As Irma the Category 5 Hurricane plows through the Caribbean and talk is the most powerful storm ever recorded nailing the Leeward Islands of Antigua and Barbuda with winds of 185 mph and is expected to head for Puerto Rico, the Dominican Republic, Haiti and Cuba before potentially reaching Florida by Sunday. And in this active Hurricane season as we brace for Irma after Harvey, we have Tropical Storm Jose following Irma’s path while we have Tropical Storm Katia which is expected to make landfall on the eastern Mexico coast by Saturday. One can only say with these acts of God all you can do is pray. And our prayers go out to all affected by these Mother Nature’s calamities.
On the Grain front the complex is trading a little easier versus the strength the market showed yesterday in the early going. Export Inspections were on the higher side of expectations but nothing to shock investors into a buying spree with Crop Progress unchanged from the previous week. In the overnight electronic session the December Corn is currently trading at 357 ¼ which is 1 ¼ of a cent lower. The trading range has been 358 ½ to 356.
On the Ethanol front the September contract is set to expire still showing 19 Open Positions. There were no trades posted in the overnight electronic session. The October contract settled at 1.505 and is currently showing 1 bid @ 1.501 and 1 offer @ 1.507 with Open Interest at 935 contracts.
On the Crude Oil front this market along with the Products in Energy are trading on fear and fear alone. As traders have been quoted many a time the markets trade on fear and greed. And right now all investors are fearful unless they need their head examined. Too many intangibles to access with tonight’s API Energy Stocks and mostly when Irma and Jose are in the rear view mirror. In the overnight electronic session the October Crude Oil is currently trading at 4917 which is 51 points higher. The trading range has been 4928 to 4852.
On the Natural Gas front the market is seeking new highs as I write. In the overnight electronic session the October contract is currently trading at 2.992 which is 2 cents higher. The trading range has been 2.995 to 2.960.
— Daniel Flynn
The Energy Report: In harm’s way
The strongest hurricane ever recorded in the Atlantic is promising catastrophic destruction for everything in its path. Hurricane Irma’s impact of financial and commodity markets could be far reaching and we offer prayers for everyone who is harm’s way. To add to the oil market worries, we now have Tropical Storm Katia that has formed in the Gulf of Mexico which will impact some Mexican oil production. A much smaller storm and close to land with maximum sustained winds are at 40 MPH. The storm is moving east/southeast at 2 miles per hour.
Oil prices are still reacting to the post Hurricane Harvey recovery efforts. Crude oil prices surged as refiners start to come back online and nervous buyers in Asia start to buy up oil supply. Reuters reported that the spread between Brent and WTI is causing some big Asian buying as refinery shut downs in the aftermath of Harvey pushed the spread between West Texas Intermediate crude and Brent crude to the widest in two years at nearly $6.00 a barrel. Yet that spread is coming back as US refiners are trying to come back. The Department of Energy reports that five refineries are in the process of restarting after being shut down and one refinery has begun operations. Six additional refineries in the Gulf Coast are operating at reduced rate.
The nation’s largest refinery, Motiva Enterprises, began restarting partial production as reported by Reuters. Despite lots of flood damage, they were going to restart the large crude distillation unit, hydrocracker and coker at the 603,000 barrel-per-day Port Arthur, Texas. “We expect the refinery to initially return to approximately 40 percent production by the end of this weekend, provided that the final assessments meet our operational standards,” Motiva spokeswoman Angela Goodwin said in a statement.
The restart news cooled RBOB futures yet still has not brought them down dramatically. Now, depending on the track of Hurricane Irma, this could potentially send prices soaring or crashing on gas, depending on where she makes land fall. One track has the storm hitting Florida straight up the middle of the state which would be bearish for prices as we would see demand destruction at a historic level. Couple that with the demand destruction that we have seen in Texas it would have a major downside compact on price. Of couse another track has us going into Alabama which would again shut down refineries and impact production and we saw from Harvey that would spike gas prices and bring down West Texas Intermediate (WTI). If we move up the East Coast that too would be a demand destruction event and depending on how far inland the storm goes, would determine the extent of the lost demand for barrels.
While the Colonial Pipeline has restarted, Line 2 (distillate) between Houston and Lake Charles is shipping gasoline from existing stocks in the Houston area there is still some complaints that they are not being flexible enough to allow the maximum flow of gas and oil. Reuters reported that Valero Energy Corp, the largest U.S. independent refiner, asked federal regulators to allow or direct Colonial Pipeline Co. to lift gasoline grade requirements in the wake of Hurricane Harvey. Valero said Colonial’s move to restrict the grades of gasoline flowing on its system is inconsistent with the intended effect of the U.S Environmental Protection Agency’s emergency fuel waivers for 38 states and Washington, D.C. The intended effect of course is to move supply as quickly as possible to get prices at the pump back down.
Natural gas is feeling demand destruction that may get worse in the aftermath of Irma. The electricity sector is making recoveries after Hurricane Harvey but demand based on cooler forecasts are a negative for natural gas. The State of Texas has 55,996 customer outages, according to EAGLE and additional utilities not captured in EAGLE. AEP Texas has 34,238 customer outages, a 2.9% increase from last report. Entergy Texas has 14,409 customer outages, a 15% decrease from last report. CenterPoint Energy has 4,746 customer outages, a 14.28% increase from last Entergy Texas will undergo a planned six hour outage for approximately 2,000 customers served by the Mayhaw Vidor Substation in the Viway area on Wednesday, Sept. 6. Beginning at 11:00 AM EDT, they will be adding a transformer and related infrastructure that will bring other customers online as much as five days earlier than anticipated. CenterPoint Energy is reporting 99.79% of customers have power.
Other markets besides energy are impacted. OJ could soar as Irma could wipe out a big part of the US crop. Lumber will rise on the rebuild. Gold is on the rise as Fed officials are more dovish and the crazy guy in North Korea promises more presents for the U.S.. Bitcoin sells off as China cracks down on a new offering, questioning its status as a safe haven currency. Call for more updates.
— Phil Flynn
The Price Futures Group’s mission is to provide traders and investors with industry-leading trading solutions, informative market analysis, and cutting-edge technologies which enable efficient decision-making. The Group is available answer marketing questions and meet your investment needs. Find the company online at www.pricegroup.com or call the Chicago office at (888) 264-5665.