The over all tone has been lower and choppy on oil economics this week but there's definately extensive buying going on with the gasoline relative the rest of the oil complex. As usual, everyone is hush-hush on admitting any refinery production problems, but if one watches the various gasoline markets, they sure seem to be indicating there's lots of conversion refining units sputtering.

Unlike straight crude distillation capacity that's relatively straightforward and, relatively speaking, simplier, conversion, or gasoline production capacity is very complex. These octane enhancing processes operate at very high temps and pressures with very complex equiptment thats more suseptible to operating (y2k?) mishaps.

On the futures exchange, the NYMEX, the gasoline crack (or the refiners's marging for producing gasoline, has firmed from $2.80 / barrel (little better than breakeven) at the start of this week to as high as $4 / barrel today. That's a considerable 3 day move.

This morning the NYMEX gasoline was supposed to open 1 cent a gallon lower. It did come in .9 cents lower but then it spurted higher on the type of news I reported here yesterday. Spot market gasoline is getting bid up relative the NYMEX gasoline values in several different markets. The NYMEX gasoline quickly moved higher on the day and seems to be pulling up the rest of the lethargic crude and heating oil all day. The oil industry consensus is this warm weather and y2k stockpiling overhang should be weighing heavy on oil values. Its this gasoline spot market buying that seems to be supporting all NYMEX oil markets.

The largest gasoline spot market in the country, the Gulf Coast spot (Colonial Pipeline barrels) started the week 5.5 cents under the NYMEX sreen. So when a refiner or a gasoline spot market trader buys his 25,000 barrel tenders, his contractual deals are quoted at a differential to the NYMEX gasoline. At the start of the week these Gulf Coast quotes were 5.5 cents under the NYMEX. They firmed to 4 cents under (relatively speaking) as of this time yesterday. There was a rumor of a deal done post-NYMEX close yesterday at 2.75 cents under. Now today the Gulf Coast gasoline is reported to be as little as only 1 cent under the NYMEX. I think this is probably the biggest 2 day move we've seen all year on Gulf Coast gasoline differentials. As TW Energy's Peter Van Cleve says, "Somebody is bidding this gasoline up. Someone's buying it. These spot market's don't lie." .

Some smaller area gasoline spot markets have seen even bigger relative moves. With 3 refinery probs (2 of them prerollover) in the Illinois area, the Chicago spot market gasoline diffs have gone from 2.5 cents under to over 3 cents over. Its a thin market. Any buying or selling here and it really moves.

So is it y2k related? There does seem to be more refinery probs than normal. We don't know all the specific but spot market and NYMEX traders are bidding the gasoline up. Normally in early Jan, the gasoline underperforms the rest of the market. Not in early 2000..........

-- Downstreamer (downstream@bigfoot.com), January 06, 2000

Answers

At the risk of sounding sarcastic (which is unintentional) or pedestrian (much closer to the truth on this subject, anyway), how would all this tie in with a 15 cent decrease in average pump prices since Christmas in my city (2 mil. pop)?

-- Simpleminded (nope@wont.never), January 06, 2000.

To All,

Another thing to think about, besides gasoline:

When we're not burning it in our internal combustion engines, we tend to make LOTS of things with petroleum.

Fertilizer. Plastics. Computer Parts. To name a very few. The list goes into the thousands.

All of this stuff is extremely complicated to fabricate. Remember: if we don't have a way to access and process the oil in the ground, things are gonna get a lot less pleasant.

Take care!

--------------

I haven't had any luvin' since the rollover; Please tell me THIS aspect of life is Y2K compliant! Or maybe, it's jus' cuz I'm,

-- Justa Jizzmopper Cleaning (stainedglass@thepeepshow.com), January 06, 2000.

Mr. Cleaning, I told you that was going to happen if you didn't forward that chain letter to at least five people. You have no one to blame but yourself.

-- Mr. Annoying-as-Hell (writing@chainletter.central), January 06, 2000.

I saw a thread on this forum claiming a freighter from Trinidad/Venz was diverted fro the USA to a destination in Europe.

And this:

NEED FOR OIL FUELS RUSSIAN WAR ON CHECHNYA January 6, 2000

http://www.jvim.com/cgi-bin/update.cgi

The London Times reported: In the chaos of the Chechnya war, one image stands out as a sign of why both sides are losing - that of the rebel who has run out of petrol for his Jeep, dashing between dugouts on a bicycle. This is an old-fashioned war, for Chechen independence and Russian self-esteem, but also a more modern one, for oil. Grozny's dwindling supplies will please Russia's generals, but for Kremlin strategists they are a reminder that Moscow's long-term goal of dominating the Caspian basin and its vast oil and gas reserves is as elusive as ever. Before the 1994-96 war, Grozny's network of refineries made it the second biggest oil city in the region after Baku, the capital of Azerbaijan. Geologists said up to 200 billion barrels lay beneath the Caspian, and there was every sign that Moscow would retain a leading role in the lucrative business of selling it. The Russian pipeline which pumped 100,000 barrels of crude a day to the Black Sea has been closed since summer. Behind the rhetoric of an anti-terrorist operation, it is clear that Moscow launched this war partly to keep a toehold in what may be the world's richest oil region outside the Middle East..."

Query: If the Chechens were to take a scorched earth defense against the Russian attack what affect would that have on gasoline availability in Russia and eastern Europe?

-- Bill P (porterwn@one.net), January 06, 2000.

About the War,

I'm not up on all the nuances of this situation; I find it horrendously difficult just to find time to get a little information on the Y2K situation(and my friends think I'm an expert on it; this really scares me).

When asking my Russian friends in Moscow(who are extremely well educated and tuned into their political situation) about this war, their reply is essentially this:

"It's about oil. Always has been, period."

I trust these folks; they have no reason to steer me wrong about anything. They also explained in depth WHY it is all about oil(to lengthy and complicated for here); their explanation was sane and highly plausible.

Peace,

Don

-- Shimoda (enlighten@me.com), January 06, 2000.

Downstreamer.... Thanks much for the informative post.

-- kevin (innxxs@yahoo.com), January 06, 2000.

Shimoda,

It is about oil, and in response to Bill P, it's not about gasoline. Russia has 40s era refineries, near Chechnya and everywhere else. They're archaic. As an example the gasoline yield off their refineries are about 25% compared to near 60% here in the US. Russia just exports crude distillate and (uncracked) E-4 fuel to the west. They aren't a gasoline factor other than the crude that's exported to the west ends up as gasoline after going through Western refineries. Chechens can scortch all the earth and oil facilities they want. The bulk of Russian crude production and distribution is a long ways from Chechnya, although a lot of the future CIS production will come from the Caspian Sea area- close to these Chechen varmants.

My post y2k concern is gasoline production facilities - not crude production or transportation. But who knows, there's still time from probs in a lot of different realms...

-- Downstreamer (downstream@bigfoot.com), January 06, 2000.

To keep up on the latest news in the oil markets, check out the Petroleum Market forum:

http://pub3.ezboard.com/fdownstreamventurespetroleummarkets

-- Bruce (Its@good.one), January 06, 2000.

It's actually the result of a quiet deal between the russian military and Putin - they give him a small, victorious war with low casualties and he wins the upcoming election. In exchange, he gives them a free hand to fight it and boosts Russian spending on the military after he's elected.

So far, both sides are holding to the bargain.

The Chechyans don't count in this, since they were never consulted.

-- John Whitley (jwhitley@inforamp.net), January 06, 2000.