The En-Pro Blog

No. Wait. This isn’t Australia because I just checked my accent and it is understandable. No it must be the stampede of the notorious Wall Street Lemmings we all have been reading about this week, as they all search for the appropriate cliff to hurl themselves off of, following the dire financial news we have been inundated with recently.

First you’ve all read the newspapers and I’m not a financial expert by any means, but the events over the last week do influence the costs of crude and transportation fuels so I feel obligated to offer an opinion on where things stand now and where they might go. After what seemed months of soap opera theatrics the US government increased its own national credit card limit known as the debt ceiling. The stock market euphoria lasted about two hours until reality set in and the Lemmings realized that a deficit reduction would mean less spending by Uncle Sam (the biggest spender in the universe). Now we have the growing financial tumor in Europe which has now become inoperable due to lack of any surgeon in the EU with the skills required to lessen the pain. The problems in the US and Europe have caused Lemming panic which has taken money out of commodities and equities and into treasuries and precious metals. As a result crude oil, being a commodity, has dropped like a stone not only because it is a commodity but because the speculators believe that slower economic growth will decrease demand. Now there’s a revelation.

By: Roger McKnight, Senior Petroleum Advisor

What about the Canadian side of things? Find out more in this week’s Energy Report. For subscription rates, email us at info@en-pro.com

We have seen a whole lot of trouble tumbling around us this week…

It began with the unexpected passing of Jack Layton creating a leadership void in Canada. Later in the week a few earthquakes, a credit downgrade in Japan, the demise of the Gaddafi regime and to end the week, the approach of Hurricane Irene bearing down on the east coast of the United States.

This could be a perfect script for a new Hollywood disaster movie called “Augustarmageddon.”

We are fortunate Hurricane Irene will miss the highly concentrated and vulnerable oil production and refining complex of the U.S. Gulf Coast. This category 4 hurricane is expected to strike the Outer Banks of North Carolina on Saturday with winds in excess of 115 mph or 185 kph, causing major flooding, gasoline demand destruction and refinery closures in Pennsylvania, New Jersey and Ohio, these three states being home to 13 refineries with a capacity of 1.6 million barrels per day. The mass evacuation of millions of people along the eastern seaboard will affect normal business routines well into next week. Depending on the extent of flooding, power outages and property damage, we anticipate next week’s U.S. inventory report to show a significant rise in gasoline and diesel inventories which could help to lower crude and fuel prices in the short term. Traders in New York will be watching closely and may increase daily fuel spot prices if supply disruptions occur.

By: John Voros, Senior Petroleum Advisor

Find out more in this week’s Energy Report. For subscription rates, email us at info@en-pro.com.

Since August 1, crude prices have fallen over 15% reaching a low of almost $75U.S./barrel during after-hours trading on Monday August 8. With this dramatic slide in crude prices, we have established a new floor of $80U.S./barrel. In our opinion crude will trade in a range of $80 - $90U.S./barrel for the near term. With the fragile global economy and the prospects of the U.S. sinking into the quicksand of a second recession, the world cannot afford higher energy costs. Saudi Arabia is expected to continue replacing the interrupted supply from Libya and, going into the fall, expect global supplies to slightly increase with lower demands supporting lower prices.
OPEC’s next production quota meeting is scheduled for December 14 in Vienna. This week the struggling Iranians are pressing the Saudis to hold an emergency meeting to discuss production cuts. In our view this will not happen unless crude prices fall and remain well below $75U.S./barrel, which is outside OPEC’s comfort zone.

What about the major dissension between OPEC members? Since their June meeting, when they were unable to come to an agreement on production quotas, they’ve been producing as they please. And find out what we don’t expect unless there is a major geopolitical/terrorist event or a devastating hurricane that hits the concentrated refinery and production network in the U.S. Gulf Coast.

By: Roger McKnight, Senior Petroleum Advisor

Find out in this week’s Energy Report. For subscription rates, email us at info@en-pro.com.