National Petroleum News (NPN) has been the independent voice of the petroleum industry since 1909 as the opposition to Rockefeller’s Standard Oil. So, motor fuels marketing and retail is not just a sideline for us, it’s our core competency.
Issue link: http://read.dmtmag.com/i/27063
MARKETING & SUPPLY Russia, yes. Has there been a slightly weaker cotton output from China and India in the last year, yes. Has there been a small problem with output in coffee supplies in South America, yes. But have they been equivalent to a 100 percent price rise in these things, I would argue no.” Peter Beutel is the president and ply, long-term demand projections are not assured.And the glass on future oil supply and demand could very easily be half full as opposed to half empty. DOES SUPPLY AND DEMAND REFLECT TRADITIONAL METRICS? If the fundamentals are the divers of current prices, the prices should reflect traditional metrics and not just with crude but with refined products. Is that the case? A number of traders and ana- lysts say that is not the case, including Dan Dicker. Dicker has been a floor trader at the New York Mercantile Exchange with more than 20 years’ experience.His recognized energy mar- ket expertise includes active trading in crude oil, natural gas, unleaded gasoline and heating oil futures contracts. He is currently finalizing a book on the issue of the markets driving oil prices titled: Oil’s Endless Bid: Taming the Unreliable Price of Oil to Secure our Economy. “We’ve seen this movie before, it’s not like we haven’t, and that’s why I wrote a book about it,” said Dicker. 16 MARCH 2011 “We’ve seen this volatility-based, trad- er-based roller coaster ride with prices based not upon the fundamentals because you can’t argue to me that oil is fundamentally worth $150 per barrel in July of 2008 and fundamentally at $33 per barrel in March of 2009. Supply and demand curves do not move that fast.” Dicker noted that a fundamental thesis is needed in order to get the investors and traders to jump into the game. “You can look at something like natural gas which does not have any fundamental reason to be bought—the supplies are enormous, demand is down, they are finding new technolo- gies to drag more and more out of the ground every day — and it just doesn’t get the excitement of traders out there right now. And it pretty much trades flatly on a fundamental basis. But if you look at anything else that offers even the smallest thesis for investing in it and the stuff doesn’t go up 10 percent it goes up 80 percent or 100 percent and that includes oil and food com- modities. Has there been a drought in chief editor of Cameron Hanover, Energy Risk Management Services. He is the author of Surviving Energy Prices, A Comprehensive Guide To Navigating The Energy Markets In This Volatile Environment. Beutel noted in the December issue of NPN’s sister publi- cation Fuel Oil News: “We have more oil than we’ve had in probably three decades. And if it were not for our good friends—investors—I believe the price of heating oil should be some- where between $0.50 and $1 on the wholesale level based upon the funda- mentals we are seeing right now. The fundamentals are worse than in 1986 when we reached something like $0.30 cents per gallon.But in any event that is not our reality.” At the time, New York Harbor heating oil futures were averag- ing about $2.50. SPECULATION ON SPECULATION If supply and demand are not the pri- mary drivers in price volatility and excessive pricing what is? As already touched on, to many oil analysts and traders the answer is simple: Speculation. Or perhaps it would be best to use the term investors or invent a term like “investulators,” as Beutel suggests. Speculation has been a traditional and needed component of the markets back to their founding to provided needed liquidity. However, in recent years there has been an unprecedented move of major institutional investors into commodities to balance out port- folios or as a hedge against inflation. This correlates well with the departure of oil and refined product prices from what have been traditional metrics rela- tive to supply, demand and inventories. NPN Magazine www.npnweb.com