Numbers for Thursday, June 20, 2013

Worth keeping an eye on...

Iran to enter Middle East fray?

In what could be the boldest move we've heard about in a long time, and one that is sure to get a reaction from the oil markets, Iran has announced that they will be sending 4000 troops from it's Revolutionary Guard into Syria to help bolster the Assad regime.

Don't be too shocked to hear that Iran desires some stability along its own front here. If Syria goes, then Iran probably won't be too far behind in experiencing a taste of internal conflict. This week also finds some proof in that pudding in that the United States will keep its forces posted in Jordan, another Middle East neighbour. Both countries have a seemingly similar distaste for one another ever since the Shah was overthrown all those years ago. To say that nothing will happen would at this point, be wishful thinking, but it appears that the Iranians want some sort of stability to preserve its own rule. What has made this situation more interesting in its nature is what's happening in a country squat between the two nations...Iraq.

Speaking of instability in the region, Iraq production is also seeing some disruption as the fighting in Syria becomes more fluid. Some battles there have overflowed into Iraqi territory just a year and a half after the US withdrawal. Any disruption there could be significant in the markets as Iraqi production was just nearing pre-war levels. Is it maybe the reason why Iran is sending in the troops; to stabilize Syria's eastern regions?

So, oil prices moved up $3 US a barrel this week on the news. Refined commodities followed with some gusto, but not enough to shock us at the pumps...Yet! While the numbers are up for the distillates this week, they're not up a whole lot on the gasoline front. So far, they've tracked more or less where I said they'd be for the summer; right around that $1.30 a litre mark for the immediate St. John's area. 

So far, so good...That's if things settle down a bit in the Middle East and barring any other outside conditions like hurricanes.

We'll keep you posted.

Here's what I have for this week's price changes:

• Heating and stove oils show an added 2.77 cents a litre.
• Diesel shows an added 2 cents a litre even.
• Regular gasoline shows a slight increase of just 9/10ths of  a cent a litre, and...
• Reformulated blend shows just an added 1/10th of a cent.

That's it for this week!

Regards,

George Murphy
Consumer Group for Fair Gas Prices
Twitter: @GeorgeMurphyMHA

Numbers for Thursday, June 13, 2013

A Word on Inventories...

It's not often one can view inventory levels of a certain product that is endeared to one's life, but the work of the Energy Information Administration has to be a standout example of the effect an inventory sampling can have on a market.

Today was no such example, but the snapshot released by the Energy Information Administration, along with it's projections on future pricing, will surely have a detrimental effect on oil prices.

As of today, the Energy Information Administration said 387 million barrels of crude oil are now at hand in US stockpiles.That's a record that has stood for something in the order of 82 years...

Think about that for a minute.

Inventory that has broken records the past few weeks is about to impact the markets, and it probably would never have happened if it had not been for the need to have strategic supplies on hand in the event of war or national emergency. Matched with a huge increase of US domestic production and a drop in consumer demand for refined product, there's trouble ahead for oil prices...

Today as well, while they raised the price of West Texas Intermediate for next year by eight cents to $93.25 a barrel, they also said that the price of Brent will drop below their initial projection of $100.75 for 2014. My thinking is that the onslaught of domestic production will lower the sale price of Brent crude because of increased domestic availability. We simply won't have to look for oil outside the US box.

Thank God for record keeping!

If we didn't know how much oil was on hand, we'd never know what to expect of the economy in the United States. And God knows then what Big Oil would be charging you and I at the pump!

Which brings one to think in this country, Canada: Why aren't we doing this sort of record keeping here? We don't know just how much of an impact our own record keeping could be on ours...

Here's what I have for this week's price changes:

• Heating and stove oils projected to increase by 1.2 cents a litre.
• Diesel to increase by 1.1 cents a litre.
• Regular gasoline to increase by 1.4 cents a litre, and...
• Reformulated blends show an added 8/10ths of a cent a litre.

That's it for this week!

Regards from the Big Land!

George Murphy
Group researcher
Twitter: @GeorgeMurphyMHA

Numbers for Thursday, June 6th, 2013

OPEC: Backed into a corner...

Well, I guess you can say that it's been another ho hum week in the markets with nothing really to report.

The traders kept trading and the sellers kept selling.

Buyers bought...

As for oil, the telltale glut had them talking in Vienna, Austria last week. The talk around the table was mostly from fellow OPEC members who, interestingly, seemed to have been put in a situation that I can almost say assuredly, they have never found themselves in: backs into a corner as they face the awful prospect of "competition".

No ordinary competition, mind you.

The competition doesn't come from just one country, where years ago you could measure the threat of strategic pooled oil reserves that may come lurking to the surface as an eager oil company may pump. It comes from almost everywhere that one can find shale oil formations, from which the fracked threat surfaces. Not that I am a solid backer of fracking, mind you. There are simply too many questions around the security and safety of water that need to be answered and secured before we go "full bore" on drilling.

You should be asking those questions too, before we lose even our own water here in Newfoundland and Labrador via the "frack door".

They call it "democratic oil", simply because almost every country in the world has somewhat of a shale deposit wherein lies the golden juice of light, sweet oil or natural gas reserves. It has literally forced the Saudi's as well as other member OPEC nations to turn their eyes toward "joining them, because they simply can't beat them" club. OPEC nations themselves, because of the low break-even price of producing product from a fracked oil well, are now forced to join the club and start looking at lower cost bottom line projects in oil production, and that's the new "where, why and when" oil prices may make another solid retreat.

In the not-too-distant future, you can see that OPEC itself will start to get into the game, ahead of getting standard pooled reserves to flow, simply because production costs to pound a hole in the ground are much lower than "older" technologies can deliver. Fracking may simply be the reason why OPEC can't make a production cut: It will simply cut itself out of what used to be a solid maketing opportunity for them. We'll have the excuse to turn off the OPEC spigot.

You see, even to OPEC, they're now forced to keep up with the Jones's...

And that's another reason why even the electricity markets aren't what they used to be...

Here's what I have for price changes this week:

• Heating and stove oils to drop by 1.2 cents a litre.
• Diesel to drop by 1.6 cents a litre.
• Regular gasoline to drop by 1.1 cents a litre, and...
• Reformulated blends show just a 8/10ths of a cent change in price.

Regards,

George Murphy
Group researcher/member
Consumer Group for Fair Gas Prices
Twitter: @GeorgeMurphyMHA