Crude oil on all fronts; Natural gas pulls back

Crude oil and precious metals soar as President Obama will send up to 300 advisers to Iraq and Russia builds up troops on the Ukraine border.

I bet that it is making the ISIS and other Sunni-militants nervous. Brent crude (NYMEX:SCN14) led the way hitting a 9-month high with WTI (NYMEX:CLN14) being dragged along for the ride. The market rallied after the President spoke because without stronger U.S. military support the odds of the ISIS gaining more ground is high.

Gold (COMEX:GCN14) and silver (COMEX:SIN14) broke out as the Fed will keep rates low and increasing geo-political risk in Iraq but in the Ukraine as well. Reports that the Ukraine army is rolling over pro-Russian separatists may be the motivation for Russia to build up troops on the Ukraine border. Talks of a cease-fire may be falling on deaf ears and the fighting goes on. Russia's prime minister denies the troop buildup and says that Russia is just securing the border. In the mean-time gas has been cut to the Ukraine so there has been a real disruption of supply.

That has not been the case in southern Iraq just yet but the risks of natural gas (NYMEX:NGN14) shortages and diesel products and the lack of oil to feed electric plants are high in Bagdad. The Baiji refinery that is under siege accounts for about one-third of the nation's refining capacity. Fox News reported that "Iraq's government insisted Thursday that security forces were still in control of the country's largest oil refinery, despite claims that Al Qaeda-aligned Sunni Muslim insurgents had raised their flag over the facility. A witness who drove past the Baiji refinery told the Associated Press that militants from the Islamic State of Iraq and the Levant (ISIS) had hung black banners on the refinery's watch towers and were manning checkpoints around the building. He said a huge fire in one of its tankers was raging at the time. The witness spoke on condition of anonymity because he feared reprisals.

An Iraqi security official said the government force protecting the refinery was still inside Thursday and that they were in regular contact with Baghdad. The refinery's workers had been evacuated to nearby villages, he said. He also said the militants took over a building just outside the refinery and were using it to fire at the government force." The Risk is going to be high going into the weekend! We will continue to buy breaks.

 

Natural gas

Natural gas pulled pack after the EIA reported that working gas in storage was 1,719 Bcf as of Friday, June 13, 2014, according to EIA estimates. This represents a net increase of 113 Bcf from the previous week. Stocks were 706 Bcf less than last year at this time and 851 Bcf below the 5-year average of 2,570 Bcf. In the East Region, stocks were 397 Bcf below the 5-year average following net injections of 70 Bcf. Stocks in the Producing Region were 350 Bcf below the 5-year average of 981 Bcf after a net injection of 27 Bcf. Stocks in the West Region were 104 Bcf below the 5-year average after a net addition of 16 Bcf. At 1,719 Bcf, total working gas is below the 5-year historical range.

The key for our natural gas future is infrastructure that is lacking. Natural gas intelligence reports billed as "America's Natural Gas Highway" has been established with the opening of a fueling station in El Paso, TX, according to fuel supplier and station developer Clean Energy Fuels Corp. of Newport Beach, CA. The completed link enables heavy-duty liquefied natural gas (LNG) truck fueling along more than 1,500 miles of Interstate Highway 10, the transcontinental highway between California and Florida.

In addition, on Tuesday Clean Energy said it had opened additional natural gas vehicle (NGV) fueling stations and/or begun construction to support a growing portfolio of NGV customers in the heavy-duty trucking, refuse and ready-mix market sectors. "One corridor at a time, our nationwide network [see Daily GPI, Aug. 25, 2011] is opening and changing how America moves," said Clean Energy CEO Andrew Littlefair. "The I-10 from Los Angeles to Houston is another link in America's goods-movement infrastructure now fueling with natural gas." The newly opened El Paso LNG fueling station will be used by EJ Madison's hauling for Cardinal Health, as announced earlier this year in a fueling agreement with Clean Energy. The fleet currently has traveled more than 500,000 miles.

EJ Madison intends to expand this fleet with an additional 30 dual-fuel LNG/diesel trucks in the coming months, according to Clean Energy. El Paso-based Clean Fuel Technologies LLC handled all conversions. Once fully deployed, this fleet is forecasted to consume approximately  36,000 diesel-gallon-equivalents (DGE) of LNG/year. Additionally in the trucking sector, Clean Energy said it has signed a multi-year fueling deal with Chavez Trucking to open another public access LNG station in West Sacramento, Calif., near the state capital. Chavez plans to deploy 15 heavy-duty LNG trucks to haul bulk aggregate materials such as road-building and construction materials. The fleet will consume about 210,000 DGEs/year.

For the refuse sector, Clean Energy said it plans to expand compressed natural gas (CNG) fueling operations with a second facility for New Haven, CT-based All American Waste. The new fueling station will be built and operated by Clean Energy. The new facility will include 40 time-fill fueling posts for providing CNG to the refuse fleet, along with two public fast-fill dispensers with four fueling hoses. Located in the heart of New Haven, the station is scheduled to open during the fourth quarter.

The Wall Street Journal reports "A federal agency on Thursday approved a natural gas export terminal in Louisiana, marking the second time the U.S. government has signed off on such a project. The Federal Energy Regulatory Commission authorized Cameron LNG LLC, a unit of San Diego-based  Sempra Energy,  SRE +0.50% to operate and construct a liquefied-natural-gas export facility in Hackberry, La., just east of the Texas border. The approval focused on the project's environmental assessment. It was the last major regulatory hurdle Cameron had to overcome and mostly clears the way for the nearly $10 billion project to begin construction. Sempra expects to begin construction later this year and will export up to 1.7 billion cubic feet of natural gas a day by 2019.

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