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September 17, 2013

September 17, 2013

 

Macroeconomic Factors

  • The Chinese PMI reports have moved back into expansion, and so has Europe.
  • A good source for monitoring 97% of the world economy shows the rebound: World Economic Update.
  • On the US economic front, most of the data has been encouraging, including initial jobless claims and housing numbers.

Eyes on Energy September 2013Eyes on Energy September 2013

  • The breaking news about Larry Summers and the Fed Chair position has caused a knee-jerk reaction expecting a softer Fed policy and therefore a weaker dollar.

Potential Risks

There have been several important developments since our August report. Prompted by widespread reports of chemical weapons use on August 21, the Obama Administration reacted quickly to address its earlier contention that this would be a “red line” which would invite foreign intervention. However, an almost-certain veto on the United Nations Security Council set the stage for a more controversial unilateral strike. Although the attack seemed imminent, the Assad Regime agreed to a last minute deal brokered by Russian diplomats. They would agree to destroy their chemical weapons with inspection by the international community. Oilprice.com describes the situation as follows:

“Washington has backed down over a strike on Syria—for now—and oil prices have responded with crude oil for October delivery falling $1.01 to close on Monday this week at $109.52 a barrel in New York. Wholesale gas prices also fell 5 cents to $2.80 per gallon, and heating oil declined 5 cents to $3.12 per gallon, while natural gas rose 8 cents to $3.61 per 1,000 cubic feet.

On Monday, despite the wildly varying statements from White House officials, it became clear that the Obama administration is eyeing a “diplomatic” solution in the form of a proposal from Russia to hand the UN control over Assad’s chemical weapons.”

Pricing

Clearly, the forward price curve for the month of September projects prices being significantly higher than they have been at any other point in the last five months. While the margin gets smaller, the price increase continues all the way through next year’s summer driving season. It is therefore reasonable to conclude that the primary cause of this escalation is more than likely tied to a broadening conflict in the Middle East.

 

 

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

 

Filed under:Eyes on Energy | by Fuel Expert @ 1:50 pm |