Weekly Petroleum Report - 6/17/05

[BoeingBoy]

From this week's EIA report:

U.S. crude oil refinery inputs averaged 16.0 million barrels per day during the week ending June 17, down 386,000 barrels per day from the previous week's average.

Refineries operated at 94.8 percent of their operable capacity last week. With lower refinery inputs, both gasoline and distillate production reported declines last week, averaging 8.7 million barrels per day and 4.2 million barrels per day, respectively.

U.S. crude oil imports averaged about 10.2 million barrels per day last week, down 440,000 barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged about 10.4 million barrels per day, which is unchanged over the
comparable four weeks last year.

U.S. commercial crude oil inventories (excluding those in the SPR) fell by 1.6 million barrels from the previous week. At 327.4 million barrels, U.S. crude oil inventories remain well above the upper end of the average range for this time of year.

Distillate fuel inventories rose by 1.3 million barrels last week, but remain in the lower half of the average range for this time of year.

Total product supplied over the last four-week period has averaged 20.6 million barrels per day, or 1.7 percent more than averaged over the same period last year.

Kerosene-type jet fuel demand is up 3.4 percent over the last four weeks compared to the same four-week period last year.

Spot prices for jet fuel on 6/17/05 [6/10/05] (6/3/05):

New York Harbor..$1.7310 [$1.6865] ($1.6810)
Gulf Coast............$1.6910 [$1.6515] ($1.6760)
Los Angeles.........$1.7250 [$1.7250] ($1.7000)

Spot prices for crude on 6/17/05 [6/10/05] (6/3/05):

WTI Cushing...$58.40 [$53.55] ($55.08)
Brent..............$56.91 [$51.98] ($51.90)

Current crude prices (at noonish) per Bloomberg:

WTI Cushing...$58.74 (latest quote is prior to release of report)
Dated Brent....$57.04
NYMEX............$58.85
CNBC..............$58.85

Finally, something I just started doing - average spot prices of jet fuel by month (by quarter once the quarter is over):

Delivery point...1Q05.....Apr05....May05.....Jun05*....2Q05**
NY Harbor..... $1.4861 $1.5836 $1.4843 $1.6886 $1.5747
Gulf Coast.... $1.4400 $1.5728 $1.4714 $1.6546 $1.5570
Los Angeles. $1.5228 $1.7980 $1.5863 $1.7147 $1.6981
* thru the 21st
**thru Jun 21

Jim

 

[jimntx]

Assume the brace position, ladies and gentlemen!

According to Bloomberg, at 1024CDT, crude futures were trading at $59.34/bbl. That is an increase of $0.14/bbl in 5 minutes!!!!!

I'm almost sure that someone(???) posted on here back in late April that $50/bbl was not sustainable, and according to the only experts worth listening to (i.e., the ones saying what he wanted to hear), we would soon seen crude in the $40-45/bbl range. When would now be a good time for that to happen?

 

[BoeingBoy]

Once or twice, I've mentioned in passing that watching crude spot prices (or NYMEX) is something of an interesting exercise, but what matters is the price of jet fuel.

Along those lines, what the refiners pay for crude is an important factor (as is presumably what they expect to pay in the future). Since refiners don't necessarily purchase only the highest grades of crude, like West Texas Intermediate or what is traded on the NYMEX, their average price is somewhat lower than the widely quoted prices on those grades.

So here's what the domestic refiners averaged paying for crude at the refinery - transportation, etc, included. Unfortunately, this info isn't as "real time" as other info.

Jan - $39.01/bbl, WTI averaged $46.84
Feb - $41.05/bbl, WTI averaged $48.15
Mar - $46.77/bbl, WTI averaged $54.19

Jim

 

[jimntx]

True, but even if you look in retrospect at the average prices paid vs. the average prices paid same quarter a year ago, it's still way up as is the cost of jet fuel quarter over quarter, is it not? Even though the cost of crude is only a portion of the price of refined products, it is a very convenient excuse for the oil companies to jack up the price of same.

Now, you noted that the average price paid/bbl was less than average WTI spot price. Let's look at the trends.

Jan avg price paid was 83% of WTI spot average.
Feb. avg price paid was 85% of WTI spot average.
Mar avg price pad was 86% of WTI spot average.

Now, if going forward the average WTI spot price is in the $60/bbl range (and T. Boone Pickens who is no slouch in the oil bidness is predicting $70/bbl before the end of the year), what may we surmise about the average price paid/bbl of crude and the probable price of jet fuel, mon ami? I reiterate, assume the brace position!

The problem for us is that increases in fuel prices have an effect on the airline business way out of proportion to the effect on the economy in general because it is such a huge portion of our cost of doing business. T. Boone noted the other day that "the economy has accepted $50/bbl oil and $2+/gal gasoline. It will accept $3/gal gas." I don't think he meant that $3/gal gas would not hurt some sectors, but rather that $3/gal gas would not stop the average American from driving alone in his/her average Sherman tank of an SUV--which is all the oil companies really care about.

Here's some food for thought...
If the avg. spot price for jet fuel is $1.7156 (NY+Gulf Coast+LA/3) when avg. price of gasoline is $2.25, what can we extrapolate for an avg. spot price for jet fuel if gasoline reaches $3/gal? I'll tell you..$2.2875! If that happens, I'm guessing it's the furlough line for me again.

 

[BoeingBoy]

Absolutely, jimntx. I'm sorry if I implied otherwise. Since none of us know what US (or AA or anyone else) is paying on a daily basis for jet fuel, all we can do is track what is available and use the reasonable assumption that as crude or jet fuel spot prices rise or fall so does the price paid at the plane.

I guess all I was saying is that there doesn't seem to be an exact relationship between WTI/NYMEX prices, refiner prices, jet fuel prices, and "in the plane" prices. While they trend in the same direction, one can't say that just because WTI is $X then US (or AA, etc) pays exactly $Y. All one can say is that if X goes up, Y almost certainly does too.

Jim

 

[jimntx]

All one can say is that if X goes up, Y almost certainly does too.

Jim

[post="278263"][/post]​

What chaps my derriere is that yes you can say that if X goes up, Y goes up. However, the reverse is not necessarily true. If X goes down, Y may go down. Historically, we can say that a $2.00 increase in X means a $0.10 increase in Y (for instance), but a $2.00 DEcrease in X usually only means a $0.05 decrease in Y when it comes to petroleum-based products.

I think you know that you and I are singing the same hymn. I just like to add drums and a saxophone sometimes.

 

[gso-crew]

Fox news is reporting that it may go to $100 barrel. I'm not kidding?

 

[BoeingBoy]

I think you know that you and I are singing the same hymn. I just like to add drums and a saxophone sometimes.

[post="278284"][/post]​

Absolutely. Whether the NYMEX crude futures go up or down a dollar today says basically nothing about the price of fuel pumped into the plane tomorrow. All one can really say is that the price trends go the same way over time - usually.

Jim

ps - having said that, CNBC is reporting crude down to just over $58

 

[SpinDoc]

Absolutely. Whether the NYMEX crude futures go up or down a dollar today says basically nothing about the price of fuel pumped into the plane tomorrow. All one can really say is that the price trends go the same way over time - usually.

Jim

ps - having said that, CNBC is reporting crude down to just over $58

[post="278307"][/post]​

SpinDoc replies:

If oil futures make it in the $70 range, I would
start putting a large fence around my house and
start stockpiling food and water. Things will get
pretty ugly with civil unrest. People in this country
will only put up with so much abuse from big oil,
and then all he11 is going to break loose.

As I have mentioned in a previous post, if there
is anyone reading this forum who has the power
to generate a credible rumor in the investment
community that would immediately cause a large
scale sale of futures contracts, now is the time
to write the research piece. The greedy bastards
who are running the prices up deserve to lose
their shirts in a futures meltdown.

 

[jimntx]

SpinDoc replies:

If oil futures make it in the $70 range, I would
start putting a large fence around my house and
start stockpiling food and water. Things will get
pretty ugly with civil unrest. People in this country
will only put up with so much abuse from big oil,
and then all he11 is going to break loose.

[post="278581"][/post]​

Oh, please. Unless people drive their Sherman-tank-sized SUVs into the gas station and there is no gas, then and only then will there be civil unrest. 20 years ago, Americans spent about 90% of their income and saved about 10%. Today, they are spending 99% of their income and saving about 1%--according to Federal statistics. If gas goes to $3/gal or more, they will just start spending 99.5% of their income.

There is absolutely no chance that any of them will change their by-god-Constitutional-right-to-do-whatever-I-want-to lifestyles. Whatever I WANT to do is my Constitutional RIGHT to do. Selfishness abounds in the good ole USA.

As long as people are not willing to change their automobile-centric lifestyles, the oil companies have absolutely nothing to worry about other than how to shelter their enormous profits from taxation.

 

[700UW]

Global Jet Fuel Prices
(midpoint)
as of June 23
NY Jet Barge
167.25 cts per gallon

Chicago Jet
166.75 cts per gallon

West Coast (LA) Jet
172.50 cts per gallon

European: Rotterdam Barges Jet
172.58 cts per gallon

Asia/Pacific: Singapore Kero
166.49 cts per gallon

 

[FWAAA]

Oh, please. Unless people drive their Sherman-tank-sized SUVs into the gas station and there is no gas, then and only then will there be civil unrest. 20 years ago, Americans spent about 90% of their income and saved about 10%. Today, they are spending 99% of their income and saving about 1%--according to Federal statistics. If gas goes to $3/gal or more, they will just start spending 99.5% of their income.

There is absolutely no chance that any of them will change their by-god-Constitutional-right-to-do-whatever-I-want-to lifestyles. Whatever I WANT to do is my Constitutional RIGHT to do. Selfishness abounds in the good ole USA.

As long as people are not willing to change their automobile-centric lifestyles, the oil companies have absolutely nothing to worry about other than how to shelter their enormous profits from taxation.

[post="278616"][/post]​

Exactly. Here in LA, everyone gripes about the price of gas as if it were the weather. But fill up the Escalade anyway. Price doesn't really matter. What matters is that the stations aren't running out of gas.

The price of many of these gas-guzzling rides is many multiples of the entire amount the owners will spend on gas while they own the behemoth. What's really killing people are the monthly payments and the sky-high insurance premiums. Gas is a very small component of owning a fuel-hogging SUV.

The only real risk of civil unrest is if we have a return to gas lines and "out of gas" signs at the filling stations.

Now excuse me while I go out and fill up my 42 gallon SUV tank. Hope a $100 bill will cover it today!

 

[BoeingBoy]

A last note before the EIA weekly report comes out tomorrow.....

After reaching an all-time high (absolute, not inflation adjusted) of almost $61/bbl, crude dropped back and was down $2.34/bbl today to close at $58.20. According to Bloomberg, the cause was two-fold - traders taking profits and consensis estimates that distillate stocks will show an increase in tomorrow's report (easing concerns for supplies meeting summer demand while still being satisfactory going into the winter heating months).

Jim

 

[SpinDoc]

A last note before the EIA weekly report comes out tomorrow.....

After reaching an all-time high (absolute, not inflation adjusted) of almost $61/bbl, crude dropped back and was down $2.34/bbl today to close at $58.20. According to Bloomberg, the cause was two-fold - traders taking profits and consensis estimates that distillate stocks will show an increase in tomorrow's report (easing concerns for supplies meeting summer demand while still being satisfactory going into the winter heating months).

Jim

[post="279352"][/post]​

SpinDoc replies:

About time these greedy muther****ing futures
speculators started selling their contracts. Maybe
they will keep going for a week or so, and things
will be back to normal at $40 - 45/bbl.

If not, then we might have to enlist the Michigan
Militia to go to Big Oil HQ and start burning down
their house with Amfuel.

 

[SpinDoc]

Ya know, maybe my position has been slightly
extreme, and I apologize if I have offended
any of the futures traders who visit this fair
site.

Here's something to ponder, and I hope
someone can tell me how we had
$15 - 19/bbl oil in 1996, and how it has
tripled since then. Did Clinton do something
to make the price fall that low, or has
W done something to make it go as high
as it is? If it were up to me, we would
always have $15 oil, but the sand heads
and big oil must have other plans.

We need to find the answer, and quickly.
$15-19/bbl oil would be excellent and
would boost the overall economy to the
point where most airline employees
would be making money.