The input price differential is not isolated to the U.S. In fact, Valero Energy’s last quarter numbers were lower than expectations due to the fact that their Quebec City refinery dragged down results as this facility uses Brent priced crude.

This pricing problem has now grow exponentially with the Europeans now cutting back on production of gasoline and diesel for exactly the same reasons that being their refining margins are verging on negative with the high input costs not recoverable at the rack.

By: Roger McKnight, Senior Petroleum Analyst

Find out more about the fragility of the refining system in this week’s Energy Report. To find more about subscription rates contact us at info@en-pro.com.

There has been more than enough media coverage on the lingering Greek debt crisis nightmare, and inaction from the European financial misfits.

Instead, we would like to discuss why recent gasoline and diesel prices have not decreased substantially with crude trading $10U.S./barrel lower on October 4 than on September 21.

By: Roger McKnight, Senior Petroleum Analyst

For the answers, check out this week’s Energy Report. For subscription rates contact us at info@en-pro.com.

Let’s start with the crude oil puzzle. As we have reported to the point of exhaustion, the spread between WTI crude and Brent crude is normally a little less than $2/bbl. Today the spread is $27/bbl with Brent on the high side at $115/bbl. On June 23 the Paris based IEA, a collection of 28 walking dust bunnies, decided to attempt to lower the Brent crude price by releasing 1.6 million barrels of crude into the market. In and around that time Brent was trading in the range of $105 to $120/bbl. So obviously Plan A was a waste of crucial reserve inventory and time. Brent continues to increase in price following the flood of dollars announced this week in an attempt to prevent the collapse of the Greek, and who knows who else’s banking “system” for want of a better word.

This move increased equity value in Europe lowered the U.S. dollar, and hey, presto! up goes Brent, or should we call it the Rent.

By: Roger McKnight, Senior Petroleum Analyst

What we should all be fearful of is… for more information on subscription rates, contact us at info@en-pro.com.

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

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.

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.

The end of last week and the beginning of this week was reminiscent of the preliminary flash crash bash and temporary market rebound we all endured at the beginning of the great recession of 2008. On Monday panic and nauseating fear consumed the psyche of investors when Standard & Poor’s announced they were downgrading the U.S. government’s credit rating to AA. Investors sold equities and most commodities including oil, based on expectations for significantly lower demands and bought into the safe haven of gold elevating its price to new record highs. This was an extremely exaggerated reaction by investors because taxes and revenues flowing into the U.S. Treasury for August will cover debt obligations six times over.

By: Roger McKnight, Senior Petroleum Advisor

What does it all mean for Canada? And what else is driving all this fear and doubt? Find out in this week’s Energy Report. For subscription rates, email us at info@en-pro.com.

Avoiding the economic data that I am sure you are all familiar with there are a few aspects of the petroleum side of things worth taking note of. The U.S. inventories have been somewhat ignored by the speculators for some time now, with the focus being on the ebb and flow of the global financial markets and the U.S. economy, which has been in long term ebb.

With two weeks left in the driving season the 3.5 million bbl decrease in gasoline inventories is of no concern especially when the inventories are in the upper range of the 5-year average. It is interesting to note that gasoline production and import levels both dropped as well as the refinery runs, which indicates that the oil companies are making every effort to maintain the exceptionally high refining margins they are currently enjoying.

How high are these margins?

By: Roger McKnight, Senior Petroleum Advisor

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