Oil rising as traders expect Fed easing to continue

Crude is Cruising

Reuter’s news reports that U.S. power company NextEra Energy Inc is seeking proposals to build a natural gas pipeline to serve the growing demand for the fuel in Florida, its chief financial officer said . "As customer demand grows and fleets across the state shift to more natural gas-fired generation, Florida's natural gas needs will increase significantly," NextEra CFO Moray Dewhurst told analysts on a conference call following the release of fourth-quarter earnings. In December, NextEra's Florida Power and Light unit issued a request for proposals for a third major gas pipeline to serve Florida. The proposed "Southeast Pipeline" will provide 400,000 million British thermal units (mmBtu) per day of gas capacity for Florida beginning in 2017, and an additional 200,000 mmBtu per day beginning in May 2020, Dewhurst said. He said the pipeline will consist of two segments and run about 700 miles in total.

Bloomberg reported that Valero Energy Corp. is considering using barges and rail to move Canadian oil to the Gulf Coast as the government weighs approval of the Keystone XL pipeline, the most economic option, Valero President Joe Gorder said. Valero could increase the amount of Canadian crude it moves by barge to its St. Charles refinery in Louisiana from Hartford, Illinois, a delivery point on an existing TransCanada Corp.line, Gorder said. Valero also owns heated rail cars and could use them to send Canadian bitumen to Louisiana and Texas. Crude production in Canada is outpacing takeaway capacity, creating a glut in Alberta that depressed prices to a record low last month against Mexico’s Maya crude, the heavy oil benchmark used on the Gulf Coast. TransCanada’s Keystone XL construction requires State Department authorization because it would cross the U.S.-Canada border.

A reason to be long natural gas years out in the future! Reuter’s reports the average price of liquefied natural gas (LNG) in Asia this year is likely to reach all-time highs near $16.90 per million British thermal units (mmBtu) as demand growth outstrips supply, Goldman Sachs said in a note. "The global LNG market tightness created by the surge in Japanese natural gas imports following the Fukushima nuclear crisis in 2011 has extended and intensified in the recent period, with increased demand from South Korea and South America," Goldman Sachs said this week. Drought-hit Brazil is ramping up LNG imports in an effort to replace depleted hydroelectric power reserves but faces stiff competition for cargoes from neighboring Argentina, which is also experiencing record demand for seaborne gas.

We called the lows in oil in December and despite the recent run up, a correction is getting closer. If you are buying here for the last $1-$2, make sure you protect your downside with some puts. 

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.

 

Futures and options trading involves substantial risk of loss and may not be suitable for everyone. The information presented by The PRICE Futures Group is from sources believed to be reliable and all information reported is subject to change without notice.


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