Today the energy complex is going to have to balance an increase in the China Purchasing Managers’ Index number versus the historic energy demand destruction caused by Hurricane Sandy. The day after RBOB wholesale gasoline futures had a classic expiration squeeze play pop and drop, other commodities are looking to China after renewed hopes of an across the board commodity rally after coming off the worst monthly loss in five months. The National Bureau of Statistics and China Federation of Logistics reported that Chinese manufacturing index increased to 50.2 in October from 49.8 in September. HSBC mirrored that commodity bullish enthusiasm reporting their China PMI showing an increase from 47.9 in September to 49.5 in October, which would be an eight-month high. While copper, precious metals and grains may soar, the energies may lag as the magnitude of this storm and its epic demand destruction starts to sink in.
Oil prices did see a pop on reports that 50% of the refining capacity in the Northeast is back online. As reported by Dow Jones, the U.S. Department of Energy indicated that two of the region's six refineries--Philadelphia Energy Solutions' 335,000-barrel-a-day refinery and Delta Airlines Inc. (DAL) 185,000 barrel-a-day facility in Trainer, Pa.--were producing at normal rates, totaling 520,000 barrels a day. That's about 44% of the East Coast's refining capacity. Two refineries in Delaware City, Del., and Paulsboro, N.J., owned by PBF Energy Inc. were running at reduced rates. These facilities have a combined capacity of 342,200 barrels a day. PBF had said Tuesday that the refineries had run well through the storm, and that it was unlikely to provide any additional updates, as it considered details about operations and maintenance to be "business confidential."
Another two refineries remained shut down--Hess Corp.'s (HES) 70,000 barrel-a-day Port Reading, N.J., refinery, and Phillips 66's (PSX) Linden, N.J., facility, which can process 238,000 barrels a day of crude. The status of the East Coast refineries shouldn't really push up gasoline prices. In fact, the hurricane "may prove to be the biggest demand destruction event" in U.S. history, due to the large quantity of cancelled flights and power outages, he said in a note.
That is good news for parts of the East Coast but the nation is also focused on imports and terminals and of course the all-important Colonial pipeline, which is hoping for a Friday restart. Yet some fear that may be overly optimistic because of the damage to some of the import terminals and questions about when electric power can be restored. Dow Jones newswires reported that IMTT's tank terminal in Bayonne, N.J., suffered major damage when Hurricane Sandy hit the area. The 600-acre complex, which receives stores and distributes refined petroleum products and commodity and specialty chemicals, is without power and its six deep-water tanker berths sustained structural damage. Dow Jones quotes one source as saying, “There's extensive flooding and debris everywhere." Dow also says that the facility, which has access to Buckeye, Colonial and Harbor Pipeline Systems, contains 620 tanks with 16 million barrels total capacity. There are truck and railcar loading and unloading facilities and 12 barge berths at the confluence of the Kill van Kull and Upper New York Harbor, 10 miles south of Manhattan. There is no estimate for restart. Privately held, New Orleans-based International-Matex Tank Terminals, or IMTT, also owns and operates 12 bulk liquid storage terminal facilities in North America .The U.S. Energy Dept. also said that NuStar Energy's terminals in Linden "are without power and have significant high-water damage." Power remains out at the Colonial Pipeline, which delivers fuel from the Gulf Coast refining belt to the New York Harbor area. The pipeline's operators said late Tuesday it was sending commercial generators to its Linden facility to provide partial power while the facility awaits the resumption of commercial service from its local supplier.
Today we will get oil inventories as well as natural gas supply report! Demand is weak all over. David Bird of Dow Jones reported that U.S. crude oil imports fell 3.4%, or 305,000 barrels a day, in August from a year earlier, government data released Wednesday show. The drop came as domestic oil output rose 9.1%, or more than 1 million barrels a day, from a year earlier, at 8.631 million barrels a day, data from the Energy Information Administration show. Output was down from a month earlier, as Alaskan output slipped to its lowest level since May 1977 amid continued declines. Output from North Dakota set a record, topping 700,000 barrels a day, in August with soaring output from shale-oil fields.
Japanese demand is weak as refiners are in maintenance. Dow reports crude-oil throughout is unlikely to rise in November even though most refineries are scheduled to come back from regular maintenance later this month, due to weak demand and as oil refiners want to avoid excessive stockpiles. Roughly 25% of the country's total oil refining capacity went offline in the second half of October, but refiners maintained even lower operational rates due to thin demand. The average refinery operating rate was 70% last week and 69% the previous week, data from the Petroleum Association of Japan showed.
Natural gas came back with the emergency at the Oyster Creek nuclear plant. Reuters reported that Exelon Corp said Wednesday it ended an alert at the Oyster Creek nuclear power plant in New Jersey after high water from Hurricane Sandy returned to normal levels. Oyster Creek, the nation's oldest operating reactor, declared the rare "alert" Monday night after water levels at the plant rose more than 6.5 feet above normal, potentially affecting the "water intake structure" that pumps cooling water through the plant. The pumps were not essential to keep the reactor cool since the plant has been shut for planned refueling since October 22. Exelon, however, was concerned that if the water rose more than 7 feet it could submerge the service water pump motor used to cool the water in the spent fuel pool, potentially forcing the company to use emergency water supplies from the in-house fire suppression system to keep the used uranium fuel rods in the pool from overheating, the U.S. Nuclear Regulatory Commission (NRC) said Monday night.
Of course down the road we know demand will come back in the rebuilding phase. But we are not there yet.