Connect with Us

The Impact of Winter Storms on Crude and Gasoline $

We have a significant contrast in impacts on two different forms of energy. First, winter storms have affected production around the country in distillates and refined fuels. Refinery outages and delays in production have forced some facilities to lose as much as a full week of production. There is a lot of impact from these conditions.

 

First, crude oil prices fell significantly in trading today – for several reasons. An inventory report showed that the amount of crude being held in the United States rose 4.14 million barrels. Contrasting this was a significant drop in gasoline inventories by 2.88 million barrels. Therefore, despite the drop in crude oil prices – we are getting a rise at the gas pump for fuel at the consumer level. And, with a significant winter storm hitting the US Midwest, production at refiners will be impacted by another several days – which will impact inventories in the weeks ahead.

 

Second, bad economic news out of Europe have helped push Brent North Sea Crude prices downward. The risk of a global recession is not yet being discussed in the hallowed halls of economics, but the markets are starting to respond like it could happen. Brent has fallen from $118 per barrel just this past Monday to currently trading at about $113 a barrel. West Texas Intermediate fell below $93 a barrel today. If crude oil prices were to stay in these ranges, it would eventually help to pull retail fuel prices downward.

 

If there is a major concern with the current dropping of oil prices it would be this: much of the price decline in oil prices is because of new concerns over a slowing global economy as mentioned. That turnaround had been stark and quick. Just this past Monday, analysts were bullish about the current global economic situation – anticipating that conditions were a lot better than perhaps expected. That sentiment has quickly changed as various economic reports have been released this week.

 

In fact, all commodities have weakened as a result of the global economic risk that appears to be factoring into the broader economic discussion. It’s demand destruction at its most aggressive point. We’ll have to see if sentiment can change quick enough to reverse some of the impacts we see on commodity prices in the near term.

 

You must be logged in to post a comment Login