Commodity Corner
Views on commodities and energy
South American LNG Terminals
The above map shows South America’s LNG import terminals ahead of the coming Southern Hemisphere winter, including Chile’s Quintero terminal, which is expected online in June. (Click on individual terminals for details)
South America’s nascent import capacity will add a new dynamic to the Atlantic Basin market, drawing LNG counter-seasonally when demand in the Northern Hemisphere wanes during summer.
LNG imports to South America are not expected to be huge in 2009 due to falling industrial demand, but they could tighten the LNG market in the longer term. – Ed McAllister
U.S. Gasoline Demand
U.S. gasoline demand has showed signs of picking up over the past month, edging up 1.6 percent over the past for weeks according to government data. Analysts say lower pump prices have led some Americans to drive more. U.S. demand fell last year for the first time since 1991 as gasoline and crude prices raced to record highs, with further pressure coming later in the year due to the economic crisis.
The above graph shows five years of gasoline consumption in the world’s top consumer, compared with the average price for a gallon of U.S. gasoline.
NYMEX Contango Narrows
The contango in the NYMEX futures curve has begun to narrow as OPEC production cuts begin to bite and U.S. gasoline demand shows signs of rebounding.
Gasoline catching up with diesel
The amount of money a U.S. refiner can make producing gasoline in the United States has improved in recent weeks relative to diesel thanks to gasoline production cuts and a heavy downturn in diesel demand from the U.S. trucking industry as the economic crisis deepens. Diesel has been the most profitable fuel a producer can make since July 2007 — an unusual occurrence for the less difficult-to-make fuel largely tied to high freight activity and demand from the under resourced global electricity sector.
The early evidence of a reversal in the profitability relationship is already having an impact on what consumers are paying at the pumps: diesel’s price premium to gasoline has dropped from 64 cents a gallon to 43 cents a gallon over the past four weeks, according to auto and travel group AAA.
In the above graph, the top line indicates the gross profit margin a U.S. refiner can achieve producing a barrel of distillate fuel, while the bottom line indicates the margin for producing gasoline.
With gas & crude prices dissociating, IMO the bet is on refiners who has no or very less crude oil inventory.
Oil and the dollar no longer linked
The correlation between oil prices and the dollar seen since the third quarter of 2007 has weakened. Investors had sold the dollar as U.S. economic prospects dimmed and bought oil as a hedge against inflation and uncertainties in the supply of raw materials. The relationship eased late last year as fundamental pressure from slumping demand and the slowdown of the overall economy pushed oil lower independent of the actions of the dollar, and analysts said the link might not return in the near term.
So long as oil is traded in dollars, and middle eastern currency is pegged to the dollar, the price of oil and the value of the dollar will remain linked, inversely or not.
Drop in oil demand slowing?
The drop in U.S. oil demand against year-ago levels has begun to slow as data is compared with weak levels from 2008, when consumption slowed due to the slumping economy and the high fuel prices seen during the first half of the year.
The graph shows the change in U.S. demand over the four-week period from levels from the previous year.
