Oil (NYMEX:CLQ13) gained for the third straight week against a backdrop of a market that is less afraid of Fed tapering, Egyptian tension and rising gasoline demand at a time refiners have been having problems. Hedge funds jumped back into oil as participation hit the highest level since May of 2011.
Gas (NYMEX:RBQ13) soared on Friday on a string of refining issues. Gasoline went crazy as wholesalers were stunned by strong demand and had been buying hand to mouth. On Friday Bloomberg reported that Phillips 66 shut units at its Ponca City refinery in Oklahoma Thursday morning after a power disruption, Houston-based spokesman Rich Johnson said. The refinery was restarting late Friday, but the damage was done. It did not help that this happened after Motiva Enterprises LLC shut a unit at its 600,000-barrel-a-day Port Arthur refinery, the largest plant in the U.S., after a fluid catalytic cracker tripped on July 10. On top of that Irving shut a 25,000-barrel-a-day FCC on July 6 and will perform work on the unit for several months, according to a report from IIR Energy. The 298,800-barrel-a-day refinery exports more than half its refined products to the U.S. Northeast, the company said on its website. Right into New York Harbor where the RBOB is priced.
Bloomberg also reported that Valero began shutting the 75,000-barrel-a-day FCC, which converts vacuum gasoil into lighter products like gasoline, after idling the unit on July 9 following a valve malfunction, Bill Day, a San Antonio-based spokesman for the company, said by e-mail. The company does not have an estimate on the duration of the shutdown.
The focus then changed to Chinese growth. China growth slowed for a second quarter coming in at 7.5%. The number was right in line with what the market was looking for, yet oil weakened a bit. China crude runs for the first six months of the year were up 4.1%.
Bloomberg News reports "Islamist supporters of ousted Egyptian President Mohamed Mursi called for mass protests today to demand his reinstatement, increasing pressure on the military as a new Cabinet began to take shape. The marches build on efforts by the Muslim Brotherhood to squeeze the army after it pushed Mursi from power on July 3. Since then, Mursi has been under detention and authorities have targeted leaders of the Brotherhood, which fielded Mursi for office, and other Islamists, with measures ranging from asset freezes to arrests. "
We think oil is trading in a new range from the $107 area back to $97. Writing condors may be in play. RBOB still is vulnerable to upward spikes. Despite near record production, supplies are tightening and refining issues are making things jumpy.