Cold snap hitting energy

Winter Wondering

Another winter storm and a disturbing weather forecast have traders (and just about everyone else) wondering if this winter is ever going to end. Natural gas soared hitting $5.59 before backing off a bit. Heating oil or ultra-low sulfur diesel hits another new high on the year amid worries about tightening supply. Crude oil longs have the largest net long position since last August. Oil traders are betting that weather will increase demand and decrease production and imports. Nat gas funds are also going long because after the warm up the forecasts are for another cold blast.

 Refining maintenance also is tightening supplies of gasoline. The delayed EIA report should show a build of 1.5 million barrels in crude supply and a drop of 2.0 million barrels of distillate and a drop of 1.5 on gasoline. Refining runs should fall by 2% and we should see a one million barrel draw in Cushing Ok. This is providing the supportive backdrop to the market.

Reuters reports that South Sudanese rebels said they had taken control of the capital of oil-producing Upper Nile state on Tuesday, in the first fighting in a major town since rebels and the government signed a ceasefire in January. The Juba government confirmed an assault was launched but denied rebels controlled the town, which lies 650 km (400 miles) north of the national capital Juba. It is also located on the fringes of one of the country's main oil-producing areas. The clashes will fuel concerns over the security of South Sudan's northern oil fields - an economic lifeline for the world's newest state - and raise pressure on both camps to revive stalled peace talks in neighboring Ethiopia.

Gold is off to its best start since 1983! The World Gold Council released its latest report and shows what was a historic disconnect from investment demand from consumer demand. The WGC said that consumers around the world bought gold in record amounts in 2013, led by demand in China and India, with China becoming the world’s biggest gold market, according to the latest World Gold Council Gold Demand Trends report. In Western markets consumer demand also remained strong with the United States, in particular, having a robust year in the jewelry bar and coin sectors. In 2013 the gold market saw 21% growth in demand from consumers which contrasted with outflows of 881 tons from ETFs. The net result was that global gold demand in 2013 was 15% lower than in 2012, with a full year total of 3,756 tons. Annual global investment in bars and coins reached 1,654 tons, up from 1,289 tons in 2012, a rise of 28%, and the highest figure since the World Gold Council’s data series began in 1992.

 

For the full year, Chinese and Indian investment in gold bars and coins was up 38% and 16%, respectively. Although much smaller markets in terms of volume, in the United States, bar and coin demand was up 26% to 68 tons, and in Turkey it was up 113% to 102 tons, demonstrating solid support on a global basis.

Meanwhile demand for jewelry, the other component of consumer demand, increased by 29% from 519 tons to 669 tons in China, and by 11% from 552 tons to 613 tons in India, reaching 2,209 tons globally, the highest figure seen since the onset of the financial crisis in 2008.

Marcus Grubb, Managing Director, Investment Strategy at the World Gold Council commented: “2013 has been a strong year for gold demand across sectors and geographies, with the exception of Western ETF markets. Specifically, it was the year of the consumer. Although demand has continued its shift from West to East, the growing demand for gold bars, coins and jewelry is a global phenomenon. Taken together, the statistics demonstrate the resilience of the gold market and the unique nature of gold as an asset class, rebalancing to reflect the economic environment.”

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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