Price changes for August 27th, 2015

Hi to all,

 

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

 

Heating and stove oils to drop by 3.7 cents.

Diesel to drop by 3.9 cents, and...

Gasoline to drop by six cents a litre.

 

In the markets...

 

China...It's all about China.

 

With the collapse of the price of oil, it's easy to point to China as an example of how dependent the world has become in using China as a "crutch" to support oil prices. We all know that as an emerging nation, China would have an effect on demand for world oil, but no one yet has considered what has been done by China to break it's initial dependence on oil. It is estimated by some that China is about three years away from putting domestic drilling regulations in place so it can try and develop its own reserves. Through the years, I've also run into small tidbits from China that others have ignored. Shell, for example, just a couple of years ago, signed a huge agreement with China to develop both natural gas and join with the state-owned oil company in developing other "sources" of oil resources. No doubt, if the "frack" goes ahead in China soon, it will have started to crack its dependence on OPEC oil and done massive damage to OPEC's chief customers. Where does oil go then?

 

OPEC countries worried

 

"Weaker" OPEC producers are beginning to worry over overall OPEC production and the Saudi drive to cut US domestic production. In what is beginning to look more like a suicidal motion towards trying to maintain market share, some of the smaller OPEC producers are beginning to question the moves by Saudi Arabia in over-producing to try to maintain market share and cut into US domestic costs to produce. It's costing smaller OPEC members to also absorb the hit to their own revenues, and has them calling for an emergency meeting to address the long-term goal of OPEC. Are we witnessing a crack in OPEC unity?

 

It's been a long drive back from the west coast, so, I'm going to leave it at that for now.

 

Regards,

 

George

Twitter @GeorgeMurphyMHA

Price changes for August 20, 2015

Hi to all,

Here's what  have for this week's price changes;

Heating and stove oils show an added 4/10ths of a cent a litre.
Diesel fuel shows no change this week, and...
Gasoline shows an additional 1.5 cents a litre at the pumps for Thursday.

In the markets

December 18th...
That's the key day to watch for as the International Energy Agency says is the earliest date by which Iranian crude will be released clear of sanctions. It's estimated that, Iranian exports from the country will amount to an immediate influx of 500,000 barrels of crude oil a day with another 500,000 to hit the markets in the intervening six months. Brent crude prices have been showing a little to the "down side" in the last coupe of days, out of par with the movement of West Texas Intermediate.

Refinery outages lead to tight gasoline markets. Prices rise
In the mid-western US states as well as western Canada, consumers too a huge hit at the pumps with gasoline spot prices rising as much as 10 to 20 cents a litre as a result of a Whiting, Indiana refinery outage that took 400,000 barrels of crude processing offline. With refinery capacity at 96.1 per cent last Wednesday, it shows just how tight the gasoline market was. Still, almost 605,000 barrels out of a possible 18.3 million barrels of refining capacity remains offline. Gas prices in Calgary hit $1.22.5 cents a litre as a result.

Speaking of Calgary...
It's a shining example of what can happen to a rapidly growing oil industry that gets handicapped by the lack of export infrastructure and a lack of secondary processing. Prices for Western Canadian Select sold at market yesterday for $22 US a barrel, while in neighbouring Edmonton, their Syncrude Sweet sold in the markets for $37 US and change. While projects like Keystone XL and projects pushing oil to the BC coast remain delayed, also delayed is any possible recovery of Alberta crude oils without a "way out", barring any other geo-political or economic factors.

Jet fuel surcharges persist...
I'm surprised at the lack of reaction from consumers who still pay absurd amounts in fuel surcharges, even though the price of jet fuel is down close to 37 cents a litre less than it was for the same time period last year. Market numbers show jet fuel selling on the New York mercantile exchange for 50.7 cents a litre, down from 87 cents a litre.
              Overseas, airlines based in Asia, like Japan Airlines and South Korean will be revisiting their fuel surcharges based on lower than expected oil prices. Japan Airlines expects their fuel surcharges to be half of what they were this time last year. Can't say the same for here. What is the policy to our Canadian airlines, WestJet and Air Canada?

That's it for this week,

George Murphy
Twitter @GeorgeMurphyMHA

Price changes for Thursday, August 13, 2015

Hi to all,

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

Heating and stove oils down by 6/10ths of cent a litre.
Diesel to drop by the same 6/10ths of a cent, and...
Gasoline to drop by 3.2 cents a litre.

Market news

China demand to hit oil?
Besides the fact that there's a problem worldwide with economic recovery, particularly evident are concerns around Chinese growth. Growth has been stagnant to say the least, with problems even arising in the Chinese trading markets. Add to that, the Chinese government's move late yesterday (today) to devalue its own currency in an attempt to attract more business to at least stabilize the downfall of industrial output. The move has led speculators to worry about the real problems in the China economy, and that, in turn, has led to another round of drops in oil prices. Fears abound about a further drop in oil demand in China, reflecting on oil.

Saudi's to drive oil lower?
If Chinese demand retreats as expected, a concerted move by Saudi Arabia to maintain overall production in the markets could lower oil prices to $36 US a barrel (WTI). The production figures out of Saudi Arabia show that 10.36 million barrels a day was pumped by the OPEC member in July. That leaves worldwide oil production at 2.9 million barrels a day more than what the world is consuming.

US domestic production keeps rising
Enter Uncle Sam...
Over the past eight months, US domestic production of oil has added close to 600,000 barrels a day, with US production hitting 9.4 million barrels a day. While OPEC is forecasting an added 90,000 barrels a day in consumption for the 2016 year, it hardly scratches both additional US domestic production and added oil to the markets from Iran, who boosted their own domestic production to 2.9 million barrels a day in anticipation of another entry into the markets. IF US producers can manage expenses in production costs, then oil prices are in a heap of trouble and bets for higher prices are off.

I'll leave it at that for now,

Regards,

George Murphy
Twitter @GeorgeMurphyMHA

Price changes for Thursday, August 6, 2015

Hi to all,

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

Heating and stove oils to drop by 2.25 cents....
Diesel to drop 2.3 cent, and...
Gasoline shows a drop of just 8/10ths of a cent.

As predicted, with the drop in the price of Brent and WTI the last two days, the Canadian dollar took another pounding against the US buck. It's the lowest in six years right now.

Consider this: If the dollar was at par with the US dollar right now, you'd be looking at prices a rough 18 cents a litre lower than they are right now.

Right now, refiner capacity remains tight with levels reaching close to 96 percent of overall US capacity, and inventories of gasoline still show signs reflecting the market volatility.

"Demand" continues to be a factor in gas prices. As we come to the end of the summer driving season, there's some hope of further retreat, but I expect refiners and speculators to play with the fact that refineries across North America will soon begin winter maintenance routines, and they'll use that "excuse" to keep prices elevated.

We'll see what happens!

That's it, short and sweet for this week.

Regards,

George Murphy
Twitter @GeorgeMurphyMHA