Thursday :: Apr 7, 2005

Crudely Speaking AM-PM


by pessimist
There's somethin' happenin' here

What it is ain't exactly clear

Early morn, talkin' oil gettin' low

Afternoon, there is plenty - let it flow!

Gotta STOP! Hey! What's the word?

Prices being changed and it's absurd!

(apologies to Stephen Stills)

I don't get it. I read two separate headlines in the same paper, and the world might as well be standing on its head:



Oil prices rise
Thursday, April 7, 2005 Updated at 8:53 AM EST


Oil prices drop Thursday, April 7, 2005 Updated at 1:19 PM EST

I suspect someone is pulling a fast one!

I've been noticing for a couple of months now that each time the price of oil reaches a new high, all of a sudden the trend gets reversed. Certainly, OPEC has openly reported that their production is up, but even they can't be pumping more oil as fast as things seem to be changing, so there has to be another reason why the price changes so quickly. Let's see what evidence we have:

8:53AM

Crude oil futures rose Thursday as the market appeared to focus on a report showing a drop in U.S. gasoline supplies, even as crude inventories increased.

1:19PM

Oil futures prices fell more than $1 (U.S.) a barrel Thursday afternoon, following the lead of gasoline futures, and brokers said there appeared to be further momentum lower. “It's collapsing,” said Ed Silliere, a broker at Energy Merchant Intermarket Futures in New York. “The market was extremely overbought.”

8:53AM

Traders said the market was building on gains made earlier in the week when prices reached new highs on both sides of the Atlantic, and is likely focusing on elements of the weekly report from the U.S. Energy Department on Wednesday that showed a decline in the supply of unleaded gasoline. The report said unleaded gasoline declined by 2.1 million barrels last week to 212.3 million barrels, or 5.5 per cent higher than last year. However, gasoline demand remained healthy, up 2 per cent from a year ago.

1:19PM

On Wednesday the U.S. Energy Department said the supply of unleaded gasoline stood at 212.3 million barrels, or 5.5 per cent higher than last year. However, gasoline demand remained healthy, up 2 per cent from a year ago.

Notice the difference? The morning report indicated a decline in unleaded gas supplies.

8:53AM

Analysts said any increases in futures prices should be constricted by other news in the report showing that the nation's inventory of crude oil grew by 2.4 million barrels last week to 317.1 million barrels, or 8 per cent higher than last year. The supply of distillate fuel, which includes diesel and jet fuel, increased by 700,000 barrels to 104.1 million barrels, or slightly higher than year-ago levels.

1:19PM

The government report also showed that the nation's inventory of crude oil was 317.1 million barrels, or 8 per cent higher than last year.

Note the difference? The report says that the oil inventory grew last week.

Here's where it really gets aromatic!

8:53AM

Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures, said he expects high gasoline prices to persist as “people are accumulating inventories before the summer driving season.” Mr. Emori said the current oil market remains “highly exaggerated,” and that if prices followed market fundamentals, they should hover around the low $40 range. “Although demand still remains strong, supplies are normal, as seen from the U.S. reports,” he said. “Even the current spare capacity is not that tight.”

1:19PM

Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures, said he expects high gasoline prices to persist as “people are accumulating inventories before the summer driving season.” Mr. Emori said the current oil market remains “highly exaggerated,” and that if prices followed market fundamentals, they should hover around the low $40 range. “Although demand still remains strong, supplies are normal, as seen from the U.S. reports,” he said. “Even the current spare capacity is not that tight.”

Oil is over priced??? I'm SHOCKED!!!

So what next?

8:53AM

“U.S. oil demand is holding up well, and will help to support prices at lower levels,” investment bank Barclays Capital said in a note. “There is ... nothing in the U.S. data to support another push up towards $60 yet.”

1:19PM

“U.S. oil demand is holding up well, and will help to support prices at lower levels,” investment bank Barclays Capital said in a note. “There is ... nothing in the U.S. data to support another push up toward $60 yet.”

BUT,...

8:53AM

The price of oil is more than $20 a barrel higher than a year ago, although fuel costs are still well below inflation-adjusted peaks set in the early 1980s.

1:19PM

U.S. benchmark crude oil prices are seen remaining above $50 a barrel for the rest of 2005 and 2006, the EIA said.

Let's see if I understand this. Gas supplies are down, but oil supplies are up, demand is up, the market findamentals indicate a $40/bbl price, yet prices will remain above $50/bbl???

I'd sure like to be on the receiving end of that baksheesh! Could it be Greenspan?


Oil Falls a 3rd Day as Greenspan Says Price `Frenzy' May Slow

Crude oil fell for a third day after U.S. Federal Reserve Chairman Alan Greenspan said rising inventories may ease the `current price frenzy'.

Rising production is forcing the market to `absorb' more oil, Greenspan said, according to the text of a speech delivered via satellite to the National Petrochemical and Refiners Association in San Antonio yesterday. U.S. crude oil inventories probably rose for an eighth week last week as OPEC's output increased to a four-month high, according to Bloomberg surveys.

"The stockpiles are well above last year's" and there is extra production coming in, said Mark Waggoner, president of Excel Futures Inc. in Huntington Beach, California.

So why was the oil price headed up this morning if all was well? Was it that gas supplies were lower?

Gasoline supplies probably fell 2 million barrels from 214.4 million the week before, according to the median forecast. Twelve analysts expected a decline and three forecast an increase. Inventories in the week ended March 25 were 7.4 percent higher than a year earlier. The department's report is scheduled for release at 10:30 a.m. Washington time.

U.S. gasoline consumption usually peaks between the Memorial Day holiday in late May and the Labor Day holiday early September. In the four weeks ended March 25, average gasoline use was 2 percent above last year, according to the department.

Increased demand and lagging production increases had absorbed much of the industry's spare capacity and strained energy markets in a way not experienced for a generation, Greenspan said yesterday.

Now wait a minute! Weren't we told just above that spare capacity 'wasn't that tight'?

What's really going on here?

"There's plenty of oil around," said Boone Pickens, who oversees about $1.8 billion at BP Capital, his Dallas hedge fund firm. "We're in the part of the year where you're going to see oil inventories going up."

Therefore, if supply is up, shouldn't the price be going down?

All of the analysts surveyed by Bloomberg expect today's Energy Department report to show a crude-oil inventory increase. Stockpiles held 314.7 million barrels in last week's report, 9 percent more than a year earlier. Supplies have risen in the department's last seven reports. The report may prompt oil to fall, Excel's Waggoner said.

I thought so! How much is it going to go down, then?

"We're going to see it come back to $54 and maybe the high $53s, at best," before rising again after the department's report, he said.

So this is only a temporary reprieve, is that it?

Any price decline will end by the third quarter, when oil will reach $60 a barrel, BP Capital's Pickens said in an interview. Demand typically rises late in the year as refiners prepare heating fuels for winter. "By the time you get to the fourth quarter it's going to be a very, very tight oil market."

But OPEC is pumping more oil than ever!

OPEC last month said it may strain to supply the 30.3 million barrels a day that may be needed from the group in the fourth quarter. In October, OPEC's members pumped 30.54 million barrels a day, the most since December 1979, based on Energy Department records.

If this oil isn't really going to be needed until the fourth quarter and inventories are rising, where is this oil going???

The U.S. government has added an average 1 million barrels a week to the reserve this year to meet President George W. Bush's goal of raising the strategic stockpile to its 700 million-barrel capacity. At that rate the reserve, which held 686.2 million barrels at March 25, could be filled by July.

Ah-HA! The plot thickens! What's behind this strategy?

Rising demand is likely to keep oil between $50 and $60 for the remainder of the year, Excel's Waggoner said.

So this means that King George is adding to his private oil bank and keeping up the prices for the rest of us??? What's that going to mean?

Prices may fall outside that band if OPEC maintains its higher levels of production once the U.S. government stops adding oil to the country's Strategic Petroleum Reserve. "The market is going to tank after that," Waggoner said.

We're paying more just so George can stock the store?

That damn gas better be back down to 75 cents a gallon when he's done packing his piggy bank!


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pessimist :: 10:57 AM :: Comments (27) :: Digg It!