CAMERON HANOVER

[DAILY PETROSPECTIVE] December 13, 2010

Energy Prices Settlements

Heating Oil Crude Oil

Month High Low Settle Change Volume Month High Low Settle Change Volume
JAN 249.56 244.90 246.52 0.77 36903 JAN 89.49 87.44 88.61 0.82 277136
FEB 251.01 246.63 248.05 0.84 17704 FEB 90.00 87.96 89.14 0.83 121540
MAR 251.29 2471.19 248.54 1.02 10238 MAR 90.49 88.47 89.63 0.84 51744
APR 250.02 246.27 247.46 1.19 3313 APR 90.85 88.88 90.01 0.84 23445
MAY 249.12 245.47 246.59 1.30 2902 MAY 91.06 89.40 90.26 0.84 16208
JUN 248.88 245.19 246.34 1.34 5115 JUN 91.25 89.56 90.42 0.83 28600
JUL 249.68 246.29 247.21 1.40 234 JUL 91.31 89.95 90.56 0.86 7853
AUG 249.34 249.34 248.33 1.50 282 AUG 91.36 90.10 90.61 0.85 8823
SEP --- --- 249.64 1.56 185 SEP 91.39 90.17 90.63 0.85 3924
OCT --- --- 250.95 1.62 248 OCT 90.99 90.96 90.64 0.86 2943
NOV 251.95 251.95 252.51 1.63 218 NOV 90.95 90.95 90.65 0.87 2110
DEC 255.20 252.20 253.84 1.64 705 DEC 91.34 89.84 90.68 0.89 22016

Unleaded Gasoline Natural Gas

Month High Low Settle Change Volume Month High Low Settle Change Volume
JAN 235.62 230.48 231.84 0.91 2776 JAN 4.547 4.323 4.420 0.003 149430
FEB 234.78 230.65 231.51 1.28 21628 FEB 4.554 4.335 4.434 0.006 61370
MAR 235.18 231.36 232.44 1.39 10478 MAR 4.528 4.322 4.415 0.006 47911
APR 244.67 240.60 242.41 1.65 4838 APR 4.487 4.290 4.381 0.006 24344
MAY 245.09 242.02 243.06 1.85 2248 MAY 4.510 4.325 4.413 0.008 10938
JUN 244.90 241.64 243.03 2.03 3179 JUN 4.546 4.360 4.453 0.009 5482
JUL 244.00 241.01 242.23 2.12 652 JUL 4.598 4.425 4.506 0.009 2709
AUG --- --- 240.99 2.15 405 AUG 4.631 4.470 4.544 0.011 2824
SEP --- --- 239.37 2.13 222 SEP 4.646 4.481 4.560 0.011 1264
OCT --- --- 228.54 2.17 215 OCT 4.729 4.559 4.636 0.010 9337
NOV --- --- 226.69 2.14 211 NOV 4.899 4.750 4.816 0.007 1553
DEC 227.62 224.50 226.09 2.09 484 DEC 5.145 5.001 5.071 0.009 1839

Early Evening Review for Monday

The fact that China did not raise interest rates this morning
seems to have buoyed investors’ hopes, and Opec’s decision to
maintain quotas at existing levels seems to have given oil
traders a reason to be bullish for supply and demand reasons.
The US dollar was under selling pressure all day long, starting
first thing Monday morning and lasting past noon. In the
process, the dollar gave up about 125 points – or 1.25 euro
cents. Even the DJIA was higher on Monday, gaining 18.24 to
end at 11,428.56. The surprise was that oil prices did not gain
more. The bulls were trying to put prices in position to break
important resistance as we move through the week.
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Investors were cheered by China’s reluctance to raise interest rates on Monday, after many had gone
home on Friday expecting exactly that. On Friday, China’s central bank increased the reserve
requirements on banks there and many
had seen that as a precursor to a rate
hike on Monday. When investors came
to work and China had not done
anything, investors started buying into
assets across the board, including oil –
and currencies (other than the dollar).
Chinese oil refiners increased
throughput at refineries to a fresh
record last month, it was revealed
Monday morning. Processing increased
by 10% in November to 36.65 million
metric tons, or 8.96 million barrels per
day. In October, Chinese refiners had
established the previous record of 8.76 million bpd. Despite price increases of 3% in refined products in
China, diesel production jumped 13.7% to 14.2 million tons, and gasoline output was up 2.1% to 6.6
million tons. Kerosene production was up 2.3% to 1.35 million tons and natural gas output was up 5.8%
to 8.42 billion cubic meters. Traders focused on the increase in refined products output, though,
because it suggests a jump in demand for crude oil.
At the same time, Opec ministers, meeting in Quito, Ecuador over the weekend, left official quotas
at 24.845 million bpd, despite actual production nearer to 29 million bpd. The cartel is producing the
most above its official target in six years, but the message sent is mixed. Ion the one hand, consumers
can look at actual production as proof that Opec will supply whatever the market can bear. But, at the
same time, it also means that there could be a call by members to return to quotas if prices weaken
from existing prices. No one knows for sure what prices the cartel would look to defend if the trend
turns down. And, there is a real question of what (high) price would be needed to convince Opec to
increase quotas, production or both. Many see the $100 level as the magic number that would force the
Saudis to push for higher quotas and output levels, but it may need to be seen before anything would
actually happen.
Technically, all three
DOE Expectations
contracts moved nearer to
Category Dow Jones Bloomberg Reuters
their key reversal highs from
Crude Oil dn 2.700 dn 2.600 dn 2.200 mln bbls
last Tuesday. We felt that
Distillate dn 0.300 dn 1.000 dn 0.500
they needed to work prices
Gasoline up 1.900 up 2.000 up 1.800
higher to get within striking
Utilization up 0.x% unchanged dn 0.3%
distance of the numbers
($90.76 in crude, 251.61 in
heating oil and 236.25-237.0 in gasoline) in order to see if they can break to new highs when the
opportunity for a strong day arises.
And investors will be watching Tuesday’s FOMC meeting for any signals that the central bank might
make changes. If the central bank signals its intention to stay on its current course, investors are
expected to sell the dollar and buy assets. That would be bullish for oil prices.

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[DAILY PETROSPECTIVE] December 13, 2010

Technical Views

Crude oil prices were higher on Monday, but have a way to go to break last Tuesday’s high.

Gasoline prices have resistance at 236.25-237.00. They were higher, but also have a way to go.

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