Not a lot popping this morning, but this caught my eye…
HEADLINE: WTI SET FOR LONGEST RUN OF WEEKLY LOSSES SINCE 1998: That headline says a lot…definite shocker, even though we have seen crude sliding for weeks. I didn’t realize it was the longest slide since 1998, a year I remember well in this industry. It was a time when crude oil was as cheap as it will probably ever be again, just north of $10/bbl. I remember advising customers to go to their bank and see how much money they could borrow because they should buy two or three years worth of propane futures. My father was one of my ‘customers’ at the time and he was one of the few who actually did that. However, he’ll tell you he gave me the idea and I’m old enough to know now to just say he’s right.
Later in this item, a statement was made to what the government will announce next week as it relates to the Federal stimulus. Everyone believes that will remain in place and nearly 40% of the analysts and traders contacted for the story linked above believe WTI will advance next week because of that.
One more thought on this one…I’ve been saying how I believe propane pricing has detached from crude oil…just reread the headline and compare that thought to what prices have done at the rack during that same run up….if you laid the price history of the two on top of one another in a line graph, it would create an X…crude down and to the right, propane up and to the right. It’s detached (to bearishness) and will stay that way until weather gives it direction.
DIXIE ARBITRAGE PLAY?
It’s not going to be long before transport companies start hauling gas out of Apex and Cheraw up into the Northeast. We are seeing retailers buying as much product as they can at Belvieu +$.6000 or more. Consider Hattiesburg at Belvieu +.1500…then add in Apex tariff of .0754..that’s Belvieu +.2254….so if the freight is less than $.3500, some folks in the Northeast can get cheaper loads out of Apex than they can at terminals in their area.
These are arbitrage plays, likely things you look at with your business and these are logistical plays we look at every day in our company; We have a logistics division whose job is to make the most economic sense.
This is just another distinct possibility we could see in the Dixie marketplace this year.If things get crazy, I will be running arbitrage plays for you this winter as we own terminals in Memphis, Ohio, East St Louis and elsewhere…we can bring in rail from our facilities in Ohio and Kansas. Believe me, the way things are heading we may get to the point where people will take gas from wherever it’s coming from.
All this and we have barely had any weather to speak of.