OPEC, DOE And Diesel
By SFOT on March 12, 2009 | More Posts By SFOT | Author's Website
Yesterday’s (Wednesday) DOE release gave 2 new insights. 1) Crude stocks are no longer building at the pace seen over the past weeks, though stock levels are still very high compared to past few years. 2) The overhang is spreading to combined products, most notably middle distillates.
Given that we are now seeing a good trend of Stock draw in crude, SFOT suspects that refining margins will start to drop off in the coing months. Demand will probably now hit distillates(diesel/jet/heating oil) more than the residuals and Crude. Opec meets this weekend and IEA+ OPEC’s own supply/demand study is due tomorrow, it should make for an interesting lead up into the weekend.
Relative value wise, it is now clear that Gasoline dynamics are the least worst off compared to any part of the barrel, while dd/ss in distillates remains very bearish. Reported stocks in Europe and US are extremely high in that part of the barrel, and is not likely to recover anytime soon.
SFOT is even more convinced of being long gasoline crack vs distillate crack on any weakness, and have added one more unit of this trade post data yesterday. Within middle distillates though, SFOT finds a little peculiarity with the behaviour of Diesel. Diesel inventories have been building up a lot in the US, which is probably normal this time of the year, barring last year when China was importing tonnes and the world was short diesel. Demand this year has been extremely poor in diesel, and the combination should see diesel weaken a lot.
However, comparing Diesel and Jet, it is Jet that has suffered the most in that part of the barrel and they are trading almost flat to each other now in spot price. SFOT shall endeavour to dig more into this relationship.

In the mean time, Well done to english teams, and congratulations arsenal for finally having a small bit of luck they have gone without for a long time. SFOT hopes for a good draw for the 1/4 finals…. Porto perhaps? SFOT has the luxury of being off tomorrow and will be back in action on Monday. Good luck.
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“The War at DOE- Part 1:
There is a war underway at DOE. For decades, DOE has been controlled by the Oil and Coal lobbies and insiders, enter the Obama administration. Programs and process which had previously been staged to make sure that alternative energy only achieves a 7% penetration, and no more, are in upheaval. The most powerful men in Washington have been entrenched in DOE but internal investigations and clear sky policies have shaken their empire to the very foundation.
The world economy has been based around the trading of oil and coal since the Vikings first transacted exchanges for these products. Some of the deadliest wars, diseases and intolerance has been caused by the policies around who has access to these materials. These materials affect trillions of dollars of economic movement and certain people and companies will do anything to maintain control of that money and that power. These power brokers have maintained that control for over a hundred years until now! Something happened; a perfect storm of political, economic, science and social whimsies, that nobody could have predicted would occur at the same point in history, shockingly reached a nexus. Now, at a single point of opportunity, the entire tide is about to change, but not without a battle royale that has already begun to spill onto the streets.
Steven Chu and lawyers from all of the energy and environmental committees, the major media, House, Senate and law enforcement groups have descended en masse in concurrent reviews of the connections of all of the players. Charts and graphics are starting to appear that show faces, boxes and lines drawn from individuals back to corporate interests much like the Elliot Ness mob charts that law enforcement used to present as they were about to bust up a Capone enclave. The Loan Guarantee Program, Section 136 funding and other efforts have clearly been halted in their tracks by oil and coal interests, in a highly visible set of delays as the battles move close to the public eye. Steven Chu, who’s past work has been funded by the US Government was all too familiar with the process but even his “revolutionary physicist” agenda could not have prepared him for what he found when he arrived at 1000 Independence Avenue in DC.
The White House, Chu, House and Senate activists and a select team of outside consultants are busy reviewing every individual at DOE, their role, their connections and the power structure that exists. Multiple public secondary hearings have already been called by Senate committees and closed door meetings are underway constantly in one of the highest pressure, most intense, most revolutionary efforts to rebuild an agency ever attempted in the Capitol. The other side is not blind to this effort and, while their power has been diminished, they are hard at work to thwart the fix. Every tool of political pressure, manipulation and social massage is being brought to bear. The effort has gone public as the first barrage of prime time TV commercials from the oil and coal industry, in relatively incredible volumes, at incredible cost have started to roll across the television airwaves, nationally, pleading for a new “appreciation of oil and coal” and admonishing Americans that it “isn’t so bad, really…”
More money is on the table, not only ready to be spent but already late and delayed, causing alternative energy companies to go out of business simply because they were promised the money , they ramped up to receive it and now they have higher than normal overheads, no money, and an even worse survival rate. So the plan of the opposing oil and coal industries is working, they are putting the alternative energy companies out of business simply by tactical logistics, but, if that money does come unstuck soon; the largest funding for alternative energy in world history will take place and then things could change. Hungry early-stage companies move light-years faster than old stodgy oil companies so it is possible, for the little new companies, even with less money and time, to supersede the old oil and coal giants. Will they, it is all up to Chu and his Watchmen… stay tuned…”
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