The Brent vs. West Texas Intermediate oil spread came in to the lowest level in three years. The reason is clear. Based on global economic data most of the demand for oil is going to be in the United States as compared to a weak Asia and Europe. Yesterday the U.S. got a Moody’s upgrade and a rocking Philly Fed index strong weekly jobless claims increasing U.S. demand prospects. In Europe weak data and refining maintenance in Russia weighed on Brent crude oil demand prospects. Refiners are running at a near record pace as WTI oil hit $108 a barrel — the highest level in 16 months. While oil gets a boost from Ben Bernanke taking away the fear that he is going to take stimulus away, the market is now back to focusing on demand. To gage demand at least until we get next week’s inventory reports we will follow the stock market for better or worse. And it is worse overnight as Google disappointed and Microsoft missed, driving the NASDAQ lower and easing off some of the Bernanke talk magic.
Natural gas prices soared after inventories failed to eclipse the five-year averages. The Energy Information Administration reported that working gas in storage was 2,745 Bcf as of Friday, July 12, 2013, according to EIA estimates. This represents a net increase of 58 Bcf from the previous week. Stocks were 414 Bcf less than last year at this time and 34 Bcf below the five-year average of 2,779 Bcf. In the East Region, stocks were 101 Bcf below the five-year average following net injections of 37 Bcf. Stocks in the Producing Region were 36 Bcf above the five-year average of 977 Bcf after a net injection of 15 Bcf. Stocks in the West Region were 31 Bcf above the five-year average after a net addition of 6 Bcf. At 2,745 Bcf, total working gas is within the five-year historical range.
Traders thought for sure that supplies would get above the five-year average, yet with record demand for power in New York and a heat wave griping the Mid-West the odds are that is not going to happen. Now while temperatures should break next week it is unlikely that nat gas will break along with it.