Oil shows weakness as API adds to bearish mood

The Clouds of Ben Bernanke

We have heard from a ton of Fed officials in recent days but now it is Ben’s turn. The market has been torn trying to decipher just when the Federal Reserve will start to back off asset purchases. Of course the policy more than likely will be one where the Fed will either increase or decrease asset purchases as needed to influence the economy. Instead of setting a target rate they will set a target asset purchase to add or subtract momentum from the economy.

Yet oil continues to look weak despite a rebounding euro and the cloud of Ben Bernanke. Products seemed to have topped because of frantic pre-holiday wholesale cash buying. It seems many have secured their needs and that seems to have brought a sense of calm and a possible top in the market both seasonally and technically. The API also added to the bearish mood by reporting crude supply increased by 459,000 barrels. On top of that a sizable 3.03 million barrel increase 3.03 million barrels in gasoline as well as an increase in distillates of 532,000 barrels gives us a bearish trifecta.

And while the Oklahoma tornado disaster had little impact on refineries or the Cushing storage facility it may have had an impact of natural gas. Reuters reported that "Southern Star Central Gas Pipeline Inc. on Tuesday said a portion of its natural gas pipeline near Moore, Oklahoma, was impacted after a tornado struck the region late Monday.”  Earlier, the company said in a website posting that it declared force majeure after it isolated most of line segment 340 near Cement, Okla., adding that several receipt points would be unavailable until further notice. In a release on Tuesday, Southern Star said its crews immediately isolated the impacted pipeline segment, depressurized the line and blew the gas from the line.

Long term the natural gas demand story continues to get more interesting. Jeffrey Ross at "Autoblog” writes , "When it comes to fleet vehicles, the Chevrolet Impala definitely plays an important role for General Motors, and it looks like GM is hard at work developing the next-gen Impala for bulk-buying businesses. The Motoring Journal recently spotted a handful of Impalas testing in Colorado with minor camouflage, but upon closer inspection, these appear to be test mules for a new compressed natural gas (CNG) model – a powertrain combination far more likely to find favor with fleet buyers than everyday consumers.” 

During the launch of the 2014 Impala, Chevrolet said that it is looking to flip the current fleet-to-retail from 70:30 to a more profitable and resale-friendly 30:70 ratio, and this new CNG Impala could be a good way to retain some of that 30% fleet business. We reached out to GM for word on when a CNG Impala might arrive, and received this response: “We do offer a CNG van and a bi-fuel pickup truck, but still studying the demand for CNG powered passenger cars. Infrastructure is a consideration for anyone buying these types of vehicles. Unfortunately, there's nothing to announce today on this front. Our best guess is that it could debut for the 2015 model year, since the ninth-generation model is carrying over for fleet-only sales as the 2014 Impala Limited.”

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