Marshall Steeves
Marshall Steeves
add covering few issue minor rise short supply
We were already on the rise through $65 on a few minor (refinery) supply disruptions. It's just another inflammatory issue to add to the short covering at the end of the week.
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We are looking to an active turnaround season because of all of the deferrals from the fall. Refineries that planned to upgrade facilities put them off because of Hurricanes Katrina and Rita.
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Trading is rather quiet this week because of Columbus Day and the Jewish holidays. You often see big swings in prices when the volume is low. Also, gasoline is close to $1.80, which is probably a little overboard in spite of the fall in demand.
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We won't know the full extent of the damage for weeks. A lot of the damage that occurred when Hurricane Ivan came through last year was underwater, which was difficult to survey and then repair.
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Also refinery utilization was lower, which was also unexpected. It means that refineries are not using as much crude, so as a consequence of that we got a larger-then-expected crude build.
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After Hurricane Ivan, it took several weeks to know the full extent of the damage to seabed pipelines. Some people are quite worried that this time could be worse because of the strength of Katrina.
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Oil prices have consolidated in the upper $60s. There's a balance between the supportive geopolitical concerns respecting Nigeria and Iran, verses the bearish influence of excess crude supplies and warm U.S. winter weather.
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There is a lack of heating demand. We're experiencing a very unusual warm pattern in the United States. Also, the DOE (inventory) expectations are pretty bearish for tomorrow.
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Inventory levels remain well above average and near-term supplies are not a problem, so the recent rally will be difficult to sustain.
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Heating oil is ascendant right now, while interest in gasoline wanes. The size of the distillate draw wasn't spectacular but is disconcerting given that we are approaching the heating season.
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Heating oil is ascendant right now, while interest in gasoline wanes.
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Gasoline will continue to lead other energy contracts until Gulf-area refineries return and European imports start to arrive.
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Gasoline demand is low enough and imports high enough to have another stock build.
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The gasoline draw was a little bit larger then expected, so I think this will support prices.