Energy Market Updates

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rising gas prices

A Tale of Two Products: News Variables Push Finished Products in Opposite Directions

Depending on the News outlet you watch or read, you will hear two very different narratives.  The one where “prices rises as Idalia makes landfall”….. or “soft demand figures push futures lower.”  It really a tale of two products right now between gas and diesel. 

Gas is more consumer centric while diesel is tied more to the Industrial world.  One is rising while the other is starting to fall.  Quick note, hurricane Idalia had little to no impact on any petroleum facilities in the Gulf or in the Mid-Atlantic, just more of a news gimmick to grab your attention. 

Consumer spending, thus gasoline demand, has been surprisingly resilient this Summer, as many of us thought that demand would crash as unemployment rose.  That really hasn’t happened and hints that the FED may still raise rates one more time are starting to come out.  While gas futures have risen roughly $.60 since the beginning of summer, it doesn’t compare to the over $1 rise seen on Diesel.  Diesel has had an unconventional run this summer.  Soft demand and varying inventories have kept pricing elevated for reasons I can not understand.  The last three days have shaved off almost $.20 in pricing and I would like to hope we are starting a nice correction in the coming weeks. 

Keep in mind, as the front months retreat, it will not be as pronounced in the outer months.  For instance, yesterday front month ULSD dropped $.11, yet MARCH24 ULSD only fell $.01.  Steep backwardation has reemerged in the diesel pit, next summer pricing is roughly $.40 lower than current. 

Two thoughts remain, will this prevent some from bringing in product again and see outages or suppliers sitting on the sidelines and also does this represent a buying opportunity for next summer needs?  We will have product for sure, and we are always willing to talk on securing some pricing. If you want to schedule a meeting to discuss your specific needs or questions, you can do so here:  Schedule a Meeting

 

ULSD 8.31.23

 

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Markets React to Syrian Conflict and Implications of US Intervention

As news continually breaks on developments on the Syrian conflict and the potential implications of US or other world power intervention in the region, stocks are dropping and commodities are going through the roof.

US Secretary of State John Kerry announced this week that there was “undeniable” evidence that the recent chemical weapons attacks in Syria were perpetrated by the Assad regime. The announcement in tandem with the presence of UN Weapons inspectors being fired upon in the country prompted speculation that the US may intervene with military action. Additionally, the
recent attacks cross the “red line” declaration issued by the Obama administration several months ago regarding chemical weapons.

The threat of US intervention has prompted Global Markets to react heavily to the news. In the US, the Dow fell Tuesday by over 170 to hit a two month low of 14,776.13 and the Nasdaq fell 78.13 points to 3579.44. Stocks took a hit while commodities shot up, notably gold in both the US & Canada. Brent Crude hit a six month high on Tuesday in the wake of the rumors of
military action, and US Crude rose over 3 dollars as well. Oil Prices have risen 15% over the past 3 months on concern over violent civil war in Egypt, and now conflict in Syria is pushing them even higher.

The issue with Syria is complex – Syria itself is not a major exporter. The issue is essentially concern that US intervention in Syria will spark regional unrest as well as create increased tensions with other major world powers, specifically Russia and China. Consensus seems to be that the major issue with intervention in the conflict could interrupt export and production schedules, particularly those in Iraq and Libya, according to cbc.ca.

It’s estimated that about 1% of global oil supply runs through the bay of Iskenderun in Turkey, only a few miles off the Syrian border, and tensions in Syria could threaten this export route, according to Olivier Jakob of Petromatrix in Reuters on Tuesday. Disruption of this supply
route would have a deep impact on European and Asian markets, particularly if tension spreads throughout the Middle East, which produces over 1/3 of Global Oil supply.

 

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Rally pushes on as strife continues

Futures soared higher again today as all eyes continue to be focused on the Mid East and Northern African Nations and the wave of civil unrest that has gripped that region.

Only a week ago it appeared that the Libyan crisis was cooling with a possible quick exit by its Leader. That was 7 days and 25 cents ago….  As Iran has been said to clamp down and imprison opposition leaders and with Algerian news outlets reporting some growing protest, the main fear is that demand will outpace the supply. With the Saudi’s announcing they will foot the bill for any excess barrels left on the table, who wouldn’t want to be investing in Saudi Arabian refineries right now! Crude goes up $2.66 today to $99.63, jackpot! From the “ No Duh” file, FED chairman Bernanke spoke today and did little for the cause as he declared rising commodity prices would hurt the economy, but not produce massive inflation. More likely a short term rise in consumer gas prices.

With Funds bow controlling roughly 23% of the long positions in the Market; it will be interesting to see where the selling will start, and yes, it will happen. It was interesting to note that a gasoline demand report by Mastercard showed a 3% increase in demand last week, but some of that can be attributed to panic buying as consumers tried to beat the next price increase.

At the close, HEAT jumped .0846 to $3.0235 and RBOB soared .0907 to 2.9834. Let’s hope to find some relief in Wednesday’s DOE report.

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