SPECIAL REPORT | June 25, 2012

U.S. Crude Is Moving East: Implications for RBOB cracks, the WTI-Brent arb, and LLS discounts

Part 2 of our Special Report on the RBOB market examines the impact of rising crude flows from the U.S. Midcontinent to the Northeast in light of refinery acquisitions and additions in PADD 1 and around the world. Cheap domestic crude may afford East Coast refineries the profitability they need to stay in business and keep the New York Harbor products market well supplied. Yet, the simultaneous expansion of overseas refining capacity threatens to put stronger and more sustained downward pres.....

SPECIAL REPORT | June 16, 2012

Saudi Succession Politics: A Primer

What to expect after Crown Prince Nayef’s death Earlier today, Saudi Crown Prince Nayef passed away, reopening the question of royal succession in the world’s largest oil-exporting country. In this Special Report, we provide an overview of the norms of succession in Saudi Arabia and highlight the events to look out for in the upcoming days and weeks. Prince Salman, Nayef’s full brother and the current Minister of Defense, is widely expected to be selected as King Abdullah’s crown prince; yet, .....

SPECIAL REPORT | June 05, 2012

The RBOB Gasoline Market: Part 1, Overview and Short-Term Outlook

After posting a strong 1Q12, RBOB prices are currently facing downward pressures. This Special Report provides an overview of the structure of the RBOB market and estimates the short-term impact of refinery shutdowns and planned midstream capacity additions in RBOB supply and demand balances in the New York Harbor trading hub. The second part of this report, to be published later this month, will analyze the impact of recent refinery acquisitions and planned processing capacity additions o.....

SPECIAL REPORT | May 23, 2012

The Final Countdown? Why a Greek exit would likely lead to the euro’s demise

The continued survival of Greece within the Eurozone was probably going to be considerably dependent on the June 17 fresh elections even if recent referendum suggestions hadn’t been made. In this note, we outline why a Greek exit could very well lead to the disbanding of the euro (in current form) in the longer term.

DATA INSIGHT | April 24, 2012

QE: Sequel in the Works? Grasping the move in the 10-year yield and the potential for more QE

• Breaking down the nominal yield into the real yield and inflation expectations illustrates that expectations of growth prospects had improved earlier this year but have deteriorated since, reflecting concerns regarding the US and — to a lesser extent — global economic growth scenarios. • Arguably, market participants are pondering about whether a relatively positive outlook can be sustained without additional monetary policy support from the Fed given their own perceived hawkish view of th.....

SPECIAL REPORT | April 12, 2012

Has Formula Pricing Kept Oil Prices Persistently High?

Downward price pressures could be gathering momentum Oil prices have remained at high levels since the beginning of the year, with Brent ( ICE front-month) above $120/bbl since February. Strong OPEC supply and a relative absence of new geopolitical crises in March and April have not provided sufficient downward pressure. In this Special Report, we argue that the formula pricing system has contributed to keeping prices persistently high.

SPECIAL REPORT | March 27, 2012

Time Spread Fundamentals: The Market for Oil Storage and the Outlook for the WTI Forward Curve

In light of the possibility that inventories in Cushing will hit new records later this year, we have prepared this Special Report outlining the fundamentals of the theory of storage and its relationship with time spreads along the forward curve. We then apply the insights of the analysis to anticipate possible changes in the WTI forward curve later this year and in 2013.

SPECIAL REPORT | March 23, 2012

Dollar to Bask in Oil’s Glory: Burgeoning US oil production raises prospects of a stronger dollar

• The US current account (CA) deficit, which peaked at 6% of GDP in 2006 and stood at 3.1% of GDP in 2011, remains a source of drag on the dollar. The petroleum deficit’s share (% of the total CA deficit) went up to 70% in 2011 from 34% in 2006. • US domestic crude oil production advanced 21% since bottoming out in September 2007. It reached 5.89 mb/d in November 2011 (highest level since June 2002) as technological advances enabled production from unconventional sources. The US beca.....

DATA INSIGHT | March 22, 2012

Who will win the race?

The showdown between natural gas and coal is heating up The withdrawal season was cut short this year. With a +900 bcf year on year surplus by the end of March and evaporating heating demand, natural gas fired power generation is called upon to clear the glut in the market. In this paper, we estimate the year-on-year injection season incremental gas demand for power use under current prices. A normal weather assumption starting April and coal’s still dominant role in the generation markets def.....

DATA INSIGHT | February 15, 2012

History to Repeat Itself?: A WTI price uptick would reconnect it with noncommercial net length

Non-commercial net length in WTI (futures and options) has been advancing for the last seven weeks and is now at the same level as the week ended May 31, 2011, according to the latest Commodity Futures Trading Commission’s ( CFTC ) Commitment of Traders report. The price of WTI has frequently moved in line with the level of non-commercial net length in WTI but there has been a disconnect between the two recently. Net length in WTI increased to historically high levels in April last yea.....