Well, it has certainly been an eventful first few days to kick off 2011, with natural gas all over the shop, as cooler weather outlooks rally prices, while bearish fundamentals hang out in the background, heckling the bulls. Crude is baffled by a stronger dollar despite rising equities and moderately decent data; hence it has been bashed back below $90, as European default worries pummel the euro, making the US look relatively spry in comparison. Meanwhile, the monkeys are the smart ones and have sought out the radiators in this most frigid of months. Let’s forget about frostbite for these bites instead: » read more
Posts Tagged ‘Economy’
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Jan 7 2011 @ 10:55am by Matt Smith in Crude Oil, Global Energy, Natural Gas, UK natural gas, risk management
Burrito Bites
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Jan 5 2011 @ 10:50pm by Matt Smith in Capital Markets, Crude Oil, Economy, Natural Gas, risk management
Hare or the Dog? Commodities in the Year of the Rabbit
Happy 2011! I hope this finds you in fine fettle. I would like to kick off 2011 by highlighting some themes (splatter gun style) which I expect to be an undercurrent in this year’s voyage through the rough seas that is commodityworld™. I nearly managed to avoid making any predictions this year (after last year’s farcical forecasts – $100 oil, rising nat gas prices, Susan Boyle dating, etc..) until Tom Fowler from Fuelfix asked me for some (here), so I figured I would expand on a couple of them – not because they are revelationary, but because they are worth keeping an eye on. » read more
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Nov 18 2010 @ 10:44am by Matt Smith in Capital Markets, Economy, Natural Gas, risk management
Harry Potter and the Energy Sector
What with all the Harry Potter excitement going round at the moment, I figured this would be topical this week…..various aspects of the industrial sector are being pushed and pulled by the forces of good and evil; so let’s take a look at three examples of the battles that are raging, through the medium of our Hogwartian hero and his friends / foes. » read more
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Nov 12 2010 @ 10:55am by Matt Smith in Capital Markets, Crude Oil, Economy, Global Energy, Natural Gas
Burrito Bites
Life is not a race, but a journey. (But if it were a race, wouldn’t you want it to be at Churchill Downs?!?). At this point in our journey through the year we can see Thanksgiving off the starboard bow, while Christmas is on the horizon. In the foreground and clearly in focus is crude oil, with its eyes on the prize of $90 (although getting cold feet today), while el natster is grappling and grasping to grab onto the $4 handle as we reach a record storage level (with at least one further injection to come). Next week sees a return to form in the flow of economic data, but for now, let’s get past the finishing post of this week with the help of some fast food: » read more
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Oct 7 2010 @ 9:39am by Matt Smith in Capital Markets, Crude Oil, Economy, Global Energy, Natural Gas, UK natural gas, energy consulting
Burrito Review of Q3
My kingdom for a horse.
Once again, time carries us over the threshold of another quarterly milestone. These past three months have brought us confirmation that the last recession has ended (in June 2009), while general markets have rallied on the hope that things are so bad that further measures will be taken to keep us from contracting again. The past ninety-two days have seen BP finally plugging the oil spill in the Gulf of Mexico (as oil prices nonchalantly went on their way), while natural gas has continued its slide down the pricing pole on further faltering fundamentals. Spain won the World Cup, the US dollar lost its luster, and some people in China spent a chunk of this past quarter in a traffic jam. Let’s use this juncture to take a look at the energy highs and lows and somewhere inbetwixts:
Scores on the doors for Q3, 2010:
US natural gas prompt month: -16.1%
US natural gas calendar 2011 strip: -16.8%
NBP UK natural gas prompt month: +4.0%
NBP UK natural gas calendar 2011 strip: -7.4%
German power prompt month: +2.9%
German power calendar 2011 strip: -6.2%
WTI crude oil prompt month: +5.7%
WTI crude oil calendar 2011 strip: +6.4%
S&P500: +10.7%
US Dollar Index: -8.5%
The above price performances sliced and diced in 156 words:
US natural gas was whoop-bang-walloped in the past quarter as production rose to a record high, more than negating the fourth hottest US summer on record and the increased cooling demand (= air conditioning) this brought. A non-eventful hurricane season only added further color to this bearish picture, and both prompt and calendar strips both slid. Across the pond, Europe saw modest gains on the prompt month for both natural gas and power due to unpredictable flows from such exporters as Norway (as well as a contangoed contract rollover), while hope that these supply issues were a transient glitch ushered the longer end of the curve lower. Crude saw a strong quarter across the forward curve as a weaker dollar and strong emerging market demand continued to rev the global economic engine (from stalling), whilst equities also buoyed the crude complex on hopes of a global recovery, regardless of being souped-up by government intervention or not.
Biggest energy-related non-event of the quarter:
Hurricane Season. Despite there being an above-average number of named storms this year (15 with Otto appearing yesterday, versus the average of 11.3), and despite the EIA predicting 146 Bcf of production to be shut in due to hurricane season, only hurricanes Alex and Bonnie caused any outages of note. And the impact of this gruesome twosome totaled less than 10 Bcf. An eventful non-event it has been.
The oddest energy-related event of the quarter:
One thing that has taken the crude complex by surprise is the blowout in the crack spread for heating oil (the exchange-traded name for the diesel contract). Despite distillate inventories being at historically glut-like levels, the crack spread (measuring the profitability of producing a barrel of heating oil from a barrel of crude) has risen as high as $15 on increased demand from Europe and refinery outages in Latin America.
The claustrophobic event of the quarter:
Chilean miners spent the majority of Q3 trapped underground.
Burrito crystal ball prediction for next quarter:
Q4 will be the quarter for rollovers. Precipitously-poised economic data will topple to the dark side - manufacturing data, housing numbers, and the unemployment rate. Eeekola.
The positive end to this review:
Fall, Thanksgiving, Christmas, and mulled wine – Q4 rocks.
