The battle shaping up...

Interesting, to say the least!

In an almost unprecedented move, Asian countries have now joined in what appears to be a global move to bring energy prices downwards to spur economic activity and recovery.

Seems to be a recognition out there from governments that OPEC's long-standing goal of keeping oil prices up is going to be a hard job.

The United States and some European countries rallied together on Thursday to release some of their crude oil reserves to the world markets, not long after OPEC met, to meet a shortfall of global crude stocks and in an effort to bring down the price of oil to bolster economic recovery. OPEC failed to increase production the other day that would have dropped crude oil prices, but the meeting to discuss production increases amongst member countries failed, spurring the move by western countries.

Brent crude shows a drop so far today by close on $1.40 a barrel, while West Texas Intermediate is down slightly by close on sixty cents. Not a big lot, but it's starting to show on refined commodity prices.

I'll be in touch, but it's off to the west coast of the province Monday.

Regards,

George

Up and down in the markets

Gas prices down, but distillate fuels up

Media release

Conception Bay South, NL, June 07, 2011- Consumers in Newfoundland and Labrador will find evidence of the 'up and down' to the markets this week when the Public Utilities Board adjusts prices this Thursday morning. That's from George Murphy, group researcher with the Consumer Group for Fair Gas Prices.

"Numbers are reflective of what happened with inventories late last week when data showed a drop in distillate fuels and a gain for inventories of gasoline," Murphy said."It's been all over the map since, with no real sign of stability. Oddly enough, inventories of crude oil increased by 2.9 million barrels even though there was an increase in refinery production, reaching a full 86 per cent, the highest level in weeks."

The numbers

"Heating and stove oils show upwards movement by 1.03 cents a litre. Diesel should increase by 1.5 cents. That is probably in line with inventory reports that showed a drop in distillate inventories by close on a million barrels. Someone is burning a lot of distillate fuel out there, most likely diesel fuel."

"Gasoline is showing the opposite: down by 2.6 cents a litre. Gasoline inventories were up last week by 2.6 million barrels for the week, probably the reason behind the drop in prices.

Oil prices may drop

There are also strong signs that OPEC member countries are getting ready to ramp up production, citing the need to keep the world economy moving in the face of slow, or even falling economic recovery. The group of producers led by Saudi Arabia, are presently meeting in Vienna.The talk is about adding 1.5 million barrels of crude oil per day to present production quotas. If that happens, it could be a plus to helping prices drop. The Saudis are concerned that high oil prices will further damage world economic recovery and they're pushing fellow OPEC members to help drop the price of oil to a more 'manageable' seventy to eighty dollars US a barrel from it's present level of around the hundred US level it presently sits at.

But there is another cause for concern.

"If the group does raise quotas, then that leaves spare refinery capacity at a minimum while Libyan production is off-line with ongoing political turmoil. Libyan production matches that of the proposed OPEC production increase: 1.5 million barrels per day. The difference here is in the interpretation of the news here. Investing agencies are concerned with losing capacity when consumers are saying that capacity is there. Just not online at this moment. I believe we're close to a retreat in prices, especially if demand for gasoline and distillate fuels stagnates."

"We'll wait and see."

-30-

For more information, contact;

George Murphy
Group researcher/Member
Consumer Group for Fair Gas Prices

*Just a footnote to this story really. demand for gasoline products this past week was recorded at 1.3% lower than the same recording period for last year. That's pretty important to see at this time, and another sign of probably what's coming.