Markets

The Energy Report - Heavy Oil

Where has all of the excitement gone?! The oil market can be one of the most exciting markets on the face of the earth and other times, it can bore you to death. Oil lacks any passion as it continues to get pulled in different directions. On the bear side fears of demand destruction brought on by weakening US economic data and OPEC promises to potentially increase production, is keeping pressure on the market. On the flip side, a weakening dollar and talk from a Chinese official that warns of holding excessive US assets could sink the dollar and drive oil higher. We can add to that Mideast tensions and some tropical weather activity down in the Gulf. The confluence of bullish and bearish forces is keeping oil in a tight range but a bit heavy long term. Choppy sideways to the mid eighties! Play the ranges!

Product issues are supportive with pipeline issues and refinery issues! The latest glitch according to Dow Jones is at Valero Energy Corp which had a power failure at its oil refinery in Port Arthur, Texas that forced the shutdown of unspecified units to reduce flaring of several contaminants to the atmosphere, according to a report to the U.S. National Response Center, or NRC. The power failure occurred at about 6:30 p.m. EDT on Monday. The status of the processing units at the 310,000-barrel-a-day throughput capacity Port Arthur refinery is not clear, a company representative wasn't immediately available to comment.

We are entering "golden age of natural gas" according to the International Energy Agency! According to Bloomberg News the IEA says, "Global gas demand may surge as much as 44 percent to 2035 over 2008 levels, reaching 4.5 trillion cubic meters a year (435 billion cubic feet a day) as China's use grows an average 6 percent a year annually. Gas demand will return to growth this year after dropping in 2009 in the wake of the economic crisis and global oversupply. Gas is the only fossil fuel for which demand in 2035 is higher than in 2008 across all of the IEA's three assumptions for climate legislation.

Of course the natural gas market is focused on hot temperatures and the storm heading into the Gulf of Mexico. The National Hurricane Center reports, "A LARGE LOW PRESSURE AREA IS CENTERED OVER THE NORTHWESTERN CARIBBEAN SEA ABOUT 100 MILES SOUTH-SOUTHWEST OF GRAND CAYMAN. THE ASSOCIATED SHOWER AND THUNDERSTORM ACTIVITY IS CURRENTLY DISORGANIZED...AND UPPER-LEVEL WINDS ARE BECOMING LESS FAVORABLE FOR DEVELOPMENT OF THIS SYSTEM. THERE IS A MEDIUM CHANCE...30 PERCENT...OF THIS SYSTEM BECOMING A TROPICAL CYCLONE DURING THE NEXT 48 HOURS. AN AIR FORCE RESERVE RECONNAISSANCE AIRCRAFT IS SCHEDULED TO INVESTIGATE THE SYSTEM THIS AFTERNOON...IF NECESSARY. REGARDLESS OF DEVELOPMENT...HEAVY RAINS COULD CAUSE FLASH FLOODS AND MUD SLIDES OVER PORTIONS OF HAITI...DOMINICAN REPUBLIC... JAMAICA...AND CUBA AS THE SYSTEM MOVES SLOWLY TOWARD THE NORTHWEST OR NORTH DURING THE NEXT COUPLE OF DAYS."

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There is a substantial risk of loss in trading futures and options.Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. PFGBEST, its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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