'Hot Winter, Hot Geopolitics, Hot Inflation' hits U.S. gas harder than world oil
February 15, 2024
Key Observations:
Our mantra: the main factors guiding heating fuel prices this season are 'hot winter, hot geopolitics, and hot inflation'. But these common factors are affecting oil and gas prices differently.
For example, a notable divergence between gasoil and gas has emerged over the past ten days. Sizable, unplanned, storm-driven refinery outages over the past month have cut global refinery runs sharply and led—in the context of rising instability in the Red Sea, Iran, and Russia—to sharp draws on stocks of middle distillates and an uplift in corresponding prices. U.S. gas supply has been less disrupted by storms and less threatened by geopolitical conflict. Instead, slack demand for heating use has been the dominant driver. This has forced the physical markets to slash cash prices to the levels that will simultaneously curb production and move bloated inventory. Today that price is below $1 in New Mexico.
Source: Bloomberg, Company Reports, ICE, NYM, Blacklight Research.
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