Energy Market Updatefrom MF Global

 

We had good readings from the US ISM services index on Tuesday, and also upbeat remarks by the Fed Chairman Bernanke about the US economy, but neither variable was enough to spark another rally in the US stock market. In his remarks, the Fed chairman projected that the current recession would end later this year, and even forecast growth of 2% for next year and 4% for 2011. These forecasts will no doubt come back to haunt him if the economy takes a detour from its anticipated U-shaped recovery.
 
API numbers came out late in the day on Tuesday, showing US crude and gasoline inventories unexpectedly falling last week, thus helping oil prices slightly higher in after-hours trading. Crude drew by 1 million barrels against expectations of a 2.2-million-barrel build. Gasoline stockpiles, which had been expected to rise by 700,000 barrels, fell by 2.9 million barrels. Distillate stocks rose by 1 million barrels, in line with estimates. Runs were up by 355,000 barrels per day.

 

There is not much to say on the energy markets at this juncture. We suspect prices will get more direction from the EIA data out later today, which as our table in our attachment shows, calls for modest builds across the board. Andy Lebow’s numbers are in line with the consensus forecasts, except for gasoline, where he does not expect an increase.

 In Other News from Reuters...

 

* Saudi Arabia’s Aramco said it cut OSPs for most grades in June to customers in the US. The price of Arab Light was cut by 70c a barrel to WTI minus $2.95. Prices to customers in Northwest Europe were also raised, while into Asia, the price of Arab Light, Medium, and Heavy were increased by 20c, 65c, and $1.15 a barrel respectively.

 

* In a related item, Saudi Arabia said it will meet an end-of-June target for raising its oil output capacity to 12.5 million barrels per day, a Saudi Aramco executive told Reuters on Tuesday. The kingdom currently produces about 8 million bpd, and there are currently no expectations for a change in the short-term.
 
* Angola contacted OPEC to clarify its oil output target. It believes its output set by OPEC is 1.656 mbpd, rather than the widely quoted 1.52 mbpd.

 

* Complex refiners in Northwest Europe running Brent saw margins average $2.29 over the past week, compared with $3.77 in the week before. In Asia, refiners running Dubai crude fell to $3.49 a barrel. U.S. margins were also down. However, U.S. Gulf plants running Brent saw margins rise to $3.26 a barrel over the past week from $3.03 in the week before.

 

* Iraq’s oil exports from Basra fell to 1.08 mbpd on Tuesday, down from 1.32 mbpd on Monday, a shipper told Reuters.

 

* Royal Dutch Shell said its joint venture in Nigeria extended force majeure on Forcados crude oil to include May loadings. Planned pipeline repairs have been revised due to the security situation in the area, a spokesperson said. The Nigerian Forcados crude oil stream was expected to load around 245,000 bpd in May. 

 

European North Sea crude oil quotes as reported by Reuters: Forties for May 15-17 offered at dated minus 20 cents. North Sea loading programmes for June are expected to begin to emerge as early as Friday, traders said.

 

U.S. gasoline/distillate quotes as reported by Reuters: In Gulf Coast trading, M2 was at 8.25c under June. On distillates, jet was at 4c under and ULSD was at 1.60c under. In New York Harbor, jet was offered at 0.5c under, ULSD was down at 0.75c over and low sulfur diesel was up at 1.5c under. On gasolines, M2 was at 6.25c under.

 

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