Huge crude supply build

Coming To America!

Everywhere from around the world, the crudes coming to America, every time that flag's unfurled
crude is coming to America, got a dream to take it there, it's coming to America. It's coming to America and
coming to America!

Give me your poor, your huddles masses but most of all give me your crude. Crude Imports surged hitting the highest level since August of 2006 leading to a whopper 7.3 million barrel build in U.S. Crude supply. This was a far cry from most analysts' expectations that were looking for a big drop in supply by thinking that Tropical Storm Bonnie would impact imports in a negative fashion. I on the other hand did predict a build because as I believed that the storm might have the opposite reaction on imports and it looks like I was right.


In fact according to one report we saw from "Gas Oil and Liquids Daily" supplies in Gulf States jumped a whopping 8.18 million barrels, or 4.6%, to 184.6 million. Regional imports gained 1.73 million bpd, or 32%, to a record 7.21 million. The gain was the largest since Gulf traffic resumed after being slowed by hurricanes Gustav and Ike in 2008.


The reason that we saw that big jump in the Gulf Coast may have more to do with the aftermath Hurricane Alex and the way the Energy Information Agency collects data then with Tropical Storm Bonnie. Crude Imports slowed and got backed up. After Alex passed that Crude that waiting out the storm rushed into port ahead of what turned out to be Tropical Storm Bonnie.


The EIA sometimes seem to be slow in acquiring import data especially when many are focused on storm events. So it is very likely some of the crude imports that they counted coming into the Gulf from last week's report missed the data deadline and ended up getting counted in this week's report.
While this was very bearish there were some signs on the product demand side that kept the complex from getting totally crushed. The Energy Information Agency Reported that total products supplied over the last four-week period has averaged 19.4 million barrels per day which was up by 3.4% compared to the similar period last year. The EIA said that over the last four weeks, motor gasoline demand has averaged 9.4 million barrels per day, up by 2.1% from the same period last year. Distillate fuel demand has averaged 3.6 million barrels per day over the last four weeks, up by 9.3% from the same period last year. Jet fuel demand is 11.2% higher over the last four weeks compared to the same four-week period last year.


Is it time to buy algae stocks? Maybe pond scum is not necessarily a bad thing. The Energy Information Agency makes me think we are getting close as they did a report looking into the attributes of algae that could make algae a potentially attractive renewable fuel that could someday replace oil. You see in that smelly gross algae stuff is natural oil that can be used for energy. You see algae converts light, carbon dioxide (CO2), water, and nutrients such as nitrogen and phosphorus into oxygen and biomass, including lipids - the generic name for the primary storage form of natural oils. The EIA says that single-cell or microalgae are most interesting because of the speed and efficiency at which they produce lipids. In fact algae can produce these amazing lipids faster per acre of harvested land than terrestrial plants because of their high lipid content and rapid growth rates. In fact according to the National Renewable Energy Laboratory (NREL) estimates that the oil yield for a moderately productive algal species could be about 1,200 gallons per acre; compared to 48 gallons per acre for soybeans. On top of that high productivity of algae could significantly reduce the land use associated with production of biofuels. In other words, it would take 62.5 million acres of soybeans (an area approximately the size of Wyoming) to produce the same 3 billion gallons of oil that could be produced from only 2.5 million acres of algae (an area approximately 70 percent the size of Connecticut). Three billion gallons of biodiesel represent about 8 percent of all the diesel fuel used for on-road transportation in the United States in 2008.


This could also end the food or fuel debate that erupted when ethanol demand drove up grain prices. Yet there are still some problems and there are those pesky technological and economic challenges in algae cultivation, harvesting, and oil extraction that have to be addressed before algae-based fuels can be commercially produced". The EIA says that among other things scalability remains a major obstacle. Harvesting and oil extraction are relatively costly. Currently, most estimates of the production cost of algal oil range from $4-$40 per gallon depending on the type of cultivation system used.


Are you wondering why it is so hot? Well maybe it is global warming. The latest report from the U.S. National Oceanic and Atmospheric Administration says that Climate change or global warming is an undeniable fact and there are clear signs of those nasty "human fingerprints" all over it. So that is why you are sweating. Another theory could be that it's summer.


Tony Heyward may be banished to Siberia while Conoco Philips is getting out. Conoco say it is selling its entire stake in Russia's Lukoil. The FT reports that Conoco CEO Jim Mulva said that the Lukoil investment had been aimed at doing joint deals and these had not happened. Or it may be because he wants to stay as far away from Tony Heyward as he can.

Phil Flynn is senior energy analyst for PFGBest Research and a Fox Business Network contributor. He can be reached at (800) 935-6487 or at pflynn@pfgbest.com

About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.

 

Futures and options trading involves substantial risk of loss and may not be suitable for everyone. The information presented by The PRICE Futures Group is from sources believed to be reliable and all information reported is subject to change without notice.


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