Today’s WSJ does a nice job trying to summarize what’s going on in US energy markets here…
“Tropical Storm Harvey’s crippling of Gulf Coast refineries, ports and pipelines is being felt across the country and even globally, a result of a U.S. energy boom that has made the country and the world increasingly reliant on Texas.
Harvey shut down a third Gulf Coast refining center Wednesday, and is knocking on the door of a fourth. More than a dozen refineries are affected—including the country’s two biggest, Saudi Arabian Oil Co.’s Motiva facility in Port Arthur and Exxon Mobil Corp.’s XOM -0.46% Baytown facility—cumulatively representing more than 30% of U.S. refining capacity, according to IHS Markit.
More than 3 million barrels a day of refining capacity in Texas remained shut Wednesday morning, according to analysts, more than Brazil’s daily national consumption of petroleum products. Three shuttered refineries said on Wednesday they were either starting up or planning to start up again.
Port closures are compounding the refineries’ woes. Port Houston has warned shippers it is likely to be closed to large vessels at least through Saturday. U.S. Coast Guard officials say it could be weeks before large container ships and oil tankers can safely navigate the Houston Ship Channel leading into the port, the second busiest in the U.S. by tonnage, and a U.S. Customs and Border Protection official said Tuesday that Houston’s port will likely be closed to large ships “for the foreseeable future.””
And, expect API and EIA weekly status reports to be noisier than usual going forward….
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Here is today’s chart (from barchart.com) of October gas cracks (RBOB futures minus crude futures):
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MarketWatch has a nice chart comparing Bitcoin’s price move to other markets that have rallied sharply in the past:
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Here is a price chart from barchart.com showing a long term perspective of natural gas futures:
Note the price spike in late 2005 due to hurricanes Katrina and Rita… Here is Bloomberg’s Liam Denning on why it’s different this time:
“The key factor here is the shale boom. In its early stages, it got added impetus from surging natural-gas prices, due to both the commodity supercycle in the decade before 2014 and disaster-related spikes such as those in the summer and fall of 2005.”
Here is Liam’s chart:
Here is the link:
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Michael Batnick of The Irrelevant Investor is buying gold… He explains why here: http://theirrelevantinvestor.com/2017/08/28/im-buying-gold/
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Here is what Harvey is doing to the relationship between crude oil and gasoline… Crude prices have moved lower (less production and fewer net imports is offset by less demand for oil as many refineries have been shut) and gasoline prices have moved sharply higher (refinery shut downs more than offset a decline in gasoline demand in the Houston area)… Here is the crack spread (gasoline minus crude) from barchart.com:
And here is the oil VIX…+ read more
CME conversation with original founders of AHL, a very successful quantitative trading group:
Top Traders Round Table – Episode 11
AHL Founders: Mike Adam, David Harding, Marty Lueck
The guests in this featured episode are the founders of AHL: Michael Adam and Marty Lueck, co-founders of Aspect Capital, and David Harding, founder and CEO of Winton Capital.
The story behind AHL
Why the “empiricist” outlook at AHL gave the team an early advantage
How technology’s limits pushed their ideas
The breakthroughs of AHL’s early research and how it still applies today
The crucial role the early clients had in AHL’s development
The power of finding the right people to work with
How the original deal between MAN and MINT influenced AHL
What the larger financial community initially thought about AHL
as a share of consumer spending…. Carpe Diem uses data from the BEA to construct the following chart:
Here is the link: https://www.aei.org/publication/tuesday-afternoon-links-24/+ read more
Here is a chart from Advisor Perspectives showing gasoline sales per capita:
And here are some reasons they give for the decline:
“In addition to improvements in fuel efficiency, declines in gasoline consumption can be attributable in large part to some powerful secular changes in US demographics and cultural in general:
We have an aging population leaving the workforce, which we clearly see in the sustained contraction in the employment-population ratio.
There is growing trend toward a portable workplace and the ability to work from home.
Social media has provided powerful alternatives to face-to-face interaction requiring transportation (Internet apps, games, the ubiquitous mobile phone for talk and texting).
There has been a general trend in young adults to drive less (related to points two and three above). See this report at the U.S. PIRG website for details.
The US is experiencing accelerating urban population growth, which reduces the per-capita dependence on gasoline.”
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From the EIA’s “This Week in Petroleum”:
“Voluntary production cuts from some Organization of the Petroleum Exporting Countries (OPEC) members since November 2016 have reduced the supply of medium and heavy quality crude oil to the world market. In addition, crude oil production outages in Canada and declines in production from Mexico and Venezuela are further reducing the total amount of medium and heavy crude oil available to refiners (Figure 1), although more gradually than OPEC production cuts. In contrast, the two OPEC members exempt from limiting production, Libya and Nigeria, have increased production of their light-sweet crude oil in recent months, although Nigeria’s production remains below its January 2016 level. In addition, much of the increase in U.S. production has come from shale formations in the Lower 48 states, which is primarily light crude oil.”
Here are price differentials:
There is more here: https://www.eia.gov/petroleum/weekly/+ read more