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Refined Products

Recap: Oil markets were settled mixed yesterday after starting up across the board. NYMEX ULSD (HO) settled down 1.15 cents to $2.8490 but NYMEX RBOB (Gasoline) settled up 68 points to $2.7527. Both September futures contracts will be expiring at the end of today's trading. The crudes finished mixed as well, with NYMEX (WTI) Crude up 67 points to $94.55, while ICE Brent Crude finished down 26 cents to $102.46 and decreasing the Brent-WTI spread down to $7.91. Currently, oil markets are all slightly up across the board: NYMEX ULSD is up 17 cents to $2.8507, NYMEX RBOB up 33 points to $2.7560, NYMEX Crude up 38 cents to $94.93, and ICE Brent up 27 cents to $102.73.  

Keeping in mind factors influencing oil market pricing: The long Labor Day weekend, the expiration of NYMEX ULSD and RBOB futures today, a more active Atlantic Basin of tropical storms, refiner maintenance, and revelations about Islamic State terrorist recruits holding passports for upwards of 50 countries as we approach the anniversary of 9/11 are all valid reasons for increased volatility that could move oil markets higher. But on the other hand, record U.S. production of crude oil, a stronger U.S. economy, weaker oil demand in China, the U.S. Federal Reserve tracking to increase interest rates helping to move investors back into U.S. treasuries and out of commodities, a stronger U.S. dollar, and reduced net speculative length, are all factors keeping a lid on oil prices from going up, and can help push them lower. For today, and through the weekend, rest and enjoy the fruits of your labor with family and friends as we get ready for another heating season. Enjoy!  

Geopolitical Hotspot Update:  As noted recently in MarketWatch, the oil markets have been pricing out many of the geopolitical risks as market participants have interpreted that there would be limited impact to oil supplies.  Russia/Ukraine: Tensions are increasing yet again on reports that Russian forces entered Ukraine to support Russian-backed separatists. Ukrainian President Petro Poroshenko said he was cancelling a trip to Turkey because of the "rapidly deteriorating situation in the eastern Donetsk region." (Reuters 8-28-14) Russia is denying that it has any involvement of either weapons or troops in Ukraine, yet the Russian defense ministry "claimed the patrol had crossed the border by mistake." (Reuters 8-26-14). But other sources paint a very different picture including a NATO military officer, who indicated there are over 1,000 Russian troops in Ukraine. A Ukrainian military spokesperson underscored the absurdity of Russia's innocence comparing it to "paratroopers [getting] lost like Little Red Riding Hood in the forest." (Reuters 8-26-14) Yesterday, U.S. ambassador to Ukraine Geoffrey Pyatt, tweeted the following: "Russian supplied tanks, armored vehicles, artillery and multiple rocket launchers have been insufficient to defeat Ukraine's armed forces. So now an increasing number of Russian troops are intervening directly in fighting on Ukrainian territory." (Reuters 8-28-14) In a televised speech yesterday afternoon, President Obama made it clear that the U.S. would not get involved militarily in this region, but could impose more economic sanctions. 

Iraq/Syria/ISIS (Islamist State): CBS News reported yesterday that a second American died fighting for ISIS in Iraq as reported by "jihadist tweets." The U.S. State Department has not officially confirmed this second death of an American fighting for ISIS, but it has confirmed the death of the first, Douglas McCain, who grew up in Minnesota.  Both of these ISIS terrorists grew up in the Minneapolis area that is "home to the largest population of Somalis outside East Africa ... and has become fertile ground for Islamic terrorist groups looking for recruits." (CBS News 8-28-14) Fox News was reporting Thursday night that upwards of 14,000 ISIS recruits from 50 different countries (300 from the U.S. and 1200 from Great Britain) could pose a threat as these 'foreign' ISIS recruits could re-enter their home countries and set up domestic ISIS terror cells. This information is on the heels of U.S. President Obama now deciding whether or not to expand military airstrikes into Syria and strike ISIS targets while continuing airstrikes against them in Iraq as well. Despite ISIS, Iraq continues to pump 2.6 MMbs of oil per day. 

2014-2015 Winter Temperature Outlook:  Meteorologist John Bagioni of Fax-Alert Weather Service released his winter outlook Thursday, and points to  colder-than-normal winter temperatures for the upcoming heating season (see chart below): "Large-scale atmospheric and oceanic pattern trends continue to suggest the winter season, December 2014 through February 2015, will feature colder- and stormier-than-normal conditions for much of the central and eastern U.S. ... if the El Nino event holds in the weak-to-moderate range and if the north Pacific warm pool hold steady as we move through the mid-fall period, confidence in the cold winter call with increase further."Click here to view today's Refined Products MarketWatch.

Natural Gas

Thursday August 28th was the first day that October 2014 became the prompt month for NYMEX Natural Gas Futures contracts.  After opening at $4.018, prices edged up to the $4.05 level.  Finding little support, October fell and hovered around the $4.03 level while the Market awaited the announcement of the weekly EIA storage report.  As soon as the report was published at 10:30AM, October surged to the intraday high of $4.101.  But prices quickly retreated to the $4.05 level before falling below the resistance level of $4.00 around noon.  Absent support from the noon weather forecasts, October continued its downward slide, dipping to the intraday low of $3.973 by 12:40PM.  The remainder of the afternoon trading hours saw October bounce back and close at $4.044 on Thursday.

The EIA Natural Gas Storage Report published on Thursday showed a 75 BCF injection to storage for the week ended August 22nd.  This was slightly below the market consensus estimate.  Total gas in storage was reported as 2,630 BCF; 15.7% below this time last year and 16.5% below the five-year average.

This morning in Globex, WTI Crude was up 36 cents; Natural Gas was down four cents; and, both Heating Oil and Gasoline were flat.

New England and New York cash prices were down as well.


Natural Gas Glossary

For access to Sprague’s full Natural Gas Market Watch Report including commentary not posted here, please send your request to or call 1-855-466-2842.