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Nov. 8 2009 - 10:06 pm | 41 views | 2 recommendations | 17 comments

Commodities Casino Keeps Rolling

HOUSTON (Dow Jones)–Sunoco Inc. (SUN) swung to a third-quarter loss on a host of charges and continued weak demand for oil-based fuels and chemicals.

Those difficulties are expected to continue amid the economy’s weakness, said Chief Executive Lynn Elsenhans.

“As we consider the outlook for the rest of the year and into 2010, we do not anticipate significant improvement in the refining market,” Elsenhans said during a call Thursday with analysts.

Last month, Sunoco became the first oil company to say it will close a U.S. refinery, a ploy aimed at getting that segment to break even this year. All of the units at Eagle Point plant in Westville, N.J., ceased production this week, Elsenhans said.

via UPDATE:Sunoco Posts 3rd-Quarter Loss On Refining, Chemical Woes – WSJ.com.

So demand for crude is down so much that we’re actually closing refineries in this country, but the price of crude is up 150% since the beginning of the year. Makes sense, right?

Thanks to my friends in the commodities business for pointing this out. We continue to see pricing in the commodities markets that is disconnected from reality, which makes it all the more distressing that the bill currently being shepherded though Barney Frank’s Financial Services Committee (and which still has to be reconciled with an AG committee bill) seemingly doesn’t do a whole lot to correct these problems. More on this later, right now I have to go remove the railroad spike I just drove into my eye after reading the story that Alex Rodriguez apparently has a portrait of himself in the form of a centaur hanging in his bedroom.


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  1. collapse expand

    “Alex Rodriguez is rumored to have portraits of himself as a mythic creature called a centaur – half man, half horse – in his home…One has to wonder which part of the horse Alex is.”

    Matt – that last line sure sounds like yours, so steal it back. If it’s not, steal it anyway. It’s hilarious!

    (Oh, and sorry about your eye. For God’s sakes, save those railroad spikes for the use the good Lord really intended them – the rear ends of every member of Goldman Sachs.)

  2. collapse expand

    For anyone making the late night drive through New Jersey en route to New York City will remember the initial shock of what appears to be the igneous glow of Hell over the horizon. Hell can look a lot like oil refineries with its flames billowing out of smoke stacks and its barrenness, or is it the other way around? Either way, who would’ve thought that Hell would go out of business? And, I wonder what kind of stuff you will find in their fire (no pun intended) sale–Sunoco pitchforks and little red suits?

  3. collapse expand

    Well, this mismatch between commodity prices and consumer demand does confirm that the oil crisis of 2007 was 2007 was driven by speculation. I remember a lot of controversy as the peak oil crowd seemed to think that oil was running out. The oil industry defenders claimed that prices were driven up by speculation, and the obscene profits the oil companies booked were therefore excused.
    GS might will make the same claims, that their obscene profits are just side-effects of “speculators” buying toxic mortgages, and their profits aren’t really obscene after all.

  4. collapse expand

    I’m not saying that Glass Steagall is the answer to all of our problems, but Wall Street has been a disaster since its repeal. WTF? If thats the case, why on earth cant we just reinstate the whole back into law? Also this commodities future speculation is really starting to piss me off! I refuse to believe any of this was done to help the country by any means…

    all of this is just getting ridiculous.

  5. collapse expand

    I had assumed Matt’s head would have exploded when he heard Goldman Sachs execs had gotten doses of H1N1 vaccine, but it’s good to see him back here fighting the good fight. The rest of the media is picking up on Goldman’s ghoulish dealings, and I think Taibbi is to be applauded for shedding some light in some dark corners.

  6. collapse expand

    Which bubble was this? Except this time it’s not GS.

    And according to the huffpo report, there are not 1 – but 2 – Arod centaur portraits! (http://www.huffingtonpost.com/2009/10/31/arod-has-centaur-selfport_n_340960.html)

    Stay away from those RR spikes!

  7. collapse expand

    “So demand for crude is down so much that we’re actually closing refineries in this country, but the price of crude is up 150% since the beginning of the year. Makes sense, right?”

    If I remember correctly, oil companies are not required to provide you cheap gasoline.

    It’s no different than the only gas station in the Mojave. Don’t like 5 dollar gasoline? Buh-Bye!

  8. collapse expand

    Hi Matt,

    We at Seeking Alpha think your blog is great and would love to have you join our team. Please contact me at contributors@seekingalpha.com.

    Thanks,
    Becci

  9. collapse expand

    About Us
    Seeking Alpha (www.seekingalpha.com) is the premier financial website for actionable stock market opinion and analysis. Handpicked from the world’s top blogs, money managers, financial experts and investment newsletters, Seeking Alpha publishes more than 250 articles daily. Seeking Alpha gives a voice to over 2500 contributors, providing access to the nation’s most savvy and inquisitive investors. The award-winning site is the only free, online source for over 3,000 companies’ quarterly earnings call transcripts including all of the Russell 3000 Index. Seeking Alpha has 40 million page views each month and combined with their distribution partners (Yahoo Finance, Google Finance, Reuters, Bnet, Etrade and others) has a total reach of 50 million unique monthly readers. Seeking Alpha was named the Most Informative Website by Kiplinger’s Magazine and received Forbes Magazine’s ‘Best of the Web’ Award.

  10. collapse expand

    It’s not just speculative madness… the market is starting to price in the fact that much of the world’s reserve figures are significantly overstated – see guardian today, http://www.guardian.co.uk/environment/2009/nov/09/peak-oil-international-energy-agency

  11. collapse expand

    Matt,

    We are getting severely Chemtrail sprayed from the sky morning, noon and night here in Los Angeles. I am also getting reports from around the world that the spraying is being ramped up in other countries as well. Are you aware of this worldwide operation? Please go on YouTube to learn more. Many of us are very concerned that a killer flu virus is getting ready to be launched on us and it is related to the Chemtrail spraying. Any time that you have to investigate this would be greatly appreciated.

    Many people in Ukraine, where they are experiencing an outbreak of Pnuemonic Hemorraghic Flu, reported low flying helicopters spraying before the outbreak. Joseph Moshe, a microbiologist who called in to a radio show to warn that Baxter Pharm. was getting ready to launch a bioweapon in Ukraine,
    was captured here in L.A. in a high speed chase captured on television, where he was tear gassed, tasered and hauled away. No one knows where he is right now.

    http://www.ken-welch.com/Commentary/Pandemic1.html
    http://www.youtube.com/watch?v=jemRjFzZy7M

  12. collapse expand

    Keep up the great reporting Matt. We’re getting screwed daily in both ends from the Wall St. hustlers, big banks and private insurers. Don’t even get me started on defense contractors. Their enablers are the suck-ass so called “representatives” in Congress who are beholden to the big money. Until we figure out a way to remove campaign donations as a factor in our political system, I’m afraid we will continue the screwing, especially of the middle class.

  13. collapse expand

    The rise in the price of oil (and other commodities) is due to the Fed’s ongoing quest to destroy the value of the US dollar.

    The US dollar has been tanking and is hovering near all-time lows. The spike in other so-called “risk assets” (including the ridiculous stock market rally) has directly correlated with the decline in value of the US dollar.

    It is the mother of all carry trades, and will eventually end in disaster when it inevitably unwinds.

    Karl Denninger writes quite a lot about this on his Market Ticker blog:

    http://www.market-ticker.org/archives/1612-Strong-Dollar-Lies.html

  14. collapse expand

    Matt
    Look at the gold chart: predictions go as high as 2,500 – sounds oily, doesn’t it?
    Christian

  15. collapse expand

    Here is more raw data to support your claim that the oil markets are being fixed.

    U.S. oil production is up 15% year over year. The amount of oil stored in the U.S. is up 6%. Demand for oil products is down 5%, and to me, the total amount of oil we import is down a staggering 20%. These numbers all come from the U.S. Department of Energy.

    As for the world, the EIA puts out a short term outlook, STEO. The world’s spare capacity in oil ranged from 1 to 2 million barrels per day from 2002 to mid 2008. As of today, the world has spare oil capacity of 4 million barrels per day.

    The bottom line is that world oil supply and capacity are at record levels while demand has fallen off a cliff in the past year. If the laws of supply and demand were followed, oil should be lower than its price in 2002, when oil was between $20 and $30 a barrel.

    I find it interesting that when Goldman Sachs and Morgan Stanley were fighting for their collective lives oil went from $147 to $30 a barrel.

    At some point, the taxpayer is going to have to ask why he is giving these two companies loans at 1 and 2% interest, and these companies in turn have doubled the price of gasoline from $1.50 to $3. Why the taxpayer is lending Morgan and Goldman money is beyond me.

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