After Americans endured the highest gas price ever posted over a Labor Day holiday weekend and commodities outperformed stocks for the second month in a row, the sad part is, there seems to be too little gasoline relief in sight. Even with the winter blend switchover price bonus, already we are seeing that RBOB futures are continuing to move higher. From around the country reports of pain are coming in. Take Maine for example where according to reports from the AP. Price-monitoring website MaineGasPrices.com reports Tuesday that the average retail cost of a gallon of gas in Maine has risen to $3.89, that’s nine cents per gallon more than the national average.
Or Chicago where prices have been the highest in the nation, according to Suburban Life and AAA ‘s Daily Fuel Gauge report. And even though gas prices are high in Chicago this Labor Day, they were actually higher this past spring. In Oakland they were at $4.40 and in LA $4.37. The average price for a gallon of gas in the Chicago metropolitan area is $4.30 for regular grade gasoline, according to AAA’s Daily Fuel Gauge report. That price is about 15 cents higher than a week ago. Last Labor Day weekend, prices for the same grade of gasoline were about $3.99 a gallon. Gulf Coast and New York Harbor spot gas prices are rising again.
The Houston Chronicle is reporting that most of the offshore oil and gas crews evacuated from the Gulf of Mexico ahead of Hurricane Isaac are back on the job, and the storm appears to have caused only minor damage to rigs and platforms, according to initial federal reports.
More than 800,000 barrels, or 58%, of daily oil production in the Gulf remains offline, the Bureau of Safety and Environmental Enforcement said Monday. About 1.7 billion cubic feet, or 39 percent, of daily natural gas production in the Gulf is still shut in. But that's a significant improvement since last week, when as much as 95% of oil production and 72% of natural gas production went offline as Isaac barreled into the region. Six rigs and 71 production platforms remain evacuated, or less than 8% of the rig fleet, and about 12% of the platforms in the Gulf, according to the safety bureau.
Of the 11 Gulf Coast refineries affected by Isaac-related flooding and power outages, one has returned to normal operation and nine others are restarting or operating at reduced rates, the U.S. Department of Energy reported Monday.
Only Phillips 66's refinery in Belle Chasse, La., remains shut down, with a capacity of 247,000 barrels per day.
Yet RBOB is being driven by a host of factors, least of which seem to be the ongoing refining issues in the Gulf Coast created by Hurricane Isaac. Gas prices are also being driven higher by a rising crude price both from West Texas Intermediate but also North Sea Brent crude. Brent crude is hitting close to a 17-week high, being driven by seasonal maintenance as well as rising geo-political tensions. It is also being held hostage by more talk of economic stimulus, which is like mothers milk to oil bull market players.
Jean-Paul Gauzes, a member of the European Parliament, is a blabber mouth and leaked a big ECB Mario Draghi secret. It seems that in a closed door meeting the European Central Bank President Mario Draghi told lawmakers he would be comfortable buying bonds with maturities of up to about three years and that it would be within the mandate of the European Central bank. That sent the euro soaring and sent oil and RBOB rising as well.
Bloomberg News reports that hedge funds raised bullish bets on gasoline to more than a three-month high, helping push prices at the pump to record levels for the U.S. Labor Day holiday, as Hurricane Isaac roared toward the Gulf of Mexico and a deadly blast closed Venezuela’s largest refinery. Money managers increased net-long positions, or wagers on rising prices, by 3% in the seven days ended Aug. 28, according to the Commodity Futures Trading Commission’s Commitments of Traders report on Aug. 31. They were the highest since the week ended May 1. Gasoline futures have advanced 22% from a 2012 low in June as stockpiles dropped and refineries closed. Futures reached a four-month high last week as Isaac closed 13% of fuel-making capacity on the Gulf Coast and a gas explosion at Venezuela’s Amuay plant shut production, threatening to revive the debate about energy costs as Barack Obama seeks re-election. Crude oil, buoyed by Middle East tension and the prospect of fiscal stimulus, also boosted the motor fuel.
Ben Bernanke also gave the markets a big bad bounce but news from China may slow things down. The closely-followed report by bank HSBC, released Monday, said export orders for China's factories slid at the sharpest rate since March, 2009. And on Saturday, the Chinese government's official manufacturing index fell to 49.2 from 50.1 in July. Any reading below 50 indicates that factory activity is shrinking rather than growing. A loyal energy report reader wrote that his in-law just returned from China and noted some big changes from just one year ago. He saw many factories closed and goods piling up. He said that fits with what we're reading. Of course the question is whether China will join other major world economies and take further actions to stimulate economic growth. Dow Jones reported that an editorial at the People's Daily, the Chinese Communist Party's flagship newspaper, on Monday called for authorities to build up an inventory of policy measures that could be used to rekindle growth but said officials should first address long standing ills such as economic imbalances and industrial overcapacity.
Right now oil gas and heating oil are on another breakout run. Unless we see some news to stop it, it looks like smooth sailing to the upside!