The West Coast gas market is in chaos, driving prices to record highs and causing shortages of gasoline and the closing of gas stations. Refinery fires and maintenance have conspired to reduce supplies. Bloomberg News reported that gasoline station owners in the Los Angeles area, including Costco Wholesale Corp. and other unbranded stations, are beginning to shut pumps because of supply shortages that have driven wholesale fuel prices to record highs.
The shortages caused refiner Valero to temporarily halt spot sales in California. While Valero can meet the needs of its branded stations, there is none extra for the independents. This has caused some to pay up or just shut down as they either refuse to pay the price, or just can’t secure supply. With Valero not selling it may be impossible for some to secure supply. The Wall Street Journal says that, "Contracts will be met, but spot sales are being temporarily halted," Valero spokesman Bill Day said. Resumption, "will depend on markets and inventories," he said.
California has been hit with refinery fires, maintenance and leaking pipelines. Chevron Corp.'s 245,000 barrel-a-day refinery in Richmond and Exxon Mobil Corp.'s 149,500 barrel-a-day refinery in Torrance California have been in maintenance against a backdrop of supply that on the West Coast stand at the lowest levels since 2008. There is a particular tightness of California’s summer blend of gasoline. These concerns drove gas prices to a record high average of $4.10 a gallon with many stations charging well over $5.00 a gallon. Trilby Lundberg says that the spike should be temporary and there are signs that things are loosing up with Exxon Torrance coming back on line but that is no comfort to a California driver that is running on empty. Bloomberg says that, "California’s summer-blend fuel requirements are in effect in Southern California until Oct. 31. The Reid Vapor Pressure, or RVP, limits are lifted in other areas of the state as early as Sept. 30".
It also did not help that oil prices came roaring back. Worries about Syria and the expansion of fighting with the bombing in Turkey helped oil put the risk trade back on. Bloomberg reported that “bond investors are taking fright after fighting in Syria spilled over the border into Turkey, sending yields up by the most in two months as the government in Ankara retaliated against shelling that claimed five lives. Yields on Turkey’s benchmark two-year notes rose as much as 18 basis points yesterday, paring the biggest drop in emerging markets this year. The lira weakened the most in two months after Turkey responded to the attack by bombarding of Syrian targets. The gap between Turkish dollar bond yields and the higher emerging-market average narrowed and the cost to insure Turkish debt against default increased".
Mario Draghi said that the euro was irreversible and if that is true, then so too is the price of gold and silver and lastly oil. Oil of course is priced in dollars and will cost more if the dollar is weak and it takes more dollars to buy that barrel and if the Euro rises and is saved, then it will rally against the dollar and the safe haven buying in the US will change.
Natural gas keeps climbing despite a negative injection report on forecasts of winter weather both short and long term. Short term we know it is going to be cold but the NOAA forecast for a weak El Niño could mean that this winter could be colder and snowier than normal. Dave Tolleris meteorologist at WxRisk.com says that the Chicago blizzard was caused by the same type of weather phenomena and it could mean that this winter will be a bear. Still Dave is watching and is not convinced it will hold up but natural gas traders do not care at this point.
Bloomberg News, "Oil is on course for its strongest second half on record, bolstered by sanctions against Iran, speculation that Europe’s debt crisis will be resolved and the prospect of additional U.S. economic stimulus." West Texas Intermediate crude will cost $94.50 a barrel on the New York Mercantile Exchange on average this quarter, up from $92.20 in the previous three months, according to the median of 26 analyst estimates tracked by Bloomberg. Oil’s previous highest level for any second half was $91.78, in 2011.
European Union and U.S. curbs on oil supplies from Iran, at least $500 billion in bailout commitments for Greece, Spain, Portugal and Ireland and a third round of quantitative easing from the Federal Reserve helped drive the Standard & Poor’s GSCI Index of 24 raw materials 11 percent higher last quarter. The gains for oil are set to keep OPEC members’ revenue above $1 trillion for a second straight year. WTI averaged $96.16 in the first nine months of this year.
At the same time, Brent averaged $112.20, just 7 cents below the same period of 2008, the year in which prices peaked at a record $147.50 a barrel. Brent tumbled 20 percent in the three months to June 30, the biggest quarterly drop since the end of 2008, as Europe’s debt crisis spread. It rallied 15 percent in the third quarter.
Plus bailouts are bullish! Greek Prime Minister Antonis Samaras said on Sept. 27 his government reached an agreement on a two-year 13.5 billion-euro ($17.6 billion) budget package that was key to receiving international aid. The same day, Spanish Prime Minister Mariano Rajoy’s nine-month-old government announced its fifth austerity package in what may be a move to head off tougher conditions demanded as part of a potential European bailout.
According to the Mayan calendar the world is supposed to end December 21st of this year. One car dealer in the Chicagoland area is offering an end of the world discount. You can buy a car at an end of the world’s clearance price. If the Mayans are wrong you still get the discount. If they are right then you get the car fort free. What a deal!