Busy day starting with Producer Price Index (PPI) at 7:30 A.M. Central followed by the last Crop Production USDA Supply/Demand report of 2017 at 11:00 A.M., API Energy Stocks at 3:30 P.M and the FOMC meeting today and tomorrow in which investors see the writing on the wall and are gearing for a rate hike. On the Corn front the March Corn broke to a new record low as NAFTA concerns and supplies ideas continue to pressure the market. The U.S. dollar has strengthened with a Hawkish Fed expected to raise interest rates, while the Brazilian Real has weekend which could help their exports. In the overnight electronic session the March Corn is currently trading at 349 ¾ which is ¾ of a cent higher. The trading range has been 349 ¾ to 349.
On the Ethanol front the January contract is currently trading at 1/295 which is .021 cents lower. The trading range has been 1.305 to 1.280. The market has an estimated 15 contracts traded with Open Interest at 1,277 contracts. The market is currently showing 2 bids @ 1.298 and 2 offers @ 1.304.
On the Crude Oil front the market is flying high this morning with January contract currently trading at 5848 which is 49 tics higher in the overnight electronic session. The trading range has been 5856 to 5790. Investors are wondering that last week’s data may have been skewed with the large NAFTA delivery to China. In any event, traders are expecting an adjustment on tonight’s data and expect the winds behind our sales as we see the economy heating up and we do not want to have it overheated after a decade of 0 growth.
On the Natural Gas front if we do not get a dose of extreme cold weather we can expect the pipelines to continue to flow with product which is not a good thing for our producers. In the overnight electronic session the January contract is currently trading at 2.820 which is .008 of a cent lower. The trading range has been 2.844 to 2.798.
— Daniel Flynn
The Energy Report: Down for Christmas
Forties is down till Christmas, in the old North Sea, it will slow those oil flows into Scotland’s refineries. Christmas will find price hikes, all the way downstream. Forties is down till Christmas and the oil price will scream.
Ho Ho Ho. A shut down of the major Forties pipeline, a major artery in the global oil market, caused a spike in the dated Brent market and is supporting oil products around the globe. The shut-down should go to at least Christmas and maybe even longer. A detected crack in the pipeline led to a total shutdown of the system for the first time in at least 7 years. This is going to further tighten an already tight dated Brent market that was supported by OPEC production cuts and surging European and Asian oil demand.
The pipeline system transports more than 40 percent of the U.K.’s North Sea oil production leaving that market in a deep hole. This oil can’t be easily replaced as other sweet oil producers are near their limits. Shale oil in the U.S. may help, but the producers can’t quickly ramp up supply nor can they move the oil fast enough to alleviate the shortage. The reverberations of this outage will be felt at first in Asia and Europe, but it will have ramifications for oil prouduct prices around the globe.
If this was not enough, reports of an explosion in Austria’s largest import hub for natural gas sent U.K. gas surging to the upside. Reports say that The Baumgartner facility, had an explosion and fire around 7:45am London time and it is said to be an accident and not terror related. Same-day gas prices in the U.K. rose 40 percent to 95 pence per therm, the highest since 2013 according to reports.
U.S. WTI prices are rising and a report by Genscape that said that U.S. crude supply in Cushing Oklahoma dropped by a massive Cushing inventory -3.1 million barrels. Keystone pipeine issues and record refinery runs is going to add to the momentum.
For products, this means higher prices. Gas oil will soar as supply of gas oil is below average for this time of year raising fears of shortages this winter. The pipeline outage has had issues for producers as well. Bloomberg says that the unplanned shutdown prompted Serica Energy Plc to cut its output guidance for the year, sending its shares tumbling by as much as 10 percent in London trading on Tuesday. Explorers EnQuest Plc and Premier Oil Plc also initially declined, before rebounding.
The U.K. link handles supplies from over 80 fields, and the shutdown forced Apache Corp. to suspend operations at its nearby Forties asset. Pipeline operator Ineos Group Ltd. said it will know in the “next few days” whether the system will be closed for two or three weeks, after declaring a “force majeure situation.”
So this rasies the stakes for economies around the globe. With a hot 3.1% inflation rate in the U.K. the coming oil price spike may force them to look to raise interest rates. Other countries now have to brace for the impact of a potential oil price spike! Oh Shale! Save me now!
— Phil Flynn
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