The devastation in the state of Oklahoma due to recent tornadoes has been terrible over the last 24 hours. With the ravaging of the storm through the town of Moore it has generated destruction totaling millions of dollars and also stole the lives of some not ready to leave this earth. We keep all effected by the storm in our hearts and minds and wish them health and happiness.
The markets have been seemingly unharmed from the storm as the market continues its slide to try to correct from July barrel trades (for gasoline). Not even 5 days ago there was a .56 differential between June and July trades in Group 3 as there were inventory shortages throughout the mid-con due to both short positions and refinery issues. With the Coffeyville refinery coming back online and HollyFrontier's El Dorado, KS refinery coming back on we are seeing the market start to correct itself. With the time left in the month of May, we should start to see values get back in line with July scenarios.
Tuesday, May 21, 2013
Tuesday, May 14, 2013
Group 3/Chicago Unleaded
Well - today has been more than eventfull....
Group 3 basis is up .21 today moving the number to a total of .50 at the current state. Based on these values marketers would be best served managing their gasoline inventories based off Chicago or even Gulf Coast economics (depending upon geographic placement). Today we are seeing differentials close to .20 - .30 per gallon between the different pipelines and are offering arbitrage advantages for marketers. From what is looks like, there is a shortage in PADD 2 and this, coupled with Group 3 refinery outages are making a blast in basis. A source told me he is under the impression there are a number of marketers who tried to take a short position due to the backwardation in the market and wanted to try to offload the product before the cycle shift. This came up to a substantial number of short barrels in the Group and moved basis much higher than in other areas of the country.
If you have the ability to purchase Chicago or Gulf Coast economics, I would suggest looking into those areas to source your supply needs.
Group 3 basis is up .21 today moving the number to a total of .50 at the current state. Based on these values marketers would be best served managing their gasoline inventories based off Chicago or even Gulf Coast economics (depending upon geographic placement). Today we are seeing differentials close to .20 - .30 per gallon between the different pipelines and are offering arbitrage advantages for marketers. From what is looks like, there is a shortage in PADD 2 and this, coupled with Group 3 refinery outages are making a blast in basis. A source told me he is under the impression there are a number of marketers who tried to take a short position due to the backwardation in the market and wanted to try to offload the product before the cycle shift. This came up to a substantial number of short barrels in the Group and moved basis much higher than in other areas of the country.
If you have the ability to purchase Chicago or Gulf Coast economics, I would suggest looking into those areas to source your supply needs.
Thursday, May 9, 2013
Chicago ULSD
Well as I'm sure most of you (in the Chicago market) have noticed ULSD skyrocketing earlier this week putting the price differential off Group 3 close to .25/gallon. Anyone looking for cheap diesel in the Chicago market should look to finding supply out of Bettendorf, IA. HWRT and Growmark have some pretty competitive pricing and they are not gouging based on Chicago basis. With freight averaging between .10 & .12 per gallon, the savings is still substantial. This also proves to be a competitive advantage heading into middle/southern Illinois as well as they are making increased profits based on Chicago ULSD basis jumping so high.
Saturday, May 4, 2013
Back at it
Well it has been a while since my last post. A lot has been going on in the market and I have been taking my time trying to learn all the issues/opportunities as they arise. The biggest thing I'm noticing is the Platts vs. rack benefits. Chicago Platts numbers are incredible compared to what is being offered at the rack level in the Chicago market (at least on diesel). If you are a large distillate user and you have the ability to lock in some contract volumes at a reasonable Platts number, I would jump on it....we're seeing savings close to .01 - .025 below low rack. We have also noticed a huge benefit with biodiesel as well. As you all know I'm a huge proponent of the product and have pushed it as a viable competitive solution for the last couple years and it is back in full force again right now. Not only do you get a tax incentive for an 11% blend (no sales tax) in Chicago, but the savings on the physical product is also substantial. Right now we are seeing a .16/gallon savings on a B20 blend NOT including an additional, probably, .11/gallon savings on not paying sales tax. I don't know about you, but for .27/gallon I'm all over using some FAME.
There have also been some weather related issues as I'm sure you've all heard. With the heavy rainstorm a couple weeks ago, we had the Forest View Terminal under 4 feet of water and it is STILL closed at this point. They expect it to be back up and running next week, but considering the conditions, I'm cautiously optimistic. Another issue which has come up is the possibility of the Enterprise pipeline discontinuing shipments of diesel starting July 1st. There have been people argue this issue and put in to have it stopped, but it still looks as though it is going to be inevitable. Though this does not have a direct effect on me, it will have an effect on many of the jobbers/retailers in the Southern Illinois/Southern Indiana markets. If you are in these markets I would suggest you contact your jobber/supplier and ask what options they are going to be offering for you to stay competitive in the market. For companies with proprietary terminals (like HWRT & Marathon) this non-shipment can increase their margins on distillate substantially as they are now going to be the only games in town offering the product. I'm not saying they would do that, but hey....supply and demand right?
There have also been some weather related issues as I'm sure you've all heard. With the heavy rainstorm a couple weeks ago, we had the Forest View Terminal under 4 feet of water and it is STILL closed at this point. They expect it to be back up and running next week, but considering the conditions, I'm cautiously optimistic. Another issue which has come up is the possibility of the Enterprise pipeline discontinuing shipments of diesel starting July 1st. There have been people argue this issue and put in to have it stopped, but it still looks as though it is going to be inevitable. Though this does not have a direct effect on me, it will have an effect on many of the jobbers/retailers in the Southern Illinois/Southern Indiana markets. If you are in these markets I would suggest you contact your jobber/supplier and ask what options they are going to be offering for you to stay competitive in the market. For companies with proprietary terminals (like HWRT & Marathon) this non-shipment can increase their margins on distillate substantially as they are now going to be the only games in town offering the product. I'm not saying they would do that, but hey....supply and demand right?
Wednesday, March 13, 2013
New Times - New Market
As you may or may not know I have changed positions and am now employed by Al Warren Oil Company out of Chicago, Illinois....one thing I can tell you about this market - it is like eating a SOUP SANDWICH. There is no rhyme or reason behind why any specific economics apply, although I have noticed the Platts opportunities are much more prevalent in this market than most. Also - it seems as though there are opportunities for supplier to take advantage of "floating margins" on Platts contracts so during specific months is still makes sense to hold the contract.
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