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Energy Market Update

05.07.2010

By Chad Besch

Energy Update April 25, 2010

DOE		Stocks			Demand		Days of Supply
Report	Change	Total	2009	Change	Total	2009	Change	Total	2009
Crude	+1.9	360.9	375.3				-0.0	24.2	26.1
Distillate	+0.6	152.4	146.5	+0.298	3.895	3.446	+0.6	41.9	41.5
Gasoline	+1.2	224.9	212.4	-0.008	9.282	8.923	+0.0	24.3	23.5

Inventory reports came out this week with crude oil and distillate supplies building slightly more than anticipated while the gasoline stocks not building quite as much as expected. Refinery utilization increased slightly and are currently operating at 89.6%.

This week brought us a huge correction in the crude oil futures, dropping by over $10 per barrel in just four days this week. Now the big question, is this just a short term dip that will begin to rebound over the next week or is there finally a shift in the sentiment of the traders. Financial concerns in Europe are getting most of the blame of the crashing of the market with most assuming the traders are taking money out of the commodities so they can invest in the dollar. While this is likely the cause behind the rapid decline this week you have to wonder if the traders will take any closer look at our huge supply of crude oil, gasoline, and distillates in this country right now.

While we, as Americans, can easily get concerned about the situation in Greece, we shouldn’t be throwing stones since we are in a glass house ourselves. Did you know that Greece’s GDP is only 17% that of the state of California? Try this one on for size...did you know that 40% of the United States GDP comes from 5 States; California, Texas, New York, Florida, and Illinois. Any idea what fiscal shape those 5 states are in? How does a combined total deficit of $69 billion sound? Many of the so called ‘pillars’ of strength underlying the US economy seem to be on rather shaky economic footing. The story gets even worse when you start to look a bit deeper. Life is tough and getting tougher for state and local governments. While revenues from personal and corporate income/sales taxes as well as property taxes are adversely affecting budget deficits, the bigger issue may be unfunded pensions. Combined state employee pension obligations are underfunded to the tune of $1 trillion, according to the Pew Research Center. States on average have set aside just 7.1% of retiree health care and other non-pension benefits, and 20 states have reserved nothing.

So what does all this mean for energy markets, a lot of uncertainty. Don’t expect the “sky is falling” attitude to continue next week. The crude oil market seemed to find some support today and will likely be range bound now while traders continue to sort through the mess in Greece along with the leaking oil well in the gulf.

Chad Besch
Energy Team Leader
MaxYield Cooperative
West Bend, IA 50597
1-800-383-0003

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