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November 2, 2007

Oil hits $96, poised to break $100 next week...

From Opis. This is the real deal baby

Subject: OPIS West Coast Report

11/2 - The runaway train continues to roll along with crude oil settling at a new all time high and RBOB coming with a penny or so of the spring pre-season highs.
Crude oil plowed $2.44 higher and settled at $95.93/bbl after hitting a $96/bbl higher just before the close, with the $96.24/bbl all-time high and key resistance at $96.40/bbl in the cross hairs for Monday. Crude oil does not need any help moving higher, but strength in gasoline helped move the crude oil market today. Earlier today. U.S. Rep. Edward Markey (D-Mass.) called on the Bush administration to release crude oil from the Strategic Petroleum Reserve. Brent crude also saw an all-time high trading up to $92.21/bbl.
RBOB futures jumped by almost 10cts today settling 9.63cts higher at $2.4395/gal and is now within earshot of the pre-season spring highs at $2.455/gal. Some of the spring 2008 contracts are approaching the $2.60/gal level in the futures market. Some of the strength in RBOB today is being attributed to a reallocation of weighting RBOB in the S&P Goldman Sachs Commodity Index to 4.55% in 2008 versus the 1.37% it held in the index in 2007.
Heating oil futures saw big gains as well today, but they were lost in the mix of huge gains in crude oil and RBOB trading rings. Heating oil futures picked up some 6cts in settling at $2.5737/gal. Incidentally, the S&P-GSCI weighting of heating oil isgoing to decrease to 4.68% from the current 5.76%.
Soaring Singapore jet fuel cash prices are expected to trim the monthly spot cargo flow to the U.S. West Coast from Asia by up to 50% in December, some traders said on Friday.
Singapore spot jet fuel surged past the $100/bbl mark earlier this week to about $110.40/bbl, gaining $6.50 on Friday.
The price surge was attributed to the expected demand spike from China and declining stocks in Japan.
The price hike could be extended over the next few months as China is expected to remain a major importer in Asia. China raised its domestic diesel and jet fuel prices for the first time in 17 months.
"Jet fuel imports into the West Coast will definitely be affected by the very strong Asian market," a trader said.
The U.S. West Coast imports an average of about 3-4 spot jet cargoes every month, with December imports possibly falling by 1-2 cargoes.
"As of now, I don't see any jet cargoes fixed for December arrival from Asia," he said.
However, the trader pointed out that the arbitrage economics could change quickly due to the volatile prices in Asia and Los Angeles as well as fluctuating freight rates.
Jet fuel in Los Angeles was trading 19.2-22cts/gal over the NYMEX December heating oil futures contract today.
In other news, Chile has tendered for a total of 49 term gas oil cargoes or
1.862 million tonnes for January-May delivery, traders said on Friday.
Private oil company COPEC has tendered to buy 35 cargoes of 38,000-tonnes each for January-May delivery. This buy tender closes on Friday. State-owned oil company ENAP has tendered to buy 14 cargoes for January-March delivery.
This tender closed on Thursday. Bidders into the ENAP buy tender are Lukoil, ConocoPhillips, Vitol, Exxon Mobil, Chevron, Lukoil and Morgan Stanley. These bidders are expected to win some cargoes each due to the high number of cargoes sought in the tender. ENAP is expected to award the cargoes later today or Monday.
Some traders pointed out that the huge volume sought in two tenders could have a bullish impact on gas oil markets, and both companies may get better prices if the tenders were issued a few weeks apart.
Chile has stepped up its gas oil imports this year due to higher demand and an unstable natural gas supply from Argentina.
"This is a lot of gas oil for two tenders, but the monthly requirements are normal for this year," a trader said.
Both companies have not officially awarded the term contracts as of early Friday.
The winners could supply gas oil to Chile from the U.S. Gulf Coast, the Caribbean, Asia or Europe, depending on the arbitrage economics.
REFINED PRODUCTS...
More records were being set today in the West Coast diesel markets on the back of record high heating oil prices as basis differentials are higher than they were at this time last year, but pretty close to the average for CARB diesel over the last year and a half plus.
Los Angeles CARB diesel was seen trading from 21-22.5cts over the futures market which had spot prices up into the $2.7825-2.7975/gal range. Meanwhile there was some separation between L.A. and the Bay as San Francisco CARB diesel was about a half-cent cheaper than L.A. based on morning trading. Jet fuel is also seeing record prices with trades done from 19.25-22cts over the December heating oil screen and flat prices ranging from $2.765-2.7925/gal.
Northwest diesel flat price remains strong, but basis wise is starting to weaken with the market pegged around $2.8625/gal or 29cts over the futures market.
CARBOB trading stayed within Thursday's range trading in a narrow range of 22.5-23cts over the futures market, but with gains of more than 9cts seen in the RBOB ring flat values were up solidly in L.A. into a $2.665-2.67/gal range, prices not seen since the spring. December CARBOB was running at a 16.75cts premium or $2.615/gal. San Francisco CARBOB is roughly a penny over L.A. now. Meanwhile in the Northwest, gasoline traded at a 9cts premium versus the futures market putting spot prices at the $2.53/gal level.

Posted by Martin at November 2, 2007 9:16 PM

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