It was so cold the politicians kept their hands in their own pockets. It was so cold the Kardasians put some clothes on. Yet where you really could tell it was cold was when you saw the Energy Information Administration petroleum and natural gas (NYMEX:NGG14) reports.
Let's start with the EIA's petroleum status report. Weather impacted refining operations leading to a big drop as runs fell to 86.5%. That was much more than anticipated and lead to a large drop in distillate stocks. The EIA reported that distillate stock fell by 3.2 million barrels as production fell to 4.5 million barrels a day.
Yet despite the large drop in refiner runs, the supply of crude oil did not rebound as much as the market had hoped. The EIA reported a tiny 1 million barrel increase is supply. As for gasoline, inventories were much higher than expected driving the heating oil and gasoline spread to a seasonal norm like trade. It was strange it seemed gasoline production actually increased.
Propane also tanked as supply fell by 3.4 million barrels. Propane shortages have grabbed the headlines as the demand from winter caught many by surprise. Emergency shortages have been declared and the EIA says that "With the onset of severely cold weather seen over the past weeks, propane supplies in the Midwest are extremely tight. The Midwest spot price of propane at Conway, Kansas, has spiked far above the Gulf Coast spot price at Mont Belvieu, Texas. The high propane prices in the Midwest are the result of both increased demand for crop drying in November and increased demand for space heating in the current cold weather."
Natural gas was knocking on the door of $4.00 but did not have the momentum to take it out after the EIA supply report came in at 107, rights in line with expectations and far away from the whisper number. The supply gained on the five-year average and after a bout of late in the day profit taking we saw some seller's remorse overnight. Nat gas is rebounding as now most weather forecasters are in agreement that the deep freeze is here to stay at least until the end of this month. U.S. infrastructure and energy transportation is being challenged unlike anything we have seen in decades and trader are getting schooled in heat versus not heat related supply and demand fundamentals.
Speaking of no heat-related fundamentals; the weak manufacturing data not only is lowering demand expectations from China, but seems to be putting a pall on emerging markets around the globe. Even the disappointing U.S. manufacturing data is seeing more markets get into a risk averse mode. Bond yields are rising and industrial metals are falling.
Gold and silver shot up, not only on slowing become fears and talk that the taper may be tapered, but also because there is a possibility that India may be waking up to the fact that their war against gold is a futile attempt to try to kill demand for a product more folks from India want. Fears about the value of the rupee have led to tariffs on gold that has caused a black market to flourish.
Kitco News reported that "Indian National Congress party chief Sonia Gandhi asked the government to ease the country's import restrictions on gold were cited as one of the factors giving the yellow metal a boost Thursday, even though the government still says no, the reported push to change the rules is seen as the type of pressure that might eventually lead the government to relent, observers said. If so, that presumably would mean increased buying of gold in the country that historically was the world's largest consumer prior to last year, when it was supplanted by China.