Seeking Alpha

Bob van der Valk's  Instablog

Bob van der Valk currently resides in Terry, Montana and is the Fuel-pricing Analyst and Director of US Branded License Program with 4Refuel Inc.out of Lynnwood, Washington. Prior to that he worked for River City Petroleum in Las Vegas, Nevada as their Marketing Manager selling ExxonMobil... More
My business:
4Refuel Inc.
My blog:
Bob
  • Get ready for a drop in diesel and gasoline prices 1 comment
    Sep 20, 2009 10:22 PM | about stocks: OIL, CME, NMX, MA
    September 20, 2009 5:30 PM MDT

    You will soon be paying under $2 per gallon again for gasoline and diesel fuel and crude oil will go back down into the 40's. So you can make plans for that trip to see the grandparents for the holidays as well as give the economy a much needed boost. Demand for gasoline in the United States typically falls after Labor Day due to vacation season ending. For the week ending September 4, 2009 demand for gasoline was at its lowest point since January 9, 2008 according to MasterCard Advisors LLC.

    Currently diesel fuel is cheaper than gasoline in Canada and vice versa in the US. Canadian truckers, who were paying $1.45 per litre in June 2008, are now just paying 92.5 cents in the first week of September per the M.J. Ervin & Associates weekly petroleum prices survey. That’s a whopping 36% savings in 15 months.
    Gasoline prices also dropped drastically in the same time period from $1.35 per litre from June last year to .994 cents per litre in the first week of September 2009. That is complete reversal from paying 10 cents per litre more for diesel to paying almost 7 cents per litre more for gasoline last week.

    The inversion in diesel fuel versus gasoline prices has not been the case in the United States since the Rita and Katrina hurricanes hit the Gulf Coast in August 2005. That event had a major long term impact on inventories of gasoline, distillates and lube stocks on both side of the border. About 25% of the U.S. refinery capacity is located on the Gulf and was severely affected by the weather phenomenon.

    According to Statistics Canada, in July 2009, six of the seven major petroleum products posted declines compared with the same month a year earlier. The decrease in total product sales was led by diesel fuel, down 314.7 thousand cubic metres (-12.5%). Motor gasoline was the only product in the major petroleum product group to post higher sales, up 158.9 thousand cubic metres (+4.3%) from July 2008, and the fifth consecutive month-over-month increase in motor gasoline sales.

    Meanwhile that difference in prices has not  yet occurred in the U.S per the AAA fuelgauge report as of September 15, 2009:

     
    Regular
    Mid
    Premium
    Diesel
    85
    **E85
    MPG/BTU
    adjusted
    price
    Current Avg.
    $2.563
    $2.721
    $2.818
    $2.664
    $2.055
    $2.704
    Yesterday Avg.
    $2.572
    $2.731
    $2.828
    $2.671
    $2.051
    $2.699
    Week Ago Avg.
    $2.578
    $2.738
    $2.835
    $2.674
    $2.061
    $2.712
    Month Ago Avg.
    $2.643
    $2.807
    $2.907
    $2.686
    $2.088
    $2.748
    Year Ago Avg.
    $3.842
    $4.007
    $4.128
    $4.185
    $3.004
    $3.954

    Money has been poured into the commodities markets recently as the U.S. dollar fell against the Euro.   Crude oil prices have risen from a low of $33 to $72 a barrel last week.

    For month investors months have used crude oil as their hedge against inflation, betting that oil prices will likely increase as the economy improves and global supplies start to shrink.

    So far 2009 has turned into the first normal year for the petroleum markets since 2004 due to the absence of the high roller speculators and adverse weather conditions. Those investors were burned in the big oil price free fall during the second half of 2008 by following bad advice from their investment brokers.

    In August 2009 the U.S. Security and Exchange Commission took initial steps to enforce the strict limitations on dealings between bankers and stock analysts. The law requires investment firms to engage in “fair dealings with customers” and prohibits in-house analysts from issuing opinions and research reports that are at odds with their true beliefs about the market. These opinions are spread fast, far and wide utilizing today’s high tech communications.

    The market is also very nervous after news that the Chicago Mercantile Exchange (CME) Group, which runs the New York Mercantile Exchange (NYMEX), notified traders and brokers of tighter enforcement of existing position limits on NYMEX, CME, and other exchanges as of September 14, 2009.
    US oil refiners, who were producing diesel in record numbers last year, reversed course earlier this year and made their refining stream fall in line with the flat demand for gasoline and the ever shrinking demand for diesel fuel.   Refinery runs have drifted down to 86.94% of capacity from the previous week's 87.2%.  Inventories of crude oil and its finished products are at all time high.
     
    That will have the affect of starting the downward slide for gasoline and diesel fuel prices with the price of crude oil following right along.   

    The writer does not have any investment or commodities
     
     
    Themes: refinery, diesel, gasoline, price, AAA, CME, Nymex, crude, oil, petroleum, canada Stocks: OIL, CME, NMX, MA
Back To Bob van der Valk's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

This post has 1 comment:

  •  
    Yank - Before passing judgment on my forecasts please read my articles published on Seeking Alpha earlier this year. My theory that gasoline prices are now driving crude oil prices has been true since about a year ago. The US refineries are now in the middle of switching from producing summer to making winter gasoline. That puts an extra 10% of gasoline supply into the market, which is currently running flat on demand. Major oil companies are stuck with the Last In/First Out method of accounting for finished inventories by the end of each year. The same thing occurred at this time last year and the rest as they say is history. Crude oil eventually followed the free fall in gasoline prices and after bottoming out in the early part of this year regained strength in March when - guess what? - US refineries have to switch to making summer gasoline.
    Sep 21 10:36 AM | Link | Reply
Full index of posts »
Latest Followers
Posts by Ticker
AMK, BP, CME, CVX, GS, ICE, MA, MS, NMX, OIL, PZE, RDS.A, SUN, TNS, TSO, VLO, XOM

Latest Comments


Most Commented
  1. When Goldman Sachs wins – You lose (2 Comments)
  2. Get ready for a drop in diesel and gasoline prices (1 Comment)
Posts by Themes
saudi, 4refuel, aaa, AAA, abdullah, AIG, air, API, arabian, arco, atomic, bailout, bakken, bank of america, barrel, Bernanke, blankfein, bonus, bp, bush, california, canada, cap, CARB, CFTC, cftc, christopher cox, clean, CME, commodities, crude, crude oil, crude oil. hurricane, crue oil, cushing, democracy now, diesel, DOE, drew, Drew Edmondson, eddie murphy, edmondson, EIA, energy, evr, exploration, exxon, FEC, Fed, felmy,
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.