Gas likely to fall as refiners resume operations

The Northeast Triangle

Problems continue to mount in the aftermath of Hurricane Sandy and the inability to open up the ports is creating a northeast triangle. Like the Bermuda triangle before it, oil-tankers are caught in some type of a weird twilight zone just floating around unable to off load their wares. The unknown as to when the heavily damaged ports can reopen has already caused movement in the markets here and around the globe. We saw heating oil sell off despite a somewhat bullish drawdown in supply in the weekly Energy Information Administration supply report and it was led lower by a sharply lower gas-oil market in Europe. The market is reacting to the incredible demand destruction in the aftermath of the storm and supply that was supposed to be destined for the United States.

Those problems forced Motiva to declare a Force Majeure for their New Jersey and New York terminals.

The storm has also reversed the prospects for the long heating oil and short gasoline trade as demand destruction and a supply back up should put downward pressure on the spread. Also the Brent crude WTI spread should come in as North Sea production returns and exports to the US are hampered. The Widow Maker’s revenge!

Gas prices should fall as Northeast refiners come back on line and the Colonial pipeline comes back on today! That should help the drivers in the Northeast — assuming they can find a gas station with power.

Getting electricity on line will be a major step forward. It is going to take an amazing feat by the power industry to get things back to normal.

About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.

 

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