A rebound in the stock market on hopes of a deal in the U.S. and political turmoil in Libya is reversing the recent negative action in the markets. It seems that just when you think the political risk in oil has calmed down it comes back once again. Oil (NYMEX:CLX13) is holding key support as it seems that this market just does not want to fall below the $100 a barrel area, just yet.
Oil got hit hard after the EIA inventories showed a big surge in supply, yet rallied on hopes that a short term deal on the debt ceiling can be reached. Overnight a report that Libyan Prime Minister Ali Zidan was abducted caused a spike in oil yet now it is being reported that he has been freed.
Oil production is falling in OPEC led by Iraq as the cartel is warning of waning demand in Asia. That may be offsetting what was a bearish stocks report. The EIA reported that crude stocks increased by 6.81 million barrels. A 3% drop in refinery runs helped top off the storage tanks. We also saw a big drop in distillate stocks as farmers get harvest underway.
Gas fell and Bloomberg reports Valero Energy Corp.’s Port Arthur, Texas, refinery is running the larger of two crude units and the coker at reduced rates because of repairs at a wet-gas compressor, two people familiar with plant operations said. Work on the compressor, which converts vapors to liquids, may take up to several weeks, said the people, who asked not to be identified because the information isn’t public. The approximately 250,000-barrel-a-day crude unit, known as AVU-146, and the coker will remain at lower rates during the repairs, one of the people said.
Valero reported flaring of wet gas during surges at its K-2300 wet-gas compressor at Port Arthur on Oct. 6, according to an emissions notice with the Texas Commission on Environmental Quality. Bill Day, a spokesman for Valero in San Antonio, said in an e-mail today that the issue with the compressor didn’t materially affect production. The Port Arthur refinery has a capacity of 310,000 barrels a day, according to data compiled by Bloomberg.
Natural gas continues to rally as it seems that demand is a lot stronger than anticipated. Hot and cold weather, take your pick, and huge flows of gas going to Mexico is providing support. The Energy Information Agency is reporting that the growth in natural gas production from the Marcellus region of Pennsylvania, West Virginia and Ohio have lowered the spot price of natural gas at the TCO Appalachia trading point in recent years. Forward market prices for natural gas indicate that this production growth will continue, driving the price in this region below the benchmark Henry Hub price early next year.