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MarketWatch

Refined Products
3.27.2015

Recap:  Oil markets rallied Thursday helped by news that Saudi Arabia was leading a military Gulf coalition including air strikes in Yemen against Iran-backed Houthi rebels. The significance of this geo-political event seems to be weighted more to a fear of a widespread Saudi (Sunni) and Iran (Shi'a) regional conflict, than to a loss of Yemeni oil production that had already been in decline. Citi Research believes, along with other commodity analyst groups, that "... this spike looks more like one to fade, driven in part by a short covering rally." (Citi Research 3-26-15) However, market participants do point to the fact that Yemen's location along one side of the Bab el-Mandeb Strait is a key location for those oil exporters utilizing the Suez Canal and SUMED Pipeline (see map below).  The EIA estimated that about 3.8 Million barrels per day (MMbpd) flowed through this strait in 2013. According to Citi Research, "...the odds of disruptions remain low; there is no indication that either side in the conflict has the means or the intention of disrupting these flows." (3-26-15) And, this Yemeni situation is on the political backdrop of the U.S. engaging in nuclear talks with Iran. "Olivier Jakob, managing director of Swiss consulting firm Petromatrix, said the prospect of Iranian oil hitting global markets a result of a possible end to sanctions is a bigger risk than the shutdown of the Bab-el-Maneb Strait along Yemen." (Dow Jones 3-26-15) However, oil markets have some bullish momentum here in the short term as  (1) April NYMEX ULSD and RBOB options expired yesterday, (2)  April ULSD and RBOB futures will expire this Tuesday, March 31st, and (3) another Baker Hughes drill rig report will be released today at 1 PM, and recent releases showing declines have provided bullish momentum.  

Settlements:  ICE Brent Crude led the way higher, settling up $2.71 or 4.8% to $59.19, within striking distance to the $60 handle. NYMEX (WTI) Crude followed up, settling up $2.22 or 4.5% and crossed the $50 handle to $51.43. NYMEX ULSD (HO) rallied 5.93 cents to $1.7876, but hit a high on the day of $1.8013. NYMEX RBOB (Gasoline) jumped 4.52 cents to $1.8817 but hit a high on the day of $1.9024. Warning: volatility will likely remain, particularly ahead of the weekend.

Currently, oil markets are down across the board on profit-taking ahead of the weekend and a stronger U.S. dollar.  NYMEX ULSD is down a penny to $1.7776, NYMEX RBOB is down 1.90 cents to $1.8627, NYMEX Crude is down 57 cents to $50.86, and ICE Brent is down 80 cents to $58.39. 

For delivery planning this weekend and next week, here is the 10-day heating degree day (HDD) forecast:  Fax-Alert Weather Service has forecasted the following heating degree day (HDD) %'s from March 27th to April 5th: (HDD percentages below 100% indicate percentage lower than normal, while percentages above 100% indicate percentage increase of HDDs above colder-than-normal temperatures.) Most Northeast locations are STILL averaging 20% colder than normal for the next 10 days.

New YorkNYC 124%, Binghamton 123%, Albany 123%

New JerseyNewark 125%, Trenton 126%

PennsylvaniaPhilly  125%

MassachusettsBoston 122%,Worcester 126%,Chicopee 127%,Hyannis 116%

Connecticut: Hartford 126%, Bridgeport 123%, New Haven 118%

NH: Manchester 115%, Portsmouth 120%, Lebanon 123%, Concord, 121%

Maine: Portland 122%, Augusta 125%, Bangor 127%

Vermont: Burlington 120%, Rutland 130%

Rhode Island:  Providence 126%

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Natural Gas
3.27.2015

On Thursday, March 26th, the front-month NYMEX Natural Gas Futures Contracts opened at $2.737, nearly two cents above Wednesday’s closing price of $2.723.  Drifting sideways near the $2.73 line for the initial hour of trading, April spiked to the intraday high of $2.756 ahead of the weekly EIA storage report.  With the report announcing inventory above most analysts’ projections, April slid down precipitously to the intraday low of $2.649 nearly ten minutes later.  After a tedious stroll along the $2.66 level, April edged up slightly at the final hour mark, and closed down nearly 2 percent at $2.672 on Thursday.

The EIA Natural Gas Storage Report published on Thursday showed a 12 BCF injection into storage for the week ended March 20th – slightly higher than the market estimate of 11 BCF.  Total working gas in storage was reported as 1,479 BCF; 63.6% above this time last year and 11.6% below the five-year average.

This morning in Globex, WTI Crude was down 80 cents; Natural Gas was four cents lower; and, both Heating Oil and Gasoline were down slightly.

New England and New York cash prices were higher across the board.

 

Natural Gas Glossary

For access to Sprague’s full Natural Gas Market Watch Report including commentary not posted here, please send your request to natgas@spragueenergy.com or call 1-855-466-2842.

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