Numbers for Thursday, November 21st, 2013

Artificially rising demand?

Why you’re getting dinged this week

St. John’s, NL., November 20, 2013 - “Consumers will see a strange occurrence this week when the Public Utilities Board adjusts prices. They’ll be increasing them.” That news from George Murphy, MHA for St. John’s East.

“Consumers may notice a slight bump upwards this week with prices for refined commodities rising out of sync with the trend in oil prices. While supply disruptions again are happening in North Africa and the Middle East, the trend toward importing available stock from North America has now been putting pressure upwards on prices this last week or so, and it’s a problem that the oil industry has created all by itself that could occur here, if it’s not already happening.” Murphy said.

Why diesel and other distillate prices are out of whack…

“Over the past seven years or so, I have counted at least fifteen refineries in Europe that have closed down out of close to one hundred, due to lower refiner margins and what one could call the sharing of supplies between companies. We know it here as reciprocal sales arrangements, where one company would share inventory with another and, at the same time, close down un-needed refinery capacity. When they do that, if demand suddenly increases, particularly for distillate fuels like heating oils and diesel fuel, then North American and European consumers get hit with price increases because of ongoing exports to Europe.

“The same thing is happening here. If the closure of refineries doesn’t stop in North America, we as consumers could end up competing with European consumers for the same refined product, thus driving up prices. That certainly appears to be what’s been happening with us the last few months.”

“That’s simply several reasons why Diesel fuel is so highly priced over gasoline: it’s a predominant fuel of choice by the transportation sector in Europe. Unless there’s a strong build in North American and European inventories, then consumers can expect more of the same. Coupled with rising demand in Europe and an engineered shortfall in production, and you have a perfect mix of reasons to increase prices. Simply put, changes are needed to both European and Canadian rules that govern competition between companies to correct the market. It’s simply too easy to sway the markets and influence prices as a result. This scenario may already be rearing its ugly head in Europe, influencing prices here with the need for more product by consumers there. They’re exporting product to Europe where they’re getting top dollar.

Latest supply disruptions

The ongoing violence in Libya has shut in close on 1.6 million barrels a day of oil production. There’s simply no timeline on when things may come back to normal. As well, we’re dealing with some cutback by some of the OPEC countries who continue to worry over ever-increasing US domestic output. While US production domestically have reached a new record of 7.9 million barrels a day, a million per day more than last year, OPEC nations have cut back on some production in an effort to maintain present pricing levels.

Numbers for this week

Here’s what I have for this Thursday’s price changes. All data in:

·        Heating and stove oils show up by 1.79 cents a litre.

·        Diesel adds another 1.9 cents a litre, and…

·        Gasoline shows an added 3.1 cents a litre.

That’s it for this week!

Regards,

George Murphy

Twitter: @GeorgeMurphyMHA

Numbers for Thursday, November 07, 2013

I won't have the last day of data until tomorrow afternoon, but here's what I have for six days out of seven needed. Not much change overall, if you keep in mind that I go on a margin of error of 3/10ths of a cent:

Heating and stove oils show an added 35/100ths of a cent.
Diesel shows a drop of 3/10ths of a cent, and..
Gasoline is showing a drop of just a half penny.

The Canuck Buck has lost close to two cents over the last week and a half against the US Greenback. Any time you see that, any drop in prices pretty much flattens out and is not as pronounced. While oil is in retreat, I still anticipate that prices will endure a slow drop. Keeping my fingers crossed on that one.

Inventories of crude oil continue and there's a lot of downwards pressure on West Texas Intermediate that could still play in consumers favour over the immediate future. Brent prices will also face pressure from increasing exports of liquefied natural gas that is entering the markets. That takes away part of the present Asian market for Brent products. The slight possibility of Iran also entering the market, if sanctions are lifted, also promises to impact Brent over the first half of 2014.

I'll be back with further updated numbers tomorrow sometime, but there shouldn't be too much change from what I have here.

George Murphy

Twitter: @GeorgeMurphyMHA

Numbers for Thursday, October 15, 2013

Hi to all,

Here’s what I have for Thursday’s price changes:

·         Heating and stove oils to increase by 1.17 cents a litre.

·         Diesel to increase by 1.4 cents a litre, and…

·         Gasoline to increase by 2.5 cents a litre.

·         Keep in mind that my heating and diesel numbers may be off slightly with the advent of the winter heating blend which includes 75% jet fuel in the mix. I hope to have the jet numbers worked into the mix by next week.

Market highlights

·         The clock is ticking towards the US debt ceiling. Some international credit agencies are now warning of a possible downgrade in US credit ratings as a result of the debt ceiling dispute. The debt ceiling dispute promises to disrupt the US economy if it fails to raise the ceiling debt-load.

·         Bloomberg has put a story up that says to expect Brent crude prices to drop below $100 if sanctions against Iran are lifted. Currently, there are ongoing discussions over exposure of Iran’s nuclear program, which is how initial sanctions ended up being placed against the Middle Eastern country. If sanctions are lifted, it could add almost 3.5 million barrels a day into the world system.

·         The United States Energy Information Administration has also been a victim of the stand-down between the Democrats and Republicans over Obamacare. While the Republicans are looking for concessions in the filibuster, Obama is not bending to their demands, which has cut off government salaries in the process. As a result, there is no inventory data being released, leaving lots of volatility in the oil and gas markets, not to mention some wiggle room for speculators to maneuver.

That’s it for this week!

Regards,

George Murphy

Twitter: @GeorgeMurphyMHA

Numbers for Thursday, October 10/13

Numbers for Thursday:

Heating and stove oils up by 1.18 cents a litre with Diesel showing an added 9/10ths of a cent on a litre.

Gasoline shows a very modest drop of just a half cent on a litre.

As the numbers show, oil stayed relatively steady over the last week, in spite of the US government shutdown. It was anticipated that off-work government workers and a drop in spending would affect the oil markets, but it certainly hasn't shown itself yet.

We'll see what happens for next week.

George

Twitter: @georgemurphymha 

Price changes for Thursday, October 3rd, 2013

Hi to all,

Here’s what I have for Thursday’s price change:

·         Heating and stove oils show no change to prices.

·         Diesel shows just 2/10ths of a cent down.

·         Gasoline shows a small dip of 6/10ths of a cent a litre.

Market highlights

·         US government shutdown last night has no effect on this week’s numbers, but an extended shutdown will most affect prices downwards starting as early as next week.

·         Bloomberg predicts an increase of 2.5 million barrels this week with a total refinery utilization of 89.5%

·         Thaw in US/Iran relations drives oil prices downwards. Iran sanctions will add oil capacity to the markets if sanctions are lifted. Contingent on Iran stopping its nuclear program.

·         Survival of Come by Chance refinery contingent on lower prices for low gravity crude. If prices drop for heavy crude, refinery stands a better chance of survival. Lower crude acquisition prices part of the problem of losses to the refinery’s bottom line. If we lose the refinery, lack of competition could mean higher prices for consumers in the province with having one refinery in Atlantic Canada being a source of supply.

That’s it for this week! Back on track I hope!

Regards,

George Murphy

Twitter: @georgemurphymha

The Power of Open Line...

A funny thing happened…

Numbers down again this week

Hi to all,

I’m back!

I’ll be the first to tell you to never underestimate the power of an Open Line show!...

A couple of weeks back, I had considerable trouble finding a new and timely source for my pricing information. In telling radio show host, Bill Rowe about the problem, a father asked his son, a Newfoundlander working in New York for an energy information firm, if he could help out myself with my predicament. As it turns out, the son working in New York gave me some direction in getting to my new source of information!

Small world it is!

I’ve been working up new numbers over the past two weeks and I feel that there’s enough stability in the numbers that I can “go” with them. Hence, I’m back in business!

Thank you to the listener of the show that day, and thank you New York!

In the numbers
Turns out that I have all seven days data as well in a timely fashion as well, so, without further ado, here's what I have for this Thursday's price changes:

Heating and stove oils down by 2.24 cents a litre.
Diesel shows a drop of 2.5 cents a litre, and...
Regular gasoline shows a drop of 3.1 cents a litre.

Market highlights

·         Besides the fact that Syria will turn over it's chemical weapons, negating (for now) a possible strike by the US, there's a bit of a thaw in US and Iranian relations that is also playing into the markets. Hence, some added downwards pressure for all fuels.

·         Canadian dollar continues to remain relatively stable against the US greenback, averaging about $1.03

If we lose the North Atlantic refinery…

This would be a threat to consumer pricing on a couple of perspectives. We have already lost the Dartmouth, NS Imperial refinery that closed a couple of months ago. With the possible closure of North Atlantic, that would leave the province heavily dependent upon the Irving, new Brunswick refinery as a single source of supply. That leaves us as consumers, vulnerable to swings in price costs, particularly for added shipping.

                It also leaves Canada with one refinery in Atlantic Canada, and that much less refining capability. That’s not a good thing for the country in the event that the Irving facility has to shut in for any length of time. Our energy security depends on it, and consumers depend on cheaper products produced here, rather than see them shipped in. No doubt, it will impact consumer prices somewhat.

                It could affect the offshore/onshore industry. Remember that we have a lot of crude offshore that is not exactly what’s wanted in the markets right now. Hebron crude oil will need to be refined in a facility unlike that which we have now. If the refinery here can’t do it, I feel it will devalue the cost of Hebron crude in the markets as it will take an added expense in getting that type of crude to another facility to process it.

                I don’t believe that the price of “dirty” crude will remain high. The advent of lighter oils availability and desirability will lower the price of crude oils that are acquired by facilities such as North Atlantic. Indeed, it may very well be part of the reason why we’re seeing a partial thaw in US/Iranian relations. Light oil has put some pressure on OPEC countries to respond to the threat of light oil. In other words, there may be hope for the refinery yet. In the least, I believe it can survive.  

Of note…
Numbers may be off slightly as a result of working up my new averages. You technically need seven days to make up an average for the week to play against the week previous to account for accuracy. Last week’s data to compare against only has five days of data, but I went with it anyway for "notice" to everyone which was important in making your purchase decision, especially for heating oils!


Regards,

George Murphy

Twitter: @GeorgeMurphyMHA