The En-Pro Blog

It’s all about distillate inventories. Although total distillate inventories fell last week by 1.2 million barrels, at 139.6 million barrels, they are 30.7% higher than last year’s level and 27.7% higher than the past 5-year average. With U.S. distillate inventories in extremely good shape combined with the fact that the EIA is predicting demand will fall by 4.5%, oil refiners are concerned that their refining margins will fall. So what weapons will the oil companies use to combat this concern and what does it mean for crack-spreads, cardlock, and rack prices? For one thing it means this summer crack-spreads will be higher on gasoline and much lower on distillates. Read more in this week’s Energy Report.

By: Molson Robertson, Senior Risk Analyst, Energy Markets

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What’s going on with Esso and the apparent exchange agreement with Petrocan in Montreal?

If Esso leaves the Quebec market, this would place the Ultramar/Esso exchange agreement in jeopardy as there would be limited options for Ultramar in Ontario.

This is especially true when you take into consideration the Suncor/Petrocan merger which is likely to be approved in September.

The Suncor refinery in Sarnia has been under-utilized and this will certainly change for the better for the merged company, but will result in Utramar scrambling for supply with the ultimate result being higher prices.

Upward price pressure will also be evident in Quebec with one less player in the game. So what do exchange agreements mean for the eastern and western Canada?

There is a very strong assumption that there will be ramifications for bulk and cardlock diesel. Want to read more? Check out the En-Pro Energy Report… send us an email to info@en-pro.com.

By: Roger McKnight, Senior Petroleum Advisor
John Voros, Petroleum Advisor

OPEC is not scheduled to meet until May 28 to discuss production levels, so with winter demand over, we expect crude inventories to continue building. The summer driving season will be upon us starting the May long weekend and we don’t expect gasoline prices to rise more than 15 cpl over current levels.

Consumers are minimizing spending at all levels due to lack of credit and fear of entering the unemployment line. The March U.S. unemployment data showed that another 663,000 people were downsized, putting the current U.S. unemployment rate at 8.5%, (the highest since 1981/82), while Canada’s unemployment rate in February had climbed to 7.7%. The increasing job loss will contribute to further erosion of petroleum demand as consumer spending represents 70% of economic activity. Until this turns around, demand will be anemic and there is no justification for higher energy prices. For the next few months we expect more negative economic news will continue to impact the energy markets. So, what are we forecasting crude prices to be at and what will President Obama’s stimulus plan, along with the G-20 Summit mean for Canadian businesses? And what does the EIA’s report on distillates and crude mean for the oil industry?

By: Roger McKnight, Senior Petroleum Advisor

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If you’re in any kind of business that uses crude oil or diesel, and you’re not utilizing more than one supplier, this blog’s for you! It’s now more important than ever, and to your distinct advantage, to pay close attention to the cardlock table, and direct your drivers to the best priced supplier.

Why?

Lately we have seen some large spreads between suppliers. There doesn’t seem to be any fundamentals being followed in today’s pricing of crude oil, gasoline or diesel prices. Current crude pricing is following the result of the immediate market reaction to any economic bailout figures, whether actual or anticipated; and, unless this injection of tax payers’ money continues, or we see any hint of an increase in demand especially for distillates, then expect to see prices for crude begin to descend.

Economic conditions have made the market extremely competitive, which is not a bad thing for the end-user.

But because of this, we wish to stress now more than ever the benefits of weighing one supplier against another.

So what does this mean for bulk and cardlock users, including some, dare we say it, good news?

Check out the Weekly Energy Report for more information. If you’re not signed up, send an email to info@en-pro.com with your email and contact information and we’ll deliver it directly to your in-box.

As many of us took part in Earth Hour, this past weekend, it’s clear it is a vitally important global event that raises critical awareness of the many issues pertaining to global climate change, and the need for us all to be pro-active.

However, carried out on a 'low peak demand day' actually cost Ontario businesses money if they participated and shifted load to another day.

If Earth Hour was instead held on a high demand day during the week, then the big polluters that use fossil fuels to make power would not be needed and we'd actually be saving those fuels from entering the environment.

But during the day, Saturday March 28, 2009, and in the evening, all we really saved was environmentally friendly power that was likely generated by hydro and nuclear.

Earth Hour is a tremendous step forward, but we’re not getting the whole picture, here in Ontario – and while it’s a great event – it’s not as effective as it is capable of becoming.

http://tinyurl.com/d8bsqb

The above links to a report showing the hourly electricity prices all day on Saturday. As you will see, for most hours, including Earth Hour, they were negative. That is because the hydro and nuclear generators bid in to the market with negative prices to ensure their capacity was used. So, in short, anyone who pays the hourly Ontario energy prices and elected to cut their usage during Earth Hour, lost money, as they would have received payment for power actually used. (Distribution transmission and other regulated costs would still be applied).

A bit of background on Ontario electricity pricing:

Each hour, generators bid into the market with their capacity. The lowest bids are taken first, so, to ensure a generator's power gets used, they have to bid in competitively.

It's difficult for Hydro and nuclear generators to reduce capacity, so they always want to make sure their generated power gets used. On Saturday, demands overall in the province were very low, so generators actually bid in to the market with very low prices, and some generators, most likely the hydro electric and nuclear, actually bid in with negative prices.

Those negative bids ended up setting the price 19 out of 24 hours, including Earth Hour.

So, if a consumer who pays the hourly energy price, elected to be a good corporate citizen, and shift some load to another time, thus not using that power during Earth Hour, they may well have had to pay for the power, rather than receive payment for using the power. It's like being given money to take the commodity off the supplier's hands.

By: John Kiemele, Vice President