Oil traders watch as sanctions squeeze Iran

Bailout Doubt Rout

Is there a better way to start the week than worrying about whether or not Spain asks for a bailout? Call it risk-off if you must, or call it crazy because you know something eventually is going to happen, for better or worse.  Or perhaps you can call it the jobs report sell-off as a stunning drop in the US unemployment rate fell below 8%.

This is a week of EU meetings in Luxembourg where the market is worried that the EU finance ministers won’t do enough to keep the market on a rocky mountain sugar high. German exports came out better than expected which means perhaps the euro can find some support, yet with euro uncertainty and a suddenly dropping US unemployment rate, the dollar is the place to be and the euro is not.

Not only is the euro under pressure, so too is Iranian President Mahmoud Ahmadinejad as Iranian Parliament attacked him for tanking the Iranian economy and the Iranian currency, the rial. The president of course said it was not his fault! When all else fails I guess he can blame Bush, which seems to work in this country.

Pressure on Ahmadinejad means pressure on oil. If traders believe that the sanctions are starting to work perhaps forcing a change in the power structure of the regime, it is very possible that the possibility of an attack on Iran is diminishing. 

California Governor Jerry Brown finally responded to the gas crisis in California and waved the requirement for summer blends of gasoline. The Governor told state regulators to immediately allow oil refineries to make an early transition to winter-blend gasoline to help bring record prices at the pump under control and increase supply. Better late than never, Jerry Brown.

Nationwide, according to the Lundberg Survey as reported by Bloomberg News, the average price for regular gasoline at U.S. filling stations rose 0.37 cent in the past two weeks to $3.8375 a gallon. That puts the average price 41.83 cents from the same time last year. Still gasoline is 12.96 cents below the year-to-date high of $3.9671 on April 6.

Trilby Lundberg, president of Lundberg Survey told Bloomberg, “There was a big difference between what happened over the last two weeks in California and the rest of the country,” said in a telephone interview. “Most cities outside of California saw a decline of between 2 and 15 cents, while in California there were gains of about 40 cents.”

Last week crude inventories fell 482,000 barrels in the week ended Sept. 28 to 364.7 million barrels, according to Energy Department data. Stockpiles are 8.4 percent higher than a year earlier. This week we should see crude fall by 1.5 million barrels.

Gasoline inventories increased 114,000 barrels to 195.9 million barrels, the first increase in 10 weeks. The prior week, inventories sank to the lowest level since October 2008. This week we should see an increase of 2 million barrels.

Distillates should be up by 1.0 million barrels and refinery runs should rise by 1.2 million barrels.

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