Here is update by Bloomberg about the surge in Refinery operating rates …… think lot of reasons are way off however.
The extended cold weather drew down more heating diesel on East Coast and all the grounded airlines and connecting flights drove lot more people to driving where they could. This gave more room in inventories to top off product tanks prior to demand increases for pre-gasoline season …….. and some of players are also putting more product & crude ships on the water continuing speculation that prices will rise. It has even gone a step higher this year as some traders have figured out that the COT futures already have increase for April prices built in & if ship is on the water the forward futures hedge can become locked in with physical delivery.
The draw down on crude inventories makes room for temporary dropping the oversupply of crude but with Saudi’s increasing crude prices via the new Argus/Saudi Sour crude Index (especially to US) but allowing more delta between light & heavy is still dependent on US demand returning and jury is still out on this. Look for same futures play on crude (some oversupply is holdover of last attempts to prop up market prices or capture lower prices).
They talk about weakened US dollar – but that should increase prices on both crude & products and work against improving margins. Additionally the big impact Greece had on destabilizing & dropping Euro which was softened by the deficit cuts is just first wave of European impacts some larger members may soon have same issues if demand doesn’t improve this summer.
The statement that demand seems to be improving – is just wishful thinking at this point. The stock market averages more than 1 correction per 10 years (done some over last 100 years) and a correction of more than 10% is overdue in market that has seen a 65% improvement (largely unjustified and speculation driven given all ills in banking, real estate & mfg industries) and all the long term technical’s still show strong indication of another bottom forming correction needed to establish a base for true recover cycle to begin. Having this backdrop occur during the normal high demand cycle of refining cycle could be especially bad.
I am usually in support of recovery cycle speak but so far nothing has been done to cure all problems that caused the current financial collapse. The banking & investment industry regulation is so far just words & no actions with few arrest but lots of bailout support. No one seems to know who owns the more than $26 trillion of toxic assets / speculative derivatives that collapsed the biggest players that siphoned off $1 trillion of bailout funds (went mostly to EU banks holding investment to AIG, M Stanley, Lehman & others). The huge tax debt the US now owes has not been funded nor has the impact hit US country credit rating or value of US dollar (and the Chinese who fund US annual $500B to $1 T deficit are signed up for 110% of that impact since they peg their currency at fixed 10% less than US dollar ….. guess there is upside). Over speculated real estate like US California, Florida, Spain & other countries will not be returning to credit driven highs so lot last boom cycle drivers are going to be disconnected.
Regards
