Energy facing toxic combo of factors driving prices higher

Winter Warriors

Another arctic blast, increased terror risk and a bad jobs report sent the petroleum complex an explosive rally Friday. Tight distillate stocks against a backdrop of another arctic blast are providing support and talk that the Fed may have to taper the taper after an anemic jobs report. Even before the report, Fed officials were downplaying the report blaming among other things the weather, yet it seems that even so, traders went into taper down the taper mode. Stocks soared and risk on in all markets.

At the same time a report of a hijacking attempt of a plane on its way to the Sochi Olympics also put in a bit of terror premium heading into the weekend. The alerts have been high going into the Olympics and traders thought twice about being short over the weekend.  Add to that reports that Iran was flexing its muscles by sending ships close to U.S. borders. We saw risk on as Brent gained on WTI. On top of that we still have Libyan tensions impacting supply as well as North Sea production problems. The Buzzard Oil field is going down for nine weeks of maintenance as well.

On top of that you have more cold that will further deplete supplies and may impact production and transportation as well. We are seeing supplies dwindle to decades low as demand hits the highest level since 2009.

Trilby Lundberg is warning that the falling gasoline prices may be coming to an end. Reuters reports the average price for a gallon of gasoline in the United States edged slightly lower over the past two weeks, dropping by less than 2¢, with further declines unlikely in the near future, according to the Lundberg survey released on Sunday.

 A gallon of regular grade gasoline fell by 1.69¢ to an average retail price of $3.29, according to the survey of about 2,500 U.S. gas stations taken on Feb. 7. In the prior two-week period, the price had declined by more than 3¢ per gallon.  Even with the minuscule decline, the current price is 30¢ less than a year ago, when regular gasoline averaged $3.59 per gallon at the pumps, according to Trilby Lundberg, publisher of the survey.  Wholesale prices that retailers are paying for their gas have gone up by about 4¢ a gallon while motorists were paying less, "and that’s a recipe for a turnaround," Lundberg said in a telephone interview. "It looks to be that we're headed either for a small rise at the pump, or at least a cessation of these drops."  In order for retail gas prices to decline further, she said, crude oil prices would have to drop substantially and quickly.  The lowest price for a gallon of regular gas in the survey was found in Billings, Montana, where the average price was $2.99. The highest price of $3.63 per gallon was found in San Diego, California.

 

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.


Comments
comments powered by Disqus