more like,
gee wouldn't that look swell? 3 tests to the top, 3 tests to the bottom of the range. Versus hard headed analysis. However, it does make sense from the perspective of well-supplied domestic markets where refining capacity is the issue not crude, and the bigger geo-political risks are not in Cushing, Oklahoma.
$this->bbcode_second_pass_quote('', ' ')Attacks on oil facilities and kidnapping of oilfield workers in Nigeria has halted production of more than 600,000 barrels a day, more than a quarter of output from Africa's biggest oil producer.
Royal Dutch Shell Plc's Nigerian venture began to restore 150,000 barrels a day of Bonny light crude oil production yesterday following an attack on pipelines on May 29. Villagers raided the Bomu Manifold, a gathering point for crude flowing to the Bonny export terminal. Production was briefly halted and no damage was incurred, Shell spokesman Precious Okolobo said.
The facility was also raided May 10, halting 170,000 barrels a day of output and prompting Shell to declare a delay on exports for May and June.
Nymex prices are discounted to world benchmarks and are unlikely to fall below $62 with peak demand and the hurricane season approaching, Altavest's Hartmann said.
Source: Bloomberg, May 31
I wish I could add some commentary to this headline, but I cannot explain it either?
$this->bbcode_second_pass_quote('', ' ')Japan's Oil Imports Fall 14%; 12th Month of Declines
Japan, the world's third-largest oil consumer, said crude oil imports fell 14 percent in April from a year earlier, declining for a 12th consecutive month.
Source: Bloomberg, May 31 The organized state is a wonderful invention whereby everyone can live at someone else's expense.
by MrBill » Fri 01 Jun 2007, 03:42:02
$this->bbcode_second_pass_quote('cube', '')$this->bbcode_second_pass_quote('MrBill', '.')..
Hard to believe that after the Second World War that Canada had the second largest merchant navy in the world, and were one of the world's largest shipbuilders. Where did we go wrong?
...
Being a strong supporter of the free market I hate to admit that YES it's true, "sometimes" governments do make good decisions.
South Korea is not exactly a free market economy...there is a huge dose of government intervention. In a nutshell this is how the system works. The government tries to guess what the "next big thing" will be and divert the nation's resources into subsidizing such industries. Shipbuilding is one of them. At the time the decision was made shipbuilding was not exactly a "sexy" business ---> who would of known?
Right now the south Korean government is investing/subsidizing high speed internet and wireless communications. You can think of this as their equivalent of the "Apollo Project". Rumor has it there is no such thing as a cell phone "dead spot" in south Korea!
Canada, like a lot of social democratic countries in the 1960's & 70's, got hooked on Keynesian economics and wealth re-distribution policies that basically said, financial discipline doesn't matter, and that we are already rich enough now, so we have to solve everyone's problems for them. Quite a disaster it turned out to be.
More than a quarter of a century on the wrong road, and the problem is that many in Canada are still fiscal liberals at heart. Even in my own family, who are conservative supporters, they still believe the government can solve all our problems by throwing money at them.
Whereas I am a firm believer that you can have any social programme - a cradle to grave welfare state if you want - so long as you can pay for it. That means generating the economic surplus today and not borrowing from future generations to pay for it later.
So we ended up throwing taxpayer money at social problems - are they all gone now? No. While the Asian Tigers subsidized industry by building infrastructure to make themselves more competitive. And they succeeded to a large extent even if they also have social problems to contend with as well.
The organized state is a wonderful invention whereby everyone can live at someone else's expense.
by MrBill » Mon 04 Jun 2007, 08:11:09
Colonial pipeline closure caused prices to spike higher according to my floor broker.
$this->bbcode_second_pass_quote('', 'C')olonial Pipeline Co. said Friday that gasoline mainline operations between Atlanta and Greensboro, N.C., will not resume later in the day as expected. The entire span of the gasoline mainline, or Line 1, was shut Tuesday morning for a system integrity check following a report from a landowner of a gasoline odor along the line's route.
"The pace of the work to replace a small section of the (gasoline)
mainline does not indicate that Line 1 will restart as earlier projected," company spokesman Steve Baker said in a recorded
message. A shift of gasoline flow to the distillate mainline at the Atlanta junction on Wednesday afternoon allowed the company to resume Line 1
Source: NYMEX floor broker note.
But the spread between WTI & Brent continues to defy normal trading patterns. Any program traders that were trading off historical patterns would have been killed this year as Brent went to an unprecedented $5-6 per barrel premium to WTI from its normal $1-2 per barrel price discount.
$this->bbcode_second_pass_quote('', 'R')ecent weakness in the WTI-Brent spread has not been structural
The evidence suggests that recent weakness in the WTI-Brent spread has been driven by temporary refinery issues rather than longer-term structural shifts
Although the WTI-Brent differential narrowed over the week, the extreme weakness in WTI prices relative to Brent as well as to other global crudes in recent months has raised the question of how much of this weakness is short term in nature - owing to refinery maintenance and disruptions in the US Mid-continent - versus structural in nature - owing to longer-term shifts in production and imports in particular. Despite substantial debate over this question, the evidence suggests that the recent weakness has resulted almost entirely from a near-term surplus owing to temporary refinery issues rather than from longer-term structural shifts.
Source: Goldman Sachs Commodities Research
June 3, 2007
Is Brent or is WTI the 'real' global benchmark price? Maybe both depending on who you ask.
$this->bbcode_second_pass_quote('', 'G')lobal following
As far as which type of crude is truly the global benchmark, experts disagreed.
Alaron's Flynn was quick to point out: "Nymex crude is out of whack with the realities of global demand" and "Brent crude is more of a reflection of worldwide demand right now."
Matthew Parry, an economist at Moody's Economy.com, agreed. "Brent tends to more accurately reflect 'true market' conditions," and is "probably the slightly more widely accepted."
'WTI sometimes seems a little pre-occupied with the weekly U.S. stock [supply] numbers.'
But Darin Newsom, an analyst at Omaha, Neb.-based DTN, said that with the U.S. pegged as the world's top oil-consuming and importing nation, "it may be the Nymex market that better reflects world supply and demand."
Source: [url=http://www.marketwatch.com/News/Story/Story.aspx?guid={6A40FC33-6CB3-4E0C-BBF9-C941D9B7D9BB}&siteid=nbi]NY crude's out of whack, but is it undervalued?[/url]
The organized state is a wonderful invention whereby everyone can live at someone else's expense.
by MrBill » Tue 05 Jun 2007, 03:26:05
This Reuters article is from May 24th, but a good summary of where we are and why?
$this->bbcode_second_pass_quote('', 'D')EMAND
While previous price spikes have been triggered by supply disruptions, demand from nations such as China and the United States is a main driver of the current rally.
Global demand growth has slowed after a surge in 2004, but it is still rising and higher prices have so far had a very limited effect on economic growth.
Analysts say the world is coping well with high nominal prices because adjusted for exchange rates and inflation, they are lower than during previous price spikes and some economies have become less energy intensive.
FACTBOX-Why oil prices are at 2007 highsHere is a little on the world of corn, and by default bio-fuels. As an aside, I think weather related price action, although always important to the agriculturals, is a side issue when you know you're going to burn everything you do not feed.
$this->bbcode_second_pass_quote('', '
')Commodities Weekly
Adverse weather presents risks to corn crop conditions and yield
As dry weather is forecast to persist in certain states in the US Midwest, we expect crop conditions to continue to decline in the coming weeks, suggesting downward risks to yield when the growing season comes to an end.
Weather shows increasing importance as corn growing season starts to take off
Concerns over dry weather in the US Midwest pushed corn prices to over 390 cent/bu on May 31, a 7% rise over the week. As planting is almost over and newly emerged young plants enter the growing period, rainfall is particularly important at this stage.
We see downside risks to yield and upside risks to prices
We have built a model that forecasts yield by final crop conditions, as reported by US farmers. Our model shows that final crop conditions with a trend term explain 94% of the variability in yields. However, as dry conditions suggest downside risks to final crop conditions, we expect downside risks to yield and upside risks to our fair value estimate of 398 cents/bu.
Source: Goldman Sachs Commodities Research
June 4, 2007
In other words, supply & demand analysis will assume lower carry over stocks from season to season if analysts assume that anything not sold as food will go into bio-fuel production. This will magnify price swings from current crop year to next planting season as there is less of a cushion of year end stocks.
And this is from Standard Bank with regards to the likelyhood of the Fed cutting interest rates in 2006 still.
$this->bbcode_second_pass_quote('', 'W')e no longer see as likely a fed funds rate cut in Q4:06. But such a cut remains entirely possible given the apparent absence of inflation pressure from sources other than commodities. If, by Q4, core inflation has settled into the 2.0% range or below and the economy seems unable to advance beyond a 2.5% GDP growth pace, the Fed may well be inclined to adjust fed funds downward from 5.25%, a rate that makes sense only when inflation is above the 2% threshold and acceleration is still perceived as a threat.
That said, the economy appears poised to compensate for the unaccountably feeble 0.6% Q1:07 quarter growth rate and in the weeks ahead there will be talk only of Fed tightening (which we still see as improbable), not of ease. Moreover, we cannot assume that US Treasury yields will fall back to the levels of March and April any time soon, although we expect them to decline in Q3. Our own focus will return to the housing slump, which is still young measured against similar episodes in recent US history, to exports, whose slide of late 2006/early 2007 remains baffling and, of course, to consumption, which remains oblivious – remarkably – to falling home prices, rising interest rates and a depreciating dollar.
Source:
ResearchStrategy@Standardbank.com
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