Many disruption scenarios can occur when a hurricane hits the U.S. directly. Whether it hits the Gulf Coast refineries and off shore oil rigs, New York Harbor refineries or the Carolina’s where there isn’t an energy infrastructure presence but a high density of population. I had the pleasure to meet with one of our experts, Mike Dombroski, Commercial Sales Account Manager to discuss in more detail how to better prepare and what could happen to fuel prices if you’re not ready.
On Saturday OPEC and non-OPEC producers agreed to raise production by 1 million barrels per day (bpd). Perhaps more important than that, they agreed to return to 100% compliance of the previously agreed upon production cuts of 1.8 million bpd. Production was lagging from struggling countries, i.e., Venezuela, Angola and Libya which effectively equated to a production cut of 2.8 million bpd. Most notably, Reuters reports that Venezuela has been pumping more than 500,000 bpd less than its target. So, let’s clear up the math. OPEC and its non-OPEC partners are effectively saying they are going to be ramping up production by 2 million bpd, 1 million to make up for lost compliance and 1 million in additional capacity. How are the markets reacting? The Brent-WTI spread is getting slammed.
On May 22nd we were hoping for a market correction prior to the holiday weekend. On that day the front month NYMEX RBOB contract settled at $2.2636. Climbing from May 2nd, close @ $2.0803. A whooping $0.18 price move inflicting severe pain on your local gas station distributor leaving retail gasoline margins negative in some markets and begging the question, who wants to blink first and raise prices?
Oil prices are lower this morning sparked by increasing trade war fears between China and the U.S. after President Trump sought to impose another $200 billion worth of tariffs yesterday.