Hurricane or Tropical Storm Harvey is not yet in the rear view mirror yet but we are ready to roll up our sleeves and get to work. We have another scary proposition with Tropical Storm Irma lurking in the shadows in the Atlantic moving west at 10 knots. The National Hurricane Center shows a cone that it is on track to make landfall in the Yucatan Peninsula, but as we have learned from our current experience, “Don’t fool with Mother Nature”. Our hearts and Prayers go out to the victims of this storm that has separated families and loved ones. God Bless you!
On the Corn front Reuters reported what a lot of investors saw this entire growing season that old crop will bolster deliveries against the Chicago Board of Trade Corn futures on this First Notice Day of all September Grain contracts. Deliveries are expected to be large but the current extreme weather may disrupt deliveries given what part of the country you live in. In the overnight electronic session the September Corn is currently trading at 328 ¾ which is ¾ of a cent lower. The trading range has been 330 ¼ to 328 ¾.
On the Ethanol front the October contract is currently trading at 1.430 which is .004 of a cent higher. The trading range has been 1.430 to 1.425 with the market currently showing 4 bids @ 1.430 and 1 offer @ 1.447 with 4 contracts traded and Open Interest at 878 contracts. With our current situation bio-fuels take a back seat until we get refineries up and running regardless of export potential. Shipping lanes and delivery points make that subject a moot point in this chapter of the story.
On the Crude Oil front the October contract is currently trading at 4607 which is 11 tics higher. The trading range has been 4633 to 4558. The market has taken a pause from free-falling as Troops on the ground access damage control and we will see pipeline closings while investors will be aware of progress in the current circumstances.
On the Natural Gas front the market is trading a little easier as investors again watch the progress of companies getting back on line in this shoulder season. In the overnight electronic session the October Natural Gas is currently trading at 2.909 which is 3 cents lower. The trading range has been 2.947 to 2.908.
— Daniel Flynn
The Energy Report: Nightmare
A shut down of the Colonial Pipeline in addition to the Explorer Pipeline and an explosion at a chemical plant is adding to the heartbreaking human suffering that is being experienced along out nations Gulf Coast.
There are reports over night of two explosions at Arkema chemical plant in Crosby, Texas, that was caused by the plant being under 6 feet of water. Power outages and flooded back-up generators failed and the ability to cool volatile chemicals became impossible, leading to the two explosions. The company warned officials that this was a probability and that there was nothing they could do to stop it. Ahead of the explosions authorities ordered the evacuation of residents within a 1.5 million radius of the plant, which makes organic peroxides used in the production of paints, plastic resins, polystyrene, and other products. The company is working with the government to try to keep this situation under control and we hope we don’t have to deal with more issues like this in the coming hours and days.
The Colonial Pipeline had to shut its main diesel and jet fuel line yesterday and will shut its main gasoline line today because of the inability to get product from refiners and keep the flows going on the line. Product is needed to keep the pressure up and now with at least 4.4 million barrels a day of refining capacity offline, or close to 24 percent of total U.S. capacity, based on company reports and estimates by Reuters, it is going to lead to sharply higher gasoline, diesel and jet fuel prices and raises the possibility of gas shortages along the East Coast. Over 3.0 million barrels a day of oil product is not going to be delivered to customers along the East Coast and even though the market is well supplied today, it may not be tomorrow.
The market is looking to European cargos to help meet the impending gasoline supply squeeze but it will not hit our shores for ten days and the volumes will not be able to replace lost supply. September RBOB futures will stop trading today and will be delivered next week, broke over $2 a gallon as there are fears that there will not be enough gasoline to be delivered. There is no talk of any failure to deliver on the NYMEX contract but there may be some companies that may declare a force majeure as the product to deliver may not be there.
Natural gas will get EIA report as shut production in shale and in the Gulf of Mexico should crimp supply. The natural gas market has been calm so far but it may not be after today’s report. Demand destruction versus production destruction.
— Phil Flynn
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