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Energy Market Update

02.19.2010

By Chad Besch

Energy Update February 19, 2009

DOE		Stocks			Demand		Days of Supply
Report	Change	Total	2009	Change	Total	2009	Change	Total	2009
Crude	+3.1	334.5	350.6				-0.3	24.6	24.7
Distillate	-2.9	153.3	140.8	-0.091	3.787	4.359	-0.7	41.2	33.2
Gasoline	+1.7	232.1	218.7	-0.245	8.521	8.908	+0.3	26.9	24.6

This week’s inventory report came out as a mixed bag with a build larger than expected for crude oil, a neutral report for unleaded, and a decline larger than expected for distillate supplies. Refinery utilizations did increase slightly after reaching a 13 year low last week and are currently operating at 79.8%.

While it might be hard to believe spring really is right around the corner. In a little over a week we’ll flip the calendar to March and more often than not that brings nicer weather and also higher energy prices. Traders seem to turn their attention to summer driving season and increasing demand when we get to March. While one might think this summer’s demand will be below average because of the economy we need to remember that the tread seems to be assuming demand will grow until it is proven otherwise.

We have been watching the US dollar over the last several weeks with the assumption that if the dollar can continue to rally we could see energy prices decline. Late Thursday the Federal Reserve made a surprise announcement that they were raising the lending rate for emergency loans to banks. This announcement should have been bullish for the dollar but the dollar finished well off of its highs for the day on Friday. Initially this appears to be a bearish sign for the dollar. If the dollar fails to rally off this news it would be reasonable to see the dollar have a considerable decline, causing energies to rally.

Propane inventories are set to finish this season at some of the lowest levels we have seen in several years. While there are obvious factors like the huge drying season and the cold winter that has contributed to this there is one that we don’t hear much about. We have seen a very large amount of LP actually get exported out of this country this year. This tells us that in order for that LP to stay in this country and build supplies we are going to need to see prices increase. This is not what we want to hear but it is a simple function of supply and demand in a global market.

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

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