Posted on 05/10/2006 8:51:30 AM PDT by LexHoskin
MAY. 10 10:59 A.M. ET Crude futures fell Wednesday after U.S. government data showed an increase in oil and gasoline supplies and higher refinery output.
Prices continued to be supported, however, by concerns about the outlook for Iran's oil exports amid the country's diplomatic confrontation with the West over its nuclear program. With global demand strong and the supply cushion thin, traders also remain worried about output losses in Nigeria, Iraq and the Gulf of Mexico.
Light, sweet crude for June delivery fell 64 cents to $70.05 a barrel on the New York Mercantile Exchange, where gasoline futures fell 1.66 cents to $2.03 a gallon.
(Excerpt) Read more at businessweek.com ...
Was it drawing from the SPR or just quit filling the SPR.
Could be. Or neither. I will look for more references out on the web. It may have never actually happened and was just a proposal.
My local station is -40 cents since last Friday.
Price is falling?
I demand a Congressional probe!!!
It was just quit filling it.
Jimma Cahta actually pulled from it.
I could end this whole gas price run-up in an instant. The moment I buy oil futures, the nation will be saved. Barrel prices will drop by $40.00 overnight. I'll give it some thought...
Ours continue to rise more and more. I guess we got your minus 40 cents over here.
Quit filling.
http://www.cnn.com/2006/POLITICS/04/25/bush.energy/
we wern't. We stopped filling it so in government speak that is the same thing.
It was to refrain from filling a pretty full reserve and diverting that oil into the refining bottleneck.
Net effect was a brief pshycological tick with the oil and gasoline traders and speculators , on the order of an afternoon.
Might be one of the causes of the drop in oil prices, though.
He said we would not ADD TO THE RESERVE for the next few months. There was no draw down planned. After the summer driving season we're supposed to resume adding. Of this I am positive.
US Dept of Energy Weekly Petroleum Report - http://tonto.eia.doe.gov/oog/info/twip/twip.asp
Analyzing the Unknowable
Teams in the National Football League (NFL) spend a lot of money, resources, and time in analyzing who they should draft each year. Players are interviewed, run through a battery of tests, and watched for countless hours on film. And yet, after all this very thorough analysis, NFL teams still end up drafting a lot of players in early rounds who don’t pan out as expected, while some players who are picked in the later rounds of the draft or are not even drafted, turn out to be stars. So, too, are oil prices difficult to forecast. Many factors influence oil prices, and often, just when someone develops a regression equation that seems to explain historical trends, other factors come to the fore that reduce its ability to account for current market conditions. So what are oil analysts to do when it comes to predicting near-term oil markets? Perhaps they should do as NFL teams do: undertake thorough research into the factors that might influence future performance, and make the best analysis given the information on hand, understanding the uncertainties in the process.
EIA’s analysis of current oil market conditions has led us to believe that there are three major factors that have caused the price of West Texas Intermediate to go from $20 to $30 per barrel in 2000-2002 to over $70 per barrel the last couple of weeks. In no particular order, they are: 1) strong global demand growth, especially in China and the United States, 2) limited surplus capacity, both upstream and downstream, and 3) major weather and geopolitical risks that have highlighted the need for more surplus capacity, both upstream and downstream. If EIA is correct in its analysis that these are the major factors driving oil prices right now, then it is logical to assume that oil prices will stay at high levels until current concerns are eased in one or more of these areas. To see if any of these factors are likely to fade away soon, let’s analyze each one a little more closely.
Strong Global Demand Growth – After averaging annual growth of just under 1 million barrels per day between 1991 and 2002 (under 0.9 million barrels per day for 2000-2002), world oil demand grew by 1.5 million barrels per day in 2003, 2.6 million barrels per day in 2004, and at least 1.1 million barrels per day in 2005. This greater-than-historical growth came even as oil prices more than doubled. In fact, some analysts argue that strong growth in the world economy, and particularly in China and the United States, has fueled the need for more oil, thus putting upward pressure on prices. That is, strong global oil demand is one of the factors causing oil prices to rise in recent years.
Limited Surplus Production Capacity – Of course, strong demand growth would not be a major factor if supply growth, or more specifically supply capacity growth, matched or exceeded the growth in demand. But this has not been the case. As a result, according to EIA estimates, surplus global oil production capacity, which was as high as 5.6 million barrels per day in 2002, plummeted to 1.8 million barrels per day in 2003, and has been around 1 million barrels per day during most of 2004 to the present. As demand has increased rapidly the last few years, the world has dipped into the surplus capacity that had been built up earlier. While some productive capacity has been brought online, it has been insufficient relative to demand growth. As a result, surplus capacity is extremely limited, dramatically reducing the ability to respond to any sudden surges in demand or disruptions in supply. The situation is similar downstream, where global refinery utilization has increased from an annual average of 85 percent in 2002 to 90 percent in 2005. This increase in refinery utilization has also reduced the system’s flexibility to respond to any disruption in refinery production, either from hurricanes or other events. Increases in refinery utilization rates may also make crude oil markets more responsive to seasonal patterns for refined products. In other words, if U.S. gasoline markets are tight, they may “pull up” crude oil prices to a degree, given that tight downstream capacity makes each gallon of product produced that much more valuable, increasing the value of the crude oil used to produce the refined products.
Weather and Geopolitical Risks – Just as the lack of surplus capacity is related to the growth in global demand, the impact on prices due to heightened weather and geopolitical risks is related to the lack of surplus capacity. If surplus capacity was sufficient to make up for any reasonable likelihood of a loss in supply, then the risks would not have as great an impact on price. However, because there is very limited surplus capacity, concerns about potential or existing supply problems in Nigeria, Iran, Iraq, Venezuela, and elsewhere, as well as the threat of more hurricane damage this summer, have exacerbated price increases related to the first two factors above. Or put another way, these risks to supply would not be putting as much upward pressure on prices if fundamentals were not tight to begin with.
Assuming these are the major factors driving up crude oil prices, what is the likelihood that any one of these factors might fade away and thus possibly lead to a dramatic drop in crude oil prices? Currently EIA expects global demand to grow by 1.6 million barrels per day in 2006 and an additional 1.7 million barrels per day in 2007. Thus, demand is not expected to slow down in the short-term. While EIA does expect surplus crude oil production capacity to increase slightly in 2006, it is expected to remain well below historical levels. Upstream surplus capacity does not appear likely to improve in 2007, either. In addition, global downstream capacity is expected to continue to grow at or slower than demand growth, thus keeping refinery utilization rates at high levels. Finally, most analysts do not expect that any of the key supply risks will go away soon. The situation in Nigeria may continue for many months, market concerns about a possible supply disruption from Iran are likely to remain through at least this year if not into next year, and concerns that we are in a cycle that could lead to strong hurricane seasons for years to come are not likely to fade away quickly.
Just as in the NFL draft, energy forecasters can make their best projections and still end up surprised (sometimes pleasantly, sometimes not) by future outcomes. Nonetheless, both football teams and energy market participants still find it worthwhile to do their analysis. EIA’s current view is that none of the three main forces that contribute to current high crude oil prices will ease significantly in the near future, so our best forecast is that crude oil prices will remain elevated through 2007.
U.S. Average Retail Gasoline Prices Up Half a Penny The U.S. average retail price for regular gasoline edged up 0.5 cent last week to 291.9 cents per gallon as of May 1, which is 68.4 cents higher than last year. Prices rose for the fifth week in a row, reaching their highest level since October 3, 2005. Prices were mixed throughout the country, with the East Coast seeing a decrease of 0.2 cent to reach 294.0 cents per gallon. Prices were also down in the Midwest and on the Gulf Coast. The West Coast showed the largest regional price increase of 12.2 cents to 313.1 cents per gallon, the highest regional price in the nation. California prices were up 13.4 cents to 320.2 cents per gallon.
Retail diesel fuel prices gained 2.0 cents to reach 289.6 cents per gallon as of May 1, which is 63.4 cents higher than last year. Prices were up throughout the country, with the Rocky Mountains seeing the largest regional increase of 10.9 cents to 301.2 cents per gallon. The Gulf Coast had the lowest regional price in the country, gaining 1.5 cents to 283.2 cents per gallon. West Coast prices were still the highest regional prices in the Nation, adding another 7.2 cents to 309.8 cents per gallon. California prices were even higher, increasing 6.0 cents to 316.3 cents per gallon.
Propane Inventories Post Above-Average April Build The propane build season, that typically spans the April through September period, was off to a good start with inventories posting a nearly 10 percent above-average April build, compared with the most recent 5-year period for this month. With last week’s 1.5-million-barrel gain, U.S. stockholders added 5.4 million barrels to the nation’s primary inventories of propane during April, propelling inventories higher to an estimated 34.4 million barrels as of April 28, 2006, a level that continues to track within the middle of the average for this time of year. Regional gains were concentrated mostly in the Midwest region last week that showed stocks building by 1.1 million barrels, followed with a modest 0.5 million-barrel-gain in the Gulf Coast region. Inventories in the East Coast and the combined Rocky Mountain/West Coast regions remained relatively unchanged during this same period. Except in the Gulf Coast region, where inventories continue at a level near the bottom of the average range, regional inventories in the East Coast and Midwest regions remain either at the upper limit or above their average ranges for this time of year. Propylene non-fuel use inventories continued lower last week with a drop of 0.1 million barrels, with its share to total propane/propylene inventories shrinking to 8.1 percent, compared with the prior week’s 8.8 percent share.
Text from the previous editions of “This Week In Petroleum” is now accessible through a link at the top right-hand corner of this page.
"Ours continue to rise more and more."
Yup. The Shell station, right across the highway from the Shell refinery, is selling regular for $3.26/gal.
Halliburton, Halliburton!! Impeach Bush!!! Frog March Cheney!!!!
Yup. And might explain why shortages have dropped.
Strong Global Demand Growth
Limited Surplus Production Capacity
Weather and Geopolitical Risks
Basically, there is not much if any surplus capacity (please give the Environmental Wackos some applause for this), China and India, which has 2 billion of the world's people, are start increase the demand on oil, and those wonderful countries that export oil tend to be unstable -- Iran, Nigeria, Venezuela, and Iraq.
Of course, Hurricanes Katrina and Rita have wrecked havoc with refineries and oil production offshore in Texas and Louisiana.
Probably one factor in market expectation...
Market fluctuation. In other news a bear pooped in the woods today.
Meanwhile, ethanol is still trading at $2.73/gallon over on the Chicago Board of Trade.
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