Polar Vortex III? Oil pops as the cold keeps coming

Turkish bath

Turkey tried to shock its currency out of an emerging market death spiral, putting more light on the struggling emerging markets. As the Fed continues its taper-heard-around-the-world, economies that have lived off Fed policy now have to learn to adjust to a world with reduced Fed stimulus. While new hawks are on board, the likelihood that the Fed will falter on its taper plan is nonexistent. Yet they may shiver as Turkey’s electric shock may not save its lira. Yet a pop in the stock market (CME:SPH14) in the U.S. and refining issues gave petroleum prices a pop.

We saw products rally on a Bloomberg Report that Suncor is investigating a fire at its refinery. Bloomberg also reported that Motiva Enterprises LLC has delayed a planned turnaround on a hydrocracker and a hydrotreater at its Norco refinery in southern Louisiana because of frigid temperatures, a person familiar with operations said. The maintenance, set to start last weekend, is on hold until temperatures are higher, said the person, who asked not to be identified because the information isn’t public. The plant is operating in the meantime with only essential personnel, the person said. Snow and ice glazed highways and closed bridges from Texas to Virginia and snow may fall as far south as New Orleans, though it isn’t expected to accumulate there, said Danielle Manning, a National Weather Service meteorologist in Slidell, Louisiana. Governor Bobby Jindal declared a state of emergency and schools closed in Baton Rouge and New Orleans. Motiva said yesterday that it began maintenance Jan. 25, declining to name the units involved. Destin Singleton, a spokeswoman for the refinery in Houston, declined today to comment on the status of the planned work. The refinery had been flaring as it prepared for the turnaround, the person said. The 250,000-barrel-a-day Norco plant is about 13 miles Kilometers) west of New Orleans. Hydrocrackers convert heavy feedstocks into lighter fuels such as high-octane gasoline and diesel, and hydrotreaters remove sulfur, metal and other impurities from refined oil products. Motiva is a refining and marketing joint venture of Saudi Refining Inc., a subsidiary of Saudi Arabian Oil Co., and Shell Oil Co., a unit of Royal Dutch Shell Plc.”

On top of that, oil (NYMEX:CLH14) is bouncing on short covering ahead of the Fed. Not to mention the cold temperatures that doesn’t seem to be going away. Just as Polar Vortex II is about to ease, some forecasters are calling for vortex three. While the petroleum market fears production outages, natural gas (NYMEX:NGG14) fears even more demand. The February contract could go off in spectacular fashion as analysts continue to downgrade their end of winter storage that will fall far below the five-year average having traders already worried about a warmer than normal summer.

We also get the Energy Information Administration supply report, and if the American Petroleum Institute version is any indication, it should be bearish. Reuters reported that crude inventories rose by 4.7 million barrels in the week to Jan. 24 to 360.4 million, compared with analysts' expectations for a increase of 2.3 million barrels. Crude stocks at the Cushing, Okla. delivery hub rose by 221,000 barrels, API said. Refinery crude runs rose by 47,000 barrels per day, API data showed. Gasoline stocks rose by 363,000 barrels, compared with analysts' expectations in a Reuters poll for a 1.1-million-barrel gain. Distillate fuels stockpiles, which include diesel and heating oil, fell by 1.8 million barrels, compared with expectations for a 2.2 million-barrel drop, the API data showed. U.S. crude imports rose last week by 105,000 barrels per day to 7.8 million bpd.

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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