ISSUES....
Inside,
confidential, off the record
Energy
price collapse
From
our friend Dennis Garthman, on its very well read and exclusive
"The Gartman Letter"
ENERGY PRICES COLLAPSED IN THE AFTERMATH OF THE FOILED TERRORIST
ATTACK, and as we have noted several times already, we find that
rather a difficult concept to have imagined.. .and now to actually
believe.
Listening to the explanations given on CNBC and Bloomberg television
yesterday we could only shake our head in confusion, for the explanation
was that the travelling public will now shun the airlines and
that airline demand for jet fuel shall plunge. We
do not doubt for a moment that the airlines will find themselves
once again in an awkward position of sorts, and that the public
will indeed curtail its flying. However, for those who've not
flown in recent weeks and months, the airplanes are crammed "gunnel
to gunnel" these days.
There is no more room for any more passengers.. anywhere.
Thus, should there be a 10% decline in passenger miles, there
will not be a concomitant 10% decline in the number of flights
taking off and landing, for those planes shall still have to fly
to accommodate the 90% of passengers who will be
flying despite the threats.
Further, one of our long standing readers sent us a very interesting
note regarding this circumstance and another that we thought worthy
of showing to our clients around the world. We've not gotten permission
to attribute this note, and so we are sending it anonymously.
Our "reader" said: Dear Dennis,
I have been an avid reader of your letter for many years. I appreciate
your insight and the unique way in which you "distill"
issues into a trade. Rarely have I been moved to write, however
today's events and the media and analyst coverage demands this
missive.
The reactionary coverage of the petroleum effects of the failed
terrorist plot missed the point. "Plane terror" is bullish
gasoline and diesel. It seems many of our esteemed colleagues
seem to forget that post 9/11 gasoline demand increased as people
chose to drive rather than fly. Given a 300 mile trip, business
travellers could either drive 5.5 hours or fly in 55 minutes.
Now given the new security regime the 55 minute trip just became
a 4 hour nightmare. ( I am not including the time to and
from the terminal to the rental lot!) Of course those in the Northeast
can ride Amtrak, as I did this evening from NY to Rhode Island.
Perhaps most comically, many "analysts" failed to acknowledge
the real issue today.
The GSCI roll out of the HU contract and into RBOB.
Goldman announced at the close of business on Wednesday they would
exit the HU contract in favour of the RBOB contract. They will
move one third of their volume into RBOB this month, with the
other two thirds going into October HU.
When October HU is rolled , half of it will go into WTI, Brent
Heating Oil and Gasoil. In November the last bit of HU will be
rolled into December WTI, Brent , Heating Oil and Gasoil. The
GSCI announcement looked like (and was) a free lunch for many
as they tried to front-run GSCI today- despite the failure of
the Venezuelan refining complex to restart ( Ven HU exports are
now zero), the failure [of] Conoco to
bring Trainer gasoline unit back up , as well as the Conoco Force
Majeure on the West Coast. Supply is being lost faster than we
can bring [it] on. The BP issues only serve to re-inforce the
impossibility of US energy independence....And the band played
on ( as the US refinery/ Petroleum industry is held together by
Band-Aids) , Regards, Jennifer This is, we think, a truly "spot
on" analysis of what did and what should have taken place
on the NYMEX yesterday, and we thank "Jennifer" for
her wisdom and insight:
Sep WTI down 183 74.50-55
Oct WTI down 151 76.00-05
Nov WTI down 136 76.86-91
Dec WTI down 125 77.39-44
OPEC's Crude Basket (08/09) $72.53 Henry Hub Nat Gas $7.49/MMBtu
You can subscribe to The Gartman Letter by contacting
Dennis Garthman: Phone 757 238 9346, Fax 757 238 9346 or dennis@thegartmanletter.com
ISSUES....
Is an independent
journalist effort from Petroleumworld, on Inside, Confidential
and Off The Record Information, its views are not necessarily
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