Petroleum Update for Week Ending 2/17/06

[BoeingBoy]

This week's EIA report - issued today due to the holiday Monday - reveals.....

U.S. crude oil imports averaged nearly 10.0 million barrels per day last week, down 305,000 barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged over 9.9 million barrels per day, a decrease of 47,000 barrels per day from the comparable four weeks last year.

U.S. commercial crude oil inventories (excluding those in the SPR) rose by 1.1 million barrels from the previous week. At 326.7 million barrels, U.S. crude oil inventories remain well above the upper end of the average range for this time of year.

U.S. crude oil refinery inputs averaged nearly 14.6 million barrels per day during the week ending February 17, down 48,000 barrels per day from the previous week's average. Refineries operated at 86.6 percent of their operable capacity last week.

Total products supplied over the last four-week period has averaged over 20.5 million barrels per day, or 0.3 percent less than averaged over the same period last year.

Jet fuel demand is down 1.1 percent over the last four weeks compared to the same four-week period last year.

Jet fuel and crude spot prices on 2/17/06:

NY Harbor - $1.7193 (down 1.77 cents WoW)
Gulf Coast - $1.7280 (up 1.60 cents WoW)
Los Angeles - $1.8100 (up 0.50 cents WoW)
WTI-Cushing - $59.76 (down $2.25 WoW)

All hit lows for the week on Tuesday/Wednesday, trading at:
NY Harbor - $1.6780 (Wed 2/15)
Gulf Coast - $1.6865 (Tue 2/14)
Loa Angeles - $1.7600 (Tue & Wed 2/14-15)
WTI-Cushing - $57.61 (Wed 2/15)

Bloomberg is not reporting a spot price for WTI-Cushing after the EIA report was released, but is showing $57.70 @ 10:04 EST. NYMEX, however, is showing $60.70 @ 10:39 EST.

As before, this is the same chart of monthly spot prices - just moved to this post for convenience.

View attachment 4433

Jim

 

[F16B747PUKE]

Just for giggles, I had some time to kill while waiting for a plane on a pilot training base out in west Texas pre oil embargo. Out of curiosity, I asked the fuel guy what Uncle Sam was paying, and he showed me something indicating $0.09.5/gal. OK, OK, that's without taxes, but.........

 

[BoeingBoy]

Oil Jumps After Attempted Attack on Saudi Processing Plant

Feb. 24 (Bloomberg) -- Crude oil jumped after Saudi Arabian forces repelled a suicide attack on the Abqaiq processing center, which handles about 7 percent of world supply.

Bloomberg

Jim

ps - Bloomberg is showing WTI-Cushing trading at $61.60 about noon today.

 

[usair_begins_with_u]

Crude goes up, LLC employee benefits and pay go down. Sucks.

 

[autofixer]

Just wait and see how much the price rises when the enemy are successful and destroy a refinery somewhere. Good shooting on the Saudis part!

 

[BoeingBoy]

Just to update - looks like WTI-Cushing closed at $62.26 today, up $3.97. Looks like having the point driven home that the world is only one lucky suicide bomber away from a significant shortage rattled a few cages.

Jim

 

[SpinDoc]

Just to update - looks like WTI-Cushing closed at $62.26 today, up $3.97. Looks like having the point driven home that the world is only one lucky suicide bomber away from a significant shortage rattled a few cages.

Jim

This can't go unresponded to. What needs to happen is for the markets to ignore the thugs and terrorists, and remove the premium that continues to lend false credence to unsustainably high market prices. I can assure you that oil futures traders are not concerned about ragtag bands of thugs, but they sure do love to use terrorism as an excuse to keep prices high and profits rolling in.

Making a profit on an investment is not a crime, unless of course you are using an unproven threat to drive the cost of your investment higher than what would be considered normal. The SEC should be investigating NYMEX and oil company executives for providing fraudulent research to drive prices continually higher. Remove the terrorism premium and the market will slowly begin to move back to rational levels at around $20 to $30 per barrel.

 

[delldude]

Just wait and see how much the price rises when the enemy are successful and destroy a refinery somewhere. Good shooting on the Saudis part!

they think in multiple hits...real devastation for economies....
sooner or later..........one way or another. 😉

 

[BoeingBoy]

using an unproven threat

Seems like the dead terrorists and injured guards in Saudia Arabia would be proof of this threat.....

Oh wait, I've got it - the terrorist attack is just like the moon walks. All filmed in a studio. Right?

Jim

 

[SpinDoc]

Seems like the dead terrorists and injured guards in Saudia Arabia would be proof of this threat.....

Oh wait, I've got it - the terrorist attack is just like the moon walks. All filmed in a studio. Right?

Jim

Jim:

I'm not saying that this incident did not occur, all I am saying is that the market is playing into their hands by reacting with price increases every time a terrorist thug group either threatens to make a move, or actually does do a small amount of damage.

We need to round up these thugs and kill them on live television for all of the world to see. I'm sure every country that is involved with the U.S. Coalition would approve this. I'm so tired of hearing about these sand heads trying to mess with America and the rest of the civilized world. They all need to be killed.

If I were President Bush, I guarantee I would give the terrorists ONE warning, and then
it's go time with nukes or whatever it takes to rid the planet of this scourge.

 

[BoeingBoy]

Well, let's see....

- Nigeria has halted almost 20 percent of output because of rebel attacks. We only get about 38 million barrels per month of crude/product from them.

- Venezuela has a leader that may do anything. We get almost 50 million barrels/month of crude/product from them.

- Iran keeps making all sorts of noises. While we don't get significant crude/product from there, any significant drop would affect the world market and therefore the U.S.

- Iraqi production is already down 38% from two years ago. While their production varies wildly, we get between 10 and 20 million barrels/day from them. Production that's at risk every day.

- A near miss in Saudia Arabia that, if successful, could have knocked out 7% of the world supply. When world supply is only about 3% above demand, a successful attack would definitely pinch. Oh year, we get almost 50 million barrles/month of crude/product from them also.

Here's what the government experts have to say - not the speculators, oil companies, refiners, or crude suppliers:

"But contango only tells part of the story, and not the most important part either. There have been times in the past when contango existed and we did not see absolute price levels this high. The other key factor is the lack of spare capacity throughout the supply chain. Beginning from the wellhead, where spare global oil production capacity remains relatively low, to transportation, where spare tanker and pipeline capacities are limited, to the refinery, where refinery utilization continues to increase across all major regions of the world, capacity is relatively tight. When put in context to an oil market where uncertainties about future supply abound (e.g., Iran, Nigeria, Iraq, Venezuela, the elimination of MTBE in gasoline, etc.), market participants are concerned about being able to get needed supplies, should something cause a drop in supply. As a result, many of them may be storing up additional inventories as a buffer should there be a supply problem at some point in the future. In other words, where markets have traditionally relied on available spare capacity to provide a part of the response to any unexpected supply problems, under current tight capacity conditions, inventories must play a relatively larger role in buffering the market. Because of this, many market participants are apparently opting for a larger inventory ushion."

Jim

 

[SpinDoc]

"But contango only tells part of the story, and not the most important part either. There have been times in the past when contango existed and we did not see absolute price levels this high. The other key factor is the lack of spare capacity throughout the supply chain. Beginning from the wellhead, where spare global oil production capacity remains relatively low, to transportation, where spare tanker and pipeline capacities are limited, to the refinery, where refinery utilization continues to increase across all major regions of the world, capacity is relatively tight.

Jim

Well then Jim, wouldn't it make sense for oil companies to boost production? If they can sell all they can extract, then they are making a killing. If they add more production, market share would rise at the expense of other oil companies that are struggling.

OPEC used to be in America's back pocket. Any time supplies got tight, they opened up the spigot to keep prices flat. Why are they not doing this now? If WalMart can sell for less and make up for it in volume, then why can't the greedy oil companies do the same? WalMart has cash coming in hand over fist.

I'm confounded by the apathy that most Americans have toward oil prices. We should be demanding cheap oil, or our elected officials should be sent packing. And don't tell me our elected officials can't affect oil prices. Clinton had $14-25 per bbl oil for most of his presidency, and I'm sure he made sure it stayed in that range through political negotiation with the oil companies and OPEC.

 

[BoeingBoy]

That's what you seem to be missing. The oil producing countries are producing nearly as much as they can. The ship operators are carrying about all the crude/product that they can. The refiners are refining almost all that they can. Where do you propose all this extra capacity is that isn't being used?

If by some wave of the magic wand (instead of billions of dollars) additional capacity could be available, petroleum products are relatively inelastic commodities. Produce more than demand and prices fall. Prices fall and it's hard to get a return on the investment used to produce more.

OPEC - they've become minority players in the U.S. market. Only 40% of our imports come from OPEC. 50% comes from friendly countries - Mexico, Canada, Norway, Netherlands, United Kingdom, Brazil, Ecuador, virgin Islands. The other 10% comes from relatively friendly countries - some more so than others - with Russia being one of the biggest of these suppliers.

Politicians having influence? Tell that to Chavez, the rulers in Iran, the rebels in Nigeria, the terrorists in Iraq, the terrorists that planned the attack in Saudia Arabia. Other than Iran and Venezuela, it not the leaders that are the problem. Bush or whoever can jawbone the leaders all they want and the problem won't be solved.

Finally, as I mentioned in another post, world oil prices are lower than what you see at Bloomberg, NYMEX, etc. On 2/17, the world average price of crude was $53.90. The U.S. average price was even lower - $51.35. That's over $8/bbl lower than WTI as reported in the OP.

Jim

 

[FCYTravis]

Peak oil, baby. Peak oil.

The world's supply of million-year-old fermented plankton corpses is finite.

 

[N628AU]

Clinton had $14-25 per bbl oil for most of his presidency, and I'm sure he made sure it stayed in that range through political negotiation with the oil companies and OPEC.

Also, the Asian economy suffered the "Asian Flu' suring most of the 90s. The economy over there sucked big time. The Japanese are only beginning to recover (Nice LA Times article Sunday on the beating they took in Hawaii Real Estate BTW). Now, the Asian economy, particularly China and India, and the US economy are roaring. Higher demand = Less Supply = Higher prices. I am not saying there is not a false premium in the market, just saying that there was more to $20 bbl oil in the 1990s than Clinton pal-ing around with OPEC.