What is supporting crude? Fundamentals of all things

Supply disruptions and weather

Overshadowing Janet and Mario

Who thought that anything could over shadow Janet Yellen today? Well, leave it to the energy complex. Refining issues and tight supply of distillate will keep oil supported as the rest of the markets focus on Jackson Hole.

Talk that Shell Deer Park refinery could be down for months as well as a Bloomberg report that Korea National Oil’s “Come by Chance” refinery in province of Newfoundland and Labrador will start shutting down the first week of September for month of work, caused a spike in RBOB that could turn around the oil. Add to that an increasing chance that next week we may be dealing with a tropical storm in the Gulf of Mexico has energy marching to a different drummer that the rest of the macro-economic focused markets.

Just in time for a seasonal bottom in distillate and RBOB(NYMEX:RBV4). Not only will refining problems tighten already tight supply for distillate RBOB could bounce as we head into the Labor Day Weekend. Triple A is predicting that gasoline demand will hit a six-year high as prices hit the lowest level since 2010.

Weather that has been a non-factor this summer may become a factor both in the short term and the long term with a tropical storm threat in the Atlantic and a prediction of a very cold winter by the Farmer’s Almanac making short plays in natural gas and products a bit more dangerous.

The National Hurricane Center is increasing the odds than we may be talking about a Tropical Storm Cristobal next week. The NHC says that shower activity associated with the small low pressure area moving over the Leeward Islands remains limited and disorganized. Interaction of the low with Puerto Rico and Hispaniola will likely inhibit significant development through tonight.  However, environmental conditions are expected to be more conducive for development when the disturbance moves near or over the southeastern Bahamas on Saturday, and a tropical depression is likely to form over the weekend or by early next week.  Regardless of tropical cyclone formation, gusty winds and heavy rainfall are expected across portions of the Leeward Islands, Puerto Rico, and the Virgin Islands today, and over Hispaniola and the southeastern Bahamas tonight and Saturday. Interests in those islands should monitor the progress of this disturbance. The storms formation chances through the next  48 hours is set at a high 60% and a formation chance through the next 5 days at a high of 80%.

In the long term get ready for another character builder of a winter. The Old Farmer's Almanac had it right last winter and their woolly caterpillars and other things they use to predict weather will send chills down your spine. They are predicting a “super cold “winter in the eastern two-thirds of the country. The west will remain a little bit warmer than normal. Get out the sweaters!

Natural gas focused on heat and blew off the 88 bcf build in natural gas supply.  Despite above average injections we are still 17.3% below the five-year average.

Are tensions being reduced in Ukraine or rising? The Russian convoy that allegedly has entered the country is carrying humanitarian aid has entered the Ukraine without permission. Russia is warning Ukraine to not attack. Stay tuned.

Seeking Alpha reports that the status of Kurdish crude oil will come to a head today, as the high-stakes dispute over a tanker carrying 1 million barrels of Kurdish crude still situated in the Gulf of Mexico will be determined by a federal court in Texas. The ruling will define the status of importing the controversial crude, as the Iraqi Oil Ministry and the Kurdistan Regional Government wrangle over the latter’s right to produce and sell its natural resources.

Metals and other markets are acting like they want to turn back up expecting that Janet Yellen will come out dovish and Mario Draghi may signal a step towards QE as Europe fights deflation. Forget the Fed Minutes. We also saw reports of an uptick in physical demand after the recent sell-off.

Dow Jones reports that India just raised its import tax on sugar. Cattle on Feed and Cold Storage today! Beware of limits!

 

 

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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