Headlines
June 22, 2009
More Spot Supply to Put More Pressure on Already Bearish Gulf Coast Gasoline
The already bearish Gulf Coast cash market is expected to be hammered down
again this week as more spot gasoline supplies are to hit the market.
ConocoPhillips has restarted, or is in the process of restarting, a 120,000-
b/d fluid catalytic cracking unit at its 247,000-b/d Alliance refinery in Belle
Chasse, La., on Monday after a nine-day downtime, traders told OPIS.
This is expected to cause a supply surge in the gasoline market that saw a
drop of more than a nickel in cash price differentials over the past week.
Coupled with the drop in paper values, the Gulf Coast cash conventional
regular gasoline outright prices fell about 15cts/gal last week. Diffs have
plunged to levels
not seen in two months, and were approaching double-digit
discounts versus the Merc at presstime.
The weakness in the Gulf was attributed to the sharp fall in prices in the
Midwest. Chicago prompt gasoline has dropped to about a penny premium from a
high of 40cts over futures in a short span of three weeks, and Group 3 prompt
barrels fell from a high of 5-8cts over to a discount of 6.25cts.
"Mid-Con did stop pulling as hard as it was earlier this month when Chicago
was like more than 40cts over," a trader said.
As with some arbitrage moves in the past, some traders lost money as they
failed to get on the boat that sailed. As the prices fell as quickly as they
rose, some players were left stranded with barrels in transition.
Some refineries in the Midwest are also resuming full production or raising
rates. This puts a damper on incremental deliveries from the Gulf Coast to the
Midwest in the near term.
June 17, 2009
Oil Demand Slump Continues: API
Market bulls looking for oil demand to pick up the slack and help propel
prices
higher aren't going to find much consolation in API's Monthly
Statistical Report released today.
The report, which summarizes oil demand for May and year-to-date, says oil
usage dropped 4 percent for the month, the largest slide of any May in ten
years.
The numbers for jet fuel and for diesel fuel continue to be dismal. It is
the distillate end of the barrel that has unraveled demand. Gasoline deliveries
edged up marginally in May, API reports.
Distillate fuel deliveries sagged 7 percent from May 2008, falling to 3.66
million b/d. Year-to-date distillate fuel deliveries are off an even larger 8.2
percent to 3.79
million b/d.
What is really striking in the API data is the severity of the decline for
deliveries of ultra-low-diesel fuel, a clear sign that the record high prices
from a year ago and the depleted economy soured demand.
ULSD deliveries fell 17.6 percent in May to 2.777 million b/d. No other
product except residual fuel declined with the magnitude of ULSD. Year-to-date
ULSD deliveries are down 9.1 percent to 2.91 million b/d.
Jet fuel deliveries continue to be lower year-over-year, which has been the
case for many months.
May jet fuel deliveries dropped 8.8 percent to 1.43 million b/d. They are
off 10.1 percent for the first five months of 2009.
The only comfort refiners can take in the API statistics is on gasoline. The
news isn't great but at least deliveries of gasoline advanced in May. Of
course, May is the changeover to lower RVP at retail, so movement of barrels
from the refinery level into secondary storage may account for some of the
modest pop.
Gasoline deliveries edged up 0.6 percent in May to 9.3 million b/d. Year-to-
date deliveries are still off 0.2 percent to 8.995 million b/d.
Lower demand for distillates resulted in lower production. May distillate
output shrunk 6.1 percent, while May jet fuel production eased 9 percent.
Gasoline production climbed 1 percent, outpacing demand.
API says that gasoline output year-to-date has averaged 8.8 million b/d, the
second-highest level ever for the time period.
Refinery utilization rates rose to average 82.5 percent in May. Capacity
being used to produce oil is about six percentage points lower than year-ago
levels.
Lousy refining margins, especially for the distillates, have kept a lid on
production.
Still, oil companies are producing at a higher rate that overall
manufacturing in the U.S. Plants across all industries averaged just 65.8
percent in April, down 11 percent from a year ago.
June 16, 2009
Credit Suisse Makes Modest Adjustments For 2009 Crude Price Forecasts
Investment bank Credit Suisse made only modest upward adjustments on Tuesday
for its crude price projections, reflecting its concerns about the ongoing oil
demand destruction and ample spare crude production capacity.
"We mark our 2Q09 oil price forecast to $60/bbl and raise our 3Q09 oil price
forecast from $55 to $60. We leave 4Q09 and beyond unchanged" at $60/bbl, the
bank said.
Oil is trading roughly $10/bbl more than the bank's second-half expectation.
"While we are not precluding the need for further upward price forecast
revisions, on balance we see the possibility of some market correction in the
back half of the year," Credit Suisse said.
The price forecast revisions were less drastic than Goldman Sachs's forecast
changes two weeks ago.
Goldman Sachs did an about-turn in its latest oil price forecast, adjusting
its price predictions higher for 2009 and 2010.
The bank predicted WTI oil prices to hit $85/bbl by the end of this year, up
$20 from the previous forecast. For the first half of 2009, Goldman projected
prices to hit $75/bbl, up from $52 predicted previously.
Credit Suisse said that oil is already pricing in the anticipated recovery
in demand, but actual demand remains weak in most areas of the world.
Despite easier comps starting in September, the swiss bank thinks that oil
demand has been permanently impaired by the recession.
"We see future global oil demand growth of 1% per annum, down from the 1.8%
growth trend seen pre-recession," it said.
Global spare crude capacity is currently at its highest level since 2002.
But, unlike in 2002, oil prices more than meet OPEC members' revenue needs.
It is more likely than not that the next move for Saudi production will be
upwards, limiting further rises in oil prices.
June 9, 2009
Stronger U.S. Cash Gasoline Prices to Draw More End-June Imports
The gasoline import flow into the U.S. from Europe is expected to return to
normal
at the end of June and early July as arbitrage economics turn favorable
this week
amid rising flat cash prices in the U.S., traders on both sides of
the Atlantic told OPIS on Tuesday.
A rise in gasoline imports in the near term should help bolster the low U.S.
gasoline inventory, and possibly slow the summer retail gasoline price hike.
The inflow at end-June is expected to be higher than the subdued levels seen
in the past several weeks, but the number of incoming cargoes would not be
overwhelming due to relatively strong European values.
Since late April, the import flow has been sluggish due to relatively strong
European prices, West African demand and poor blending economics.
"European conventional regular (M2 grade) supply is tight, but M2 keeps
flowing to the U.S.," a trader in London said.
"F2 (summer RBOB) arbitrage economics should work because of cheap naphtha
for blending. The U.S. market should be well-supplied," he added. Favorable
arbitrage economics would encourage players to deliver incremental barrels to
the U.S.
In May, gasoline imports into the U.S. averaged at 909,750 b/d versus 1.097
million bbl a year ago.
To get back to the normal levels for summer, imports would need to average
close to 1.2 million b/d for June.
The import flow at end-June and early July would receive a boost from the
rising New York Harbor flat prices.
Last Friday, prompt New York Harbor M2 cash outright prices rose to a high
of $1.9246/gal, gaining 14cts in two weeks. RBOB flat price was at $1.9771/gal
versus $1.8458/gal on May 22.
A second trader said that arbitrage economics for June imports are marginal
at a meager 4.2ct spread, and sub-7cts for July imports.
The marginal import economics should discourage an armada of ships sailing
from Europe to the U.S.
Also, some major arbitrage players with products swing storage tanks in the
U.S. prefer to use these tanks to store distillates instead of gasoline. This
is because of the steep heating oil price contango.
June 2, 2009
Credit Card Swipes Show End-May U.S. Gasoline Demand at 9.244 MBD
U.S. gasoline consumption edged 9,000 b/d or 0.1% lower in the week ended May 29, to 9.244 million b/d, according to the SpendingPulse report from MasterCard Advisors issued on Tuesday.
Demand, as measured by purchases at the pump, stood 2.2% higher than the level seen one year ago. A comparison of four-week average demand shows the
2009 period 1% higher than the same measure in 2008.
The seven-day period included the Memorial Day weekend, the traditional beginning of the summer "driving season" in recent years. Until last year's price spike discouraged driving, gasoline demand would often rise in the weeks just before the holiday, then fall back a little and run at elevated levels into August.
The SpendingPulse number, along with the previous week's, reinforces the notion of stronger demand (week to week as well as versus a year ago) seen in recent government data. However, the Energy Information Administration's lofty
9.538 million b/d implied demand for the week ended May 22 (about 300,000 b/d higher than SpendingPulse's) may well have been due more to pre-holiday restocking within the distribution system than to consumer purchases of gasoline.
EIA releases petroleum data for the week ended May 29 on Wednesday.
The agency implies demand from its measure of the total amount of gasoline supplied from refineries, pipelines, blending plants and terminals on its way to retail outlets.
June 1, 2009
Retail Gasoline Up Nearly 55% Since New Year's Day
Measured via percentage, the U.S. has never had five months that delivered
as much of a retail upswing as the first five months of 2009.
OPIS daily retail price survey of pump prices conducted for AAA in
cooperation with Wright Express shows a nationwide average of $2.512/gal this
morning, up 88.6cts/gal from the Jan. 1 price of $1.626/gal, or some 54.5%
higher on average than where prices began the year.
That is the largest five-month retail advance this century, far exceeding
the 37% increase seen in 2008, when prices eventually advanced as high as
$4.11/gal by midsummer. The pump price jumps, however, pale in comparison to
the wholesale gasoline bounce. On Dec. 24, 2008, gasoline futures contracts
(RBOB) traded for below 79cts/gal. This morning, gasoline futures have been
trading around $1.91/gal, an increase of 142%.
Even larger increases have been seen in some wholesale markets. On Christmas
Eve 2008, Chicago spot gasoline sold for less than 78cts/gal. This morning,
OPIS has confirmed spot sales for Chicago gasoline at $2.15/gal, an increase of
more than 175% in a little over five months.
The severity of the spike in the Midwest explains why states like Michigan,
Indiana and Illinois -- hit hard by the recession and the auto manufacturing
crisis -- have seen the largest retail increases of 2009. Pump prices in those
three states are up more than $1.00/gal so far this year. The only other state
to see a $1.00/gal or greater increase is Montana.
The smallest increases show up outside the continental U.S. Alaskan retail
prices are up just 20.9% this year, and Hawaiian numbers have advanced only
48.6%. In the lower 48 states, Nevada has seen the smallest increase, but
prices in that state are still up 70.2% since New Year.
State Jan 1 Jun 1 Increase
AK 255.2 276.0 +20.9
AL 150.2 235.3 +85.1
AR 147.1 239.8 +92.8
AZ 159.4 236.0 +76.6
CA 185.1 275.9 +90.7
CO 151.8 244.2 +92.3
CT 174.2 263.0 +88.8
DC 170.2 254.8 +84.6
DE 153.9 242.4 +88.5
FL 164.4 248.7 +84.2
GA 151.4 235.4 +84.0
HI 231.8 280.4 +48.6
IA 162.3 251.7 +89.4
ID 153.9 242.8 +88.9
IL 168.5 270.4 +101.9
IN 161.7 261.7 +100.0
KS 153.6 245.1 +91.4
KY 157.4 250.7 +93.3
LA 151.4 238.1 +86.7
MA 162.6 245.8 +83.2
MD 158.2 244.7 +86.5
ME 171.1 252.7 +81.6
MI 166.1 275.8 +109.7
MN 161.8 256.5 +94.8
MO 139.6 236.8 +97.2
MS 147.6 235.3 +87.7
MT 148.4 252.0 +103.6
NC 156.9 243.3 +86.4
ND 169.9 256.7 +86.8
NE 165.3 258.3 +93.0
NH 160.9 241.8 +80.9
NJ 147.3 235.9 +88.7
NM 160.8 251.7 +90.9
NV 179.5 249.7 +70.2
NY 182.7 264.1 +81.3
OH 165.6 261.8 +96.3
OK 149.1 242.7 +93.6
OR 174.9 258.4 +83.5
PA 167.8 251.9 +84.0
RI 166.1 251.9 +85.8
SC 146.1 231.9 +85.7
SD 163.7 250.3 +86.7
TN 146.7 234.4 +87.7
TX 146.5 237.9 +91.4
US 161.8 251.2 +89.4
UT 146.4 234.6 +88.2
VA 151.5 237.6 +86.2
VT 166.7 244.9 +78.2
WA 180.9 268.4 +87.5
WI 169.5 267.8 +98.4
WV 172.5 260.0 +87.5
WY 143.5 237.2 +93.7