Oil prices retake $100 level on retail sales

Driving us higher and higher

Who said that America's gas guzzling days were over? Oil prices soared coming beyond $100.00 a barrel on strong economic data that might suggest that perhaps consumers are getting back on the roads.

For the first time in days the heating oil market fell back versus RBOB gasoline as the spread came back in as a strong retail sales number seems to suggest that gasoline demand will improve. If people are shopping more, then it is likely they will start driving more. That optimism was confirmed by a better than expected gasoline demand report from MasterCard SpendingPulse. The report showed that gasoline demand actually increased 133,000 barrels per day. That was an increase of 1.5% bringing demand to an improving 8.798 million barrels per day. That translates to 61.585 million bbl of gasoline sold at gas stations, an increase of 928,000 bbl from the previous week. Still, despite the increase, gas demand is still 4.4% versus a year ago.

We also saw a substantial drop in the Brent versus West Texas Intermediate spread WTI oil spread. This is something I said would happen and what I called the "Dead Spread." On October 25th I was trying to explain the impact of the death of Moammar Gaddafi on oil. I said that the Brent/WTI spread almost became a household word in the conflict between Gaddafi loyalists and the Libyan rebels. Libyan crude is of a very high quality oil that found its niche in Europe, subbing for the production challenged North Sea Brent crude. The loss of that crude created a void because European refiners, accustomed to a regular flow of light crude, failed to have the type of units needed to refine those heavier grades. The loss of that crude caused the Brent/WTI spread to go to a record high. I said that coincidentally or not, the spread has come and would continue to come in after Mr. Gaddafi's demise. I said that because there was not a lot of damage to the oil infrastructure and the expected return of North Sea oil production, the spread would come in. We are already seeing the benefits of increased Libyan oil from Libya's giant Elephant oil and gas.

Still we see a break at the pump for gas prices as refiners kick up production to meet tight distillate supply and weaker Brent crude costs. And a report from the Federal Trade Commission say that it is supply and demand driving gasoline prices, not speculators! Told you so!

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.

 

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