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April 10, 2013

April 10, 2013


Macroeconomic Factors

  • During March, the picture was more mixed in the U.S. Last week’s data showed employment growth below recent trends.
  • The European economy continues to muddle along at recession levels, but the Chinese economy is seen by most to be growing at close to 8%.
  • Energy prices – especially natural gas in the U.S. – were supported by cold weather in March.

Potential Risks

The energy risk factors were showing improvement until about a week ago, when bellicose statements from North Korea caused tension there to ratchet higher. While this is not an “energy region” the market reaction demonstrates how international tension anywhere can affect markets. Our discussion of this topic will be a little longer this month, and we will split it into two parts.


The most pressing international issue is the potential for escalating violence on the Korean Peninsula. Since the North Korean government successfully conducted its third nuclear test last February, the international community has become increasingly uncomfortable with the stability of the region. The United States has been conducting joint military exercises with South Korea and Japan to show support for its allies, which has in turn prompted strong rhetoric from North Korea. On March 30, the North Korean government repudiated the cease-fire that served to end the hostilities of the 1950-53 Korean War.

Most recently, their government has issued safety warnings to foreign embassies in the event that there is an outbreak of violence near the border between North and South Korea.

The Guardian reports:

“North Korea has warned foreign embassies in Pyongyang that it cannot guarantee their safety from the threat of conflict after 10 April, and has advised them to consider pulling their staff out of the capital.

The message to diplomats came as tensions in the region continued to escalate despite international efforts to defuse the situation.

South Korea’s Yonhap news agency cited Seoul military sources as saying two Musudan missiles had been positioned on mobile launchers on North Korea’s east coast. The missiles are believed to have a range of at least 1,875 miles. That would cover South Korea and Japan and possibly the US territory of Guam in the Pacific Ocean.

South Korea reacted to the missile activity by deploying two battleships capable of intercepting and destroying ballistic missiles. The US has already moved interceptor missiles and warships to the region to defend against a possible attack.”

The initial effect on oil markets was to push prices higher, without any clear reason. We will continue to monitor the situation closely.


After an anomalous move near the beginning of March, the forward price curve for the month of April has moved higher while retaining the expected seasonal pattern. While spot prices are expected to move lower later in the year, the overall curve is higher than at any point so far in 2013.

To download a more detailed version of this report CLICK HERE.

Filed under:Eyes on Energy | by Fuel Expert @ 4:04 pm |