Contributing Member of the Energy & Industrials Councils

GLG News by this Author

Oil and Natural Gas No Longer Mix

October 8, 2009

Analysis of:Cold winter may not dent U.S. heating oil, diesel glut | www.reuters.com

Oil and Natural Gas prices have become disconnected in the USA with respect to historical comparisons. Over the years, utilities and others have switched from oil based products to natural gas. In today's price environment, if one has not already switched from oil to gas, one probably can't due to supply or logistics considerations.

Turning the Crude Oil Surplus into a Distillate Surplus

June 8, 2009

Analysis of:Crude oil in floating storage reduced by 20m barrels | www.lloydslist.com

There is good news and bad news. As floating crude oil inventory cleans up, the crude oil market perceives increased demand and consequently higher crude oil prices ahead. Good for oil producers. On the other hand, releasing VLCC's from storage along with continued delivery of new builds depresses the tanker market. Bad for shipowners. The oil markets recently have bid up refining margins and utilization is rising. Good news for refiners. Unfortunately they are increasing the supply of distillate which is running out of land based storage. In the last week, traders took 3 more VLCC's for distillate storage. Bad for the heat crack, some good for tanker owners.

Murder in the Crude Morgue

April 2, 2009

Analysis of:Crude Truth Behind the Numbers that Govern Our Lives | business.timesonline.co.uk

The recent volatility in the crude oil market over the last several months resulted in the NYMEX Light Sweet Crude contract trading at a significant discount to Brent Futures. This phenomenon, coupled with a contango market structure led to the perception that the NYMEx crude oil contract had become disconnected or even irrelevant from the rest of the world oil market. The major oil markers in the Atlantic Basin, NYMEX Light Sweet Crude, ICE Brent and Dated Brent all have their limitations.

The NYMEX Crude Oil Contango

January 19, 2009

Analysis of:Oil Rises as Traders Attempt to Profit From Price Differentials | www.bloomberg.com

The NYMEX crude oil futures market is encouraging all those with storage facilities at Cushing OK to fill them. By the end of January this storage will be full.  Crude oil can be deliverred from many different sources. The next question is its disposal.

OPEC Attempts to Halt the Downward Price Spiral

December 12, 2008

Analysis of:Russia Volunteers to Join an OPEC Cut in Oil Output | www.nytimes.com

In spite of continued production cuts, OPEC has failed to stem the fall in prices over the last few months. As the world economy slows down, demand continues to fall and OPEC is playing catch up to balance supply with lower demand. OPEC needs to cut another 2 million barrels per day of production at its December 17 meeting in conjunction with a Russian cut of 300 to 500,000 barrels per day to stabilize prices.

Ethanol Fuel Standards for 2009

November 21, 2008

Analysis of:U.S. raises ethanol fuel standard for 2009 | www.upi.com

The content of this article is misleading. The EPA is simply enacting the provisions of the Energy Independence and Security Act of 2007. Furthermore, the EISA legislation sets Renewable Fuel Standards for total volume along with subsets requiring a minimum amount of a particular fuel.  After these specialized fuels are accounted for, the 2009 RFS of 11.1 billion gallons per year leaves 10.5 billion gallons to be fulfilled with any renewable fuel. This volume does not necessarily have to be provided by corn based ethanol, although on a practical matter it will. Theoretically 10.5 billion gallons could be filled with biodiesel. It all depends on relative economics, supply and the distribution system. 

Lower Oil Prices: Another Problem for Ethanol and Biodiesel Producers

November 11, 2008

Analysis of:Will plummeting gas prices hurt the push for alternative fuels? | abcnews.go.com

The Renewable Fuels Standard provides a baseload of demand for ethanol and biodiesel. However, the lower oil prices have impacted the economics for discretionary blending and could limit the continued growth in use of these alternative fuels.

Refiners Driven to Diesel Production

November 4, 2008

Analysis of:Demand for diesel fuel: Perspectives and future Considerations on prices and supply for diesel car and truck fuel users | www.dieselforum.org

During the middle of the summer in 2006, refining economics began to be turned upside down. NYMEX Heating oil futures prices and cash diesel prices were higher than NYMEX gasoline prices. This phenomena ended in February of 2007 but reappeared once in again by August and have remained with us since.  Consequently refiners have maximized distillate production setting all sorts of production and yield records in 2008. In addition, distillate exports also reached a record level and had it not been for this arbitrage, the USA would be overflowing with distillate inventory.  

Will Airline Investors Get a Nasty Surprise?

September 19, 2008

Analysis of:Airline Stocks Fly Through the Downturn | www.thestreet.com

Airlines that hedged their jet fuel may now be looking at substantial unrealized losses (perhaps some has already been realized) depending on where they initiated their jet fuel hedge. Will this result in a nasty earnings surprise?

Suppose they cancelled the Renewable Fuels Standard Tomorrow.....

July 1, 2008

Analysis of:American Feed Industry Association Urges EPA to Temporarily Waive RFS Mandate | www.grainnet.com

Even if the government cancelled, suspended or modified the Renewable Fuel Standard, industry would use a minimum 5.25 billion gallons per year just to meet federal, state and local requirements. Furthermore, given the current sales price of ethanol, there is great economic incentive to continue blending.   Therer are two big losers if the RFS was cancelled or suspended. The first is the value of RINS would plummet to zero. The second is the biodiesel industry since the 2009 RFS requires the use of 500 million gallons.

Oil Price Rise: Inventory Levels (Supply/Demand) or Market Caps (Speculation/Investment)

July 1, 2008

Analysis of:Oil Supply Growth Has Outpaced Demand Growth | www.downstreamtoday.com

There is a serious effort on all parties, governments, producers, or consumers to shift the blame of high oil prices elsewhere. However, I believe that the oil price rise is a combination of both these factors. If we could solve the issues around inventories and money flows an answer might appear.

Refiners Still Need to Buy Oil to Make Products

June 6, 2008

Analysis of:Oil Refinery May Help Gas Prices | www.keloland.com

There are two issues that I believe are melded into one in this article. The first is do we have enough refining capacity in the USA and the second is do we have alternative oil sources in the USA that could displace crude oil purchases from abroad.

How Safe are Big Oil Stocks? Could Oil Prices Really Fall?

May 28, 2008

Analysis of:Big Oil stocks seen as a safe place to be | www.iht.com

Crude Prices are up approximately 30% this year. Product prices, especially diesel fuel have soared as well. Prices could decline  for many reasons: A stronger dollar forcing some speculators out of a short dollar long commodity position, significant declines in demand (or declines in the rate of demand growth) due to a rapidly deteriorating economy, or declines in demand due to the lifting of fuel subsidies around the world.  

Crisis for US Airlines: Jet Fuel Hedging

May 22, 2008

Analysis of:Crisis for US airlines as oil prices defy gravity | www.platts.com

Airlines are faced with a dilemma-- to hedge or not to hedge and if so how. Even Southwest Airlines, who runs the most agressive hedging program is at risk to increases in price as they note there is limited opportunity for heddging jet fuel.

Save the SUV(maybe) and Dump the Truck

May 19, 2008

Analysis of:Don't Get Rid Of That SUV, Just Yet. Oil Is Dropping To Below $100 Before Year End!! | www.msnbc.msn.com

The USA is so focused on gasoline that in my opinion many have lost sight of the fact that the oil market is being led up by strong diesel demand around the world. Oil prices are up roughly 30% since the beginning of 2008, and although the fundamentals in the long term point to higher prices, there is a possibility of lower prices by the end of the year, one must just specify which commodity. Hurricane season aside, the fundamentals point ahead to a very weak gasoline market, a very strong diesel and heating oil market, and crude oil tucked in between the two.

Crude Surpasses $123: The Blame Game Begins

May 13, 2008

Analysis of:Crude surpasses $123 as Democrats blame speculators | db.riskwaters.com

With all commodity prices soaring and the consumer on the street being squeezed from all sides, politicians everywhere are looking to place blame. Speculation on the futures exchanges from the long side is only one of the many reasons that have caused oil prices to rise.

Refinery Conversion Capacity: Can't live without it.

April 15, 2008

Analysis of:Nippon Oil to shutter Toyama refinery | www.ogj.com

Refiners without VGO and residuum conversion capacity are going to face a difficult future. Gasoline and diesel sulfur specifications have been reduced in many parts of the world and will continue to be more restrictive. Bunker fuel will also have lower sulfur specifications in the future forcing refiners to invest in upgrading capacity or trying to find new uses for residual fuel. What seems like a time far out in the future is much closer when one considers optaining permitting, financing and completing construction of new processing units.

Sugar based Ethanol: Sweeter than Corn?

April 11, 2008

Analysis of:Biofuel startup slow going as slow as molasses | www.chron.com

For a number of very good reasons, the author posits that producing ethanol from sugar makes much more sense that making ethanol out of corn. Few can argue that converting sugar to ethanol is more efficient than converting starch to sugar and then to ethanol. However, I think that part of the story that has been missing is the one of unintended consequences: What is the result on food prices by substantially increasing the demand of an agricultural commodity into the fuel supply? We are now seeing the results.

US Ethanol PRofits

March 25, 2008

Analysis of:Weekly US ethanol profits steady depite corn rise | uk.reuters.com

The ethanol industry profitability continues to be plagued by many factors beyond its control. Volatile feedstock costs, infrastructure limitations and the threat of imports just as prices rise hamper margins. This calculation by Reuters on the date of this articel, March 6, 2008 may indicate better times ahead, but the fact of the matter is that Pacific Ethanol, Aventine, Verasun and US BioEnergy did not have a very good 2007.

Ethanol Production Capacity: Too Little, Too Much or Way Too Much

January 25, 2008

Analysis of:Table-US Ethanol capacity nears 7.9 bln gallons/yr | uk.reuters.com

Ethanol production capacity continues to rise. With a current capacity of 7.9 BG/yr, refiners and blenders need the timely completion of projects under construction to meet the 2008 mandate of 9 BG/yr. With another 5.4 BG/yr under construction this seems assured. However it seems to me the Table is missing at least 15 other projects that are well under construction totalling over 800 MMG/yr capacity and another 600MMG that have recently broken ground. Although logistics and distribution are impediments to increased use of ethanol throughout the country, the number one problem is state motor fuel quality regulations that prevent the addition of 10% ethanol to the finished gasoline sitting in the terminal. For example, the ethanol distirbution system is in place in Las Vegas for winter blending, why is it not used in the summer?

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