Tag: Hurricane

Another lousy DOE report, Speedway hikes to $3.95

Edit: Speedway has just hiked to $3.95 in Michigan; while not totally shocking, this is something that might have been expected. The Gas Game gets quite difficult to predict at times like this!

Another disappointing report from the Dept. of Energy this week, we can look for gasoline to trade higher today.

Perhaps due to the Hurricane/Tropical Storms last week, the DOE reported refinery utilization at just 85.9%, with crude oil inventories falling 400,000 barrels (LOOP was closed [Louisiana Offshore Oil Platform] last week) which likely altered crude import numbers, but gasoline… OUCH! Gasoline inventories fell a massive 6.4 million barrels last week, putting us now in the lower part of the average range, and putting us almost exactly at the same amount of gasoline in inventories as this week in 2007.

In a month we’ve consumed 14.3 million barrels (600.6 million gallons) of gasoline more than were refined. Amazing! Look for that stat to perhaps spook traders as they see some bullish numbers coming in. I definitely expect gasoline to trade higher today, perhaps triggering a hike in the Grand Rapids area… more on that later today IF necessary.

Also, the SPR is STILL adding barrels to its massive storage?! Didn’t the Dept. of Energy state that with oil prices so high they were going to delay deliveries to the SPR in mid-to-late July? It hasn’t happened! This week the SPR sits at 707.2mb, last week 706.8mb and last year at 690.3mb. Just more empty promises from government to do something positive for the market.

Look for gasoline to pull oil higher as traders get some bullish news.

Patrick

PS- Midwest PADD storage fell to 48mb this past week, look for the Chicago Premium to start hurting soon!

Watch out for a hike to $3.99!

After enjoying lower prices for a few weeks, I’m sad to announce I’m expecting a hike to $3.99 around Grand Rapids soon. Perhaps as early as Monday, or they could wait. Prices have been creeping up, we have a tropical storm in the Gulf that’s pushing prices higher (not as much as it could… small storm)

Be sure to fill up soon. I was “lucky” to get gas for (are you going to be upset at me?) $3.64 Saturday in Fremont with the help of a Speedway Credit Card… that may be as low as we see it for sometime now as Hurricane season kicks into high gear.

I can’t believe its August already and I’m still seeing gas prices well over $3.50. Oh well.

Patrick

EDIT: Prices are sliding on the market today. Looks like we will dodge a price hike!
August 4, 2:30pm EDT

EDIT: August 5: Prices didn’t decrease fast enough for Grand Rapids, a price increase is now at 50/50 odds!

Gasoline prices slide on news China raising prices of fuels

Today’s market slid over 13-cents per gallon on positive news coming out of China: they’re finally lowering subsidies on oil and fuel products.

The market immediately turned south after realizing that one of the biggest developing nations was now passing on higher prices to its consumers. This has the potential to turn the whole market around as traders finally realize that sustained oil and gasoline prices at these levels will kill off demand, even in developing countries that rely on it.

With the added news that the Saudi’s are increasing oil production, the market may correct… however, I doubt any correction to bring prices down more than $1 as oil stockpiles are tens of millions of barrels lower than last year, and oil inventories remain much below average.

We still may be poised for a mid-to-late summer decline, as long as Hurricane season stays in check.

For now, wait to fill up. Prices should moderate through the weekend, with potential of $3.95’s coming out within the next 5-7 days. We also may be poised for a jump in the market tomorrow. It’ll either be a small jump or another significant decline.

Patrick

The 2008 Driving Season Begins. What’s in store?

The long awaited 2008 Summer Driving season is now upon us, after a mostly gloomy and cool Memorial Day weekend here in Mid-Michigan. With gasoline prices approaching and surpassing $4, many are asking what’s in store for this Summer… what can I expect, when should I vacation?

This post may be one of my longer posts. Just sit back and read it, you may find some information you didn’t know. I’ll try to cover everything that’s on my mind at this point.

First glance this morning the market was up… but now we’re seeing a good size pullback in the oil and gasoline markets, with crude falling over $3bbl at this writing. Why? I’ll explain.

If you haven’t noticed, we’ve had a significant run-up in prices this past Spring. I suspect the main reasons were the weaker U.S. dollar, higher global demand, and speculation. It’s anyone’s guess what percentage each one of those played in the higher prices, but I’m sure there are a couple factors that I haven’t included that have helped push prices up as well.

$4.19 was the price this weekend if you hadn’t noticed, and many are wondering if this is the highest we’ll see this year. It’d be easy for me to say yes based on past years. In 2006 and 2007 prices for the year peaked in mid-to-late May. However, this year hasn’t been anywhere close to resembling ’06 and ’07. In those years prices climbed more due to actual issues and problems- refinery maintenance, etc. This year, we’ve really not had as much bad news, but the economy has been more the indicator. The worse the economy seems to get, the more oil and gasoline prices rise. You’d think the two would be hand-in-hand, but that’s not the case.

I’m *thinking* that now we’re in driving season, we may see traders pull out as they realize we’re sitting on record high oil prices without a real reason. Supply is remaining constant, Saudi Arabia says they’ll try to pump more oil, and we haven’t really had any refinery issues. Is it time for the market to go back to realizing the fundamentals instead of buying based on speculation?

Refineries have and are in the midst of a huge number of expansions and upgrades. Many older refineries are adding and replacing older equipment that isn’t as efficient. They’re tightening their belts [refineries] to get every penny out of every gallon of gasoline. Since oil companies have been enjoying record profits, they’ve also been spending billions on refinery expansions. Shell is well underway to renovate an existing refinery to near DOUBLE its output. While we won’t see it online for the next couple years, the market should be looking down the road and realizing that output will grow as record profits continue.

Let’s not forget about the Goldman Sachs analysts, Murti and Currie- they’ve predicted record territory for oil the last few years and have been amazingly accurate. Just a week or so ago, they raised their forecast to say the average price of oil in 2008 would be $141 and oil have a “super spike” to $150-$200/bbl. The day they released that forecast, oil prices took a sharp jump, and have continued their climb… not because of OPEC lowering output, or because a refinery shut, but because two men predicted higher oil prices. This is where I’m talking about a return to fundamentals instead of speculation! Anyway, these two men forecasted in 2005 that oil prices would rise to $50-$105 over six to 24 months and were pretty accurate. They then boosted their forecast to $80-$135 in September 2007, even during a seemingly non-existent hurricane season. Still, they re-raised themselves last December, and just weeks ago re-raised again. Just keep in mind WHY Goldman analysts may be doing this… that is, making seemingly high forecasts. They are in the business of selling oil, I consider them an oil broker. They run huge commodity funds, give advice, and trade oil. Wouldn’t you think that to be a HUGE conflict of interest? Almost like going against the Terms of Service of eBay and bidding up your own online auction.

The interesting part of this is that while Goldman analysts have raised their own forecasts, which would provide HUGE profit to oil companies (ExxonMobil, BP, Shell, etc), Goldman has NOT raised their stock outlook for these companies, and they’ve kept their rating on ExxonMobil at “neutral”. Would one think that Goldman might put its money where its mouth is and raise their outlook on these oil companies stocks? Quite interesting. Perhaps Goldman knows that while they enjoy making tons of money off trading oil, one day the bubble will pop. I can’t think of any other reason why Goldman would not raise their outlook on XOM stock [ExxonMobil].

Point here is that this latest rally is pretty much only supported by Goldman, which is like the oil trading god. Perhaps Goldman has been the one fueling the latest rises, buying more oil to push prices up so its analysts are correct. Nothing like using fear to make a profit, which may be what they’re trying to do.

Back to my office chair- I stare at the $3.98’s and $4.19’s that are out in the Midwest.

I’d love to predict lower prices, but the way I see it, any prediction I make will have odds that are worse than buying a Big Game lottery ticket.

However, I’ll do it anyway, and maybe the odds will be much better than a Big Game ticket, but still, I wouldn’t put more than a $20 bet on it.

Summer 2008 outlook:
Gasoline:
Late May prices peak to $4+, slowly decline into early-to-mid June, perhaps as low as $3. Early July will have much of the same, people will be rejoicing when prices come under $3, but that doesn’t look entirely realistic as hurricane season approaches. Traders will begin focusing on any hurricane that develops, and starting in mid-August, we’ll see prices fluctuate quite a bit. If any Category 3 or higher hurricane strikes West of the Mississippi in the Gulf, expect gasoline to jump right back to Spring highs or even higher. If the 2008 hurricane season is a non-event, expect market fundamentals to kick in and we may see a large correction in gasoline prices. I think that with demand slowing late Summer and oil prices due to come back down,
it will boost crack profit, which will entice refiners to make
utilization rates climb all summer leading to a potential collapse in
prices this fall/winter- perhaps as low as $2.50 starting in October and lasting through mid-November.

Diesel:
Prices won’t really pause much as global supplies remain well-below average. Prices may flirt with $5 in the Midwest while nationwide prices rise to near $4.75. Don’t expect high diesel prices to cause a huge demand slowdown, especially with farmers raking in profits growing their fields, feeding their equipment. The U.S. has been exporting a lot of diesel to Europe as well, so our own stockpiles aren’t as cushy as possible. Diesel may fall back to $4.35 as the summer continues, but it won’t last long. Expect diesel to rise substantially if hurricane season is active.

The huge wildcard will continue to be the 2008 Hurricane Season. If it’s more active than usual, be prepared to cancel vacations. If not, it may help push prices lower come late Summer and early Fall.

Obviously things can and will change rapidly, but Ed and I will continue to monitor prices throughout the Summer. We will both need some time off and may miss a prediction here and there, but overall TheGasGame.com will continue to be active!

Patrick

$4+ Gasoline and $4.75 (Possibly $5) Diesel is likely

As Speedway hikes to the predicted $3.999 this morning, I was busy looking at markets to see what’s going to happen next.

Unfortunately, it looks like things still aren’t as bad as they will get. I expect gasoline to crest $4 in the next week or two, and diesel prices look like they will accelerate toward $5 as global demand continues to cause supply worries. I expect diesel to hit $4.75 and rise as high as $5 here in the Grand Rapids area before moderating into the beginning of summer.

There isn’t much you can do except to park the car for a while or to trade in the gas guzzler. We’re in a period of sustained higher prices. Don’t expect prices to get back into comfortable territory for quite some time.

For the immediate future the outlook is: higher prices until early June, some moderating towards July, and a pickup in prices in mid-August as Hurricane season arrives. Hurricane forecasts can and will greatly effect pricing, so stay tuned to those forecasts.

Patrick

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