DAILY PETROSPECTIVE January 20th, 2011

C AMERON HANOVE
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Energy Prices Settlements

Heating Oil Crude Oil

Month High Low Settle Change Volume Month High Low Settle Change Volume
FEB 265.68 259.62 262.32 -3.30 22952 FEB 90.86 88.00 88.86 -2.00 18773
MAR 265.90 259.90 262.65 -3.25 42319 MAR 91.80 88.90 89.59 -2.22 418136
APR 264.43 258.90 261.56 -3.13 13639 APR 92.95 90.26 90.96 -2.02 158258
MAY 263.24 258.13 260.63 -3.08 5882 MAY 93.94 91.44 92.18 -1.81 90813
JUN 263.48 258.02 260.47 -3.02 9620 JUN 94.71 92.26 93.04 -1.66 75927
JUL 263.85 258.74 261.28 -3.06 4247 JUL 95.09 93.00 93.65 -1.58 19490
AUG 262.93 259.80 262.27 -3.11 3353 AUG 95.42 93.31 94.04 -1.53 11678
SEP 266.11 261.40 263.75 -3.04 1778 SEP 95.67 93.59 94.34 -1.48 8904
OCT 265.92 263.02 265.33 -2.92 574 OCT 95.70 93.94 94.60 -1.43 6361
NOV 267.55 264.61 266.92 -2.75 524 NOV 96.08 94.19 94.83 -1.36 5244
DEC 270.87 265.95 268.25 -2.62 1716 DEC 96.30 94.19 95.04 -1.29 42169
JAN 268.50 267.60 269.55 -2.53 86 JAN 96.08 95.60 95.10 -1.23 4561

Unleaded Gasoline Natural Gas

Month High Low Settle Change Volume Month High Low Settle Change Volume
FEB 248.16 239.75 242.25 -5.91 27220 FEB 4.690 4.525 4.695 0.134 158196
MAR 249.72 241.65 244.21 -5.42 45769 MAR 4.688 4.534 4.692 0.116 111219
APR 260.25 252.93 255.41 -4.73 18175 APR 4.671 4.531 4.677 0.107 53609
MAY 259.73 253.96 256.22 -4.51 10338 MAY 4.700 4.568 4.707 0.103 22917
JUN 260.65 253.92 256.27 -4.38 10250 JUN 4.730 4.607 4.739 0.096 9065
JUL 259.50 253.40 255.70 -4.23 4340 JUL 4.781 4.666 4.791 0.089 9348
AUG 256.10 252.82 254.49 -4.01 3410 AUG 4.800 4.699 4.816 0.086 4924
SEP 256.02 252.20 252.72 -3.83 1218 SEP 4.805 4.705 4.821 0.083 3929
OCT 243.04 240.02 242.17 -3.47 666 OCT 4.852 4.756 4.869 0.075 23065
NOV 240.85 239.43 240.17 -3.34 393 NOV 4.994 4.926 5.002 0.055 4846
DEC 242.60 237.60 239.32 -3.30 2089 DEC 5.200 5.125 5.202 0.039 4910
JAN 240.24 240.24 240.30 -3.27 71 JAN 5.320 5.252 5.326 0.032 10352

Daily Energy Evening Review for Thursday

The oil complex was down sharply on Thursday as a combination of
stalling upward momentum, overbought pressures, and technical
resistance ran head-long into fears that China will shift gears from
promoting growth to fighting inflation. The complex was already
falling when this week’s DOE statistics showed builds across the
board, which was not expected. The consensus (although not our
estimate) was that crude oil stocks would decline. Instead, they were
up 2.617 million bpd on a combination of lower utilization and slightly
higher crude oil imports.
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 DAILY PETROSPECTIVE January 20th, 2011
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We noted Thursday morning that China’s GDP had expanded by 9.8% in the fourth quarter, which
was a fractional increase against the 9.6% rise experienced in the third quarter and well above
expectations for growth of 9.2%. Chinese inflation came in at 4.6% in December, down from 5.1% in
November (which was a two-year high and the
source of a great deal of worry in Beijing).
While news stations flashed pictures (or were
they lithographs?) of a statuesque (not tall) Ju
Hintao, investors used them as the backdrop to
their worries that China may now be more
eager to rein in inflation rather than to promote
growth. This makes discussions about wooden
exchange rates moot on Capitol Hill. The Fed is
pursuing QE2, but it is being short-circuited by
Chinese upwards pressure on interest rates and
reserve requirements in China. China is trying
to fight inflation and is being short-circuited by the Fed’s stated intent to promote higher inflation. It
makes for an interesting fight that neither side really wants – nor even cares to acknowledge.
The stock market reacted at first to the worries that China will raise rates (or reserve requirements).
But, the real story was of a stock market that managed to look beyond those increases to a recovering
global economy. On Thursday, both countries got what they wanted to an extent. Commodities prices
were under selling pressure while the stock market rallied from its lows to finish with very minor losses.
In economic reports released on Thursday, The January Philadelphia Fed report “was stronger than
the dip in the headline index to 19.3 from 20.8
suggested,” Capital Economics wrote. “New DOE Report
orders jumped to a six-year high of 23.6, from Crude Stocks up 2.617 mln bbls
10.6. Shipments improved to 13.4, from 5.2. Distillate up 1.038
Gasoline up 4.443
Employment strengthened to a four-year high of Utilization dn 3.4% to 83.0%
17.6, from 4.3,” CE wrote. It was a fourth Crude Imports up 0.104 mln to 8.999 mln bpd
consecutive month of growth for manufacturing in
the Philadelphia region. In another report, the
Conference Board’s index of leading indicators was up 1% in December, after a 1.1% increase in
November. And the National Association of Realtors reported purchases of previously-owned homes up
12% in December to a 5.28 million annualized rate. Finally, the Labor Department reported a decline in
the number of new unemployment insurance applications of 37,000, to 404,000, for the week ended
January 15th. The four-week average dropped from 415,750 to 411,750.
This week’s DOE showed a drop of 3.4% in refinery utilization, which is the sign we have been
waiting for to tell us that maintenance turnarounds have officially begun.

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 DAILY PETROSPECTIVE January 20th, 2011
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Energy Charts

The DJIA ended Thursday down 2.49 to 11,822.80, but that disguises the real story of a market that made up large losses to finish
nearly unchanged. The table is set for a potentially strong move higher on Friday.

Oil prices dropped steeply on fears that China will raise interest rates.

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