ISSUES....
Inside,
confidential, off the record
Order
on the market !
ENERGY PRICES ARE A BIT LOWER, as the markets try to
bring order out of the rather chaotic weekly DOE/IEA
inventory report released yesterday. Crude inventories,
which had widely been expected to fall, rose instead...
by 1.2 million barrels [Ed. Note: We note also that inventories
in the Strategic Petroleum Reserve also rose... modestly
of course... but they rose nonetheless by 0.3 million
barrels.]. That was somewhat bearish of course, with
the emphasis upon "somewhat." Gasoline inventories,
which had been expected to be up modestly, were instead
unchanged. That was modestly supportive. Distillate inventories,
also expected to be up modestly were instead down a bit,
falling 1.2 million barrels. That too was therefore modestly
supportive. Finally, the refinery run rate was 87.5%,
well below
expectations, and was also the explanation as to why
crude inventories rose. Note the " chart" just
below (courtesy of our old friend, Mr. Kevin Cooper...
keeper of all things energy-data related!) of cruderefinery
runs in recent history.We are at
that point in the year when refinery run rates do drop
rather
materially.[Ed. Note: Please note that the " red
line" in the chart, which is of the "worst" level
of refinery runs in the past five years, is of course
the result of the Katrina-Rita related problems of several
years ago. Even so, seasonally
refinery run rates do fall into mid-October as seasonal maintenance is done
on the nation's refineries.], so the decline yesterday
should not be too surprising. We were surprised by the
rise in crude inventories, for as the chart this page
(Courtesy of our good friend, Mr. Stephen Schork) shows, the
backwardation in WTI crude continues, arguing against
inventory accumulation. Simply put, when inventories
of crude rise, it is by accident, not by design, as long
as the market remains backwardated. We note also this
morning that the premium
now enjoyed
by WTI over Brent (which is proper, by the way) has now extended
out into May and June of next year. It was only a short while ago
that nearby Brent sold nearly two dollars premium to WTI, a wholly
illogical situation under nearly any and all circumstances other
than those existing earlier this year when inventories of crude
in Cushing, Oklahoma coming down out of Canada were more than merely
burdensome... they were crushingly so. Now that that has worked
its way through the system, order is restored and WTI is now premium
to Brent crude far out into next year:
Nov WTI down 35 79.69-74
Dec WTI down 50 78.78-83
Jan WTI down 55 77.86-91
Feb WTI down 48 77.13-18
OPEC "Basket" $74.55 10/03
Note
from the PW editor: Mr. Garthman comments include graphs, but
we were unable to post them.
Commentary from Dennis Garthman /10 04 07
For more on interesting comments, you can subscribe to The Gartman
Letter by contacting Dennis Garthman: Phone 757 238 9346, Fax 757
238 9346 or dennis@thegartmanletter.com
Petroleumworld
10 04 07
ISSUES....
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