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February 20, 2014

February 20, 2014

 

Macroeconomic Factors

  • The simple fact is that we have a couple of months of data where the implications are unclear. The recent Fed minutes said as much. We expect continuing modest growth in the spring.
  • China looks a little weaker based upon the HSBC “flash PMI” but still slightly positive on the “official” version. We prefer to look at harderdata, and that seems to show continuing growth in the 7 – 7.5% range.
  • The extreme cold is also influencing energy demand, mostly natural gas prices. There is spillover into gasoline.
  • And finally, we have the potential for increased supply. It was a pretty lucky season for hurricanes and other weather effects. This has shifted the official forecasts in a friendly direction.

 

Potential Risks

As the month of February draws to a close, the rise in crude oil prices that accompanies the spring and summer becomes more apparent. According to

Newsday:

“The price of gasoline held steady into early February, but an increase is almost inevitable this time of year. Pump prices have gone up an average 31 cents per gallon in February over the past three years. And although this year’s rise might not reach the heights of years past, there are reasons for drivers in some regions – like the Northeast – to worry about a painful spike.

‘We’re going to get increases and they are going to be noticeable,’ says Tom Kloza, chief oil analyst at Gasbuddy.com and the Oil Price Information Service. ‘We’re going to get that pop relatively soon.’ The price of crude oil has risen 8 percent over the past month, to $100 per barrel. And analysts expect fuel supplies to begin to decline as refineries dial back production to perform maintenance and make the switch to summer fuels.”

Pricing

The forward price curve for the month of February appears a bit higher than the year-end projections, but levels out in the distant future. This indicates that the market expects geopolitical pressures to push crude oil prices up to levels not seen since the beginning of fall.

 

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

Filed under:Eyes on Energy | by Fuel Expert @ 4:26 pm |