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June 14, 2013

Macroeconomic Factors

  • The economic picture remains mixed, with below-trend U.S. growth of about 2%.
  • Despite the continuing fiscal drag from budget cuts, leading economic forecasting firms Moody’s Analytics and Macroeconomic Advisers both see the probability of a strong 2014 as the economy reaches “escape velocity.”
  • Chinese GDP is now projected to be somewhat lower, perhaps 7.7% growth instead of 8%.

Potential Risks

Refinery outages pushed gas prices higher in the Midwest last month, particularly around the Memorial Day weekend. Demand remained consistent as prices continued to soar – starting off the summer driving season with a sharp kick.

 

The USA Today reported:

 

“Gas prices in Minnesota, Iowa, Missouri, North Dakota, South Dakota, Nebraska, Ohio, Oklahoma and Wisconsin have spiked up to 40 cents a gallon the past week alone…

While the USA may be dripping in new found crude oil deposits and early May supplies were at their highest levels since the early 1930s, issues at a handful of refineries that turn crude into gasoline and diesel fuel underscore how kinks in the supply chain can cause quick surges in what consumers pay at the pump.

In Minnesota, regular, unleaded gas averaged $4.15 a gallon heading into the weekend — an all-time state record. With some Twin Cities outlets now selling gas for more than $4.50 a gallon, making Minnesota the priciest state for gasoline in the continental U.S., overtaking California, which now averages $4.06 a gallon. In oil-rich North Dakota, prices average $3.98, also a record-high.

Pricing

The curve for the month of June reflects anticipated higher prices moving into the summer driving season. Though higher than May, it is important to note that the forward curve had not reached the peak it did in April earlier this year. It is likely that speculation over geopolitical tensions is likely for the exaggeration in spring prices. Most importantly, you can see that there are still good opportunities to lock in prices for twelve-month periods beginning in October, 2013 or later.

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

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