Oil looking up on taxes and QE2

EMI Global Equity Index

12/8/10

Change

Change

2010 YTD

2010

From

From

Change

5:51 AM

Yesterday

Yesterday %

%

US/Dow Jones

11,359

(3)

-0.03%

8.9%

Can/S&P-TSX

13,251

(25)

-0.19%

12.8%

Lon/FTSE

5,810

2

0.03%

7.3%

Paris/Cac 40

3,818

8

0.20%

-3.0%

Germany/Dax

7,002

(1)

-0.01%

17.5%

Japan/Nikkei

10,232

91

0.90%

-3.0%

HongKong/HangSeng

23,092

(336)

-1.43%

5.6%

Aussie/SYDI

4,700

(27)

-0.57%

-3.7%

China/Shanghai A

2,983

(29)

-0.96%

-13.2%

Brazil/Bvspa

69,338

(214)

-0.31%

1.1%

EMI Global Equity Index

15,158

(53)

-0.35%

3.3%

Yesterday the EIA released their latest Short Term Energy Outlook. The forecast remains overall supportive for the oil complex as shown in some of the main highlights of the report shown below.

Crude Oil and Liquid Fuels Overview. Gradual tightening in global oil markets continues to support world oil prices. Projected liquid fuels consumption growth of 2 million barrels per day (bbl/d) in 2010 is almost double the growth in supply from countries outside of the Organization of the Petroleum Exporting Countries (OPEC), which has led to rising demand for OPEC crude oil production and declining global oil inventories. While overall commercial oil inventories in the Organization for Economic Cooperation and Development (OECD) countries remain high, stock levels are unevenly distributed with some regions experiencing tightness in recent months. Both floating and reported on-shore inventories have been declining, and EIA believes that the projected continued reduction in OECD stocks over the forecast period should lend support to firming oil prices.

Global Crude Oil and Liquid Fuels Consumption. Projected world liquid fuels consumption increases by 2 million bbl/d in 2010, following declines in 2008 and 2009. As a result, total global consumption in 2010 should be close to the 2007 level. Global oil consumption growth slows to 1.4 million bbl/d in 2011. Non-OECD regions, especially China, the Middle East, and Brazil, represent most of the expected growth in world oil consumption next year. Among the countries of the OECD, only the United States is expected to show any significant growth in consumption volume in 2011 at about 0.2 million bbl/d.

NonOPEC Supply. EIA projects the total non-OPEC supply of crude oil will grow by just over 1.0 million bbl/d to an average 51.5 million bbl/d in 2010 - the largest year-over-year increase since 2002. The increase in total non-OPEC supply for the year is the result of higher production in the United States, Brazil, China, and Russia. However, non-OPEC supply falls by 280,000 bbl/d in 2011. The decline in non-OPEC supply in 2011 would be only the third time in the last 15 years that non-OPEC supplies fall year-over-year. Previous declines in 2005 and 2008 were primarily the result of supply disruptions in the Gulf of Mexico related to hurricanes.

OPEC Supply. EIA expects that OPEC crude oil production will increase by 0.3 and 0.4 million bbl/d in 2010 and 2011, respectively, similar to last month's Outlook, to accommodate increasing world oil consumption. Projected non-crude liquids increase by 0.7 million bbl/d in both 2010 and 2011. OPEC surplus capacity should remain close to 5 million bbl/d, compared with 4.3 million in 2009 and 1.5 million in 2008.

OECD Petroleum Inventories. Commercial oil inventories held by OECD countries at the end of 2010 are an estimated 2.73 billion barrels, equivalent to about 58 days of forward cover and roughly 94 million barrels more than the 5-year average for the corresponding time of year. OECD oil inventories decline through the forecast period, though days of forward cover should remain high by historical standards.

Late yesterday afternoon the API released their latest inventory assessment. The API released a mixed inventory report for the second week in a row. The API showed a strong decline in crude oil stocks and builds in both gasoline and distillate fuel inventories. The API reported a crude oil inventory draw of about 7.3 million barrels as refinery utilization rates surged by 4.2%. They also showed a huge build in gasoline stocks of about 4.8 million barrels while distillate fuel stocks also increased strongly by about 1.7 million barrels. The results of the API report are summarized in the following table. So far the reaction to the API report has been bearish as prices have continued to decline in overnight trading. In fact the API report is very bearish and if today’s EIA report is in sync with the API report it is likely to result in a strong round of profit taking selling.

<< Page 2 of 3 >>
Comments
comments powered by Disqus