The Great Energy Divide
There is a growing gap in this country between the haves and have nots. This is what I call the great energy divide. If you heat with natural gas you are the fortunate and if you heat with heating oil, well boy, you are in trouble. Once again heating oil soars as US supply is dangerously low and strong demand elsewhere around the globe is keeping our supply tight. The good news is that as refiners ramp up production to meet heating oil demand, the beneficiary will be gasoline as supply should surge because demand is still weak. This of course opens up a host of spread opportunities whether you are talking about the "Widow Maker," heating oil vs. gasoline spread or even the Brent versus WTI spread and the gasoline vs. crack could fall while the heat vs. crack could rise. The best part is that volatility, the mother's milk of the oil speculators, will continue to run high.
This shortage has been building for weeks. We wrote about how the heating oil/gasoline spread had widened. At the same time we have seen the gas crack tank and the Brent vs. WTI spread come back in. At the same time US refiners expected strong demand for WTI crude as one of the reasons that this market may just kiss $100 a barrel. Heat-oil is probably headed to above $3.20, so other than worrying about Italy's bond yields or whether the next Greek Prime Minister is going to be Papademos or Popinfresh, oil traders have to watch the supplies of distillates closely as they are the tightest they have been in about four years.
Of course natural gas users are in heaven. While natural gas storage is down 0.2 percent from last year, record supply natural gas stocks should set a new record because of above average temperatures that are being forecast. The EIA said that the week ending Nov. 4, the country's natural gas stockpiles fell 6 billion cubic feet from last year at this time, coming in at 3,831 bcf and increased by a more than expected 37 bcf increase from last week. Stocks are now a whopping 215 bcf above the five-year average. Traders are going long heat, short natural gas, and nat gas prices for the strip are near historic lows for this time of year.
A Courageous Decision
You have to admire the Obama Administration's courageous decision to delay the decision to make a decision on the Fate of the Keystone Pipeline. Oh wait a second. If make a decision that delays a decision is that really a decision at all? The Obama Administration has been playing Keystone Cops over the Keystone pipeline, the pipeline that has been waiting for approval since he took office. While the President comes up with phony jobs creating stimulus bills to rebuild our nation's infrastructure with tax money, here is a business that wants to create infrastructure and create jobs with its own money. That's 20,000 jobs on the low end of estimates and possibly many more. The reason for the delay is that Obama is worried that the pipeline is going over a Nebraska aquifer and that could endanger drinking water if there is a leak. It only took this administration 18 months to figure out that this might be a problem!
The Keystone XL could substantially lower crude prices by easing the bottleneck at Cushing, Oklahoma, create jobs and provide the country with cheap oil. If he gives the go ahead the environmentalist will sit out the election. If he says "no" the Unions will be angry. If he waits until after the election, then it may be someone else's problem. In the meantime the President is putting his election or his ideology above the interests of the unemployed in this country and the country at large.
Now he may try to tell you he is worried about the so called impact Canadian oil sands may have on the environment but the truth is that whether you believe that or not, those sands will be developed, pipeline or not. Reuters News reports that if you avoid the US or creating jobs in the US that, "TransCanada's rivals look set to step into the breach. And the competing pipelines will not require a presidential permit since they will not cross U.S. borders, which should reduce the political risk factor. For instance Enbridge ENB.TO has been able to quietly bundle an expansion of its U.S. network into the proposed Wrangler pipeline proposal. The expanded Enbridge line will almost certainly move sands crude oil and allow for greater flows of Canadian crude into the United States." In other words we will still burn the "Dirty Canadian oil sands oil" yet will not benefit one iota from the jobs it will create. Mr. President, it is time that you put the interest of the nation ahead of your reelection. Have some guts and make the correct decision.
You want to talk about real courage! Let's talk about our Veterans. Today take a moment to say a prayer and thank God for the men and women of this country that sacrificed so much so that I have the right to call out the President of The United Sates and not have to worry about retribution. It is called FREEDOM! God Bless Our Vets and God Bless America! I had the honor to shake the hands of some World War II Veterans that were being honored by the CME Group. It was indeed an honor! Thank you again for your service!
Phil Flynn is senior energy analyst for PFGBest Research and a Fox Business Network contributor. He can be reached at (800) 935-6487 or at firstname.lastname@example.org.