Auto Sales > Gasoline Demand

Yeah, not for long though.  A few ways to think about the huge auto sales that have topped 16M 3/mos in a row for the first time in 7 years.  Number one, there’s a lot more cars on the road and no matter what kind of fuel efficiency they get, they need to buy more gasoline.  Number two, people are buying cars because they need the transportation.  That probably means they have a new job, making more money at their current job or feel like they have enough disposable income to buy more cars.  And number three?  Coscto Effect.

Yellen yelling?

I was slightly amused at some of the pundits yesterday talking about how the Dems pick for a “dovish” Fed President was going to be the ticket.  Then lo and behold Yellen hit her first press conference post FOMC meeting with claws out and looking for timid mice.  Nah, I don’t buy it.  I think that she’s still the same Dove that she’s always been, but as with a lot of academic types, you put them on the spot to ad lib and too much starts going through their head and comes out of their mouth.  Too many people have been praising her for being a woman who talks in more simple terms.  That of course is the absolute problem with her at the helm.  Nothing against women, but I think Yellen is trying too hard to make everyone happy.  The one thing she is not is confrontational.  As with most women I know, they are looking for a balanced solution to problems.  No that it’s a bad thing, but this is monetary policy and you have to put a lot of people in place.  I think that’s the thing that Bernanke grew tired of.  By the end of his term, most of the other Fed Presidents disagreed with him and he just wasn’t interested in playing politics.  I first thought that Bernanke must be bitter with all of this praise heaped on Yellen, but I think he knows the worst is still ahead.

I’ll tell you as an investor, I’d be worried about Yellen.  For as many people are thinking this was only her first presser and it was only “one statement”, it was her off the cuff stumble that caused the market to panic.  No matter how small, that’s not how you want to see the Federal Reserve President start her term.  Now I’m thinking that anytime she goes off script, something could get misinterpreted.  If she decides to be “folksy”, more people are going to wonder how much is she really able to interpret.  Gomer Pyle is folksy and I sure don’t want him running my Fed.  I said this after her testimony in front of Congress last month, I’d rather have a Fed President that I need to look up terminology rather than a 5th grader getting the big picture.  All this is making me concerned is that we now have a Fed President that can say anything without a real understanding of market influence.  Any argument from anyone, I can tell you that it’s highly unlikely that the FOMC members were sitting around the table yesterday and said, “Hmm, we’ll get to raising rates after we stop buying bonds.  Let’s say about six months.”

If you can see the problem here is it’s just so simple, folksy.  An arbitrary number thrown out “about six months”.  Can someone please explain how based on economic principles and fundamentals how one can come up with “six months“?  I don’t know if the market is foolish enough to believe in what she said or if she was really that foolish to make that number up.  If she didn’t make it up, that’s the other thing I’m concerned about for the markets.  By now we all know that Greenspan’s “irrational exuberance” was a planned and suave way for that Fed President to take the then fluff out of the market.  It worked well and it’s part of his legacy in directing one of the biggest and best growth periods in the market.  With Yellen starting her term trying to manipulate the market, it’s a little disturbing.  She’s not proven anything to anyone as Fed President and why are we going to leave the fate of our market and economic growth in someone who thinks they can wield this power on day one?

Whoa…whaaa?

U.S. PLANS TO RELEASE UP TO 5 MLN BARRELS OF CRUDE OIL FROM STRATEGIC PETROLEUM RESERVE – GOVERNMENT SOURCE

This is an almost unheard of move from the US Gvt.  The last time I can recall any SPR oil released from SPR outside of a real physical disruption was in 1996 when President Clinton used money from the sale to push the US budget into surplus.

The timing is quite curious too and is a slight of hand that might put even more pressure on Russia.  If they want to play Ukraine for their oil ports, this is pointed move.  We covered some of this idea in this morning’s Newsletter.

$100 (AGAIN)

We’re at the $100 mark once again for WTI, also known as “mark of the beast”.  I wish I could have seen this one coming and be bragging my way through the weekend, but the truth is it’s pretty confusing.  My last ditch explanation is that the Smart Guys in the Room are thinking that a 2nd month in a row of weak job growth is setting the stage for Janet Yellen to start off her “When Doves Cry” Fed Presidency.

We can wait out the March FOMC meeting for her and the Fed to ease off the gas pedal on QE tapering, or we can see a little pillow talk regarding the Fed’s target for raising rates.  The pace at which we’re seeing Unemployment fall and a lack of job creation is a recipe for disaster or hyper inflation, whichever comes first.  I don’t think I’m too far off on this theory because we saw WTI fall from grace in late December to the FOMC meeting in January when QE tapering was increased, so as we rally back up above $100, it sure looks like the opposite can stand.

Then again, it might just be the markets gift to me for O3 2K coming up on Monday.

Have a great weekend.

You are the weakest link…

Thanks for coming in to check in this morning my teeming millions.  If you’re like the rest of America right now you are crying, but there’s no sound.  That’s the US Jobs report in a nutshell.  We only saw 113K in Non Farm Payrolls and a pretty weak revision to the already weak Dec number (75K v 74K).  The cray thing about this whole dilemma is that the Unemployment rate dropped again to 6.6%.  I guess ObamaCare is working as planned, more people are so happy they are getting cheap (free) insurance, they are just giving up on work altogether.  Yeah, that’s a good plan to return America to one of the hardest working countries in the world.

So far CL is holding it’s own and I think it’s more in a state of shock than anything.  We think that the big money funds and banks are all trying to play the fixed income markets and wondering if we see another poor showing in February if Yellen hits the brakes on QE tapering at her first FOMC meeting in March.  It’s a tough call because this is all that “shadow unemployment” that so many are talking up.  Rate is headed lower, but so are the people looking for work.  That in turn is going to weigh on our beloved gasoline first and foremost.  We can’t see higher gas demand if nobody is driving to and from work.  Trust me, the drive to my computer from my bed is one of the most fuel efficient drives of my day.

Key to Keystone

Updated!!!

*U.S. SAID TO FIND KEYSTONE WON’T GREATLY BOOST OIL SANDS OUTPUT
*STATE DEPARTMENT BRIEFED U.S. HOUSE STAFF ON KEYSTONE REPORT

Looks like it’s going to happen before they legalize marijuana.

We hear that there will be a US State Dept. report out today on Keystone and we think that this is going to go through.  We surmise that the POTUS declined to talk about the amazing oil industry in the SOTU because he didn’t want to stir the pot.

If this does head closer to approval, we think that this is going to put pressure on the rail industry, but be a boon for pipeline activity.  For those Barrelheads that don’t watch the equities too closely, we want to revisit the fact that Warren (Railroad) Buffett took time to purchase Phillips 66 Specialty Fuels earlier this month.  Those specialty fuels are specific to helping move crude through pipelines.  I know this guy it an “oracle”, but a little inside information never hurt either.

Now if this does happen, we can start thinking about throwing a funeral ceremony for the Brent contract as we know it.  More Canadian heavy crude imports are going to help replace whatever (OPEC) crude barrels that are still coming into the US Gulf.  Since there’s no other benchmark to hedge foreign crude, the loss of more imports, no matter light or heavy, this contract will fade like a fart in the American wind.  <stronger WTI/weaker Brent>

As for Cushing, this may mean that even more pipeline flow is going to increase as barrels come into the US and move south.  We knew we were going to continue to see oil transplanted from Cushing to storage in the USG, but this hits the fast forward button.  <stronger backwardation in CL spreads>

Crude rallies?

Aside from “I told you so”, the general consensus in the oil circles is that we’re hearing rumors about a surprise oil inventory draw coming up tonight/tomorrow.  We’re putting this one on the back burner for now because we haven’t heard about the API hiring Mark Felt recently.

Now for those that can think outside the box, we think that the chances the QE tapering is going to get tapered.  Money is flowing in across the board and it’s easier to use money when it’s cheaper today than it’s worth tomorrow.

Prayers

I don’t post on the weekend, but I for once am late to a very important story in oil.

My friend and WSJ reporter David Bird has been missing since last weekend.  I usually talk to him every week to recap some of the stories in the news and missed him this week without a second thought.

David has been a friend of mine since 2002 and to that, his writings have been a source of inspiration.  It’s from his “Energy Matters” columns that I developed a love for the irony of oil in the world.  He helped me become the writer of energy that I am today.

My prayers our out there for you David and I hope for your safe return.

Politics not Geo-politics

There’s a little rally to the WTI market here on the back end of the trading session.  Seems as if people are once again playing the “HOPE” and “CHANGE” card.

(Reuters) – President Barack Obama on Thursday directed his administration to conduct a broad review focused on infrastructure required for “transporting, transmitting, and delivering energy,” the White House said.

In a memo establishing the Quadrennial Energy Review, Obama said a related task force would develop recommendations and submit a report to the president every four years beginning with the first one by January 31, 2015.

http://www.reuters.com/article/2014/01/09/us-usa-energy-obama-idUSBREA081AS20140109

Let’s see…review submitted Jan 2015…discussion/debate for a year…Presidential election in 2016.  Yeah, no.

Moving oil…

Let’s see what we can come up with for this video:

http://jalopnik.com/5769271/watch-horses-pull-a-tanker-truck-out-of-snow

  • Moving oil faster than Keystone
  • Not sure the octane, but the horsepower is off the chart
  • Safer than rail even with feed costs
  • They were told the tanker was carrying feedstock