Oil rising as traders expect Fed easing to continue

Crude is Cruising

Oil prices are on the rise as the euro soars in a sign that traders believe the worst may be over in Europe and the Fed will continue to be accommodative. WTI soared on economic optimism and the expectations on a return to higher run rates on the all-important Seaway pipeline. The dollar is showing a bit of weakness as the market does not expect to upset the QE applecart in today’s statement. In Egypt things are falling apart for the Muslim brotherhood and the geopolitical risk is high. Still let’s face it we already have priced in a significant amount of risk.

Bloomberg is reporting that one of Egypt’s main opposition leaders called for talks with the government and military aimed at ending a wave of deadly clashes, after President Mohamed Mursi signaled a softening of emergency measures. “Ending the violence is a priority,” Mohamed ElBaradei said on his Twitter account. He said Mursi, his defense and interior ministers and Islamist and opposition parties should attend the meeting to discuss “urgent measures” after at least 50 people were killed in the past week and the defense minister warned the state’s authority was in danger of collapsing.

Bloomberg reports that United Nations special envoy Lakhdar Brahimi offered the grimmest picture yet of Syria’s descent into chaos, leaving little doubt that diplomatic paths have been exhausted as the conflict drags on indefinitely. Syria is unraveling before the eyes of the world, Brahimi told the UN Security Council yesterday, according to an account provided by two UN officials who asked to not be named because the meeting was closed to the public. The regime of President Bashar al-Assad has defied forecasts of imminent collapse and is surviving with no end in sight, even though its legitimacy has been irrevocably lost, said the two officials.

Seaway caused a big rally then drop and a rally again. Bloomberg news quoting a Morgan Stanley analyst reported that a last week transformer outage shut the pipeline draining crude from Jones Creek storage tanks, partly because this coincided with maintenance at Phillips 66’s Sweeny, Texas refinery that could have otherwise acted as a safety valve. This meant less crude was drained southwards Enterprise’s Seaway pipeline from congested storage tanks at Cushing, Okla., the delivery point for Nymex WTI crude. The Sweeny refinery usually uses heavier crudes, so congestion at Cushing will linger through 1H13, MS says. Maintenance of crude units at Wood River, Ill., refinery in Feb. to also keep congestion at Cushing, MS says.

RBOB Gasoline is on its best run since 2009 as refining issues and the Sale by Hess of terminals and its getting out of the refining business continues to drive this market higher. Bloomberg news reports that Philadelphia Energy Solutions will shut the Girard Point section of its plant, the largest near the harbor, this month for 60 days of work. A fluid catalytic cracker at Delta Airlines Inc.’s Trainer, Pennsylvania, refinery has been shut for repairs since December.

Valero Energy Corp. plans five weeks of work on a crude unit at its McKee refinery in Sunray, Texas, in April and a refinery-wide turnaround at its Quebec plant the same month, the company said in an e-mailed statement. The company said previously it planned a four-week turnaround at McKee to start in March. The 170,000-barrel-a-day McKee plant can process oil from fields in Texas and the U.S. Midwest, as well as receive crude from the Cushing, Oklahoma, storage hub. The plant-wide work at the 235,000-barrel-a-day Quebec City facility will last for nine weeks. It was originally scheduled for the first quarter, according to Valero’s second-quarter earnings call. The Corpus Christi refinery’s West plant shut a 90,000- barrel-a-day heavy oil cracker this month for eight weeks. Valero’s Texas City, Texas, plant shut its 83,500-barrel-a-day fluid catalytic cracker earlier this month for six weeks of work. The San Antonio company has 16 refineries in North America and Europe with a total processing capacity of about 3 million barrels a day, according to Valero’s website.

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