Petroleum Market Updates

April 15, 2008

Energy – Crude Complex Reaches New Records in Overnight Trade as Supply Worries Feed, Dollar Weakness Spurs Gains –

Crude and product futures were higher overnight posting fresh records as the rally continued from Monday on supply worries and a weak U.S. dollar. Funds continue to pour money into commodities as investors search for a hedge against the devaluation of the dollar against other world currencies. Increased interest in dollar-denominated crude oil continues to spark record high prices for crude as the contract topped the overnight session at $113.66 before backing down slightly still holding well above the $113/bbl mark. Products were also sharply higher in GLOBEX trade following crude’s rally as supply concerns continue to drive gains. Driving the supply concerns were reports of supply disruptions as Shell reported its Capline pipeline shut due to a leak. Shell said the pipeline, which carries 1.2 million barrels of crude per day from the Gulf Coast to the Midwest was closed on the weekend but was restarted late Monday and is currently operating at a slightly reduced capacity. Further, reports that an ENI facility in Nigeria was forced to cut production by 5,000 bpd due to sabotage fed market worries of tightening supply. The incidents follow weeks of reported drawdowns in U.S. crude and product stocks from the EIA supporting market woes. Eyes will be trained to this week’s data from the EIA to be released Wednesday at 10:30 AM ET. The report is expected to show a gain of about 1.2 million barrels of crude oil, a decline of 1.8 million barrels of gasoline and a decline of 1.5 million barrels of distillate. Refinery runs likely increased about 0.2% on the week. Although inventories will still remain comfortable compared to normal for this time of the year and with the year on year surplus of gasoline inventories still at all time highs the market will likely interpret such numbers as bullish. Along with supply worries, the market was fed additional bullishness from the demand side as China reported its demand for diesel has risen almost 50% in March over Feb. imports. Crude oil imports also increase in March over Feb by about 25%. OPEC meanwhile released its Monthly Oil Market report today, in it revising lower its world demand forecast by 1.4 mb/d to 85.7 mb/d, which is broadly in line with the typical seasonal decline. OPEC said the demand for its oil in 2007 is estimated to average 31.9 mb/d, an increase of 0.3 mb/d over the previous year. In 2008, the demand for OPEC crude is expected to average 31.8 mb/d, a decline of about 0.2 mb/d.