Oil Inventory Review. There was nothing bullish in yesterday’s numbers. After a Mahmoud mania inspired $2 rally crude in the morning the EIA’s petroleum inventory report put a damper on the bulls spirits. Both gasoline and distillates numbers came in with smaller than expected draws as more refiners went back to work and imports surged.
Crude fell 0.9 million barrels as refinery utilization ticked back up.
Gasoline - A Picture Show.
• Imports Picking Up After A Lull. It seems that higher U.S. gas prices attract tankers. Imports need to remain above the one million barrel mark to put a dent in RBOB and need to stay that high to keep prices from heading back towards last Summer’s prices.
• Utilization - Starting to get up off the mat. We’re about 2% points below where would we usually are for this time of year (89% since 2000) although I’d point out that doesn’t mean we’re producing less gasoline than has been the March average since productive capacity has risen steadily over the period. The majors and independent refiners may not break ground on new facilities (which would be pretty inefficient and a complete headache for them) but they continually upgrade the infrastructure they've already got.
• Demand Remains Robust. Although not growing as fast as it has been on a week to week basis, demand remains strong. People never learn. Toyota now has to offer incentives on the Prius since the early adopters have spent all their green; Piaggio , maker of Vespa, is too hard to trade here or I’d be in and whatever happened to all those Segways that were supposed to revolutionize the planet.
• Gasoline Inventories Remain Sufficient (Above Average) For This Time of Year.
If we’re not running out and IF imports and production are coming back up than should the RBOB contract look like the east face of K2?
Hype Over (fundamental) Matter. Natural Gas Inventory Day. Natural gas closed up a nickel yesterday to $7.56 and has been on a pretty good rally ever since last Thursday when the earliest recorded injection of the season was reported.
- My Expectation: +/- 20 Bcf. It’s the should season and pretty hard to predict. If you go with the weather alone than we should see another middle teen sized injection into storage.
- Street Consensus. Withdrawal of 18 Bcf.
- Next week’s numbers will almost certainly be a bigger injection.
Natural gas prices are rising on the two pronged hype attack of a hot summer and increased hurricane activity in the Gulf of Mexico. I think the floor is still around $6 to $6.50 this Spring but gas may hit $8 first on this hysteria.
Odds & Ends
Analyst Watch: very little activity. (NYSE:CCJ) price target upped from $42 to $55 at FBR.
Pickens Watch: $75 before $55. T. Boone Pickens (or as I respectfully call him, Mr. Burns) was on CNBC this morning preaching higher oil prices. “When oil prices are spiking, Boone Pickens is the first person we need to talk to” ~ Becky Glick.
- Why, because he’s going to say something different? Global inventories are falling, Saudi Arabia can only maintain their current level of productin if that, fear and doom and gloom yada, yada, yada. Same stuff he always says when prices are up on factors he’s not talking about until prompted like a temporary discombobulation in gasoline production.
- CNBC, why don’t you ask him if he’s more short than long oil contracts right now? Pickens also debunked my thought that gasoline prices will peak earlier than usual this year (since they’ve already one heck of a run they should run more). He’s a smart guy but I question his motives, after all he is a hedge fund guy and CNBC’s own Jim Cramer says to never trust them, that all they do is lie for a living.
Iran Standoff : Week 2 Begins. I’m surprised CNBC doesn’t have a counter with tenths of second going since the hostages were taken.
- Mahmoud showed a video of it’s involuntary British guests yesterday and they looked well enough.
- John Stewart’s people claim that Brits make the best hostages so if you’re looking to nab someone they’re your mark.
- Apparently being a woman gets you out of Iranian jails and not only to be stoned for adultery or self defense against rape.
- U.S. excersises in the Gulf came to an end yesterday.
- Now Iran says that Britain can just admit it’s soldiers trespassed and the whole thing will be over.
Probably Good News For (NYSEMKT:LNG) (the company) and (NYSE:MMR). From Upstream: Shell has drooped plants to build a liquified natural gas terminal offshore Louisiana because import capacity will be sufficient without it…when Shell announced plans for Gulf Landing in 2003, there was one LNG terminal in the Gulf of Mexico. Now, seven are either operating or under construction in the US and Mexico.
Holdings Watch: Added (NYSE:SU) May 75 puts yesterday and added to the (NYSE:TSO) put position. Finally, I took position in XOM calls as insurance against a potential incident (or rumor of one) spiking oil prices again.