Category Archives: Energy

What About Locking In Extended Diesel or Natural Gas?

From everything I keep hearing, I think it’s best to remain patient. I think late-Jan to mid-Feb might provide an even better opportunity to lock in extended coverage. The EIA recently released info that showed Natural gas working inventories on November 28 totaled 3.41 trillion cubic feet (Tcf), 0.23 Tcf (6%) below the level at the same time a year ago and 0.37 Tcf (10%) below the previous five-year average (2009-13).  Despite the lower stocks at the start of this winter’s heating season, EIA expects the Henry Hub natural gas spot price to average $3.98/million British thermal units (MMBtu) this winter compared with $4.53/MMBtu last winter, reflecting both lower expected heating demand and higher natural gas production this winter. (Source: US Energy Information Administration Outlook)

Oil prices drop to their lowest since October 2011

Oil seems to​ be​ all the talk inside the trade as it​’​s down almost 30% since early-summer: AAA is saying this is leaving US consumers with an extra $250 million a day in their pocket when compared to mid-June price levels. The question is how long can oil producers afford to hang on? Keep in mind, several nations and private oil explorations companies are already being forced to digest prices below their cost of production. Below is a great map from Reuters and Deutsche Bank that has been floating around the trade. As you can see, oil prices below $80 could spell disaster for countries like Iran, Nigeria, Russia, and Venezuela… maybe there’s a “bigger picture” item being put into play by some of the global powers? I’ve already heard rumblings from inside Russia that they may soon need to make massive government spending cuts. With Russia already being considered a “high risk” creditor it might be next to impossible for them to borrow money. W​e’l​l see how popular Putin is inside Russia once their government is forced to make massive cuts in public spending? Let’s also not forget that a nuclear Iran is a huge thorn in the side for Saudi Arabia. Bottom-line, the North American shale boom has flattened the supply curve and OPEC is no longer the only price determining player in the game. Maybe the Saudis realize this and are trying to run some of the other players out of the game? Maybe there is more global political jockeying here than we care to realize? In any regard it appears the Saudis are serious about shaking up the world of energy production as we know it. I’m afraid this is just the beginning of a long process with many uncertainties associated. Be careful swimming out too far into the “energy” space…