Vastly Different Prices For Natural Gas At Various Hubs Around The US

The choppy action continues for energy markets as a strong round of buying Tuesday gave way to more selling to start Wednesday’s session.

Refined product inventories dropped last week with gasoline stocks down 2 million barrels while distillates were down 1.5 million barrels. Crude inventories saw a modest build of 1.6 million barrels. We’ve seen large swings in the DOE’s weekly demand estimates in October, and that will be something to watch this morning when they release their status report at the normal time. Refinery runs should also be watched for signs of slowing due to weak margins that have been telegraphed as hurting Q3 earnings, which will begin being released tomorrow.

The EIA this morning published a note on the vastly different prices for natural gas at various hubs around the US, which tend to be more dynamic than refined product spot markets which have stayed essentially the same for decades. While gasoline and diesel basis values in the US are no strangers to volatility, on a percentage basis natural gas differentials are much more volatile than their counterparts. A big increase in LNG export capacity in the US in the coming years should offer some relief to the Gulf Coast area spot markets that have traded in negative territory at times, and restricted the output of oil in the Permian, due to a lack of takeaway space.

Phillips 66 reported another unplanned flaring event at the Wilmington section of its LA-area refining complex Tuesday afternoon, the 2nd upset of the past 4 days. Chevron is also dealing with an unplanned upset at its El Segundo facility while Marathon is in the middle of a week’s worth of maintenance at its Carson plant, and yet LA basis values have not reacted much thus far to those events. An article this week highlights how new refineries in India and China, many of whom are buying discounted Russian oil today, will be relied upon in coming years to supply the California market as more US refineries in the state shut their doors.

The National Hurricane Center shows no storms being tracked in the Atlantic basin, and no development expected in the next week. That “should” be enough to get the Gulf of Mexico energy assets a sigh of relief as Gulf storms are almost unheard of in November. An RBN article this week highlighted the impacts of Hurricane Sandy 12 years ago and offers a reminder that while one coast may breathe easier, there are still risks ahead.