The En-Pro Blog

…Even the oil companies can, at times, be as confused as the consumer when it comes to understanding their own marketing tactics (almost said logic). It looks to us that the refiners have taken up the hobby of reading the heads or tails forecasts as offered by the speculative community. By this I mean that supply and demand is being ignored and the focus switched to nebulous postulations on the U.S. dollar, the equity markets, the Euro, the hurricane season, and the likelihood of an elusive economic recovery in the U.S.

If you look at the inventory data you will see that the oil companies have been convinced that the economy has or is recovering. Refinery runs have increased from 77.7% in January to 91.5% as of last week in anticipation of a marked increase in demand.

Inventories are now all above the upper limit of the five-year average and the demand is not even close to keeping pace. Oops!! As a matter of fact the U.S. economy is not showing consistent signs of recovery, the subjective consumer confidence levels are the lowest they have been in a year, and unemployment remains close to the 10% level. So now we have a situation because of the imbalance in supply and demand that the refining margins will begin to erode dramatically with some calling for crack spread reductions of 75% in the coming months.

By: Roger McKnight, Senior Petroleum Advisor

Has this happened before? What does it all mean for Canada? Find out in this week’s Energy Report. Sign up by sending your email to: info@en-pro.com.

Since late May crude prices have traded between $70-80 U.S./barrel amid mixed economic data and very little change in the overall supply and demand landscape. Last week began the kick-off of the 2nd quarter corporate earnings season and early results have suddenly dazzled the stock markets with renewed hope of promising economic growth. Alcoa, Intel and J. P. Morgan Chase last quarter results have exceeded market expectations. They are now making lots of money; therefore it must mean we are out of the Recession. The enthusiasm was accelerated with the announcement by the Paris-based IEA (global energy policy advisor); forecasting that global oil demand will increase by 1.3 million barrels per day in 2011. Even OPEC rubber stamped the IEA’s forecast.

Investors/speculators created short term demand by buying commodities, including oil. Oil was swept up in this stock market mania reaching a high of $77.15U.S./barrel and the rising Euro and sliding U.S. dollar were also contributing factors. Don’t be fooled because this optimistic bubble will burst and will bring oil back to a realistic price well below $80U.S./barrel for the foreseeable future.

So what do the good corporate earnings and all the enthusiastic media coverage mean for Canada’s economy, and where is the price of oil headed? And what do current gasoline inventories and distillates mean for the economy?

By: Roger McKnight, Senior Petroleum Advisor

Check out the Weekly Energy Report. Subscriptions are available, send your email to: info@en-pro.com.

That way we will all not be sent into financial fainting spells while not really understanding why (and the Chinese not really caring why so we are all even). Sort of as exciting as a soccer game…..nil-nil, nod-nod, wake me when they have commercials. Cynical venting now complete, let’s turn to some developments that are cause for discussion, which is why we are going to discuss them. Although the two key issues concern recent activities in the east, those in the west should take notes as to what can happen depending on the mood swings of government and big oil.

Firstly, the Pilot buyout of Flying J was formally approved on June 30 with the proviso that 26 Pilot or Flying J sites in the US had to be sold. The most notable benefit to the trucking industry seems to be the acceptance of TCH cards at Pilot sites and Comdata cards at Flying J sites. Flying J restaurants will however loose their particular identity and popularity, as they will be converted into the fast food trio of Denny’s, Pizza Hut and Subway. The most disturbing aspect of this buyout is that it looks like Pilot is not interested in Ontario, Quebec or the Maritimes. So what does this news mean for Maritimes and Quebec, central and western Canada? And what is the second development for the QC government data ‘Green Tax.” Find out in this week’s Energy Report.

By: Roger McKnight, Senior Petroleum Advisor
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Investors have been traveling down the economic train tunnel this year hoping to see a light at the end, but, in fact, have come to the realization that the government’s much touted summer of economic recovery is very much slower than expected. Investors were very concerned about the global economy, which saw a massive stock market sell off, bringing down oil prices. Last week, fund managers and investors seemed to want to get an early start to the Canada Day and Independence Day long weekends, as they took whatever profits they had and headed for the hills. Let’s hope they come back after the holidays or it could be a long dismal summer.

Contributing to this declining confidence, are more concerns that China’s economy was slowing down in April, (based on a key indicator, meaning they will be buying less commodities, including oil). When the world’s biggest importer and exporter takes an economic sabbatical, the markets notice. The U.S. private sector new job index was released last week showing there were only 13,000 new private sector jobs, well below the expected 65,000 for May. In Canada, the Ontario and British Columbia consumers will begin paying more for gasoline, hair cuts, utilities and restaurant meals with the introduction of the HST on July 1. Gasoline users in these provinces will begin paying $4 more for a $50 fill up.

By: Roger McKnight, Senior Petroleum Adivor

What does it mean for Canadian prices? And what’s happening in the natural gas and electricity markets? Check out his week’s Energy Report. Sign up by sending your email to: info@en-pro.com.

After the announcement of the astronomic 1 trillion dollar U.S. bailout of Greece by the International Monetary Fund and European Union, the initial stock market euphoria has turned into caution and unsettled fear. Now Britain has their first coalition government in 70 years and will they be able to rein in their ballooning debt.

Governments have been living beyond their means and drastic cuts are needed now to avoided faults. The markets are asking, will it buy enough time for the Euro fiscal misfits to get their finances in order? Will they be able to pass enough belt tightening measures without massive riots and turmoil? Can the people in the effected countries ratchet down to beans on toast lifestyle after enjoying caviar and champagne? Is this just a temporary financial bailout that will come back to haunt the euro/global markets in two or three years? How much will these social and financial changes affect global energy demands? All these questions add more uncertainty and the investor’s are fearful. They are moving away from selected currencies and commodities and diving further into the safe glitter of gold. This week gold bullion reached a new record high o f $1243/once and is expected to continue rising due to market uncertainty. Crude continued its slide this week, and since May 3 has decreased by 12% to close on Wednesday at $75.65U.S./barrel. We expect there will be continued market volatility until more economic data confirms the recovery is really happening.

So what does the Euro bailout mean for Canada and the U.S.? And what will this week’s (EIA) U.S. government inventory report mean for Canada?

By: Roger McKnight, Senior Petroleum Advisor

Find out this week’s energy report. Sign up by sending your email to: info@en-pro.com. Also in this week’s report, natural gas and electricity commentary.