Oil finds support in Fed comments, gasoline gets some relief

The Party is Not Over

The Energy Information Administration also weighed in on Chicago gas prices. The EIA reported that as previously reported, Midwest gasoline prices shot up in April and May with refinery outages—some planned, some not—that lasted longer than expected, thus reducing Midwest gasoline supply. But Midwest gasoline prices are now falling closer to normal, helped by resumption of refining and the import of gasoline from other parts of the nation. Fuel prices in Minnesota and North Dakota have fallen to below the current U.S. average gasoline price, and prices in Michigan, Indiana, and Illinois are heading lower with the return of regional refinery production. Since April, nationwide gasoline prices have been stable, moving within a 16-cents-per-gallon range. But Midwest (PADD 2) prices varied in a range almost three times that of U.S. average prices. Planned and unplanned refinery maintenance as well as longer-term refinery upgrading projects over the past few months reduced gasoline production in the Midwest, pushing gasoline inventories lower and gasoline prices higher. Refinery utilization in the Midwest averaged 85% over the four weeks ending June 21.

Gasoline inventories typically increase before refinery maintenance season, and in April gasoline inventories were high. However the number of unplanned refinery outages—including Flint Hills (277,000 bbl/d) in Minnesota and Holly Frontier (138,000 bbl/d) in Kansas—and longer-than-anticipated planned maintenance caused gasoline inventories to decline quickly. Between mid-April and mid-May, Midwest gasoline inventories declined by 6 million barrels (11%) before recovering as refineries returned to normal operations and as gasoline supplied from other regions reached the Midwest. Refineries in the Midwest do not typically produce enough gasoline to meet Midwest demand, especially during the summer driving season. As a result, gasoline is supplied to the Midwest by pipeline and barge from other regions of the country, mostly from the U.S. Gulf Coast. Given the distances involved, resupply times can be long, which amplifies price volatility during disruptions.

Prices in Minnesota and North Dakota have come down sharply following the resumption of operations at Minnesota's two refineries, Northern Tier and Flint Hills. In the Great Lakes region, the 239,000 bbl/d Joliet, Illinois, refinery, which had been shut down for planned maintenance and which was expected to restart around the end of May, returned to operation on June 10, according to trade press reports, while BP's Whiting, Indiana refinery is expected to restart a crude unit that has been out of service since late last year by the end of June. While it will take several weeks for the refineries to reach full production, resupply from the U.S. Gulf Coast is already reaching the Midwest via pipeline.

The EIA also tanked natural gas with a whopping summertime injection number. The EIA reported that working gas in storage was 2,533 Bcf as of Friday, June 21, 2013, according to EIA estimates. This represents a net increase of 95 Bcf from the previous week. Stocks were 522 Bcf less than last year at this time and 31 Bcf below the 5-year average of 2,564 Bcf. In the East Region, stocks were 89 Bcf below the 5-year average following net injections of 58 Bcf. Stocks in the Producing Region were 13 Bcf above the 5-year average of 944 Bcf after a net injection of 24 Bcf. Stocks in the West Region were 45 Bcf above the 5-year average after a net addition of 13 Bcf. At 2,533 Bcf, total working gas is within the 5-year historical range.

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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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