Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
BREWING FINANCIAL CRISIS 2.0 Suggests RECESSION 2022 - 28th Jan 22
Financial Stocks Sector ETF XLF $37.50 Continues To Present Opportunities - 28th Jan 22
Stock Market Rushing Headlong - 28th Jan 22
The right way to play Climate Change Investing (not green energy stocks) - 28th Jan 22
Why Most Investors LOST Money by Investing in ARK FUNDS - 27th Jan 22
The “play-to-earn” trend taking the crypto world by storm - 27th Jan 22
Quantum AI Stocks Investing Priority - 26th Jan 22
Is Everyone Going To Be Right About This Stocks Bear Market?- 26th Jan 22
Stock Market Glass Half Empty or Half Full? - 26th Jan 22
Stock Market Quoted As Saying 'The Reports Of My Demise Are Greatly Exaggerated' - 26th Jan 22
The Synthetic Dividend Option To Generate Profits - 26th Jan 22
The Beginner's Guide to Credit Repair - 26th Jan 22
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

High U.S. Gas Prices Could Continue Despite Falling Demand

Commodities / Gas - Petrol Aug 27, 2012 - 02:51 AM GMT

By: EconMatters

Commodities

Best Financial Markets Analysis ArticleCrude oil rallied alongside other commodities and the euro to its highest in three months last week on NYMEX, mostly from market's expectation of new Euro Zone bailouts and a third round of quantitative easing from the U.S. Fed.


Crude oil had continued the uptreand after the Energy Dept. reported a decrease of U.S. oil inventory by 5.4 million barrels in the week of last Friday.  Scanning the news, you are likely to see quotes such as "The [EIA inventory] report is relatively supportive," and "Supply concerns persist due to Iran dispute, Syria tension."

What Oil Shortage?  

On the crude oil side, although crude stockpile has gone through four consecutive weeks of draw, it is still above the 5-year range (See Chart Below).  Moreover, as we are heading into the slow demand season of the year, inventory most likely will start to build again.



About That "Tight" Gasoline Market 

Inventories of gasoline (and diesel) in the U.S. are at their lowest levels for this time of year since 2008 (partly due to recent refinery fires and the closing of some refineries in the Northeast).  Gasoline futures have soared 19% over the past two months as traders seem to be betting that prices of gasoline and diesel will continue to rise.  Pump prices typically lag behind the futures market by several weeks.

However, America’s demand for fuel dropped to the lowest July level since 1995, plus the summer driving season is nearing an end, which will lead to even lower gasoline demand.

Furthermore, domestic refiners have significantly ramped up fuel exports.  For the first seven months of the year, exports were 14% higher than during the same period in 2011, according to API (American Petroleum Institution) data.  What that means is that there are more product supply could be diverted for domestic use.  And even if there's a real shortage for whatever reason, refiners can draw more oil from the abundant stockpile.  

Iran Oil Sanctions: Where There's a Will, There's a Way

Regarding the "supply concern" due to Iran oil sanction by the western nations, Saudi has cranked up oil production to multi-decades high ahead of the actual sanction that took effect on July 1.  Reuters also got the latest scoop that Iran oil are still finding plenty of buyers:
Top Asian buyers -- China, India, Japan and South Korea together take more than half of Iran's crude oil exports -- have worked around the European Union embargo, suggesting imports will stay at least around these levels for the rest of the year.
And here's how these energy hungry Asian economies get around the ban by the U.S. and EU:
South Korea joined its Chinese counterparts by asking Iran to deliver crude on Iranian tankers, government and industry sources said. This shifts to Tehran the responsibility for insurance, sidestepping the EU ban.

Indian refiners have adopted a twin plan to deal with the insurance issue. They are seeking government approval to ask Tehran to deliver the oil, and are trying to use limited cover from state-run insurers for locally-owned tankers to ship it.
Very Few Compelling Price Drivers

Growth in emerging economies in Asia, particularly China, has been the main driver of oil-demand growth in recent years.  However, currently, there's no such compelling story of strong demand and supply shortage that drove oil price to 2008 highs.

Near Term Market Movers 

Although the supply and demand factors do not seem to support the current price levels in crude and gasoline, there are plenty of other events to sustain and add the risk/fear/speculation premium.
  • The worse-than-forecast tropical storm Isaac is expected to strengthen to a Category 2 hurricane and hit the Gulf Coast at midweek disrupting refineries and offshore oil production.  Crude and gasoline futures already partly reflected this risk premium.  US gasoline prices could really spike is any of the refineries are off line.  
  • Petroleum Economist cited unnamed sources on Friday that IEA has agreed to a coordinated SPR (Strategic Petroleum Reserves) release with the U.S. in September.  However, during the IEA coordinated SPR release last summer (due to Libyan civil war), oil price managed to climb back to where it was before the release in just eight days. 
  • Federal Reserves Chairman Bernanke's often times market-moving speech at Jackson Hole meeting on Aug. 31. 
  • New bailout and stimulus package development from the Euro Zone and/or China.
  • Geopolitics in the Middle East
EIA estimated that for every $1 per barrel change in oil prices, consumers are expected eventually to see a 2.4-cent-per-gallon change in retail gasoline and diesel prices, if everything else remains the same.  Unfortunately,  these events mentioned above, with the exception the SPR release (the price effect will be temporary), could be enough to keep crude and gasoline at or above current price levels in the near term.

By EconMatters

http://www.econmatters.com/

The theory of quantum mechanics and Einstein’s theory of relativity (E=mc2) have taught us that matter (yin) and energy (yang) are inter-related and interdependent. This interconnectness of all things is the essense of the concept “yin-yang”, and Einstein’s fundamental equation: matter equals energy. The same theories may be applied to equities and commodity markets.

All things within the markets and macro-economy undergo constant change and transformation, and everything is interconnected. That’s why here at Economic Forecasts & Opinions, we focus on identifying the fundamental theories of cause and effect in the markets to help you achieve a great continuum of portfolio yin-yang equilibrium.

That's why, with a team of analysts, we at EconMatters focus on identifying the fundamental theories of cause and effect in the financial markets that matters to your portfolio.

© 2012 Copyright EconMatters - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in