Jan 02 2009

Gears of the World Starting to Turn

January 2, 2009

In a follow-up to Wednesday’s post about GASOIL crack-spreads flashing signs of demand in Europe, there is a short piece out today from Platt’s on this topic. Spot demand for ULSD (ultra-light sulpher diesel, which is a more refined diesel conforming to environment standards) is now on the march. In addition, Brent today has held most of its gains from the end-of-year rally two days ago, and GASOIL is very strong. According to Platt’s, spot demand for GASOIL has driven GASOIL spot prices up as high as 6-7 percent over front month GASOIL, which is the February contract. European refiners will mint money if this continues.

The world hums to the drumbeat of diesel. It’s a very versatile fuel. It was in fact Chinese demand to stockpile diesel in the first half of last year that drove world oil prices to the highs. For the world to start up its engine again after last year’s credit-induced industrial heart-attack, there must be demand for diesel. Diesel must start flowing through the veins.

I’m getting every indication right now the kick-starting process is underway.

-Gregor

• Comments
Author: Gregor Macdonald   Posted in: Oil   Tagged:    
  • ShortBusTrader
    Europe's largest independent refiner, Petroplus Holdings AG (PPHN) on the Swiss exchange is at its lows right now. Here are the refineries it owns. http://www.petroplusholdings.com/bus_ref.php

    If this is not a good way to play this move, let me know. There are lots of dynamics going on in European oil and gas and I am no expert in this field.
  • gregor.us
    Hi,

    In general I do not give specific investment advice on my website. Bloggers have to be careful about that. More broadly, however, that's not really my focus. I try to tackle the big issues. Besides, as I am sure you are aware, everything possible can be at the back of a particular stock, and then "stocks" in general become a lousy way to play a theme.

    Royal Dutch Shell has the best downstream exposure that I know of generally, in Europe. But, again, that's not an investment recommendation.

    FWIW, you might read over the goals I lay out also for my newsletter. Same thing, no individual stock advice. The main reason is that so many people are offering this already, I am trying to do a different value-add proposition. But the most important thing is that I want broad readership.

    I strongly suspect that in 2009, energy is going to be back on the front page again, and that investors will start placing a premium on geo-political safety in an unstable world.

    This decade, Canada has been my preferred investment country to play oil and gas--though, as you can see, low prices hurt the oil sands producers alot.

    HTH

    G
  • ShortBusTrader
    Do you have any ideas as to which refiners in Europe will be most benefited by this change ?

    From my knowledge most of the publicly traded refiners are all vertically integrated and not pure play refiners.

    Here is a list of NON US refiners, but none are European, so seems there is no direct way to play this.

    http://finviz.com/screener.ashx?v=111&f=geo_not...
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