The Energy Report
by Phil Flynn
The API Catch Up
3/10/2010
The Energy Report for Wednesday, March 10, 2010
The API Catch Up.
It looks like the API is playing catch up to the Department of Energy. A massive crude build according to the American Petroleum Institute, along with big product draws is going to keep the oil market on edge.
The API released another shocker when they said that US oil inventories increased by an incredible 6.5 million barrels. Yet at the same time the API reported big time product draws. For gasoline the API reported supplies fell by 3.18 million barrels and gasoline by almost 3.18 million barrels. Yet is this a case of the API just catching up to the Department of Energy or does it mean something more significant to the marketplace. Last week the DOE said that US crude stocks stood at 341,571 million barrels yet the API’s total stood at 337,090. If you add this week’s 6.5 million barrel API build to last week’s supply it would put you up to 343,590 million barrels. That would put you just over 2.019 million barrels over last week’s Department of Energy total crude stocks. This coincidently is the same consensus estimate increase that the street is looking for. Is the API just playing catch up and does this mean that the DOE will report an increase of around 2 million barrels?
As far as gasoline is concerned, the drawdown of 3.18 million barrels that the API reported reflects strong demand. In fact according to the MasterCard SpendingPulse report gasoline consumption hit the highest level since last July. According to the report, Bloomberg News said U.S. gasoline consumption reached those lofty levels as West Coast storms subsided and milder weather returned to parts of the Gulf Coast. MasterCard said that motorists bought an average 9.62 million barrels of gasoline a day in the week ended March 5, up 2.5 percent from the week ended July 3, when drivers were filling their tanks for the U.S. Independence Day holiday weekend. Overall gas demand is up 1.5 percent from a year earlier. The API also reported a larger than expected drawdown in distillate supply of 2.8 million barrels. Last week the API total supply was 154,639 million barrels as compared to the Department of Energy which came in at 151,821 a difference surprisingly enough of 2.8 million barrels roughly the same amount of this week’s drawdown.
Snow storms and delays have played havoc with the numbers but it appears that unless the Department of Energy has big surprises for us, the numbers should get in line. Despite the wild moves we still know that as of right now we are well supplied in every category.
Yet if you believe the latest report from the Department of Energy’s Energy Information Agency this is no time to get complacent. The EIA is getting more optimistic on the global economy and at the same time global oil demand. The EIA projected that world petroleum demand will grow by 270,000 barrels per day to 1.5 million bpd bringing global consumption to near average 85.51 million bpd. Most of that growth is in Asia. In the US the EIA projected economic growth higher saying that GDP will grow by 3.4 percent, compared with 2.3 percent and 2.7 percent growth, respectively. The 2011 forecast for real GDP growth is relatively unchanged at 2.6 percent and 3.5 percent for the United States and the world, respectively.
Call me for the latest updates at 800-935-6487 email me at pflynn@pfgbest.com to open your account. And as always check me out every day on the best in business news on the Fox Business Network!
China Appreciation Day
3/9/2010
The Energy Report for Tuesday, March 9, 2010
China Appreciation Day.
Oil prices are under a bit of pressure to start the day as attention turns again to the forex markets. Comments from China about their currency and their foreign exchange reserves are capturing the attention of traders across the commodity spectrum. Is it possible that the Chinese are on the verge of letting the Yuan appreciate for the first time since July of 2008?
Market Watch News reported that Chinese central bank Gov. Zhou Xiaochuan said China will in due course move away from its current currency-exchange policy, indicating Beijing doesn't plan to keep the Yuan’s de-facto peg to the U.S. dollar indefinitely. These comments, as well as comments surrounding their reserves are giving a boost to the dollar and helping to bring inflated oil back down to earth. Oil prices have been supported by China in many ways and we are just not talking about demand. China’s peg to the dollar, or should we say re-peg to the dollar, has created an excess of printed Yuan’s. The Chinese re-pegged their currency to the dollar as the rising Yuan caused China to lose manufacturing jobs as their exports became more expensive. So China went back to its tried and true formula of pegging its currency to the dollar. Chinese’s stimulus, along with the dollar peg, has created the perfect scenario for the Chinese to buy more oil driving up the price and doing no favors to the strength of the green back. The Chinese peg is another weight on the dollar making oil more expensive in dollar terms. Obviously if China lifts its dollar peg this will be bearish for oil, the question is how bearish. Well that depends how much room they give the Yuan to float and when. Gov Xiaochuan says, "Sooner or later, we will exit [these] policies. Of course maybe that means sooner rather than later.
IFAOnline says that China could end its near two-year currency peg on the dollar as soon as next month, according to respected economist Professor Nouriel Roubini. They say that Prof Roubini believes the Beijing government will authorize a 2% increase against the dollar initially, followed by a further 1%-2% strengthening over the next 12 months. "They will move by a token amount. The world is much cloudier in every dimension. They are super cautious."
Also comments about the Chinese appetite for gold may have an impact on commodities. Market watch reported that China's appetite for gold as a way to diversify its foreign-exchange reserves is limited because of the metal's poor returns over the past 30 years, the nation's foreign-exchange regulator was cited as saying in a report Tuesday. (What, doesn’t he believe G. Gordon Liddy?) Marketwatch says that Yi Gang, director of China's State Administration of Foreign Exchange, said China's gold reserve, at 1,054 metric tons, was the fifth-largest in the world, Dow Jones Newswires reported, citing comments by Yi at a press conference at the National People's Congress. But Yi downplayed any desire to add the holdings as a strategy to diversify the nation's $2.4 trillion foreign exchange stockpile. "Gold is not a bad asset, but currently a few factors limit our ability to increase foreign-exchange investment in gold," Yi was quoted as saying. A precursor to another China purchase perhaps?
These types of stories are a reminder how the commodity bull market is built on shaky ground. When you build a base on printed money and central bank currency pegs, we know it creates bubbles that can easily burst. Make sure you get out before it does. Call me for the latest updates at 800-935-6487 email me at pflynn@pfgbest.com to open your account. And as always check me out every day on the best in business news in town, the Fox Business Network.
All is well
3/8/2010
The Energy Report for Monday, March 8, 2010
All is well. One dose of a better than expected jobs report and all our troubles just go away. Traders fearful that snow storms would have added to the countries employment woes were pleasantly surprised when Friday’s employment report seemed to suggest that it's not quite as bad as feared. The February unemployment rate held steady at 9.7%, with 36,000 jobs lost. The consensus expectations were for the unemployment rate to climb to 9.8% and for 65,000 jobs to be lost.
Now if that doesn't make you feel good enough on a Monday, then perhaps news that the French say they will stand behind Greece and their economic crises. Or maybe we have to take away some of those good feelings. Is it possible that building concerns over credit in China could wipe away these good feelings? Bloomberg News reports that, “China plans to nullify all guarantees local governments have provided for loans taken by their financing vehicles as concerns about credit risks on such debt increases." Bloomberg says that, "The Ministry of Finance will also ban all future guarantees by local governments and legislatures in rules that may be issued as early as this month," Yan Qingmin, head of the banking regulator’s Shanghai branch, said in an interview. The ministry held meetings on the rules on Feb. 25 with regulators including the China Banking Regulatory Commission and the People’s Bank of China.
These worldwide happenings in China and Greece could be significant as it may call into question everything oil bears believe about the market.
Call me for the latest updates at 800-935-6487 or email me at pflynn@pfgbest.com to open your account and see me every day on the Fox Business Network.
About Phil Flynn »
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