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Energy Market Update

03.12.2010

By Chad Besch

Energy Update March 12, 2010

DOE		Stocks			Demand		Days of Supply
Report	Change	Total	2009	Change	Total	2009	Change	Total	2009
Crude	+1.4	343.0	351.3				-0.0	24.6	24.9
Distillate	-2.2	149.6	145.4	-0.184	3.645	3.784	-0.5	40.1	36.6
Gasoline	-2.9	229.0	212.5	+0.110	8.992	8.972	-0.5	25.8	23.6

Inventory reports this week came out with a bullish surprise tone to most of them. Inventories of both distillates and gasoline declined more than anticipated while the crude oil supplies built, but the build was less than anticipated. Refinery utilization dropped by 1.2% and is currently running at 80.7%.

Refinery utilization has seen an increase over the past several weeks after reaching its lowest point in 21 years, outside of hurricane events. As demand for gasoline and distillates continues to run well behind the 5 year average we continue to see inventories of these products run well above the 5 year average. This scenario makes profits for refiners slim, giving them no reason to keep building those supplies. While you would think this would give us declining prices the speculators are in control of this market and with their mindset of an improving economy we might not see prices relax much until we get into summer and see what kind of shape the economy is really in.

The inverse correlation that the dollar and crude oil futures had been experiencing has lessened slightly over the last month. While the dollar has seen its value increase over the past month, so has crude oil. Crude oil seems to have developed a better relationship with the Dow Jones industrial average, moving in the same direction. Traders are citing the thought that a stronger Dow will bring a stronger economy, resulting in higher demand for gasoline and diesel fuel.

While the spot market for LP has softened slightly the odds of the deferred months doing the same looks to be slim. The last few weeks have continued to bring big draws in our supplies of propane in this country, depleting our supplies even further. While we have seen prices decrease very slightly over the summer months in the past it is going to be a challenge to see that happen this year. Supplies are well below the 5 year average and will likely trail that average for much of the summer.

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

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