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May 23, 2014

May 23, 2014

 

Macroeconomic Factors

  • Industrial production increased due to utilities and then weakened with the warmer weather.
  • Employment has improved, as measured in both job losses (lower initial claims) and net job creation.
  • Today’s reports on new home sales show strength in March and April, once again after the worst of the weather. Mortgage rates have hit another new low.
  • China seems to be growing at slightly less than the 7.5% government target.

Potential Risks

The turmoil in Eastern Ukraine over the Russian Federation’s role in the region continues to dominate headlines in energy markets. A recent Bank of America commodities report suggests this is the most significant factor in moves this week:

“Crude continued its choppy, albeit range bound, trading yesterday as it rallied on stronger equities, increased tensions in the Ukraine over the weekend, and on expectations of crude stocks declining for this week’s stat. WTI rallied 60 cents in the prompt, breaking through its 200 day moving average to settle at $100.59/bbl. Front spreads were lower, however, as they remain in a tight range while the spreads further out the curve were stronger. Brent rallied as well, ignoring headlines of a further ramp up in Libyan exports given similar reports in the past haven’t materialized. Brent’s gains were capped around $108.80/bbl as it gained 52 cents on the day to settle at $108.41/bbl.”

We will continue to keep a close eye on geopolitical events and short-term market trends to assess the potential risk of price increases at the pump. The summer months hold much potential for unforeseen conflicts to bump up prices around the nation.

Pricing

In April, the forward curve maintained the relatively stable prices seen in the market over the winter. May futures reflect an increase across the entire curve. The market expects a substantial rise in coming months due to the summer driving season and the potential for hurricanes in the Gulf of Mexico. Those acting to lock in prices do not buy the high current spot price, of course. It is easily possible to assure price stability for the much lower future prices – and to do so before hurricane season.

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

Filed under:Eyes on Energy | by Fuel Expert @ 1:51 pm |