Tag: storage

Follow-up on likely gas price hike… “triple whammy”

As I said earlier today, gasoline prices are likely to jump across all Speedway States as soon as tomorrow to $1.99 or even higher.

I’ll follow up and let you know what’s going on.

As you may know, Midwest prices have been seen as low as $1.59, much lower than the national average today of $1.891 according to AAA’s Fuel Gauge Report. A large reason of lower Midwest pricing as of late is that PADD 2 storage levels have reached high levels, untypical for this time of year. I have said that we’ve recently benefited from this, what I call a "Chicago Discount". The "Chicago Discount" is due to a regional condition causing Chicago "Spot" Pricing to be lower than other areas.

Now onto the bad news.
Yesterday, ExxonMobil reported shutting down a unit at its 238,000 bpd plant just outside Chicago, IL (Joliet), which would cause a large drop in output at Midwest refineries. This, coupled with news from the DOE that regional stockpiles fell last week, as well as a huge nationwide drop in gasoline stockpiles, will cause a large price spike.

Any Chicago Discount will likely "dry up", and with the changeover to the April gasoline contract also adding to a hike. The gasoline contract for March, expiring today, was 8-cents lower than the new April contract, which takes effect tomorrow, causing a "triple whammy": More expensive April contract begins tomorrow, Refinery outage regionally, and a loss in gasoline stockpiles will definitely cause higher prices.

I would be *shocked* if prices don’t rise tomorrow and stations that purchase new fuel tomorrow would lose money if they do not raise prices.

I am unsure about the amount of the hike, but it may be over $2/gal, as soon as tomorrow morning.

Be sure to fuel ASAP.

More price hikes coming for most of U.S., poor DOE report

Today’s DOE report definitely wasn’t so hot- showing a large loss in gasoline stockpiles when an increase was expected. Traders polled were expecting a small 500,000 barrel increase in gasoline stockpiles and the DOE reported a loss of 2.6 million barrels.

In an interesting twist, supplies in storage in the Midwest region actually rose over a million barrels, which may cause the Midwest to see prices staying under the national average for some time.

Refining continues to be a poor money maker, but with this news, I expect wholesale  gasoline prices to climb, causing refiners to slowly increase production due to increasing margins.

Speedway has been all over the map in the Midwest lately, with a hike last week in Minneapolis, and a hike yesterday in the Great Lakes area. While most of the nation should see slowly increasing wholesale prices, the Midwest should feature either flat wholesale prices or rising disproportionately slow compared to the rest of the country.

On another note, Diesel should slowly become cheaper than gasoline in many areas of the country over the next few months as driving season approaches.

States that have recently seen Speedway price hikes (this week) should be stable without a huge price hike (barring some large news maker), but areas outside the Midwest will continue to see prices climb.

Patrick

Diesel under $2?! Quite possible in just days…

That’s right- you folks with the diesel trucks may FINALLY get to see diesel under $2 again, something maybe you thought (and I) that you wouldn’t see again in your lifetime!

The Pilot station in Burns Harbor, Indiana (about a 1.5-2 hour drive from Grand Rapids) is currently selling diesel at $2.01. Now, you definitely would not drive down there just to get fuel, but if you’re taking a trip to Chicago, fill up there.

I wonder when and if UPS will EVER give up their fuel surcharges now that diesel prices have come down. I highly doubt it, I’m sure they love the extra income it brings!

I don’t see Midwest prices going up anytime soon, in fact- I see a Chicago Discount building in. Midwest PADD storage was at 52.5 million barrels yesterday in the DOE’s weekly report- a GREAT number to be sitting at. Refiners will start having to sell that winter blend fuel at discounted prices once Summer comes closer…

Midwest prices should fall into the $1.70’s. I’ll be watching the market closely, a price hike may happen sooner rather than later.

I’ll be taking vacation to sunny Florida next week, so posting may be lacking.

Patrick

80 million barrels of oil floating in the ocean, owners betting and hoping for higher prices

Just to warn you, this post will be a bit lengthy, but may be incredibly insightful for some. First off, it looks like Ed has predicted a hike to $1.99. We’ll see if he’s right on… if you can get gas for around $1.80, fill up like I did tonight just in case. I’m not completely sold on a price hike, but we will see what happens.

Now to explain my post title. Was there a ship leak or some accident? No. There ARE 80 million barrels of oil floating on the sea protected by a thin layer of steel, sitting in huge supertankers. According to Bloomberg, Frontline Ltd., the world’s biggest owner of said tankers has made this claim. It would be the most oil stored at sea in 20 years, as traders seek to cash in on higher prices later in the year.

This is an idea that carries a good amount of risk if you ask me… but you don’t make money without risk. Oil prices haven’t really started a good climb yet this year, and prices have largely given up most of their gains they made the last two weeks. These supertankers are huge ships that cost large amounts of money to lease but some can hold well over a million barrels of oil. If prices jump $10/bbl, there’s a large amount to be gained. However, with oil supplies in Cushing, Oklahoma nearly at capacity (the delivery point for contracts traded on the NYMEX), what’s going to happen? We’re already awash in oil, sitting nearly 40 million barrels above where we were JUST LAST YEAR! Crude oil in storage this week, as reported by the DOE, was 326.6 million barrels. Like I said, storage in Cushing, OK, was at 33 million barrels, with capacity of 34 million barrels. This represents a 20% GAIN in oil inventories there in just 4 WEEKS! How are these traders betting on higher prices in a few months when we’re lush with oil in a recession?

Figuring those 80 million barrels could go anywhere in the world, let’s figure half goes to the U.S., the world’s leading consumer of oil. If that 40 million barrels (which is doing nothing) would eventually end up at U.S. ports in a few weeks, we could have the most oil in storage since September 21, 1990!
Even WITHOUT the 40 million barrels, we’re already at our highest level of storage for a January since 1999, when demand was strong and the economy was surging ahead… remember the .com era? So many startup companies… and to see us at the same level of oil now with a much different outlook?

Let’s throw a name out here… a banking company that used to actively trade oil contracts (and bet on higher prices). Remember Goldman Sachs? The company whose analysts predicted $150 oil? What ever happened to them? They seem to have gotten out of the oil trading business. Goldman is now forecasting oil prices in the $30’s for quite some time. Do they have any obvious interests in oil now? Not that I can see- and crazy enough they’re actually making some sense with their seemingly non-biased oil price forecasts!

What’s this all got to do with gas prices?

Lets think it over. I’ll even format it so it’s easy to read:

  • U.S. January oil inventories highest since 1999 and economic outlook is much worse than that of 1999
  • 80 million barrels of crude oil haven’t even hit the market, owners betting on higher prices
  • Gasoline inventories healthy
  • Excluding 2006 and two weeks in 2007, oil inventories (including SPR) are at their highest levels EVER
  • Gasoline demand down 3-4%
  • Diesel demand down 4-5%
  • Jet fuel demand down 12-15%
  • OPEC countries need to pump more to generate revenues
  • Refinery utilization at just 85% and we’re still putting plenty of gasoline into storage

Point is-with such great news on the shape of oil inventories, how can oil and/or gasoline make a spring run-up in prices? Ed’s bet that we’d see $2 gas before we saw $1 gas is nearly the OFFICIAL winner, but I still think prices have more room to fall.

My short-term bet on oil (the next two months) is that prices fluctuate between $30-$45, but we may briefly break the $30 barrier. A gasoline prediction? I’ve already had that bet with Ed. Once he wins, MAYBE I’ll make another prediction.

Patrick

Temporary respite in gas price hikes likely… prices to fall!

After the expected Speedway hike to $1.99 Tuesday, we can expect a break in gas price hikes as the DOE released a favorable report on weekly oil inventories today.

The report on oil and gasoline stockpiles contained some very good (bearish) news for the markets. It was expected that oil inventories were to gain 800,000 barrels last week while they actually gained much more than that- an astounding 6.7 million barrels. Gasoline inventories also gained much more than expected, to the tune of 3.3 million barrels. Traders were expecting very small gains in both and news of such a large gain prompted thoughts of the weak economy and recession we’re in and prompted selling.

Midwest stockpiles (PADD 2) also gained a healthy amount jumping from 46.8 million barrels to over 48 million barrels.

All of this news comes at a good time for Midwest gasoline consumers who had been taking a hit as Midwest storage had fallen to levels not seen since 2007. We can expect that gasoline prices have a temporary drop in Midwestern states (Indiana, Ohio, Michigan), and that any “Chicago Premium” will either drop off completely, or become a “Chicago Discount” as we see PADD 2 reach higher levels not seen since before Thanksgiving (2008).

As many know, wholesale prices may rise the remainder of the week negating my comments below, but if wholesale prices do not rise, we could see areas in the Midwest drop into the $1.70s… keep in mind ONLY if wholesale prices do not rise soon.

Patrick

Here we go again! Prepare for another price hike… $1.99 possible

After an unprecedented week of price hikes in the area, I am sad to report that more hike(s) are likely very soon. The stage is set for a price hike Monday to $1.99 (they’d go higher but I expect them to stay under $2 because of negative reaction), but the exact price may be different if the market drops a significant amount tonight (Sunday).

Unfortunately, it looks like the pending war between Israel and Hamas and OPEC are likely two of the main reasons that wholesale prices and oil prices have been rising. It looks like the market may be starting to turn back as we get closer to Spring.

Also, our spot pricing is much higher, in my opinion, due to our PADD levels being so low. We’re sitting at 46.8 million barrels of petroleum in storage. We haven’t seen a low like that since 2007.

That can probably be traced to Sunoco’s Toledo, OH refinery undergoing 6 weeks of maintenance that that recently started.

Those two factors are likely pushing MIDWEST prices higher than other places.

We’ll see how things go, but I would definitely fill up tonight or first thing in the morning as our trend has definitely turned into a upward pressure on prices rather than a downward pressure on prices.

Has our enjoyment of gas around $1.50 come to an end? It might have…

Fill up!

Patrick

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