Supply slide economics. Oil rides high topping $65 a barrel as the bearish supply side theories, as in we just have too much supply, are now slowly slip sliding away.
The Department of Energy's Energy Information Agencyreported another big drop in crude supply and abig jump in refinery runs adding to a big surge in gasoline production. And it seems oil imports fell as oil that normally might end up hereis seeking better prices in Europe and Asia. How does a 5.4 million barrel crude drawdown get your attention? Well it sure got the market's attention along with a 600 barrel gasoline supply drop. Refineries operated at 85.1 percent of their operable capacity last week as refiners increased gasoline production to meet what seems to be a bottoming out of weak demand. The EIA said that gasoline production rose last week, averaging nearly 9.4 million barrels a day as refiners seemed to start rigging up to meet a rising tide of resurgent demand. Gas supply are well below the five year average and a continued increase in runs and weak imports may tightened crude supply faster than many thought. Sure crude supply is astronomical and well above the five year average but so were gasoline supplies not too long ago.
And right now the US may not be the import beacon for the world's oil suppliers than it once was. Bloomberg News reports that the number of supertankers transporting fuel oil to Asian markets from the Caribbean between March and May has doubled since a year ago as traders seize on a profitable arbitrage, quoting shipbrokers. Traders can take advantage of the price difference for fuel oil between the two markets, which is now greater than the cost to charter a vessel. Petroleos Mexicanos, China National Petroleum Corp., Glencore Holdings AG and Chemoil Energy Ltd have chartered ships since the end of last month. In other world they are buying cheaper petroleum in the Gulf coast market and selling it in Asia reducing Imports to the US.
All these factors of course are signaling a big turn in the supply demand equation. Traders that keep reciting high supply and weak demand as areason oil should be lower, is seeing that trend changeboth on the supply and demand side. The market has been signaling better demand and tighter supplies to come and it has hard evidence. Not just in the raw data but in the other macro and political factors that have been played out. Traders have to take account of the impact of quantitative easing, the dollar, and the Obama administration policies of record deficits and green energy policy which really is an anti oil and gas policy. The market is already pricing in the costs of President Obama's green energy anti petroleum cap and trade policies, increasing royalties and lease rates while shortening lease holding times, banning off shore oil drilling. Oil is in part rising because the market does not believe that Obama's green energy plan will be sufficient to meet demand and at the same time will discourage investment in traditional forms of energy creating a price spike potential that may make the last sprint up to $147 a barrel look like a mere walk in the park. It seems that before all the billions that the Obama administration and the cap and trade policy of the congress is being judged a failure by the market place before it has even got started. Well if not a failure at least a wildly expensive proposition that will cost every American a substantial bit of their weekly paycheck and I am not just talking about the taxes.
Hey what is with my old buddy over at CNBC Melissa Francis doing offending poor little OPEC super secret leader Ali-al- Naimi? Do you know that she had the nerve to call OPEC a cartel! How derogatory! And right to Ali's face! How do I know it was derogatory? Well Ali said so. And you could see why. Take a look at the definition of cartel from Wikipedia. A cartel is a counterfeit agreement among industries. It is an informal organization of producers that agree to coordinate prices and production. See what I mean! Informal! OPEC is always formal when they agree to conspire and coordinate prices and fleece the public! Don't you see how they dress for heaven sakes! All the fancy get ups. When Ms Francis asked what OPEC should be called he said an organization! Well the mob likes to be called the organization so why not OPEC. Of course we have been calling OPEC a cartel for so long that it is hard to stop. My buddy Ken William's a heating oil dealer suggested that like Prince perhaps we should refer to OPEC by a symbol! Perhaps like a raised finger or something. And when we write about OPEC we should perhaps refer to them as OPEC the Organization formally known as a cartel. And as for Ms Francis she really needs to take some cartel sensitivity training. Think of all the organizations formally known as cartels that had their feelings hurt. It brings a tear to my eye!
We're long July crudefrom apprx 5959- raise stop to 5890.
We're long July heatingoilfromapprx 15645 -stop at 15800!
Buy July RBOBat18200-stop 16900.
We're longJuly natural gas fromapprx 390 -stop 330.
The Dan Flynn Corn & Ethanol Report
The July Corn settled at 433 which was up 4 1/4 cents.
Settling on the high, the range was 433to 427.
It looks like this market is is looking to make a run to the upside.
Remember our focus remains with weather U.S. Dollar and the Stock Market.
This weekends weather forecast calls forpositive planting conditions sofarmers in the Eastern Mid-West can catch up
Energiescontinue to run with no real heavy resistance in sight.
Have a Great Trading Day !