Instead of talking about refinery runs it looks like all of a sudden there has been a run on refineries. In an historic move Delta Airlines is now in the refinery business. Bloomberg News reported that Delta Air Lines Inc. agreed to buy a refinery from ConocoPhillips, breaking with U.S. carriers’ tradition of not owning their own fuel assets. After $30 million in state government assistance, Delta is paying $150 million for the complex in the Philadelphia suburb called Trainer, the world’s second-largest carrier said today in a statement. Production at the refinery combined with multi-year agreements to exchange other products for jet fuel will provide 80% of Delta’s needs in the U.S. ConocoPhillips had planned to shut the Trainer operation unless it found a buyer by the end of May as tighter profit margins squeeze East Coast refineries.
The Oil and Gas Journal reported that Energy Transfer Partners signed a definitive merger agreement to acquire Sunoco Inc. in a unit and cash transaction valued at $5.3 billion. Sunoco has been withdrawing from the refining business and now operates mainly as a logistics and retail business, owning the general partner interest of Sunoco Logistics Partners LP. It has said it will close its 330,000-b/d Philadelphia refinery in July if it doesn’t find a buyer but recently disclosed discussions about operating the facility under a joint venture with Carlyle Group. Sunoco Logistics owns 2,500 miles of products pipelines in the Northeast, Midwest and Southwest U.S. and equity interests in four products pipelines. It also owns 5,400 miles of crude oil pipelines, mainly in Texas and Oklahoma. Its terminal facilities include 42 million bbl of product and crude oil storage capacity Sunoco Logistics terminals include the 22-million-bbl Nederland Terminal on the Texas Gulf Coast and the 5 million bbl Eagle Point Terminal on the Delaware River in New Jersey. Sunoco Inc. owns about 4,900 retail operations in 23 states. ETP owns 23,500 miles of natural gas gathering and transportation pipelines in 10 states, as well as treating and processing properties and three storage facilities. It owns a 70% interest in Lone Star NGL, which operates storage, fractionation, and transportation assets in Texas, Louisiana, and Mississippi.
Natural gas rose as the Energy Information Agency reported that production fell. Reuters News reported that U.S. natural gas production in February fell slightly from January's record high according to government data on Monday, stirring expectations that an over-supplied gas market might finally tighten and help pull up historically low prices. The EIA reported that lower 48 "wet" or gross gas output in February totaled 72.32 billion cubic feet per day, down 0.42 bcf per day, or 0.6%, from downwardly revised January output of 72.74 bcf daily. The EIA's previous estimate for January was 72.85 bcf per day.
While this seems to be giving the bulls new life, it is still not enough of a cut to change the fact that production will continue to outstrip demand all summer. More than likely, after traders bask in this insignificant cut-back for the next couple of days, the weekly inventory number should once again bring them back down to earth.
Climate Change Alert! Climate Change Alert! The Wall Street Journal reports that Wind Farms are having an impact on climate! Darned environmental altering wind farms. The Journal says that large wind farms slightly increase temperatures near the ground as the turbines' rotor blades pull down warm air, according to researchers who analyzed nine years of satellite readings around four of the world's biggest wind farms. More proof that the actions of man can impact climate! Let’s call for a global commission so they can find a way to tax wind-farms to make up for their impact on the environment! Not to mention all of the dead birds.
Oil continues in a tight range with a slight upside bias. Swing trades should be considered. The dollar has been the main determining factor for oil as the balance between oversupply vs. geopolitical risk seems to be priced in. Natural gas is looking strong but is perhaps destined to fail … again.