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正文
(朋友PHUL FLYNN的油盤看法1-16-2007)
The Energy Report for Tuesday, January 16, 2007
We might have to start a new field of study called etha-nomics! The study of the economics of ethanol as related to crude oil, and other things. Last week I warned that the economics of ethanol might not make sense if the price of crude fell below $50.00 a barrel. This week lesson 2 is the price of a bushel of corn. Now we have to wonder if the economics of ethanol make sense if the price of corn goes up to $5.00 or $10.00 dollars a bushel.
Does it sound crazy to say corn could get to $5.00 a bushel?! Well maybe it might be as crazy as it sounds. The corn market is now on fire raising fears there might not be enough corn to meet the demand for feed and energy. Those fears are being played out in the corn pit where the Department of Agriculture shocked the market by reducing the US corn crop and the carryover - which is the amount of corn left from last year - in its monthly report released on Friday. The Agricultural Department lowered the corm crop estimate by a whopping 210 million bushels below its previous estimate and lowered the carryover by a stunning 183 million bushels. And that is just from last month. It seems the Department of Agriculture underestimated the impact from drought conditions in the eastern parts of the corn belt and late season weather conditions in the eastern part of the Midwest growing belt.
Corn locked limit-up and is expected to lock limit up again today and this is a reminder that just because the price of corn has been cheap for decades, there's no reason to believe it will always stay that way.
Today's Wall Street Journal reports, “Corn prices are likely to reach unprecedented highs in the next two to three years, as an ethanol boom is likely to limit corn’s availability for food and feed use”. It also quotes the report from the Earth Policy Institute that said, "Soaring food prices could cause urban riots in scores of low-income countries that rely on grain imports, such as Indonesia, Egypt, Algeria. Nigeria and Mexico”.
The Wall Street Journal says that if corn prices get too high, the ethanol industry will be driven to find lower cost feedstock and as these alternatives develop, price and demand will stabilize.
Winter is back. You remember winter don’t you? Cold, snow and Ice. The return to cold is somewhat supportive yet the real test for winter is if it can stay cold for the long haul. We will see what the market thinks about old man winter today.
A fire at a Chevron's Richmond California refinery yesterday caused some people to be confined to their homes. The plant that was on fire accounts for 23 percent of Chevron's US refining capacity and has a capacity of 225,000 barrels of crude a day. Not bad for a refinery that is 105 years old.
BP will be hit with the release of a report by James Baker that will say BP failed to provide adequate safety at its refineries and that the responsibility goes right up to senior management. No wonder Lord John Browne made an early exit.
Will they meet or wont they! It looks like the emergency OPEC meeting is off. Saudi Oil Minister said there is no need for additional cuts. That news sent a quiet market falling.
We're long February crude oil from apprx 5250 - leave stop at 5150.
Buy February heating oil at 14500 - stop 14200.
We're long February RBOB from apprx 13500 - leave stop at 13300.
Sell February natural gas at 702 - stop 722.
Have a GREAT day!
The Energy Report for Tuesday, January 16, 2007
We might have to start a new field of study called etha-nomics! The study of the economics of ethanol as related to crude oil, and other things. Last week I warned that the economics of ethanol might not make sense if the price of crude fell below $50.00 a barrel. This week lesson 2 is the price of a bushel of corn. Now we have to wonder if the economics of ethanol make sense if the price of corn goes up to $5.00 or $10.00 dollars a bushel.
Does it sound crazy to say corn could get to $5.00 a bushel?! Well maybe it might be as crazy as it sounds. The corn market is now on fire raising fears there might not be enough corn to meet the demand for feed and energy. Those fears are being played out in the corn pit where the Department of Agriculture shocked the market by reducing the US corn crop and the carryover - which is the amount of corn left from last year - in its monthly report released on Friday. The Agricultural Department lowered the corm crop estimate by a whopping 210 million bushels below its previous estimate and lowered the carryover by a stunning 183 million bushels. And that is just from last month. It seems the Department of Agriculture underestimated the impact from drought conditions in the eastern parts of the corn belt and late season weather conditions in the eastern part of the Midwest growing belt.
Corn locked limit-up and is expected to lock limit up again today and this is a reminder that just because the price of corn has been cheap for decades, there's no reason to believe it will always stay that way.
Today's Wall Street Journal reports, “Corn prices are likely to reach unprecedented highs in the next two to three years, as an ethanol boom is likely to limit corn’s availability for food and feed use”. It also quotes the report from the Earth Policy Institute that said, "Soaring food prices could cause urban riots in scores of low-income countries that rely on grain imports, such as Indonesia, Egypt, Algeria. Nigeria and Mexico”.
The Wall Street Journal says that if corn prices get too high, the ethanol industry will be driven to find lower cost feedstock and as these alternatives develop, price and demand will stabilize.
Winter is back. You remember winter don’t you? Cold, snow and Ice. The return to cold is somewhat supportive yet the real test for winter is if it can stay cold for the long haul. We will see what the market thinks about old man winter today.
A fire at a Chevron's Richmond California refinery yesterday caused some people to be confined to their homes. The plant that was on fire accounts for 23 percent of Chevron's US refining capacity and has a capacity of 225,000 barrels of crude a day. Not bad for a refinery that is 105 years old.
BP will be hit with the release of a report by James Baker that will say BP failed to provide adequate safety at its refineries and that the responsibility goes right up to senior management. No wonder Lord John Browne made an early exit.
Will they meet or wont they! It looks like the emergency OPEC meeting is off. Saudi Oil Minister said there is no need for additional cuts. That news sent a quiet market falling.
We're long February crude oil from apprx 5250 - leave stop at 5150.
Buy February heating oil at 14500 - stop 14200.
We're long February RBOB from apprx 13500 - leave stop at 13300.
Sell February natural gas at 702 - stop 722.
Have a GREAT day!
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