The En-Pro Blog

Crude oil at anywhere near $85/bbl is laughable if there was ever any punch line to this joke. Crude at $85/bbl is 80% higher than a year ago! Crude oil, diesel and gasoline prices are about to tumble and these are some of the reasons why:
There is too much supply and too little demand. Although the U.S inventory data above shows (to view the graph, please subscribe to the En-Pro Blog, send your email to info@en-pro.com) an increase in gasoline demand of 2.7% this is misleading as the actual gasoline demand as supplied at the wholesale level is down 1.9%. Diesel is even worse with the actual delivered demand down 3.3% as opposed to the listed decrease of 0.1%. Due to the volcanic ash problem in Europe this past week, the distillate demand numbers will be a disaster next week as kerosene (jet fuel) is part of the distillate family of refined products.

Staying in Europe; it’s apparent that the economic picture in Greece is becoming as hard to swallow as a week old glass of Retsina. The European Union (EU) has discovered that the Greek budget deficit is much worse than previously forecasted. “So what?” you might ask with good reason. The EU will be forced to rescue Greece, which will devalue the Euro and increase the value of the USD. Crude oil is traded in USD and a higher USD makes crude more expensive for foreign investors, which in turn, slows demand and eventually crude prices. Therefore as the USD increases, crude prices decrease.

Let’s move on to New York, the city that never sleeps and I’ll bet that will be the case for the head honchos at good old Goldman Sachs (GS) who along with Morgan Stanley have been the lead barracudas in the attack of crude oil pricing logic at the expense of the consumer and to the profit of themselves. Well, it seems that the SEC has accused GS of fraud and they may have been the ground zero cause of the near vaporization most of the western worlds economies. “So what?” you again might ask.

By: Roger McKnight, Senior Petroleum Advisor

These two current situations have an impact on the North American and global economies. Find out more in this week’s Energy Report. And find out what The Most Imperial of All Oils tells our Roger McKnight. Sign up by sending your email to: info@en-pro.com.

This week we decided not to focus on the weekly inventory reports, the strengthening Canadian dollar, the Greek debt crisis, or those pesky “specuvestors”.

Instead in this report you’ll see the average diesel cardlock prices (excluding all taxes) in 16 major Canadian cities over the last 8 ½ months by supplier from a regional and a national basis. We chose this period because crude prices traded in the $70 to $85/barrel range, better representing the recent market and exclude the recessionary low crude prices from 2009. Dividing the report into eastern and western cities will allow our regional clients to better utilize the information. The lowest cost regional suppliers are listed in the left column and the highest are shown in the right column based on the average of the eight cities. For example, in the east Petro Canada formula pricing was on average the lowest and in the West Husky prevailed.

By: Roger McKnight, Senior Petroleum Advisor

Find out more in this week’s Energy Report – sign up by sending your email to: info@en-pro.com

Let’s dispense with last week’s U.S. inventory report, which has been carrying less and less clout lately as a means of crystal balling short to medium term price movements. A huge jump in crude inventories was offset with a drop in levels of gasoline and distillates, giving us a net neutral image of short term price trends. Gasoline is normally imported into the U.S. northeast at a rate of 1,200,000 bpd but this fell to 608,000 bpd, which somewhat accounts for the lower overall inventories.

There was a minor increase in refinery runs of 0.5% and with the annual refinery maintenance programs more or less over it makes you wonder, when these refineries kick into gear, where all the extra gasoline is going to go. With U.S. unemployment stubbornly holding, we can’t see an increase in demand that would allow refineries to run anywhere near their traditional 95% level this summer.

In fact, all we can see is further refinery closures or at least long term mothballing as the only means the oil industry has to improve or restore their margins to justify their very existence.

What are the numbers indicating industrial production is gradually coming back and what does it mean in the midst of an awakening economy? Find out in this week’s Energy Report. Sign up by sending your email to info@en-pro.com.

By: Roger McKnight, Senior Petroleum Advisor